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Assistant Professor, Director Projects and Theses,
Management Knowledge Unit Head, GIFT University.
Theory
apply
Nahi Hoti
New problems New solutions
“Quote”
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Thinking Strategically:
The Three Big Strategic Questions
1. Where are we now?
2. Where do we want to go?
Business(es) to be in and market
positions to stake out?
Buyer needs and groups to
serve?
Outcomes to achieve?
3. How do we get there?
15
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
What is Strategy?
A company’s strategy consists of the set of
competitive moves and business approaches that
management is employing to run the company
Strategy is management’s “game plan” to
Conduct operations
Compete successfully
18
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Figure 1-1: The Five Tasks
of Strategic Management
Task 1 Task 2 Task 3 Task 4 Task 5
Develop a Monitor,
Craft a Implement
Strategic Evaluate,
Set Strategy and
Vision and Take
Objectives to Achieve Execute
and Corrective
Objectives Strategy
Mission Action
19
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
1.8 Basic Elements of the Strategic Management Process (Fig. 1.1)
Evaluation
Environmental Strategy Strategy
and
Scanning Formulation Implementation
Control
External Mission
Reason for
Societal
existence
Environment Objectives
General Forces
What results
to
Task Strategies
accomplish
Environment
by when Plan to
Industry Analysis
achieve the
Policies
mission &
Internal objectives Broad
guidelines for Programs
Structure decision Process
Chain of Command making Activities to monitor
needed to performance
Culture Budgets and take
accomplish
Beliefs, Expectations, a plan corrective
Cost of the
Values action
programs
Procedures
Resources
Sequence
Assets, Skills
of steps
Competencies,
needed to
Knowledge do the job Performance
Feedback/Learning
Ch. 1-22
Fred R. David
Prentice Hall
Benefits of Strategic
Management
• Financial benefits
– Improvement in sales
– Improvement in profitability
– Improvement in productivity
Ch. 1-23
Fred R. David
Prentice Hall
Benefits of Strategic
Management
• Non-Financial benefits
– Enhanced awareness of external threats
– Improved understanding of competitors’
strategies
– Increased employee productivity
– Reduced resistance to change
– Understanding of performance-reward
relationships
– Enhances problem-prevention capabilities
Ch. 1-24
Fred R. David
Prentice Hall
Business Ethics and Strategic
Management
Ch. 1-25
Fred R. David
Prentice Hall
Business Ethics and Strategic
Management
Ch. 1-26
Fred R. David
Prentice Hall
Business Ethics & Strategic
Planning
Business actions always unethical include:
• Misleading advertising
• Misleading labeling
• Environmental harm
• Poor product or service safety
• Padding expense accounts
• Insider trading
• Dumping flawed products on foreign markets
Ch. 1-27
Fred R. David
Prentice Hall
A Firm’s Ethical Responsibilities
to Its Stakeholders
Owners/shareholders
Owners/shareholders –– Rightfully
Rightfully expect
expect some
some
form
form of
of return
return on
on their
their investment
investment
Employees
Employees -- Rightfully
Rightfully expect
expect respect
respect for
for their
their
worth
worth and
and devoting
devoting their
their energies
energies to
to firm
firm
Customers
Customers -- Rightfully
Rightfully expect
expect aa seller
seller to
to provide
provide
them
them with
with aa reliable,
reliable, safe
safe product
product or
or service
service
Suppliers
Suppliers -- Rightfully
Rightfully expect
expect to
to have
have an
an equitable
equitable
relationship
relationship with
with firms
firms they
they supply
supply
Community
Community -- Rightfully
Rightfully expect
expect businesses
businesses to
to be
be
good
good citizens
citizens in
in their
their community
community
McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 28
The most
Strategic Intent
Winning competitive battles effective
through deciding how to leverage strategists
internal resources, capabilities, provide a vision
and core competencies
(strategic intent)
to effectively
elicit the help of
Strategic Mission others in
An application of strategic intent creating a firm's
in terms of products to be offered competitive
and markets to be served advantage
Ch. 1 2
Developing a Strategic Vision
First Task of Strategic Management
Involves thinking strategically about
Firm’s future business plans
Where to “go”
Tasks include
Creating a roadmap of the future
Deciding future business
position to stake out
Providing long-term direction
Giving firm a strong identity
30
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Questions to Address in
Developing a Strategic Vision
1. What changes are occurring in the market arena(s)
where we operate and what implications do these
changes have for our future direction?
2. What new or different customer needs should we
be moving to satisfy?
3. What new or different buyer segments should we
be concentrating on?
4. What new geographic or product markets should
we be pursuing?
5. What should the company’s business makeup look
like in 5 years?
6. What kind of company should we be trying to
become?
31
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Why is a Strategic Vision Important?
A managerial imperative exists to look beyond
today and think strategically about
Impact of new technologies
?
How customer needs and
expectations are changing
What it will take to outrun competitors
Which promising market opportunities ought to
be aggressively pursued
External and internal factors driving what a
company needs to do to prepare for the future
32
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Three Elements of a Strategic Vision
Mission
Mission Statement
Statement Vision
Vision Statement
Statement
Answers
Answers the
the Question
Question Answers
Answers the
the Question
Question
“What
“What isis Our
Our “What
“What Do
DoWe
WeWant
Want
Business?”
Business?” to
to Become?”
Become?”
34
©1999 Prentice Hall
Missions vs. Strategic Visions
A mission statement A strategic vision
focuses on current concerns a firm’s future
business activities -- “who business path -- “where we
we are and what we do” are going”
Current product and Markets to be pursued
service offerings Future technology-
Customer needs product-customer
being served focus
Technological and Kind of company that
business capabilities management is
trying to create
35
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Characteristics of a Mission Statement
Defines current business activities
Highlights boundaries of current business
Conveys
Who we are,
What we do, and
Where we are now
Company specific, not generic —
so as to give a company its own identity
A company’s mission is not to make a profit !
The real mission is always—“What will we do to
make a profit?”
McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 36
Mission and Vision of GIFT
Vision:
To bring about a change in society by becoming a leading educational and
research institution that utilizes the latest technology and provides
intellectually stimulating, professionally relevant and progressive and
innovative education that is consistent with our national values and is
accessible to all.
Mission:
Employ highly qualified faculty with established research credentials
Hire competent and professional administrative staff
Ensure quality intake of students
Utilize the latest technology in teaching, research and administration
Provide adequate infrastructure and facilities for teaching and learning
Establish linkages with industry and collaborate with national and
international institutions
Provide state of the art library, computer laboratories and other research
resources
and so on….
Mission
We Educate
Leaders, who
make a difference
in the world.
McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 41
Why
Why isis aa Mission
Mission Statement
Statement Important?
Important?
- To Insure Unanimity of Purpose
- To Provide a Basis for Allocating Resources
- To Serve as a Focal Point for Individuals
- To Reconcile Differences Among Stakeholders
- To Resolve Divergent Views Among Managers
- To Arouse Positive Feelings About the Firm
- To Provide a Basis for Goals and Strategies
- To Provide Direction
42
©1999 Prentice Hall
Exhibit 8–2 Components of a Mission Statement
Source: Based on F. David, Strategic Management, 11 ed. (Upper Saddle River, NJ: Prentice Hall, 2007), p.70.
© 2007 Prentice Hall, Inc. All rights reserved.
Examples: Mission and Vision Statements
Microsoft Corporation
Empower people
through great software
anytime, anyplace, and
on any device.
46
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
Examples: Mission and Vision Statements
Intel
CORPORATE SECURITY
To provide services for the protection of corporate
personnel and assets through preventive
measures and investigations.
VALUES
NE-II-159 52
What is a value?
Qualities, characteristics, or ideas
about which we feel strongly.
Our values affect our decisions, goals
and behavior.
A belief or feeling that someone or
something is worthwhile.
Values define what is of worth, what is
beneficial, and what is harmful
Values are standards to guide your
action, judgments, and attitudes.
Direction:
Values – Goals – Behavior – Self-
value
Values give direction and
consistency to behavior.
Values help you know what to
and not to make time for.
Values establish a relationship
between you and the world.
Values set the direction for one’s
life.
Values take a variety of forms
◦ Principles or ◦ Character Traits
standards Loyalty,
“Service Above enthusiasm,
Self” openness to others
“Be Prepared” ◦ Codes of Ethics
“Do A Good Turn Hippocratic Oath
Daily” Religious Values –
Quranic Values- Ten
Commandments-
◦ Personal Qualities
Honesty ◦ Goals
Communication Living a healthy life
Being Organized Caring for others
55
Where do we get values?
financial objectives!
De
Industry
Le
mo
opportunities exist in
al /
Environment
gra
iti c
these environments?)
ph
P ol
ic
2. Firm develops internal
skills required by
So
mi c
cio
Environment
ltu
An Attractive Industry
An Attractive Industry
Strategy Formulation
Strategy Formulation
An Attractive Industry
Strategy Formulation
Superior Returns
Resource-based Model of Above Average
Returns
Resources: inputs into a firm’s
production process
Resource-based Model of Above Average
Returns
Resource-based 2. Determine the firm’s
Model capabilitieswhat it can do
better than its competitors
Resources
Capability Capability: capacity of an
integrated set of resources to
integratively perform a task or
activity
Four Attributes of Resources and
Capabilities (Competitive Advantage)
Valuable allow the firm to exploit opportunities or
neutralize threats in its external
Resources and Capabilities
environment
Valuable
Resources and Capabilities
Rare
Core Competencies
Costly to imitate
Nonsubstitutable
Core Competencies are the basis for a
firm’s
Competitive
advantage
Strategic
competitiveness Core Competencies
Ability to earn
above-average
returns
Resource-based Model of Above Average
Returns
Resource-based 3. Determine the potential of the
Model firm’s resources and
capabilities in terms of a
Resources competitive advantage
Capability
Capability
Competitive Advantage
Competitive Advantage
An Attractive Industry
Strategy formulation and
Strategy Form/Impl implementation: strategic
actions taken to earn above
average returns
Resource-based Model of Above Average
Returns
Resource-based
Model
Resources
Capability
Competitive Advantage
Superior Returns
Figure 2.3: Identifying the Components of
a Single-Business Company’s Strategy
Planned, proactive moves to outcompete rivals
Scope of
R&D strategy Business geographic
Supply chain Fu Strategy coverage
management nc
strategy tio
na
Manufacturing lS Collaborative
strategy tra partnerships and
te
Marketing gi strategic alliances
strategy es
Human Finance strategy
resources strategy
McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 86
Figure 2.2: Corporate Strategy for
a Diversified Company
Narrow or broad-based diversification
Is diversification
Approach to
related, unrelated
capital allocation
or a mix?
Scope of
Efforts to capture Corporate geographic
cross-business
strategic fits
Strategy operations
4(a) 4(b)
Scan and
Assess Analyze
Internal Internal
Environment: Factors:
Structure Strengths
Culture Weak-
Resources nesses
Hierarchy of Strategy
Corporate Strategy
Business
(Division Level)
Strategy
Functional
Strategy
Source: Suggested by J. R. Galbraith, “Strategy and Organization Planning,” in The Strategy Process: Concepts, Contexts, Cases,
2nd ed., edited by H. Mintzberg and J. B. Quinn (Englewood Cliffs, N.J.: Prentice Hall, 1991), p. 316.
• Product
• Price
• Place
• Promotion
• People
• Process
• Physical Evidence
Other tangibles
Development A
Stage of Product/Market Evolution
B C
Growth
Shakeout
E
Objectives
• Increased profitability
• Number one in customer satisfaction
• Number three in North American unit sales
•
•
Policies
No cost reduction proposal will be approved if it reduces product quality
in any way
• Every product, from the least expensive to the highest priced, should be
superior to the competition in overall quality and performance
• The corporation must not emphasize market share at the expense of
profitability
• Business units must be managed for synergies, while simultaneously the
specialized expertise among those units must be allowed to flourish
Prentice Hall, 2000 Chapter 1 106
1.35c Strategic Management Process at Maytag Corporation : Programs & Budgets
Industry Matrix
Company A Company A Company B Company B
Strategic Factors Weight Rating Weighted Score Rating Weighted Score
1 2 3 4 5 6
Total 1.00
Source: T. L. Wheelen and J. D. Hunger, “Industry Matrix.” Copyright © 1997 by Wheelen and Hunger Associates. Reprinted by
permission.
Prentice Hall, 2000 Chapter 3 110
Industry Analysis (CPM)
Competitive Profile Matrix
Ch.3-111
Fred R. David
Prentice Hall
(CPM) Procter
Avon L’Oreal & Gamble
Critical Success Weight Rating Score Rating Score Rating Score
Factor
Advertising 0.20 1 0.20 4 0.80 3 0.60
Product Quality 0.10 4 0.40 4 0.40 3 0.30
Price Competition 0.10 3 0.30 3 0.30 4 0.40
Management 0.10 4 0.40 3 0.30 3 0.30
Financial Position 0.15 4 0.60 3 0.45 3 0.45
Customer Loyalty 0.10 4 0.40 4 0.40 2 0.20
Global Expansion 0.20 4 0.80 2 0.40 2 0.40
Market Share 0.05 1 0.05 4 0.20 3 0.15
Total 1.00 3.15 3.25 2.80
Ch.3-112
Fred R. David
Prentice Hall
3.16 External Factor Analysis Summary (EFAS): Blank
External Weighted
Strategic Factors Weight Rating Score Comments
1 2 3 4 5
Opportunities
Threats
Notes: 1. List opportunities and threats (5–10 each) in column 1. 2. Weight each factor from 1.0 (Most Important) to 0.0 (Not Important) in Column 2
based on that factor’s probable impact on the company’s strategic position. The total weights must sum to 1.00. 3. Rate each factor from 5 (Outstanding)
to 1 (Poor) in Column 3 based on the company’s response to that factor. 4. Multiply each factor’s weight times its rating to obtain each factor’s
weighted score in Column 4. 5. Use Column 5 (comments) for rationale used for each factor. 6. Add the weighted scores to obtain the total weighted
score for the company in Column 4. This tells how well the company is responding to the strategic factors in its external environment.
Source: T. L. Wheelen and J. D. Hunger, “External Strategic Factors Analysis Summary (EFAS).” Copyright © 1991 by Wheelen and Hunger Associates.
Reprinted by permission.
Prentice Hall, 2000 Chapter 3 113
1.10 Environmental Variables (Fig. 1.3)
Environmental Variables
Societal Environment
Shareholders Suppliers
Governments
Internal
Employees/
Environment
Special Labor Unions
Interest Structure
Culture
Groups
Resources
Competitors
Customers
Trade Associations
Creditors
Political-Legal Technological
Communities
Forces Forces
Ch. 3 12
General Environment Components
Ch. 3 12
3.3 Scanning the External Environment (Fig. 3.1)
Market
Analysis
Community Competitor
Analysis Analysis
Supplier
Analysis
Selection of
Interest Group Strategic Factors Governmental
Analysis Analysis
• Opportunities
• Threats
Ch.3-129
Fred R. David
Prentice Hall
UST—Key External Factors Weighted
Weight Rating
Opportunities score
Weighted
Internal Factors Weight Rating Score Comments
1 2 3 4 5
Strengths
Weaknesses
Notes: 1. List strengths and weaknesses (5–10 each) in column 1. 2. Weight each factor from 1.0 (Most Important) to 0.0 (Not Important) in Column 2
based on that factor’s probable impact on the company’s strategic position. The total weights must sum to 1.00. 3. Rate each factor from 5 (Outstanding)
to 1 (Poor) in Column 3 based on the company’s response to that factor. 4. Multiply each factor’s weight times its rating to obtain each factor’s
weighted score in Column 4. 5. Use Column 5 (comments) for rationale used for each factor. 6. Add the weighted scores to obtain the total weighted
score for the company in Column 4. This tells how well the company is responding to the strategic factors in its internal environment.
Source: T. L. Wheelen and J. D. Hunger, “External Strategic Factors Analysis Summary (EFAS).” Copyright © 1991 by Wheelen and Hunger Associates.
Reprinted by permission.
Prentice Hall, 2000 Chapter 4 131
4.17 Internal Factor Analysis Summary (IFAS): Maytag as Example (Table 4.2)
Strengths 1 2 3 4 5
• Quality Maytag culture .15 5 .75 Quality key to success
• Experienced top management .05 4 .20 Know appliances
• Vertical integration .10 4 .40 Dedicated factories
• Employee relations .05 3 .15 Good, but deteriorating
• Hoover’s international orientation .15 3 .45 Hoover name in cleaners
Weaknesses
• Process-oriented R&D .05 2 .10 Slow on new products
• Distribution channels .05 2 .10 Superstores replacing
small dealers
• Financial position .15 2 .30 High debt load
• Global positioning .20 2 .40 Hoover weak outside the
United Kingdom and
Australia
• Manufacturing facilities .05 4 .20 Investing now
Ch.3-133
Fred R. David
Prentice Hall
Internal Analysis (IFE)
Mandalay Bay Weight Rating
Weighted
Internal Strengths score
Ch.3-134
Fred R. David
Prentice Hall
Internal Analysis (IFE)
Mandalay Bay Weight Rating
Weighted
Internal Weaknesses score
Ch.3-135
Fred R. David
Prentice Hall
Integrating Strategy and Culture
Cultural products
Values stories
beliefs legends
rites sagas
rituals language
ceremonies symbols
myths heroes
Ch 4-136
Fred R. David
Prentice Hall
THE POWER OF CULTURE IN
BUSINESS
“Imagine that your beautifully crafted strategy failed
when the divisions within your organization clashed.
Logically, it seems that strategy should drive behavior
—but, in reality, it's your culture (underlying norms,
values, belief systems) that dictates how people are
going to work together. As a result, employee behavior
directly impacts your bottom line — your costs,
revenue, productivity, customer base, even your
brand. Every aspect of your business is affected.”
Time Relationships
Values
Attitudes
Communication & Learning Styles Work Ethic
Methods of Decision Making Negotiating Styles
Deep Culture
PRIORITIES OF CULTURAL VALUES
THEORY A – THEORY J – THEORY Z
9.3 Assessing Strategy-Structure Compatibility (Fig. 9.1)
Compatibility Yes
No
Very Attractive
Integration Assimilation
Not at All Attractive
System
Inputs Transformation Outputs
•Raw material •Employees’ work Activities •Products and
services
•Human resources •Management Activities
•Financial Results
•Capital •Technology and Operations
Methods •Information
•Technology
Human Results
•Information
Feedback
Enviro m en t
nment v i ro n
En
Discovering Core Competitive
Advantage
Competencies Gained through
Core Competencies
Strategic
Core Competitiveness
Competencies
Discovering
Core Above-Average
Sources of Returns
Competitive Competencies
Advantage
Criteria of Value
Capabilities
Sustainable Chain
Teams of Advantages Analysis
Resources
Ch. 4 14
4.6 Corporation Value Chain
Firm Infrastructure
(general management, accounting, finance, strategic planning)
Primary Activities
Prentice Hall, 2000 Chapter 4 147
Ch. 4 14
Resources What a firm Has to work with
Tangible Resources Its assets, including its people
Financial and the value of its brand name.
*
* Physical Resources represent inputs into
* Human Resources a firm’s production process...
* Organizational
such as capital equipment, skills
of employees, brand names,
Intangible Resources finances and talented managers.
* Technological
* Innovation
* Reputation
$ $ $ $ $ $
Ch. 4 14
Ch. 4 15
Capabilities What a firm Does...
Combined in
unique That
combinations Create
core That
competencies Have
strategic That
value Can lead to
competitive
advantage
Ch. 4 15
Ch. 4 15
Core Competencies For a strategic
capability to be a Core Competency, it must be:
Valuable allow a firm to neutralize threats or exploit
opportunities in its external environment.
Rare possessed by few, if any, current and
potential competitors.
Sustainable Above
YES YES YES YES Competitive Average
Advantage Returns
Ch. 4 15
Core Competencies--
Cautions and Reminders
Never take for granted that core
competencies will continue to provide
a source of competitive advantage
All core competencies have the potential to
become Core Rigidities
Core Rigidities
They are former core competencies that sow
the seeds of organizational inertia
Prevent the firm from responding appropriately
to changes in the external environment
Ch. 4 15
Core Competencies--
Cautions and Reminders
Strategic myopia
and inflexibility
can stop the
firm’s ability to
grow and adapt to
environmental
change or
competitive
threats
Ch. 4 * 15
Internal Audit
• Parallels process of external audit
• Gather & assimilate information from:
• Management
• Marketing
• Finance/accounting
• Production/operations
• Research & development
• Management information systems
Ch.3-157
Fred R. David
Prentice Hall
Management Audit Checklist
• Does the firm use strategic-
management concepts?
• Are company objectives and goals
measurable and well communicated?
• Do managers at all hierarchical levels
plan effectively?
• Do managers delegate authority well?
• Is the organization’s structure
appropriate?
Ch 4-158
Fred R. David
Prentice Hall
Management Audit Checklist
Ch 4-159
Fred R. David
Prentice Hall
Marketing
• Customer analysis
• Selling products/services
• Product and service planning
• Pricing
• Distribution
• Marketing research
• Opportunity analysis
Ch 4-160
Fred R. David
Prentice Hall
Marketing Audit
Ch 4-161
Fred R. David
Prentice Hall
Marketing Audit
Ch 4-163
Fred R. David
Prentice Hall
Finance/Accounting
Ch 4-164
Fred R. David
Prentice Hall
Finance/Accounting Audit
Ch 4-165
Fred R. David
Prentice Hall
Finance/Accounting Audit
Ch 4-166
Fred R. David
Prentice Hall
Production/Operations
• Process
• Capacity
• Inventory
• Workforce
• Quality
Ch 4-167
Fred R. David
Prentice Hall
Production/Operations Audit
Ch 4-168
Fred R. David
Prentice Hall
Production/Operations Audit
Ch 4-169
Fred R. David
Prentice Hall
Research and Development
Ch 4-170
Fred R. David
Prentice Hall
Research and Development Audit
Ch 4-172
Fred R. David
Prentice Hall
Management Information
Systems
Purpose –
– Improve performance of an enterprise by
improving the quality of managerial
decisions.
Ch 4-173
Fred R. David
Prentice Hall
Management Information
Systems Audit
• Do all managers in the firm use the
information system to make decisions?
• Is there a chief information officer or
director of information systems position
in the firm?
• Are data in the information system
updated regularly?
Ch 4-174
Fred R. David
Prentice Hall
Management Information
Systems Audit
• Do managers from all functional areas
of the firm contribute input to the
information system?
• Are there effective passwords for entry
into the firm’s information system?
• Are strategists of the firm familiar with
the information systems of rival firms?
Ch 4-175
Fred R. David
Prentice Hall
Management Information
Systems Audit
• Is the information system user-friendly?
• Do all users of the information system
understand the competitive advantages
that information can provide firms?
• Are computer training workshops
provided for users?
• Is the firm’s system being improved?
Ch 4-176
Fred R. David
Prentice Hall
5.2 Strategic Factor Analysis Summary (SFAS): Blank (Table 5.1)
INTERMEDIATE
(Select the most important
opportunities/threats from EFAS, Table 3.4
Weighted
SHORT
and the most important strengths and
LONG
weaknesses from IFAS, Table 4.2) Weight Rating Score Comments
Total Score
Notes: 1. List each of your key strategic features developed in your IFAS and EFAS tables in Column 1. 2. Weight each factor from 1.0 (Most
Important) to 0.0 (Not Important) in Column 2 based on that factor’s probable impact on the company’s strategic position. The total weights must sum to
1.00. 3. Rate each factor from 5 (Outstanding) to 1 (Poor) in Column 3 based on the company’s response to that factor. 4. Multiply each factor’s
weight times its rating to obtain each factor’s weighted score in Column 4. 5. For duration in Column 5, check appropriate column (short term—less
than 1 year; intermediate—1 to 3 years; long term—over 3 years.) 6. Use Column 6 (comments) for rationale used for each factor.
Source: T. L. Wheelen and J. D. Hunger, “Strategic Factors Analysis Summary (SFAS).” Copyright © 1997 by Wheelen and Hunger Associates. Reprinted
by permission.
Prentice Hall, 2000 Chapter 5 177
5.3 Strategic Factor Analysis Summary (SFAS): Maytag as Example (Figure 5.1)
Duration
Key Strategic Factors
INTERMEDIATE
(Select the most important
opportunities/threats from EFAS, Table 3.4
Weighted
SHORT
and the most important strengths and
LONG
weaknesses from IFAS, Table 4.2) Weight Rating Score Comments
S1 Quality Maytag culture (S) .10 5 .50 X Quality key to success
S3 Hoover’s international orientation (S) .10 3 .30 X Name recognition
W3 Financial position (W) .10 2 .20 X High debt
W4 Global positioning (W) .15 2 .30 Only in N.A., U.K., and Australia
O1 Economic integration of
European Community (O) .10 4 .40 X Acquisition of Hoover
O2 Demographics favor quality (O) .10 5 .50 X X Maytag quality
O5 Trend to super stores (O + T) .10 2 .20 X Weak in this channel
T3 Whirlpool and Electrolux (T) .15 3 .45 X Dominate industry
T5 Japanese appliance companies (T) .10 2 .20 X Asian presence
1.00 3.05
Total Score
Notes: 1. List each of your key strategic features developed in your IFAS and EFAS tables in Column 1. 2. Weight each factor from 1.0 (Most
Important) to 0.0 (Not Important) in Column 2 based on that factor’s probable impact on the company’s strategic position. The total weights must sum to
1.00. 3. Rate each factor from 5 (Outstanding) to 1 (Poor) in Column 3 based on the company’s response to that factor. 4. Multiply each factor’s
weight times its rating to obtain each factor’s weighted score in Column 4. 5. For duration in Column 5, check appropriate column (short term—less
than 1 year; intermediate—1 to 3 years; long term—over 3 years.) 6. Use Column 6 (comments) for rationale used for each factor.
Source: T. L. Wheelen and J. D. Hunger, “Strategic Factors Analysis Summary (SFAS).” Copyright © 1997 by Wheelen and Hunger Associates. Reprinted
by permission.
Prentice Hall, 2000 Chapter 5 178
5.1 SWOT Analysis
SWOT Analysis
Internal Environment
• Strengths
• Weaknesses
External Environment
• Opportunities
• Threats
TOWS Matrix
Source: Adapted from Long-Range Planning, April 1982, H. Weihrich, “The TOWS Matrix—A Tool for Situational Analysis”
p. 60. Copyright 1982, with kind permission from H. Weihrich and Elsevier Science Ltd. The Boulevard, Langford Lane,
Kidlington OX5 1GB, UK.
Prentice Hall, 2000 Chapter 5 180
5.5 TOWS Matrix: Maytag as Example (Fig. 5.3)
Threats ST WT
T1 Increasing
(T) government Strategies • Sell offStrategies
• Acquire Raytheon’s Dixie-Narco division to
regulation
appliance business reduce debt
T2 Strong US competition • Emphasize cost reduction to
• Merge with major Japanese
T3 Whirlpool & Electrolux
home appliance company reduce break-even point
positioned for global economy • Sell out to Raytheon or a
• Sell off non-Maytag brands;
defend Maytag’s US niche. Japanese firm.
T4 New product advances
T5 Japanese companies
Source: Adapted from Long-Range Planning, April 1982, H. Weihrich, “The TOWS Matrix—A Tool for Situational Analysis” p. 60.
Copyright 1982, with kind permission from H. Weihrich and Elsevier Science Ltd. The Boulevard, Langford Lane, Kidlington OX5
1GB, UK.
Prentice Hall, 2000 Chapter 5 181
4.7a Basic Structures of Corporations: Simple and Functional (Fig. 4.4)
Owner-Manager
Workers
Top Management
Top Management
Organic Model
A structure that is flat, uses cross-hierarchical and
cross-functional teams, has low formalization,
possesses a comprehensive information network, and
relies on participative decision making.
Innovation Strategy
A strategy that emphasizes the introduction of major
new products and services.
Cost-minimization Strategy
A strategy that emphasizes tight cost controls,
avoidance of unnecessary innovation or marketing
expenses, and price cutting.
Imitation Strategy
A strategy that seeks to move into new products or
new markets only after their viability has already
been proven.
© 2005 Prentice Hall Inc. All rights reserved.
Why
Why Do
Do Structures
Structures Differ?
Differ? –– Size
Size
Size
How the size of an organization affects its structure.
As an organization grows larger, it becomes more
mechanistic.
Characteristics
Characteristicsof
oflarge
largeorganizations:
organizations:
• •More
Morespecialization
specialization
• •More
Morevertical
verticallevels
levels
• •More
Morerules
rulesand
andregulations
regulations
Technology
How an organization transfers its inputs into outputs.
Characteristics
Characteristicsof
ofroutineness
routineness(standardized
(standardizedor
or
customized)
customized)ininactivities:
activities:
• •Routine
Routinetechnologies
technologiesare
areassociated
associatedwith
withtall,
tall,
departmentalized
departmentalizedstructures
structuresand
andformalization
formalizationinin
organizations.
organizations.
• •Routine
Routinetechnologies
technologieslead
leadto
tocentralization
centralizationwhen
when
formalization
formalizationisislow.
low.
• •Nonroutine
Nonroutinetechnologies
technologiesare
areassociated
associatedwith
withdelegated
delegated
decision
decisionauthority.
authority.
Environment
Institutions or forces outside the organization that
potentially affect the organization’s performance.
Key
KeyDimensions-
Dimensions-
• • Capacity:
Capacity:the
thedegree
degreeto
towhich
whichan
anenvironment
environmentcan
can
support
supportgrowth.
growth.
• • Volatility:
Volatility:the
thedegree
degreeof
ofinstability
instabilityininthe
theenvironment.
environment.
• • Complexity:
Complexity:the
thedegree
degreeof
ofheterogeneity
heterogeneityand
and
concentration
concentrationamong
amongenvironmental
environmentalelements.
elements.
Market growth rate Fast growth breeds new entry; slow growth spawns increased rivalry & shake-out of weak rivals
Capacity
surpluses/shortages Surpluses push prices & profit margins down; shortages pull them up
Industry profitability High-profit industries attract new entrants; depressed conditions lead to exit
High barriers protect positions and profits of existing firms; low barriers make existing firms
Entry/exit barriers vulnerable to entry
Product is big-ticket item
for buyers More buyers will shop for lowest price
Standard products Buyers have more power because it’s easier to switch from seller to seller
Rapid technological Raises risk; investments in technology facilities/equipment may become obsolete before they wear
change out
Big requirements make investment decisions critical; timing becomes important; creates a barrier to
Capital requirements entry and exit
Raises capital requirements; often creates competitive & cost differences among fully vs. partially
Vertical integration vs. non-integrated firms
Economies of scale Increases volume & market share needed to be cost competitive
Rapid product innovation Shortens product life cycle; increases risk because of opportunities for leapfrogging
19
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 2
Question 2: What Is Competition Like and
How Strong Are the Competitive Forces?
Objective
To identify
Main sources of
competitive forces
Strength of these forces
Key analytical tool
Five Forces Model
of Competition
19
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 3
Figure 3-4: Five Forces
Model of Competition
Substitute Products
(of firms in
other industries)
Rivalry
Suppliers
Among
of Key Buyers
Competing
Inputs
Sellers
Potential
New
Entrants
19
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 4
Analyzing the Five Competitive Forces:
How to Do It
Assess strength of each of the five competitive forces
(Strong? Moderate? Weak? )
Rivalry among competitors
Competition from substitute products
Competitive threat from potential entrants
Bargaining power of suppliers and
supplier-seller collaboration
Bargaining power of buyers and
buyer-seller collaboration
Explain how each force acts to create competitive pressure
—What are the factors that cause each force to be strong
or weak?
Decide whether overall competition (the combined effect
of all five competitive forces) is brutal, fierce, strong,
normal/moderate, or weak
19
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 5
Rivalry Among Competing Sellers
Usually the most powerful of the five forces
The big factor determining the strength of rivalry is how
actively and aggressively are rivals employing the
various weapons of competition in jockeying for a
stronger market position and seeking bigger sales
Is price competition vigorous?
Active efforts to improve quality?
Are rivals racing to offer better
performance features?
Are rivals racing to offer better
customer service?
Lots of advertising/sales promotions?
Active efforts to build a stronger
dealer network?
Active product innovation?
Active use of other weapons of rivalry?
19
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6
What Causes Rivalry to be Stronger?
Active jockeying for position among rivals and frequent
launches of new offensives to gain sales and market share
One or more firms initiates moves to bolster their
standing at expense of rivals
Lots of firms that are relatively equal in size and capability
Slow market growth
Industry conditions tempt some firms to go on the offensive
to boost volume and market share
Customers have low costs in switching to rival brands
A successful strategic move carries a big payoff
Costs more to get out of business than to stay in
Firms have diverse strategies, corporate priorities,
resources, and countries of origin
19
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Factors That Affect the Strength of Rivalry
Rivalry is generally stronger when:
•Rivals are active in making fresh moves to
The “Weapons” of
increase sales and market share
Competitive Rivalry Buyer demand is growing slowly
•Lower prices Rivalry The number of rivals ranges from at least 5 to
More appealing among upwards of 12 or more
features Competing Rivals are of roughly equal size and capability
Better product Buyer costs to switch brands are low
Sellers
performance One or more rivals is dissatisfied with their
Higher quality
Efforts of current position and market share and make
Strong brand image
rivals to gain aggressive moves to improve their market
and appeal
better market prospects
Better customer When rivals have diverse strategies and
position,
service capabilities
higher sales objectives and are located in different countries
Wider product When one or two rivals have powerful
and market
selection
share, strategies and other rivals are scrambling to
Bigger/better dealer
and stay in the game
network
competitive
Stronger product
advantage
innovation Rivalry is generally weaker when:
capabilities Rivals move only infrequently or in a non-
Longer warranties aggressive manner to draw sales and market
Higher levels of share away from rivals
advertising Buyer demand is growing rapidly
Buyer costs to switch brands are high
19
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Principle of Competitive Markets
20
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Common Barriers to Entry
Sizable economies of scale
Inability to gain access to specialized
technology
Existence of strong learning/experience
curve effects
Strong brand preferences and customer loyalty
Large capital requirements and/or other specialized
resource requirements
Cost disadvantages independent of size
Difficulties in gaining access to distribution channels
Regulatory policies, tariffs, trade restrictions
20
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 2
Principle of Competitive Markets
Examples
Eyeglasses vs. Contact Lens
Sugar vs. Artificial Sweeteners
Newspapers vs. TV vs. Internet
E-mail vs. Overnight Delivery vs “Snail
mail” (U.S. Post Office)
20
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 4
How to Tell Whether Substitute
Products are a Strong Force
Sales of substitutes are
growing rapidly
Profits of producers of
substitutes are up
20
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 5
Factors Affecting Competition
from Substitutes
Firms in Other
Industries
Offering Competitive pressures
Competitive pressures Substitute from substitutes are
from substitutes are Products stronger when
weaker when: Good substitutes are
Good substitutes are readily available or new
not readily available or ones are emerging
don’t exist Substitutes are lower
Competitive pressures coming
Substitutes are higher from the attempts of priced relative to the
priced relative to the companies outside the performance they
performance they deliver industry to win buyers
deliver
Buyers have high costs over to their products
Buyers have low costs
in switching to in switching to
substitutes Rivalry substitutes
among Buyers grow more
Competing comfortable with using
Sellers substitutes
20
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Principle of Competitive Markets
20
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Factors Affecting Supplier Bargaining Power
Competitive
Suppliers of Raw pressures Rivalry
Materials, Parts, stemming from
supplier Among
Components,
or Other
bargaining Competing
power and
Resource Inputs seller-supplier Sellers
collaboration
21
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 0
Competitive Pressures: Collaboration
Between Sellers and Suppliers
Rival sellers are forming long-term strategic
partnerships with select suppliers to
Promote just-in-time deliveries and reduced
inventory and logistic costs
Speed availability of next-generation components
Enhance quality of parts being supplied
Reduce suppliers’ costs which paves way for
lower prices on items supplied
Competitive advantage potential may accrue to
industry rivals doing the best job of managing supply-
chain relationships
21
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Principle of Competitive Markets
21
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Factors Affecting Buyer Bargaining Power
Competitive pressures
Rivalry
stemming from buyer
Among Competing bargaining power and Buyers
Sellers seller-buyer
collaboration
21
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Principle of Competitive Markets
Ch. 3 * 22
Bargaining Power of Suppliers
Suppliers are likely to be powerful if:
Suppliers exert * Supplier industry is dominated by a
power in the few firms
industry by:
* Suppliers’ products have few
* Threatening to raise substitutes
prices or to reduce * Buyer is not an important customer
quality to supplier
Powerful suppliers * Suppliers’ product is an important
can squeeze industry input to buyers’ product
profitability if firms
are unable to * Suppliers’ products are differentiated
recover cost * Suppliers’ products have high
increases switching costs
* Supplier poses credible threat of
forward integration
Ch. 3 * 22
Bargaining Power of Buyers
Buyer groups are likely to be powerful if:
* Buyers are concentrated or purchases
are large relative to seller’s sales
* Purchase accounts for a significant Buyers compete
fraction of supplier’s sales with supplying
* Products are undifferentiated industry by:
* Buyers face few switching costs
* Bargaining down prices
* Buyers’ industry earns low profits
* Forcing higher quality
* Buyer presents a credible threat of
backward integration
* Playing firms off of
each other
* Product unimportant to quality
Ch. 3 22
Threat of Substitute Products
Keys to evaluating substitute products:
Products with improving price /
* performance tradeoffs relative
Products
to present industry products
with similar
function
limit the For Example:
prices firms Electronic security systems in
can charge place of security guards
Fax machines or e-mailed
attachments in place of
overnight mail delivery
Ch. 3 22
Porter’s 5 Forces Model of Competition
Threat of
Threat of
New
New
Entrants
Entrants
Bargaining Bargaining
Rivalry Among Competing
Power of Power of
Firms in Industry
Suppliers Buyers
Threat of
Substitute
Products
Ch. 3 * 22
Rivalry Among Existing Competitors
Intense rivalry often plays out in the following ways
* Jockeying for strategic position
* Using price competition
* Staging advertising battles
* Increasing consumer warranties or service
* Making new product introductions
Occurs when a firm is pressured or sees an opportunity
Ch. 3 23
Rivalry Among Existing Competitors
Cutthroat competition is more likely to occur when
* Numerous or equally balanced competitors
* Slow growth industry
* High fixed costs
* High storage costs
* Lack of differentiation or switching costs
* Capacity added in large increments
* Diverse competitors
* High strategic stakes
High exit barriers
*
Ch. 3 23
Rivalry Among Existing Competitors
Ch. 3 23
Question 3: What Forces Are at
Work to Change Industry Conditions?
Industries change because forces
are driving industry participants
to alter their actions
23
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 3
Analyzing Driving Forces
23
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Common Types of Driving Forces
Internet and e-commerce opportunities
Increasing globalization of industry
Changes in long-term industry growth rate
Changes in who buys the product and how they
use it
Product innovation
Technological change/process innovation
Marketing innovation
23
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 5
Common Types of Driving Forces
Entry or exit of major firms
Diffusion of technical knowledge
Changes in cost and efficiency
Market shift from standardized to differentiated
products (or vice versa)
Regulatory policies / government legislation
Changing societal concerns, attitudes, and
lifestyles
Changes in degree of uncertainty and risk
23
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 6
Environmental Scanning
Definition
Monitoring and interpreting sweep of social,
political, economic, ecological, and technological
events to spot budding trends that could
eventually impact industry
Purpose
Raise consciousness of managers about potential
developments that could
Have important impact on industry conditions
Pose new opportunities and threats
23
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 7
Question 4: Which Companies are in
Strongest / Weakest Positions?
One technique for revealing the different
competitive positions of industry rivals is strategic
group mapping
A strategic group
consists of those
rivals with similar
competitive
approaches in
an industry
23
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 8
Strategic Group Mapping
Firms in same strategic group have two or
more competitive characteristics in common
Sell in same price/quality range
Cover same geographic areas
Be vertically integrated to same degree
Have comparable product line breadth
Emphasize same types of distribution
channels
Offer buyers similar services
Use identical technological approaches
23
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 9
Procedure for Constructing a
Strategic Group Map
STEP 1: Identify competitive characteristics that
differentiate firms in an industry from one
another
STEP 2: Plot firms on a two-variable map using
pairs of these differentiating
characteristics
STEP 3: Assign firms that fall in about the same
strategy space to same strategic group
STEP 4: Draw circles around each group, making
circles proportional to size of group’s
respective share of total industry sales
24
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 0
Example: Strategic Group Map of the
Video Game Industry
Types of Video Game Suppliers/Distribution
Arcades
Arcade
operators Publishers
Home PCs of games on
CD-ROMs
Sony, Sega,
Channels
Nintendo, several
Video game others
consoles
24
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 1
Guidelines: Strategic Group Maps
Variables selected as axes should not be highly
correlated
Variables chosen as axes should expose big
differences in how rivals compete
Variables do not have to be either quantitative or
continuous
Drawing sizes of circles proportional to combined
sales of firms in each strategic group allows map
to reflect relative sizes of each strategic group
If more than two good competitive variables can
be used, several maps can be drawn
24
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 2
Interpreting Strategic Group Maps
Driving forces and competitive pressures often
favor some strategic groups and hurt others
Profit potential of different strategic groups varies
due to strengths and weaknesses in each group’s
market position
The closer strategic groups are on map, the
stronger the competitive rivalry among member
firms tends to be
24
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 3
Question 5: What Strategic Moves Are
Rivals Likely to Make Next?
A firm’s own best strategic moves are affected by
Current strategies of competitors
Future actions of competitors
Profiling key rivals involves gathering
competitive intelligence about their
Current strategies
Most recent moves
Resource strengths and weaknesses
Announced plans
24
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 7
Competitor Analysis
Successful strategists take great pains in scouting
competitors to
Understand their strategies
Watch their actions
Evaluate their vulnerability to driving
forces and competitive pressures
Size up their resource strengths and
weaknesses and their capabilities
Try to anticipate rivals’ next moves
24
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 8
Table 3.3: Categorizing Objectives
and Strategies of Competitors
Competitive Market Share Competitive Strategic Competitive
Scope
Strategic Intent Objective Position Posture Strategy
24
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 9
The Advantages and Disadvantages of Different Entry
Modes
Entry Mode Advantages Disadvantages
Exporting • Ability to realize location and • High transport costs
experience-curve economies • Trade barriers
• Problems with local marketing agents
Licensing • Low development costs and risks • Inability to realize location and
experience-curve economies
• Inability to engage in global strategic
coordination
• Lack of control over technology
Franchising • Low development costs and risks • Inability to engage in global strategic
coordination
• Lack of control over quality
TABLE 8.2
Copyright © 2001 Houghton Mifflin Company. All rights reserved.
The Advantages and Disadvantages of Different
Strategies for Competing Globally
Strategy Advantages Disadvantages
International • Transfer of distinctive competencies • Lack of local responsiveness
to foreign markets • Inability to realize location economies
• Failure to exploit experience-curve
effects
TABLE 8.1
Copyright © 2001 Houghton Mifflin Company. All rights reserved.
Choosing an Investment Strategy at the
Business Level
TABLE 6.2
25
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 7
Example: KSFs for Apparel
Manufacturing Industry
Fashion design -- to
create buyer appeal
Low-cost manufacturing
efficiency -- to keep selling
prices competitive
25
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 8
Example: KSFs for Tin and
Aluminum Can Industry
Locating plants close to end-use
customers -- to keep costs of shipping
empty cans low
Ability to market plant output within
economical shipping distances
25
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 9
Strategic Management Principle
26
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 0
Question 7: Is the Industry
Attractive or Unattractive and Why?
Objective
Develop conclusions about whether the industry
and competitive environment is attractive or
unattractive, both near- and long-term, for
earning good profits
Principle
A firm uniquely well-suited in an otherwise
unattractive industry can, under certain
circumstances, still earn unusually good profits
26
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 1
Things to Consider in
Assessing Industry Attractiveness
Industry’s market size and growth potential
Whether competitive conditions are conducive to
rising/falling industry profitability
Will competitive forces become stronger or
weaker
Whether industry will be favorably or unfavorably
impacted by driving forces
Potential for entry/exit of major firms
Stability/dependability of demand
Severity of problems facing industry
Degree of risk and uncertainty in industry’s future
26
McGraw-Hill/Irwin Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. 2
Conducting an Industry and
Competitive Situation Analysis
Two things to keep in mind
Intuition + Analysis
Ch. 1-269
Fred R. David
Prentice Hall
Strategies in Action
-- Will Rogers
Ch5-270
Fred R. David
Prentice Hall
Long-Term Objectives
Ch5-271
Fred R. David
Prentice Hall
Long-Term Objectives
Objectives –
– Quantifiable
– Measurable
– Realistic
– Understandable
– Challenging
– Hierarchical
– Obtainable
– Congruent
– Time-line
Ch5-272
Fred R. David
Prentice Hall
Long-Term Objectives
– Corporate
– Divisional
– Functional levels
Ch5-273
Fred R. David
Prentice Hall
Integration Strategies
Forward Integration
Integration
Backward Integration
Strategies
Horizontal Integration
Ch5-274
Fred R. David
Prentice Hall
Integration Strategies
Integration strategies –
Ch5-275
Fred R. David
Prentice Hall
Integration Strategies
Forward Integration –
Ch5-276
Fred R. David
Prentice Hall
Integration Strategies
Guidelines for Forward Integration –
Backward Integration –
Ch5-278
Fred R. David
Prentice Hall
Integration Strategies
Guidelines for Backward Integration –
Horizontal Integration –
Ch5-280
Fred R. David
Prentice Hall
Integration Strategies
Guidelines for Horizontal Integration –
Ch5-281
Fred R. David
Prentice Hall
Intensive Strategies
Market Penetration
Intensive
Market Development
Strategies
Product Development
Ch5-282
Fred R. David
Prentice Hall
Intensive Strategies
Intensive strategies –
Ch5-283
Fred R. David
Prentice Hall
Intensive Strategies
Market Penetration –
Ch5-284
Fred R. David
Prentice Hall
Intensive Strategies
Guidelines for Market Penetration –
Ch5-285
Fred R. David
Prentice Hall
Intensive Strategies
Market Development –
Ch5-286
Fred R. David
Prentice Hall
Intensive Strategies
Guidelines for Market Development –
Ch5-287
Fred R. David
Prentice Hall
Intensive Strategies
Product Development –
Ch5-288
Fred R. David
Prentice Hall
Intensive Strategies
Guidelines for Product Development –
Ch5-289
Fred R. David
Prentice Hall
Diversification Strategies
Concentric
Diversification
Diversification Conglomerate
Strategies Diversification
Horizontal
Diversification
Ch5-290
Fred R. David
Prentice Hall
Diversification Strategies
Diversification strategies –
Ch5-291
Fred R. David
Prentice Hall
Diversification Strategies
Concentric Diversification –
Ch5-292
Fred R. David
Prentice Hall
Diversification Strategies
Guidelines for Concentric Diversification –
Ch5-293
Fred R. David
Prentice Hall
Diversification Strategies
Conglomerate Diversification –
Ch5-294
Fred R. David
Prentice Hall
Diversification Strategies
Guidelines for Conglomerate Diversification –
Ch5-295
Fred R. David
Prentice Hall
Diversification Strategies
Horizontal Diversification –
Ch5-296
Fred R. David
Prentice Hall
Diversification Strategies
Guidelines for Horizontal Diversification –
Retrenchment
Defensive
Divestiture
Strategies
Liquidation
Ch5-298
Fred R. David
Prentice Hall
Defensive Strategies
Retrenchment –
Divestiture –
Ch5-301
Fred R. David
Prentice Hall
Defensive Strategies
Guidelines for Divestiture –
Liquidation–
Ch5-303
Fred R. David
Prentice Hall
Defensive Strategies
Guidelines for Liquidation –
Ch5-304
Fred R. David
Prentice Hall
Michael Porter’s Generic Strategies
Differentiation Strategies
Focus Strategies
Ch5-305
Fred R. David
Prentice Hall
Joint Venture/Partnering
Ch5-306
Fred R. David
Prentice Hall
Joint Venture/Partnering
Cooperative Arrangements –
Ch5-307
Fred R. David
Prentice Hall
Joint Venture/Partnering
Ch5-308
Fred R. David
Prentice Hall
Joint Venture/Partnering
Ch5-310
Fred R. David
Prentice Hall
Leveraged Buyout (LBO)
Ch5-311
Fred R. David
Prentice Hall
Strategy Analysis & Choice
-- Bill Saporito
Ch5-312
Fred R. David
Prentice Hall
Strategy Analysis & Choice
Ch5-313
Fred R. David
Prentice Hall
Strategy Analysis & Choice
Ch5-314
Fred R. David
Prentice Hall
Strategy Analysis & Choice
Ch5-315
Fred R. David
Prentice Hall
Success criteria
• Strategies are evaluated according to
their suitability to the firm’s strategic
situation, their feasibility in terms of
resources and competences and their
acceptability to key stakeholders
group.
Fred R. David
Prentice Hall
Suitability
• Exploit strengths: that is unique resources and core
competences
• Rectify an organization’s weakness, or deal with problems
identified in it
• Neutralize or deflect environmental threats
• Help the firm to seize opportunities
• Satisfy the goals of organization
• Fill the gap identified by the gap analysis
• Generate/maintain competitive advantage
• Involve an acceptable level of risk
• Suit the politics and corporate culture
Fred R. David
Prentice Hall
Feasibility
• Machinery
• Makeup
• Management
• Markets
• Materials
• Men and women
• Methods
• Money
Fred R. David
Prentice Hall
Acceptability
• Financial considerations
– Return on investemnt
– Profits
– Cashflow
– Cost-benefit analysis
– EPS
• Customers
• Banks
• Government
• The publics
• Risk
Fred R. David
Prentice Hall
Strategy Formulation Framework
Fred R. David
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Strategy-Formulation Analytical Framework
Ch5-321
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Formulation Framework
Competitive Profile
Matrix
Fred R. David
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Input Stage
Ch5-323
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Formulation Framework
TOWS Matrix
SPACE Matrix
Stage 2:
BCG Matrix
The Matching Stage
IE Matrix
Fred R. David
Prentice Hall
6.5 General Electric’s Business Screen (Fig. 6.3)
D
Industry Attractiveness
Winners
E Average
Businesses
Medium F
Losers
H
Losers
G
Low Source: Adapted from Strategic
Profit
Producers Management in GE, Corporate Planning
Losers
and Development, General Electric
Corporation. Used by permission of
General Electric Company.
Strong Average Weak
Business Strength/Competitive Position
Prentice Hall, 2000 Chapter 6 325
6.6 Portfolio Matrix for Plotting Products by Country (Fig. 6.4)
High Low
Dominate/Divest
High
Invest/Grow
Joint Venture
Country Attractiveness
Selective
Strategies
Harvest/Divest
Low
Low High
Activity's Potential for Competitive Advantage
Outsource Outsource
Completely: Completely:
Low
Ch5-328
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Prentice Hall
Matching Stage
TOWS Matrix
– Threats
– Opportunities
– Strengths
– Weaknesses
Ch5-329
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Prentice Hall
TOWS Matrix
– Strengths-Opportunities (SO)
– Weaknesses-Opportunities (WO)
– Strengths-Threats (ST)
– Weaknesses-Threats (WT)
Ch5-330
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SO Strategies
Ch5-331
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WO Strategies
Improving
Threats internal
Opportunities WO weaknesses by
Weaknesses Strategies taking
Strengths advantage of
(TOWS) external
opportunities
Ch5-332
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ST Strategies
Ch5-333
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WT Strategies
Ch5-335
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TOWS Matrix
Developing the TOWS Matrix
Ch5-336
Fred R. David
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TOWS Matrix
Leave Blank Strengths-S Weaknesses-W
TOWS Matrix
SPACE Matrix
Stage 2:
BCG Matrix
The Matching Stage
IE Matrix
Fred R. David
Prentice Hall
SPACE Matrix
Strategic Position and Action Evaluation Matrix
Ch5-339
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SPACE Matrix
Ch5-340
Fred R. David
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SPACE Matrix
• EFE Matrix
• IFE Matrix
Ch5-342
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SPACE Factors
Internal Strategic Position External Strategic Position
Ch5-343
Fred R. David
Prentice Hall
SPACE Matrix
FS
Conservative Aggressive
+6
+5
+4
+3
+2
+1
CA IS
-6 -5 -4 -3 -2 -1 -1 +1 +2 +3 +4 +5 +6
-2
-3
-4
-5
Defensive -6 Competitive
ES
Fred R. David
Ch5-344
Prentice Hall
Formulation Framework
TOWS Matrix
SPACE Matrix
Stage 2:
BCG Matrix
The Matching Stage
IE Matrix
Fred R. David
Prentice Hall
BCG Matrix
Boston Consulting Group Matrix
Ch5-348
Fred R. David
Prentice Hall
BCG Matrix
Relative Market Share Position
High Medium Low
1.0 .50 0.0
Industry Sales Growth Rate
High
+20
Stars Question Marks
II I
Medium
0
Ch5-350
Fred R. David
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BCG Matrix
Stars
Ch5-352
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BCG Matrix
Dogs
Ch5-353
Fred R. David
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Formulation Framework
TOWS Matrix
SPACE Matrix
Stage 2:
BCG Matrix
The Matching Stage
IE Matrix
Fred R. David
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Grand Strategy Matrix
• Popular tool for formulating alternative
strategies
Quadrant I
Ch5-357
Fred R. David
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Grand Strategy Matrix
Quadrant II
Ch5-358
Fred R. David
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Grand Strategy Matrix
Quadrant III
Ch5-359
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Grand Strategy Matrix
Quadrant IV
Ch5-360
Fred R. David
Prentice Hall
9.1 Matching Chief Executive “Types” with Strategy
Growth—Concentration Retrenchment—
Save Company
Dynamic Industry Expert
Turnaround
High
Specialist
Industry Attractiveness
Stability
Medium
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QSPM
Ch5-363
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Prentice Hall
QSPM
Ch5-364
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QSPM
Limitations:
Ch5-365
Fred R. David
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QSPM
Positives:
Ch5-366
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Cultural Aspects of Strategy
Choice
Culture:
Ch5-367
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Cultural Aspects of Strategy
Choice
Culture:
Ch5-368
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Politics of Strategy Choice
Politics in organizations:
• Management hierarchy
• Career aspirations
• Allocation of scarce resources
Ch5-369
Fred R. David
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Politics of Strategy Choice
• Equifinality
• Satisfying
• Generalization
• Focus on Higher-Order Issues
• Provide Political Access on Important Issues
Ch5-370
Fred R. David
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Politics of Strategy Choice
Ch5-371
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Politics of Strategy Choice
Political tactics for strategists:
Ch5-373
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Implementing Strategies:
Management Issues
Ch 7-374
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Implementing Strategies:
Strategy Analysis & Choice
Management Issues
Ch 7-375
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Prentice Hall
Implementing Strategies:
Strategy Analysis & Choice
Management Issues
Ch 7-376
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Prentice Hall
Implementing Strategies:
Strategy Analysis & Choice
Management Issues
Ch 7-377
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Prentice Hall
Implementing Strategies:
Strategy Analysis & Choice
Management Issues
Ch 7-378
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Prentice Hall
Implementing Strategies:
Strategy Analysis & Choice
Management Issues
Ch 7-379
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Implementing Strategies
-- Peter Drucker
Ch 8-380
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Marketing Issues
• Market Segmentation
• Production Positioning
Ch 8-381
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Finance/Accounting Issues
Ch 8-382
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Research & Development Issues
Ch 8-383
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MIS Issues
Ch 8-384
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Strategy Evaluation
3 Basic Activities –
Ch 8-386
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Prentice Hall
Evaluation Framework
I. Review Underlying Bases
Differences? Yes
NO III.
Take
II. Measure Firm Performance Corrective
Actions
Differences? Yes
NO
Ch 8-388
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Reviewing Bases of Strategy
Ch 8-389
Fred R. David
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Reviewing Bases of Strategy
Ch 8-390
Fred R. David
Prentice Hall
Reviewing Bases of Strategy
Ch 8-391
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Prentice Hall
Reviewing Bases of Strategy
Ch 8-392
Fred R. David
Prentice Hall
Evaluation Framework
I. Review Underlying Bases
Differences? Yes
NO III.
Take
II. Measure Firm Performance Corrective
Actions
Differences? Yes
NO
Note: The strategic audit can be used to develop a business plan. It provides detailed questions to serve as a checklist.
Source: Thomas L. Wheelen, “Contents of a Strategic Business Plan for an Entrepreneurial Venture.” Copyright © 1988
by Thomas L. Wheelen. Reprinted by permission.
Ch. 9 39
International Strategy Opportunities & Outcomes
Identify Explore Use Core Strategic
International Resources & Competence Competitiveness
Opportunities Capabilities Outcomes
International Modes of Management
Strategies Entry Problems, Risk,
and First Steps
Increased International Exporting
Market Size Bus.-Level
Strategy Higher
Return on Licensing
Performance
Investment Multidomestic Returns
Strategic
Strategy
Economies Alliances
of Scale and Global
Acquisition Innovation
Learning Strategy
Location Transnational Establishment
Advantage Strategy of New Sub.
Management
Problems, Risk,
and First Steps
Ch. 9 39
Business-Level International Strategies
International Low Cost
Usually located in home country
Export to international markets
Low value added operations in foreign countries
High value added operations in home country
International Differentiation
Countries with advanced or
specialized factor conditions
most likely to use this strategy
e.g. Canada, Germany, Japan, U.S.A.
Ch. 9 39
Business-Level International Strategies
International Focus Strategies
Technologically advanced firms follow
focused low cost strategy
Focused differentiation firms compete on the
basis of image & design
Third group competes on low price by imitating
Ch. 9 39
Corporate-Level International Strategies
Type of Corporate Strategy selected
will have an impact on the selection and
implementation of the business-level strategies
Some Corp. strategies provide individual country
units with flexibility to choose their own strategies
Others dictate bus.-level strategies from the home
office & coordinate resource sharing across units
Multi-Domestic Strategy
Three
Corporate Global Strategy
Strategies Transnational Strategy
Ch. 9 40
Corp.-Level International Strategies
Multi-Domestic Strategy
Strategy & operating decisions are decentralized
to strategic business units (SBU) in each country
Products & services are tailored to local markets
Business units in each country are independent
of each other
Assumes markets differ by country or regions
Focus on competition in each market
Prominent strategy among European firms due to
broad variety of cultures & markets in Europe
Ch. 9 40
Corp.-Level International Strategies
Global Strategy
Products are standardized across
national markets
Decisions regarding business-level strategies
are centralized in the home office
Strategic business units (SBU) are assumed to
be interdependent
Emphasizes economies of scale
Firm often lacks responsiveness to local markets
Requires resource sharing & coordination across
borders (which also makes it difficult to manage)
Ch. 9 40
Corp.-Level International Strategies
Transnational Strategy
Seeks to achieve both global
efficiency and local responsiveness
Difficult to achieve because of simultaneous
requirements for strong central control and
coordination to achieve efficiency as well as
local flexibility and decentralization to
achieve local market responsiveness
Ch. 9 40