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SM7 Mid Revision
SM7 Mid Revision
SM7 Mid Revision
It is the job of top level management to chart the course of the entire enterprise. It consists of:
Analysis of the internal and external environment of the firm. Definition of the firms mission. Formulation and implementation of strategies to create or continue a competitive advantage.
Strategic management involves both long-range thinking and adaptation to changing conditions.
Strategies should be designed to generate a sustainable competitive advantage. Competitors should be unable to duplicate what the firm has done or should find it too difficult or expensive.
Implement strategies
Assess strategic outcomes
SWOT Analysis
Step 1: Analyze the organizations internal environment, identifying its strengths and weaknesses. Step 2: Analyze the organizations external environment, identifying its opportunities and threats. Step 3: Cross-match
Strengths with opportunities Weaknesses with threats Strengths with threats Weaknesses with opportunities
Identify opportunities and threats in the marketplace. Avoid surprises. Respond appropriately to competitors moves.
A major challenge is to gather accurate market intelligence in a timely fashion, and transform it into usable knowledge to gain a competitive advantage.
Assessing
Forecasting
Competitor Analysis
Strategic Groups
Threat of substitutes
Suppliers
Customers
Intensity of rivalry among competitors
Each company has something that it does well. These are called core competencies. Company executives should identify the resources, capabilities, and knowledge the firm has that may be used to exploit market opportunities and avoid potential threats. Resource-based view: Basing the strategy on what the firm is capable of doing
4.
Select a strategy that best exploits the firms capabilities relative to external opportunities.
3.
Appraise the profit generating potential of resources/capabilities in terms of creating, sustaining, and exploiting competitive advantage.
Identify the firms capabilities (What can the firm do?)
5.
Identify resource gaps that need to be filled. Invest in replenishing and augmenting the firms resource base.
2.
Capabilities
1.
Identify the firms resources and locate areas of strength and weakness relative to competitors.
Resources
Difficult to quantify and included on a balance sheet Often provides the firm with a strong competitive advantage. Competitors find it difficult to purchase or imitate these resources.
Functional Analysis
Benchmarking
Capability
Effective financial control systems Expertise in strategic control of diversified corporation Effectiveness in motivating and coordinating divisional and business-unit management Management of acquisitions Values-driven, in-touch corporate leadership Comprehensive and effective MIS network, with strong central coordination
Information Management
Capability in basic research Ability to develop innovative new products Speed of new product development
Effectiveness in promoting and executing sales Efficiency and speed of distribution Quality and effectiveness of customer service
Technology
Source Sophistication
Product Design
Function
Manufacturing
Integration
Marketing
Prices Advertising Promotion Sales Force Package
Distribution
Channels Integration Inventory Warehousing Transport
Service
Warranty Dealer Support Availability Speed Prices
Physical Raw Materials Characteristics Patents Capacity Aesthetics Product Process Location Quality Product Choices Procurement Assembly
Identifying activities or functions that are weak and need improvement. Identifying firms that are known to be at the leading edge of these activities or functions. Studying the leading-edge firms by visiting them, talking to managers and employees, and reading trade publications. Using the information gathered to redefine goals, modify processes, and acquire new resources to improve the firms functions.
The primary guides to strategic management are formal statements of strategic intent and mission. Strategic intent is internally focused, defining how the firm uses its resources, capabilities, and core competencies. Strategic mission is externally focused, defining what will be to produced and marketed, utilizing its internal core competencies.
Strategy Formulation
The design of an approach to achieve the firms mission. Takes place at:
Corporate-Level Business-Level
Corporate-Level Strategy
Portfolio Analysis
The basic idea is to classify the businesses of a diversified company within a single framework.
The McKinsey-General Electric Portfolio Analysis Matrix The Boston Consulting Groups Growth Share Matrix
Medium
High
1)
Low
2)
3)
Harvest
4)
Medium
5)
6)
Industry Attractiveness
Hold
7)
High
8)
9) Build
Earnings: high stable, growing Cash Flow: neutral Strategy: invest for growth STAR
Earnings: low, unstable, growing Cash Flow: negative Strategy: analyze to determine whether business can be grown into a star, or will degenerate into a dog
? Earnings: high, stable Cash Flow: high stable Strategy: milk COW Earnings: low, unstable Cash Flow: neutral or negative Strategy: divest DOG
Diversification Strategy
Type of Diversification Concentration strategy Vertical integration strategy Concentric diversification strategy Conglomerate diversification Process of Diversification Acquisition and restructuring strategies Acquisition Merger International strategy
Business-Level Strategy
Deals with how to compete in each business area or market segment. Firms have two basic choices:
Strategy Implementation
Organizational Structure and Controls Cooperative Strategies Human Resource Strategies
Strategic Outcomes
Company leaders should periodically assess whether the outcomes meet expectations. A firm must first and foremost cater to the desires of its primary stakeholders. The firm should also consider the desires of other stakeholders affected by its performance. Some of the standard measures of strategic success includes:
Profits Growth of sales/market share Growth of corporate assets Reduced competitive threats Innovations
An effective manager must be proactive in responding to evolving challenges and opportunities rather than being overtaken by events. Learning to think strategically forces managers to:
Be alert for changes in the external and internal environments. Modify the firms strategic intent, mission, and formulated strategy when necessary. Effectively implement the new or redesigned strategies.
The strategic management process generally involves teams of managers and employees from different areas who bring their perspectives and expertise to bear on issues facing the firm. A key factor is how well the firm can mobilize and integrate the efforts of team members.
Individual employees are more likely to make greater contributions to the firm if they engage in activities that have strategic value. Employees can be attuned to changes in their area of expertise and advise management on the strategic implications of those changes.
Employee success depends on the ability to adapt to the firms strategic change.