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Strategic Management 1 Notes Nust Zimbabwe
Strategic Management 1 Notes Nust Zimbabwe
Strategic Management 1 Notes Nust Zimbabwe
4107
MR J. RANGANAI
EMAIL: ranganaij@gmail.com
0772 122 120 /0733 236 657/0713 421 422
Conceptualizing & Defining Strategy
*Merely playing in the marketplace with a gun loaded with hope
and little else is not courage nor strategy. It is important to define
how you intend to win. How will you play? You cannot let fate
answer that question unless you are insane (Kamwendo;2014)
*Oh what a king,sitteth not down first and consulted whether he be
able with ten thousand to meet him that cometh with twenty
thousand (Luke 14 verse 31 )
*STRATEGY is the direction and scope of an org over the
long term, which achieves competitive advantage in a changing
environment through its configuration of resources and
competencies with the aim of fulfilling stakeholder expectations . (Adapted Johnson et al 2006)
Defining Strategy: Mintzberg `s five fold
definition
*Further ,pursuant to defining strategy, it is Mintzberg et al
(2009) who came up with the most holistic definition of
strategy which is fivefold, that is defines strategy from five
perspectives as follows:
(i) Strategy as a plan: from this perspective, strategy is
some sort of consciously intended course of action, a
guideline (or set of guidelines) to deal with a situation
- As a plan, strategy is thus a direction, a guide or course of
action into the future or a path to get here from there.
(ii) Strategy as a pattern: Here ,strategy is seen as a
pattern in a stream of actions.
-It is the aggregate of behaviour that can be consistently
observed in an organisation over time.
Defining Strategy: Mintzberg `s five fold
definition
(ii) Strategy as a pattern (Deliberate & Emergent
strategies) : Mintzberg and Quinn (1996) distinguish deliberate
strategies as those where intentions that existed previously were realized,
from emergent strategies, where patterns developed in the absence of
intentions, or despite them, went unrealized.
Defining Strategy: Mintzberg `s five fold
definition
Technological Leadership
Utilization of resources (ROI or ROE)
Market Leadership
Contribution to employees (job security, competitive
remuneration & good working
environment,fullfilling jobs)
Contribution to society (taxes,charity & needed
products)
Market Leadership
Corporate Culture
INTERNAL ANALYSIS
EXTERNAL ANALYSIS
INTERNAL ANALYSIS
• Tangible
– Financial; borrowing capacity, internal funds generation
• Human
– Skills and knowledge, Motivation, flexibility and adaptation,
loyalty.
Sustainability of a Resource as a source of
Competitive Advantage
Threats of
New Entrants
Threats of
New
Substitutes
Porter’s 5 forces Model
89
01/29/21
Threats of New Entrants
90
01/29/21
Bargaining Power of Suppliers
91
If a firm’s suppliers have bargaining power they will:
Exercise that power
Sell their products at a higher price
Squeeze industry profits
*Bargaining power of suppliers depends on
(i) Uniqueness of the input supplied
(ii) The relative size & strength of the supplier
(iii) The number of suppliers for each essential input
(iv) Competition for the input from other industries
(v) Cost of switching to alternative sources
01/29/21
Bargaining Power of Buyers
92
01/29/21
Threat of Substitute Products
93
01/29/21
Degree of Competitive Rivarly
94
01/29/21
Sixth Force ? (Power of
Complementors)
*The sixth force, “The Power of Complementors’’ was
added by Brandenburger & Nalebuff (1996) who
identified the power of affect the usage & sales of PC
market players like IBM,DELL & HP
-Complementors are not found in every industry &
reseaerchers only noticed them when they were studying
new industries like software.
-Complementors do not complete in the industry ,do not
supply it or buy from it.
-Porter (2001) disputes the power of complementors to
directly affect the profitability of an industry-in his fiew
its not a true force.
Porter `s Four Corner Analysis Model
*Developed by Michael Porter, the four corner’s analysis is a
useful tool for analysing competitors.
It emphasises that the objective of competitive analysis
should always be on generating insights into the future.
Porter `s Four Corner Analysis Model
Summary of Porter's Four Corner's
Analysis Model
a) Motivation – drivers: Analysing a competitor’s
goals assists in understanding whether they are
satisfied with their current performance and market
position.
This helps predict how they might react to external
forces and how likely it is that they will change
strategy.
b) Motivation – Management Assumptions:
The perceptions and assumptions that a competitor
has about its business, the industry and other
companies will influence its strategic decisions.
Summary of Porter's Four Corner's
Analysis
a) Resources
b) Corporate Culture
c) Technological know-how
d) Market Power
e) Relationships
f) Size of the organization.
COLLABORATIVE AND
COOPERATIVE STRATEGIES
*STRATEGIC ALLIANCES
*OUTSOURCING
What is Collaboration
a) Strategic Alliances
b) Outsourcing
(a) Strategic Alliances
Nonequity Joint
Alliance Venture
Contracts Joint Equity
Equity
• licensing Alliance Holdings
• supply & • independent
distribution Cross Equity firm is
agreements Holdings created
• partners own
stakes in
eachother
Reasons for Forming Strategic Alliances
*Risks
Loss of competitive knowledge in outsourced
activities
Conflicting objectives with outsourcing partner
Danger of outsourcing the wrong types of
activities which impact on the org ’s capabilities.
Conclusion
CORPORATE STRATEGY
What is Corporate Strategy?
*Determining the overall direction that will enable the org to best
fulfill its purpose & achieve its strategic goals through:
(i) The org `s overall orientation towards
growth,stability,retrenchment or combination (directional
/grand strategies)
(i) Actions to boost combined performance of businesses through
the manner in which mngt co-ordinates the activities & transfers
resources & cultivates capabilities among SBUs (parenting
strategy)
(ii) The industries or markets in which the firm competes through its
SBUs, establishing investment priorities & steering corporate
resources into most attractive units (portfolio strategy)
Possible Corporate (grand /directional )
strategies
(1) Growth: expansion of organizational activities.
(2) Stability: keeping the organization where it is in
order to consolidate or maintain a firm`s
competitive position
(3) Retrenchment: reversing the organization’s
weaknesses or decline through reduction in
product/service lines, markets or functions.
(4) Combination Strategy: a multi-strategy
approach whereby there is justification for
pursuing one strategy in some SBUs & another in
the others
A. GROWTH as grand/directional strategy
Growth strategy
Involves the attainment of specific growth objectives by
increasing the level of an firm’s operations
Typical growth objectives for businesses
Increase in sales revenues
Increase in earnings or profits
Other performance measures
(prd-mkt/limited/intensive)
International
Concentration
Organizational
Growth
Diversification
•Related Vertical
•Unrelated Integration
Horizontal •Backward
Integration •Forward
Concentration Strategy
market development
product development.
Market Penetration
*A growth strategy seeking to increase market share for
present products or services in present markets through
greater marketing efforts with two broad objectives:
To increase market share
To retain existing customers.
*Firm concentrates on doing better what it has been
doing well such that its objectives are actualized through:
Increasing the consumption rate of existing users.
Attracting new users to the product
Getting competitor customers to switch to your products.
Conditions favouring Market Penetration
When current markets are not saturated with a
particular product or service.
When the usage rate of present customers could be
increased significantly
When increased economies of scale provide major
competitive advantages
Market Development
A concentration growth alternative where expansion is
driven by introducing present products or services into
new geographic areas. The new markets can be:
(ii) New geographical markets such as foreign countries,
or
(ii) new market segments not currently using the product
Over the past 30 yrs,China has been an attractive
target of many firms' mkt development initiatives
especially those that deal in consumer goods & `kids
related products.
Conditions favouring Market Development
Ignorance
Ignorance
Neglect
(aboutnewly
newly
Neglect
(about (ofcore
(of core
enteredfields)
entered fields) business)
business)
Coordination
Coordination
((Communication
Communication
•Accountability)
•Accountability)
Balancing the Benefits & Costs of
Diversification
Benefits • Costs
Textile Producer
Textile Producer
Reducing Risk
Maintaining growth
Balancing Cash Flows
Sharing Infrastructure
Increasing Market power
Capitalizing on core competence
Portfolio Strategy
Creative flair
Sustainable profitability
Inbuilt barriers to entry
Disproving entrenched economic theory through achieving low
cost and differentiation simultaneously
Absence of price wars that are associated with crowded market
places.
Based on a unique but clear methodology and a refreshing set of
analytical tools
Based on a refreshing and game changing approach to business
Higher profits on the backdrop of low costs
Encouraging creativity and innovativeness in an organisation
Unique business model that cannot be created by other
companies and that competitors cannot make sense of
Weaknesses of a Blue Ocean Strategy based
business model
Viable in Zimbabwe
Sustainable in Zimbabwe
Blue Ocean based business model has more
strengths than weaknesses
There are current or possible blue oceans in
Zimbabwe
Zimbabwean Companies are able to achieve
differentiation and low cost simultaneously.
Blue Ocean Strategy is the future of strategy
C.MILES & SNOW `s ADAPTIVE
STRATEGIES
Miles and Snow's adaptive strategies approach
is based on the strategies that organizations
use to successfully adapt to their uncertain
competitive environment. They identify four
strategic postures:
i. Prospector strategy
ii.Defender strategy
iii. Analyser strategy
iv.Reactor strategy
Prospector strategy
By Marketing Image
By Product Quality
By Product Support
Undifferentiated
Mintzberg’s Generic Competitive
Strategies
(i) Differentiation by price: is a modification of
Porter `s cost leadership strategy whereby
Mintzberg argued that having lowest costs didnt
provide a competitive advantage by itself but that
advantage came from allowing the org to charge
below market average prices.
(ii) Differentiation by image: competitive strategy in
which org relies on creating a certain image in
customer`s mind.
(iii) Differentiation by design: competing on the basis
of providing desirable features & design
configurations.
Mintzberg’s Generic Competitive
Strategies
(iv) Differentiation by product quality: superior
quality products drives an org `s competitiveness.
(v) Differentiation by product support: competitive
advantage sought through providing an all encompassing
bundle of desired customer support services.
(vi) Undifferentiated Strategy: org has no basis for
strategy or when it follows a copy cat strategy.
STRATEGY FORMULATION &
CHOICE