Strategic Management

Strategic Management Strategic management requires an understanding of: • Strategic management process • How to develop an overall strategy • Intended targets of the strategy

Competitive Advantage Competitive advantage • The ability of a firm to win consistently over the long term in a competitive situation • Competitive advantage is created through the achievement of four qualities Superior Value Rarity Difficult to Imitate Non-substitutability • A competitive advantage should generate above-average returns: profits that are greater than the average for a comparable set of firms

Strategic Management Process: Setting Direction Strategic management process is a planning process in which managers: • Set the organization's general direction and objectives • Formulate a specific strategy • Plan and carry out the strategy’s implementation • Monitor results and make necessary adjustments

Strategic Management Process Determine strategic vision Define organizational mission Analyze external environment Analyze internal resources Establish objectives Formulate strategy • Implement strategy • Action plans • Implement plans • Monitor outcomes Adapted from Exhibit 5.1

Determining the Strategic Vision Strategic vision: provides a view of the firm over the long term and what it should achieve in the future. • Strategic vision: • Provides general identity, direction, and level of aspirations • Is the heart of the strategy and strategic plan • Is short and compelling

Mission Statement Mission statement articulates fundamental purpose of the organization • Company philosophy • Company identity, or self-concept • Principal products or services • Customers and markets • Geographic focus • Obligations to shareholders • Commitment to employees

External Environmental Analysis Managers must conduct an analysis of the firm’s general environment: • Social/cultural • Technological • Economic • Political/legal • Global Techno- logical Environment Social/ Cultural Environment The Firm Economic Environment Political/ Legal Environment Global Environment

Industry and Competitive Environment New Entrants Industry competitors Rivalry among existing firms Suppliers Customers Substitutes

Profits and Industry Forces • Few competitors • Quality-based competition • High entry barriers • Few new entrants • Many customers • Fragmented customers • Many suppliers Higher Profits • Many competitors • Price-based competition • Low entry barriers • Many new entrants • Many substitutes • Few customers • United customers • Few suppliers Lower Profits Adapted from Exhibit 5.4

The Value Chain Primary Activities Support Activities

Integrating Internal and External Analyses Internal environment • Strengths • Weaknesses • Tools • Core competencies framework • Resource analysis framework • Value chain framework Internal Environment SWOT

Integrating Internal and External Analyses External environment • Opportunities • Threats • Tools • Product life cycle analysis • Portfolio analysis • Five forces framework SWOT External Environment

Strategic Objectives Strategic objectives translate the strategic intent and mission into concrete and measurable goals • Facilitates a firm's ability to • Allocate resources appropriately • Reach a shared understanding of priorities • Delegate responsibilities • Hold people accountable for results

Formulating a Strategy Competitive strategy: determining how the company is going to compete and achieve its strategic objectives, mission, and ultimate strategic intent • Generic strategies • Techniques and tools

Formulating a Strategy Generic competitive strategies • Cost leadership • Differentiation • Focus Other generic competitive strategies • Integrated Differentiation-Cost Leadership • Multipoint Competition

Generic Strategies and Scope General player whose product or service features command industry average prices but whose costs are significantly below the industry average Example: Wal-Mart Niche player with average Prices and below-average costs That focuses on a segment of customers or a specific geography Example: Columbia Sports Cost leadership Strategy General player whose product or service features command premium prices and whose costs are at the industry average Example: Sony Niche player with average costs but commanding premium prices that focuses on the high end and customers in a general or specific geography Example: Morgan Motors Differentiation General Focused Scope

Strategy Skills Structure Shared Values Systems Staff Style Strategy Implementation

Strategic Management