Strategic Management

1. StrategicManagement

2. Strategic Planning Process Identify Mission and Objectives Analyze Internal and External Environment Formulate Strategy Implement Strategy Evaluate Results and Control

3. Figure 9.1:Strategy formulation and implementation in the strategic management process.

4. 2. Analyze Internal and External Environment • The SWOT Analysis provides information that is helpful in matching the firm’s resources and capabilities to the competitive environment • Identifies: • Strengths • Weaknesses • Opportunities • Threats

6. SWOT • Strengths • Resources and capabilities that can be used as a basis for developing its competitive advantage • Examples: • Manufacturing efficiency • Skilled workforce • Superior reputation among customers • Good market share • Strong financing • Patents • Strong brand names • Favourable access to distribution networks • Exclusive access to high grade natural resources

7. SWOT • Weaknesses • The absence of certain strengths may be viewed as a weakness • Examples: • Lack of patent protection • Weak brand name • Inexperienced staff • Limited storage space • Outdated facilities • Obsolete technologies • May be the flip side of a Strength

8. SWOT • Opportunities • The external environment analysis may reveal certain new opportunities for profit and growth. • Examples: • An unfulfilled customer need • Arrival of new technologies • Loosening of regulatuions • Removal of international trade barriers • Weak market rivals • Growing geographical area

9. SWOT • Threats • Changes in the external environment also present threats to firms • Example: • Shifts in consumer tastes • Emergence of substitute products • New competitors • Increased trade barriers • Economical/World issues • New regulations

10. SWOT Matrix • A competitive advantage can be developed by : • Finding a fit between a business’ strengths and upcoming opportunities • Using their strengths to create strategies that take advantage of these opportunities and minimize threats

11. SWOT Matrix • S-O Strategies • Pursue opportunities that are a good fit with company’s strengths • W-O Strategies • Overcome weaknesses to pursue opportunities • S-T Strategies • Identify ways that the company can use its strengths to reduce its vulnerability to external threats • W-T Strategies • Establish a defensive plan to prevent the firm’s weaknesses from making it highly susceptible to external threats

12. Personal SWOT Analysis - Example For Career Planning • Complete table • Answer the following questions • How can you capitalize on your strengths and pursue opportunities? • How can you overcome your weaknesses to be able to pursue opportunities? • Identify ways that you can use your strengths to reduce vulnerability to external threats? • What can you do to prevent your weaknesses from making you susceptible to external threats?

13. PEST Analysis - Link •  is a tool to examine the external factors that provide opportunities and threats to an organization that are beyond the organization’s control.

14. PEST Analysis • Political factors include: political stability, trade regulations, taxation, labour laws, and safety regulations. These factors vary widely from country to country. • Economic factors include: economic growth, stagnation, recession, interest rates, exchange rates, and inflation. • Social factors include: demographics and cultural aspects, e.g., health consciousness, population growth, age distribution, education, and attitudes to work and leisure. • Technological factors include: new discoveries and developments, rates of technological obsolescence, changes in information technology, and research and development activity.

15. PEST Analysis is useful for four main reasons: • It helps you to spot business or personal opportunities, and it gives you advanced warning of significant threats. • It reveals the direction of change within your business environment. This helps you shape what you're doing, so that you work with change, rather than against it. • It helps you avoid starting projects that are likely to fail, for reasons beyond your control. • It can help you break free of unconscious assumptions when you enter a new country, region, or market; because it helps you develop an objective view of this new environment.

16. Figure 9.4 Porter’s model of five strategic forces affecting industry competition. LINK Source: Developed from Michael E. Porter, Competitive Strategy (New York: Free Press, 1980).VIDEO

18. Porter's Five Forces • Porter’s model develops strategies to meet opportunities and threats in the organization’s external environment.   • Five competitive forces that shape every industry and every market. • Competitors are the existing competitive rivalry within the industry. • New entrants involve the threat from new market entrants. • Customers mean the bargaining power of buyers. • Suppliers are the bargaining power of suppliers. • Substitutes are the threat of substitute products which includes technology change

19. Types of strategic plans • Growth Strategy • involves expanding current operations. • Concentration - expanding in the same industry, • e.g., Tim Horton’s opens more stores, all of them selling the same products. • Vertical integration which means expansion by buying suppliers or distributors, • e.g., a meat processing company buying farms (suppliers) or grocery stores (distributors). • Diversification which means buying or starting businesses in other industries. • Rogers Communications Inc. is an example of a diversified Canadian corporation.

20. Types of strategic plans • RetrenchmentStrategy • used when an organization is in crisis. • It seeks to correct weaknesses by making changes to current business practices.  • Restructuring and downsizing are two commonly used terms for retrenchment strategies.

21. Types of strategic plans • e-business Strategy • the use of the Internet to become more successful. • Businesses can use Internet technology to buy materials from their suppliers and to sell products to their customers. • Even businesses who don’t sell goods or services online will use the Internet for advertising, collecting information, and distributing information.

22. 3. Strategy Formulation Where are the major opportunities for achieving sustainable competitive advantage? • Cost and Quality • Knowledge (innovation) and Speed • Barriers to Entry • Financial resources

23. Differentiation – make our products appear different from competitors Cost Leadership – minimize costs to operate more efficiently than the competition. Focused Differentiation - concentrate on one special market segment to offer a unique product Focused low cost – concentrate on one special market segment and be the provider with the lowest cost 3. Strategy Formulation Market Scope Source of the competitive advantage

24. 4. Strategy Implementation • Involves organization of the firms resources and motivation of the staff to achieve objectives • Care must be taken to communicate the strategy and reasoning behind it

25. 5. Evaluation and Control • Define parameters to be measured • Define target values for those parameters • Perform measurements • Compare measured results to the pre-defined standard • Make necessary changes

26. Critical tasks of Strategic Leadership • Be a guardian of tradeoffs • Create a sense of urgency • Ensure that everyone understands the strategy • Be a teacher • Be a great communicator

27. Case Studies • Read the case study assigned to your group. As a group, discuss the answers to the questions included at the end of each case. • Decide on a format to present the results of your work to your teacher and peers. • website, a slideshow presentation, or a video. • The presentation must present a brief introduction to the business and its situation, as well as answers to the questions. Be sure to use the concepts and terms you studied.