1. STRATEGIC MANAGEMENT
Strategy is the great work of the organization. In situation of life or death, it is the Tao of survival or extinction. Its study cannot be neglected
Sun Tzu, The Art of War

2. Contents What is strategy? (by Michael E Porter)
The importance of strategic management to a small business
Why and how a small business must create a competitive advantage in the market
The 9 steps in the strategic planning process
The 3 basic strategies
The importance of control: the balance scorecard
Give a brief overview of the presentation. Describe the major focus of the presentation and why it is important.
Introduce each of the major topics.
To provide a road map for the audience, you can repeat this Overview slide throughout the presentation, highlighting the particular topic you will discuss next.

3. Who are they?

4. Who are they? Vitality, intelligence, and tremendous energy
…. but lacks outstanding talents as a vocalist, musician, actress, or any other principal vocations within popular entertainment
…. dedication, opportunism, periodic re-invention of image and product offerings, and a well-coordinated multimarket presence

5. Who are they?
The military, human, and economic resources of the Vietnamese Communists were dwarfed by those of the U.S and South Vietnam. Yet, in 1975, the world most powerful nation was humiliated by one of the world’s poorest
…. sound strategy pursued with total commitment over a long period can succeed against vastly superior resources
…. protracted war of limited engagement, constrained by domestic and international opinion from using their full military might  sap the willingness to fight

6. Williams had children to fulfill a specific goal
Who are they?
…. an astute observer of the world of professional tennis in terms of recognizing both the physical and mental qualities of world ranked players
Williams had children to fulfill a specific goal
Richard Williams has taken careful account of their different physical characteristics as well as their separate vulnerabilities and psychological needs

7. What is strategy?

8. What is strategy? Operational effectiveness is not strategy
Strategy rests on unique activities
The essence of strategy is choosing to perform activities differently than rivals do.
A sustainable strategic position requires trade-offs
Fit Drives Both Competitive Advantage and Sustainability:
Simple consistency
Re-inforcing
Optimization of efforts
Rediscovering strategy
At general management’s core is strategy: defining a company’s position, making trade-offs, and forging fit among activities.

9. Ikea’s activity system map

11. The importance of strategic management to a small business

12. Strategic Management
Small companies that are prepared can create the disruptions that revolutionize their industries, and, in the process, create a competitive edge
Apple Computer and the iPod
Knowledge has become the critical factor of production
Intellectual capital counts!

13. A Major Shift . . .
. . . from financial capital to intellectual capital
Human
Structural
Customer

14. Strategic Management Is crucial to building a successful business
Involves developing a game plan to guide a company as it strives to accomplish its mission, goals, and objectives, and to keep it on its desired course

15. Why and how a small business must create a competitive advantage in the market

16. Strategic Management and Competitive Edge
Developing a strategic plan is crucial to gaining a competitive advantage, the aggregation of factors that sets a company apart from its competitors and gives it a unique position in the market
Example: Honest Tea

17. Key: Core Competencies
Unique set of skills, knowledge, or abilities that a company develops in key areas such as superior quality, customer service, innovation, team-building, flexibility, responsiveness, and others that allow it to vault past competitors

18. Key: Core Competencies
Core competencies are what a company does best
Durable, forming the building blocks for everything a company does
Difficult for competitors to duplicate
Must provide customers with a valuable perceived benefit
Best to rely on a natural advantage (often linked to a company’s “smallness”)

19. The 9 steps in the strategic planning process

20. Strategic Management Process
Step 1: Develop a vision and translate it into a mission statement
Step 2: Assess strengths and weaknesses
Step 3: Scan environment for opportunities and threats
Step 4: Identify key success factors

21. Strategic Management Process ...
(continued)
Step 5: Analyze competition
Step 6: Create goals and objectives
Step 7: Formulate strategies
Step 8: Translate plans into actions
Step 9: Establish accurate controls

22. Step 1: Develop a Vision and Create a Mission Statement
Vision – an expression of what an entrepreneur stands for and believes in; the “sixth sense that tells us why we make a difference in the world”
Vision is based on an entrepreneur’s values - 3 to 6 core values
A clearly defined vision:
Provides direction
Determines decisions
Motivates people

23. Step 1: Develop a Vision and Create a Mission Statement
Mission - addresses question:"What business are we in?”
A written expression of how the company will reflect the owner’s values, beliefs, and vision
Sets the tone for the entire company and guides the decisions people make

24. Step 1: Develop a Vision and Create a Mission Statement
Elements:
Purpose
Business we are in
Values
Example: Fetzer Vineyards
We are an environmentally and socially conscious grower, producer, and marketer of wines of the highest quality and value
Working in harmony with respect for the human spirit, we are committed to sharing information about the enjoyment of food and wine in a lifestyle of moderation and responsibility
We are dedicated to continuous growth and development of our people and our business

25. Step 1: Develop a Vision and Create a Mission Statement
GM’S VISION STATEMENT
GM’s vision is to be the world leader in transportation products and related services. We will earn our customers’ enthusiasm through continuous improvement driven by the integrity, teamwork, and innovation
of GM people.
FACEBOOK’S MISSION STATEMENT
Facebook's mission is to give people the power to share and make the world more open and connected.
SOUTHWEST AIRLINE’S VISION STATEMENT
Our vision is to expand our locations both domestic and overseas by being the largest and most profitable airline company to achieve both short and long-haul carriers efficiently and with low cost. Also to be an airline carrier that has the most productive workforce to guarantee the best flight possible for each and every passenger.

26. Step 2: Assess Company Strengths and Weaknesses
Positive internal factors that contribute to accomplishing the mission, goals, and objectives
Weaknesses
Negative internal factors that inhibit the company’s ability to accomplish its mission, goals, and objectives
Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall

27. Step 3: Scan for Opportunities and Threats
Positive external options the company can exploit to accomplish its mission, goals, and objectives
Threats
Negative external forces that inhibit the company’s ability to accomplish its mission, goals, and objectives

28. 65 Million Years Ago…
Today…movie theater owners – threats?

29. External Market Forces
Technological
Competitive
Economic
Political and Regulatory
Social and Demographic

30. Step 4: Identify Key Success Factors
Key success factors: factors that influence a company’s ability to compete successfully in an industry
The keys to unlocking the secrets of succeeding in a particular market segment

31. Step 5: Analyze Competitors
Study: Top execs say that their industries are becoming more competitive
Factors:
Smarter rivals
More price competition
Increased customer awareness

32. Competitor Analysis Direct competitors Significant competitors
Offer the same products and services
Customers often compare prices, features and deals among these competitors when they shop
Significant competitors
Offer some of the same or similar products or services
Product or service lines overlap but not completely
Indirect competitors
Offer same or similar products in only a small number of areas

33. Competitor Analysis Analyzing key competitors allows entrepreneurs to:
Avoid surprises from existing competitors’ new strategies and tactics
Identify potential new competitors and the threats they pose
Improve reaction time to competitors’ actions
Anticipate rivals’ next strategic moves
Improve ability to differentiate your company from competitors

34. Competitor Analysis Techniques do not require unethical behavior:
Monitor industry and trade publications
Talk to customers and suppliers
Listen to employees, especially sales representatives and purchasing agents
Attend trade shows and conferences

35. Competitor Analysis Techniques do not require unethical behavior:
Monitor competitors’ employment ads
Conduct searches for patents filed by competitors
Check EPA reports about manufacturing
Search databases for types of materials and equipment competitors are importing

36. Competitor Analysis Techniques do not require unethical behavior:
Study competitors' literature and "benchmark" their products and services
Get competitors' credit reports and SEC filings
Check out the local library
Use the World Wide Web to learn more about competitors
Visit competing businesses to observe their operations

37. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

38. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

39. Step 6: Create Company Goals and Objectives
Goals – broad, long-range attributes to be accomplished; general and abstract
“BHAGS” – one factor that sets apart successful companies from unsuccessful ones
Objectives – more detailed, specific targets of performance that are S.M.A.R.T.
Specific
Measurable
Assignable
Realistic (yet challenging)
Timely

40. Step 7: Formulate Strategies
Strategy
A “road map” that guides a company through a turbulent environment as it seeks to fulfill its mission, goals, and objectives
Focused on the key success factors identified in Step 4
Mission, goals, and objectives = Ends
Strategy = Means

41. The 3 basic strategies

42. Three Strategic Options
Three basic strategies:
Strategy?
Cost leadership
Differentiation
Focus

43. Three Strategic Options
Source of Competitive Advantage
Low-Cost
Position
Uniqueness Perceived
by the Customer
Differentiation
Low Cost
Industry
Target
Market
Differentiation
Focus
Niche
Cost
Focus

44. Cost Leadership
Goal: to be the low-cost producer in the industry or market segment
Advantages:
Reaching buyers who buy on the basis of price
Power to set the industry’s price floor
Works well when:
Buyers are sensitive to price changes
Competing firms sell the same commodity products
A company can benefit from economies of scale

45. Differentiation
Company seeks to build customer loyalty by positioning its goods or services in a unique or different fashion
Idea is to be better than the competition at something customers value
Key: Build basis for differentiation on a distinctive competence, something that a small company is uniquely good at doing in comparison to its competitors
Example: Pharmaca

46. Focus
Company selects one or more customer segments in a market, identifies customers’ special needs, wants, or interests, and then targets them with a product or service designed specifically for them
Strategy builds on differences among market segments

47. Focus
Rather than try to serve the total market, the company focuses on serving a niche (or several niches) within that market
Examples:
Amazing Butterflies
1570 Cinema Services
Freed of London

48. Step 8: Strategies into Action Plans
Create projects by defining:
Purpose
Scope
Contribution
Resource requirements
Timing

49. Step 9: Establish Accurate Controls
The plan establishes the standards against which actual performance is measured
Entrepreneur must:
Identify and track key performance indicators
Take corrective action

50. Balanced Scorecard
A set of measurements unique to a company that includes both financial and operational measures
Gives managers a quick yet comprehensive picture of a company’s overall performance

51. Balanced Scorecard Five Perspectives:
Customer: How do customers see us?
Internal Business: At what must we excel?
Innovation and Learning: Can we continue to improve and create value?
Financial: How do we look to shareholders?
Corporate Citizenship: What must we do to meet our social responsibility to society as a whole, the environment, the community, and other stakeholders?

52. Balanced Scorecard

53. Balanced Scorecard

54. Balanced Scorecard