1. 1 Should we import? Should we import? Will NAFTA affect our firm? Will NAFTA affect our firm? Should we export? Should we export? Should I learn a foreign language? Should I learn a foreign language? Global Considerations Impact Virtually All Strategic Decisions ©1999 Prentice Hall

2. 2 Should we outsource MIS? Should we outsource MIS? Should we buy our sales staff laptops? Should we buy our sales staff laptops? Should we upgrade our PCs? Should we upgrade our PCs? Should we set up a Web site? Should we set up a Web site? Information Technology Has Become A Vital Strategic Management Tool ©1999 Prentice Hall

3. 3 Should we recycle? Should we recycle? Will Congress pass tougher laws? Will Congress pass tougher laws? Should we burn low-sulfur coal? Should we burn low-sulfur coal? Is our firm environmentally friendly? Is our firm environmentally friendly? Preserving the Natural Environment is an Important Strategic Issue ©1999 Prentice Hall

4. 4 The Stages and Activities in the Strategic Management Process StagesActivities Strategy formulation Strategy evaluation Strategy implementation Conduct research Establish annual objectives Review internal and external factors Integrate intuition with analysis Devise policies Measure performance Make decisions Allocate resources Take corrective action ©1999 Prentice Hall

5. 5 The Basis for Good Strategic Decisions Intuition + Analysis Effective Strategic Decisions ©1999 Prentice Hall

6. 6 Ten Key External Forces Economic Social Cultural Demographic Environmental Political Legal Governmental Technological Competitive ©1999 Prentice Hall

7. 7 Fourteen Key Internal Forces Management Marketing Distribution Production/ Operations Production/ Operations Research & Development Purchasing Manufacturing ©1999 Prentice Hall

8. 8 Key Internal Forces (cont.) Finance/Accounting Packaging Computer Information Systems Vendor Relations Promotion Human Resource Management Employee/ Manager Relations ©1999 Prentice Hall

9. 9 Business Mission Strategy Formulation External Opportunities and Threats Internal Strengths and Weaknesses Keys to Formulating Strategies ©1999 Prentice Hall

10. 10 A Comprehensive Strategic Management Model Develop Mission Statement Develop Mission Statement Establish Long- term Objectives Establish Long- term Objectives Generate, Evaluate, and Select Strategies Generate, Evaluate, and Select Strategies Establish Policies and Annual Objectives Establish Policies and Annual Objectives Allocate Resources Allocate Resources Measure and Evaluate Performance Measure and Evaluate Performance Perform External Audit Perform External Audit Perform Internal Audit Perform Internal Audit Feedback Strategy FormulationStrategy ImplementationStrategy Evaluation ©1999 Prentice Hall

11. 11 Benefits of Strategic Management - Improved Communication - Increased Understanding - Enhanced Commitment - Greater Productivity - More Effective Strategies - Higher Productivity - Allow Firm to Influence, Initiate, and Anticipate - Be Proactive Rather Than Reactive ©1999 Prentice Hall

12. 12 The Communications Benefits of Engaging In Strategic Management Managers from all functional areas listen and discuss their views in strategic management meetings. This interaction yields learning, appreciation, and understanding among managers who otherwise do not communicate with each other ©1999 Prentice Hall

13. 13 Porter’s Generic Strategies Defined Cost Leadership A Strategy Aimed at Producing Standardized Products at Low Per-Unit Cost for Consumers Who are Price-Sensitive Differentiation A Strategy Aimed at Producing Products and Services Considered Unique Industrywide and Directed at Consumers Who are Relatively Price-Insensitive ©1999 Prentice Hall

14. 14 Porter’s Generic Strategies (cont.) Focus A Strategy Aimed at Producing Products and Services That Fulfill the Needs of Small Groups of Customers ©1999 Prentice Hall

15. 15 Why is a Mission Statement Important? - To Insure Unanimity of Purpose - To Provide a Basis for Allocating Resources - To Serve as a Focal Point for Individuals - To Reconcile Differences Among Stakeholders - To Resolve Divergent Views Among Managers - To Arouse Positive Feelings About the Firm - To Provide a Basis for Goals and Strategies - To Provide Direction ©1999 Prentice Hall

16. 16 Mission Statement Answers the Question “What is Our Business?” “What is Our Business?” Vision Statement Answers the Question “What Do We Want to Become?” “What Do We Want to Become?” Vision Versus Mission ©1999 Prentice Hall

17. 17 Components of a Mission Statement Customers Products or Services Markets Technology Concern for Survival and Growth Philosophy Self-Concept Concern for Public Image Concern for Employees ©1999 Prentice Hall

18. 18 Key External Forces Economic Governmental Demographic Environmental Political Social Legal Cultural Technological Competitive ©1999 Prentice Hall

19. 19 Importance of External Environment on Firm Behavior Changes in the External Environment Changes in Consumer Demand Changes in the Products and Services a Firm Offers ©1999 Prentice Hall

20. 20 Competitors Suppliers Creditors Customers Employees Communities Managers Stockholders Labor unions Governments Trade associations Special interest groups Products Services Markets Natural environment Competitors Suppliers Creditors Customers Employees Communities Managers Stockholders Labor unions Governments Trade associations Special interest groups Products Services Markets Natural environment AN ORGANIZATION’S OPPORTUNITIES AND THREATS Economic Forces Social, cultural, demographic, and environmental forces Technological forces Competitive forces Economic Forces Social, cultural, demographic, and environmental forces Technological forces Competitive forces Relationship Between Key External Forces and an Organization ©1999 Prentice Hall

21. 21 Who are our competitors? Who are our competitors? Where are our competitors located? Where are our competitors located? What are Competitors’ Strengths? What are Competitors’ Strengths? What are Competitors’ Objectives? What are Competitors’ Objectives? How Vulnerable are we to our Competitors’ Strategies? How Vulnerable are we to our Competitors’ Strategies? What are Competitors’ Weaknesses? What are Competitors’ Weaknesses? Key Questions About Competitors ©1999 Prentice Hall

22. 22 Porter’s “Five-Forces” Model of Competition Potential development of substitute products Potential development of substitute products Rivalry among competing firms Rivalry among competing firms Potential entry of new competitors Potential entry of new competitors Bargaining power of suppliers Bargaining power of suppliers Bargaining power of consumers Bargaining power of consumers ©1999 Prentice Hall

23. 23 A Definition of Distinctive Competencies A firm’s strengths that cannot be easily matched or imitated by competitors ©1999 Prentice Hall

24. 24 Developing Strategies That Use An Organization’s Strengths To Take full advantage of external opportunities Reduce the effects of external threats Improve an organization’s weaknesses Formulating Strategies Based on Key Internal Factors ©1999 Prentice Hall

25. 25 The Management Functions PlanningOrganizing MotivatingStaffing Controlling ©1999 Prentice Hall

26. 26 The Three Levels of Planning Top Management CEO President Vice-Presidents General Managers Division Managers Middle Management Divisional Managers Product Line Managers Department Managers Plant Managers Lower Management Functional Managers Unit Managers Supervisors Foreman Typical Planning Horizon Two to five years Six months to two years One week to six months ©1999 Prentice Hall

27. 27 Why Are Clear Objectives Needed? To Provide DirectionTo Provide Purpose To Allow SynergyTo Aid in Evaluations To Establish PrioritiesTo Reduce Uncertainty To Minimize ConflictsTo Stimulate Exertion To Allocate ResourcesTo Design Jobs To Motivate Managers & Employees ©1999 Prentice Hall

28. 28 The TOWS Matrix (Figure 6-3) List strengthsList weaknesses STRENGTHS - SWEAKNESSES - W OPPORTUNITIES - OSO STRATEGIESWO STRATEGIES THREATS - TST STRATEGIES WT STRATEGIES List opportunities Use strengths to take advantage of opportunities Overcome weaknesses by taking advantage of opportunities List threats Use strengths to avoid threats Minimize weaknesses and avoid threats ©1999 Prentice Hall

29. 29 The BCG Matrix Relative Market Share Position in the Industry Industry Sales Growth Rate (Percent) High +20 Medium 0 Low -20 High Medium Low 1.0.50 0.0 Question Marks (I) Dogs (IV) Stars (II) Cash Cows (III) ? ©1999 Prentice Hall

30. 30 Why Should We Begin of Expand Our Foreign Operations? 95% of the world’s population lives outside the U.S. Gain economies of scale Use excess capacity Capitalize on lower taxes, wage rates, inflation Locate near natural resources NAFTA., GATT, NATO English Channel tunnel is completed ©1999 Prentice Hall

31. 31 Some Attributes of American Managers Compared to Foreign Managers - Have a Lower Tolerance for Silence - Are More Action-Oriented - Place Greater Emphasis on Short-Term Results - Use First Names More Quickly in Doing Business - Place a Higher Priority on Time - Place More Significance on Material Wealth - Emphasize Competitiveness and Individualism More than Modesty, Team Spirit, & Patience ©1999 Prentice Hall

32. 32 Comparing Management Styles Across Countries West Germany Switzerland Spain Italy Denmark Japan France Netherlands India United States Great Britain High Conformity High Individualism ©1999 Prentice Hall

33. 33 Marketing Variables of Central Importance to Strategy Implementation Market Segmentation The subdividing of a market into distinct subsets of customers according to need and buying habits. Product Positioning Entails developing schematic representations that reflect how a firm’s products or services compare to competitors’ on dimensions most important to success in its industry. ©1999 Prentice Hall

34. 34 Establish a World Wide Web Site Use Newsgroups Use E-Mail Information Technology Perspective - Three Ways to Advertise on the Internet ©1999 Prentice Hall

35. 35 Financial Implementation Tools Pro Forma Financial Statements Pro forma (projected) financial statement analysis is a central strategy-implementation technique because it allows an organization to examine the expected results of various actions and approaches Financial Budgets A financial budget is a document that details how funds will be obtained and spent for a specific period of time. ©1999 Prentice Hall

36. 36 Activity One: Review Underlying Bases of Strategy Prepare revised Internal Factor EvaluationPrepare revised External FactorMatrix Compare revised versus existing InternalCompare revised versus existing ExternalEvaluation Matrix Do significant differences occur? No Activity Two: Measure Organizational Performance: Compare planned versus actual progress toward meeting stated objectives Do significant differences occur? No Continue present course Yes Activity Three: Take Corrective Actions A Strategy-Evaluation Framework ©1999 Prentice Hall

37. 37 Information Technology Perspective on How to Change Your Business Location Using the Internet 1. Establish a World Wide Web Site 2. Join a Cybermall ©1999 Prentice Hall

38. 38 Make Comparisons to Past Periods and to Industry Averages for the Company By Product By Division By Department By Geographic Area By Salesperson By Strategic Business Unit By Product By Division By Department By Geographic Area By Salesperson By Strategic Business Unit Measure Organizational Performance ©1999 Prentice Hall