Presentation on theme: "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."— Presentation transcript:
1 STRATEGIC MANAGEMENTStrategy 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 neglectedSun Tzu, The Art of War
2 Contents What is strategy? (by Michael E Porter) The importance of strategic management to a small businessWhy and how a small business must create a competitive advantage in the marketThe 9 steps in the strategic planning processThe 3 basic strategiesThe importance of control: the balance scorecardGive 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.
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 playersWilliams had children to fulfill a specific goalRichard Williams has taken careful account of their different physical characteristics as well as their separate vulnerabilities and psychological needs
8 What is strategy? Operational effectiveness is not strategy Strategy rests on unique activitiesThe essence of strategy is choosing to perform activities differently than rivals do.A sustainable strategic position requires trade-offsFit Drives Both Competitive Advantage and Sustainability:Simple consistencyRe-inforcingOptimization of effortsRediscovering strategyAt general management’s core is strategy: defining a company’s position, making trade-offs, and forging fit among activities.
11 The importance of strategic management to a small business
12 Strategic ManagementSmall companies that are prepared can create the disruptions that revolutionize their industries, and, in the process, create a competitive edgeApple Computer and the iPodKnowledge has become the critical factor of productionIntellectual capital counts!
13 A Major Shift . . .. . . from financial capital to intellectual capitalHumanStructuralCustomer
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 marketExample: 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 bestDurable, forming the building blocks for everything a company doesDifficult for competitors to duplicateMust provide customers with a valuable perceived benefitBest to rely on a natural advantage (often linked to a company’s “smallness”)
20 Strategic Management Process Step 1: Develop a vision and translate it into a mission statementStep 2: Assess strengths and weaknessesStep 3: Scan environment for opportunities and threatsStep 4: Identify key success factors
21 Strategic Management Process ... (continued)Step 5: Analyze competitionStep 6: Create goals and objectivesStep 7: Formulate strategiesStep 8: Translate plans into actionsStep 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 valuesA clearly defined vision:Provides directionDetermines decisionsMotivates 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 visionSets the tone for the entire company and guides the decisions people make
24 Step 1: Develop a Vision and Create a Mission Statement Elements:PurposeBusiness we are inValuesExample: Fetzer VineyardsWe are an environmentally and socially conscious grower, producer, and marketer of wines of the highest quality and valueWorking 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 responsibilityWe 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 STATEMENTGM’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 innovationof GM people.FACEBOOK’S MISSION STATEMENTFacebook's mission is to give people the power to share and make the world more open and connected.SOUTHWEST AIRLINE’S VISION STATEMENTOur 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.
27 Step 3: Scan for Opportunities and Threats Positive external options the company can exploit to accomplish its mission, goals, and objectivesThreatsNegative 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 TechnologicalCompetitiveEconomicPolitical and RegulatorySocial and Demographic
30 Step 4: Identify Key Success Factors Key success factors: factors that influence a company’s ability to compete successfully in an industryThe 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 competitiveFactors:Smarter rivalsMore price competitionIncreased customer awareness
32 Competitor Analysis Direct competitors Significant competitors Offer the same products and servicesCustomers often compare prices, features and deals among these competitors when they shopSignificant competitorsOffer some of the same or similar products or servicesProduct or service lines overlap but not completelyIndirect competitorsOffer 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 tacticsIdentify potential new competitors and the threats they poseImprove reaction time to competitors’ actionsAnticipate rivals’ next strategic movesImprove ability to differentiate your company from competitors
34 Competitor Analysis Techniques do not require unethical behavior: Monitor industry and trade publicationsTalk to customers and suppliersListen to employees, especially sales representatives and purchasing agentsAttend trade shows and conferences
35 Competitor Analysis Techniques do not require unethical behavior: Monitor competitors’ employment adsConduct searches for patents filed by competitorsCheck EPA reports about manufacturingSearch 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 servicesGet competitors' credit reports and SEC filingsCheck out the local libraryUse the World Wide Web to learn more about competitorsVisit competing businesses to observe their operations
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 onesObjectives – more detailed, specific targets of performance that are S.M.A.R.T.SpecificMeasurableAssignableRealistic (yet challenging)Timely
40 Step 7: Formulate Strategies StrategyA “road map” that guides a company through a turbulent environment as it seeks to fulfill its mission, goals, and objectivesFocused on the key success factors identified in Step 4Mission, goals, and objectives = EndsStrategy = Means
42 Three Strategic Options Three basic strategies:Strategy?Cost leadershipDifferentiationFocus
43 Three Strategic Options Source of Competitive AdvantageLow-CostPositionUniqueness Perceivedby the CustomerDifferentiationLow CostIndustryTargetMarketDifferentiationFocusNicheCostFocus
44 Cost LeadershipGoal: to be the low-cost producer in the industry or market segmentAdvantages:Reaching buyers who buy on the basis of pricePower to set the industry’s price floorWorks well when:Buyers are sensitive to price changesCompeting firms sell the same commodity productsA company can benefit from economies of scale
45 DifferentiationCompany seeks to build customer loyalty by positioning its goods or services in a unique or different fashionIdea is to be better than the competition at something customers valueKey: Build basis for differentiation on a distinctive competence, something that a small company is uniquely good at doing in comparison to its competitorsExample: Pharmaca
46 FocusCompany 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 themStrategy builds on differences among market segments
47 FocusRather than try to serve the total market, the company focuses on serving a niche (or several niches) within that marketExamples:Amazing Butterflies1570 Cinema ServicesFreed of London
48 Step 8: Strategies into Action Plans Create projects by defining:PurposeScopeContributionResource requirementsTiming
49 Step 9: Establish Accurate Controls The plan establishes the standards against which actual performance is measuredEntrepreneur must:Identify and track key performance indicatorsTake corrective action
50 Balanced ScorecardA set of measurements unique to a company that includes both financial and operational measuresGives 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?