1. THE STRATEGIC MANAGEMENT PROCESS [or How to Analyze a Case]
Dr. Laura Whitcomb
Mgmt 497

2. Strategic Management Definition
= The process whereby managers establish an organization’s long-term direction. This involves:
1) Setting Mission & Goals
2) Strategy Formation
--internal capabilities
--external environment
--selection of strategy
3) Strategy Implementation
4) Strategy Evaluation

3. How to Analyze a Case Mission/Vision & Objectives Current Strategy
Industry Analysis
S.W.O.T. Analysis
Recommendations

4. MISSION Defined
Answers the question “What business are we in?” or “Why do we exist?”
--Customer Needs: What is being satisfied?
--Customer Groups: Who is being satisfied?
--Distinctive Competencies: How are customer needs being satisfied?

5. Pepsico vs. Coke?
To be the world's premier consumer products company focused on convenient foods and beverages. 
To Refresh the World...in body, mind, and spirit.
To Inspire Moments of Optimism... through our brands and our actions.
To Create Value and Make a Difference... everywhere we engage.

6. Vision Statements Future-oriented; transformative
Mission = what is; vision = what will be
Companies may have mission or vision or both
Mission and/or vision often accompanied by statement of company values

7. GOALS = a desired future state that a company attempts to realize.
Should be:
- precise & measurable
- addressing important issues
- challenging but realistic
- set for a specific time period
- consistent with each other

8. Types of Goals Financial Customer Internal Process Learning & growth
Profitability
Revenue growth
Long-term shareholder value
Customer
Product/service attributes; relationship; image
Internal Process
Operations, customers, innovation
Corporate social responsibility
Learning & growth
Human, information, & organization resources

10. Levels of Strategy & Organization Structure
Corporate Strategy
------>Corporate Head Office
Business Strategy
------>Business Divisions
Functional Strategy
------>R&D, HR, Finance, Operations, Marketing/Sales

11. Corporate Strategy Generic Alternatives/Grand Strategies
Stability
Expansion
Retrenchment
Combination

12. Expansion/Retrenchment Generic Choices
How?
Internal
External
Alliances
What?
Vertical integration
Horizontal integration
Diversification: related/unrelated

13. Nestle’s Corporate Strategy
2001 Acquired Purina pet food
2002/5 Acquired Dreyer’s Ice Cream
2006 Acquired Novartis nutrition business & Jenny Craig diet products
2007 Acquired Gerber baby foods
WSJ 7/23/07
From Swiss retailers to US institutional investor pressures
29% of L’Oreal

14. Porter’s Generic Competitive Strategies
Purpose: achieve above-average long-run ROI for your industry.
Competitive Advantage
Cost Leadership
Differentiation
Competitive Scope
Broad Target
Narrow Target (Focus/Niche)

15. Porter’s Generic Competitive Strategies

16. Tesla Goals & Strategy (summer 2007) Auto co. based in Silicon Valley
Begin producing $98,000 electric sports car in Oct. 2007
Tesla engineers focus on the battery, computer software, & proprietary motor; outsource the rest
Uses lithium ion batteries, used in laptops, vs. nickel metal hydride
Development center in Detroit, with engineers hired away from Big 3
Future: Sedan called White Star, $55-68,000; in 5 years, Blue Star, $30,000
BusinessWeek, 7/30/07, pp

17. Corporate Culture
= Collection of beliefs, expectations, and values learned and shared by members and transmitted from one generation of employees to another.
= Collective mental programming.

18. Functions of Corporate Culture
Conveys a sense of identity
Generates employee commitment
Adds to organizational stability
Serves as a frame of reference

19. Industry Analysis: Porter’s 5 Competitive Forces
Purpose: understand why some industries have higher profit margins & what factors can change long-run industry profitability.
Risk of New Entry
Rivalry Among Established Firms
Bargaining Power of Buyers
Bargaining Power of Suppliers
Threat of Substitute Products

20. ENTRY Barriers Brand Loyalty Absolute Cost Advantages
patents
access to raw materials
superior production techniques
Economies of Scale
Government Regulation

21. Factors Affecting Intensity of RIVALRY
Competitive Structure
number of firms
relative market share
Demand conditions
growth
decline
Exit barriers

22. Factors Affecting BARGAINING POWER
Number of firms in buyer vs. supplier industries
Quantity or % of total orders
Switching costs
Standardization vs. specialization of input
Threat of vertical integration

23. SUBSTITUTES
= products from OTHER industries that serve consumers’ needs in a way that is similar to those being served by your industry.
Example: coffee vs. tea vs. soft drinks
NOTE: Substitutes are very difficult to monitor, because they can involve technological changes in industries that did not pose any threat in the past.

24. Company Situation Analysis
INTERNAL: Strengths & Weaknesses
financial position: relative & changes over time
functional capabilities: sustainable? distinctive?
EXTERNAL: Opportunities & Threats
demographic & socio-cultural changes
economic & political/legal changes
industry & technological changes

25. RECOMMENDATIONS Shift from Analysis--->Synthesis
Is a fundamental shift in strategy required or not?
How do your recommendations line up with your SWOT analysis?
Is this a feasible, creative solution that is supported by your analysis?