Chapter 05 STRATEGIC MANAGEMENT 5-1

Learning Objectives You should learn to: 1,Explain the importance of strategic management 2,Describe the steps in the strategic management process 3,Explain SWOT analysis 4,Differentiate corporate-, business-, and functional-level strategies 5,Explain what competitive advantage is and why it’s important to organizations 6,Describe the five competitive forces 7,Identify the various competitive strategies 5-2

1,The Importance Of Strategic Management What Is Strategic Management? –A set of managerial decisions and actions that determines the long-run performance of an organization Purposes of Strategic Management –involved in many decisions that managers make –companies with formal strategic management systems have higher financial returns than companies with no such system –important in profit and not-for-profit organizations 5-3

2,The Strategic Management Process © Prentice Hall,

2,The Strategic Management Process (1) Identifying the Organization’s Current Mission, Objectives, and Strategies –mission - statement of the purpose of an organization important in profit and not-for-profit organizations important to identify the current goals in place 适当 and the current strategies being pursued 5-5

Components of a Mission Statement © Prentice Hall,

The Strategic Management Process (cont.) (2) Analyzing the Environment –successful strategies are aligned with the environment –examine both the specific and general environments to determine what trends and changes are occurring (3) Identifying Opportunities and Threats –opportunities - positive trends in the external environmental –threats - negative trends in the external environment 5-7

The Strategic Management Process (cont.) (4) Analyzing the Organization’s Resources and Capabilities –examine the inside of the organization –available resources and capabilities always constrain the organization in some way –core competence - a unique and exceptional capability or resource the organization’s major value-creating, competitive weapon 5-8

The Strategic Management Process (cont.) (5) Identifying Strengths and Weaknesses –strengths - activities the organization does well or any unique resource –weaknesses - activities the organization does not do well or resources it needs but does not possess –organization’s culture has its strengths and weaknesses strong culture - new employees easily identify the organization’s core competencies –may serve as a barrier to accepting change influence managers’ preferences 偏好 for certain strategies 3;SWOT analysis - analysis of the organization’s strengths, weaknesses, opportunities, and threats 5-9

Identifying the Organization’s Opportunities Organization’s Opportunities Organization’s Resources/Abilities Opportunities in the Environment 5-10

The Strategic Management Process (cont.) (6) Formulating Strategies –require strategies at the corporate, business, and functional levels of the organization –strategy formulation follows the decision- making process (7) Implementing Strategies –a strategy is only as good as its implementation (8) Evaluating Results –control process to determine the effectiveness of a strategy 5-11

4;Levels of Organizational Strategy © Prentice Hall,

Types Of Organizational Strategies （一） Corporate-Level Strategy –determines what businesses a company should be in or wants to be in 从 事 the direction that the organization is going the role that each business unit will play –Grand Strategy (1) Stability Strategy no significant change is proposed organization’s performance is satisfactory environment appears to be stable and unchanging few organizations today pursue this strategy 5-13

Types Of Organizational Strategies (cont.) (2)Growth Strategy seeks to increase the level of the organization’s operations concentration - growth through direct expansion of organization’s own business operations 集中方式 vertical integration 纵向一体化 –backward 后向一体化 - become your own supplier –forward 前向一体化 - become your own distributor horizontal integration 横向一体化 - grow by combining with other organizations in the same industry 5-14

Types Of Organizational Strategies (cont.) related diversification 相关多元化 - grow by merging with or acquiring firms in different, but related industries –“strategic fit 战略一致性 ” unrelated diversification 非相关多元化 - grow by merging with or acquiring firms in different and unrelated industries 5-15

Types Of Organizational Strategies (cont.) (3) Retrenchment 紧缩 Strategy retrenchment- designed to address 处理 organizational weaknesses that are leading to performance declines –intended to: 有助于 »stabilize operations »revitalize 激活 organizational resources and capabilities »prepare to compete once again 5-16

SWOT Analysis And Grand Strategies Corporate Growth Strategies Corporate Stability Strategies Corporate Retrenchment Strategies Abundant Environmental Opportunities Critical Environmental Threats Corporate Stability Strategies Critical Weaknesses Valuable Strengths Environmental Status Firm Status 5-17

Types of Organizational Strategies (cont.) Corporate-Level Strategy (cont.) –Corporate Portfolio 业务组合 Analysis - used when corporate strategy involves a number of business 业务 Boston Consulting Group (BCG) matrix 矩阵 - provides a framework for understanding diverse businesses –helps managers establish priorities 优先目标 for making resource allocation decisions –businesses classified in terms of »market share »anticipated market growth 5-18

The BCG Matrix Stars Cash Cows Dogs Question Marks Market Share High Low High Low Market Growth Rate 5-19

Types of Organizational Strategies (cont.) Corporate-Level Strategy (cont.) –BCG matrix (cont.) strategic implications of the matrix –cash cows – stability strategies –stars - require heavy investment Growth Strategies –question marks - two strategies »A partial business will be invested to transform them into stars »A another partial business takes the retrenchment strategies »dogs - sold off or liquidated 5-20

5,Explain what competitive advantage is and why it’s important to organizations （二） Business-Level Strategy 事业层战略 –determines how an organization should compete in each of its businesses –strategic business units - independent businesses that formulate their own strategies –Role of Competitive Advantage competitive advantage - sets an organization apart by 通过 providing a distinct edge 明显的优势 –comes from the organization’s core competencies –not every organization can transform core competencies into a competitive advantage –once created, must be able to sustain it 5-21

6,Describe the five competitive forces –Competitive Strategies Michael Porter - industry analysis based on five competitive forces 竞争力 –Threat of new entrants 加入者 - affected by barriers to entry –Threat of substitutes 替代 - affected by buyer loyalty and switching costs –Bargaining power of buyers - affected by number of customers, availability 可获得 性 of substitute products 5-22

Business-Level Strategy (cont.) –Bargaining power of suppliers - affected by degree of supplier concentration –Existing rivalry - affected by industry growth rate, demand for firm’s product or service, and product differences 6,Describe the five competitive forces 5-23

Current Rivalry Industry Competitors Forces In The Industry Analysis Suppliers New Entrants Buyers Substitutes Threat of New Entrants Threat of Substitutes Bargaining Power or Buyers Bargaining Power or Suppliers 5-24

7,Identify the various competitive strategies Business-Level Strategy (cont.) –Competitive strategies (cont.) Porter’s three generic 一般 strategies （ 1 ） cost leadership - goal is to become the lowest-cost producer in the industry »tries to identify efficiencies in all operations »overhead kept to a minimum »product or service must be perceived to be of comparable quality to that offered by competitors 产品或服务在质量上必须不低于竞争对手 5-25

7,Identify the various competitive strategies （ 2 ） differentiation 差异化战略 - offer unique products that are widely valued by customers »sets the firm apart from competitors »differentiation based on quality, service, product design, brand image »customers must be willing to pay a price premium 溢价 that exceeds the cost of differentiation 5-26

7,Identify the various competitive strategies （ 3 ） focus 聚焦战略 - aims at a cost advantage or differentiation advantage in a narrow segment 市场区隔上 »no attempt to serve the broad market »feasibility 可行性 of strategy depends on the size of the segment and the ability of the firm to support the cost of focusing 5-27

Requirements for Successfully Pursuing Porter’s Competitive Strategies © Prentice Hall,

Functional-Level Strategy (cont.) –used to support the business-level strategy –creates an appropriate supporting role for each functional area of the organization e.g., manufacturing, marketing, human resources 5-29