1. Introduction to Business Concepts
Unit 3: Strategy
Prepared by: Lecturer, Ouch Phanhavisoth

2. Strategy What is strategy?
Strategy is the direction and scope of an organization over the long-term:
- To achieves advantage for the organization through its configuration of resources within a challenging environment
- To meet the needs of markets
- To fulfill stakeholder expectations

3. Vision, Strategy, Planning and Tactics
Vision: - What you want the organization to be; your dream. - A vision must be sufficiently clear and concise that everyone in the organization understands it and can buy into it with passion.

4. (Cont)
Strategy - What you are going to do to achieve your vision - Your strategy is one or more plans that you will use to achieve your vision.

5. (Cont)
Planning - Is the process of thinking about and organizing the activities required to achieve a desired goal. - Planning is the conscious, systematic process of making decisions about goals and activities that an individual, group, work unit, or organization will pursue in the future.

6. (Cont)
Tactics - How you will achieve your strategy and when - Your tactics are the specific actions, sequences of actions, and schedules you will use to fulfill your strategy.

7. The basic planning process

8. (Cont) Step 1: Situational Analysis
Example: Clothes shop
- What kind of clothes should I sell?
- Where can I establish my business?
- who will buy my clothes?
Step 2: Alternative Goals and Plans
- I will sell adult clothes or kid clothes?
- I will go and get the clothes in Thailand or China?
- How can I achieve my goals?

9. (Cont)
Step 3: Goal and Plan Evaluation - If I sell adult clothes, will there be buyers or if I sell kid clothes, will there be customers according to my situation? - If I go to gather the clothes in Thailand or China, what will be the cost and quality from those two countries? - If I face any risks, how will I solve it?

10. (Cont)
Step 4: Goal and Plan Selection - I will sell adult clothes - I will go to China - I will ask my father for help if I face any risks Step 5: Implementation The owner has selected the goals and plans, he/she must implement the plans designed to achieve the goals.

11. (Cont)
Step 6: Monitor and Control - Income statement - Lost and profit account - Should I continue or dis-continue? - Should I keep my business the same or update it or completely change my business?

12. Strategic Management Process
Step 1: Establishment of Mission, Vision, and Goals Step 2: Analysis of External Environment/PESTLE Analysis Step 3: Analysis of Internal Environment Step 4: SWOT Analysis Step 5: Strategy Implementation Step 6: Strategic Control

13. Step 1: Establishment of Mission, Vision, and Goals

14. Step 2: Analysis of External Environment/PESTLE Analysis
describes a framework of macro-environmental factors used in the environmental scanning component of strategic management. They’re included:
Political:  factors are how and to what degree a government intervenes in the economy.
Economic: factors include economic growth, interest rates, exchange rates and the inflation rate.
Social: factors include the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety.

15. (Cont)
4. Technological: factors include technological aspects such as R&D activity, automation, technology incentives and the rate of technological change. 5. Environmental: factors include ecological and environmental aspects such as weather, climate, and climate change. 6. Legal: factors include discrimination law, consumer law, antitrust law, employment law, and health and safety law.

16. Step 3: Analysis of Internal Environment
The internal business environment has a direct impact on the business such as the Company Structure, Culture, Resources, Financial Analysis, Marketing Research, HRM and Competencies.

17. 1. Company Structure

18. 2. Culture
The culture of internal business environment is a collection of beliefs, values and assumptions shared by members of an organization, which is often taken for granted.

19. 3. Resource
Company Resources are Profitability, sales, product quality brand associations, existing overall brand, relative cost of this new product, employee capability.

20. 4. Financial Analysis
Examines financial strengths and weaknesses through financial statements such as a balance sheet and an income statement or profit and lost account.

21. 5. Marketing Research
While it applies to a wide range of situations, marketing research gives decision-makers the information they need to find solutions to business problems, such as the following:
1. How satisfied are customers with your product and service offering?
2. How will customers react to a decision to change a price or product?
3. What are service representatives hearing from customers?
4. What responses to competition will bring you success in a given market?
Simply put, the solution to most business problems can be found through marketing research.

22. 6. Human Resource Management
Examines strengths and weakness of all levels of management and employees and focuses on key human resources activities, including recruitment, Selection, Placement, Training and development, relationship, and quality of work.

23. 7.Competencies
The next last of internal business environment is Identifying resources and competencies that your company owns. It can be tangible (i.e. financial), intangible (i.e. reputation) or human (i.e. skills & knowledge).

24. Step 5: Strategy Implementation
As with any plan, formulating the appropriate strategy is not enough. Strategic managers also must ensure that the new strategies are implemented effectively and efficiently.

25. Step 6: Strategic Control
The final component of the strategic management process is strategic control. A Strategic Control System is designed to support managers in evaluating the organizations progress with its strategy and, when discrepancies exist, taking corrective action

26. Five Forces Model
Five forces interact with one another to determine the setting in which companies compete and, hence, the attractiveness of the industry:
1.Rivalry among companies in the industry
2.Bargaining power of suppliers
3.Bargaining power of buyers
4.Threat of new entrants
5.Threat of substitute products or services

27. (Cont)

28. Rivalry among existing firms
Strongest of the five forces
Industry is more attractive when:
1. Number of competitors is large, or, at the other extreme, quite small
2. Competitors are not similar in size or capacity
3. Industry is growing fast
4. Opportunity to sell a differentiated Produce or service exists

29. Bargaining Power of Suppliers
The greater the leverage of suppliers, the less attractive the industry.
Industry is more attractive when:
1. Many suppliers sell a commodity product
2. Switching costs are available
3. Items account for a small portion of the cost of finished products

30. Bargaining power of buyers
Buyers’ influence is high when number of customers is small and cost of switching to a competitor’s product is low.
Industry is more attractive when:
1. Customers’ switching costs are high
2. Number of buyers is large
3. Customers want differentiated products
4. Customers find it difficult to collect information for comparing suppliers
5. Items account for a small portion of customers’ finished products

31. Threat of New Entrants
The larger the pool of potential new entrants, the less attractive an industry is.
Industry is more attractive to new entrants when:
1. Advantages of economies of scale are absent.
2. Capital requirements to enter are high
3. Buyers are not loyal to existing brands
4. Government’s business requirements are restricted to the entrance of new companies

32. Threat of Substitutes
Substitute products or services can turn an industry on its head.
Industry is more attractive to new entrants when:
1. Quality substitutes are not readily available
2. Prices of substitute products are not significantly lower than those of the industry’s products
3. Buyers’ switching costs are high