1. Strategic Management: Planning for Long-Term Success
Chapter Seven
Strategic Management: Planning for Long-Term Success

2. Chapter Objectives
Define the term strategic management and explain its relationship to strategic planning, implementation, and control.
Explain the concept of synergy and identify four kinds of synergy.
Describe Porter’s model of generic competitive strategies.
Identify and explain the major contribution the business ecosystems model makes to strategic thinking.

3. Chapter Objectives (cont’d)
Identify seven basic Internet business models and four Internet strategy lessons.
Identify and describe the four steps in the strategic management process.
Explain the nature and purpose of SWOT analysis.
Describe the three types of forecasts.

4. Why All Managers Need an Understanding of Strategic Management
A strategic orientation encourages far-sightedness in managers.
Employees who think in strategic terms tend to understand better how top managers think and why they make the decisions they do.
The trend toward greater teamwork and cooperation throughout the planning cycle is eroding the traditional distinction between those who plan and those who implement plans.

7. Strategic Management = Strategic Planning + Implementation + Control
The ongoing process of ensuring a competitively superior fit between an organization and its changing environment
Includes budget control, long-range planning, and strategic planning
Merges strategic planning, implementation, and control to create a dynamic process
Requires every employee to consider the “big picture”
Involves strategy innovation in rethinking the basis for competition (business model) in the industry

8. Strategic Management = Strategic Planning + Implementation + Control (cont’d)
Strategy
An integrated externally oriented perception of how to achieve the organization’s mission
Strategic Planning
The process of determining how to pursue the organization’s long-term goals with resources expected to be available

9. Thinking Strategically (Including E-Business Strategies)
Synergy
The concept that the whole is greater than the sum of the parts
Types of Synergy
Market synergy: Extending products to new markets
Cost synergy: Savings from combinations of common-base operations, resources, and facilities
Technological synergy: The transfer and application of technologies to new markets
Management synergy: Complementary skills that make for more effective overall management

10. Porter’s Generic Competitive Strategies
Model’s Competitive Variables
Competitive advantage: How to compete in a market
Competitive scope: How broad of a market to target
Cost Leadership Strategy
Having the lowest overall cost in a market to provide a competitive advantage in pricing over competitors
Differentiation Strategy
Providing unique and superior value for the customer that builds brand loyalty

11. Figure 7.1: Porter’s Generic Competitive Strategies
Source: Reprinted with the permission of The Free Press, a division of Simon & Schuster from THE COMPETITIVE ADVANTAGE OF NATIONS by Michael E. Porter. Copyright © l990, 1998 by Michael E. Porter.

12. Porter’s Generic Competitive Strategies (cont’d)
Cost Focus Strategy
Attempting to gain a competitive edge in a narrow (or regional) market segment by controlling (competitively dominating) the segment
Focused Differentiation
Achieving a competitive edge by delivering a superior product and/or service to a limited audience

13. Business Ecosystems Business Ecosystem
A business ecosystem is an economic community of organizations and all their stakeholders, including suppliers and customers.
Organizations need to be as good at cooperating as they are at competing if they are to succeed.
Coevolving: Key organizations selectively cooperate and compete to achieve both their individual and collective goals, which they could not achieve on their own.
Greater strategic cooperation is needed to foster the the spread of realized innovation.

14. E-Business Strategies for the Internet
Internet Strategy Lessons
The Internet changes everything, but it doesn’t change everything overnight.
Some of the old rules still apply. An investment should still either save you money or make you money.
First, we overestimated the Internet; don’t underestimate it now. Its long-term impact will likely exceed expectations.
Evolving Internet technologies are still emerging.
There is no one-size-fits-all Internet strategy.

16. E-Business Strategies for the Internet (cont’d)
Internet Strategy Lessons (cont’d)
Customer loyalty is built with reliable brand names and “sticky” web sites.
Bricks and clicks: Blending the best of two worlds
E-business partnering should not dilute strategic control or ethical standards.

17. The Strategic Management Process
Four Steps in the Strategic Management Process
Formulation of a grand strategy
Formulation of strategic plans
Implementation of strategic plans
Strategic control

18. Figure 7.2: The Strategic Management Process

19. Formulation of a Grand Strategy
A general explanation of how the organization’s mission is to be accomplished
Situational Analysis
Finding the organization’s niche by performing a SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis to match unfolding opportunities with resources being acquired
Capability profile: Identifying the organization’s strengths and weaknesses

20. Figure 7.3: Determining Strategic Direction Through Situational (SWOT) Analysis

21. Formulation of a Grand Strategy (cont’d)
Situational Analysis (cont’d)
Key capabilities for today’s companies
Quick response to market trends
Rapid product development
Rapid production and delivery
Continuous cost reduction
Continuous improvement of processes, human resources, and products
Greater flexibility of operations

22. Formulation of a Grand Strategy (cont’d)
The Need for Speed
Speed has become an important competitive advantage.
Speed involves more than just doing the same old things faster.
Reengineering: Radically redesigning the entire business cycle for greater strategic speed

23. Criteria for Formulating Strategic Plans
Develop clear results-oriented objectives stated in measurable terms.
Identify activities required to accomplish the objectives.
Assign specific responsibilities to the appropriate personnel.
Estimate times to accomplish activities and their appropriate sequencing.
Determine resources required to accomplish the activities.
Communicate and coordinate the above elements and complete the action plan.

24. Strategic Implementation and Control
Implementation of Strategic Plans
Developing a systematic filtering-down process that facilitates the implementation process and builds middle-manager commitment requires a company to consider:
Organizational structure
People
Culture
Control systems

25. Strategic Implementation and Control (cont’d)
A formal control system should be developed that helps keep strategic plans on track by
Setting up and testing channels for information on progress, problems, and the fit of strategic assumptions to the environment
Using software programs for real-time tracking of production, financial, and marketing reports

26. Strategic Implementation and Control (cont’d)
Corrective Action Based on Evaluation and Feedback
Negative feedback should prompt corrective action at the step immediately before the problem occurs.
Possible corrective actions include:
Updating strategic assumptions
Reformulating strategic plans
Rewriting policies
Making personnel changes
Modifying budget allocations

27. Forecasting Forecasts Types of Forecasts
Predictions, projections, or estimates of future situations
Types of Forecasts
Event outcome forecasts: Predictions of the outcome (effects) of highly probable future events
Event timing forecasts: Predictions of when a given event will occur
Time series forecasts: Estimates of future values in a statistical sequence (e.g., sales forecast)

29. Forecasting Techniques
Informed Judgment
Forecasts relying on intuitive judgments that are based on how well informed the forecaster is
Scenario Analysis
Preparing written descriptions of alternative but equally likely future situations
Longitudinal scenarios: Describing how the future situations will evolve from the present
Cross-sectional scenarios: Describing future situations at a given point in time

30. Forecasting Techniques (cont’d)
Surveys
A forecasting technique involving face-to-face interviews and mail or questionnaires
Problems with surveys
Construction of the survey instrument
Cost of administration
Errors in data collection and interpretation
Trend Analysis
The hypothetical extension of a past series of events into the future

31. Summary
Strategic management sets the stage for virtually all managerial activity.
Strategic thinking is necessary for successful strategic management and planning.
Porter’s generic competitive strategies model helps managers create a profitable “fit” between the organization and its environment.
Competitors coevolve into business ecosystems when they use both competition and cooperation.
Effective use of the correct Internet strategies affords opportunities for competitive advantage.

32. Terms to Understand Strategic management Strategy Synergy
Differentiation
Business ecosystem
Grand strategy
Situational analysis
Capability profile
Reengineering
Forecasts
Event outcome forecasts
Event timing forecasts
Time series forecasts
Scenario analysis
Longitudinal scenarios
Cross-sectional scenarios
Trend analysis