Presentation on theme: "CHAPTER 7 STRATEGY AND STRATEGIC MANAGEMENT"— Presentation transcript:
1 CHAPTER 7 STRATEGY AND STRATEGIC MANAGEMENT B0H4MCHAPTER 7STRATEGY AND STRATEGIC MANAGEMENT
2 OVERVIEW What is strategic management? What are the essentials of strategic analysis?What are the corporate strategies and how are they formulated?What are business strategies and how are they formulated?What are some current issues in strategy implementation?
3 What Is Strategic Management? Competitive AdvantageSustainable Competitive AdvantageStrategyStrategic IntentGoal of strategic management is to create above-average returns for investors.Returns exceeding those for alternative opportunities at equivalent risk.Earning above-average returns depends in part on the organization’s competitive environment.
4 What Is Strategic Management? STRATEGIC MANAGEMENT PROCESSStrategic ManagementStrategic AnalysisStrategy FormulationStrategy Implementation
5 Figure 7.2 Strategy formulation and implementation in the strategic management process. Management 2e - Chapter 7
6 ESSENTIALS OF STRATEGIC ANALYSIS Mission – Statement expresses the organization’s reason for existence in societyAn important test of the mission is how well it serves the organization’s stakeholders
7 Figure 7.3 How external stakeholders can be valued as strategic constituencies of organizations. Management 2e - Chapter 7
8 ESSENTIALS OF STRATEGIC ANALYSIS Core Values -Organizational Culture
9 ESSENTIALS OF STRATEGIC ANALYSIS Analysis of objectives:Operating objectives direct activities toward key and specific performance results.Typical operating objectives:ProfitabilityMarket shareHuman talentFinancial healthCost efficiencyProduct qualityInnovationSocial responsibilityManagement 2e - Chapter 7
10 ESSENTIALS OF STRATEGIC ANALYSIS What are our WeaknessesOutdated facilities?Inadequate research and development?Obsolete technologies?Weak management?Past planning failures?What are our Strengths?Manufacturing efficiency?Skilled workforce?Good market share?Strong financing?Superior reputation?Management 2e - Chapter 7
11 ESSENTIALS OF STRATEGIC ANALYSIS What are our Opportunities?Possible new markets?Strong economy?Weak market rivals?Emerging technologies?Growth of existing market?What are our Threats?New competitors?Shortage of resources?Changing market tastes?New regulations?Substitute products?
12 Figure 7.4 SWOT analysis of strengths, weaknesses, opportunities, and threats. Management 2e – Chapter 7
13 Figure 7.5 Porter’s model of five strategic forces affecting industry competition. Source: Developed from Michael E. Porter, Competitive Strategy (New York: Free Press, 1980).Management 2e - Chapter 7
14 Corporate Strategy Levels of strategies Corporate strategy sets long-term direction for the total enterpriseBusiness strategyidentifies how a division or strategic business unit will compete in products or servicesFunctional strategyguides activities within one specific area of operations
15 Figure 7.1 Three levels of strategy in organizations- corporate, business, functional strategies. Management 2e - Chapter 7
16 Corporate Strategy Grand or master strategies: Growth strategies: seek an increase in size and the expansion of current operations.Stability strategy:maintains current operations without substantial changesRenewal strategy:tries to solve problems and overcome weaknesses that are hurting performance.Combination strategy:pursues growth, stability, or retrenchment in some
17 Corporate Strategy Growth and diversification strategies: Growth strategiesSeek an increase in size and the expansion of current operations.Types of growth strategies:Concentration strategiesDiversification strategiesRelated diversificationUnrelated diversificationVertical integration
18 Corporate Strategy Restructuring strategies: Tries to correct weaknesses by changing the mix or reducing the scale of operations.Restructuring through turnaroundRestructuring through downsizingRestructuring through divestiture
19 Corporate Strategy Global strategies: Globalization strategy. World is one large market; standardize products and advertising as much as possible.Ethnocentric view.Multidomestic strategy.Customize products and advertising to local markets as much as possible.Polycentric view.Transnational strategy.Balance efficiencies in global operations and responsiveness to local markets.Geocentric view.
20 Corporate Strategy Cooperative strategies Strategic alliances — two or more organizations partner to pursue an area of mutual interest.Types of strategic alliances:Outsourcing alliancesSupplier alliancesDistribution alliancesCo-opetition
21 Corporate Strategy E-business strategies The strategic use of the Internet to gain competitive advantage.Popular e-business strategiesBusiness-to-business (B2B) strategiesBusiness-to-customer (B2C) strategies
22 Business-level Strategy Porter’s generic strategies modelBusiness-level strategic decisions are driven by:Market scopeSource of competitive advantageMarket scope and source of competitive advantage combine to generate four generic strategies.
23 Figure 7.7 Porter’s generic strategies framework: soft-drink industry examples. Management 2e - Chapter 7
25 Strategy Implementation Strategic planning failures that hinder strategy implementation:Failures of substanceInadequate attention to major strategic planning elementsFailures of processPoor handling of strategy implementationLack of participation errorGoal displacement error
26 Strategy Implementation Corporate governance:System of control and performance monitoring of top management.Done by boards of directors and other major stakeholder representatives.Controversies regarding roles of inside directors and outside directors.Increasing emphasis on corporate governance in contemporary businesses.
27 Strategy Implementation Strategic controlMaking sure strategies are well implemented and that poor strategies are scrapped or modified.The top leadership of a firm or organization is expected to exercise strategic control of the enterprise.
28 Strategy Implementation Strategic leadershipThe capability to inspire people to successfully engage in a process of continuous change, performance enhancement, and implementation of organizational strategies.
29 Strategy Implementation Critical tasks of strategic leadershipBe a guardian of trade-offs.Create a sense of urgency.Ensure that everyone understands the strategy.Be a teacher.
30 ReviewCan an organization have a good strategy and still fail to achieve competitive advantage?Would a monopoly get a perfect score for in