1. Copyright © Houghton Mifflin Company. All rights reserved. 7-1 Chapter 7 Strategic Management: Planning for Long-Term Success

2. Copyright © Houghton Mifflin Company. All rights reserved. 7-2 Chapter Outline Strategic Management = Strategic Planning + Implementation + Control

3. Copyright © Houghton Mifflin Company. All rights reserved. 7-3 Chapter Outline (continued) Thinking Strategically u Synergy u Porter’s Generic Competitive Strategies u Business Ecosystems: A New Strategic Perspective u Strategy.com

4. Copyright © Houghton Mifflin Company. All rights reserved. 7-4 Chapter Outline (continued) The Strategic Management Process u Formulation of a Grand Strategy u Formulation of Strategic Plans

5. Copyright © Houghton Mifflin Company. All rights reserved. 7-5 Chapter Outline (continued) Strategic Implementation and Control u Implementation of Strategic Plans u Strategic Control u Corrective Action Based on Evaluation and Feedback

6. Copyright © Houghton Mifflin Company. All rights reserved. 7-6 Chapter Outline (continued) Forecasting u Types of Forecasts u Forecasting Techniques

7. Copyright © Houghton Mifflin Company. All rights reserved. 7-7 DIFFERENT STRATEGY-MAKING MODES Table 7.2 Traditional Modes: u Command (Commanders and Soldiers) u Symbolic (Coaches and Players) u Rational (Bosses and Subordinates)

8. Copyright © Houghton Mifflin Company. All rights reserved. 7-8 DIFFERENT STRATEGY-MAKING MODES (continued) Modern Modes: u Transactive (Facilitators and Participants) u Generative (Sponsors and Entrepreneurs)

9. Copyright © Houghton Mifflin Company. All rights reserved. 7-9 STRATEGIC MANAGEMENT = STRATEGIC PLANNING + IMPLEMENTATION + CONTROL Strategic management: the ongoing process of ensuring a competitively superior fit between an organization and its changing environment. Strategy: “the pattern of decisions a firm makes.” “The strategic management perspective is the product of a historical evolution and is now understood to include budget control, long-range planning, and strategic planning.”

10. Copyright © Houghton Mifflin Company. All rights reserved. 7-10 SYNERGY (Thinking Strategically) Synergy: occurs when two or more variables (for example, chemicals, drugs, people, organizations) interact to produce an effect greater than the sum of the effects of the variables acting independently. u The 1 + 1 = 3 effect u The whole is greater than the sum of its parts

11. Copyright © Houghton Mifflin Company. All rights reserved. 7-11 SYNERGY (Thinking Strategically) (continued) Four Kinds of Synergy: u Market synergy u Cost synergy u Technological synergy u Management synergy

12. Copyright © Houghton Mifflin Company. All rights reserved. 7-12 SYNERGY (Thinking Strategically) (continued) Individual Exercise: What kinds of synergy have you achieved in your personal affairs? Team Exercise: How many examples of synergy in the business world can you identify in five minutes?

13. Copyright © Houghton Mifflin Company. All rights reserved. 7-13 PORTER’S GENERIC COMPETITIVE STRATEGIES (Thinking Strategically) Differentiation: “the ability to provide unique and superior value to the buyer in terms of product quality, special features, or after-sale service.”

14. Copyright © Houghton Mifflin Company. All rights reserved. 7-14 PORTER’S GENERIC COMPETITIVE STRATEGIES (Thinking Strategically) (continued) Cost Leadership Strategy u Competitive scope: Broad target u Competitive advantage: Lower cost

15. Copyright © Houghton Mifflin Company. All rights reserved. 7-15 PORTER’S GENERIC COMPETITIVE STRATEGIES (Thinking Strategically) (continued) Differentiation Strategy u Competitive scope: Broad target u Competitive advantage: Differentiation

16. Copyright © Houghton Mifflin Company. All rights reserved. 7-16 PORTER’S GENERIC COMPETITIVE STRATEGIES (Thinking Strategically) (continued) Cost Focus Strategy u Competitive scope: Narrow target u Competitive advantage: Lower cost

17. Copyright © Houghton Mifflin Company. All rights reserved. 7-17 PORTER’S GENERIC COMPETITIVE STRATEGIES (Thinking Strategically) (continued) Focused Differentiation Strategy u Competitive scope: Narrow target u Competitive advantage: Differentiation

18. Copyright © Houghton Mifflin Company. All rights reserved. 7-18 BUSINESS ECOSYSTEMS (Thinking Strategically) Business ecosystem : an economic community of organizations and all their stakeholders, including suppliers and customers. Key theme: “Organizations need to be as good at cooperating as they are at competing if they are to succeed.”

19. Copyright © Houghton Mifflin Company. All rights reserved. 7-19 BUSINESS ECOSYSTEMS (Thinking Strategically) (continued) James F. Moore: “the major factor today limiting the spread of realized innovation is not a lack of good ideas, technology, or capital. It is the inability to command cooperation across broad, diverse communities of players who must become intimate parts of a far-reaching process of coevolution.”

20. Copyright © Houghton Mifflin Company. All rights reserved. 7-20 BUSINESS ECOSYSTEMS (Thinking Strategically) (continued) Individual or Team Exercise: Pick a well-known organization and identify members of its ecosystem. What organization is dominant in that ecosystem?

21. Copyright © Houghton Mifflin Company. All rights reserved. 7-21 STRATEGY.COM (Thinking Strategically) E-Commerce Strategy Lessons: u Different types and combinations of revenue sources will require different business models. u Loyal customers still expect a personal touch and some “hand holding” when they have questions, problems, or suggestions. u Identify core competencies to decide which bricks-and-mortar facilities earn their keep.

22. Copyright © Houghton Mifflin Company. All rights reserved. 7-22 STRATEGY.COM (Thinking Strategically) (continued) E-Commerce Strategy Lessons: u E-commerce sometimes requires a quick revolution, rather than slow evolution. (Start with a blank sheet of paper. Cannibalism may pay.) u E-commerce customers increasingly want high ethical standards throughout the supply chain. u “Only the paranoid survive.” (Everyone is a potential competitor in e-commerce.

23. Copyright © Houghton Mifflin Company. All rights reserved. 7-23 THE STRATEGIC MANAGEMENT PROCESS 1.Formulation of a grand strategy u Grand strategy: a general explanation of how the organization’s mission is to be accomplished. u Situational analysis: a technique for matching organizational strengths and weaknesses with environmental opportunities and threats to determine the organization’s right niche. (SWOT analysis)

24. Copyright © Houghton Mifflin Company. All rights reserved. 7-24 THE STRATEGIC MANAGEMENT PROCESS (continued) 2.Formulation of strategic plans 3.Implementation of strategic plans 4.Strategic control

25. Copyright © Houghton Mifflin Company. All rights reserved. 7-25 CONDUCTING A SWOT ANALYSIS (A Team Exercise) Instructions: Select a well-known organization and complete the following SWOT analysis. (Tip: Work on one variable at a time.) Next, outline a strategic direction for the organization, based on your SWOT analysis.

26. Copyright © Houghton Mifflin Company. All rights reserved. 7-26 CONDUCTING A SWOT ANALYSIS (A Team Exercise) (continued) Organization:_____________________ Organization StrengthsWeaknesses

27. Copyright © Houghton Mifflin Company. All rights reserved. 7-27 CONDUCTING A SWOT ANALYSIS (A Team Exercise) (continued) Environment Opportunities Threats

28. Copyright © Houghton Mifflin Company. All rights reserved. 7-28 FORECASTING Forecasts: predictions, projections, or estimates of future events or conditions in the environment in which the organization operates.

29. Copyright © Houghton Mifflin Company. All rights reserved. 7-29 FORECASTING (continued) Types of Forecasts u Event outcome forecasts: used when strategists want to predict the outcome of highly probable future events. u Event timing forecasts: predict when, if ever, given events will occur. u Time series forecasts: seek to estimate future values in a sequence of periodically recorded statistics.

30. Copyright © Houghton Mifflin Company. All rights reserved. 7-30 FORECASTING (continued) Forecasting Techniques u Informed judgment u Scenario analysis (Longitudinal and cross-sectional scenarios) u Surveys u Trend analysis