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What is Strategy?
Important
Involve a significant commitment of
resources
Not easily reversible
Basic Framework
External
The firm
Environment
Goals & Values
Competitors
Resources &
Strategy Customers
Capabilities
Structures & Suppliers
Systems etc
Basic Model of
Strategic Management
SWOT analysis
PEST analysis
Five forces analysis
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SWOT analysis
Strengths (internal)
Weaknesses (internal)
Opportunities (external)
Threats (external)
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PEST Analysis
Political factors
Economic factors
Socio-cultural factors
Technological factors
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Political/Legal Factors
Economic growth
Inflation
Employment
Disposable income
Business cycles
Availability and cost of energy
Availability and prices of raw materials
Socio-Cultural Factors
Demographic factors
Role of women
Extent of Poverty
Extent of Inequality
Regional Disparities
Caste and creed
Race and religion
Food habits
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Technological Factors
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Strategic Management Process
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Strategic Management Process
(cont’d)
Step 3: Conducting an internal analysis
Assessing organisational resources, capabilities,
activities and culture:
Strengths (core competencies) create value for
the customer and strengthen the competitive
position of the firm.
Weaknesses (things done poorly or not at all)
can place the firm at a competitive
disadvantage.
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Strategic Management Process
(cont’d)
Step 4: Formulating strategies
Develop and evaluate strategic
alternatives
Select appropriate strategies for all levels
in the organization that provide relative
advantage over competitors
Match organizational strengths to
environmental opportunities
Correct weaknesses and guard against
threats
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Strategic Management Process
(cont’d)
Step 5: Implementing strategies
Implementation: effectively fitting
organisational structure and activities to the
environment
Effective strategy implementation requires
an organisational structure matched to its
requirements.
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The most important strategy concepts:
Vision
Picture of what the firm wants to be
What the firm ultimately wants to achieve
An effective vision statement is the responsibility
of the leader who should work with others to form
it
Foundation for the mission
Mission
Specifics business(es) in which firm intends to
compete and customers it intends to serve
More specific than the vision
The Strategic Management Process
Owners/Stakeholders
Local community
Trade Associations
Competitive
advantage
Structural Process
Position Execution
Enterprise Synergies
Organizational
Capacity
Differentiation
Quick Response
Criteria for Resources and Capabilities That
Become Core Competencies
Valuable
Valuable Rare
Rare
Core
Core
Competencies
Competencies
Nonsubstitutable
Nonsubstitutable Costly
Costly to
to Imitate
Imitate
How Resources and Capabilities
Provide Competitive Advantage
Strategy Frameworks
2. Marketing Oriented
d. Theme/ Copy Strategy
e. Media Distribution Strategy
f. Distribution Strategy
g. Pricing Strategy
Resource –Oriented
Strategy
h. Raw Material
i. Employees
j. Financial –Resources
The Five Forces of
Competition Model
Threat of New Entrants: Barriers to
Entry
Economies of scale
Product differentiation
Capital requirements
Switching costs
Access to distribution channels
Cost disadvantages independent of
scale
Government policy
Expected retaliation
Barriers to Entry
Economies of Scale
Marginal improvements in efficiency
that a firm experiences as it
incrementally increases its size
Advantages and disadvantages of
large-scale and small-scale entry
Barriers to Entry (cont’d)
ProductRequirements
Capital differentiation
Unique products
Physical facilities
Customer loyalty
Inventories
Products atactivities
Marketing competitive prices
Availability of capital
Barriers to Entry (cont’d)
Switching Costs
One-time costs customers incur when
they buy from a different supplier
New equipment
Retraining employees
Psychic costs of ending a relationship
Barriers to Entry (cont’d)
Access to Distribution Channels
Stocking or shelf space
Price breaks
Cooperative advertising allowances
Cost Disadvantages Independent of
Scale
Proprietary product technology
Favorable access to raw materials
Desirable locations
Barriers to Entry (cont’d)
Cost disadvantages independent of
scale
Proprietary product technology
Favorable access to raw materials
Desirable locations
Government policy
Licensing and permit requirements
Deregulation of industries
Barriers to Entry (cont’d)
Expected retaliation
Responses by existing competitors may
depend on a firm’s present stake in the
industry (available business options)
Bargaining Power of Suppliers
Supplier power increases when:
Unattractive
Strong threats from
substitute products
Industry
Attractive
Few threats from
substitute products
Industry
• Do we assume the
Current Strategy future will be volatile?
• Are we operating
Assumptions under a status quo?
• What assumptions do
our competitors hold
about the industry
and themselves?
Competitor Analysis (cont’d)
Future Objectives
Current Strategy
Assumptions
• What are our
strengths and
Capabilities weaknesses?
• How do we rate
compared to our
competitors?
Competitor Analysis (cont’d)
Future Objectives Response
Customers
Demand reliable products at low prices
Suppliers
Seek loyal customers willing to pay highest
sustainable prices for goods and services
Host communities
Want companies willing to be long-term employers
and providers of tax revenues while minimizing
demands on public support services
Union officials
Want secure jobs and desirable working conditions
Organizational Stakeholders
Employees
Expect a dynamic, stimulating and
rewarding work environment
Are satisfied by a company that is
growing and actively developing their
skills
Stakeholder Involvement
Two issues affect the extent of stakeholder
involvement in the firm
1.How to divide returns
to keep stakeholders
involved?
Capital
Organizational
Market
2.How to increase
returns so everyone
Product
Product
Market
Market
has more to share?
Firm level analysis
q First, consider units of
analysis
u Corporate level
u Business level
uFunctional level
Levels of strategy
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Tasks of Corporate Strategy
Moves to achieve diversification
Establishing investment
priorities and steering
corporate resources into the
most attractive businesses
Tasks of Business Strategy
Its strategy
Thinking Strategically:
Three Big Central Questions
over time.
The Five P’s
Plan
The Five P’s
Ploy
Plan
The Five P’s
Ploy
Plan
Pattern
The Five P’s
Ploy
Plan
Perspective Pattern
Position
Different Kinds of Strategy
Intended Strategy
Different Kinds of Strategy
Deliberate
Intended Strategy
Unrealized
Strategy
Different Kinds of Strategy
Deliberate
Intended Strategy
Emergent
Strategy
Unrealized
Strategy
Different Kinds of Strategy
Deliberate
Emergent
Unrealized Strategy
Strategy
Dimensions of Strategy
Strategies contain goals, policies, and
action sequences.
Strategies develop around a few key
concepts.
Strategies deal with the unpredictable
and the unknowable.
Strategies require hierarchies of mutual
support strategies.
Examples of Strategies Based
on Distinctive Capabilities
Sophisticated distribution systems – Wal-Mart
Product innovation capabilities – 3M Corporation
Complex technological process – Michelin
Defect-free manufacturing – Toyota and Honda
Specialized marketing and merchandising know-
how – Coca-Cola
Global sales and distribution capability – Black & Decker
Superior e-commerce capabilities – Dell Computer
Personalized customer service – Ritz Carlton hotels