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Strategic Management Readings

The document discusses the importance of strategic management and competitive advantage, emphasizing that intangible resources are often more valuable than tangible ones. It outlines key concepts such as Porter's Five-Forces Model, which analyzes competitive dynamics in industries, and stresses the need for effective planning, organizing, motivating, staffing, and controlling in strategy implementation. Additionally, it highlights the significance of establishing clear annual objectives and policies to guide and facilitate the execution of strategies within organizations.

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26 views

Strategic Management Readings

The document discusses the importance of strategic management and competitive advantage, emphasizing that intangible resources are often more valuable than tangible ones. It outlines key concepts such as Porter's Five-Forces Model, which analyzes competitive dynamics in industries, and stresses the need for effective planning, organizing, motivating, staffing, and controlling in strategy implementation. Additionally, it highlights the significance of establishing clear annual objectives and policies to guide and facilitate the execution of strategies within organizations.

Uploaded by

follosojericho
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Strategic Management Readings

BSOA3 – BSOA4 – BSBAFM

Competitive advantage is more likely to spring from intangible rather than tangible resources.

• Focus on the Strengths–Opportunities quadrant (top left)


• Focus on the Weaknesses–Threats quadrant (bottom right)
• Focus on the Strengths–Threats quadrant (top right)
• Focus on the Weaknesses–Opportunities quadrant (bottom left)
Being stuck in the middle of different strategic positions is a recipe for inferior performance and
competitive disadvantage – “you cannot be everything to everybody”.

Guidelines for Effective Strategic Management


All firms have a strategy, even if it is informal, unstructured, and sporadic. All organizations are
heading somewhere, but unfortunately some organizations do not know where they are going. The old
saying “If you do not know where you are going, then any road will lead you there!”

Competitive Analysis: Porter’s Five-Forces Model

Rivalry Among Competing Firms


Potential Entry of New Competitors
• Whenever new firms can easily enter a particular industry, the intensity of competitiveness
among firms increases.
• Barriers to entry, however, can include the need to gain economies of scale quickly, the need to
gain technology and specialized know-how, the lack of experience, strong customer loyalty, strong
brand preferences, large capital requirements, lack of adequate distribution channels,
government regulatory policies, tariffs, lack of access to raw materials, possession of patents,
undesirable locations, counterattack by entrenched firms, and potential saturation of the market.
• Despite numerous barriers to entry, new firms sometimes enter industries with higher-quality
products, lower prices, and substantial marketing resources.
• When the threat of new firms entering the market is strong, incumbent firms generally fortify
their positions and take actions to deter new entrants, such as lowering prices, extending
warranties, adding features, or offering financing specials.
Potential Development of Substitute Products
• In many industries, firms are in close competition with producers of substitute products in other
industries.
• The presence of substitute products puts a ceiling on the price that can be charged before
consumers will switch to the substitute product.
• Competitive pressures arising from substitute products increase as the relative price of substitute
products declines and as consumers’ switching costs decrease.
Bargaining Power of Suppliers
• The bargaining power of suppliers affects the intensity of competition in an industry, especially
when there are many suppliers, when there are only a few good substitute raw materials, or when
the cost of switching raw materials is especially costly.
• It is often in the best interest of both suppliers and producers to assist each other with reasonable
prices, improved quality, development of new services, just-in-time deliveries, and reduced
inventory costs, thus enhancing long-term profitability for all concerned.
Bargaining Power of Consumers
• When customers are concentrated or large or buy in volume, their bargaining power represents
a major force affecting the intensity of competition in an industry.
• Bargaining power of consumers also is higher when the products being purchased are
standard or undifferentiated.
Planning
• An organization can develop synergy through planning. Synergy exists when everyone pulls
together as a team that knows what it wants to achieve; synergy is the 2 + 2 = 5 effect.

Organizing
• Combining jobs to form departments results in an organizational structure, span of control, and
a chain of command.
• Changes in strategy often require changes in structure because positions may be created,
deleted, or merged.

Motivating
• Communication, perhaps the most important word in management, is a major component in
motivation.

Staffing
• also called personnel management or human resource management, includes activities such
as recruiting, interviewing, testing, selecting, orienting, training, developing, caring for, evaluating,
rewarding, disciplining, promoting, transferring, demoting, and dismissing employees, as well as
managing union relations.
Controlling

Nature of Strategy Implementation (Advance topic)

ANNUAL OBJECTIVES
• Establishing annual objectives is a decentralized activity that directly involves all managers in
an organization.
• Active participation in establishing annual objectives can lead to acceptance and commitment.
• Annual objectives are essential for strategy implementation because they
(1) represent the basis for allocating resources;
(2) are a primary mechanism for evaluating managers;
(3) are the major instrument for monitoring progress toward achieving long-term objectives; and
(4) establish organizational, divisional, and departmental priorities.
Annual objectives should be measurable, consistent, reasonable, challenging, clear, communicated
throughout the organization, characterized by an appropriate time dimension, and accompanied by
commensurate rewards and sanctions.
Objectives should state quantity, quality, cost, and time—and be verifiable.
Terms and phrases such as maximize, minimize, as soon as possible, and adequate should be avoided.
• Clear annual objectives do not guarantee successful strategy implementation, but they do
increase the likelihood that personal and organizational aims can be accomplished.
POLICIES
• Changes in a firm’s strategic direction do not occur automatically.
• On a day-to-day basis, policies are needed to make a strategy work.
• Policies facilitate solving recurring problems and guide the implementation of strategy.
• Policies are instruments for strategy implementation.
• Policies set boundaries, constraints, and limits on the kinds of administrative actions that can
be taken to reward and sanction behavior
• Policies let both employees and managers know what is expected of them.
• Policies also clarify what work is to be done and by whom.
• Policies can apply to all divisions and departments (for example, “We are an equal opportunity
employer”). Some policies apply to a single department (“Employees in this department must
take at least one training and development course each year”).

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