What is strategic management and the concepts of strategy?

Strategic management is the process of defining, implementing, and evaluating

strategies to achieve organizational goals and objectives. It involves the
formulation and execution of the major goals and initiatives taken by an
organization's top management, based on consideration of resources and an
assessment of the internal and external environments in which the organization
operates.
Here are the key components of strategic management:
1. Strategic Analysis: Assessing the internal and external environments using
tools like SWOT analysis (Strengths, Weaknesses, Opportunities, Threats), PEST
analysis (Political, Economic, Social, Technological factors), and industry
analysis.
2. Strategy Formulation: Developing strategies based on the analysis, which
could include setting longterm goals, defining mission and vision statements, and
identifying competitive advantages.
3. Strategy Implementation: Putting the formulated strategies into action by
allocating resources, assigning responsibilities, and establishing timelines. This
involves the coordination and integration of all activities and resources to achieve
the strategic goals.
4. Strategy Evaluation: Monitoring and evaluating the outcomes of the
implemented strategies to ensure they are meeting the objectives. This includes
measuring performance, reviewing internal and external factors, and making
adjustments as necessary.
5. Continuous Improvement: Adapting and refining strategies based on feedback
and changing conditions to ensure ongoing relevance and effectiveness.
benefits of Strategic Management?
• Establish the mission
• Formulate philosophy
• Establish policies
• Setting objectives
• Developing strategy
• Plan the organizational structure
• Provide personnel
 • Establish procedures
• Provide facilities
• Provide capital
• Set standards
• Establish programs and plans
• Control information
• Activate people
What is the strategic management process?

Environmental Scanning:
• Internal Analysis: Assess the organization's strengths and weaknesses,
including its resources, capabilities, and internal processes.
• External Analysis: Examine the external environment for opportunities and
threats, considering factors such as market trends, competition, regulatory
changes, and technological advancements.

Strategy Formulation:
• Setting Objectives: Establish specific, measurable, achievable relevant, and
timebound (SMART) objectives that align with the organization's mission and
vision.
• Strategy Development: Formulate strategies that leverage strengths and
opportunities while addressing weaknesses and threats. Common approaches
include cost leadership, differentiation, focus, an innovation.

Strategy Implementation:
• Resource Allocation: Allocate resources (financial, human technological)
based on the chosen strategies.
• Organizational Alignment: Align the organization's structure, processes, and
systems with the selected strategies. This may involve changes in roles,
responsibilities, and workflow
• Strategic Initiatives: Develop and execute specific projects o initiatives to
implement the strategies effectively.

Strategic Evaluation and Control:

• Performance Measurement: Establish key performance indicators (KPIs) to
monitor and measure progress toward strategic objectives.
• Feedback and Adjustment: Regularly evaluate the effectiveness o strategies
and compare actual performance with expected outcomes. Based on this
evaluation, make necessary adjustments to the strategies or their
implementation.
Identification of an industry‘s opportunities and threats?
Opportunities
1. Innovation Leadership: Pioneering new products, services, or business models
to gain a competitive edge.
2. Diversification: Entering new markets or sectors to spread risk and create new
revenue streams.
3. Mergers & Acquisitions: Strengthening market position or acquiring new
capabilities.
4. Cost Leadership: Achieving cost efficiency that allows competitive pricing.
5. Customer Relationship Management: Building strong customer loyalty and
brand equity.
6. Sustainable Practices: Adopting green initiatives that attract ecoconscious
consumers and comply with regulations.

Threats
1. Market Saturation: Limited growth in a crowded market.
2. Disruptive Technologies: New technologies that change industry dynamics.
3. Operational Risks: Failures or inefficiencies in operations.
4. Strategic Misalignment: Lack of coherence between strategy and market
demands.
5. Regulatory Risks: Compliance challenges and potential legal issues.
6. Reputation Risk: Negative publicity or scandals impacting brand value.
Porter‘s Five Forces Model of competitiveness?
Barriers to new entrants include:

1. Economies of Scale – as firms expand output unit costs fall via:

 Cost reductions – through mass production
 Discounts on bulk purchases – of raw material and standard parts
 Cost advantages – of spreading fixed and marketing costs over large
volume
2. Brand Loyalty
 Achieved by creating wellestablished customer preferences
 It is difficult for new entrants to take market share from established
brands
3. Absolute Cost Advantages – relative to new entrants
 Accumulated experience – in production and key business processes
 Control of particular inputs required for production
 Lower financial risks – access to cheaper funds
4. Customer Switching Costs for Buyers – where significant
Rivalry Among Established Companies
1. Industry Competitive Structure
 Number and size distribution of companies
 Consolidated versus fragmented industries
2. Demand Conditions
 Growing demand – tends to moderate competition and reduce rivalry
 Declining demand – encourages rivalry for market share and revenue
3. Cost Conditions
 High fixed costs – profitability leveraged by sales volume
 Slow demand and growth – can result in intense rivalry and lower
profits
Bargaining Power of Buyers
1. Buyers are dominant.
 Buyers are large and few in number.
 The industry supplying the product is composed of many small
companies.
2. Buyers purchase in large quantities.
 Buyers have purchasing power as leverage for price reductions.
3. The industry is dependant on the buyers.
 Buyers purchase a large percentage of a company’s total orders.
4. Switching costs for buyers are low.
 Buyers can play off the supplying companies against each other.
Bargaining Power of Suppliers
1. The product supplied is vital to the industry and has few substitutes.
2. The industry is not an important customer to suppliers.
 Suppliers are not significantly affected by the industry.
3. Switching costs for companies in the industry are significant.
 Companies in the industry cannot play suppliers against each other.
4. Suppliers can threaten to enter their customers’ industry.
 Suppliers can use their inputs to produce and compete with companies
already in the industry.
Substitute Products
Substitute Products are the products from different businesses or industries that
can satisfy similar customer needs.
Substitutes are a weak competitive force if an industry’s products have few close
substitutes.
Other things being equal, companies in the industry have the opportunity to raise
prices and earn additional profits.
Competitive advantage, value chain and value creation?

1.Competitive Advantage

Competitive advantage refers to the factors that allow a company to produce

goods or services better or more cheaply than its rivals. These factors enable the
company to generate more sales or superior margins compared to its market peers.
Key sources of competitive advantage include:

 Cost Leadership: Being the lowestcost producer in the industry.

 Differentiation: Offering unique products or services that stand out from
competitors.
 Focus: Targeting a specific market niche where the company can excel.

2. Value Chain

The value chain is a set of activities that a firm performs to deliver a valuable
product or service to the market. Developed by Michael Porter, it's a model that
helps businesses identify their primary and support activities that add value to
their final product. The value chain consists of:

Primary Activities:

Inbound Logistics: Receiving, storing, and distributing inputs.

Operations: Transforming inputs into final products.

Outbound Logistics: Distributing the final product to customers.

Marketing & Sales: Promoting and selling the product.

Service: Providing aftersales services and support.

Support Activities:

Firm Infrastructure: Organizational structure, management, and culture.

Human Resource Management: Recruitment, training, and development.

Technology Development: Research and development, IT systems.

Procurement: Purchasing of raw materials and other inputs.

3. Value Creation

Value creation is about generating worth for customers and stakeholders. It

involves understanding and leveraging the value chain to optimize activities and
achieve strategic objectives. Companies create value by:

Innovation: Developing new products, services, or processes.

Customer Engagement: Building strong relationships and understanding

customer needs.

Operational Efficiency: Streamlining processes to reduce costs and improve

quality.

Sustainability: Adopting practices that ensure longterm success and

environmental stewardship.
Growth - Share Matrix – BCG?

Stars

• High Growth, High Market Share

• Star units are leaders in the category. These products have –
• A significant market share, hence they bring the most cash to the
business.
• A high growth potential that can be used to increase further cash
inflow.
• With time, when the market matures, these stars become cash cows
that hold huge market shares in a low-growth market. Such cows
are milked to fund other innovative products to develop new stars.

Cash Cows

• Low Growth, High Market Share

• Cash cows are products with significant ROI but operating in a
matured market which lacks innovation and growth. These
products generate more cash than it consumes.
• Usually, these products finance other activities in progress
(including stars and question marks).
Dogs

• Low Growth, Low Market Share

• Dogs hold a low market share and operate in a market with a low
growth rate. Neither do they generate cash, nor do they require
huge cash.
• In general, they are not worth investing in because they generate
low or negative cash returns and may require large sums of money
to support.
• Due to low market share, these products face cost disadvantages.

Question Marks

• High Growth, Low Market Share

• Question marks have high growth potential but a low market
share which makes their future potential to be doubtful.
• Since the growth rate is high here, with the right strategies and
investments, they can become cash cows and ultimately stars.
• But they have a low market share so wrong investments can
downgrade them to Dogs even after lots of investment.

PESTLE model?
SWOT
Starbucks SWOT Analysis

• Strengths
• Largest market share in industry
• Differentiated atmosphere
• Weaknesses
• Aggressive expansion could lead to managerial / financial problems
• Opportunities
• Whole bean sales in supermarkets
• Threats
• Lack of ownership of coffee farms can lead to price fluctuations

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