Strategic Management

Week 9 & 10

Ms. Nazia Jabeen

Lecturer DBA
University of Sahiwal

1
 Previous Lecture recap
Establishing Goals and Developing Plans
Discuss how traditional goal setting works.
• Explain the concept of the means–end chain.
• Describe the management by objective (MBO) approach.
• Describe the characteristics of well-designed goals.
• Explain the steps in setting goals.
• Discuss the contingency factors that affect planning.
 • Describe the approaches to planning

2
 Objectives
• To understand strategic management
• To describes the importance of strategic management and business
model
• To explain the six steps strategic management process
• To define the types of strategies
• To analysis Strategies management in today world

3
L E A R N I N G O U T L I N ES
The Importance of Strategic Management
 Define strategic management, strategy, and business model.
•Explain why strategic management is important.
The Strategic Management Process •
List the six steps in the strategic management process.
 Describe what managers do during external and internal analyses.
Explain the role of resources, capabilities, and core competencies.
 Define strengths, weaknesses, opportunities, and threats

4
 Strategic Management
• What managers do to develop the organization’s strategies.
• Strategies
The decisions and actions that determine the long-run performance of an organization
Business Model
• Is a strategic design for how a company intends to profit from its strategies, work
processes, and activities.
Focuses on two things:
1. Whether customers will value what the company is providing.
2. Whether the company can make any money doing that.

5
 Why is Strategic Management Important

1. It results in higher organizational performance.

2. It requires that managers examine and adapt to business environment changes.
3. It coordinates diverse organizational units, helping them focus on
organizational goals. 4.
4. It is very much involved in the managerial decision-making process.

6
 Strategic Management Process
Step 1: Identifying the organization’s current mission, goals,
and strategies
• Mission: the firm’s reason for being
• The scope of its products and services
• Goals: the foundation for further planning
• Measurable performance targets
• Step 2: Doing an external analysis
The environmental scanning of specific and general environments
 Focuses on identifying opportunities and threats

7
8
 Strategic Management Process (cont’d)
• Step 3: Doing an internal analysis Step
• Assessing organizational resources, capabilities, and activities
• Strengths create value for the customer and strengthen the competitive position of the
firm.
• Weaknesses can place the firm at a competitive disadvantage.
• Analyzing financial and physical assets is fairly easy, but assessing intangible assets
(employee’s skills, culture, corporate reputation, and so forth) isn’t as easy.
• Steps 2 and 3 combined are called a SWOT analysis. (Strengths, Weaknesses,
Opportunities, and Threats)

9
 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

10
 Strategic Management Process (cont’d)
Step 5: Implementing strategies
• Implementation: effectively fitting organizational structure and activities to the
environment.
• The environment dictates the chosen strategy; effective strategy implementation
requires an effective strategy implementation requires an organizational structure
matched to its requirements.
Step 6: Evaluating results
• How effective have strategies been?
• What adjustments, if any, are necessary?

11
12
Types of Strategy
• Corporate Strategies
• Growth Strategy
• Seeking to increase the organization’s business by expansion into new
products and markets.
• Types of Growth Strategies
1. Concentration
2. Vertical integration
3. Horizontal integration
4. Diversification

13
Growth Strategies
• Concentration
• Focusing on a primary line of business and increasing the number of
products offered or markets served.
• Vertical Integration
• Backward vertical integration: attempting to gain control of inputs (become a
self-supplier).
• Forward vertical integration
• Attempting to gain control of output through control of the distribution
channel or provide customer service activities (eliminating intermediaries).

14
 Growth Strategies (cont’d)
• Horizontal Integration
Combining operations with another competitor in the same industry to increase
competitive strengths and lower competition among industry rivals.
• Related Diversification
Expanding by combining with firms in different, but related industries that are
“strategic fits.”
• Unrelated Diversification
Growing by combining with firms in unrelated industries where higher
financial returns are possible.

15
Growth Strategies (cont’d)

• Stability Strategy
• A strategy that seeks to maintain the status quo to deal with the
uncertainty of a dynamic environment, when the industry is experiencing
slow- or no-growth conditions, or if the owners of the firm elect not to
grow for personal reasons.

16
Growth Strategies (cont’d)

• Renewal Strategies
• Developing strategies to counter organization weaknesses that are
leading to performance declines.
• Retrenchment
• focusing of eliminating non-critical weaknesses and restoring
strengths to overcome current performance problems.
• Turnaround addressing critical long-term performance problems
through the use of strong cost elimination measures and large-scale
organizational restructuring solutions.

17
 Corporate Portfolio Analysis
• Managers manage portfolio (or collection) of businesses using a corporate
portfolio matrix such as the BCG Matrix.
• BCG Matrix
Developed by the Boston Consulting Group
Considers market share and industry growth rate
Classifies firms as
A. Cash cows: low growth rate, high market share
B. Stars: high growth rate, high market share
C. Question marks: high growth rate, low market share
D. Dogs: low growth rate, low market share
18
19
Business or Competitive Strategy

• Business (or Competitive) Strategy

A strategy focused on how an organization should compete in each of its
SBUs (strategic business units).

20
 The Role of Competitive Advantage
• Competitive Advantage
• An organization’s distinctive competitive edge.
• Quality as a Competitive Advantage
• Differentiates the firm from its competitors.
• Can create a sustainable competitive advantage.
• Represents the company’s focus on quality management to achieve continuous
improvement and meet customers’ demand for quality.

21
The Role of Competitive Advantage (cont’d)
• Sustainable Competitive Advantage
• Continuing over time to effectively exploit resources and develop core
competencies that enable an organization to keep its edge over its industry
competitors.

22
 Five Competitive Forces
1. Threat of New Entrants
• The ease or difficulty with which new competitors can enter an industry.
2. Threat of Substitutes
• The extent to which switching costs and brand loyalty affect the likelihood of customers
adopting substitutes products and services.
3. Bargaining Power of Buyers
The degree to which buyers have the market strength to hold sway over and influence competitors
in an industry.
4. Bargaining Power of Suppliers
The relative number of buyers to suppliers and threats from substitutes and new entrants affect
the buyer-supplier relationship.
5. Current Rivalry
Intensity among rivals increases when industry growth rates slow, demand falls, and product
prices descend. 23
24
 Types of Competitive Strategies
• Cost Leadership Strategy
• Seeking to attain the lowest total overall costs relative to other industry
competitors.
•Differentiation Strategy
Attempting to create a unique and distinctive product or service for which
customers will pay a premium.
• Focus Strategy
• Using a cost or differentiation advantage to exploit a particular market
segment rather a larger market

25
 The Rule of Three
• Similar to Porter’s generic competitive strategies
• The competitive forces in an industry will create a situation where three
companies (full-line generalists) will dominate a market.
• Some firms in the market become “super niche players” and while others end up
as “ditch dwellers.”
• Firms unable to develop either a cost or differentiation advantage become “stuck
in the middle” and lack prospects for long-term success.
• A few firms successfully pursue both differentiation and cost advantages.

26
 Strategic Management Today
• Strategic Flexibility
• New Directions in Organizational Strategies
1. e-business
2. customer service
3. innovation

27
28
How the Internet Has Changed Business
• The Internet allows businesses to
1. Create knowledge bases that employees can tap into anytime, anywhere.
2. Turn customers into collaborative partners who help design, test, and launch
new products.
3. Become virtually paperless in specific tasks such as purchasing and filing
expense reports.
4. Manage logistics in real time
5. Change the nature of work tasks throughout the organization .

29
Strategies for Applying e-Business Techniques
• Cost Leadership
• On-line activities: bidding, order processing, inventory control,
recruitment and hiring
• Differentiation
• Internet-based knowledge systems, on-line ordering and customer
support
• Focus
• Chat rooms and discussion boards, targeted web sites

30
Customer Service Strategies

• Giving the customers what they want.

• Communicating effectively with them.
• Providing employees with customer service training.

31
 Innovation Strategies
• Possible Events
• Radical breakthroughs in products.
• Application of existing technology to new uses. • Strategic Decisions about
Innovation
• Basic research
• Product development
• Process innovation
• First Mover
• An organization that brings a product innovation to market or use a new
process innovations
32
33
34