Characteristics of Strategic DecisionsCharacteristics of Strategic Decisions
Concerned with the scope of an organization’s Concerned with the scope of an organization’s activitiesactivities
Matching the organization’s activities to its Matching the organization’s activities to its environmentenvironment
Matching the organization’s activities to its resource Matching the organization’s activities to its resource capabilitycapability
Strategic decisions have major resource implicationsStrategic decisions have major resource implications Affect operational decisionsAffect operational decisions Influenced by values and expectations of Influenced by values and expectations of
shareholdersshareholders Determine long-term direction of an organizationDetermine long-term direction of an organization
Levels of StrategyLevels of Strategy
Corporate LevelCorporate Level Competitive or Business StrategyCompetitive or Business Strategy Operational StrategyOperational Strategy
Corporate strategyCorporate strategy... defines the scope of the business in terms of ... defines the scope of the business in terms of the industries and markets in which it competes.the industries and markets in which it competes. includes decisions about diversification, vertical integration, includes decisions about diversification, vertical integration,
acquisitions, new ventures, divestments, allocation of scarce acquisitions, new ventures, divestments, allocation of scarce resources between business unitsresources between business units
Business strategyBusiness strategy... is concerned with how the firm competes within ... is concerned with how the firm competes within a particular industry or market... to win a business unit must adopt a a particular industry or market... to win a business unit must adopt a strategy that establishes a competitive advantage over its rivals.strategy that establishes a competitive advantage over its rivals.
Functional strategyFunctional strategy... the detailed deployment of resources at the ... the detailed deployment of resources at the operational leveloperational level
Vocabulary of StrategyVocabulary of Strategy
MissionMission GoalsGoals ObjectiveObjective StrategyStrategy TacticsTactics ActionAction Control Control RewardsRewards
Characteristics of Strategic DecisionsCharacteristics of Strategic Decisions
Concerned with the scope of an organization’s Concerned with the scope of an organization’s activitiesactivities
Matching the organization’s activities to its Matching the organization’s activities to its environmentenvironment
Matching the organization’s activities to its resource Matching the organization’s activities to its resource capabilitycapability
Strategic decisions have major resource implicationsStrategic decisions have major resource implications Affect operational decisionsAffect operational decisions Influenced by values and expectations of Influenced by values and expectations of
shareholdersshareholders Determine long-term direction of an organizationDetermine long-term direction of an organization
Strategic ManagementStrategic Management
Strategic AnalysisStrategic Analysis
Strategic Choice Strategy Implementation
Elements of Strategic ManagementElements of Strategic Management
Strategic Analysis Strategic Analysis The EnvironmentThe Environment Culture and Stakeholder ExpectationsCulture and Stakeholder Expectations Resources and Strategic CapabilityResources and Strategic Capability
Strategic ChoiceStrategic Choice Identifying Strategic OptionsIdentifying Strategic Options Evaluating OptionsEvaluating Options Selecting StrategySelecting Strategy
Strategy ImplementationStrategy Implementation Planning and Allocating ResourcesPlanning and Allocating Resources Organization Structure and DesignOrganization Structure and Design Managing Strategic ChangeManaging Strategic Change
Patterns of Strategy DevelopmentPatterns of Strategy Development
Natural selection viewNatural selection view Planning viewPlanning view Logical incremental viewLogical incremental view Cultural viewCultural view Political viewPolitical view Visionary viewVisionary view
Integrating views of strategy developmentIntegrating views of strategy development
Cultural WebCultural Web
ParadigmParadigm
StoriesStories SymbolsSymbols Power StructurePower Structure Organizational structuresOrganizational structures Control systemsControl systems Rituals and routinesRituals and routines
Macro Environmental AnalysisMacro Environmental Analysis
PESTLEPESTLE
PoliticalPolitical EconomicsEconomics SocialSocial TechnologicalTechnological LegalLegal EnvironmentalEnvironmental
Threat of New Entry
Rivalry Among Existing Competitors
Bargaining Powerof Customers
Threat of Substitutes
Bargaining Powerof Suppliers
• Economies of scale• Proprietary product
differences• Brand identity• Switching costs
• Capital requirements• Access to distribution• Absolute cost advantages• Government policy• Expected retaliation
• Relative price performance of substitutes• Switching costs• Buyer propensity to substitute
• Industry growth• Fixed costs / value
added• Overcapacity• Product differences• Brand identity
• Switching costs• Concentration and balance• Informational complexity• Diversity of competitors• Corporate stakes• Exit barriers
• Differentiation of inputs• Switching costs• Presence of substitute
inputs• Supplier concentration• Importance of volume to
supplier• Cost relative to total
purchases• Impact of inputs on cost or
differentiation• Threat of forward
integration
• Buyer concentration• Buyer volume• Buyer switching costs• Buyer information• Ability to integrate
backward• Substitute products• Price / total purchases• Product differences• Brand identity• Impact of quality /
performance• Buyer profits
Porter’s Five Forces Porter’s Five Forces AnalysisAnalysis
Porter’s Five Forces Porter’s Five Forces AnalysisAnalysis
Strategic Group AnalysisStrategic Group AnalysisBCG Growth-Share MatrixBCG Growth-Share MatrixBCG Growth-Share MatrixBCG Growth-Share MatrixL
ow
LowHigh
An
nu
al r
ea
l ra
te o
f ma
rke
t gro
wth
%
Hig
h
Relative Market Share
Earnings: high stable, growing
Cash flow: neutral
Strategy: invest for growth
Earnings: low, unstable, growing
Cash flow: negative
Strategy: analyze to determine whether business can be grown into a
star, or will degenerate into a dog
Earnings: high stable
Cash flow: high stable
Strategy: milk
Earnings: low, unstable
Cash flow: neutral or negative
Strategy: divest
Strategic CapabilityStrategic Capability
Resource AuditResource Audit
Physical resourcesPhysical resources Human resourcesHuman resources Financial Financial IntangiblesIntangibles
Comparative AnalysisComparative Analysis
Historical analysisHistorical analysis Comparison with Industry normsComparison with Industry norms Best practice analysisBest practice analysis
Balance of ResourcesBalance of Resources
Portfolio analysisPortfolio analysis
Balance of skills/personalitiesBalance of skills/personalities
Financial resourcesFinancial resources
Flexibility of resourcesFlexibility of resources
Key IssuesKey Issues
SWOT analysisSWOT analysis
StrengthStrengthWeaknessWeaknessOpportunitiesOpportunitiesThreatThreat
Core CompetencyCore Competency
Who owns the competencyWho owns the competencyHow durable are the competencesHow durable are the competencesHow transferable are the competencesHow transferable are the competencesHow replicable are the competencesHow replicable are the competences
Culture and Stakeholder ExpectationsCulture and Stakeholder Expectations
Cultural Context – External and InternalCultural Context – External and Internal
InfluenceInfluence
Expectations – Individuals, External stakeholders, Internal Expectations – Individuals, External stakeholders, Internal stakeholdersstakeholders
PowerPower
Purposes – Mission, ObjectivesPurposes – Mission, Objectives
InfluenceInfluence
StrategiesStrategies
Cultural Context of StrategyCultural Context of Strategy
External influencesExternal influences
Values of SocietyValues of Society
Organized groupsOrganized groups
Internal influencesInternal influences
ParadigmParadigm
Stakeholder AnalysisStakeholder Analysis
PowerPower – hierarchy, influence, control of strategic resources, – hierarchy, influence, control of strategic resources, knowledge or skills, control of environment, decision-knowledge or skills, control of environment, decision-making expertisemaking expertise
DynamismDynamism
InterestInterest
Strategic ChoiceStrategic Choice
Development StrategiesDevelopment Strategies
What Basis – Generic Strategies: price based, differentiation, What Basis – Generic Strategies: price based, differentiation, focusfocus
Which Direction – Alternative Directions: withdrawal, Which Direction – Alternative Directions: withdrawal, consolidation, market penetration, product development, consolidation, market penetration, product development, market development, diversification (related or unrelated)market development, diversification (related or unrelated)
How - Alternative Methods: internal development, How - Alternative Methods: internal development, acquisition, joint development alliancesacquisition, joint development alliances
Strategic EvaluationStrategic Evaluation
Evaluation CriteriaEvaluation Criteria
SuitabilitySuitability
FeasibilityFeasibility
AcceptabilityAcceptability
Also check portfolio analysis, PLC, Value-chain and Also check portfolio analysis, PLC, Value-chain and profitabilityprofitability
Strategy ImplementationStrategy Implementation
Resource AllocationResource Allocation identifying resourcesidentifying resources fit with existing resources – new requirements, fit with existing resources – new requirements,
changing old…consistency and changing old…consistency and linkageslinkages
Organization Structure and DesignOrganization Structure and Design
Simple structureSimple structure Functional structureFunctional structure Multidivisional structureMultidivisional structure MatrixMatrix
Strategic ChangeStrategic Change
Understanding processes of strategic changeUnderstanding processes of strategic change Diagnosing strategic change needsDiagnosing strategic change needs Managing the strategic change processManaging the strategic change process Styles of managing changeStyles of managing change Changing organizational routinesChanging organizational routines Symbolic activitySymbolic activity Political activityPolitical activity Leadership and change agencyLeadership and change agency