Download - Lecture 3 Strategic Management (Std)
-
8/3/2019 Lecture 3 Strategic Management (Std)
1/33
F202B3
Foundations of Management
Lecture 3
Strategic Management
-
8/3/2019 Lecture 3 Strategic Management (Std)
2/33
2
Learning Objectives
Define strategic management, strategy and businessmodel
Explain the importance of strategic management
Describe the steps in the strategic managementprocess
Explain SWOT analysis
Differentiate corporate-, business-, and functional-level strategies
Explain what competitive advantage is and why it isimportant to organizations
Identify the various competitive strategies
-
8/3/2019 Lecture 3 Strategic Management (Std)
3/33
3
Strategic Management
What Is Strategic Management?
SM involves managers from all parts of theorganisation in the formulation and
implementation of strategic goals and strategies(Bateman & Snell, 2011).
It is a set of related actions that managers take toincrease their companys performance (Hill &
Jones, 2008) The game plan or roadmap
-
8/3/2019 Lecture 3 Strategic Management (Std)
4/33
For a strategy to be successful, a firm must beflexible and make changes to the plan basedon experience
Strategies should be designed to generate asustainable competitive advantage.
Competitive advantage: anything that a firm
does especially well compare to rival firms Success is 10% formulation and 90%
implementation
4
-
8/3/2019 Lecture 3 Strategic Management (Std)
5/33
5
Importance of SM It explains why do some companies fail whereas
others succeed
Managers use SM to make decisions in order to copewith uncertain environments
SM helps organizations co-ordinate differentdepartments and functions and direct employeesfocus on achieving organizational goals.
It allows an organization to be more proactive in
shaping its own future; initiate influence and exertcontrol over its own destiny
-
8/3/2019 Lecture 3 Strategic Management (Std)
6/33
6
The Strategic Management Process
PLANNING, IMPLEMENTATION, EVALUATION
Establishment of vision,mission and goals
Feedback
-
8/3/2019 Lecture 3 Strategic Management (Std)
7/33
7
Step 1: Identify Current Vision,Mission, Values,
Goals and Strategies
Vision - Statement of future desired state
Mission - The reason for its existenceValues - A statement of key values that
an organization is committed to
Goals - The measurable desired future
state that an organization
attempts to realize
-
8/3/2019 Lecture 3 Strategic Management (Std)
8/33
Example Air Asia
Vision:
To be the largest low cost airline in Asia and
serving the 3 billion people who are currentlyunderserved with poor connectivity and high
fares.
-
8/3/2019 Lecture 3 Strategic Management (Std)
9/33
Air Asia
Mission:
To be the best company to work for wherebyemployees are treated as part of a big family
Create a globally recognized ASEAN brand
To attain the lowest cost so that everyone canfly with AirAsia
Maintain the highest quality product,embracing technology to reduce cost andenhance service levels
-
8/3/2019 Lecture 3 Strategic Management (Std)
10/33
Air Asia
Values:
We make the low fare model possible through the implementation of the following key
strategies,
Safety First:
Partnering with the worlds most renowned maintenance providers and complying with the
with world airline operations. High Aircraft Utilisation:
Implementing the regions fastest turnaround time at only 25 minutes, assuring lower costs
and higher productivity.
Low Fare, No Frills:
Providing guests with the choice of customizing services without compromising on quality
and services.
Streamline Operations:
Making sure that processes are as simple as possible.
Lean Distribution System:
Offering a wide and innovative range of distribution channels to make booking and travelling
easier.
Point to Point Network:
Applying the point-to-point network keeps operations simple and costs low.
-
8/3/2019 Lecture 3 Strategic Management (Std)
11/33
11
Step 2: Doing an External Analysis
Analysis of the organizations external operating
environment
successful strategies are aligned with theenvironment
Opportunities: Positive trends in external
environmental factors (Favorable conditions) Threats: Negative trends in external
environmental factors
-
8/3/2019 Lecture 3 Strategic Management (Std)
12/33
How to identify opportunities and threats?
- The general environment (PESTEL analysis)
- The industry environment (Porters 5 forcesanalysis)
- Strategic group
- Competitor analysis
12
Step 2: Doing an External Analysis
-
8/3/2019 Lecture 3 Strategic Management (Std)
13/33
13
Step 3: Doing an Internal Analysis
To identify the resources and capabilities of the organization
Resources: tangible and intangible
Capabilities: companys skills at coordinating its resources andputting them into productive use.
When a firm has company-specific and valuable resources andcapabilities, it creates distinctive competencies.
Distinctive/core competencies- a unique and exceptional
capability or resource the organizations major value-creating, competitive
weapon
-
8/3/2019 Lecture 3 Strategic Management (Std)
14/33
14
Step 3: Doing an Internal Analysis
Strengths: unique resources or activities which
the organization does well
Weaknesses: resources an organization needsbut does not possess, activities which the
organization does not do well
Combined internal & external analysis SWOT
analysis
-
8/3/2019 Lecture 3 Strategic Management (Std)
15/33
15
Step 3: Doing an Internal Analysis
Strengths: unique resources or activities which
the organization does well
Weaknesses: resources an organization needsbut does not possess, activities which the
organization does not do well
Combined internal & external analysis SWOT
analysis
-
8/3/2019 Lecture 3 Strategic Management (Std)
16/33
16
Step 4: Formulating
Strategies
Consider the realities of the external
environment & the available resources &
capabilities design strategies that will helpthe organization achieving its mission and
vision.
There are three types of organizational strategies
-
8/3/2019 Lecture 3 Strategic Management (Std)
17/33
17
Types of Organizational Strategies
-
8/3/2019 Lecture 3 Strategic Management (Std)
18/33
18
Corporate-Level Strategy
Aim Maximizing profitability and profit growth
Determines
what businesses a company should be in or wants to be in
the direction that the organization is going
the role that each business unit will play
There are three types of corporate strategies :
- Growth- Stability
- Renewal
-
8/3/2019 Lecture 3 Strategic Management (Std)
19/33
19
Corporate-Level Strategy
Growth seeks to increase the level of the organizations operations
1. concentration - growth through direct expansion of organizations ownbusiness operations
2. vertical integration
backward- become your own supplier
forward- become your own distributor
3. horizontal integration - grow by combining with other organizations inthe same industry
4. diversification
Concentric/related diversification - grow by merging with or acquiringfirms in different, but related, industries
strategic fit
Conglomerate/unrelated diversification - grow by merging with oracquiring firms in different and unrelated industries
-
8/3/2019 Lecture 3 Strategic Management (Std)
20/33
Corporate-Level Strategy
Stability
no significant change is proposed
organizations performance is satisfactory
environment appears to be stable and unchanging
few organizations today pursue this strategy
20
-
8/3/2019 Lecture 3 Strategic Management (Std)
21/33
21
Corporate-Level Strategy
Renewal designed to address organizational weaknesses that are leading to
performance declines
Retrenchmentshort run renewal strategy used in situations whenperformance problems are not so serious, e.g. declining profits
intended to:
stabilise operations
revitalise organizational resources and capabilities
prepare to compete once again
Turnaround renewal strategy where performance problems arecritical e.g. loses
Managers cut costs, restructure organizational operations
-
8/3/2019 Lecture 3 Strategic Management (Std)
22/33
22
Corporate-Level Strategy
Corporate Portfolio Analysis - used when corporate strategyinvolves a number of businesses
Portfolio analysis helps to classify businesses into a single framework
Boston Consulting Group (BCG) matrix
helps managers establish priorities for making resource
allocation decisions
businesses classified in terms of
current market share
anticipated market growth
-
8/3/2019 Lecture 3 Strategic Management (Std)
23/33
23
BCG Matrix
-
8/3/2019 Lecture 3 Strategic Management (Std)
24/33
24
BCG Matrix
Cash cows: (low growth, high market share) generate
large amounts of cash, prospects for growth limited
Stars: (high growth, high market share) fast growing,
hold dominant share of that market
?: (high growth, low market share) attractive industry
but small market share percentage
Dogs: (low growth, low market share) do notproduce or consume much cash, no promise of
improved performance.
-
8/3/2019 Lecture 3 Strategic Management (Std)
25/33
25
BCG Matrix
strategic implications of the matrix
cash cows - milk
use cash to invest in stars and question marks
stars - require heavy investment
eventually will become cash cows
question marks - two strategies
invest to transform them into stars divest
dogs - sold off or liquidated
-
8/3/2019 Lecture 3 Strategic Management (Std)
26/33
26
Business-Level Strategy
determines how an organization should compete ineach of its businesses
strategic business units - independent businessesthat formulate their own strategies (for org withmultiple businesses)
Role ofCompetitive Advantage competitive advantage - sets an organization apart by
providing a distinct edge comes from the organizations core competencies
not every organization can transform core competencies into acompetitive advantage
once created, must be able to sustain it
-
8/3/2019 Lecture 3 Strategic Management (Std)
27/33
27
Competitive Strategy
Porters three generic strategies
cost leadership - goal is to become the
lowest-cost producer in the industry tries to identify efficiencies in all operations
overhead kept to a minimum
product or service must be perceived to be of
comparable quality to that offered by
competitors
-
8/3/2019 Lecture 3 Strategic Management (Std)
28/33
28
Competitive Strategy
differentiation - offer unique products
that are widely valued by customers
sets the firm apart from competitors
differentiation based on quality, service,
product design, brand image
customers must be willing to pay a pricepremium that exceeds the cost of
differentiation
-
8/3/2019 Lecture 3 Strategic Management (Std)
29/33
29
Competitive Strategy
focus - aims at a cost advantage or
differentiation advantage in a narrow
segment no attempt to serve the broad market
feasibility of strategy depends on the size of
the segment and the ability of the firm tosupport the cost of focusing
-
8/3/2019 Lecture 3 Strategic Management (Std)
30/33
30
Functional-Level Strategy
used to support the business-level
strategy
creates an appropriate supporting rolefor each functional area of the
organisation
e.g., manufacturing, marketing, humanresources
-
8/3/2019 Lecture 3 Strategic Management (Std)
31/33
31
Step 5: Implementing Strategies
A strategy is only as good as its
implementation
Involves adjustments of
Structure
Human resources
Management leadership
-
8/3/2019 Lecture 3 Strategic Management (Std)
32/33
32
Step 6: Evaluating Results
control process to determine the
effectiveness of a strategy
Have the goals been achieved?
What adjustments, if any, are necessary?
-
8/3/2019 Lecture 3 Strategic Management (Std)
33/33
33
Readings
Bateman & Snell, Chapter 4
Robbins, Chapter 8
Gomez-Mejia,3rd
ed, Chapter7