mgs 526 ch.1 definitions,models and the dillema

8/6/2019 Mgs 526 Ch.1 Definitions,Models and the Dillema

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MGS 526

WINNING STRATEGIES FOR REAL WORLD SUCCESS

BUSINESS WEALTH CREATIONAND

STRATEGIC STAKEHOLDER MANAGEMENT

1.0: STRATEGY DEFINITIONS & THEORIES

2.0: STRATEGY PROCESS MODELS RE: MICRO & MACRO ENVIRONMENTAL SCANNING

MODELS DEVELOPMENT FORMULATION -

IMPLEMENTATION

3.0: THE STRATEGIC DILEMMA


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1.0: STRATEGY DEFINITIONS

1.1: QUOTATIONS

Strategy is about setting yourself apart from the competition. Its not a matterof being better at what you do its a matter of being different at what you do.~ Michael Porter

A satisfied customer is the best business strategy of all.

Michael Leboeuf

Leaders establish the vision for the future and set the strategy for getting there; they cause change.They motivate and inspire others to go in the right direction and they, along with everyone else,sacrifice to get there.

John Kotter

There will be hunters and hunted, winners and losers. What counts in global competition is the rightstrategy and success.

Heinrich von Pierer

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http://thinkexist.com/quotes/michael_leboeuf/http://thinkexist.com/quotes/john_kotter/http://thinkexist.com/quotes/heinrich_von_pierer/http://thinkexist.com/quotes/john_kotter/http://thinkexist.com/quotes/heinrich_von_pierer/http://thinkexist.com/quotes/michael_leboeuf/


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BUSINESS WEALTH CREATION AND STRATEGIC STAKEHOLDERMANAGEMENT

THE WHY THIS COURSE

This course is designed to provide Business Faculty students with the opportunity to

understand how strategic business battles are won or lost by studying real world

examples as to "how and why" various corporations succeeded or failed resultant of

their managerial competencies to effectively deploy resource assets to achieve

pluralistic stakeholder objectives.

THERFORE IT IS ESSENTIAL T/B EXPOSED TO

THE DYNAMICS-THE MODELS AND THE PROCESS

RE:STRATEGIC DECISION MAKING

WHY?

TO COMPREHEND COMPARATIVE REAL WORLD EXAMPLES RE:THE IMPACT OF REAL WORLD STRATEGIC APPLICATIONS

CONSEQUENTLY:

WHAT WORKED -----WHAT DIDNTMORE IMPORTLANTLYUNDERSTANDING THE WHY

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1.2: THEORIESStrategy According to Kenneth Andrews

Kenneth Andrews presents this lengthy definition of strategy in his book, The Concept of CorporateStrategy[4]:

"Corporate strategy is the pattern of decisions in a company that determines and reveals itsobjectives, purposes, or goals, produces the principal policies and plans for achieving those goals,and defines the range of business the company is to pursue, the kind of economic and human

organization it is or intends to be, and the nature of the economic and non-economic contribution itintends to make to its shareholders, employees, customers, and communities."

Strategy According to George Steiner

. Steiner also points out that there is very little agreement as to the meaning of strategy in thebusiness world. Some of the definitions in use to which Steiner pointed include the following:

Strategy is that which top management does that is of great importance to the organization.

Strategy refers to basic directional decisions, that is, to purposes and missions.

Strategy consists of the important actions necessary to realize these directions.

Strategy answers the question: What should the organization be doing?

Strategy answers the question: What are the ends we seek and how should we achieve them?

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BUSINESS WEALTH CREATION AND STRATEGIC STAKEHOLDERMANAGEMENT1.2: THEORIES

Strategy According to Henry Mintzberg

Henry Mintzberg, in his 1994 book, The Rise and Fall of Strategic Planning[3], points out that peopleuse "strategy" in several different ways, the most common being these four:

1. Strategy is a plan, a "how," a means of getting from here to there.

2. Strategy is a pattern in actions over time; for example, a company that regularly markets veryexpensive products is using a "high end" strategy.

3. Strategy is position; that is, it reflects decisions to offer particular products or services inparticular markets.

4. Strategy is perspective, that is, vision and direction.

Mintzberg argues that strategy emerges over time as intentions collide with and accommodate achanging reality. Thus, one might start with a perspective and conclude that it calls for a certainposition, which is to be achieved by way of a carefully crafted plan, with the eventual outcome andstrategy reflected in a pattern evident in decisions and actions over time. This pattern in decisionsand actions defines what Mintzberg called "realized" or emergent strategy.

STRATEGY ACCORDING TO HP CEO LEWIS PALTT

STRATEGY is defensive self-destruction and renewal. We have to be willing to cannibalize whatwe're doing today in order to ensure our leadership in the future....

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BUSINESS WEALTH CREATION AND STRATEGIC STAKEHOLDERMANAGEMENT1.2: THEORIES:

The concept of strategy has been borrowed from the military and adapted for use inbusiness

A strategy is a long term plan of action designed to achieve a particular goal, most often "winning". Strategy isdifferentiated from tactics or immediate actions with resources at hand by its nature of being extensivelypremeditated, and often practically rehearsed.

The word derives from the Greek wordstratgos, which derives from two words:stratos (army) and ago(ancient Greek for leading).Stratgos referred to a 'military commander' during the age ofAthenian

Democracy.

PER GEORGE PATTON THE FAMOUS AMERICAN WORLD WAR 11 GENERAL

NO POOR DUMB BASTARD EVER WON A WAR BY DYING FOR HIS COUNTRY-----HE

WON IT BY MAKING THE OTHER POOR DUMB BASTARD DIE FOR HIS COUNTRY

IN THE BUSINESS SCENARIO----THE ULTIMATE WIN IS ACHIEVING MONOPOLY

THAT IS

RESULTANT OF WINNING THE CUSTOMERS ABSOLUTE FRANCHAISE

COMPETING WITH BASICALLY ZERO COMPETITION

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2.0: STRATEGY PROCESS MODELS

2.1: THE GENERAL STANDARD MODEL

DEFINING THE MISSION

IDENTIFYING OBJECTIVES

SITUATION ANALYSIS

STRATEGY FORMULATION IMPLEMENTATION

CONTROL

2.11:DEFINING THE MISSION

The Companys mission must expressed clearly its Raison detre i.e. Its reason for being.The mission is typically communicated in the form of a Mission Statement that is geared to convey

a sense of purpose to the Company employees and also project the desired Company image to the

Companys Target Market----effectively the Mission Statement crystallizes where the Company is

going.

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BUSINESS WEALTH CREATION AND STRATEGIC STAKEHOLDERMANAGEMENT2.0: STRATEGY PROCESS MODELS

2.12: IDENTIFYING OBJECTIVES/GOALS

Objectives are specific goals that the Company wants to achieve over a specified time spectrum.

For example: MARKET SHARE, EXPANSION, PROFTS,and MARGINS ETC.

The defined objectives s/b expressed in qualitative and quantitative terms so that over the

prescribed period of achievement, performance can be monitored for feedback and appropriate

reactive correction.

2.13: CONDUCTING A SITUATIONAL ANALYSIS

An environmental scan to identify market place opportunities in conjunction with an examination

of the Companys capabilities and its limitations in order to select the appropriate opportunities it

can realistically capitalize on with a high probability of success.

The situational scan should include macro and micro analyses to examine the Companys

positioning status as related to the general environment plus its positioning as related to its

competitive environment and within the context of its own assets.

SITUATIONAL ANALYTICAL MODELS

SWOT REF. EXHIBIT B

PORTER-REF. EXHIBIT C

PEST- REF. EXHIBIT D

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2.14: STRATEGY FORMULATION

STRATEGY FORMULATION DEFINED

Strategy formulation is the process of determining appropriate courses of action

for achieving organizational objectives and thereby accomplishing organizational

purpose.

FOR EXAMPLE

Sustainable competitive advantage--- allows the maintenance and improvement of theenterprise's competitive position in the market. It is an advantage that enablesbusiness to survive against its competition over a long period of time.

PROCESS

The strategy you formulate should reflect your environmental analyses lead tofulfillment of your organizational mission, and result in reaching organizational

objectives.Tools you can use to assist you in formulating strategies should/could include

SWOT analysis,

PEST analysis

Porter's model for industry analysis

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Organizations effective at strategy implementation successfully managesix strategy supporting factors:

1. Action Planning

First, organizations successful at strategy implementation develop detailed actionplans... chronological lists of action steps (tactics) which add the necessary detail to

strategies. And assign responsibility to a specific individual for accomplishing each ofthose action steps. Also, they set a due date and estimate the resources required toaccomplish each of their action steps. Thus they translate their broad strategystatement into a number of specific work assignments.

2. Organization StructureSuccessful implementers give thought to their organizational structure... and ask if

their intended strategy is appropriate for that current structure. And they ask adeeper question as well... "Is the organizational structure appropriate to the intendedstrategy?"

3. Human ResourcesOrganizations successful at implementation consider the human resource factorin making strategies happen

2.15: STRATEGY IMPLEMENTATION

By Bill Birnbaum,CMC

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Organizations effective at strategy implementation successfully managesix strategy supporting factors CONTD:

4. The Annual Business PlanOrganizations successful at implementation are aware of their need to fund their

intended strategies--- they "dollarize" the necessary financial commitment early inthe planning process. First, they "ballpark" the financial requirements when they firstdevelop their strategy... and later when developing their action plans, they "firm up"that commitment; they link their strategic plan to their annual business plan (andtheir budget). And they eliminate the "surprises" they would otherwise receive atbudgeting

5. Monitoring and ControlMonitoring and controlling the plan includes a periodic look to see if you're on course...and it also includes a list of options to get back on course if you should veer off. Thoseoptions include changing the schedule, changing the action steps, changing thestrategy or (as a last resort) changing the objective

2.15: STRATEGY IMPLEMENTATION

By Bill Birnbaum, CMC

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3.0: THE STRATEGIC DILEMMA

MOST COMPANIES HAVE STRATEGIES, BUT FAR FEWER ACHIEVE THEM. VARIOUSSTUDIES SUPPORT THIS VIEW, FOR EXAMPLE:

A Fortune Magazine study suggested that 70% of 10 CEOs who fail do sonot because of bad strategy, but because of bad execution. (Source: Why

CEOs Fail - R Charan & G Colvin, Fortune Magazine, 21 Jun 1999.)

In another study of 200 companies in the Times 1000, 80% of directorssaid they had the right strategies but only 14% thought they wereimplementing them well, no doubt linked to the finding that despite 97%of directors having a 'strategic vision', only 33% reported achieving

'significant strategic success'. (Source: Why do only one third of UKcompanies achieve strategic success? - I Cobbold & G Lawrie, 2GC Ltd.,May 2001.)

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3.0: THE STRATEGIC DILEMMA---STRATEGY IMPLEMENTATION FAILURE

Why Strategy Implementation Fails.

The most common reasons for failure include:

People don't want to make the strategy work.

Ineffective communication.

Failure to analyze the implications of the strategy on the Organization.

Changing too much at once. Lack of 80/20 focus.

Mixed messages.

Lack of role clarity who? must do what--by when.

Lack of action! Focus on knowing rather than doing. Being 'put off' by resistance to change.

Failing to remove or step around barriers to implementation.

Lack of perseverance. Things get worse before they get better.

Implementation is seen as negative and stressful rather than creative and exciting.

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THE WHY THIS COURSE

This course is designed to provide Business Faculty students with the opportunity to

understand how strategic business battles are won or lost by studying real world

examples as to "how and why" various corporations succeeded or failed resultant of

their managerial competencies to effectively deploy resource assets to achieve

pluralistic stakeholder objectives.

HAVING BEEN EXPOSED TO

THE DYNAMICS-THE MODELS AND THE PROCESS

RE:STRATEGIC DECISION MAKING

NOW YOU ARE IN A BETTER POSTION

TO STUDY COMPARATIVE REAL WORLD EXAMPLES RE:THE IMPACT OF REAL WORLD STRATEGIC APPLICATIONS

SPECIFCALLY:

WHAT WORKED -----WHAT DIDNTMORE IMPORTLANTLYUNDERSTANDING THE WHY

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BUSINESS WEALTH CREATION AND STRATEGIC STAKEHOLDERMANAGEMENTSTRATEGY PROCESS MODEL EXHIBITS

ANALYTICAL MODELS

SWOT REF. EXHIBIT B

PAGE:13-17

PORTER-REF. EXHIBIT C

PAGE:18-22

PEST- REF. EXHIBIT D

PAGE:2-25

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EXHIBIT B

SWOT REPRESENTS

StrengthsWeaknessesOpportunitiesThreatsFor a organizations strategy to be well conceived,it must be matched to both

Taking advantage of its internal strengthswhile defending against its weaknessIdentifying thebest market opportunitiesWHILE SIMULTANEOUSLYMINIMIZING OR ELIMINATINGexternal threats to its well-being.

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SWOT Analysis: What to Look ForPotential Resource Strengths

Powerful strategy Strong financial condition Strong brand name image/reputation Widely recognized as market leader Proprietary technology Cost advantages Strong communications Product innovation Good customer service Better product quality No clear strategic direction

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SWOT Analysis: What to Look For

Potential Resource Weaknesses

Obsolete facilities Weak balance sheet; excess debt Higher overall costs than rivals Missing some key skills/competencies Internal operating problems Falling behind in R&D Too narrow product line Weak marketing

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Potential Opportunities

Serving additional customergroups Expanding to new geographic areas Expanding product line

Transferring skills to new products or services Vertical integration Take market share from rivals Alliances or acquisitions Openings to exploit new technologies

Openings to extend brand name/image

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Potential External Threats

Entry of potent new competitorsSubstitute products or services

Slowing market growth Adverse shifts in political or economic conditions Costly new regulations Growing leverage of customers or suppliers

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EXHIBIT C

Porter 5 forces analysis

Porter's 5 forces analysis is a framework for industry analysis and business strategy development developed by

Michael E. Porterin 1979 ofHarvard Business School. It uses concepts developed in IndustrialOrganization (IO) economics to derive 5 forces that determine the competitive intensity and thereforeattractiveness of a market. Porter referred to these forces as the micro environment, to contrast it with the more

general term macro environment. They consist of those forces close to a company that affect its ability to serveits customers and make a profit. A change in any of the forces normally requires a company to re-assess the

marketplace.

] Porter's Five Forces

Five forces include three forces from 'horizontal' competition: threat of substitute products, the

threat of established rivals, and the threat of new entrants; and two forces from 'vertical'

competition: the bargaining power of suppliers, bargaining power of customers.

1: The threat of substitute products

The existence of close substitute products increases the propensity of customers to switch to

alternatives in response to price increases (high elasticity of demand).

buyer propensity to substitute

relative price performance of substitutes

buyer switching costs

perceived level of product differentiation

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Porter's Five Forces -CONTD

2:The threat of new entrants

Profitable markets that yield high returns will draw firms. The result is that many new entrants,which will effectively decrease profitability. Unless the entry of new firms can be blocked by

incumbents, the profit rate will fall towards a competitive level (perfect competition).

the existence of barriers to entry (patents, rights, etc.)

economies of product differences

brand equity

switching costs or sunk costs

capital requirements

access to distribution

absolute cost advantages

learning curve advantages

expected retaliation by incumbents

government policies

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3: The intensity of competitive rivalry

For most industries, this is the major determinant of the competitiveness of the industry.

Sometimes rivals compete aggressively and sometimes rivals compete in non-price dimensions suchas innovation, marketing, etc.

number of competitors

rate of industry growth

intermittent industry overcapacity

exit barriers diversity of competitors

informational complexity and asymmetry

fixed cost allocation per value added

level of advertising expense

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4: The bargaining power of customers

Also described as the market of outputs. The ability of customers to put the firm under pressure

and it also the customer's affects the sensitivity to price changes.

buyer concentration to firm concentration ratio

bargaining leverage

buyer volume

buyer switching costs relative to firm switching costs

buyer information availability

ability to backward integrate

availability of existing substitute products

buyer price sensitivity

price of total purchase

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5: The bargaining power of suppliers

Also described as market of inputs. Suppliers of raw materials, components, and services (such as

expertise) to the firm can be a source of power over the firm. Suppliers may refuse to work withthe firm, or e.g. charge excessively high prices for unique resources.

supplier switching costs relative to firm switching costs

degree of differentiation of inputs

presence of substitute inputs

supplier concentration to firm concentration ratio threat of forward integration by suppliers relative to the threat of backward

integration by firms

cost of inputs relative to selling price of the product

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EXHIBIT D

PEST ANALYSIS FRAMEWORK

This is a tool to assist in analysing the overall business context an Organization isoperating in and covers five (5) primary dimensions encompassing the business arena.

Political

Environmental Economic Social

Technology

Examples of what could/should be considered in each area are:

1: Political Factors

Political stability

Legal framework for contractual enforcement

Intellectual property enforcement Trade regulations & tariffs

Price regulations

Wage legislation

Environmental legislation

Product labeling

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PEST ANALYSIS FRAMEWORK CONTD

2: Environmental Factors Kyoto protocol

Biodiversity

Climate Change\

Desertification

Nuclear test Ban\ Ozone layer protection

Safety and health Environmentally responsible corporate citizens

3: Economic Factors

Economic system operable (socialism capitalism-communism-dictatorship)

Government intervention in the marketplace

Comparative advantage of host country

Exchange rates

Labour costs

Business cycle stage

Discretionary income

Unemployment rates

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PEST ANALYSIS FRAMEWORK

4: Social Factors

Demographics

Class Structure

Education

Culture

5: Technology Factors

Information management development

Privacy of data

Reliability Updates on technology

Hurdles of acceptance

Lack of history in new technology Protection of intellectual property Ease of transferring funds with technology

Resourcing

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mgs 526 ch.1 definitions,models and the dillema

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