strategic management presented by: jerome p. dumlao 7 july 2008

StrategicStrategicManagementManagement

Presented by:Presented by:

Jerome P. DumlaoJerome P. Dumlao

7 July 20087 July 2008

Strategic Management Strategic Management DefinedDefined

A comprehensive and ongoing A comprehensive and ongoing management process aimed at management process aimed at formulating and implementing formulating and implementing effective strategies; it is a way of effective strategies; it is a way of approaching business opportunities approaching business opportunities and challenges (Griffin)and challenges (Griffin)


Strategic management is the process Strategic management is the process of specifying an organization's of specifying an organization's objectives, developing policies and objectives, developing policies and plans to achieve these objectives, plans to achieve these objectives, and allocating resources so as to and allocating resources so as to implement the plans. implement the plans. (It is the highest level of managerial (It is the highest level of managerial activity, usually performed by the activity, usually performed by the company's Chief Executive Officer company's Chief Executive Officer [CEO] and executive team.) [CEO] and executive team.)


The The artart and and sciencescience of formulating, of formulating, implementing, and evaluating cross-implementing, and evaluating cross-functional decisions that enable an functional decisions that enable an organization to achieve its organization to achieve its objectives. (David, 1999) objectives. (David, 1999)


Art is the principles or methods Art is the principles or methods governing any craft or branch of governing any craft or branch of learning which is based on the learning which is based on the interpretation of what is appealing or interpretation of what is appealing or what is likable for a particular what is likable for a particular situation.situation.


Science is a branch of knowledge or Science is a branch of knowledge or study dealing with a body of facts or study dealing with a body of facts or truths systematically arranged and truths systematically arranged and showing the operation of general showing the operation of general laws.laws.

Focus of Strategic Focus of Strategic ManagementManagement

Strategic Management focuses on Strategic Management focuses on integrating management, marketing, integrating management, marketing, finance/accounting, production/ finance/accounting, production/ operations, research and operations, research and development, and computer development, and computer information systems to achieve information systems to achieve organizational success. organizational success.

Strategy DefinedStrategy Defined

A company's overall plan of A company's overall plan of development.development.

A comprehensive plan for A comprehensive plan for

accomplishing an organization's accomplishing an organization's goals.goals.


The game plan management has for The game plan management has for positioning the company in its positioning the company in its chosen market arena, competing chosen market arena, competing successfully, pleasing customers, successfully, pleasing customers, and achieving good business. and achieving good business. (Strickland, 1999)(Strickland, 1999)


Game Plan - a carefully thought out Game Plan - a carefully thought out set of activities set of activities


StrategyStrategy is a set of carefully thought is a set of carefully thought out out activitiesactivities managementmanagement has for has for

positioning the company in its positioning the company in its chosen market arenachosen market arena, ,

competing successfullycompeting successfully, , pleasing customerspleasing customers, and , and achieving good businessachieving good business..


Activities Activities are the actions, events or are the actions, events or procedures done by the functional procedures done by the functional

areas such asareas such as management, management, marketing, finance/accounting, marketing, finance/accounting,

production/ operations, research and production/ operations, research and development, and computer development, and computer

information systemsinformation systems


Management Management refers to the person or refers to the person or people who perform the act(s) of people who perform the act(s) of

management: planning, organizing, management: planning, organizing, leading and controllingleading and controlling


Chosen market arena Chosen market arena refers to the refers to the industry with which the business is industry with which the business is

categorized.categorized.


Competing successfully Competing successfully would mean would mean achieving your organization’s goals achieving your organization’s goals

despite the competition, using despite the competition, using ethical practices notwithstanding.ethical practices notwithstanding.


Pleasing customers Pleasing customers refers to giving refers to giving them quality service before, during them quality service before, during

and after the sale. Quality would and after the sale. Quality would mean satisfying their needs and mean satisfying their needs and

wants with the product/service you wants with the product/service you are selling.are selling.


Achieving good business Achieving good business refers to refers to creating a good name for your creating a good name for your

organization through good organization through good management practices.management practices.

Corporate

Strategy

Business

Strategies

Functional Strategies

(R&D, manufacturing, marketing, finance, human

resources, etc.)

Operating Strategies

(regions and districts, plants, departments within functional

areas)

Two-Way Influence

Two-Way Influence

Two-Way Influence

Responsibility of corporate-level managers

Responsibility of business-level general managers

Responsibility of heads of major functional activities within a business unit or division.

Responsibility of plant managers, geographic unit managers, and lower-level supervisors

A Diversified CompanyThe Strategy-Making Pyramid

A Single-Business Company

The Strategy-Making Pyramid

Business

Strategy

Functional Strategies

(R&D, manufacturing, marketing, finance, human

resources, etc.)

Two-Way Influence

Two-Way Influence

Responsibility of executive-level managers

Responsibility of heads of major functional activities within a business

Operating Strategies

(regions and districts, plants, departments within functional

areas)

Responsibility of plant managers, geographic unit managers, and lower-level supervisors

Types of Grand StrategiesTypes of Grand Strategies

Integration StrategiesIntegration Strategies• Forward IntegrationForward Integration• Background IntegrationBackground Integration• Horizontal IntegrationHorizontal Integration


Integration StrategiesIntegration Strategies• Forward IntegrationForward Integration - involves gaining - involves gaining

ownership or increased control over ownership or increased control over distributors or retailers.distributors or retailers.


Integration StrategiesIntegration Strategies• Backward IntegrationBackward Integration - a strategy of - a strategy of

seeking ownership or increased control seeking ownership or increased control of a firm’s suppliers. of a firm’s suppliers.


Integration StrategiesIntegration Strategies• Horizontal IntegrationHorizontal Integration - refers to a - refers to a

strategy of seeking ownership of or strategy of seeking ownership of or increased control over a firm’s increased control over a firm’s competitors competitors


Intensive StrategiesIntensive Strategies• Market PenetrationMarket Penetration• Market DevelopmentMarket Development• Product DevelopmentProduct Development


Intensive StrategiesIntensive Strategies• Market PenetrationMarket Penetration - seeks to increase - seeks to increase

market share for present products or market share for present products or services in present markets through services in present markets through greater marketing efforts. greater marketing efforts.


Intensive StrategiesIntensive Strategies• Market DevelopmentMarket Development - involves - involves

introducing present products or services introducing present products or services into new geographic areas. into new geographic areas.


Intensive StrategiesIntensive Strategies• Product DevelopmentProduct Development - a strategy that - a strategy that

seeks increased sales by improving or seeks increased sales by improving or modifying present products or services. modifying present products or services.

Ansoff’s Product-Market Ansoff’s Product-Market Growth MatrixGrowth Matrix

Ansoff MatrixAnsoff Matrix

The matrix allows marketers to The matrix allows marketers to consider ways to grow the business consider ways to grow the business via existing and/or new products, in via existing and/or new products, in existing and/or new markets – there existing and/or new markets – there are four possible product/market are four possible product/market combinations. This matrix helps combinations. This matrix helps companies decide what course of companies decide what course of action should be taken given current action should be taken given current performance.performance.

Igor Ansoff (1912 – 2002)Igor Ansoff (1912 – 2002)

the father of Strategic the father of Strategic managementmanagement

Russian émigré to the USRussian émigré to the US Expertise: the concept of Expertise: the concept of

environmental turbulence, environmental turbulence, the contingent strategic success the contingent strategic success paradigm and real-time strategic paradigm and real-time strategic management.management.


Diversification StrategiesDiversification Strategies• Concentric DiversificationConcentric Diversification• Horizontal DiversificationHorizontal Diversification• Conglomerate DiversificationConglomerate Diversification


Diversification StrategiesDiversification Strategies• Concentric DiversificationConcentric Diversification - adding new, - adding new,

but related, products or services is but related, products or services is widely called concentric diversification.widely called concentric diversification.


Diversification StrategiesDiversification Strategies• Horizontal DiversificationHorizontal Diversification - adding new, - adding new,

unrelated products or services for unrelated products or services for present customers is called horizontal present customers is called horizontal diversification.diversification.


Diversification StrategiesDiversification Strategies• Conglomerate DiversificationConglomerate Diversification - adding - adding

new, unrelated products or services is new, unrelated products or services is called conglomerate diversification.called conglomerate diversification.


Defensive StrategiesDefensive Strategies• Joint VentureJoint Venture• RetrenchmentRetrenchment• DivestitureDivestiture• LiquidationLiquidation


Defensive StrategiesDefensive Strategies• Joint VentureJoint Venture - occurs when two or more - occurs when two or more

companies form a temporary companies form a temporary partnership or consortium for the partnership or consortium for the purpose of capitalizing on some purpose of capitalizing on some opportunity. opportunity.


Defensive StrategiesDefensive Strategies• RetrenchmentRetrenchment - occurs when an - occurs when an

organization regroups through cost and organization regroups through cost and asset reduction to reverse declining asset reduction to reverse declining sales and profits. sales and profits.


Defensive StrategiesDefensive Strategies• DivestitureDivestiture - the selling a division or - the selling a division or

part of an organization. Often used to part of an organization. Often used to raise capital for further strategic raise capital for further strategic acquisitions or investments. acquisitions or investments.


Defensive StrategiesDefensive Strategies• LiquidationLiquidation - selling all of a company’s - selling all of a company’s

assets, in parts, for their tangible worth. assets, in parts, for their tangible worth.


Other StrategiesOther Strategies• AcquisitionAcquisition• MergersMergers• Leveraged BuyoutsLeveraged Buyouts


Other StrategiesOther Strategies• AcquisitionAcquisition - occurs when a large - occurs when a large

organization purchases (acquires) a organization purchases (acquires) a smaller firm, or vice versa. smaller firm, or vice versa.


Other StrategiesOther Strategies• MergersMergers - occurs when two - occurs when two

organizations of about equal size unite organizations of about equal size unite to form one enterprise. to form one enterprise.


Other StrategiesOther Strategies• Leveraged BuyoutsLeveraged Buyouts - occurs when a - occurs when a

corporation’s shareholders are bought corporation’s shareholders are bought out (hence buyout) by the company’s out (hence buyout) by the company’s management and other private management and other private investors using borrowed funds (hence investors using borrowed funds (hence leveraged). leveraged).

The Grand Strategy The Grand Strategy MatrixMatrix

Quadrant II

1. Market development

2. Market penetration

3. Product development

4. Horizontal integration

5. Divestiture6. Liquidation

Quadrant I

1. Market development2. Market penetration3. Product development4. Forward integration5. Backward integration6. Horizontal

integration7. Concentric

diversification

Quadrant III

1. Retrenchment2. Concentric

diversification3. Horizontal

diversification4. Conglomerate divers.5. Divestiture6. Liquidation

Quadrant IV

1. Concentric diversification

2. Horizontal diversification3. Conglomerate

diversification4. Joint venture

Weak Competitive Position

Strong Competitive Position

Slow Market Growth

Rapid Market Growth

Generic Business StrategiesGeneric Business Strategies

• Cost Leadership StrategiesCost Leadership Strategies• Differentiation StrategiesDifferentiation Strategies• Focus StrategiesFocus Strategies


Michael Eugene Porter Michael Eugene Porter • university Professor at Harvard university Professor at Harvard

Business School, with academic Business School, with academic interests in management and interests in management and economics. economics.

• main academic objectives focus on how a main academic objectives focus on how a firm or a region can build a competitive firm or a region can build a competitive advantage and develop competitive advantage and develop competitive strategy. strategy.

• originally an engineer, then an economist originally an engineer, then an economist before specializing in strategy.before specializing in strategy.

Threat of Substitute Products

Threat of Substitute Products

Bargaining power of suppliers

Bargaining power of suppliers

Bargaining power of consumers

Bargaining power of consumers

Rivalry among competing firms

Threat of New Entrants

Threat of New Entrants

Michael Porter’s Michael Porter’s Five-Forces Model of Five-Forces Model of

CompetitionCompetition


• Cost Leadership StrategiesCost Leadership Strategies - cals for - cals for being the low cost producer in an being the low cost producer in an industry for a given level of quality.industry for a given level of quality.

The firm sells its products either at The firm sells its products either at average industry prices to earn a profit average industry prices to earn a profit higher than that of rivals, or below the higher than that of rivals, or below the average industry price to gain a market average industry price to gain a market share.share.


• Differentiation StrategiesDifferentiation Strategies - call for the - call for the development of a product or a service development of a product or a service that offers unique attributes that are that offers unique attributes that are valued by customers and that customers valued by customers and that customers perceive to be better than or different perceive to be better than or different from the products or services of the from the products or services of the competition.competition.


• Focus StrategiesFocus Strategies – also called – also called segmentation strategies, concentrate on segmentation strategies, concentrate on a narrow segment and within that a narrow segment and within that segment attempts to achieve a cost segment attempts to achieve a cost advantage or differentiation. The advantage or differentiation. The premise is that the needs of the group premise is that the needs of the group can be better serviced by focusing can be better serviced by focusing entirely on it.entirely on it.

Michael Porter’s Michael Porter’s Generic Business Strategies Generic Business Strategies

Recent DevelopmentRecent Development

Michael Treacy and Fred Wiersema Michael Treacy and Fred Wiersema (1993) have modified Porter's three (1993) have modified Porter's three strategies to describe three basic strategies to describe three basic "value disciplines" that can create "value disciplines" that can create customer value and provide a customer value and provide a competitive advantage. They are competitive advantage. They are operational excellence, product operational excellence, product leadership, and customer intimacy.leadership, and customer intimacy.


Fred WiersemaFred Wiersema• A business strategist noted for his A business strategist noted for his

action-oriented insights, founder and action-oriented insights, founder and president of The Customer Strategy president of The Customer Strategy Group LLC. Group LLC.

• Adviser to corporate executives in North America Adviser to corporate executives in North America and Europe on how to grow their strategic and Europe on how to grow their strategic customer base, leverage customer-intimate customer base, leverage customer-intimate practices and revamp their value propositions. practices and revamp their value propositions.

• helps companies find and connect with new helps companies find and connect with new customers and create powerful internal structures customers and create powerful internal structures dedicated to delivering customer value. dedicated to delivering customer value.

Generic Business StrategiesGeneric Business StrategiesMichael TreacyMichael Treacy

• an internationally known expert an internationally known expert on corporate strategy and business on corporate strategy and business process transformation. process transformation.

• the cornerstone of this new strategy the cornerstone of this new strategy (called “value leadership”) is the notion (called “value leadership”) is the notion of unearthing “customer value.” of unearthing “customer value.”

• new strategy of “value leadership” is presented new strategy of “value leadership” is presented in a recently published book, in a recently published book, The Discipline of The Discipline of Market Leaders Market Leaders co-authored with Fred Wiersema.co-authored with Fred Wiersema.

• he was a professor of management science at he was a professor of management science at the Sloan School of Management at MIT. He the Sloan School of Management at MIT. He holds a Ph.D. in management science from MIT.holds a Ph.D. in management science from MIT.

Recent DevelopmentsRecent Developments

• Operational ExcellenceOperational Excellence - superb - superb operations and execution often by operations and execution often by providing a reasonable quality at a very providing a reasonable quality at a very low price. The focus is on efficiency, low price. The focus is on efficiency, streamlining operations, Supply Chain streamlining operations, Supply Chain Management, no-frills, volume counts. Management, no-frills, volume counts. Most large international corporations are Most large international corporations are working out of this discipline.working out of this discipline.


• Product LeadershipProduct Leadership - very strong in - very strong in innovation and brand marketing, innovation and brand marketing, operating in dynamic markets. The focus operating in dynamic markets. The focus is on development, innovation, design, is on development, innovation, design, time-to-market, high margins in a short time-to-market, high margins in a short timeframe.timeframe.


• Customer IntimacyCustomer Intimacy - excel in - excel in customer attention and customer customer attention and customer service. Tailor their products and service. Tailor their products and services to individual or almost services to individual or almost individual customers. Focus is on CRM, individual customers. Focus is on CRM, deliver products and services on time deliver products and services on time and above customer expectations, and above customer expectations, lifetime value concepts, reliability, being lifetime value concepts, reliability, being close to the customer. close to the customer.

““All men can All men can see these see these

tactics tactics whereby I whereby I

conquer, but conquer, but what none can what none can

see is the see is the strategy out of strategy out of

which victory which victory is evolved.”is evolved.”

-Sun Tzu-Sun Tzu

““If you know the enemy and If you know the enemy and know yourself, you need not know yourself, you need not fear the result of a hundred fear the result of a hundred battles. If you know yourself battles. If you know yourself but not the enemy, for every but not the enemy, for every victory gained you will also victory gained you will also suffer a defeat. If you know suffer a defeat. If you know neither the enemy nor yourself, neither the enemy nor yourself, you will succumb in every you will succumb in every battle.”battle.”

Sun TzuSun Tzufrom The Art of Warfrom The Art of War

strategic management presented by: jerome p. dumlao 7 july 2008

Documents

game plan management

ongoing management process

comprehensive plan

artscienceartscience

game plangame plan slide

organizations objectives

challenges griffin slide

science of formulating