Principles of Management

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Principles of Management
Week 3 Strategic Management

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What Is Strategic Management?

• A set of managerial decisions and actions that
  determines the long-run performance of an
  organization
• A formula of success

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Strategic Management Process
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The Strategic Management Process

• 1. Identifying the Organizations Current
  Mission, Objectives, and Strategies
• mission - statement of the purpose of an
  organization
• important in profit and not-for-profit
  organizations

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Components of a Mission Statement
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Strategic Management Process

• Step 2 Doing an external analysis
• The environmental scanning of specific and
  general environments
• Focuses on identifying opportunities and threats

Organizations Resources/ Abilities
Organizations Opportunities
Opportunities in the Environment
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Strategic Management Process (contd)

• Step 3 Doing an internal analysis
• 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.
• Steps 2 and 3 combined are called a SWOT
  analysis. (Strengths, Weaknesses, Opportunities,
  and Threats)

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SWOT ANALYSIS McDonald's
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Levels of Org. Strategy
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Corporate Level Strategy

• What businesses should the company be in?
• PepsiCo soft drinks
• IBM computers
• SKII cosmetic products
• 3 major corporate level strategy
• Growth, Stability, and Renewal

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Growth, Stability, Renewal

• Growth
• The strategy is to expanding the number of
  products offered
• Can be achieved through
• Concentration
• Backward vertical integration
• Forward vertical integration
• Horizontal integration
• Related diversification
• Unrelated diversification

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Growth, Stability, Renewal

• Stability
• The strategy is to make no significant
  changes!!!!
• Renewal
• The strategy is to address weaknesses that lead
  to performance declines
• Retrenchment
• Cut cost, hang in there
• Turnaround
• Cut cost, hang in there, more dramatic changes

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The BCG Matrix
Stars Add resources, Build business
Question Marks Growth or retrench
Cash Cows Modest growth
Dogs Retrenchment, liquidate
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Business Level Strategy

• How an organization compete in each of its
  businesses (SBU)?
• Strategic business units (SBU)
• Independent units of an organization that have
  their own strategies
• Within an industry, there are 5 competing forces
  (M. Porter)

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M. Porters 5-Force Model

• Bargaining power of suppliers
• Bargaining power of buyers
• Threats of substitutes
• Threats of new entrants
• Current rivalry

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Porters typology of business-level strategies

• Cost leadership strategy
• Differentiation strategy
• Stuck in the middle
• Focus strategy

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Functional Level Strategy

• used to support the business-level strategy and
  culture
• creates an appropriate supporting role for each
  functional area of the organization
• e.g., manufacturing, marketing, human resources

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Management, Science, Art

• Is Management an Art ?
• Art
• Often abstract
• Different interpretations
• Stimulating and soothing

• Is Management a Science?
• Science
• Real
• Full of answers solutions
• Science explains