Figure 11: The Five Tasks of Strategic Management

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STRATEGICMANAGEMENTLECTURE
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Without a strategy the organization is like a
ship without a rudder, going around in circles.
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Thinking StrategicallyThe 3 Big Strategic
Questions

• 1. Where are we now?
• 2. Where do we want to go?
• Business(es) to be in and marketpositions to
  stake out
• Buyer needs and groups to serve
• Outcomes to achieve
• 3. How will we get there?

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Benefits of Strategic Thinking and a
Strategic Approach to Managing

• Guides entire firm regarding what it is we are
  trying to do and to achieve
• Makes managers more alert to winds of change,
  new opportunities,and threatening developments
• Unifies numerous strategy-related decisions and
  organizational efforts
• Creates a proactive atmosphere
• Promotes development of an evolving business
  model focused on bottom-line success
• Provides basis for competing and achieving
  competitive advantage
• HELPS A COMPANY PREPARE FOR THE FUTURE!

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The 5 Tasks of Strategic Management
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Who Performs the FiveStrategic Management
Tasks?

• Senior Corporate Executives
• Managers of Subsidiary Business Units
• Functional Area Managers
• Operating Managers

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SETTING CORPORATE DIRECTION TASKS 1 2IF
YOU DONT KNOW WHERE YOU ARE GOING, ANY ROAD WILL
TAKE YOU THERE
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SETTING CORPORATE DIRECTION
TASK 1 VISION MISSION TASK 2 GOALS
OBJECTIVES
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Developing a Strategic Vision
Task 1 of the Strategic Management Process

• Involves thinking strategically about
• Future of company
• Where are we going?
• Statement about a companys long-term direction

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Example Vision Statement
Verizon Communications
To be the customers first choice for
communications and information services in every
market we serve,domestic and international.
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Example Vision Statement
Levi Strauss Company
We will clothe the world by marketing the most
appealing and widely worn casualclothing in the
world.
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Example Vision Statement
Microsoft Corporation (Old Vision)
A computer on every desk, in every home
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Example Vision Statement
General Electric (Jack Welch)
We will become number one or number two in every
market we serve, and revolutionize this company
to have the speed and agility of a small
enterprise.
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Example Vision Statement
Microsoft Corporation (New Vision)
"To enable people and businesses throughout the
world to realize their full potential"
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Example Vision Statement
General Electric (Jeff Immelt)
GE is committed to achieving worldwide leadership
in each of its businesses. To achieve that
leadership, GE's ongoing business strategy
centers on four key growth initiatives -
Technology - Services - Customer Centricity -
Globalization
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MISSION
DEFINES A COMPANYS BUSINESS

• PRODUCT / MARKET
• TERRITORY / GEOGRAPHY

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Simple Mission Statements
Eastman Kodak
We are in the picture business.
Wit Capital (an Internet startup company)
Our mission is to be the premier Internet
investment banking firm focused on the offering
and selling of securities to a community of
online individual investors.
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More Mission Statements
Otis Elevator
Our mission is to provide any customer a means of
moving people and things up, down, and sideways
over short distances with higher reliability than
any similar enterprise in the world.
Avis Rent-a-Car
Our business is renting cars. Our mission is
total customer satisfaction.
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INTERNAL REVENUE SERVICE
OLD MISSION
The purpose of the IRS is to collect the proper
amount of tax revenues at the least cost to the
public, and in a manner that warrants the highest
degree of public confidence in our integrity,
efficiency and fairness.
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IRS - NEW MISSION (Since 1998)
Provide Americas taxpayers top quality service
by helping them understand and meet their tax
responsibilities and by applying the tax law with
integrity and fairness to all.
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Setting Goals Objectives
Second Task of Strategic Management

• Converts vision and mission into specific
  performance targets
• Creates yardsticks to track performance
• Management by Objective (MBO) - focused on
  results

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GOALS
BROAD TARGETS
OBJECTIVES
(a) QUANTIFIED (b) TIME-BASED
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• 2 CATEGORIES
• FINANCIAL
• STRATEGIC

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Financial Goals

• Strive for stock price appreciation equal to or
  above the SP 500 average
• Maintain a positive cash flow every year
• Achieve and maintain a AA bond rating

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Financial Objectives

• Grow earnings per share 15 annually
• Boost annual return on investment (or EVA) from
  15 to 20 within three years
• Increase annual dividends per share to
  stockholders by 5 each year

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Strategic Goals

• Increase firms market share
• Overtake key rivals on quality or
  customer service or product performance
• Attain lower overall costs than rivals
• Boost firms reputation with customers
• Attain stronger foothold in international markets
• Achieve technological superiority
• Become leader in new product introductions
• Capture attractive growth opportunities

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STRATEGY FORMULATION TASK 3
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What is Strategy?

• A companys strategy consists of the set of
  competitive moves and business approaches that
  management is employing to run the company
• Strategy is managements game plan to
• Attract and please customers
• Stake out a market position
• Conduct operations
• Compete successfully
• Achieve organizational objectives

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Levels of Strategy-Making in a Diversified
Company
Corporate Strategy
Corporate-Level Managers
Division Managers
Business Strategies
Functional Mgrs
Functional Strategies
Operating Mgrs
Operating Strategies
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Levels of Strategy-Making in a
Single-Business Company
Executive-Level Managers
Business Strategy
Functional Managers
Functional Strategies
Operating Managers
Operating Strategies
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Networking of Vision, Missions,Goals/Objectives
, and Strategies
Corporate Level Goals/Objs
Corporate-wide Vision Mission
Corporate Level Strategy
Corporate-Level Managers
Business Level Goals/Objs
Business Level Mission
Business Level Strategies
Functional Objectives
Functional Goals
Functional Strategies
Operating Objectives
Operating Goals
Operating Strategies
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Factors Shaping theChoice of Company
Strategy
? External Factors
Social, political, regulatory and community
factors
Competitive conditions and industry attractiveness
Company opportunities and threats to companys
well-being
Craft the strategy
Identify and evaluate alternatives
Determine relevance of internal and external
factors
Companys Strategic Situation
Resource strengths, capabilities, and weaknesses
Influences of key executives
Shared values and company culture
? Internal Factors
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SWOT Analysis- What to Look For
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The Basic Strategy FrameworkLink between the
Firm and its Environment
THE FIRM Goals Values Resources
Capabilities Structure Systems
THE INDUSTRY ENVIRONMENT Competitors Customers S
uppliers
STRATEGY
STRATEGY
EXTERNAL
INTERNAL
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Market-Focus (External)vs.Resourced-Based
(Internal)

• Market-Focus what industry do we want to be in,
  the position we want to take, and then how can we
  assemble the resources to compete?
• Resource-Based what capabilities do we want to
  build and what market opportunities would exploit
  them best?

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MARKET-FOCUS VIEW OF STRATEGY (EXTERNAL ANALYSIS)
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The Components of a Companys Environment
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INDUSTRY ANALYSIS
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5 Forces Model
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Industry Driving Forces

• Internet and e-commerce opportunities
• Increasing globalization of industry
• Changes in long-term industry growth rate
• Changes in who buys the product and how they use
  it
• Product innovation
• Technological change/process innovation
• Marketing innovation

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What Are the Key Factors for Competitive
Success?

• Competitive factors most affecting every industry
  members ability to prosper
• Specific strategy elements
• Product attributes
• Resources
• Competencies
• Competitive capabilities
• KSFs spell the difference between
• Profit and loss
• Competitive success or failure

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Example KSFs for Beer Industry

• Full utilization of brewing capacity -- to keep
  manufacturing costs low
• Strong network of wholesale distributors -- to
  gain access to retail outlets
• Clever advertising -- to induce beer drinkers to
  buy a particular brand

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Example KSFs for Apparel Manufacturing
Industry

• Appealing designs and color combinations -- to
  create buyer appeal
• Low-cost manufacturing efficiency -- to keep
  selling prices competitive

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COMPETITOR ANALYSIS
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What Are the Market Positions of Industry
Rivals?

• One technique for revealing the different
  competitive positions of industry rivals is
  strategic group mapping
• A strategic group consists of those rivals with
  similar competitive approachesin an industry

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Strategic Group Mapping

• Firms in same strategic group have two or more
  competitive characteristics in common
• Have comparable product line breadth
• Sell in same price/quality range
• Emphasize same distribution channels
• Use same product attributes to appeal to similar
  types of buyers
• Use identical technological approaches
• Offer buyers similar services
• Cover same geographic areas

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Example Strategic Group Mapof Selected
Retail Chains
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Concept of Competitive Advantage

• Competitive advantage exists when a firms
  strategy gives it an edge in
• Attracting customers and
• Defending against competitive forces
• Convince customers firms product / service
  offers superior value
• A good product at a low price
• A superior product worth paying more for
• A best-value product

Key to Gaining a Competitive Advantage
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5 Generic Competitive Strategies
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RESOURCE-BASED VIEW OF STRATEGY (INTERNAL
ANALYSIS)
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Core Competencies -- AValuable Company
Resource

• A competence becomes a core competence when the
  well-performed activity is central to a companys
  competitiveness and profitability
• Often, a core competence results from
  collaboration among different parts of a company
• Typically, core competencies reside in a
  companys people, not in assets on the balance
  sheet
• A core competence gives a company apotentially
  valuable competitive capabilityand represents a
  definite competitive asset

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Examples of Core Competencies

• Expertise in integrating multiple technologies to
  create families of new products
• Know-how in creating operating systems for cost
  efficient supply chain management
• Speeding new/next-generation products to market
• Better after-sale service capability
• Skills in manufacturing a high quality product
• System to fill customer orders accurately and
  swiftly

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Example Hondas Core Competence

• Expertise in gasoline enginetechnology and small
  engine design

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Example Intels Core Competence
Design of complex chips for personal computers
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Example Procter GamblesCore Competencies

• Superb marketing-distribution skills and RD
  capabilities in five core technologies - fats,
  oils, skin chemistry, surfactants, emulsifiers

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Example Sonys Core Competence

• Expertise in electronic technology and ability to
  translate the expertise into innovative
  productsminiaturized radios and video cameras,
  TVs and VCRs with unique features, attractively
  designed PCs

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Distinctive Competence -- ACompetitively
Superior Resource

• A distinctive competence is a competitively
  significant activity that a company performs
  better than its competitors

• A distinctive competence
• Represents a competitively
  valuable capability rivals do not have
  
• Presents attractive potential for being a
  cornerstone of strategy
• Can provide a competitive edge in the
  marketplacebecause it represents a competitively
  superior resource strength

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Examples Distinctive Competencies

• Sharp Corporation
• Expertise in flat-panel display technology
• Toyota, Honda, Nissan
• Low-cost, high-quality manufacturingcapability
  and short design-to-market cycles
• Intel
• Ability to design and manufactureever more
  powerful microprocessors for PCs
• Starbucks
• Store ambience and innovative coffeedrinks

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The Concept of aCompany Value Chain

• A companys business consists of all activities
  undertaken in designing, producing, marketing,
  delivering, and supporting its product or service
  
• The value chain contains two types of activities
• Primary activities -- where most of the value
  for customers is created
• Support activities -- facilitate performance of
  the primary activities

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RepresentativeCompany Value Chain
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Representative Value Chain for an Entire
Industry
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The Value Chain Systemfor an Entire
Industry

• Assessing a companys cost competitiveness
  involves comparing costs all along the industrys
  value chain
• Suppliers value chains are relevant because
• Costs, quality, and performance of inputs
  provided by suppliers influence a firms own
  costs and product performance
• Forward channel allies value chains are relevant
  because
• Forward channel allies costs and margins are
  part of price paid by ultimate end-user
• Activities performed affect end-user satisfaction

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Example Key Value Chain Activities
Pulp Paper Industry

• Timber farming
• Logging
• Pulp mills
• Papermaking

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Example Key Value Chain Activities
Home Appliance Industry

• Parts and components manufacture
• Assembly
• Wholesale distribution
• Retail sales

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Example Key Value Chain Activities
Soft-Drink Industry

• Processing of basic ingredients
• Syrup manufacture
• Bottling and can filling
• Wholesale distribution
• Advertising
• Retailing

Albertsons
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Example Key Value Chain Activities
Computer Software Industry

• Programming
• Disk loading
• Marketing
• Distribution

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Benchmarking Costs ofKey Value Chain
Activities

• Focuses on cross-company comparisons of how
  certain activities are performed and the costs
  associated with these activities
• Purchase of materials
• Payment of suppliers
• Management of inventories
• Getting new products to market
• Performance of quality control
• Filling and shipping of customer orders
• Training of employees
• Processing of payrolls

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STRATEGY IMPLEMENTATION EXECUTION TASK 4
Strategies most often fail because they arent
executed well.
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Crafting vs. Executing Strategy

• Executing the Strategy
• Primarily an operations-driven activity
• Successful strategy execution depends on
• Good organization-building and people management
• Creating a strategy-supportive culture
• Continuous improvement
• Getting things done and delivering good results

• Crafting the Strategy
• Primarily a market-driven activity
• Successful strategy making depends on
• Business vision
• Perceptive analysis of the situation
• Attracting and pleasing customers
• Outcompeting rivals
• Forging a competitive advantage

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Implementing a Newly Chosen Strategy
Requires Adept Leadership

• Implementing a new strategytakes adept
  leadership to
• Convincingly communicatereasons for the new
  strategy
• Overcome pockets of doubt
• Build consensus and enthusiasm
• Secure commitment of concerned parties
• Get all implementation pieces in place and
  coordinated

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Who Are theStrategy Implementers?

• Implementing and executing strategy involves a
  companys whole management team and all of its
  employees
• Just as every part of a watch plays a role in
  making the watch function properly, it takes all
  pieces of an organization working cohesively for
  a strategy to be well-executed
• Top-level managers must lead the process
  and orchestrate major initiatives
• But they must rely on the cooperation of
  middleand lower-level managers to see that
  things go well in the various parts of the
  organization and on employees to perform their
  roles competently on a daily basis

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The 8 Actions of Implementing and Executing
Strategy
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Numerous Rolesof Strategic Leaders
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UNLESS WE CHANGE OUR DIRECTION WE ARE LIKELY TO
END UP WHERE WE ARE HEADED Ancient Chinese
proverb