Management 11e John Schermerhorn

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Management 11e John Schermerhorn

• Chapter 9
• Strategy and Strategic Management

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Planning Ahead Chapter 9 Study Questions

1. What is strategic management?
2. What are the essentials of strategic analysis?
3. What are corporate-level strategies, and how are
   they formulated?
4. What are business-level strategies and how are
   they formulated?
5. What are the foundations for strategy
   implementation?

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Study Question 1 What is strategic management?

• Basic concepts of strategy
• Competitive advantage operating with an
  attribute or set of attributes that allows an
  organization to outperform its rivals
• Sustainable competitive advantage one that is
  difficult for competitors to imitate
• Types of competitive advantage
• Cost and quality
• Knowledge and speed
• Barriers to entry
• Financial resources

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Study Question 1 What is strategic management?

• Basic concepts of strategy
• Strategy
• a comprehensive action plan that identifies
  long-term direction for an organization and
  guides resource utilization to accomplish
  organizational goals with sustainable competitive
  advantage
• Strategic intent focusing all organizational
  energies on a unifying and compelling goal
• Levels of strategies
• Corporate Sets long-term direction for the
  total enterprise
• Business How a division or strategic business
  unit will compete in its product or service
  domain
• Functional Guides activities within one specific
  area of operations

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Figure 9.1 Three levels of strategy in
organizations- corporate, business, functional
strategies
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Study Question 1 What is strategic management?

• Strategic Management Process
• Strategic management
• the process of formulating and implementing
  strategies to accomplish long-term goals and
  sustain competitive advantage
• Strategic analysis
• process of analyzing the organization, the
  environment, its competitive position and current
  strategies
• Strategy formulation
• the process of crafting strategies to guide
  allocation of resources
• Strategy implementation
• putting strategies into action

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Figure 9.2 Strategy formulation and
implementation in the strategic management
process
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Study Question 1 What is strategic management?

• Strategy formulation
• The process of creating strategy
• Involves assessing existing strategies,
  organization, and environment to develop new
  strategies and strategic plans capable of
  delivering future competitive advantage
• Strategy implementation
• The process of allocating resources and putting
  strategies into action
• All organizational and management systems must be
  mobilized to support and reinforce the
  accomplishment of strategies

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Study Question 2 What are the essentials of
strategic analysis?
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Study Question 2 What are the essentials of
strategic analysis?

• Analysis of mission
• The reason for an organizations existence
• Good mission statements identify
• Customers
• Products and/or services
• Location
• Underlying philosophy
• An important test of the mission is how well it
  serves the organizations stakeholders
• Stakeholders
• Individuals and groups directly affected by the
  organization and its strategic accomplishments
• An important test of the mission is how well it
  serves the organizations stakeholders

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Figure 9.3 How external stakeholders can be
valued as strategic constituencies of
organizations
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Study Question 2 What are the essentials of
strategic analysis?

• Analysis of Core values
• Broad beliefs about what is or is not appropriate
  
• Organizational culture reflects the dominant
  value system of the organization as a whole
• Analysis of objectives
• Operating objectives direct activities toward key
  and specific performance results
• Analysis of organizational resources and
  capabilities
• Core competency is a special strength that gives
  an organization competitive advantage
• Important goal of assessing core competencies

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Study Question 2 What are the essentials of
strategic analysis?
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Study Question 2 What is the strategic
management process?
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Study Question 2 What is the strategic
management process?

• SWOT Analysis
• Examination of an organizations current position
  by looking at
• Internal strengths and weaknesses
• Environmental opportunities and threats

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Figure 9.4 SWOT analysis of strengths,
weaknesses, opportunities, and threats
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Study Question 2 What is the strategic
management process?

• Porters Model of Five Strategic Forces Affecting
  Competition

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Figure 9.5 Porters model of five strategic
forces affecting industry competition
Source Developed from Michael E. Porter,
Competitive Strategy (New York Free Press, 1980).
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Study Question 3 What are corporate-level
strategies and how are they formulated?

• Corporate-level strategy formulation
• Strategic portfolio planning
• Portfolio planning seeks the best mix of
  investments among alternative business
  opportunities
• BCG Matrix analyzes business opportunities
  according to market growth rate and market share
• BCG matrix
• Ties strategy formulation to analysis of business
  opportunities according to
• Industry or market growth rate
• Low versus high
• Market share
• Low versus high

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Figure 9.6 The BCG matrix approach to corporate
strategy formulation
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Study Question 3 What are corporate-level
strategies and how are they formulated?

• BCG matrix business conditions and related
  strategies
• Stars
• High share/high growth businesses
• Preferred strategy growth
• Cash cows
• High share/low growth businesses
• Preferred strategy stability or modest growth
• Question marks
• Low share/high growth businesses
• Preferred strategy growth for promising
  question marks and restructuring or divestiture
  for others
• Dogs
• Low share/low growth businesses
• Preferred strategy retrenchment by divestiture

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Study Question 3 What are corporate-level
strategies and how are they formulated?

• Growth strategies
• Seek an increase in size and the expansion of
  current operations
• Types of growth strategies
• Concentration strategies
• Grow within the same business area
• Diversification strategies
• Grow by acquiring or investing in new and
  different business areas
• Related diversification
• Unrelated diversification
• Vertical integration

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Study Question 3 What are corporate-level
strategies and how are they formulated?

• Retrenchment and restructuring strategies
• Readjusting operations when an organization is in
  trouble
• Chapter 11 bankruptcy
• Protects a firm from creditors while management
  re-organizes to restore solvency.
• Types of retrenchment and restructuring
  strategies
• Liquidation Business closes and sells assets to
  pay creditors
• Downsizing Decreases size of operations
• Divestiture Sells off parts of the organization
  to refocus attention on core business areas
• Turnaround Strategy Tries to fix specific
  performance problems

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Study Question 3 What are corporate-level
strategies and how are they formulated?

• Global strategies

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Study Question 3 What are corporate-level
strategies and how are they formulated?

• Cooperative strategies
• Strategic alliances two or more organizations
  partner to pursue an area of mutual interest
• Types of strategic alliances
• Outsourcing alliances
• Supplier alliances
• Distribution alliances
• Co-opetition working with rivals on projects of
  mutual benefit

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Study Question 4 What are business-level
strategies and how are they formulated?

• Business-level strategy formulation
• Good strategies help achieve above average
  returns
• Key question is How can we best compete for
  customers in our market and with our products or
  services?
• Porters competitive strategies model
• Business-level strategic decisions are driven by
  
• Market scope
• Source of competitive advantage
• Porters generic strategies for gaining
  competitive advantage
• Differentiation strategy
• Cost leadership strategy
• Focused differentiation strategy
• Focused cost leadership strategy

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Figure 9.7 Porters competitive strategies
framework soft-drink industry examples
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Study Question 5 What are the foundations for
strategy implementation?

• Strategy implementation
• Must be supported in every aspect of management
• Planning
• Controlling
• Organizing
• Leading
• Strategic planning failures that hinder strategy
  implementation
• Failures of substance
• Inadequate attention to major strategic planning
  elements
• Failures of process
• Poor handling of strategy implementation
• Lack of participation error
• Goal displacement error

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Study Question 5 What are the foundations for
strategy implementation?

• Corporate governance
• System of control and performance monitoring of
  top management
• Done by boards of directors and other major
  stakeholder representatives
• Controversies regarding roles of inside directors
  and outside directors
• Increasing emphasis on corporate governance in
  contemporary businesses
• Strategic control
• Makes sure strategies are well implemented and
  that poor strategies are scrapped or modified

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Study Question 5 What are the foundations for
strategy implementation?

• Strategic leadership
• Inspires people to continually change, refine,
  and improve strategies and their implementation
• Critical tasks of strategic leadership
• Be a guardian of trade-offs
• Create a sense of urgency
• Ensure that everyone understands the strategy
• Be a teacher
• Be a great communicator

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Chapter 9 Case

• Dunkin Donuts Betting dollars on donuts