Managing Strategy and Strategic Planning

1
Managing Strategy and Strategic Planning
Peshawar City Institute Of Modern Sciences

• Chapter 08

2
The Nature of Strategic Management
Peshawar City Institute Of Modern Sciences

• Strategy
• A way of approaching business opportunities and
  challenges.
• Strategic Management
• A comprehensive and ongoing management process
  aimed at formulating and implementing effective
  strategies a way of approaching business
  opportunities and challenges.
• Effective Strategy
• A strategy that promotes a superior alignment
  between the organization and its environment and
  the achievement of strategic goals.

3
The Nature of Strategic Management
Peshawar City Institute Of Modern Sciences

• The Components of Strategy
• Distinctive Competence
• An organizational strength possessed by only a
  small number of competing firms.
• Scope
• When applied to strategy, it specifies the range
  of markets in which an organization will compete.
• Recourse Deployment
• How an organization distributes its resources
  across the areas in which it competes.

4
The Nature of Strategic Management
Peshawar City Institute Of Modern Sciences

• Types of Strategic Alternatives
• Business-Level Strategies
• The set of strategic alternatives from which an
  organization chooses as it conducts business in a
  particular industry or market.
• Corporate-Level Strategies
• The set of strategic alternatives from which an
  organization chooses as it managers its
  operations simultaneously across several
  industries and several markets.

5
The Nature of Strategic Management
Peshawar City Institute Of Modern Sciences

• Strategy Formulation and Implementation
• Strategy Formulation
• The set of processes involved in creating or
  determining the strategies of the organization
  it focuses on the content of strategies.
• Strategy Implementation
• The methods by which strategies are
  operationalized or executed within the
  organization it focuses on the processes through
  which strategies are achieved.

6
The Nature of Strategic Management
Peshawar City Institute Of Modern Sciences

• Strategy Formulation and Implementation
• Deliberate Strategy
• A plan of action that an organization chooses
  and implements to support specific goals.
• Emergent Strategy
• A pattern of action that develops over time in
  an organization in the absence of mission and
  goals or despite mission and goals.

7
Using SWOT Analysis to Formulate Strategy
Peshawar City Institute Of Modern Sciences

• Strengths
• Weaknesses
• Opportunities
• Threats

Internal Analysis
External Analysis
8
Using SWOT Analysis to Formulate Strategy
Peshawar City Institute Of Modern Sciences

• Evaluating an Organizations Strengths
• Organizational Strength A skill or capability
  that enables an organization to conceive of and
  implement its strategies.
• Strategic Imitation The practice of duplicating
  another organizations distinctive competence and
  thereby implementing a valuable strategy.
• Sustained Competitive Advantage A competitive
  advantage is a competitive advantage that exists
  after all attempts at strategic imitation have
  ceased.

9
Using SWOT Analysis to Formulate Strategy
Peshawar City Institute Of Modern Sciences

• Evaluating an Organizations Weaknesses
• Organizational Weakness A skill and capability
  that does not enable an organization to choose
  and implement strategies that support its
  mission.
• Competitive Disadvantage A situation in which an
  organization is not implementing valuable
  strategies that are being implemented by
  competing organizations.

10
Using SWOT Analysis to Formulate Strategy
Peshawar City Institute Of Modern Sciences

• Evaluating an Organizations Opportunities and
  Threats
• Organizational Opportunities An area in the
  environment that, if exploited, may generate high
  performance.
• Organizational Threats An area in the
  environment that increases the difficulty of
  organization's achieving high performance

11
Peshawar City Institute Of Modern Sciences
Mission An organizations fundamental purpose
SWOT Analysis To formulate strategies that
support the strategies
Internal Analysis
External Analysis
Strengths
Opportunities
Threats
Weaknesses
Good Strategies

• Those that support the mission and
• Exploit opportunities and strengths
• Neutralize threats
• Avoid weaknesses

SWOT Analysis
12
Formulating Business-Level Strategies
Peshawar City Institute Of Modern Sciences

• Three Important Classification of Business Level
  Strategies
• Porters Generic Strategies
• Miles and Snow Typology
• Strategies Based on Product Life Cycle (PLC)

13
Formulating Business-Level Strategies
Peshawar City Institute Of Modern Sciences

• Porters Generic Strategies
• Differentiation Strategy
• A strategy in which an organization seeks to
  distinguish itself from competitors through the
  quality of its products or services.
• Overall Cost Leadership Strategy
• A strategy in which an organization attempts to
  gain competitive advantage by reducing its costs
  below the costs of competing firms.
• Focus
• A strategy in which an organization concentrates
  on a specific regional market, product line, or
  group of buyers.

14
Formulating Business-Level Strategies
Peshawar City Institute Of Modern Sciences

• The Miles and Snow Typology
• Prospector Strategy
• A strategy in which the firm encourages
  creativity and flexibility and is often
  decentralized.
• Defender Strategy
• A strategy in which a firm focuses on lowering
  costs and improving the performance of current
  products.
• Analyzer Strategy
• A strategy in which the firm attempts to
  maintain its current business and to be somewhat
  innovative in new businesses.
• Reactor Strategy
• A strategy in which a firm has no consistent
  approach to strategy.

15
Formulating Business-Level Strategies
Peshawar City Institute Of Modern Sciences
Reactor Little consideration of environment
drift with little concern for strategy
Analyzer Stress maintenance of status quo with
moderate innovation and growth
Prospector Stress innovation and growth seek new
opportunities
Defender Stress stability, conservatism, and
maintenance of status quo
Dynamic, growing environment characterized by
high uncertainty and risk
Moderately stable environment with some
uncertainty and risk
Very stable environment with little
uncertainty and risk
16
Formulating Business-Level Strategies
Peshawar City Institute Of Modern Sciences

• Strategies Based on Product Life Cycle (PLC)
• Product Life Cycle
• A model that portrays how sales volume for
  products changes over the life of products.

17
Formulating Business-Level Strategies
Peshawar City Institute Of Modern Sciences
18
Implementing Business-Level Strategies
Peshawar City Institute Of Modern Sciences

• Implementing Porters Generic Strategies
• Differentiation Strategy
• Marketing should focus on high quality and
  high-value image of the organization.
• Accounting and finance should focus on control on
  funds without discouraging creativity.
• Organization culture should focus on creativity,
  innovation and response to customer needs in
  every function of the organization..

19
Implementing Business-Level Strategies
Peshawar City Institute Of Modern Sciences

• Implementing Porters Generic Strategies
• Overall Cost Leadership Strategy
• Marketing should focus on simple product
  attributes and should reduce the cost for
  achieving economies of scale.
• Accounting and finance should focus on tight
  accounting and financial control.
• Manufacturing should focus on buying raw material
  at cheaper prices, minimize manufacturing waste
  and achieving economies of scale.
• Organization culture should focus on improving
  efficiency in every function of the organization.

20
Implementing Business-Level Strategies
Peshawar City Institute Of Modern Sciences

• Implementing Miles and Snow Strategies
• Prospector Strategy
• Prospector strategy can be achieved through
  innovation, seek new market opportunities, and
  take numerous risks.
• Defender Strategy
• Defender strategy can be achieved through
  protecting the market from new competitors. Low
  prices and improved performance of the product
  can be an effective strategy.
• Analyzer Strategy
• Analyzer strategy can be used to maintain current
  business and innovate new ones. Effective
  marketing, tight accounting systems and strong
  culture should be maintained while search for new
  markets should be a focus too.

21
Formulating Corporate-Level Strategies
Peshawar City Institute Of Modern Sciences

• Most large organizations are engaged in several
  businesses, industries, and markets. Each
  business or set of business within such an
  origination is frequently referred to as a
  Strategic Business Unit (SBU).
• Diversification
• The number of different businesses that an
  organization is engaged in and the extent to
  which these businesses are related to one another.

22
Formulating Corporate-Level Strategies
Peshawar City Institute Of Modern Sciences

• Single-Product Strategy
• A strategy in which organization manufactures
  just one product or service and sells in in a
  single geographic market.

23
Formulating Corporate-Level Strategies
Peshawar City Institute Of Modern Sciences

• Related Diversification
• A strategy in which an organization operates
  several businesses that are linked to one another.

• Bases of Relatedness
• Similar technology
• Common distribution and marketing skills
• Common brand name and reputation
• Common customers

• Advantages
• Reduce organizations dependencies
• Reduce overhead cost
• Exploitation of strengths and capabilities in
  more then one business

24
Formulating Corporate-Level Strategies
Peshawar City Institute Of Modern Sciences

• Unrelated Diversification
• A strategy in which an organization operates
  several businesses that are not associated.
• Advantages
• If one business is in the decline stage the other
  business may enjoy growth stage. So resources can
  be used in the business where they have the high
  potential
• Using different unrelated business may create
  greater synergy.

25
Implementing Corporate-Level Strategies
Peshawar City Institute Of Modern Sciences

• Becoming a Diversified Firm
• Development of New Products
• Replacement of Suppliers and Customers
• Backward Vertical Integration An organization's
  beginning the business activities formally
  conducted by its suppliers.
• Forward Vertical Integration An organization's
  beginning the business activities formally
  conducted by its customers.
• Mergers and Acquisitions
• Merger The purchase of one form by another firm
  of approximately the same size.
• Acquisition The purchase of a firm by a firm
  considerably larger.

26
Implementing Corporate-Level Strategies
Peshawar City Institute Of Modern Sciences

• Managing Diversification
• Portfolio Management Technique
• A method that diversified organizations use to
  determine which business to engage in and how to
  manage these businesses to maximize corporate
  performance.
• Two important portfolio management techniques
  are
• BCG Matrix
• GE Business Screen

27
Implementing Corporate-Level Strategies
Peshawar City Institute Of Modern Sciences
Managing Diversification
Stars
Question Marks
High
Relative Market Growth
Dogs
Cash Cows
Low
High
Low
Relative Market Share
The Boston Consulting Group (BCG) Matrix
28
Implementing Corporate-Level Strategies Managing
Diversification
Peshawar City Institute Of Modern Sciences
Winner
Winner
Question Mark
High
Winner
Average Business
Loser
Industry Attractiveness
Medium
Profit Producer
Loser
Loser
Low
Good
Medium
Poor
Competitive Position
The General Electric (GE) Business Screen
Competitive Position
Industry Attractiveness
1.
Market share
1.
Market growth
2.
Technological know-how
2.
Market size
3.
Product quality
3.
Capital requirements
4.
Service network
4.
Competitive intensity
5.
Price competitiveness
6.
Operating costs