1 Strategic Management. If you don’t have a map, any route you take will get you where you are...

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Strategic Management

If you don’t have a map, any route you take will get you where you are going. Peter Drucker

If a man take no thought about what is distant, he will soon find sorrow near at hand. He who will not worry about what is far off will soon find something worse than worry.

Confucius

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Strategic Planning

What is the strategic management process? External environment analysis Internal environment and strategic

direction SWOT analysis Formulation, Implementation and Control

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Strategic Management ProcessStrategic Management Process

External and Internal Environmental Analysis

Strategic Direction Strategy Formulation Strategy Implementation and Control Strategic Restructuring

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Strategy and Strategic Management Strategy and Competitive Advantage

– Strategy is an action focus that links an organization to its environment

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Strategy and Strategic Management The Strategic Management Process

– the process of formulating and implementing strategies to advance an organization’s mission and objectives and secure competitive advantage

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Strategy and Strategic Management The Strategic Management Process

– Strategy formulation (Drucker)• What is our business mission?• Who are our customers?• What do our customers consider value?• What have been our results?• What is our plan?

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Strategy and Strategic Management The Strategic Management Process

– Strategy implementation• putting plans into action

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Strategy and Strategic Management Analysis of Mission, Values, and Objectives

– Mission statement• domain

– customers– products and/or services– location

• philosophy

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•Strategy and Strategic Management

Analysis of Mission, Values, and Objectives– Strategic constituencies analysis

• assessment of how well the organization serves stakeholders

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•Strategy and Strategic Management

Analysis of Mission, Values, and Objectives– Core values

• broad beliefs about what is/is not appropriate

– Objectives• direct activities toward key and specific results

SWOT

StrengthsWeaknesses

Opportunities

Threats

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•Strategy and Strategic Management

Analysis of Organizational Resources and Capabilities– SWOT analysis

• Organizational – Strengths – Weaknesses

• Environmental – Opportunities– Threats

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Situation Analysis(SWOT)

Strengths– What resources and capabilities do you

possess that can lead to a competitive advantage for position and market share in the industry?

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Situation Analysis(SWOT) Weaknesses What resources and capabilities do you

not possess, but are necessary to compete for position and market share in the industry?

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Situation Analysis(SWOT) Opportunities Conditions in the external environment that

that allow you to take advantage of your strengths, overcome your weaknesses or neutralize threats.

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Situation Analysis(SWOT) Threats Conditions in the external environment that

may stand in the way of achieving corporate goals and objectives.

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Strategies Used by Organizations

Levels of Strategy– corporate– business– functional

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Strategies Used by Organizations

Types of Strategies– growth

• concentration• diversification

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Strategies Used by Organizations

Types of Strategies– retrenchment (defensive)

• turnaround• divestiture• liquidation

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Strategies Used by Organizations

Types of Strategies– stability– combination

• used by large and complex organizations

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Strategy Formulation

Opportunities for Competitive Advantage– Cost and quality– Knowledge and timing– Barriers to entry– Financial resources

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Strategy Formulation

Boston Consulting Group (BCG) Matrix– ties strategy formulation to analysis of business

opportunities according to market growth rate and market share• stars• cash cows• question marks• dogs

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Strategy Formulation

Portfolio Planning– investing scarce

organizational resources among competing business opportunities

Porter’s Five Competitive Forces

New Entries

Industry Environment

Direct Competition

Substitutes

Suppliers Buyers

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Competition

The healthcare industry: Complex Highly competitive High tempo of change External Environment Highly demanding consumers, Government

regulation New entries

– Group practice, Ambulatory centers

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Competition (con’t)

Buyers – Employers– Health plans

Suppliers– Physicians– Health plans

Substitutes– Generic Rx– Alternative health care

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Strategy Formulation

Porter’s Competitive Strategies Model– new competitors– bargaining power of suppliers– bargaining power of customers– threats of substitute products and services– competition between existing companies

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Strategy Formulation

Porter’s Competitive Strategies Model– Strategies to Gain Competitive Advantage

• differentiation• cost leadership• focus

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Business Strategy (Domain and Navigation)

Low-Cost leadership (volume discounts) Differentiation (set apart from other

competitors) Focused (a niche market combining

differentiation and low-cost leadership)

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Strategy Formulation

Corporate Strategy (Domain)– Specialization/niche– Vertical integration (forward and backward)– Horizontal integration– Diversification– Retrenchment or divestiture– Strategic alliances (joint ventures, mergers and

consolidations)

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Strategy Formulation

Product Life Cycles– Stages

• introduction• growth• maturity• decline

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Strategy Formulation

Emergent Strategies– develop progressively over time

Logical incrementalism– strategies that develop as modest adjustments to

past patterns

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Strategy Implementation

Strategic Management Failures– Substance

• inadequate attention to major strategic planning elements

– Process• poor handling of strategy implementation

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Strategy Implementation

Leadership and Top Management Teams– effective strategy implementation depends on

all managers Corporate Governance

– boards of directors• inside• outside

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Strategy and Entrepreneurship

Who are the Entrepreneurs?– Risk-taking

individuals who pursue opportunities that others do not see

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Strategy and Entrepreneurship

Typical Characteristics of Entrepreneurs

• internal locus of control• high energy level• high need for achievement• tolerance for ambiguity• self-confidence• action oriented

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Strategy and Entrepreneurship

Entrepreneurship and Small Business–Small business

• fewer than 500 employees• most common type of business in the U.S.• high failure rate

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Strategy and Entrepreneurship

Small Business Development–Small Business Administration (SBA)

• Small Business Development Centers– offer guidance on how to run a business

successfully

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Strategy and Entrepreneurship

Entrepreneurship and Large Enterprises– intrapreneurship

• entrepreneurial behavior within large organizations

– skunk works• groups of employees work in a creative

setting