Implementation of Strategic ManagementRev: Feb, 2012

Euiho (David) Suh, Ph.D.

POSTECH Strategic Management of Information and Technology Laboratory(POSMIT: http://posmit.postech.ac.kr)

Dept. of Industrial & Management EngineeringPOSTECH

Contents※ Discussion Questions

1 Introduction of Strategic Management

2 Strategic Management Process

1) Understand Company Mission

2) Analyze External Environment

3) Analyze Internal Environment

4) Set Long Term Objectives

5) Craft the Strategy

6) Implement the Strategy

7) Evaluate the Strategy

3 Case Study

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Discussion Questions (1/2)

■ Briefly explain the seven components of the strategic management process. Which of these components do you think is most important to the organiza-tion? Why?

■ In the component you chose in the previous question, what factors are impor-tant to proceed the component activity?

■ What is the generic strategy? How can generic corporate level strategies be driven?

■ What do you think is most important in implementing strategies?

■ In the case study, what were two strategies of Kwang-dong Pharmacy? To achieve its mission, which IS was applied?

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Discussion Questions (2/2)

■ In the HBR case study, “Strategic Sourcing”,– Explain how the “changing basis of competitive advantage” or changing basis of com-

petition” affected the outsourcing of the companies such as AT&T, Wal-Mart, Chrysler, American Express, etc.

– How did the 7-Eleven benchmark the Japanese keiretsu model to bring a dramatic suc-cess?

– Explain the differences of the following:• Business Strategy vs. Corporate Strategy• Vertical Integration vs. Horizontal Integration

■ Discussion Questions in textbook (p. 67, Chapter 2)– How could a business leverage its investment in information technology to build

strategic IT capabilities that serve as a barrier to new entrants into its markets?– How could a business use information technology to increase switching costs and lock

in its customers and suppliers? Use business examples to support your answer.

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■ Strategic Management Process

2. Strategic Management Process

AnalyzeExternal Envi-

ronment

AnalyzeInternal Environ-

ment

Implementthe Strat-

egy

SetLong term Objec-

tives

UnderstandCompany Mission

Craft the Strat-egy

Evaluate & Con-trol

the Strategy

FeedbackFeedback

1

2 3

4

5

6

7

Opportunity& Threat

Strength& Weakness

Today’s Cover-age

Strategic Management Process

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Setting Strategic (Long Term) Objectives

■ Characteristics of Long Term Objectives– Acceptable to managers– Adaptable to extraordinary changes in the environment– Clearly measurable against specified criterion– Understandable

■ Generic Groups of Long Term Objectives– Product/Market scope– Profitability– Competitive edge– Financial specifications, expenditures, net worth, etc.– Innovation and technology– Employee Development/Productivity– Sources of, and Deployment of resources– Synergy– Risk– Legitimacy (Satisfaction of Resources)– Ideological leadership

2. Strategic Management Process4) Set Long Term Objectives

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Crafting Corporate Level Strategy

■ Objectives– Maintaining corporate-wide consistency of direction of the total company

toward long range– Leveraging resources for long range goals– Reducing financial risk by building a balanced portfolio of businesses

with a balanced portfolio of advantages– Investing in core competencies for the businesses

(usually called Strategic Business Units or SBUs)

■ Process– Choose Generic Corporate Level Strategies

• Feasible corporate level strategies• Choose final generic strategy option

– Choose Specific corporate level strategy, guide by final generic strategy to yield

2. Strategic Management Process5) Craft the Strategy

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Choose Generic Corporate Level Strategies(1/2)

■ Generic Strategy– A group of corporate level strategies that are first determined so that the decision

maker is guided toward making an appropriate specific strategy

■ List of generic strategies– Concentration– Concentric diversification– Conglomerate diversification– Vertical backward integration– Forward integration– Joint ventures– Divestiture– Turnaround/Restructuring– Bankruptcy– Liquidation

2. Strategic Management Process5) Craft the Strategy

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Choose Generic Corporate Level Strategies(2/2)

■ Feasible Corporate Generic Strategies

1. Concentric Diversification2. Conglomerate Diversifica-

tion3. Joint Ventures

1. Turnaround or retrench-ment

2. Concentric diversification3. Conglomerate Diversifica-

tion4. Divestiture5. Liquidation

1. Concentration2. Vertical Integration3. Concentric Diversification

1. Reformation of concen-tration

2. Horizontal integration3. Divestiture4. Liquidation

WeakCompetitivePosition

StrongCompetitivePosition

Rapid Market Growth

Slow Market Growth

SupermarketGroup

SpecialtyShopGroup

DrugStoreGroup

2. Strategic Management Process5) Craft the Strategy

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Implementing The Strategy (1/2)

■ Implementing with structure– Communicating the strategy to the organization to prepare every employee with an

understanding of what will follow and the things in general that must be done– Prepare and disseminate a list of major annual objectives for the organization– Establish policies and procedures for actions– Prepare an organization structure that matches the new strategy– Install best practices for each department based on the value chain and benchmarks

■ Implementing with organizational leadership– Staff the organization with committed leaders capable of driving implementation– Avoid resistance to change through employee development and communication with

employees– Tie rewards and communication with employees– Develop a strategy-supporting culture

■ Implementing with concern for laws, environmental, and social concerns– Implementation must be carried out with concern for factors

that may not always be spelled out– But must represent good citizenship

2. Strategic Management Process6) Implement the Strategy

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Implementing The Strategy (2/2)

■ Implementing with the functional components of strategy– Marketing: product policies, distribution policies, ethics, customer relations, pricing

policies

– Production/operations: equipment, layout, method of delivery of services, work methods, production planning, quality control, outsourcing

– R&D/design: estimating the time for new product development, quality and cost balance in design, continuing education of creative workers, outsourcing of design work

– Accounting/finance: increasing labor costs, increasing sales expense, economic value added, taxes, exchange rate between U. S. and other currencies, transfer pric-ing

– Human Resource Management: assignment of people to new projects, salary and bonus payments, promotions and dismissals, major human errors, recruitment and selection

– Corporate information and communication systems: management information system, personal communications, mass communications, communicating policies

2. Strategic Management Process6) Implement the Strategy

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Strategy Evaluation

■ Quantitative Criteria– Overall financial performance such as ROI, ROE, profit margin, market share, earning

per share– Time of implantation vs. planned time– Increase in productivity, quality, number of employees, etc.

■ Qualitative Criteria– Is the strategy internally consistent?– Is the strategy consistent with the environment?– Is the strategy appropriate in view of the available resources?– Does the strategy involve an acceptable degree of risk?– Does the strategy have an appropriate time framework?– Is the strategy workable?

2. Strategic Management Process7) Evaluate the Strategy

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Case Study 3. Case Study

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HBR Case Study

■ Strategic Sourcing, HBR[Mark Gottfredson, Rudy Puryear and Stephen Phillips, 2005]

3. Case Study

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Reference

■ Euiho Suh, “Strategic management 1 (PPT Slide)”, POSMIT Lab. (POSTECH Strategic Management of Information and Technology Laboratory)

■ Euiho Suh, “Strategic management 2 (PPT Slide)”, POSMIT Lab. (POSTECH Strategic Management of Information and Technology Laboratory)

■ O’Brien & Marakas, “Introduction to Information Systems – Fifteenth Edition”, McGraw – Hill, Chapter 2, pp. 43~71

■ Cathy A. Enz. “Hospitality Strategic Management: Concepts and Cases“, WILEY,Chapter 1