STRATEGIC MANAGEMENTSTRATEGIC MANAGEMENT

The Dynamics of Strategic PlanningThe Dynamics of Strategic Planning

StrategyStrategy – large-scale action plan that sets the direction for large-scale action plan that sets the direction for

an organizationan organization Strategic management Strategic management

– process that involves managers from all parts of process that involves managers from all parts of the organization in the formulation and the the organization in the formulation and the implementation of strategies and strategic goalsimplementation of strategies and strategic goals

What Is an Effective Strategy?What Is an Effective Strategy?

Strategic positioning Strategic positioning Sustainable competitive advantage by Sustainable competitive advantage by

preserving what is distinctive about a companypreserving what is distinctive about a company– Being responsive to customersBeing responsive to customers– InnovationInnovation– QualityQuality– EffectivenessEffectiveness

The creation of a unique, valuable, inimitable The creation of a unique, valuable, inimitable positionposition

LEVELS OF STRATEGYLEVELS OF STRATEGY

CorporateCorporate– What set of businesses should be in?What set of businesses should be in?

BusinessBusiness– How should we compete in business?How should we compete in business?

FunctionalFunctional– What should our strategy be in each functional area?What should our strategy be in each functional area?

CORPORATE STRATEGY: CORPORATE STRATEGY: BASIC QUESTIONSBASIC QUESTIONS

Grand StrategyGrand Strategy– StabilityStability– GrowthGrowth– RetrenchmentRetrenchment

Single Product vs. DiversificationSingle Product vs. Diversification

Single-Product versus Single-Product versus DiversificationDiversification

Single-product strategy Single-product strategy – company makes and sells only one product company makes and sells only one product

within its marketwithin its market– Benefit?Benefit?– Risk?Risk?

Single-Product versus Single-Product versus DiversificationDiversification

DiversificationDiversification – operating several businesses under one operating several businesses under one

ownership that are not related to one anotherownership that are not related to one another– Related, unrelatedRelated, unrelated– Benefits?Benefits?

CORPORATE STRATEGY:CORPORATE STRATEGY:TOOLSTOOLS

Portfolio MatrixPortfolio Matrix BCG MatrixBCG Matrix

The Product Life CycleThe Product Life Cycle

BCG MATRIXBCG MATRIX

S T A R S

Q U E S T I O N M A R K S

? ?

C A S H C O W S

D O G S

Growth

LOW

HIGH

Market ShareHIGH LOW

BUSINESS-LEVEL STRATEGYBUSINESS-LEVEL STRATEGY

5 forces5 forces SWOTSWOT Generic StrategiesGeneric Strategies

IndustryCompetitors

Intensity of Rivalry

Suppliers Buyers

Substitutes

NewEntrants

Entry BarriersEconomies of ScaleBrand IdentityCapital Requirements

Determinants of Supplier Power

Switching CostsSupplier VolumeImpactForward Integration

Determinants of Substitution Threat

Relative Price PerformanceSwitching Costs

Determinants of Buyer Power

Buyer ConcentrationBuyer VolumeBackward Integration

Rivalry DeterminantsIndustry GrowthFixed CostsProduct DifferencesBrand IdentityExit Barriers

S.W.O.T. ANALYSISS.W.O.T. ANALYSIS

S W O T S W O T represents the first letter inrepresents the first letter in– SS trengths trengths– WW eaknesses eaknesses– OO pportunities pportunities– TT hreats hreats

Strategy-makingStrategy-making must be well-matched to must be well-matched to bothboth– A firm’sA firm’s resource strengths and weaknesses resource strengths and weaknesses– A firm’s A firm’s best market opportunitiesbest market opportunities and and externalexternal threats to its threats to its

well-beingwell-being

S W

O T

4 GENERIC STRATEGIES4 GENERIC STRATEGIES

Cost Leadership

Differentiation

Cost Focus

Differentiation

Focus

Scope

BroadTarget

NarrowTarget

Lower Cost Differentiation

The Strategic Management The Strategic Management ProcessProcess

The Three Core Processes of The Three Core Processes of BusinessBusiness

PeoplePeople StrategyStrategy OperationsOperations