MAN 4720 Online BBA

MAN 4720 Global Policy and StrategyProfessor Joseph PattonSpring 20131Listen to recorded call while you review this presentation Follow this presentation on the recorded call. (optional, it will give more detail)

Call 605-477-2199 (free)Access code is 197195#Reference number is 1#Listen to call while you scroll through the presentationEach slide is numbered in lower right corner for easily following22Follow along on the recorded callIn this PPT presentation, I am going to review the major concepts of Strategic Management that we are going to focus on in this course.

Please read the chapter powerpoints as well those will be more comprehensive about all of the chapter material. This presentation will highlight the major concepts, and those that will be on the exams. 33What is strategy? The big planStrategy is the THINKING behind business actions.

It answers the question: What is our plan for growing the business and attracting customers, operating, and achieving our financial and strategic objectives?

Top management needs to decide the big questions such as:

Who are our customers?What products do we sell?What business(es) do we want to be in?Do we want to merge or acquire or expand or shrink?How is the market changing, and what are we going to do to keep up?

It is really about, What is the plan?44Strategy is the THINKINGStrategy is not the doing, (that is called execution), it is the thinking, and answering HOW will we achieve our goals.

Thinking strategically is the working smart, whereas executing and day to day work is working hard. We want to do both, but in this class we are focused on the thinking BEHIND what we do. 55What is the plan? Lets decide before we start working hard. Actually running a business however is a process of ACTION, not thinking. Just thinking and strategizing without doing anything is useless.

But we need to decide WHAT we want to do, then HOW we are going to do it before we run off and start DOING things. 66Actions (the work) must support StrategyTo work smart, we operate in this order:

What are our Goals/Objectives?

Decide our Strategy (HOW to reach goal)

Implement our Action Steps/Tactics (this is where most of your day to day work will take place)77Example of different strategies to achieve our goal of more salesFor example, suppose we are a manufacturer of ice cream that sells in the Southern USA, and decide that we want to sell more ice cream and have higher sales.

We could do this in a variety of ways:Launch new flavors of ice cream or other productsExpand into new markets like the Western USA or MexicoAcquire one of our competitors and take over their business.

All of these will help us achieve these goals of higher sales.

But before we start working hard, we need to decide WHAT strategy we are going to pursue. Only then can we decide our TACTICS and then execute those tactics. 88What strategy we pick affects what action steps we take. Strategy: Launch New FlavorsStrategy: Acquire CompetitorsAction Steps:Decide what flavorsTest new flavors with customersDesign new packagingDevelop advertising or marketing planDecide pricing for new flavor

Action Steps:Identify criteria for who to buyContact competitorsEnter into negotiations to purchaseDevelop plan to merge new operations with our existingDecide what to do with new and old employeesInform customers about new management

99Three different strategies to sell our juiceGoal: Sell More Juice

Only after we decide what our positioning is can we start the work of executing:

We could sell it as: CoolHeart HealthyEco Friendly

Our action steps to sell our new juice might involve deciding on label, package, slogan, celeb endorsement, where to advertise, etc.

1010Different strategies = Different action steps needed. Eco FriendlyHeart HealthyPackage: recyclableAd: Drink our juice, save the planetCeleb: BonoAdvertising: Yoga and Nature Magazines

Package: Has sporty athlete on itAd: Good for your heart!Celeb: Lance ArmstrongAdvertising: Health & Fitness Magazines1111Break top strategy into tasks and objectivesOnly after we set our plans can we break down the work into action steps that middle or lower employees can work on, and be given goals with timelines and measurements

For example in the ice cream example:A manager might be given the task of developing new packaging for the new flavor. A salesperson will be given new monthly sales targets for their region for the new flavor.A plant manager tasked with test producing the new flavor

These smaller actions will help the company achieve its larger goal of higher overall sales.

1212Your strategies have to adapt over timeStrategy is always a work in progress, because market conditions, technologies and customer preferences change

Kodak used to make its $$ in film, now it does with digital cameras etc it still focuses on IMAGES, but has adapted to changing market

Apple used to make its money on Computers, now it makes a lot with phones, iPods, etc.

Encyclopedia Britannica practically went out of business.

1313Balanced Scorecard of ObjectivesStrategic Objectives (like customer satisfaction, market share, launching new products, going into new markets)

Financial Objectives(such as sales, profits, share price)

We need both in rough balance. We cant have one without the other over the long term1414How can we tell if our strategy is a good one?You should now know the difference between strategy and tactics.

What strategy is best for our company?

It should match up with the resources that we haveIt should match up with what the market wantsIt should show results (like sales, profits, customers, market share)1515If you cant do it, bad strategy for youA strategy that doesnt match with our capabilities is not a good one.

You might see a profitable market in making some product, but you dont know how to make it

If the market doesnt want what you sell, dont blame the market. 1616We need to understand our internal and external environmentWe will look at:

The Internal environment - inside our company and organization

The External environment - outside our organizationwhere our competitors are and our customers exist.1717SWOT Analysis a basic overviewMost basic tool of analysis is called a S.W.O.T. analysis

StrengthsWeaknessesOpportunitiesThreats

Gives a good overall situational overview, and lets us craft a strategy well matched to our situation.

We need to know what we are good at and not so good at. What things we have going for us, and what we dont. 1818What are Competencies?Competencies things you know how to do

Core competencies competencies that are central to your business

Distinctive competencies you can do it differently and hopefully better than others

1919What are the resources and capabilities that we have?Resources: Money, Land, Brands, Customers, Machines, Reputation, Contracts, Monopoly, Rights, Permits.

Capabilities / Competencies:Inventing, Manufacturing, Selling, Distributing, Advertising, Getting legal permissions, Attracting customers. 2020We need a competitive advantageThe idea is to leverage our resources and capabilities to create a competitive advantage a situation where we have an advantage over our rivals in attracting and pleasing our customers.

Gaining a competitive advantage is the best long term predictor of sales and profits. Without it, we are forced to compete on lowest price.

2121Examples of Competitive AdvantageExamples of competitive advantage:

Our product is superiorOur customer service is superiorThe experience of buying from us is greatWe have a cool and attractive brand imageWe have the only store in townWe control the market here in FLAWe have a monopolyOur cost structure is the lowest in the industryWe are the only ones that know how to build thisOur drugs are approved by the FDA.We have a superior distribution network and lots of customers

2222All Competitive Advantage is about the customerWhatever route we take to get to a competitive advantage, we must deliver superior value to the customer in a way that rivals cannot match (in the mind of the customer, not our own)2323What is the Industry like?We also want to understand the Industry in which we operate

Dominant Characteristics: What is this industry like currently?

How big is this industry ($ sales?) Is it growing or shrinking, by how much? How many buyers and sellers are there for this product, and how powerful is each? What is the level of government regulation?2424Driving Forces of ChangeWhat is causing this industry to change?

Changes in consumer preferences (We dont buy Vienna Sausages anymore, give us organic food please- and btw we dont want FAX machines anymore either)

Changes in technology (Sorry travel agents, we dont need you much anymore)

Changes in government regulation (New laws and regulations on your industry makes it less attractive)

Entry/Exit of major players (Google is coming in to our market, panic!)2525Key Success Factors - KSFsWhat are the keys to competing in this Industry?

Things you MUST have high level of strength in

An airline MUST get landing spots and FAA permission to fly

A drug company MUST get FDA permission to sell its drugs

Having a good accounting or IT department are good for these companies, but not essential. KSFs are. 2626Porter 5 forces model rate each factor as High or LowWhat is competition like in this industry?

Porter 5 forces model of Industry CompetitionIntensity of the Rivalry among SellersThreat of SubstitutesThreat of New EntrantsPower of our Buyers (Customers)Power of our Suppliers2727Rivalry Among Existing Sellers The force measuring existing rivalry is usually the strongest.

If this rivalry is strong/high, we will see:Lots of advertising, price wars, fighting for customers, lots of free giveaways and good service, lower profit margins

If it is low: opposite of above.

We prefer this rivalry to be LOW

2828Power of our Customers & Suppliers: We want them lowIf our buyer has power, they will want: Free delivery, easy return policy, pay me months from now, great customer service, and responsibility if the products cause legal problems later. We dont like this.

If our supplier has power they want the opposite: Buyer, you come pick it up, you cannot return it, pay me in advance, dont call me for service, you are liable for any problems later. We dont like this either.

Our company is a supplier to our customers , and we are the customers of our suppliers2929Whats the Threat of Substitutes?A substitute is NOT a different brand of the product sold by a competitor (even though it has difference), it is a DIFFERENT PRODUCT that meets the same needs of the customer.

If a customer can easily switch to a substitute product, that makes me less powerful.

If chicken becomes too expensive (among all sellers) consumers can buy pork or beef instead and get roughly the same benefit. (so threat of substitutes is HIGH)

If all the gasoline stations make me unhappy, I cannot easily switch to other substitutes..such as diesel or ethanol (or taking the bus), because those do NOT work in my car or give me the same benefit. Threat of substitutes here is LOW

3030Threat of New EntrantsWhat is the likelihood that that companies that are NOT currently in the market might enter and compete with you?

This threat is higher when:The industry is attractive (profitable $)There are low entry barriers

I dont want new competitors, I have enough problems with my current competitors, so I want this threat to be LOW. 3131Entry BarriersEntry Barriers are things that make it harder for a new competitor to get into the market:

High Cost, Permits, Difficulty technology, Patents, Exclusive contracts, high brand loyalty, switching costs, etc

3232Results of a the 5 forces analysisIs this industry attractive?

Evaluate the 5 forces Analysis.

As a company, we would like all of these 5 forces to be LOW.

If they are LOW, we have more power, and industry is more attractive from the standpoint of making profits.

If they are HIGH, I have little power and need to compete fiercely for sales and profits, my customers easily can abandon me, and this industry is LESS attractive from the standpoint of making profits

3333The Generic StrategiesThe four generic strategies that companies use are

Broadly DifferentiatedNarrowly Differentiated

Broadly Low CostNarrow Low Cost3434Differentiated vs. Low Cost (Undifferentiated)The Generic Strategies based on:

Differentiation how different is your product? Does it have special quality, service, brand image? Or is it a commodity type product that is similar or same as others, therefore needs to compete on a low cost basis.

Scope of Market: Do we focus on a broad market (All US adults) or a narrow (small) market (Teenagers in Florida)35354 different Hotel strategies Examples of Strategies for different hotels

Focused, Differentiated The Delano, Miami Beach

Focused, Undifferentiated No name hotel, Miami Beach

Broad, Undifferentiated Econolodge, Motel 6 chains

Broad, Differentiated Ritz-Carlton, Sheraton chains3636Differentiation is the most expensive but allows higher prices and brand loyaltyDifferentiated is the most expensive strategy to pursue..because it is about ADDING costs

High quality of productHigh level of serviceAdvertising to build brand image

Low cost (undifferentiated) is more about REMOVING costs and ending up with the leanest meanest way to deliver the product at a low cost and still make a profit. 3737Vertical & Horizontal IntegrationVertical Integration moving up or down in the sales channel: A FL pork processor buying a farm to raise its own pigs, or launching new line of bacon

Horizontal Integration staying in the same part of industry, doing it in more markets: FL Pork processor expands into Georgia and Alabama and starts processing pork there. 3838Cooperative Strategies / M&AStrategic Alliances agreement between two companies to work together (be careful you dont become dependent)

Outsourcing hiring another company to do some of your work (best if it is not Core or essential functions)

Merger combining companies

Acquisition one company taking over another company

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