7/24/2019 Entrepreneurship chapter 2
1/30
Chapter 2: Strategic Mgt 1Copyright 2003 Prentice Hall Publishing Company
Strategic Managementand the Entrepreneur
Strategic Managementand the Entrepreneur
7/24/2019 Entrepreneurship chapter 2
2/30
Chapter 2: Strategic Mgt 2Copyright 2003 Prentice Hall Publishing Company
A Major Shift . . .A Major Shift . . .
. . . From financial capital to. . . From financial capital to
intellectual capital.intellectual capital.
HumanHuman
StructuralStructural
CustomerCustomer
7/24/2019 Entrepreneurship chapter 2
3/30
Chapter 2: Strategic Mgt 3Copyright 2003 Prentice Hall Publishing Company
Strategic ManagementStrategic Management
Is crucial to building a successful business.Is crucial to building a successful business.
Involves developing a game plan to guide aInvolves developing a game plan to guide a
company as it strives to accomplish its missioncompany as it strives to accomplish its missiongoals and objectives and to !eep it on itsgoals and objectives and to !eep it on its
desired course.desired course.
7/24/2019 Entrepreneurship chapter 2
4/30
Chapter 2: Strategic Mgt 4Copyright 2003 Prentice Hall Publishing Company
Is Strategic "lanning #eally $hatIs Strategic "lanning #eally $hat
Important%Important%
Study of &'' small companies(Study of &'' small companies(
)ne of the most significant factors in)ne of the most significant factors in
distinguishing gro*ing companies from thosedistinguishing gro*ing companies from thosein decline( use of a *ritten business plan.in decline( use of a *ritten business plan.
Another study(Another study(
)nly +,- of small companies had a long)nly +,- of small companies had a longrange plan in *riting.range plan in *riting.
7/24/2019 Entrepreneurship chapter 2
5/30
Chapter 2: Strategic Mgt 5Copyright 2003 Prentice Hall Publishing Company
Strategic Management andStrategic Management and
Competitive EdgeCompetitive Edge
/eveloping a strategic plan is crucial/eveloping a strategic plan is crucial
to creating ato creating a competitive advantagecompetitive advantage
the aggregation of factors that sets athe aggregation of factors that sets a
company apart from its competitorscompany apart from its competitors
and gives it a uni0ue position in theand gives it a uni0ue position in the
mar!et.mar!et.
E1ample( Adventurous $ravelerE1ample( Adventurous $raveler2oo!store2oo!store
7/24/2019 Entrepreneurship chapter 2
6/30
Chapter 2: Strategic Mgt 6Copyright 2003 Prentice Hall Publishing Company
3ey( Core Competencies3ey( Core Competencies
4ni0ue set of capabilities a company develops4ni0ue set of capabilities a company develops
in !ey areas such as superior 0uality customerin !ey areas such as superior 0uality customer
service innovation teambuilding fle1ibilityservice innovation teambuilding fle1ibility
responsiveness and others that allo* it to vaultresponsiveness and others that allo* it to vault
past competitors.past competitors.
$hey are *hat a company does best.$hey are *hat a company does best.
2est to rely on a2est to rely on a natural advantagenatural advantage 5often lin!ed5often lin!edto a company6s smallness7.to a company6s smallness7.
7/24/2019 Entrepreneurship chapter 2
7/30Chapter 2: Strategic Mgt Copyright 2003 Prentice Hall Publishing Company
Strategic Management "rocessStrategic Management "rocess
Step +Step +( /evelop a vision and translate it( /evelop a vision and translate it
into a mission statement.into a mission statement.
Step ,Step ,
( Assess strengths and *ea!nesses.( Assess strengths and *ea!nesses.
Step 8Step 8( Scan environment for( Scan environment for
opportunities and threats.opportunities and threats.
Step 9Step 9( Identify !ey success factors( Identify !ey success factors..
7/24/2019 Entrepreneurship chapter 2
8/30Chapter 2: Strategic Mgt !Copyright 2003 Prentice Hall Publishing Company
Strategic Management "rocess ...Strategic Management "rocess ...
Step &Step &( Analy:e competition( Analy:e competition..
Step ;Step ;( Create goals < objectives.( Create goals < objectives.
Step =Step =( Formulate strategies( Formulate strategies..
Step >Step >( $ranslate plans into actions( $ranslate plans into actions..
Step ?Step ?( Establish accurate controls( Establish accurate controls..
(continued)(continued)
7/24/2019 Entrepreneurship chapter 2
9/30Chapter 2: Strategic Mgt "Copyright 2003 Prentice Hall Publishing Company
Step +(Step +(Develop a VisionDevelop a Visionandand
Create a Mission StatementCreate a Mission Statement
@ision an e1pression of *hat an@ision an e1pression of *hat an
entrepreneur stands for and believes in.entrepreneur stands for and believes in.
A clearly defined vision(A clearly defined vision( "rovides direction"rovides direction
/etermines decisions/etermines decisions
Motivates peopleMotivates people
7/24/2019 Entrepreneurship chapter 2
10/30Chapter 2: Strategic Mgt 10Copyright 2003 Prentice Hall Publishing Company
Step +( /evelop a @ision andStep +( /evelop a @ision and
Create a Mission StatementCreate a Mission Statement
Mission addresses 0uestion(BhatMission addresses 0uestion(Bhat
business are *e in%Dbusiness are *e in%D
A *ritten e1pression of ho* theA *ritten e1pression of ho* thecompany *ill reflect the o*ner6scompany *ill reflect the o*ner6s
values beliefs and vision.values beliefs and vision.
Sets the tone for the entire companySets the tone for the entire company
and guides the decisions people ma!e.and guides the decisions people ma!e.
E1ample( Fet:er @ineyardsE1ample( Fet:er @ineyards
http(***.fet:er.comhttp(***.fet:er.com
http://www.fetzer.com/letsfetzer/stor_miss.htmlhttp://www.fetzer.com/letsfetzer/stor_miss.htmlhttp://www.fetzer.com/letsfetzer/stor_miss.html7/24/2019 Entrepreneurship chapter 2
11/30
Chapter 2: Strategic Mgt 11Copyright 2003 Prentice Hall Publishing Company
Step ,( Assess Company StrengthsStep ,( Assess Company Strengths
and ea!nessesand ea!nesses
StrengthsStrengths
"ositive internal factors that"ositive internal factors that
contribute to accomplishing thecontribute to accomplishing the
mission goals and objectives.mission goals and objectives. ea!nessesea!nesses
egative internal factors that inhibitegative internal factors that inhibit
the accomplishment of the missionthe accomplishment of the mission
goals and objectives.goals and objectives.
7/24/2019 Entrepreneurship chapter 2
12/30
Chapter 2: Strategic Mgt 12Copyright 2003 Prentice Hall Publishing Company
Step 8( Scan for )pportunitiesStep 8( Scan for )pportunities
and $hreatsand $hreats
)pportunities)pportunities "ositive e1ternal factors the company can"ositive e1ternal factors the company can
employ to accomplish its mission goals andemploy to accomplish its mission goals and
objectives.objectives.
$hreats$hreats egative e1ternal factors that inhibit the firmGsegative e1ternal factors that inhibit the firmGs
ability to accomplish its mission goals andability to accomplish its mission goals and
objectives.objectives.
7/24/2019 Entrepreneurship chapter 2
13/30
E1ternal Mar!et ForcesE1ternal Mar!et Forces
CompetitiveCompetitive EconomicEconomic
"olitical and
#egulatory"olitical and
#egulatory
$echnological$echnological
Social and
/emographicSocial and
/emographic
7/24/2019 Entrepreneurship chapter 2
14/30
Chapter 2: Strategic Mgt 14Copyright 2003 Prentice Hall Publishing Company
Step 9( Identify 3ey SuccessStep 9( Identify 3ey Success
FactorsFactors
3ey success factors(3ey success factors(
relationships bet*een arelationships bet*een a
controllable variable and acontrollable variable and a
critical factor that influence acritical factor that influence acompany6s ability to competecompany6s ability to compete
in the mar!et.in the mar!et.
$he !eys to unloc!ing the$he !eys to unloc!ing the
secrets of competingsecrets of competing
successfully in a particularsuccessfully in a particular
mar!et segment.mar!et segment.
7/24/2019 Entrepreneurship chapter 2
15/30
Chapter 2: Strategic Mgt 15Copyright 2003 Prentice Hall Publishing Company
Step &( Analy:e CompetitorsStep &( Analy:e Competitors
Analy:ing !ey competitors allo*s an entrepreneurAnaly:ing !ey competitors allo*s an entrepreneurto(to(
avoid surprises from e1isting competitors6 ne*avoid surprises from e1isting competitors6 ne*
strategies and tactics.strategies and tactics.
identify potential ne* competitors and theidentify potential ne* competitors and the
threats they pose.threats they pose.
improve reaction time to competitors6 actions.improve reaction time to competitors6 actions.
anticipating rivals6 ne1t strategic moves.anticipating rivals6 ne1t strategic moves.
7/24/2019 Entrepreneurship chapter 2
16/30
Chapter 2: Strategic Mgt 16Copyright 2003 Prentice Hall Publishing Company
Step &( Analy:e CompetitorsStep &( Analy:e Competitors
$echni0ues do$echni0ues do notnotre0uire unethicalre0uire unethicalbehavior(behavior(
Monitor industry and trade publications.Monitor industry and trade publications.
$al! to customers and suppliers.$al! to customers and suppliers. isten to employees especially salesisten to employees especially sales
representatives and purchasing agents.representatives and purchasing agents.
Attend trade sho*s and conferences.Attend trade sho*s and conferences.
7/24/2019 Entrepreneurship chapter 2
17/30
Chapter 2: Strategic Mgt 1Copyright 2003 Prentice Hall Publishing Company
Step &( Analy:e CompetitorsStep &( Analy:e Competitors
$echni0ues do$echni0ues do notnotre0uire unethicalre0uire unethicalbehavior(behavior( Study competitorsG literature andStudy competitorsG literature and
Bbenchmar!B their products and services.Bbenchmar!B their products and services.
et competitorsG credit reports.et competitorsG credit reports. Chec! out the local library.Chec! out the local library.
4se the orld ide eb to learn more about4se the orld ide eb to learn more about
competitors.competitors.
@isit competing businesses to observe their@isit competing businesses to observe their
operations.operations.
7/24/2019 Entrepreneurship chapter 2
18/30
Sample Competitive Profile Matrix
Key Success Factors Your Business Competitor 1 Competitor 2
(from Step 4) ei!"t #atin!
ei!"te$
Score #atin!
ei!"te$
Score #atin!
ei!"te$
Score
Market Share 0.10 3 0.30 2 0.20 3 0.30Price Competitiveness 0.20 1 0.20 3 0.60 4 0.80
Financial Strength 0.10 2 0.20 3 0.30 2 0.20
Prodct !alit" 0.40 4 1.60 2 0.80 1 0.40
Cstomer #o"alt" 0.20 3 0.60 3 0.60 2 0.40
%otal 1.00 2&' 2& 2&1
7/24/2019 Entrepreneurship chapter 2
19/30
Chapter 2: Strategic Mgt 1"Copyright 2003 Prentice Hall Publishing Company
3no*ledge Management3no*ledge Management
$he practice of gathering organi:ing and$he practice of gathering organi:ing anddisseminating the collective *isdom anddisseminating the collective *isdom and
e1perience of a company6s employees for thee1perience of a company6s employees for the
purpose of strengthening its competitive position.purpose of strengthening its competitive position.
3no*ledge management involves(3no*ledge management involves( $a!ing inventory of the special !no*ledge the people$a!ing inventory of the special !no*ledge the people
in the company possess.in the company possess.
)rgani:ing that !no*ledge and disseminating it to)rgani:ing that !no*ledge and disseminating it to
those *ho need it.those *ho need it.
7/24/2019 Entrepreneurship chapter 2
20/30
Chapter 2: Strategic Mgt 20Copyright 2003 Prentice Hall Publishing Company
Step ;( Create Company oalsStep ;( Create Company oals
and )bjectivesand )bjectives oals broad longrange attributes to beoals broad longrange attributes to be
accomplished.accomplished. JJ2HASD one factor that sets apart successful2HASD one factor that sets apart successful
companies from unsuccessful ones.companies from unsuccessful ones.
)bjectives more detailed specific targets of)bjectives more detailed specific targets ofperformance that are S.M.A.#.$.performance that are S.M.A.#.$. SSpecificpecific
MMeasurableeasurable
AAssignablessignable
##ealistic 5yet challenging7ealistic 5yet challenging7
$$imelyimely
7/24/2019 Entrepreneurship chapter 2
21/30
Step =( Formulate StrategiesStep =( Formulate Strategies
StrategyStrategy A Jroad mapD that guides a company through aA Jroad mapD that guides a company through a
turbulent environment as it see!s to fulfill its missionturbulent environment as it see!s to fulfill its mission
goals and objectives.goals and objectives.
A game plan for *inning.A game plan for *inning. $hree basic strategies($hree basic strategies(
Strategy%
Cost leadershipCost leadership
/ifferentiation/ifferentiation
FocusFocus
7/24/2019 Entrepreneurship chapter 2
22/30
$hree Strategic )ptions$hree Strategic )ptions
Competitive AdvantageCompetitive Advantage
TargetTarget
MarketMarket
IndustryIndustry
NicheNiche
Uniqueness PerceivedUniqueness Perceived
by the Customerby the Customer
o! Costo! Cost
PositionPosition
"i#erentiation"i#erentiation o! Costo! Cost
"i#erentiation $ocus
"i#erentiation $ocus
Cost$ocus
Cost$ocus
7/24/2019 Entrepreneurship chapter 2
23/30
Chapter 2: Strategic Mgt 23Copyright 2003 Prentice Hall Publishing Company
Cost eadershipCost eadership
oal( to beoal( to be thethelo*cost producer in the industrylo*cost producer in the industryor mar!et segment.or mar!et segment.
Advantages(Advantages( reaching buyers *ho buy on the basis of price.reaching buyers *ho buy on the basis of price.
po*er to set the industry6s price floor.po*er to set the industry6s price floor. or!s *ell *hen(or!s *ell *hen(
buyers are sensitive to price changes.buyers are sensitive to price changes.
*hen competing firms sell the same commodity*hen competing firms sell the same commodity
products.products. *hen a company can benefit from economies of scale.*hen a company can benefit from economies of scale.
7/24/2019 Entrepreneurship chapter 2
24/30
Chapter 2: Strategic Mgt 24Copyright 2003 Prentice Hall Publishing Company
/ifferentiation/ifferentiation
Company see!s to build customer loyalty byCompany see!s to build customer loyalty bypositioning its goods or services in a uni0ue orpositioning its goods or services in a uni0ue or
different fashion.different fashion.
Idea is to be uni0ue at something customersIdea is to be uni0ue at something customers
value.value. 3ey( 2uild basis for differentiation on a core3ey( 2uild basis for differentiation on a core
competency those things that the smallcompetency those things that the small
company is uni0uely good at doing incompany is uni0uely good at doing in
comparison to its competitors.comparison to its competitors. E1ample( East 2an! ClubE1ample( East 2an! Club
7/24/2019 Entrepreneurship chapter 2
25/30
Chapter 2: Strategic Mgt 25Copyright 2003 Prentice Hall Publishing Company
FocusFocus
Company selects one or more customer segmentsCompany selects one or more customer segmentsin a mar!et identifies customers6 special needsin a mar!et identifies customers6 special needs
*ants or interests and then targets them *ith a*ants or interests and then targets them *ith a
product or service designed specifically for them.product or service designed specifically for them.
Strategy builds onStrategy builds on differencesdifferencesamong mar!etamong mar!etsegments.segments.
#ather than try to serve the total mar!et the#ather than try to serve the total mar!et the
company focuses on serving a niche 5or severalcompany focuses on serving a niche 5or several
niches7 *ithin that mar!et.niches7 *ithin that mar!et.
E1ample( Clo*n Shoes and "ropsE1ample( Clo*n Shoes and "rops
7/24/2019 Entrepreneurship chapter 2
26/30
Chapter 2: Strategic Mgt 26Copyright 2003 Prentice Hall Publishing Company
Step ?( $ranslate StrategiesStep ?( $ranslate Strategies
into Action "lansinto Action "lans
Create projects by defining(Create projects by defining(
"urpose"urpose
ScopeScope
ContributionContribution
#esource re0uirements#esource re0uirements
$iming$iming
7/24/2019 Entrepreneurship chapter 2
27/30
Chapter 2: Strategic Mgt 2Copyright 2003 Prentice Hall Publishing Company
Step +'( Establish Accurate ControlsStep +'( Establish Accurate Controls
$he plan establishes the standards against$he plan establishes the standards against
*hich actual performance is measured.*hich actual performance is measured.
Entrepreneur must(Entrepreneur must(
identify and trac! !ey performanceidentify and trac! !ey performance
indicators.indicators.
$a!e corrective action.$a!e corrective action.
7/24/2019 Entrepreneurship chapter 2
28/30
Chapter 2: Strategic Mgt 2!Copyright 2003 Prentice Hall Publishing Company
2alanced Scorecards2alanced Scorecards
A set of measurements uni0ue to a companyA set of measurements uni0ue to a company
that includes both financial and operationalthat includes both financial and operational
measuresmeasures
ives managers a 0uic! yet comprehensiveives managers a 0uic! yet comprehensive
picture of a company6s overall performance.picture of a company6s overall performance.
7/24/2019 Entrepreneurship chapter 2
29/30
Chapter 2: Strategic Mgt 2"Copyright 2003 Prentice Hall Publishing Company
2alanced Scorecards2alanced Scorecards
Four "erspectives(Four "erspectives(
Customer( Ho* do customers see us%Customer( Ho* do customers see us%
Internal 2usiness( At *hat must *e e1cel%Internal 2usiness( At *hat must *e e1cel%
Innovation and earning( Can *e continueInnovation and earning( Can *e continue
to improve and create value%to improve and create value%
Financial( Ho* do *e loo! to shareholders%Financial( Ho* do *e loo! to shareholders%
7/24/2019 Entrepreneurship chapter 2
30/30
$he 2alanced Scorecard in!s "erformance Measures.$he 2alanced Scorecard in!s "erformance Measures.
Financial "erspectiveFinancial "erspective
oalsoals MeasuresMeasures
Customer "erspectiveCustomer "erspective
oalsoals MeasuresMeasures
Internal 2usiness "erspectiveInternal 2usiness "erspective
oalsoals MeasuresMeasures
Innovation and earning "erspectiveInnovation and earning "erspective
oalsoals MeasuresMeasures
Ho* do customersHo* do customers
see us%see us%
Ho* do *e loo!Ho* do *e loo!
to shareholders%to shareholders%
At *hat mustAt *hat must
*e e1cel%*e e1cel%
Can *e continue toCan *e continue to
improve and createimprove and createl %l %