formulating, implementing and evaluating cross functional decisions that enable organization to achieve objectives. Stages of SM: Strategy formulation/implementation and evaluation Intuition, Adapting to change. 9 Key terms of SM: Competitive Advantage, Strategist, Vision/Mission Statement, External Opportunities and Threats, Internal Strength and Weakness, Long term objectives, Strategies, Annual Objectives, Policies Strategic Management Model. Benefits of SM Why some firms do no SM Business Vision /Mission VISION: a possible & desirable picture of the future standing. Linked to the mission or purpose, it embraces key values and specific goals. MISSION: is more associated with behaviour and the present. Peter Ducker: What is our business = what is our mission Mission Statement or CREED Statement: MS is declaration of Organizations reason of being. MS is essential for effectively establishing objectives and formulating strategies Developing VS/MS: create emotional bond and sense of mission b/w organization and its employees. Characteristics of MS: 1. Declaration of Attitude, 2. Customer Orientation MS 9 Component: Customer, Product/Services, Market, Technology, Concern for Survival, Growth & Profitability, Philosophy, Self-concept, Concern for public Image, Concern for Employee. The External Assessment External SM Audit: Environmental Scanning or Industry Analysis, focus on identifying and evaluating trends and beyond control events. Nature of EA: Develop list of Opportunities and Threats. 5 Key External Forces: Economic, Social/ Cultural/Demographic & Natural environment, Political/Legal/Governmental, Technological, Competitive. Process of performing EA: Industrial Organization (I/0) view: Competitive Intelligence Program Market Commonality and Resource Similarity. Competitive Analysis: Poters Five Force Model: 1. Rivalry among competitive firms 2. Potential entry of new competitors 3. Potential development of substitute product 4. Bargaining power of supplier 5. Bargaining power of consumer Industry Analysis: EFE Matrix External Factor Evaluation (EFE): allow strategist to summarize 5 key external forces. 5 steps of EFE: (same as IFE) Industry Analysis: CPM Matrix Competitive Profile Matrix identifies firms major competitors and its particular strength and weakness. CPM 2 most imp. factors to being successful are advertising and Global Expansion
The Internal Assessment
Internal SM Audit: focus on identifying and evaluating a firms strength and weaknesses in the functional area of business 5 Key External Forces: Marketing, Finance/Accounting, Production / Operation, R&D, MIS) Nature of EA: Develop list of Strengths and Weaknesses Objectives and strategies established: with intentions of capitalizing upon internal strengths and overcoming weaknesses Distinctive Competencies. The Resource Based View (RBV) approach to competitive advantage: Internal Recourses are important than External. 3 Internal Resources: Physical, Human, Organizational Valuable Resources: Rare, Hand to Initiate and not easily substitutable (empirical Indicator) Management: Planning, Organizing, Motivating, Staffing, Controlling Marketing: 7 basic function: Customer analysis, Selling products/services, Products/services planning, Pricing, Distribution, Market Research, CostBenefit Analysis Finance & Accounting: single best measure of firms competitive position & overall attractiveness to investors. F & A Function: comprises 3 Decisions: Investment/Financing/Dividend Basic Financial Ratios: Liquidity, Leverage, Activity, Profitability Production/Operation: R & D: Internal, Contract. MIS: Value Chain Analysis (VCA): process to determine cost association with organization activities. Total revenue Total cost undertake to develop and market a product or service yield value. Bench Marking. Internal Factor Evaluating Matrix (IFE). allow strategist to summarize 5 key internal forces. 5 steps of IFE: 1. List key External factors 2. Assign weight (0.0 to 1.0), industry based 3. Assign rating (1 to 4) to each key IF, company based. 4. Multiply 2 to 3 = weighted score 5. 4.
Strategy Analysis & Choice
A Comprehensive Strategy: Formulation Frame Work Stage 1: Input Stage EFE CP IFE Stage 2: Matching Stage SWOT Space BCG IE Grand Strategy Stage 3: Decision Stage Quantitative Strategy Planning Matrix SWOT Matrix: 4 Strategies SO, WO, ST, WT Space Matrix: (Strategic Position and Actual Evaluation); 2 Internal Dimensions (Financial (FP) & Competitive (CP) positions) & 2 External Dimensions (Stability (SP) & Industrial (IP) positions)
Quadrant Frame Work; Aggressive, Consecutive,
Defensive, Competitive Strategies BCG Matrix; Boston Consulting Group Matrix; Quadrant Q1 (Question Mark), Q2 (Stars), Q3 (Cash Cows0< Q4 (Dogs)
IE Matrix; the Internal-External Matrix
Grow & Build (I, II, IV) Integration & Intensive Strategy Hold & Maintain (III, V, VII) Market Penetration & Product Development Harvest & Divest (VI, VIII, IX) Retrenchment & Divestiture
The Grand Strategy Matrix:
2 Evaluative Dimensions (Competitive Position and Market Growth) and 4 Quadrants
Decision Stage (QSPM) indicate which alternate strategy
is best, uses inputs of stage 1, matches with stage 2 and analyses to decide objectively Strategies in Action: 16 types of strategies Long Term Objective: Nature of LTO:
Should be quantitative, measureable, realistic, understandable, challenging, obtainable, and hierarchical.
Needed at corporate, divisional and functional levels.
Financial Objectives, Strategic Objectives. Not Managing by Objectives: Avoid Managing by Exploration/Crisis/Subjective/Hope Types of Strategies:
Integration: Forward/Backward/Horizontal
Intensive: Market Penetration, Market/Product Development
Large Firm: Corporate, Divisional, Functional, Operational
Small Firm: Company, Functional, Operational
Michael Porter 5 Generic Strategies: Cost Leadership (low cost and best value), Differentiation, Focus (low cost and best value). Means of Achieving Strategies: Cooperation among Competitors, joint Ventures, Merger/Acquisition