Introduction to management 13th schemerhorn bachrach chapter 10

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Chapter 10 Strategy and Strategic Management

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Planning Ahead — Key Takeaways

 Discuss the process and importance of strategic management.

 Identify the essential elements in strategic analysis.

 Explain alternative corporate strategies.

 Explain alternative business-level strategies.

 Describe the foundations for strategy implementation.

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2. Essentials of Strategic Analysis

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Chapter 10 Outline

3. Corporate-Level Strategy Formulation

4. Business-Level Strategy Formulation



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Chapter 10 Outline

5. Strategy Implementation

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Strategic Management

 Basic concepts of strategy:

 Competitive advantage — ability to do something so well that one outperforms

competitors

 Sustainable competitive advantage — one that is difficult or costly for

competitors to imitate

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 Sources of competitive advantage

 Technology

 Cost and quality

 Knowledge and speed

 Barriers to entry

 Financial resources

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Figure 10.1 Three levels of strategy in organizations- corporate, business, functional strategies

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 Strategic Management Process:

 Strategic management

and sustain competitive advantage

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Figure 10.2 Strategy formulation and implementation in the strategic management process

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 Strategy formulation

 The process of creating strategy

 Involves assessing existing strategies, organization, and environment to

develop new strategies and strategic plans capable of delivering future competitive advantage

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 Strategy implementation

 The process of allocating resources and putting strategies into action

 All organizational and management systems must be mobilized to support and

reinforce the accomplishment of strategies

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Essentials of Strategic Analysis

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 Analysis of mission:

 The reason for an organization’s existence

 Good mission statements identify:

 An important test of the mission is how well it serves the organization’s

stakeholders

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Figure 10.3 How external stakeholders can be valued as strategic constituencies in an organization’s mission statement

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 Analysis of Core values:

 Broad beliefs about what is or is not appropriate behavior

 Organizational culture reflects the predominant value system of the

organization as a whole

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 Analysis of objectives:

 Operating objectives are specific results that organizations try to accomplish

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 Analysis of organizational resources and capabilities:

 Core competency is a special strength that gives an organization competitive

advantage

 Important goal of assessing core competencies

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 SWOT Analysis

 Examination of an organization’s current position by looking at

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Figure 10.4 SWOT analysis of strengths, weaknesses, opportunities, and threats

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Figure 10.5 Porter’s model of five strategic forces affecting industry competition

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Porter’s Model of Five Strategic Forces Affecting Competition:

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Corporate-Level Strategy Formulation

 Corporate-level strategy formulation

 Portfolio planning model:

opportunities

 BCG Matrix analyzes business opportunities according to market growth rate and market share

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BCG matrix

 Ties strategy formulation to analysis of business opportunities according to …

 Low versus high

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Figure 10.6 The BCG matrix approach to corporate strategy formulation

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BCG matrix — business conditions and related strategies:

 Stars

 Cash cows

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BCG matrix—business conditions and related strategies (cont.):

 Question marks

divestiture for others

 Dogs

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Growth strategies

 Types of growth strategies:

Grow within the same business area

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Types of growth strategies continued

 Diversification and integration strategies

 Related diversification

 Unrelated diversification

 Vertical integration – (backward or forward)

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Retrenchment and restructuring strategies:

 Pursue radical changes to solve problems

 Chapter 11 bankruptcy

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Types of retrenchment and restructuring strategies

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Types of retrenchment and restructuring strategies

 Divestiture

 Turnaround Strategy

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Global strategies:

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 Co-opetition – working with rivals on projects of mutual benefit

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Business-Level Strategy Formulation

Business-level strategy formulation

 Good strategies help achieve above average returns

 Key question is “How can we best compete for customers in our market and

with our products or services?”

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Porter’s competitive strategies model

 Business-level strategic decisions are driven by:

 Market scope and source of competitive advantage combine to generate three

generic strategies

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Figure 10.7 Porter’s competitive strategies framework: soft-drink industry examples

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Porter’s generic strategies for gaining competitive advantage:

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 Differentiation strategy

 Seeks competitive advantage through uniqueness

 Cost leadership strategy

 Seeks competitive advantage by operating with lower costs than competitors

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Focus strategy

 Concentrates on a special market segment

 Two types:

Focused differentiation – offers a unique product to a special market segment

Focused cost leadership – seeks the lowest cost of operations within a special market segment

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 Lack of participation error

 Goal displacement error

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Strategy Implementation

Corporate governance:

– System of control and performance monitoring of top management

– Done by boards of directors and other major stakeholder representatives

– Controversies regarding roles of inside directors and outside directors

– Increasing emphasis on corporate governance in contemporary businesses

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Strategy Implementation

Critical tasks of strategic leadership

 Maintain strategic control

 Be the guardian of trade-offs

 Create a sense of urgency

 Ensure that everyone understands the strategy

 Be a teacher

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