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This chapter’s objectives are to: Explain how businesses use planning to solve problems and make a difference; distinguish how planning is different at the organizational, divisional, and functional levels of a business; outline methods that managers use to understand their industries and competitors.
MANAGEMENT SECOND EDITION Chapter Designing Strategies Learning Objectives § § § Explain how businesses use planning to solve problems and make a difference Distinguish how planning is different at the organizational, divisional, and functional levels of a business Outline methods that managers use to understand their industries and competitors Copyright ©2017 John Wiley & Sons, Inc Learning Objectives (cont.) § § § Describe how managers assess the organization’s capacity to execute proposed business plans Demonstrate how managers develop divisional strategies and tactical plans Compare traditional strategic planning models to an eventbased approach Copyrightâ2017JohnWiley&Sons,Inc HowManagersPlantoMakea Difference(p.228) Đ Đ Designinganddevelopingstrategiesisa continuousprocessthathelpsorganizations determinewhattheydo,whytheyshouldbein business,howtheycanwinandsustainmarket share,andhowtheycancontinuallyinnovate tokeepaheadofthecompetition Acquisition(p.230) ã Whenanorganizationpurchasesanother organizationorbusinessinordertogrow Copyrightâ2017JohnWiley&Sons,Inc DifferentLevelsofStrategy(p.230) Đ Strategy ã • Plan of action for achieving goals Three levels of strategy § § § Organizational strategy – corporate level strategy that addresses the question “What business are we in?” and unites all parts of the organization Divisional strategy – strategy that determines how a business will competeinaparticularindustryormarket Functionalstrategystrategythatdetermineshowemployees willimplementandachieveatacticalplan Copyrightâ2017JohnWiley&Sons,Inc DifferentLevelsofStrategy(cont.) Đ Organizational,divisional,andfunctional strategiesaredocumentedusingbusiness, tactical,andoperationalplans,respectively ã • • Business plan – stated actions and goals that support the organizational strategy (p. 230) Tactical plan – stated actions and goals that support achieving the divisional strategy Operational plan – stated actions and goals that support achieving the functional strategy Copyright ©2017 John Wiley & Sons, Inc Different Levels of Strategy (cont.) § Connecting “mission, vision, and values” to strategies and plans Figure 9.1 Copyright ©2017 John Wiley & Sons, Inc Organizational Strategies (p. 231) § Organizational strategies designed to gain a competitive advantage • § Reactor • § Characteristics of an organization’s products or services that distinguish it from competitors and provide an advantage in the market Company that does not follow a consistent strategy but just responds to changes in the environment Analyzer ã Companywhosestrategiesseektomaintainexistingproductsand serviceswhilepursuinglimitedinnovation Đ Oftenimitateorfollowtheprovensuccessofprospectororganizations Copyrightâ2017JohnWiley&Sons,Inc OrganizationalStrategies(cont.) Đ Defender(p.231) ã • • Company whose strategies support stable growth and continual improvement of existing products and services Stability strategy – organization focuses on processes, products, and services that will sustain it over the long term (p. 232) Cost leadership strategy – organization seeks competitive advantage by reducing production costsandthereforeconsumerprices Copyrightâ2017JohnWiley&Sons,Inc OrganizationalStrategies(cont.) Đ Prospector(p.232) ã ã Companythatusesstrategiesforhighưrisk,fast growththroughproductandmarketinnovation Firstmovercompanythatgainscompetitive advantagebybeingthefirsttoofferanewproduct orservice,ortouseanewcostưsavingtechnology Copyrightâ2017JohnWiley&Sons,Inc IndustryandCompetitiveAnalysis (p.232) Đ Competitiveanalysis ã Đ Processofassessingandmonitoringthecompetitionin order to design more effective strategies Five forces model (p. 233) • • • Michael Porter Allows managers to assess the major threats that an organization can expect to encounter Enables continued reinvention and shaping of the business to reflect market changes Copyrightâ2017JohnWiley&Sons,Inc IndustryandCompetitiveAnalysis (cont.) Fiveforcesmodel: Figure9.2 Copyrightâ2017JohnWiley&Sons,Inc IndustryandCompetitiveAnalysis (cont.) Đ Fiveforcesmodel(cont.) • • • • Power of suppliers – ability to increase prices Power of buyers (customers) – ability to decrease prices charged by company for its products or services (p. 234) Substitute products and services – importance of uniqueness of company’s products or services Rivalry – increase in competitors that offer the same productsorservices(p.236) Copyrightâ2017JohnWiley&Sons,Inc IndustryandCompetitiveAnalysis (cont.) Đ Fiveforcesmodel(cont.) ã Newentrantsnewcompetitorsthatenterthemarket(p. 234) Đ Barriers to entry – obstacle that makes it difficult for an organization to enter a particular market or replicate a competitor’s service or product offerings § § § § § § § Supplyside economies of scale (p. 235) Demandside benefits of scale Customer switching costs Capital requirements Incumbent advantages independent of size Unequal access to distribution channels (p. 236) Restrictive government policy Copyright ©2017 John Wiley & Sons, Inc Industry and Competitive Analysis (cont.) § Five forces model (cont.) • New entrants (cont.) § Expected retaliation (p. 236) § § § Financial resources of incumbent, loyalty of customer base, andcontroloverdistributionchannels Incumbentsabilitytoreduceprices Industrygrowthrate Copyrightâ2017JohnWiley&Sons,Inc OrganizationalPositionandCapacity (p.237) Đ Resources ã Đ Marketposition ã Đ Assets,people,processes,andcapabilitiesofan organization Honestassessmentabouthowthecompanycompetesinits industry Capacity ã Financialandhumanresourcesavailabletothecompany whichwillenableorhinderittoachieveitsgoals Copyrightâ2017JohnWiley&Sons,Inc OrganizationalPositionandCapacity (p.237) Đ Companyposition ã BostonConsultingGroupMatrixframeworkfor evaluatingbusinessunitsaccordingtogrowthand marketshare(p.237) § § Largely based on the proportion of the market controlled by the organization Growth strategy – strategy for increasing revenue, profits, market share, or territories (p. 238) § High growth markets – total business is expanding Copyright ©2017 John Wiley & Sons, Inc Organizational Position and Capacity (cont.) BCGMatrix: Figure8.3 Copyrightâ2017JohnWiley&Sons,Inc OrganizationalPositionandCapacity (cont.) Đ BCGMatrix(cont.) ã ã • • • § Business’s position in the matrix determines a strategic recommendation (p. 237) Dogs (low market share/low market growth) Cash cows (high market share/low market growth) Stars (high market share/high market growth; p. 238) Question marks (low market share/high market growth SWOTanalysis ã Methodofassessinganorganizationsstrengths, weaknesses,opportunities,andthreats Copyrightâ2017JohnWiley&Sons,Inc OrganizationalPositionandCapacity (cont.) Đ Capabilitiesandresources(p.240) ã ã Corecapabilities(competencies)activitiesand processesthatanorganizationroutinelydoeswell incomparisontoitscompetitors Resourcesassets,people,andprocessesofan organization Copyrightâ2017JohnWiley&Sons,Inc StrategiesforPerformance(p.245) Đ Focusstrategy(p.246) • • § Organization concentrates on a specific target market May employ cost leadership and/or differentiation strategies Differentiation strategy • Organization seeks competitive advantage by providinggoodsorservicesthataresignificantly differentfromthecompetition Copyrightâ2017JohnWiley&Sons,Inc StrategiesforPerformance(cont.) Đ Verticalintegration(p.247) ã Diversificationmethodinwhichanorganizationadopts: Đ Backwardintegrationưbeginsproducingitsownsupplies § § § Form of diversification strategy in which an organization adds new kinds of goods, services, or business units Forward integration – takes on the distribution and selling of its products Renewal strategy • Addresses declining performance through retrenchment and regrowth Copyright ©2017 John Wiley & Sons, Inc ... Đ Connectingmission,vision, andvaluestostrategies andplans Figure9.1 Copyrightâ2017JohnWiley&Sons,Inc OrganizationalStrategies(p.231) § Organizational? ?strategies? ?designed to gain a competitive ... OrganizationalStrategies(cont.) § Defender (p. 231) • • • Company whose? ?strategies? ?support stable growth and continual improvement of existing products and services Stability strategy? ?–? ?organization focuses on ... support the organizational strategy (p. 230) Tactical plan? ?–? ?stated actions and goals that support achieving the divisional strategy Operational plan? ?–? ?stated actions and goals that supportachievingthefunctionalstrategy