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Concepts Of Strategic Management

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Title: Concepts Of Strategic Management


1
Concepts Of Strategic Management
  • The study of strategic management

2
Strategic management Definition
  • Strategic management is that set of managerial
    decisions and actions that determines the
    long-run performance of a corporation.
  • Strategic management includes
  • Environmental scanning (both external and
    internal).
  • Strategy implementation.
  • Evaluation and control.

3
How has strategic management evolved
  • Strategic management within a firm generally
    evolves through four sequential phases
  • Basic financial planning.
  • Forecast-based planning.
  • Externally oriented planning (strategic
    planning).
  • Strategic management.

4
Initiation of strategy Triggering events
  • A triggering event is something that stimulates a
    change in strategy. Some of the possible
    triggering events are
  • New CEO.
  • Intervention by an external institution.
  • Threat of a changing in ownership.
  • Managements recognition of a performance gap.

5
External Assessment
  • If you're not faster than your competitor,
    youre in a tenuous position, and if youre only
    half as fast, youre terminal.
  • George Salk

6
External Assessment (Contd)
  • The idea is to concentrate our strength against
    our competitors relative weakness.
  • Bruce Henderson

7
External Assessment (Contd)
  • External Strategic-Management Audit
  • Industry analysis
  • Environmental scanning

8
External Assessment (Contd)
  • External audit
  • Focuses on identifying evaluating events beyond
    the immediate control of the firm

9
External Assessment (Contd)
  • External audit focuses on
  • Increased foreign competition
  • Population shifts
  • Demographics (e.g., aging population)
  • Information technology

10
External Assessment (Contd)
  • External audit reveals
  • Key opportunities
  • Key threats
  • Managers then formulate strategies
  • Take advantage of opportunities
  • Avoid/reduce impact of threats

11
External Assessment (Contd)
  • External Audit
  • Aimed at identifying key variables that offer
    actionable responses

12
External Assessment (Contd)
  • Key External Forces
  • Five (5) broad categories
  • Economic forces
  • Social, cultural, demographic, environmental
    forces

13
External Assessment (Contd)
  • Key External Forces (Contd)
  • Five (5) broad categories
  • Political, governmental, legal forces
  • Technological forces
  • Competitive forces

14
External Assessment (Contd)
Competitors Suppliers Distributors Creditors Custo
mers Employees Communities Managers Stockholders L
abor Unions Special Interest Groups Products
  • Competitors
  • Suppliers
  • Distributors
  • Creditors
  • Customers
  • Employees
  • Communities
  • Managers
  • Stockholders
  • Labor Unions
  • Special Interest Groups
  • Products
  • Services

OPURTUNITIES threats
Key external forces
15
External Assessment (Contd)
  • Process of External Audit
  • Involve as many managers employees as possible
  • Gather competitive intelligence
  • Information about social, demographic, cultural,
    environmental, etc.
  • Monitor sources of information (key magazines,
    articles, etc.)
  • Utilization of Internet
  • Suppliers, distributors, customers as sources of
    information

16
External Assessment (Contd)
Key External Factors Vary over time Vary by
industry
  • Process of External Audit
  • Involve as many managers employees as possible
  • Gather competitive intelligence
  • Information about social, demographic, cultural,
    environmental, etc.
  • Monitor sources of information (key magazines,
    articles, etc.)
  • Utilization of Internet
  • Suppliers, distributors, customers as sources of
    information

17
External Assessment (Contd)
  • Key External Factors
  • Important to achieving long-term objectives
  • Measurable
  • Applicable to all competing firms
  • Hierarchical
  • Process of External Audit
  • Involve as many managers employees as possible
  • Gather competitive intelligence
  • Information about social, demographic, cultural,
    environmental, etc.
  • Monitor sources of information (key magazines,
    articles, etc.)
  • Utilization of Internet
  • Suppliers, distributors, customers as sources of
    information

18
External Assessment (Contd)
  • Examples of Key External Factors
  • Market share
  • Breadth of competing products
  • World economies
  • Proprietary key account advantages
  • Price competitiveness
  • Technological advancements
  • Interest rates

19
Economic Forces
  • Monitor Key Economic Variables
  • Availability of credit
  • Level of disposable income
  • Interest rates
  • Inflation rates
  • Money market rates
  • Government budget deficits
  • Gross domestic product trend
  • Consumption patterns

20
Economic Forces (Contd)
  • Monitor Key Economic Variables (Contd)
  • Unemployment trends
  • Worker productivity levels
  • Value of the dollar in world markets
  • Stock market trends
  • Foreign countries economic conditions
  • Import/export factors
  • Demand shifts for goods/services
  • Income differences by region/customer

21
Economic Forces (Contd)
  • Monitor Key Economic Variables (Contd)
  • Price fluctuations
  • Exportation of labor capital
  • Monetary policies
  • Fiscal policies
  • Tax rates
  • ECC policies
  • OPEC policies
  • LDC policies

22
Social Environmental Forces
  • Social, cultural, demographic, and environmental
    changes
  • Major impact on
  • Products
  • Services
  • Markets
  • Customers

23
Social Environmental Forces
  • World population gt 6 billion
  • U.K. population lt 60 million
  • Great potential for domestic production expansion
    to other markets
  • Domestic only is a risky strategy

24
Social Environmental Forces
25
Social Environmental Forces
  • E-commerce Perspective
  • Question
  • Is the Internet Revolution Bypassing Poor,
    Minorities?
  • Answer
  • Yes!

26
Social Environmental Forces
  • Internet revolution is widening the gap between
    rich poor
  • 42 U.S. households have personal computers
  • 80 of them are in households w/family income gt
    75,000

27
Social Environmental Forces
  • Internet usage lowest (3) among Americans
    earning 10K or less
  • 26.7 of White Americans use Internet at home
    compared to 9.2 Blacks 8.8 of Hispanics
  • 90 shares of common stock of American companies
    held by the wealthiest 10 of Americans

28
Social Environmental Forces
  • Key social, cultural, demographic,
    environmental variables
  • Childbearing rates
  • Number of special-interest groups
  • Number of marriages
  • Number of divorces
  • Number of births
  • Number of deaths
  • Immigration emigration rates

29
Social Environmental Forces
  • Key social, cultural, demographic,
    environmental variables (Contd)
  • Life expectancy rates
  • Per capita income
  • Attitudes toward business
  • Average disposable income
  • Buying habits
  • Ethical concerns
  • Attitudes toward saving

30
Social Environmental Forces
  • Key social, cultural, demographic,
    environmental variables (Contd)
  • Racial equality
  • Average level of education
  • Government regulation
  • Attitudes toward customer service
  • Attitudes toward product quality
  • Energy conservation
  • Social responsibility

31
Social Environmental Forces
  • Key social, cultural, demographic,
    environmental variables (Contd)
  • Value placed on leisure time
  • Recycling
  • Waste management
  • Air water pollution
  • Ozone depletion
  • Endangered species

32
Political, Govt., Legal Forces
  • Government Regulation
  • Key opportunities key threats
  • Antitrust legislation (Microsoft)
  • Tax rates
  • Lobbying efforts
  • Patent laws

33
Political, Govt., Legal Forces
  • Increasing Global Interdependence
  • Impact of political variables
  • Formulation of strategies
  • Implementation of strategies

34
Political, Govt., Legal Forces
  • Increasing Global Interdependence
  • Strategists in a global economy
  • Forecast political climates
  • Legalistic skills
  • Diverse world cultures

35
Political, Govt., Legal Forces
  • Globalization of Industry
  • Worldwide trend toward similar consumption
    patterns
  • Global buyers sellers
  • E-commerce
  • Instant transmission of money information
    across continents

36
Political, Govt., Legal Forces
  • Key Political, govt., legal variables
  • Government regulation/deregulation
  • Tax law changes
  • Special tariffs
  • Political Action Committees (PACs)
  • Voter participation rates
  • Number of patents
  • Changes in patent laws

37
Political, Govt., Legal Forces
  • Key Political, govt., legal variables (Contd)
  • Environmental protection laws
  • Equal employment legislation
  • Level of government subsidies
  • Antitrust legislation/enforcement
  • Sino-American relationships
  • Russian-American relationships
  • European-American relationships

38
Political, Govt., Legal Forces
  • Key Political, govt., legal variables(Contd)
  • Ethnic minorities relationships
  • Import-export regulations
  • Monetary policy
  • Political conditions in other countries
  • Government budgets
  • World oil, currency, labor markets
  • Location and severity of terrorist activities

39
Technological Forces
  • Technological Change
  • Dramatic effect on business
  • Fiber optics
  • Biometrics
  • EFT
  • Computer engineering
  • Superconductivity advancements

40
Technological Forces (Contd)
  • Internet impact on opportunities threats
  • Altering life cycles of products
  • Increasing speed of distribution
  • Creating new products services
  • Erasing limitations of traditional geographic
    markets

41
Technological Forces (Contd)
  • Internet impact on opportunities threats
    (Contd)
  • Altering economies of scale
  • Changing entry barriers
  • Redefining relationships
  • Industries suppliers, creditors, customers, and
    competitors

42
Technological Forces (Contd)
  • Capitalizing on Information Technology (IT)
  • Chief Information Officer (CIO)
  • Chief Technology Officer (CTO)

43
Competitive Forces
  • External Audit Competing Firms
  • Identifying rival firms
  • Strengths
  • Weaknesses
  • Capabilities
  • Opportunities
  • Threats
  • Objectives
  • Strategies

44
Competitive Forces
  • Competitor Information
  • Sources
  • Moodys Manuals
  • Standard Corporation Descriptions
  • Value Line Investment Surveys
  • Duns Business Rankings
  • Standard Poors Industry Surveys
  • Industry Week
  • Forbes, Fortune, Business Week

45
Competitive Forces
  • Most competitive firms in America
  • Seven Characteristics
  • Market share matters
  • Understand what business you are in
  • Broke or not, fix it
  • Innovate or evaporate

46
Competitive Analysis Porters Five-Forces Model
Potential development of substitute products
Rivalry among competing firms
Bargaining power of suppliers
Bargaining power of consumers
Potential entry of new competitors
47
Global Challenge
  • Differences U.S. and MNCs
  • Affect strategic management
  • Language
  • Culture
  • Politics
  • Economy
  • Government interference
  • Labor relations
  • Trade barriers

48
Reference
  • For more details about this lecture see Chapter 3
    in
  • Strategic Management Concepts and Cases,
    9/eFred David   
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