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Strategic Management Chapter 4


Strategic Management Chapter 4 Mr. Sherpinsky Business Management Class Council Rock School District – PowerPoint PPT presentation

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Title: Strategic Management Chapter 4

Strategic ManagementChapter 4
  • Mr. Sherpinsky
  • Business Management Class
  • Council Rock School District

Goals Objectives
  • Define strategy, and explain its importance to
    organizational success
  • Explain the three levels of strategy that exist
    in an organization
  • Discuss the stages of the strategic management
  • Define organizational mission, and explain how
    mission relates to long- and short-range
  • Discuss the components of a SWOT analysis
  • Explain how strategic alternatives are identified
    and selected

What is Strategic Management?
  • The word Strategy originated with the Greeks
    about 400B.C.
  • Strategy outlines the basic steps that
    management plans to take to reach an objective or
    set of objectives How management intends to
    achieve its objectives

Levels of Strategy
  • Three primary levels in an organization.
  • Classified according to the scope of what they
    intended to accomplish.
  • Corporate
  • Business
  • Functional

What is Strategic Management?
  • Most important part is developing strategic plans
  • Plans must remain current as changes occur inside
    and outside the company
  • Involves many levels of management
  • Top level formally develops basic plans
  • Different departments may be asked to develop
    plans for their own areas
  • A solid plan guarantees that plans are
    coordinated and are supported by everyone in the

Corporate Strategies
  • Developed at the highest levels of the company
  • Usually involve a long range time horizon
  • Provide overall direction for the company
  • Deal with most important aspects of the companys
  • Specifically tied to mission statement
  • Four types
  • Growth,
  • Stability
  • Retrenchment
  • Combination

Grand Strategies
  • Growth strategy
  • Plans developed when a company tries to expand
    sales, products, or number of employees
  • Concentration strategy
  • Vertical integration
  • Diversification

Grand Strategies
  • Stability strategy
  • Plan to keep the company operating at the same
    level that it has for several years
  • Used when a company is satisfied with its profits
    and not seeking growth
  • Company growth is possible, but will be very
    slow, methodical, nonagressive
  • Most successful in unchanging or very slowly
    changing environment

Grand Strategies
  • Retrenchment (defensive) strategy
  • Plan to reverse negative trends in a company
  • Such as losses in sales or to reduce its costs
  • Used to overcome a crisis or problem
  • Turnaround regain success
  • Divestiture company sells some part of its
  • Liquidation entire company is sold or dissolved

Grand Strategies
  • Chrysler corporation was on the verge of
    bankruptcy when it hired Lee Iacocca as their new
    CEO. He let go of a large number of employees
    and closed 20 plants. Remaining workers agreed
    to give up part of their salaries and benefits to
    save the company and by 1982 Chrysler began to
    show profit.
  • What kind of strategy did Iacocca implement?

Turnaround Strategy
Grand Strategies
  • Combination strategy
  • A plan that employs several different strategies
    at once
  • Its possible that all issues cannot be addressed
    by implementing just one strategy
  • Coca Cola, 1989
  • Divested Columbia Pictures division and expanded
    its soft-drink and orange juice businesses at the
    same time

Business Strategies
  • Business Strategies, the second primary level of
    strategy formulation
  • Also called competitive strategies
  • Narrower in scope and usually applies to a single
    department or business unit
  • Three (3) types
  • Overall cost leadership
  • Differentiation
  • Focus strategies

Business Strategies
  • Overall cost leadership
  • Designed to produce and deliver a product or
    service for a lower cost than the competition
  • Can be very effective when there are many buyers
    who are price-sensitive
  • Requires close attention to production methods,
    overhead, overall cost minimization in sales
  • Wal-Mart, Home Depot

Business Strategies
  • Differentiation
  • Strives to make the product or service unique
  • Companies can charge higher prices for unique
  • Can be achieved through a design or brand image,
    quality, technology, customer service, or dealer
  • Basic purpose Gain brand loyalty/lower
    sensitivity to price
  • Gillette, Jaguar, Adidas sportswear

Business Strategies
  • Focus
  • Directs marketing and sales towards a small
    segment of the market
  • Company can serve a well-defined market better
    than competitors that serve a broader market
  • Rolex, Mercedes-Benz, Ralph Lauren

Business Strategies
  • Colgate-Palmolive has a 70 percent market share
    of toothpaste sold to Hispanics. This is
    attributed to an understanding that
    three-quarters of the Hispanics who watch TV or
    listen to the radio do so with Spanish-language
  • What kind of business strategy does this

Focus Strategy
Functional Strategies
  • Narrower in scope
  • Short-range operational plans (one-year or less)
    that support business strategies by emphasizing
    practical implementation
  • Function or use often defines plans
  • Sales and marketing
  • Production
  • Financial
  • Research and development
  • Personnel

Strategic Management Process
  • Three phases critical to the success of the
  • Formulation
  • Developing the strategic plan
  • Implementation
  • Putting the formulated plan to work
  • Evaluation
  • Continuously evaluating and updating the
    strategic plan

Formulating Strategy
  • Mission
  • Broadest and highest level objectives
  • Past and present strategies
  • Look at past strategy to see what did and did not
  • Past and present performance
  • Review what did and did not go well
  • Using data to determine next steps

Formulating Strategy
  • Setting objectives
  • Look at internal and external environments
  • Long-range, intermediate, short-range objectives
  • SWOT Analysis
  • Strengths, Weaknesses, Opportunities and Threats
  • Used for drawing conclusions about current state
    from data

Formulating Strategy
  • Identify the mission statement
  • Outlines why the company exists
  • Describes the companys basic products and/or
    services and defines markets and sources of
  • Designed to accomplish several goals and ensures
    a common purpose within the company

Formulating Strategy
  • Comparing strategic alternatives
  • Based on data garnered
  • Knowing which direction is best to go
  • Being able to prioritize with limited resources
  • Strategic Business Unit (SBU)
  • A distinct business that has its own set of
    competitors and can be managed independently of
    other businesses
  • Small businesses ARE SBUs

Implementation Phase
  • Organizational structure
  • Understanding how structure, policies and systems
    already in place will be impacted with new
  • Might mean more training required
  • Functional strategys impact
  • Understand how the functional areas will be
    impacted by overall strategic plan

Evaluation Phase
  • Constantly evaluate
  • Companies should constantly evaluate their
    strategy to determine if it is working
  • Make changes if it isnt working
  • Respond to internal and environmental changes
  • As things change, such as environment or economy,
    readjust strategy