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Managing Strategy and Strategic Planning

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Title: Managing Strategy and Strategic Planning


1
Managing Strategy and Strategic Planning
Peshawar City Institute Of Modern Sciences
  • Chapter 08

2
The Nature of Strategic Management
Peshawar City Institute Of Modern Sciences
  • Strategy
  • A way of approaching business opportunities and
    challenges.
  • Strategic Management
  • A comprehensive and ongoing management process
    aimed at formulating and implementing effective
    strategies a way of approaching business
    opportunities and challenges.
  • Effective Strategy
  • A strategy that promotes a superior alignment
    between the organization and its environment and
    the achievement of strategic goals.

3
The Nature of Strategic Management
Peshawar City Institute Of Modern Sciences
  • The Components of Strategy
  • Distinctive Competence
  • An organizational strength possessed by only a
    small number of competing firms.
  • Scope
  • When applied to strategy, it specifies the range
    of markets in which an organization will compete.
  • Recourse Deployment
  • How an organization distributes its resources
    across the areas in which it competes.

4
The Nature of Strategic Management
Peshawar City Institute Of Modern Sciences
  • Types of Strategic Alternatives
  • Business-Level Strategies
  • The set of strategic alternatives from which an
    organization chooses as it conducts business in a
    particular industry or market.
  • Corporate-Level Strategies
  • The set of strategic alternatives from which an
    organization chooses as it managers its
    operations simultaneously across several
    industries and several markets.

5
The Nature of Strategic Management
Peshawar City Institute Of Modern Sciences
  • Strategy Formulation and Implementation
  • Strategy Formulation
  • The set of processes involved in creating or
    determining the strategies of the organization
    it focuses on the content of strategies.
  • Strategy Implementation
  • The methods by which strategies are
    operationalized or executed within the
    organization it focuses on the processes through
    which strategies are achieved.

6
The Nature of Strategic Management
Peshawar City Institute Of Modern Sciences
  • Strategy Formulation and Implementation
  • Deliberate Strategy
  • A plan of action that an organization chooses
    and implements to support specific goals.
  • Emergent Strategy
  • A pattern of action that develops over time in
    an organization in the absence of mission and
    goals or despite mission and goals.

7
Using SWOT Analysis to Formulate Strategy
Peshawar City Institute Of Modern Sciences
  • Strengths
  • Weaknesses
  • Opportunities
  • Threats

Internal Analysis
External Analysis
8
Using SWOT Analysis to Formulate Strategy
Peshawar City Institute Of Modern Sciences
  • Evaluating an Organizations Strengths
  • Organizational Strength A skill or capability
    that enables an organization to conceive of and
    implement its strategies.
  • Strategic Imitation The practice of duplicating
    another organizations distinctive competence and
    thereby implementing a valuable strategy.
  • Sustained Competitive Advantage A competitive
    advantage is a competitive advantage that exists
    after all attempts at strategic imitation have
    ceased.

9
Using SWOT Analysis to Formulate Strategy
Peshawar City Institute Of Modern Sciences
  • Evaluating an Organizations Weaknesses
  • Organizational Weakness A skill and capability
    that does not enable an organization to choose
    and implement strategies that support its
    mission.
  • Competitive Disadvantage A situation in which an
    organization is not implementing valuable
    strategies that are being implemented by
    competing organizations.

10
Using SWOT Analysis to Formulate Strategy
Peshawar City Institute Of Modern Sciences
  • Evaluating an Organizations Opportunities and
    Threats
  • Organizational Opportunities An area in the
    environment that, if exploited, may generate high
    performance.
  • Organizational Threats An area in the
    environment that increases the difficulty of
    organization's achieving high performance

11
Peshawar City Institute Of Modern Sciences
Mission An organizations fundamental purpose
SWOT Analysis To formulate strategies that
support the strategies
Internal Analysis
External Analysis
Strengths
Opportunities
Threats
Weaknesses
Good Strategies
  • Those that support the mission and
  • Exploit opportunities and strengths
  • Neutralize threats
  • Avoid weaknesses

SWOT Analysis
12
Formulating Business-Level Strategies
Peshawar City Institute Of Modern Sciences
  • Three Important Classification of Business Level
    Strategies
  • Porters Generic Strategies
  • Miles and Snow Typology
  • Strategies Based on Product Life Cycle (PLC)

13
Formulating Business-Level Strategies
Peshawar City Institute Of Modern Sciences
  • Porters Generic Strategies
  • Differentiation Strategy
  • A strategy in which an organization seeks to
    distinguish itself from competitors through the
    quality of its products or services.
  • Overall Cost Leadership Strategy
  • A strategy in which an organization attempts to
    gain competitive advantage by reducing its costs
    below the costs of competing firms.
  • Focus
  • A strategy in which an organization concentrates
    on a specific regional market, product line, or
    group of buyers.

14
Formulating Business-Level Strategies
Peshawar City Institute Of Modern Sciences
  • The Miles and Snow Typology
  • Prospector Strategy
  • A strategy in which the firm encourages
    creativity and flexibility and is often
    decentralized.
  • Defender Strategy
  • A strategy in which a firm focuses on lowering
    costs and improving the performance of current
    products.
  • Analyzer Strategy
  • A strategy in which the firm attempts to
    maintain its current business and to be somewhat
    innovative in new businesses.
  • Reactor Strategy
  • A strategy in which a firm has no consistent
    approach to strategy.

15
Formulating Business-Level Strategies
Peshawar City Institute Of Modern Sciences
Reactor Little consideration of environment
drift with little concern for strategy
Analyzer Stress maintenance of status quo with
moderate innovation and growth
Prospector Stress innovation and growth seek new
opportunities
Defender Stress stability, conservatism, and
maintenance of status quo
Dynamic, growing environment characterized by
high uncertainty and risk
Moderately stable environment with some
uncertainty and risk
Very stable environment with little
uncertainty and risk
16
Formulating Business-Level Strategies
Peshawar City Institute Of Modern Sciences
  • Strategies Based on Product Life Cycle (PLC)
  • Product Life Cycle
  • A model that portrays how sales volume for
    products changes over the life of products.

17
Formulating Business-Level Strategies
Peshawar City Institute Of Modern Sciences
18
Implementing Business-Level Strategies
Peshawar City Institute Of Modern Sciences
  • Implementing Porters Generic Strategies
  • Differentiation Strategy
  • Marketing should focus on high quality and
    high-value image of the organization.
  • Accounting and finance should focus on control on
    funds without discouraging creativity.
  • Organization culture should focus on creativity,
    innovation and response to customer needs in
    every function of the organization..

19
Implementing Business-Level Strategies
Peshawar City Institute Of Modern Sciences
  • Implementing Porters Generic Strategies
  • Overall Cost Leadership Strategy
  • Marketing should focus on simple product
    attributes and should reduce the cost for
    achieving economies of scale.
  • Accounting and finance should focus on tight
    accounting and financial control.
  • Manufacturing should focus on buying raw material
    at cheaper prices, minimize manufacturing waste
    and achieving economies of scale.
  • Organization culture should focus on improving
    efficiency in every function of the organization.

20
Implementing Business-Level Strategies
Peshawar City Institute Of Modern Sciences
  • Implementing Miles and Snow Strategies
  • Prospector Strategy
  • Prospector strategy can be achieved through
    innovation, seek new market opportunities, and
    take numerous risks.
  • Defender Strategy
  • Defender strategy can be achieved through
    protecting the market from new competitors. Low
    prices and improved performance of the product
    can be an effective strategy.
  • Analyzer Strategy
  • Analyzer strategy can be used to maintain current
    business and innovate new ones. Effective
    marketing, tight accounting systems and strong
    culture should be maintained while search for new
    markets should be a focus too.

21
Formulating Corporate-Level Strategies
Peshawar City Institute Of Modern Sciences
  • Most large organizations are engaged in several
    businesses, industries, and markets. Each
    business or set of business within such an
    origination is frequently referred to as a
    Strategic Business Unit (SBU).
  • Diversification
  • The number of different businesses that an
    organization is engaged in and the extent to
    which these businesses are related to one another.

22
Formulating Corporate-Level Strategies
Peshawar City Institute Of Modern Sciences
  • Single-Product Strategy
  • A strategy in which organization manufactures
    just one product or service and sells in in a
    single geographic market.

23
Formulating Corporate-Level Strategies
Peshawar City Institute Of Modern Sciences
  • Related Diversification
  • A strategy in which an organization operates
    several businesses that are linked to one another.
  • Bases of Relatedness
  • Similar technology
  • Common distribution and marketing skills
  • Common brand name and reputation
  • Common customers
  • Advantages
  • Reduce organizations dependencies
  • Reduce overhead cost
  • Exploitation of strengths and capabilities in
    more then one business

24
Formulating Corporate-Level Strategies
Peshawar City Institute Of Modern Sciences
  • Unrelated Diversification
  • A strategy in which an organization operates
    several businesses that are not associated.
  • Advantages
  • If one business is in the decline stage the other
    business may enjoy growth stage. So resources can
    be used in the business where they have the high
    potential
  • Using different unrelated business may create
    greater synergy.

25
Implementing Corporate-Level Strategies
Peshawar City Institute Of Modern Sciences
  • Becoming a Diversified Firm
  • Development of New Products
  • Replacement of Suppliers and Customers
  • Backward Vertical Integration An organization's
    beginning the business activities formally
    conducted by its suppliers.
  • Forward Vertical Integration An organization's
    beginning the business activities formally
    conducted by its customers.
  • Mergers and Acquisitions
  • Merger The purchase of one form by another firm
    of approximately the same size.
  • Acquisition The purchase of a firm by a firm
    considerably larger.

26
Implementing Corporate-Level Strategies
Peshawar City Institute Of Modern Sciences
  • Managing Diversification
  • Portfolio Management Technique
  • A method that diversified organizations use to
    determine which business to engage in and how to
    manage these businesses to maximize corporate
    performance.
  • Two important portfolio management techniques
    are
  • BCG Matrix
  • GE Business Screen

27
Implementing Corporate-Level Strategies
Peshawar City Institute Of Modern Sciences
Managing Diversification
Stars
Question Marks
High
Relative Market Growth
Dogs
Cash Cows
Low
High
Low
Relative Market Share
The Boston Consulting Group (BCG) Matrix
28
Implementing Corporate-Level Strategies Managing
Diversification
Peshawar City Institute Of Modern Sciences
Winner
Winner
Question Mark
High
Winner
Average Business
Loser
Industry Attractiveness
Medium
Profit Producer
Loser
Loser
Low
Good
Medium
Poor
Competitive Position
The General Electric (GE) Business Screen
Competitive Position
Industry Attractiveness
1.
Market share
1.
Market growth
2.
Technological know-how
2.
Market size
3.
Product quality
3.
Capital requirements
4.
Service network
4.
Competitive intensity
5.
Price competitiveness
6.
Operating costs
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