Chapter 8: Strategic Management

Report
Management, 7e
Schermerhorn
Prepared by
Michael K. McCuddy
Valparaiso University
John Wiley & Sons, Inc
COPYRIGHT
Copyright 2002 © John Wiley & Sons, Inc. All rights reserved.
Reproduction or translation of this work beyond that named in
Section 117 of the United States Copyright Act without the express
written permission of the copyright owner is unlawful. Requests for
further information should be addressed to the Permissions
Department, John Wiley & Sons, Inc. The purchaser may make backup copies for his/her own use only and not for distribution or resale.
The Publisher assumes no responsibility for errors, omissions, or
damages, caused by the use of these programs or from the use of the
information contained herein.
Chapter 8
Strategic Management
 Planning ahead—study questions
– What are the foundations of strategic
competitiveness?
– What is the strategic management process?
– What types of strategies are used by
organizations?
– How are strategies formulated?
– What are current issues in strategy
implementation?
Schermerhorn - Chapter 8
3
What are the foundations of strategic
competitiveness?
 Basic concepts of strategy:
– Competitive advantage—operating in a
successful way that is difficult for competitors
to imitate.
– Sustainable competitive advantage—
consistently dealing with market and
environmental forces better than competitors.
Schermerhorn - Chapter 8
4
What are the foundations of strategic
competitiveness?
 Basic concepts of strategy:
– Strategy—a comprehensive action plan
providing long-term direction and guiding
resource utilization to accomplish
organizational goals with sustainable
competitive advantage.
– Strategic intent—focusing all organizational
energies on a unifying and compelling goal.
Schermerhorn - Chapter 8
5
What are the foundations of strategic
competitiveness?
 Basic concepts of strategy:
– Strategic management—the process of
formulating and implementing strategies to
accomplish long-term goals and sustain
competitive advantage.
Schermerhorn - Chapter 8
6
What are the foundations of strategic
competitiveness?
 Strategic management goals
– Formulate and implement strategies that yield
long-term, sustainable competitive advantage.
– Create above-average returns for investors.
• Earning above-average returns depends in part on
the organization’s environment.
Schermerhorn - Chapter 8
7
What are the foundations of strategic
competitiveness?
 Environments and competitive advantage
– Monopoly
• Only one player and no competition
• Creates absolute competitive advantage
– Oligopoly
• Few players not directly competing against each other
• Long-term competitive advantage in defined market segment.
– Hypercompetition
• Several players directly competing against each other
• Any competitive advantage is only temporary
Schermerhorn - Chapter 8
8
What is the strategic management
process?
 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.
Schermerhorn - Chapter 8
9
What is the strategic management
process?
 The strategy formulation process (Drucker)
• What is our business mission?
• Who are our customers?
• What do our customers consider value?
• What have been our results?
• What is our plan?
Schermerhorn - Chapter 8
10
What is the strategic management
process?
 Strategy implementation
– The process of allocating resources and putting
strategies into action.
– All organizational and management systems
must be mobilized to support the
accomplishment of strategies.
Schermerhorn - Chapter 8
11
What is the strategic management
process?
 Essential tasks for strategy implementation …
– Identify organizational mission and objectives.
– Assess current performance vis-à-vis mission and
objectives.
– Create strategic plans to accomplish purpose and
objectives.
– Implement the strategic plans
– Evaluate results; change strategic plans and/or
implementation processes as necessary.
Schermerhorn - Chapter 8
12
What is the strategic management
process?
 Analysis of mission
– The reason for an organization’s existence.
– Good mission statements identify:
•
•
•
•
Customers
Products and/or services
Location
Underlying philosophy
– An important test of the mission is how well it
serves the organization’s stakeholders
Schermerhorn - Chapter 8
13
What is the strategic management
process?
 Analysis of values
– Values are broad beliefs about what is or is not
appropriate.
– Organizational culture reflects the dominant
value system of the organization as a whole.
Schermerhorn - Chapter 8
14
What is the strategic management
process?
 Analysis of objectives
– Operating objectives direct activities toward key and
specific performance results.
– Typical operating objectives:
•
•
•
•
•
•
•
•
Profitability
Market share
Human talent
Financial health
Cost efficiency
Product quality
Innovation
Social responsibility
Schermerhorn - Chapter 8
15
What is the strategic management
process?
 Analysis of organizational resources and
capabilities
– Assessing organizational Strengths and Weaknesses
within SWOT analysis
– Identifying core competencies
• Technology
• Human resources
• Manufacturing approaches
• Management talent
• Financial strength
Schermerhorn - Chapter 8
16
What is the strategic management
process?
 Analysis of industry and environment
– Assessing Opportunities and Threats within
SWOT analysis
– Assessment of actual and future environmental
conditions
• Macro environment
• Industry environment
– Unattractive industry
– Attractive industry
Schermerhorn - Chapter 8
17
What types of strategies are used by
organizations?
 Levels of strategy
– Corporate strategy—directs the organization as
a whole toward sustainable competitive
advantage.
– Business strategy—sets the strategic direction
for a single business unit or product line.
– Functional strategy—guides the use of
resources to implement business strategy,
focusing on activities within a specific area of
operations.
Schermerhorn - Chapter 8
18
What types of strategies are used by
organizations?
 Growth and diversification strategies
– Growth strategies—seek an increase in size and
the expansion of current operations.
– Concentration strategies—growth occurs
through expansion in the same business area.
– Diversification strategies—growth occurs
through acquisition of or investment in new
and/or different business areas.
Schermerhorn - Chapter 8
19
What types of strategies are used by
organizations?
 Restructuring and divestiture strategies
– Liquidation—operations cease due to sale of
assets or bankruptcy.
– Restructuring—changes in the scale and/or mix
of operations to gain efficiency and improve
performance.
– Divestiture—selling off parts of the
organization to refocus on core competencies.
Schermerhorn - Chapter 8
20
What types of strategies are used by
organizations?
 Cooperative strategies
– Strategic alliances—two or more organizations
partner to pursue an area of mutual interest.
– Types of strategic alliances:
• Outsourcing alliances
• Supplier alliances
• Distribution alliances
Schermerhorn - Chapter 8
21
What types of strategies are used by
organizations?
 E-business strategies
– The strategic use of the Internet to gain
competitive advantage.
– Popular e-business strategies
• Business-to-business (B2B) strategies
• Business-to-customer (B2C) strategies
Schermerhorn - Chapter 8
22
What types of strategies are used by
organizations?
 Web-based business models:
– Brokerage model
– Advertising model
– Merchant model
– Subscription model
– Infomediary model
– Community model
Schermerhorn - Chapter 8
23
How are strategies formulated?
 Opportunities for achieving sustainable
competitive advantage:
– Cost and quality
– Knowledge and speed
– Barriers to entry
– Financial resources
Schermerhorn - Chapter 8
24
How are strategies formulated?
 Business-level strategy formulation
– Focus on finding ways to do a better job of
attracting customers within a given business or
industry.
– Helpful planning tools in formulating businesslevel strategies:
• Porter’s generic strategies
• Product life cycle
Schermerhorn - Chapter 8
25
How are strategies formulated?
 Porter’s generic strategies model
– Business-level strategic decisions are driven by:
• Competitive scope
• Source of competitive advantage
– Competitive scope and source of competitive
advantage combine to generate four generic
strategies.
Schermerhorn - Chapter 8
26
How are strategies formulated?
 Porter’s generic strategies model
– Generic strategies for gaining competitive
advantage:
• Differentiation strategy
• Cost leadership strategy
• Focused differentiation strategy
• Focused cost leadership strategy
Schermerhorn - Chapter 8
27
How are strategies formulated?
 Product life cycle
– A series of stages that a product or service goes
through during the life of its marketability.
– Stages of the life cycle:
• Introduction
• Growth
• Maturity
• Decline
Schermerhorn - Chapter 8
28
How are strategies formulated?
 Product life cycle
– Introduction and growth stages
• Use differentiation and prospector strategies
– Maturity stage
• Use focus and/or cost leadership strategies
– Decline stage
• Use defender or analyzer strategies
Schermerhorn - Chapter 8
29
How are strategies formulated?
 Corporate-level strategy formulation
– Key issue is the selection and refinement of the
organization’s mix of businesses.
– Approaches to formulating business-level
strategies:
• Portfolio planning
• Adaptive strategies
Schermerhorn - Chapter 8
30
How are strategies formulated?
 Portfolio planning approach
– Designed to help managers decide on investing
scarce organizational resources among
competing business opportunities.
– Useful for multibusiness or multiproduct
situations.
Schermerhorn - Chapter 8
31
How are strategies formulated?
 BCG matrix
– Ties strategy formulation to analysis of
business opportunities according to …
• Industry or market growth rate
– Low versus high
• Market share
– Low versus high
Schermerhorn - Chapter 8
32
How are strategies formulated?
 BCG matrix—business conditions and
related strategies:
– Stars
• High share/high growth businesses
• Preferred strategy—growth
– Question marks
• Low share/high growth businesses
• Preferred strategy—growth for promising question
marks and restructuring or divestiture for others
Schermerhorn - Chapter 8
33
How are strategies formulated?
 BCG matrix—business conditions and
related strategies:
– Cash cows
• High share/low growth businesses
• Preferred strategy—stability or modest growth
– Dogs
• Low share/low growth businesses
• Preferred strategy—retrenchment by divestiture
Schermerhorn - Chapter 8
34
How are strategies formulated?
 GE Business Screen …
– Business strengths:
• Market share, technological advantage, product quality,
operating costs, and price competitiveness.
– Industry attractiveness:
• Market size and growth, capital requirements, and competitive
intensity.
– Combining business strength and industry
attractiveness yields a matrix that identifies business
units as:
• Winners, question marks, average businesses, profit producers,
or losers.
Schermerhorn - Chapter 8
35
How are strategies formulated?
 Adaptive strategies
– Miles and Snow model
– Organizations should pursue product/market
strategies that are congruent with their external
environments.
Schermerhorn - Chapter 8
36
How are strategies formulated?
 Types of adaptive strategies:
– Prospector strategy
• Appropriate in dynamic, high-potential environments
– Defender strategy
• Appropriate in stable or declining environments
– Analyzer strategy
• Following leading competitors in high-potential environments
– Reactor strategy
• Following competitors as a last resort regardless of
environment
Schermerhorn - Chapter 8
37
How are strategies formulated?
 Incrementalism
– Modest and incremental changes in strategy
occur as managers learn from experience.
 Emergent strategies
– Develop progressively over time in the streams
of decisions that managers make.
Schermerhorn - Chapter 8
38
What are current issues in strategy
implementation?
 Common strategic planning failures
– Failures of substance
• Inadequate attention to major strategic planning
elements
– Failures of process
• Poor handling of strategy implementation
– Lack of participation error
– Goal displacement error
Schermerhorn - Chapter 8
39
What are current issues in strategy
implementation?
 Guidelines for double-checking strategy
– Is the strategy consistent with your mission and values?
– Is the strategy feasible, given strengths and
weaknesses?
– Is the strategy responsive to opportunities and threats?
– Does the strategy offer a sustainable competitive
advantage?
– Is the risk in the strategy a “reasonable” risk?
– Is the strategy flexible enough?
Schermerhorn - Chapter 8
40
What are current issues in strategy
implementation?
 Corporate governance
– System of control and performance
monitoring of top management.
– Done by boards of directors and other
major stakeholder representatives.
– Increasing emphasis on corporate
governance in contemporary businesses.
Schermerhorn - Chapter 8
41
What are current issues in strategy
implementation?
 Strategic leadership
– Strategic management is a leadership
responsibility.
– The capability to get people to successfully
engage in the continuous change, refinement,
and implementation of strategies.
Schermerhorn - Chapter 8
42
What are current issues in strategy
implementation?
 Critical tasks of strategic leadership …
– Be a guardian of trade-offs.
– Create a sense of urgency.
– Ensure that everyone understands the
strategy.
– Be a teacher.
– Be a great communicator.
Schermerhorn - Chapter 8
43

similar documents