Chapter Strategic Management PowerPoint slides by R Dennis Middlemist Colorado State University Learning Objectives After studying this chapter, you should be able to:     Define strategy Explain the role of environmental analysis in strategy formulation Explain the strategic planning process Utilize strategic planning tools, such as the product life cycle model, portfolio matrix, and SWOT analysis ©2005 Learning Objectives After studying this chapter, you should be able to:   Describe strategy implementation tools such as the Seven S Model Describe the differences between intended and emergent strategies ©2005 Competitive Advantage  Competitive advantage  The ability of a firm to win consistently over the long term in a competitive situation  Competitive advantage is created through the achievement of five qualities  Superiority  Non-substitutability  Inimitability  Appropriability  Durability ©2005 Five Qualities that Lead to Competitive Advantage Superiority Superiority  Are you significantly better than your competitors?  At what things are you better? ©2005 Five Qualities that Lead to Competitive Advantage Superiority Inimitability  Managers must create Inimitability barriers that make it hard for others to copy their superiority advantages  Culture  Product design  Marketing strategy  And others ©2005 Five Qualities that Lead to Competitive Advantage Superiority Inimitability Durability Durability (long lasting)  Legally protected  Patents  Copyrights  Brand names  Well-established  Brand image  Reputation for quality ©2005 Five Qualities that Lead to Competitive Advantage Superiority Non-substitutability  Can the customer’s need Inimitability Durability Non-substitutability ©2005 that you fulfill can be met by alternative means?  Encyclopedias vs information availability on the Internet  Movie theater entertainment vs concert band entertainment Five Qualities that Lead to Competitive Advantage Superiority Appropriability  Can you actually capture Inimitability Durability the profits that can be made in the business?  Supernormal returns  Profits Non-substitutability Appropriability ©2005 that are above the average for a comparable set of firms  Primarily a function of greater‑than‑average cost‑price margins Strategic Management Process: Setting Direction Strategic management process is a planning process in which managers Set the organization's general direction and objectives Formulate a specific strategy Plan and carry out the strategy’s implementation Monitor results and make necessary adjustments 10 ©2005 Strategic Management Process: Formulating a Strategy  Internal and external analysis  Tools and concepts  Environmental analysis  Value proposition  Organizational analysis    20 ©2005 Value chain Five primary activities Four support activities Value Proposition for Three Car Companies High Company C Equal value line Company B Reliability Company A Best Value Low Low High Price 21 ©2005 Adapted from Exhibit 6.4: Value Proposition for Three Companies Support Activities The Value Chain Firm infrastructure (e.g., Finance, Planning) Human resource management Technology development Procurement Inbound logistics Operations Outbound logistics Marketing and sales After-sale service Primary Activities 22 ©2005 Adapted from Exhibit 6.5: The Value Chain Strategic Management Process: Formulating a Strategy  Leveraging the value chain  Determine where in your value chain you have the potential to add the greatest value  Segment business activities, see the important linkages and make adjustments  Resource-based approach  Recognize and exploit internal strengths of the company 23 ©2005 Strategic Management Process: Formulating a Strategy  Core competencies  Are interrelated sets of activities that deliver competitive advantages in the short-term and longterm  Provide access to a wide variety of markets  Significantly contribute to perceived customer benefits of the end products or services  Are difficult for competitors to imitate 24 ©2005 Integrating Internal and External Analyses Product Life Cycle Birth Growth Maturity Decline High Low Time 25 ©2005 Adapted from Exhibit 6.6: Product Life Cycle Integrating Internal and External Analyses Product Life Cycle Sales High Low Time 26 ©2005 Adapted from Exhibit 6.7: International Product Life Cycles Integrating Internal and External Analyses Portfolio Analysis Market Attractiveness High BCG Matrix Low 27 ©2005 Relative Market Share High Adapted from Exhibit 6.8: BCG Matrix Integrating Internal and External Analyses Portfolio Analysis Market Attractiveness High BCG Matrix Low 28 ©2005 Our Relative Ability Market To Compete Share High Adapted from Exhibit 6.9: International Matrix Integrating Internal and External Analyses SWOT Analysis  Internal environment  Strengths  Weaknesses  Tools  Core competencies framework  Resource analysis framework  Value chain framework 29 ©2005 Internal Environment SW Integrating Internal and External Analyses SWOT Analysis  External environment  Opportunities  Threats  Tools  Product life cycle analysis  Portfolio analysis  Five forces framework SWOT External Environment 30 ©2005 Strategic Management Process: Strategy Implementation Strategy Seven S’s Structure Strategy  Plan or course of action  Allocation of firm’s resources to reach goals Structure  Basic grouping of reporting relationships and activities  Linking of separate organizational entities 31 ©2005 Adapted from Exhibit 6.10: Seven S Model Strategic Management Process: Strategy Implementation Strategy Seven S’s Shared Values  Significant meanings or guiding concepts Systems  Formal processes and procedures     32 Structure Shared values Systems Management control systems Performance measurement and reward systems Planning and budgeting systems The ways people relate to them ©2005 Adapted from Exhibit 6.10: Seven S Model Strategic Management Process: Strategy Implementation Strategy Seven S’s Skills Structure Shared values Skills  Organizational competencies  Other capabilities residing in the organization Systems Style Style  Leadership style of management  Operating style of the organization  Reflection of the norms people act upon 33 ©2005 Adapted from Exhibit 6.10: Seven S Model Strategic Management Process: Strategy Implementation Strategy Seven S’s Staff  Recruitment  Selection  Development  Socialization  Advancement of people in the organization 34 ©2005 Skills Structure Shared values Systems Staff Style Adapted from Exhibit 6.10: Seven S Model ... Implement plans Strategic Planning 11 ©2005 Monitor outcomes Feedback Adapted from Exhibit 6.1: Strategic Management Process Strategic Management Process: Setting Direction Strategic Intent Strategic... Primarily a function of greater‑than‑average cost‑price margins Strategic Management Process: Setting Direction Strategic management process is a planning process in which managers Set the organization's... mission is to “provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all.” 14