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1
Should weimport?
Should weimport?
Will NAFTA affect our firm?Will NAFTA
affect our firm?Should we
export?Should we
export?
Should I learn a foreign
language?
Should I learn a foreign
language?
Global Considerations Impact Virtually All Strategic Decisions
©1999 Prentice Hall
2
Should we outsource MIS?
Should we outsource MIS?
Should we buyour sales staff
laptops?
Should we buyour sales staff
laptops?
Should we upgrade our
PCs?
Should we upgrade our
PCs?
Should we setup a Web site?Should we setup a Web site?
Information Technology Has Become A Vital Strategic Management Tool
©1999 Prentice Hall
3
Should werecycle?
Should werecycle?
Will Congresspass tougher
laws?
Will Congresspass tougher
laws?
Should weburn low-sulfur
coal?
Should weburn low-sulfur
coal?
Is our firmenvironmentally
friendly?
Is our firmenvironmentally
friendly?
Preserving the Natural Environment is an Important
Strategic Issue
©1999 Prentice Hall
4
The Stages and Activities in the Strategic Management Process
The Stages and Activities in the Strategic Management Process
Stages Activities
Strategy formulation
Strategy evaluation
Strategy implementation
Conduct research
Establish annual
objectives
Review internal and external
factors
Integrate intuition with
analysis
Devise policies
Measure performance
Make decisions
Allocate resources
Take corrective
action©1999 Prentice Hall
5
The Basis for Good Strategic DecisionsThe Basis for Good Strategic Decisions
Intuition + Analysis
Effective Strategic Decisions©1999 Prentice Hall
6
Ten Key External ForcesTen Key External Forces
EconomicEconomic
SocialSocial
CulturalCultural
DemographicDemographic EnvironmentalEnvironmental
PoliticalPolitical
LegalLegal
GovernmentalGovernmental
TechnologicalTechnological
CompetitiveCompetitive
©1999 Prentice Hall
7
Fourteen Key Internal ForcesFourteen Key Internal Forces
ManagementManagement
MarketingMarketing
DistributionDistribution
Production/
Operations
Production/
Operations
Research & DevelopmentResearch & Development
PurchasingPurchasing
ManufacturingManufacturing
©1999 Prentice Hall
8
Key Internal Forces (cont.)Key Internal Forces (cont.)
Finance/AccountingFinance/Accounting
PackagingPackaging
Computer Information
Systems
Computer Information
Systems
Vendor RelationsVendor
Relations
PromotionPromotion
Human Resource
Management
Human Resource
Management
Employee/ Manager Relations
Employee/ Manager Relations
©1999 Prentice Hall
9
Business MissionBusiness Mission
Strategy FormulationStrategy Formulation
External Opportunities and Threats
External Opportunities and Threats
Internal Strengths and Weaknesses
Internal Strengths and Weaknesses
Keys to Formulating Strategies
©1999 Prentice Hall
10
A Comprehensive Strategic Management ModelA Comprehensive Strategic Management Model
DevelopMission
Statement
DevelopMission
Statement
Establish Long-term
Objectives
Establish Long-term
Objectives
Generate,Evaluate,
andSelect
Strategies
Generate,Evaluate,
andSelect
Strategies
Establish Policies and
AnnualObjectives
Establish Policies and
AnnualObjectives
AllocateResources
AllocateResources
Measureand
EvaluatePerformance
Measureand
EvaluatePerformance
PerformExternal
Audit
PerformExternal
Audit
PerformInternalAudit
PerformInternalAudit
Feedback
Strategy Formulation Strategy Implementation Strategy Evaluation©1999 Prentice Hall
11
Benefits of Strategic ManagementBenefits of Strategic Management
- Improved Communication
- Increased Understanding
- Enhanced Commitment
- Greater Productivity
- More Effective Strategies
- Higher Productivity
- Allow Firm to Influence, Initiate, and Anticipate
- Be Proactive Rather Than Reactive©1999 Prentice Hall
12
The Communications Benefits of Engaging In Strategic ManagementThe Communications Benefits of
Engaging In Strategic Management
Managers from all functional areas listen and discuss their views in strategic management meetings. This interaction yields learning, appreciation, and understanding among managers who otherwise do not communicate with each other
©1999 Prentice Hall
13
Porter’s Generic Strategies DefinedPorter’s Generic Strategies Defined
Cost Leadership
A Strategy Aimed at Producing Standardized Products at Low Per-Unit Cost for Consumers Who are Price-Sensitive
DifferentiationA Strategy Aimed at Producing Products and Services Considered Unique Industrywide and Directed at Consumers Who are Relatively Price-Insensitive
©1999 Prentice Hall
14
Porter’s Generic Strategies (cont.)Porter’s Generic Strategies (cont.)
Focus
A Strategy Aimed at Producing Products and Services That Fulfill the Needs of Small Groups of Customers
©1999 Prentice Hall
15
Why is a Mission Statement Important?Why is a Mission Statement Important?
- To Insure Unanimity of Purpose
- To Provide a Basis for Allocating Resources
- To Serve as a Focal Point for Individuals
- To Reconcile Differences Among Stakeholders
- To Resolve Divergent Views Among Managers
- To Arouse Positive Feelings About the Firm
- To Provide a Basis for Goals and Strategies
- To Provide Direction
©1999 Prentice Hall
16
Mission Statement Answers the Question
Mission Statement Answers the Question
“What is Our Business?”
“What is Our Business?”
Vision Statement Answers the Question
Vision Statement Answers the Question
“What Do We Wantto Become?”
“What Do We Wantto Become?”
Vision Versus Mission
©1999 Prentice Hall
17
Components of a Mission StatementComponents of a Mission Statement
Customers
Products or Services
Markets
Technology
Concern for Survival and Growth
Philosophy
Self-Concept
Concern for Public Image
Concern for Employees©1999 Prentice Hall
18
Key External ForcesKey External Forces
Economic
Governmental DemographicEnvironmental
Political
Social
Legal
Cultural
Technological
Competitive
©1999 Prentice Hall
19
Importance of External Environment on Firm Behavior
Changes in the External
Environment
Changes in the External
Environment
Changes in Consumer Demand
Changes in Consumer Demand
Changes in the Products and
Services a Firm Offers
Changes in the Products and
Services a Firm Offers
©1999 Prentice Hall
20
CompetitorsSuppliersCreditorsCustomersEmployeesCommunitiesManagersStockholdersLabor unionsGovernmentsTrade associationsSpecial interest groupsProductsServicesMarketsNatural environment
CompetitorsSuppliersCreditorsCustomersEmployeesCommunitiesManagersStockholdersLabor unionsGovernmentsTrade associationsSpecial interest groupsProductsServicesMarketsNatural environment
AN ORGANIZATION’S OPPORTUNITIES AND
THREATS
AN ORGANIZATION’S OPPORTUNITIES AND
THREATS
Economic Forces
Social, cultural, demographic, and
environmental forces
Technological forces
Competitive forces
Economic Forces
Social, cultural, demographic, and
environmental forces
Technological forces
Competitive forces
Relationship Between Key External Forces and an Organization
©1999 Prentice Hall
21
Who are ourcompetitors?Who are ourcompetitors?
Where are ourcompetitors
located?
Where are ourcompetitors
located?
What areCompetitors’
Strengths?
What areCompetitors’
Strengths?
What areCompetitors’Objectives?
What areCompetitors’Objectives?
How Vulnerableare we to ourCompetitors’Strategies?
How Vulnerableare we to ourCompetitors’Strategies?
What are Competitors’Weaknesses?
What are Competitors’Weaknesses?
Key Questions About Competitors
©1999 Prentice Hall
22
Porter’s “Five-Forces” Model of Competition
Potential developmentof substitute
products
Potential developmentof substitute
products
Rivalry among
competingfirms
Rivalry among
competingfirms
Potential entry of new
competitors
Potential entry of new
competitors
Bargainingpower ofsuppliers
Bargainingpower ofsuppliers
Bargainingpower of
consumers
Bargainingpower of
consumers
©1999 Prentice Hall
23
A Definition of Distinctive Competencies
A firm’s strengths that cannot be easily matched or imitated by competitors
©1999 Prentice Hall
24
Developing Strategies That Use An Organization’s Strengths To
Developing Strategies That Use An Organization’s Strengths To
Take full advantage of
external opportunities
Take full advantage of
external opportunities
Reduce the effects of external threatsReduce the effects of external threats
Improve an organization’s
weaknesses
Improve an organization’s
weaknesses
Formulating Strategies Based on Key Internal Factors
©1999 Prentice Hall
25
The Management FunctionsThe Management Functions
Planning Organizing
Motivating Staffing
Controlling
©1999 Prentice Hall
26
The Three Levels of Planning
Top Management
CEO
President
Vice-Presidents
General Managers
Division Managers
Middle ManagementDivisional Managers
Product Line Managers
Department Managers
Plant Managers
Lower Management
Functional Managers
Unit Managers
Supervisors
Foreman
Typical Planning Horizon
Two to five years
Six months to two years
One week to six months
©1999 Prentice Hall
27
Why Are Clear Objectives Needed?Why Are Clear Objectives Needed?
To Provide Direction To Provide Purpose
To Allow Synergy To Aid in Evaluations
To Establish Priorities To Reduce Uncertainty
To Minimize Conflicts To Stimulate Exertion
To Allocate Resources To Design Jobs
To Motivate Managers & Employees
©1999 Prentice Hall
28
The TOWS Matrix (Figure 6-3)
List strengths List weaknesses
STRENGTHS - S WEAKNESSES - W
OPPORTUNITIES - O SO STRATEGIES WO STRATEGIES
THREATS - T ST STRATEGIES WT STRATEGIES
List opportunitiesUse strengths to take
advantage of opportunities
Overcome weaknesses by taking advantage
of opportunities
List threats Use strengths to avoid threats
Minimize weaknesses and avoid threats
©1999 Prentice Hall
29
The BCG MatrixThe BCG Matrix
Relative Market Share Position in the Industry
Industry Sales Growth Rate (Percent)
High +20
Medium 0
Low -20
High Medium Low
1.0 .50 0.0
Question Marks (I)
Dogs (IV)
Stars (II)
Cash Cows (III)
?
©1999 Prentice Hall
30
Why Should We Begin of Expand Our Foreign Operations?
Why Should We Begin of Expand Our Foreign Operations?
95% of the world’s population lives
outside the U.S.
Gain economies of scale
Use excess capacity
Capitalize on lower taxes, wage rates,
inflation
Locate near natural resources
NAFTA., GATT, NATO
English Channel tunnel is completed©1999 Prentice Hall
31
Some Attributes of American Managers Compared to Foreign Managers
Some Attributes of American Managers Compared to Foreign Managers
- Have a Lower Tolerance for Silence
- Are More Action-Oriented
- Place Greater Emphasis on Short-Term Results
- Use First Names More Quickly in Doing Business
- Place a Higher Priority on Time
- Place More Significance on Material Wealth
- Emphasize Competitiveness and Individualism More than Modesty, Team Spirit, & Patience
©1999 Prentice Hall
32
Comparing Management Styles Across Countries
Comparing Management Styles Across Countries
West Germany
Switzerland
Spain
Italy
Denmark
Japan
France
Netherlands
India
United States
Great Britain
High Conformity
High Individualism©1999 Prentice Hall
33
Marketing Variables of Central Importance to Strategy Implementation
Marketing Variables of Central Importance to Strategy Implementation
Market Segmentation
The subdividing of a market into distinct subsets of customers
according to need and buying habits.
Product Positioning
Entails developing schematic representations that reflect how a firm’s products or services compare to competitors’ on dimensions most important to success in its industry.
©1999 Prentice Hall
34
Establish a World Wide Web Site
Use Newsgroups
Use E-Mail
Information Technology Perspective - Three Ways to Advertise on the InternetInformation Technology Perspective -
Three Ways to Advertise on the Internet
©1999 Prentice Hall
35
Financial Implementation ToolsFinancial Implementation Tools
Pro Forma Financial Statements
Pro forma (projected) financial statement analysis is a central strategy-implementation technique because it allows an organization to examine the expected results of various actions and approaches
Financial Budgets
A financial budget is a document that details how funds will be obtained and spent for a specific period of time.
©1999 Prentice Hall
36
Activity One: Review Underlying Bases of Strategy
Prepare revised Internal Factor Evaluation Prepare revised External Factor
Matrix Matrix
Compare revised versus existing Internal Compare revised versus existing External
Evaluation Matrix Evaluation Matrix
Do significant differences occur?
No
Activity Two: Measure Organizational Performance:
Compare planned versus actual progress toward meeting
stated objectives
Do significant differences occur?
No
Continue present course
Yes
Yes
Activity Three:
Take
Corrective
Actions
A Strategy-Evaluation Framework
©1999 Prentice Hall
37
Information Technology Perspective on How to Change Your Business Location
Using the Internet
1. Establish a World Wide Web Site
2. Join a Cybermall
©1999 Prentice Hall
38
Make Comparisons
to Past Periods and to Industry
Averages for the Company
Make Comparisons
to Past Periods and to Industry
Averages for the Company
By Product
By Division
By Department
By Geographic Area
By Salesperson
By Strategic Business Unit
By Product
By Division
By Department
By Geographic Area
By Salesperson
By Strategic Business Unit
Measure Organizational Performance
©1999 Prentice Hall