MGT 409 EXAM 1

Key attributes of strategy

1. Directs the organization towards overall goals and objectives

2. Includes multiple stakeholders in decision making

3. Needs to incorporate short-term and long-term objectives

4. Recognizes tradeoffs between efficiency and effectiveness

Hierarchy of goals (General to specific & Long time horizon to short)

Vision, Mission Statement, Strategic Objectives

Coherence in Strategic Direction ensured by a set of goals

vision, mission statement, strategic objectives

Organizational Vision

Goal that is "massively inspiring, overarching, and long term"

Fundamental statement of an organization's values, aspirations, and goals

EXP: (Disney to be the happiest place on earth)

Mission Statement

Set of goals that include both the purpose of the organization and the basis of its competitive advantage

Strategic Objectives

Goals that are used to operationalize the mission statement

Specific, measurable, appropriate, realistic timely

Strategic Management Process

(From planning to realization)

Intended Strategy-> Deliberate Strategy -> Realized Strategy

(Unrealized Strategy) (Emergent Strategy)

Intended Strategy

Decisions are determined only by analysis

Deliberate Strategy

Decisions are determined by both analysis and unforeseen environmental developments, unanticipated resource constraints, and/or changes in managerial preferences

Strategy Management Involves..

Analysis

Decisions - Formulation

Actions- Implementation

Analysis

Strategic goals (vision, mission, strategic objective)

Internal and external environment

Decisions - Formulation

What industries should we complete in?

How do we compete in those industries?

Actions - Implantation

Design the organization to bring intended strategies to reality

Allocate necessary resources

Strategy Analysis- Analyzing the External Environment of the Firm

Managers must monitor & scan the environment as well as analyze the competitors

-The General Environment

-The Industry Environment

Strategy Analysis- Accessing the Internal Environment of the firm

Analyzing strengths & relationships among activities that constitutes a firm's value chain

Can uncover potential sources of competitive advantage

Strategic Management Process

Strategic Analysis -> Strategy Formation -> Strategy Implementation

Strategic Analysis

External Condition (T & O)

Internal Condition (S & W)

Strategy Formulation

Competitive Strategy

Business Strategy

Corporate Strategy

Cooperative Strategy

International Strategy

Strategy Implementation

Cooperate Governance

Leadership & Entrepreneurship

Org Structure

External Environment

includes the industry in which the firm competes as well as those against whom it competes

1. General Environment

2. Industry

3. Competitor

External Factors that influence the firm

(Industry Environment) economic, physical, demographic, sociocultural

(Competitor Environment) global, political/legal

Opportunities

condition in the environment, that if exploited correctly will benefit the company and help the company reach its strategic competitiveness

Threats

condition in the environment that slows a company in their goal of reaching strategic competitiveness

External Analysis Toolkit

1. Forecasting

2. General Environments

3. Strategic Group Analysis

4. Porter's 5 Forces

5. SWOT analysis

Forecasts

1. Environmental Scanning

2. Environmental Monitoring

3. Competitive Intelligence

Environmental Scanning

surveillance of a firm's external environment to predict environmental changes and detect changes already underway

-studying all segments in the general environment

-important in highly volatile environments

Environmental Scanning Function

Alerts the firm to critical trends

-before they happen

-before competitors realize it

Environmental Monitoring

a firm's analysis of the external environment that tracks evolution of environmental trends, sequences of events, or streams of activities

more definite, data driven

-observe environmental changes to see if any important trend or idea is emerging from the data that is being collected

Environmental Monitoring

consumer confidence index, percentage of GDP spent on health care, etc.

Competitive Intelligence

a firm's activities of collecting and interpreting data on competitors, defying and understanding the industry, and identifying competitor's strengths and weaknesses

Environmental Forecasting

develop feasible predictions of direction, scope, speed and intensity of environment change

it is based on the input of environmental scanning, monitoring and intelligence

The General Environment

factors external to an industry, usually beyond a firm's control

(demographic, sociocultural, legal/political, technological, economic, global)

Demographic Segment

aging population, rising or declining affluence, changes in ethnic composition, geographic distribution of population, greater disparities in income level

Sociocultural Segment

more women in the workforce, dual income families, increase temporary workers, greater concern for healthy diets and physical activity, greater interest in the environment, postponement of having children.

Political/Legal Segment

Tort reform, ADA, Repeal of Glass Steagall Act 1999, deregulation of utility and other industries, increase in federal mandated minimum wages, taxes, corporate governance reforms

Technological Segement

genetic engineering, emergence of internet technology, computer aided design, wireless communication, nanotechnology

Economic Segment

interest rates, unemployment, consumer price index, gdp, changes in stock market valuations

Global Segment

increasing global trade, currency exchange rates, emergence of Indian and Chinese economies, trade agreements, creations of WTO

Strategic Group Analysis

cluster of firms that share similar strategic dimensions and use similar strategy: breadth of product and geographic scope, price/quality, degree of vertical integration, type of distribution system

**ASSUMPTION: no 2 firms are totally different, no 2 firms are the same

Competitor Analysis

1. What drives competitors? according to its future objectives

2. what the competitor is doing and can do, as revealed by its current strategy

3. what the competitor believes about the industry, as shown by its assumptions

4. what the competitors capabilities are, as shown by its strengths and weaknesses

Threat of Substitutes

Goods or services from outside a given industry with performance similar or the same function as the product that the industry produces

Substitution can be severe when..

is functionally superior, charges lower prices, generates lower switching costs, gains socially importance

Ways to reduce threat of new entrants

Create economies of scale/reduces costs (Wal-MArt)

Product differentiation (Apple)

Increase Specialization (toyota)

Increase efficiency (FedEx)

Create switching costs (Microsoft)

Create firm interdependence (intel)

government policy

expected retaliation

How to increase market power?

cost-leadership

differentiation

The Bargaining Power of Buyers

A Buyer is Powerful When...

large, concentrated buyers

standardized, undifferentiated products

few switching costs

buyers have low profits

backward integration

industry's products are not very important to quality of the buyer's products or services

Strategic management

the analyses, decisions, and actions an organization undertakes in order to create and sustain competitive advantages

Strategic management (2)

the study of why some firms outperform others

Strategy

the ideas, decisions, and actions that enable a firm to succeed

Buyers threaten an industry by...

forcing down prices

bargaining for higher quality or more services

playing competitors against each other

A supplier group will be powerful when..

few suppliers, more concentrated

no substitutes to the supply

firm is not critical to supplier

supplier is not critical to the firm

differentiated supplier with switching costs

forward integration

Suppliers exert power when...

Threatening to raise prices

Threatening to reduce the quality of purchased goods or services

How to increase bargaining power?

Switching costs: a consumer faces a switching cost between sellers when an investment specific to his current seller must be duplicated for a new seller

Value chain analysis

A strategic analysis of an organization that uses value creating activities

Why value chains are useful?

can help us to fin what is your competitive advantage is and where you can improve

The Value Chain

General admin , HR, Technology , Procurement (Support Activities) Inbound logistics, operations, outbound logistics, marketing and sales, service (Primary activities

VCA Primary Activities

contribute to the physical creation of the product or service, its sale and transfer to the buyer, and its service after the sale.

inbound logistics, operations, outbound logistics, marketing and sales, and service

Value creation activities

Produce value that exceeds the cost of providing the product or service, i.e. to make a profit margin

PA: Inbound logisitics

Associated with receiving, storing, inventory control of input materials and their distribution to manufacturing

PA: Operations

Associated with transforming inputs into the final product from: machining, packaging, assembly, equipment maintenance, testing, etc

PA: Outbound Logistics

activities required to get the final product to customers: warehousing, order fulfillment, transportation, distribution management

PA: Marketing and sales

activities associated with the identification of customer needs and the generation of sales: channel selection, advertising, promotion, selling, pricing, retail management, etc.

PA: Service

activities that maintain and enhance the value after the products and services are sold to the customer: customer support, repair services, installation, training, spare parts management, upgrading

Supporting activities

actives of the value chain that either add value by themselves or add value through important relationships with both primary activities and other support actives. procurement, technology development, hr, and general admin

SA: Procurement

activities of purchasing the raw materials, servicing, spare parts, building, machines, and other inputs used in the value-creating activities

SA: Human Resource Management

activities involved in the recruiting, hiring, training, development, and compensation of all types of personnel

SA: Technology Development

process automation, design, redesign

SA: General Administration

general management, planning, finance, accounting, legal and government, quality management, informations system

Sources of competitive advantage

tangible resources

intangible resources

capabilities

Tangible resoures

Financial (Firm's cash account and cash equivalents, Firm's capacity to raise equity, Firm's borrowing capacity)

Physical (Modern plant and facilities, Favorable manufacturing locations, State-of-the-art machinery and equipment)

Technological (Trade secrets, Innovative production processes, Patents, copyrights, trademark)

Organizational (Effective strategic planning processes, Excellent evaluation and control systems)

What resources help the firm get competitive advantage?

Valuable, rare, non-imitable (causal ambiguity, history, social complexity), non-substitutable

Strengths

what are the firm's important assets? (internal)

Weaknesses

Firm's biggest vulnerabilities? (internal)

Opportunities

Can the environment compliment? (external)

Threats

Could our success be undermined? (external)