Strategic Management Lecture Review
Strategic Management: Realizing a Grand Design
The Foundation of Strategy
Core Elements: Strategy begins with defining fundamental organizational principles:
Values: What the organization stands for; its core beliefs and ethical guidelines.
Vision: What the organization aspires to be in the future; its long-term inspirational goal.
Mission: What the organization does; its current purpose and activities.
Example: Apple's vision under Steve Jobs evolved over time (e.g., from 1997 to 2010), showcasing dynamic strategic intent.
Strategic Planning
Key Considerations for Strategic Planning:
Market Analysis: Assessing market size (whether it's growing or shrinking) and identifying specific market segments.
Competition: Understanding the competitive landscape.
Organizational Positioning: Determining the current position in the market and desired future position.
Strategies:
Defined as 4-6 primary areas of focus that enable the organization to achieve its vision and mission.
Must align with and be representative of the organization's values.
A strategic plan is typically developed every 3 years.
Strategic Plan Example: Aim to achieve 6\% growth in Europe through technological innovation.
Operational or Tactical Plans
Purpose: These plans detail the specific actions required to achieve the broader strategic plan.
Structure: Typically, 3 tactics are developed for each strategy.
Example:
Strategy: Achieve 6\% growth in Europe through technological innovation.
Tactic: Implement new ERP (Enterprise Resource Planning) software to improve production and decrease customer lead time by 12\%..
Business Plan Cycle: Annual Business Plans focus on sales and profit, supported by monthly operating reviews to monitor progress.
Real-World Application: ARAMARK Refreshment Services
Context: A major player in the refreshment services market, with over $900 Million in annual sales in North America, operating in a $5 Billion market.
Key segments: Office Coffee and Vending.
Serves over 50,000 customers in North America, providing coffee, snacks, and beverages to enhance employee productivity and happiness.
Employs over 14,000 individuals within a route-based distribution system.
Organizational Structure: A pyramid structure with a President at the top, supported by Regional Vice Presidents (RVPs), District Managers (DMs), and various functional VPs (HR, Sales, Marketing, CFO) with their respective directors.
Strategy Example: Focus on Single Serving Coffee solutions (e.g., Keurig).
Tactics for Keurig Initiative:
Sell to new customers through the dedicated sales force.
Market and sell to existing customers via Customer Service Sales Representatives (CSSRs) and delivery drivers.
Opportunity: Converting just 10\% of existing customers to this new offering represents an annual opportunity of $20,200,000.
Levels of Strategy
Corporate-Level Strategy:
Focuses on the organization as a whole, addressing questions of what industries to be in and how to manage the portfolio of businesses.
Executives at this level are often referred to as the “C-Suite.”
Business-Level Strategy:
Concentrates on individual business units or specific product/service lines.
Managers at this level implement decisions stemming from corporate-level strategies, focusing on how to compete effectively in a given market.
Functional-Level Strategy:
Applies to key functional departments or units within the business units (e.g., marketing, finance, operations, HR).
Functional managers focus on tactical issues, detailing how to execute business-level strategies within their specific areas.
The Strategic-Management Process
This process involves five interconnected steps, with continuous feedback:
Establish Mission, Vision, and Values Statements: Define the organization's purpose, aspirations, and guiding principles.
Assess the Current Reality: Analyze internal strengths and weaknesses, and external opportunities and threats.
Formulate Corporate, Business, and Functional Strategies: Develop specific plans for each level of the organization based on the assessment.
Execute the Strategies: Implement the formulated plans.
Maintain Strategic Control: Monitor progress, assess performance, and take corrective actions as needed.
Feedback Loop: Crucial for revising actions and adapting strategies based on performance outcomes and changing conditions.
Tools for Strategic Analysis
SWOT Analysis: A framework used for environmental scanning.
Environmental Scanning: Monitoring internal and external environments to detect early signs of opportunities and threats that could influence future plans.
Components:
Strengths (Internal): Internal capabilities that give an advantage.
Weaknesses (Internal): Internal limitations that place the organization at a disadvantage.
Opportunities (External): Favorable external conditions that could be exploited.
Threats (External): Unfavorable external conditions that could pose risks.
Forecasting: Predicting the future.
Trend Analysis: Hypothetically extending a past series of events into the future.
Contingency Planning: Creating alternative hypothetical but equally likely future scenarios to prepare for different outcomes.
Benchmarking: A process of comparing an organization's performance, products, or services with those of high-performing, best-in-class organizations to identify areas for improvement.
Types of Corporate Strategies
Growth Strategy: Involves expansion in various aspects such as sales revenues, market share, number of employees, or customer base.
Stability Strategy: Involves maintaining the current status quo with little to no significant change in operations or market posture.
Defensive Strategy (Retrenchment): Involves reducing the organization’s efforts or scaling back operations, often in response to declining performance or adverse market conditions.
BCG Matrix: A strategic tool (Boston Consulting Group Matrix) used to analyze product portfolios based on market share and market growth rate, though not detailed in this context.
Porter’s Five Competitive Forces
Michael Porter's framework suggests that business-level strategies are heavily influenced by five primary competitive forces within a firm's environment:
Threat of New Entrants: The ease with which new competitors can enter the market.
Bargaining Power of Suppliers: The ability of suppliers to influence the prices or quality of inputs.
Bargaining Power of Buyers: The ability of customers to drive down prices or demand higher quality.
Threats of Substitute Products or Services: The likelihood of customers finding alternative ways to satisfy their needs.
Rivalry Among Competitors: The intensity of competition among existing firms in the market.
Porter’s Four Competitive Strategies
These strategies focus on how a business unit competes within its industry:
Cost-Leadership Strategy:
Objective: To keep the costs (and thus prices) of products or services below those of competitors.
Target Market: Wide market.
Differentiation Strategy:
Objective: To offer products or services that are perceived as unique and of superior value compared to competitors.
Target Market: Wide market.
Cost-Focus Strategy:
Objective: To keep the costs of products below those of competitors.
Target Market: Narrow market segment.
Focused-Differentiation Strategy:
Objective: To offer products or services that are perceived as unique and of superior value compared to competitors.
Target Market: Narrow market segment.
Applying Strategy in Interviews and Careers
Interview Preparation: Understanding business strategy is critical for job interviews. Answering questions like “Tell me what you learned about strategy in business school” requires a comprehensive understanding.
A typical college interview might involve 45 minutes of content discussion and 15 minutes for intelligent questions.
Demonstrating knowledge of strategic and operational/tactical plans, even from roles like Student Organization Officer or Intern, is valuable for roles paying $55,000 to $70,000.
Business Careers and Strategic Relevance:
Sales: Requires comprehensive business knowledge, problem-solving for customers, strong interpersonal skills, self-drive, persistence, and the ability to influence. All business roles benefit from sales skills.
Human Resources (HR): Bridges business strategy with HR strategy via training, recruitment, diversity promotion, employee relations, performance management, legal compliance, and compensation/benefits. Roles can be specialist or generalist, field or headquarters, with high compensation potential.
Marketing: Focuses on market research, branding, advertising, and communication strategies.
Accounting: Involves financial statement preparation, allocations, audit processes, and controls.
Programmers / MIS: Deals with information system management.
Finance: Heavily involved in driving financial performance, investment analysis, budgeting, and forecasting across all business aspects.
General Management: Responsible for the Profit & Loss (P&L) and leads all aspects of the business.
AI & Data Analytics: A cutting-edge and highly marketable field, with strong capabilities noted in specific contexts (e.g., FOX).