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ninth editionninth editionSTEPHEN P.ROBBINSSTEPHEN P.ROBBINSPowerPoint Presentation by Charlie CookPowerPoint Presentation by Charlie CookThe University of West AlabamaThe University of West AlabamaMARY COULTERMARY COULTER 2007 Prentice Hall,Inc.2007 Prentice Hall,Inc.All rights reserved.All rights reserved.Strategic Management 2007 Prentice Hall,Inc.All rights reserved.82L E A R N I N G O U T L I N E L E A R N I N G O U T L I N E Follow this Learning Outline as you read and study this chapter.Follow this Learning Outline as you read and study this chapter.The Importance of Strategic ManagementThe Importance of Strategic Management Define strategic management,strategy,and business Define strategic management,strategy,and business model.model.Explain why strategic management is important.Explain why strategic management is important.The Strategic Management ProcessThe Strategic Management Process List the six steps in the strategic management process.List the six steps in the strategic management process.Describe what managers do during external and internal Describe what managers do during external and internal analyses.analyses.Explain the role of resources,capabilities,and core Explain the role of resources,capabilities,and core petencies.Define strengths,weaknesses,opportunities,and threats.Define strengths,weaknesses,opportunities,and threats.2007 Prentice Hall,Inc.All rights reserved.83L E A R N I N G O U T L I N E (contL E A R N I N G O U T L I N E (cont d)d)Follow this Learning Outline as you read and study this chapter.Follow this Learning Outline as you read and study this chapter.Types of Organizational StrategiesTypes of Organizational Strategies Describe the three major types of corporate strategies.Describe the three major types of corporate strategies.Discuss the BCG matrix and how itDiscuss the BCG matrix and how it s used.s used.Describe the role of competitive advantage in business-Describe the role of competitive advantage in business-level strategies.level strategies.Explain PorterExplain Porter s five forces model.s five forces model.Describe PorterDescribe Porter s three generic competitive strategies and s three generic competitive strategies and the rule of three.the rule of three.2007 Prentice Hall,Inc.All rights reserved.84L E A R N I N G O U T L I N E (contL E A R N I N G O U T L I N E (cont d)d)Follow this Learning Outline as you read and study this chapter.Follow this Learning Outline as you read and study this chapter.Strategic Management in TodayStrategic Management in Today s Environments Environment Explain why strategic flexibility is important.Explain why strategic flexibility is important.Describe strategies applying e-business techniques.Describe strategies applying e-business techniques.Explain what strategies organizations might use to Explain what strategies organizations might use to become more customer oriented and to be more become more customer oriented and to be more innovative.innovative.2007 Prentice Hall,Inc.All rights reserved.85Strategic ManagementWhat managers do to develop the What managers do to develop the organizationorganization s strategies.s strategies.StrategiesThe decisions and actions that determine the The decisions and actions that determine the long-run performance of an organization.long-run performance of an organization.2007 Prentice Hall,Inc.All rights reserved.86Strategic Management(contd)Business ModelBusiness ModelIs a strategic design for how a company intends to Is a strategic design for how a company intends to profit from its strategies,work processes,and work profit from its strategies,work processes,and work activities.activities.Focuses on two things:Focuses on two things:vvWhether customers will value what the company is providing.Whether customers will value what the company is providing.vvWhether the company can make any money doing that.Whether the company can make any money doing that.2007 Prentice Hall,Inc.All rights reserved.87Why is Strategic Management Important1.It results in higher organizational performance.It results in higher organizational performance.2.It requires that managers examine and adapt It requires that managers examine and adapt to business environment changes.to business environment changes.3.It coordinates diverse organizational units,It coordinates diverse organizational units,helping them focus on organizational goals.helping them focus on organizational goals.4.It is very much involved in the managerial It is very much involved in the managerial decision-making process.decision-making process.2007 Prentice Hall,Inc.All rights reserved.88Exhibit 8Exhibit 8 1 1The Strategic Management ProcessThe Strategic Management Process 2007 Prentice Hall,Inc.All rights reserved.89Strategic Management ProcessStep 1:Identifying the organizationStep 1:Identifying the organization s current s current mission,goals,and strategiesmission,goals,and strategiesMission:Mission:the firm the firm s reason for beings reason for beingvvThe scope of its products and servicesThe scope of its products and servicesGoals:Goals:the foundation for further planning the foundation for further planningvvMeasurable performance targetsMeasurable performance targetsStep 2:Doing an external analysisStep 2:Doing an external analysisThe environmental scanning of specific and general The environmental scanning of specific and general environmentsenvironmentsvvFocuses on identifying opportunities and threatsFocuses on identifying opportunities and threats 2007 Prentice Hall,Inc.All rights reserved.810Exhibit 8Exhibit 8 2 2Components of a Mission StatementComponents of a Mission StatementSource:Based on F.David,Strategic Management,11 ed.(Upper Saddle River,NJ:Prentice Hall,2007),p.70.2007 Prentice Hall,Inc.All rights reserved.811Strategic Management Process(contd)Step 3:Doing an internal analysisStep 3:Doing an internal analysisAssessing organizational resources,capabilities,and activities:Assessing organizational resources,capabilities,and activities:vvStrengths create value for the customer and strengthen the Strengths create value for the customer and strengthen the competitive position of the petitive position of the firm.vvWeaknesses can place the firm at a competitive disadvantage.Weaknesses can place the firm at a competitive disadvantage.Analyzing financial and physical assets is fairly easy,but Analyzing financial and physical assets is fairly easy,but assessing intangible assets(employeeassessing intangible assets(employee s skills,culture,corporate s skills,culture,corporate reputation,and so forth)isnreputation,and so forth)isn t as easy.t as easy.Steps 2 and 3 combined are called a SWOT analysis.Steps 2 and 3 combined are called a SWOT analysis.(Strengths,Weaknesses,Opportunities,and Threats)(Strengths,Weaknesses,Opportunities,and Threats)2007 Prentice Hall,Inc.All rights reserved.812Exhibit 8Exhibit 8 3 3Corporate Rankings(partial lists)Corporate Rankings(partial lists)Sources:“Americas Most Admired Companies,”Fortune,February 22,2006,p.65;“The 100 Best Companies to Work For,”Fortune,January 11,2006,p.89;R.Alsop,“Ranking Corporate Reputations,”Wall Street Journal,December 6,2005,p.B1;and“The 100 Top Brands,”BusinessWeek,August 1,2005,p.90.Interbrand/BusinessWeek 100 Top Global Brands(2005)1.Coca-Cola2.Microsoft3.IBM4.General Electric5.IntelHarris Interactive/Wall Street Journal National Corporate Reputation(2005)1.Johnson&Johnson2.Coca-Cola3.Google4.United Parcel Service5.3M CompanyHay Group/Fortune Americas Most Admired Companies(2006)Great Place to Work Institute/Fortune100 Best Companies to Work For(2006)1.General Electric2.FedEx3.Southwest Airlines4.Procter&Gamble5.Starbucks1.Genentech2.Wegmans Food Markets3.Valero Energy4.Griffin Hospital5.W.L.Gore&Associates 2007 Prentice Hall,Inc.All rights reserved.813Strategic Management Process(contd)Step 4:Formulating strategiesStep 4:Formulating strategiesDevelop and evaluate strategic alternativesDevelop and evaluate strategic alternativesSelect appropriate strategies for all levels in the Select appropriate strategies for all levels in the organization that provide relative advantage over organization that provide relative advantage over competitorscompetitorsMatch organizational strengths to environmental Match organizational strengths to environmental opportunitiesopportunitiesCorrect weaknesses and guard against threatsCorrect weaknesses and guard against threats 2007 Prentice Hall,Inc.All rights reserved.814Strategic Management Process(contd)Step 5:Implementing strategiesStep 5:Implementing strategiesImplementation:Implementation:effectively fitting organizational effectively fitting organizational structure and activities to the environment.structure and activities to the environment.The environment dictates the chosen strategy;The environment dictates the chosen strategy;effective strategy implementation requires an effective strategy implementation requires an organizational structure matched to its requirements.organizational structure matched to its requirements.Step 6:Evaluating resultsStep 6:Evaluating resultsHow effective have strategies been?How effective have strategies been?What adjustments,if any,are necessary?What adjustments,if any,are necessary?2007 Prentice Hall,Inc.All rights reserved.815Types of Organizational StrategiesCorporate StrategiesCorporate StrategiesTop managementTop management s overall plan for the entire s overall plan for the entire organization and its strategic business unitsorganization and its strategic business unitsTypes of Corporate StrategiesTypes of Corporate StrategiesGrowth:expansion into new products and marketsGrowth:expansion into new products and marketsStability:maintenance of the status quoStability:maintenance of the status quoRenewal:redirection of the firm into new marketsRenewal:redirection of the firm into new markets 2007 Prentice Hall,Inc.All rights reserved.816Exhibit 8Exhibit 8 4 4Levels of Organizational StrategyLevels of Organizational Strategy 2007 Prentice Hall,Inc.All rights reserved.817Corporate StrategiesGrowth StrategyGrowth StrategySeeking to increase the organizationSeeking to increase the organization s business by s business by expansion into new products and markets.expansion into new products and markets.Types of Growth StrategiesTypes of Growth StrategiesConcentrationConcentrationVertical integrationVertical integrationHorizontal integrationHorizontal integrationDiversificationDiversification 2007 Prentice Hall,Inc.All rights reserved.818Growth StrategiesConcentrationConcentrationFocusing on a primary line of business and increasing Focusing on a primary line of business and increasing the number of products offered or markets served.the number of products offered or markets served.Vertical IntegrationVertical IntegrationBackward vertical integration:attempting to gain Backward vertical integration:attempting to gain control of inputs(become a self-supplier).control of inputs(become a self-supplier).Forward vertical integration:attempting to gain control Forward vertical integration:attempting to gain control of output through control of the distribution channel or of output through control of the distribution channel or provide customer service activities(eliminating provide customer service activities(eliminating intermediaries).intermediaries).2007 Prentice Hall,Inc.All rights reserved.819Growth Strategies(contd)Horizontal IntegrationHorizontal IntegrationCombining operations with another competitor in the Combining operations with another competitor in the same industry to increase competitive strengths and same industry to increase competitive strengths and lower competition among industry rivals.lower competition among industry rivals.Related DiversificationRelated DiversificationExpanding by combining with firms in different,but Expanding by combining with firms in different,but related industries that are related industries that are“strategic fits.strategic fits.”Unrelated DiversificationUnrelated DiversificationGrowing by combining with firms in unrelated Growing by combining with firms in unrelated industries where higher financial returns are possible.industries where higher financial returns are possible.2007 Prentice Hall,Inc.All rights reserved.820Growth Strategies(contd)Stability StrategyStability StrategyA strategy that seeks to maintain the status quo to A strategy that seeks to maintain the status quo to deal with the uncertainty of a dynamic environment,deal with the uncertainty of a dynamic environment,when the industry is experiencing slow-or no-growth when the industry is experiencing slow-or no-growth conditions,or if the owners of the firm elect not to conditions,or if the owners of the firm elect not to grow for personal reasons.grow for personal reasons.2007 Prentice Hall,Inc.All rights reserved.821Growth Strategies(contd)Renewal StrategiesRenewal StrategiesDeveloping strategies to counter organization Developing strategies to counter organization weaknesses that are leading to performance declines.weaknesses that are leading to performance declines.vvRetrenchment:Retrenchment:focusing of eliminating non-critical focusing of eliminating non-critical weaknesses and restoring strengths to overcome current weaknesses and restoring strengths to overcome current performance problems.performance problems.vvTurnaround:Turnaround:addressing critical long-term performance addressing critical long-term performance problems through the use of strong cost elimination measures problems through the use of strong cost elimination measures and large-scale organizational restructuring solutions.and large-scale organizational restructuring solutions.2007 Prentice Hall,Inc.All rights reserved.822Corporate Portfolio Analysis Managers manage portfolio(or collection)of businesses Managers manage portfolio(or collection)of businesses using a corporate portfolio matrix such as the BCG using a corporate portfolio matrix such as the BCG Matrix.Matrix.BCG Matrix BCG Matrix Developed by the Boston Consulting GroupDeveloped by the Boston Consulting GroupConsiders market share and industry growth rateConsiders market share and industry growth rateClassifies firms as:Classifies firms as:vvCash cows:Cash cows:low growth rate,high market share low growth rate,high market sharevvStars:Stars:high growth rate,high market share high growth rate,high market sharevvQuestion marks:Question marks:high growth rate,low market share high growth rate,low market sharevvDogs:Dogs:low growth rate,low market share low growth rate,low market share 2007 Prentice Hall,Inc.All rights reserved.823Exhibit 8Exhibit 8 5 5The BCG MatrixThe BCG Matrix 2007 Prentice Hall,Inc.All rights reserved.824Business or Competitive StrategyBusiness(or Competitive)StrategyBusiness(or Competitive)StrategyA strategy focused on how an organization should A strategy focused on how an organization should compete in each of its SBUs(strategic business compete in each of its SBUs(strategic business units).units).2007 Prentice Hall,Inc.All rights reserved.825The Role of Competitive AdvantageCompetitive AdvantageCompetitive AdvantageAn organizationAn organization s distinctive competitive edge.s distinctive competitive edge.Quality as a Competitive AdvantageQuality as a Competitive AdvantageDifferentiates the firm from its competitors.Differentiates the firm from its competitors.Can create a sustainable competitive advantage.Can create a sustainable competitive advantage.Represents the companyRepresents the company s focus on quality s focus on quality management to achieve continuous improvement and management to achieve continuous improvement and meet customersmeet customers demand for quality.demand for quality.2007 Prentice Hall,Inc.All rights reserved.826The Role of Competitive Advantage(contd)Sustainable Competitive AdvantageSustainable Competitive AdvantageContinuing over time to effectively exploit resources Continuing over time to effectively exploit resources and develop core competencies that enable an and develop core competencies that enable an organization to keep its edge over its industry organization to keep its edge over its industry petitors.2007 Prentice Hall,Inc.All rights reserved.827Five Competitive ForcesThreat of New EntrantsThreat of New EntrantsThe ease or difficulty with which new competitors can The ease or difficulty with which new competitors can enter an industry.enter an industry.Threat of SubstitutesThreat of SubstitutesThe extent to which switching costs and brand loyalty The extent to which switching costs and brand loyalty affect the likelihood of customers adopting substitutes affect the likelihood of customers adopting substitutes products and services.products and services.Bargaining Power of BuyersBargaining Power of BuyersThe degree to which buyers have the market strength The degree to which buyers have the market strength to hold sway over and influence competitors in an to hold sway over and influence competitors in an industry.industry.2007 Prentice Hall,Inc.All rights reserved.828Five Competitive ForcesBargaining Power of SuppliersBargaining Power of SuppliersThe relative number of buyers to suppliers and The relative number of buyers to suppliers and threats from substitutes and new entrants affect the threats from substitutes and new entrants affect the buyer-supplier relationship.buyer-supplier relationship.Current RivalryCurrent RivalryIntensity among rivals increases when industry Intensity among rivals increases when industry growth rates slow,demand falls,and product prices growth rates slow,demand falls,and product prices descend.descend.2007 Prentice Hall,Inc.All rights reserved.829Exhibit 8Exhibit 8 6 6Forces in the Industry AnalysisForces in the Industry AnalysisSource:Based on M.E.Porter,Competitive Strategy:Techniques for Analyzing Industries and Competitors(New York:The Free Press,1980).2007 Prentice Hall,Inc.All rights reserved.830Types of Competitive StrategiesCost Leadership StrategyCost Leadership StrategySeeking to attain the lowest total overall costs relative Seeking to attain the lowest total overall costs relative to other industry competitors.to other industry competitors.Differentiation StrategyDifferentiation StrategyAttempting to create a unique and distinctive product Attempting to create a unique and distinctive product or service for which customers will pay a premium.or service for which customers will pay a premium.Focus StrategyFocus StrategyUsing a cost or differentiation advantage to exploit a Using a cost or differentiation advantage to exploit a particular market segment rather a larger market.particular market segment rather a larger market.2007 Prentice Hall,Inc.All rights reserved.831The Rule of ThreeSimilar to PorterSimilar to Porter s generic competitive strategiess generic competitive strategiesThe competitive forces in an industry will create a The competitive forces in an industry will create a situation where three companies(full-line generalists)situation where three companies(full-line generalists)will dominate a market.(telecommunication)will dominate a market.(telecommunication)Some firms in the market become Some firms in the market become“super niche super niche playersplayers”and while others end up as and while others end up as“ditch dwellers.ditch dwellers.”Firms unable to develop either a cost or differentiation Firms unable to develop either a cost or differentiation advantage become advantage become“stuck in the middlestuck in the middle”and lack and lack prospects for long-term success.prospects for long-term success.A few firms successfully pursue both differentiation A few firms successfully pursue both differentiation and cost advantages.and cost advantages.2007 Prentice Hall,Inc.All rights reserved.832Strategic Management TodayStrategic FlexibilityStrategic FlexibilityNew Directions in Organizational StrategiesNew Directions in Organizational Strategiese-busine
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