Post on 10-Feb-2017
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Strategic Management
Prof Steve Courter
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The Classics Strategy Planning Process
Modern firms engage in Strategic Planning to remain competitive Define objectives Assess environment
Internal External
Formulate Strategy Implement Strategy Evaluate progress Adjust
Environmental
Scanning
StrategyFormulation
StrategyImplementation
Evaluationand Control
Mission & Objectives
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How Strategy has evolved Macro level shifts in the Global and US
economies Agriculture –to- Manufacturing –to- Technologies and Services
Short life-cycles Short development cycles Minimal capital investments Lower barriers to entry
Resulting in more dynamic and intricate transactions
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Creating a unique and valuable position
That the core of a Strategy is never imitating anyone
Strategic positioning comes from three distinct sources Serving the few needs of many customers (Jiffy Lube) Serving the broad needs of a few customers (J.P. Morgan’s
Private Bank) Serving the broad needs of many customers in a narrow
market (Ikea)
Michael Porter’s Definition of Strategy
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Strategy is…
You must make trade-offs in competing and chose what not to do You cannot be all things to all customers and create a
unique, sustainable, competitive position
You must create a fit among all of your firm’s activities
Being disciplined and making clear choices
Being different versus being efficient
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Strategy is not…
Operational efficiency An aspiration
To be #1 or #2 a la Jack Welch of GE This is a goal.
How you accomplish that goal is a strategy
A vision To reach $60 billion in revenue in 2014 is a goal
Whose market share you take to get there is a strategy
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Strategy is not …
Innovation The Internet Any form of technology Experimentation
Flexibility Nimbleness Agility Change Re-engineering Execution
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Who uses Strategic Management? Board Investors Analysts Employees Consultants Legal Support Competition Governments Vendors/Suppliers Auditors!!
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International Expansion Motivation
Market and Resource Seeking Secure raw materials Exploit factor cost differences Protect exports Provide growth
Competitive Positioning Match competitors Capture global scale Preempt markets Play “Global Chess”
Global Scanning/ Learning Global intelligence scan Access scarce knowledge Recruit skills, expertise
Pre-1970
70s/80s
90s/00s
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Strategic Management Tools SWOT Financial Ratios (limited) Value Chain Waterfall Charts Porters Five Forces Competitive Advantages BCG Portfolio Matrix General Electric Business Screen Core Competencies Environmental Scanning Goal Matrix Product Life Cycle Stakeholder Analysis Global Competitive Diamond RBV Globalization Drivers Restructuring (Chap 11) Contemporary Control Measures Christensen Dilemma PEST Analysis
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Strategic Management Tools SWOT Financial Ratios (limited) Value Chain Waterfall Charts Porters Five Forces Competitive Advantages BCG Portfolio Matrix General Electric Business Screen Core Competencies Environmental Scanning Goal Matrix Product Life Cycle Stakeholder Analysis Global Competitive Diamond RBV Globalization Drivers Restructuring (Chap 11) Contemporary Control Measures Christensen Dilemma PEST Analysis
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SWOT Analysis SWOT analysis
A framework for analyzing a company’s internal and external environment and that stands for strengths, weaknesses, opportunities, and threats.
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Example: Harley-Davidson Strengths
Strong & adaptable brand image Weaknesses
Limited ability to develop new non-traditional products
Opportunities Growing leisure interest in motorcycles worldwide Response??
Threats Differing foreign policies governing motorcycles
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The General Environment
Demographic Sociocultural Legal/Political
Technological Economic Global
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Factors external to an industry, usually beyond a firm’s control
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Porter’s Five Forces Model of Industry Competition
2-15Exhibit 2.7
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The Bargaining Power of Buyers A buyer group is powerful when
It is concentrated or purchases large volumes relative to seller sales
The products it purchases from the industry are standard or undifferentiated
The buyer faces few switching costs It earns low profits The buyers pose a credible threat of backward
integration The industry’s product is unimportant to the
quality of the buyer’s products or services
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The Bargaining Power of Suppliers A supplier group will be powerful when
The supplier group is dominated by a few companies and is more concentrated than the industry it sells to
The supplier group is not obliged to contend with substitute products for sale to the industry
The industry is not an important customer of the supplier group
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The Bargaining Power of Suppliers A supplier group will be powerful when
The supplier’s product is an important input to the buyer’s business
The supplier group’s products are differentiated or it has built up switching costs for the buyer
The supplier group poses a credible threat of forward integration
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The Value Net
2-19Exhibit 2.10
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The Value Chain
3-20Exhibit 3.1
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Firm infrastructure
Human resource management
Technology development
Procurement
Inbound logistics
Operations Outbound logistics
Marketing and sales
Service
NFL recruits top talent after generating hypeVivid uses exclusivity contract to secure “beautiful star”SAS low turnover rate through great benefits
C.F. Martin leverages flexible construction methodsToyota Production SystemLimmer handcrafted boots
“Ace, the helpful place”Delta Airlines additional tier on loyalty programeBay’s innovations on the website for search and evaluation of sellers
IKEA’s flat pack furniture allows customers to transport in carOzarka water home deliveryEncore Wire central warehouse
HiltonToHome.com increases brand awearenessMyMacys program helps stores adapt to local tastesDe Beers trying to drive demand
UPS using technology for cost-cutting efficiencyDyson’s cyclone, digital motor, and ball pivot
Costco ‘s dual inventory warehouse/retail storeZara Distribution
Starbucks acquiring inputs from ethical sources
Value Chain Examples
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Three Generic Strategies
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Exhibit 5.1
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Competitive Advantage and Business Performance
5-23
Exhibit 5.2
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Potential Pitfalls of Differentiation Strategies
Uniqueness that is not valuable Too much differentiation Too high a price premium Differentiation that is easily imitated Diffusion of brand identification through
product-line extensions Perceptions of differentiation may vary
between buyers and sellers
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International Growth Tactics`
Exporting
Licensing
Franchising
Joint Venture
Greenfield Venture
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Vertical Integration
6-26
Exhibit 6.3
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Vertical Integration
Benefits A secure source of raw materials or
distribution channels. Protection of and control over valuable
assets. Access to new business opportunities. Simplified procurement and
administrative procedures. Learn Supplier business
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GE Business Screen
High D
A: Home Office
B: Entertainment Software
E C: Appliances D: Services A E: Consumer Electronics
B
C
Low
Strong WeakCompetitive Position
Indu
stry
A
ttrac
tiven
ess
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Mergers and Acquisitions
Most research indicates that mergers and acquisitions perform poorly:
High premiumsIncreased interest costsHigh advisory feesPoison pills
High turnoverManagerial distractionLess innovationLack of fitIncreased risk
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MMergers and Acquisitions that WorkerWorM
Strong relatedness Friendly negotiations Low-to-moderate debt Continued focus on core strengths of firm Careful selection of and negotiations with
target firm Strong cash or debt position Similar firm cultures and management styles Sharing resources across companies
Beating the odds
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Strategic Alliances and Joint Ventures Introduce successful product or service into a new
market Lacks requisite marketing expertise
Join other firms to reduce manufacturing (or other) costs in the value chain Pool capital, value-creating activities, facilities
Develop or diffuse new technologies Use expertise of two or more companies Develop products technologically beyond the
capability of the companies acting independently
6-31
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Unmet Expectations: Strategic Alliances and Joint Ventures
Improper partner Each partner must bring desired complementary
strengths to partnership Strengths contributed by each should be unique
Partners must be compatible Partners must trust one another Sound Familiar??
6-32
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Co-Operation ConflictSt
rate
gic
Ope
ratio
nal
Goal Matrix
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•Facilitates Global Expansion•Strong competition against Lufthansa KLM/Air France•Companies have worked together•Immediate Market Share Improvement
•Service offering differences, business class (BA) versus low cost (IB)•Iberia’s financial performance•Individual branding maintained•Employee issues..unions/culture
•Expansion of Plant routes/runways/planes•Improved Pricing Power•Economies of Scale/cost synergies•Develop Madrid as a gateway
•Perceived BA Dominance•Current Alliances may be an issue•Diverse expansion goals•Iberia Shareholder concerns
Co-Operation ConflictSt
rate
gic
Ope
ratio
nal
Goal Matrix BA-Iberia
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•Improved Competitive Position•Global Expansion for brands•Strong business focus•Shareholders benefit
•Union issues and contract expiration •Trademark Dispute will grow•Management styles/Cultural Issues•Production priorities and facilities be an issue•Marketing philosophy may be an issue
•Cost reductions using Busch’s cost cutting plans as outline•Improved wholesale distributor •Bud goes Global•Anheuser already the exclusive U.S. importer of InBev products-Shared Technology
•Possible cannibalization of brands•Globalization will curtail AB productintroductions outside US•InBev’s Cuban presence•Strategic conflicts with currentPartners/distributors-Modelo
Co-Operation ConflictSt
rate
gic
Ope
ratio
nal
Goal Matrix Anheuser Busch In Bev
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Godfather Advice Previous
60% more appropriate Listen to your lawyer! How much is Tattaglia really getting? Money better spent in casinos Narcotics not “victimless” No brainer..diversification=stability Sabotage Solozzo after learning biz! Morally bankrupt business Is it cheaper to do it in US vs Sicily Share profits with rehab centers Too good to pass up Go through ST process Is Solozzo reliable? Find a new supplier in Columbia Good short term….bad long term Kill him after establishing market Get 50% Kill Turk in an accident Do a pro forma impact Communicate new vision to team Warn Solozzo to stay out of biz! Band with other 5 families Do it..but later Sounds good! High margins! 30% not enough Demand double the return Take over in 2 years Wait Strategy Solozzo is like you s ok Look at unintended consequences Set up your own shop Yes ..and No Too dangerous..do a bridge loan Never accept first offer..get more
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