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Strategic Management and Entrepreneurship

• StrategyA comprehensive plan of action that sets critical direction for an organization and guides the allocation of its resources.

• Strategic ManagementThe process of formulating and implementing strategies.

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Five Strategic Management Tasks

• Identify organizational mission and objectives.What are we….what do we want to be……

• Assess current performance vis-à-vis mission and objectives.How are we doing…...

• Create strategic plans to accomplish purpose and objectives.How can we get where we want to be…..

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Five Strategic Management Tasks

• Implement the strategic plans.

Has everything been done that needs to be done….

• Evaluate results; change strategic plans and/or implementation processes as necessary.

Are things working out as planned, and what can be improved upon…...

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The Strategic Management Process

•Strategy Formulation

–Analysis of the Mission (Purpose)

–Analysis of Values (Corp Culture)

–Analysis of the Organization (S&W)

–Analysis of the Environment (O&T)

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Analysis of the Mission

•Usually expressed in the form of a Mission Statement in which it identifies the organization’s official objectives, and it defines the Domain in which the organization intends to operate such as:

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Analysis of the Mission

– the Customer it intends to serve.

– the Products and/or Services to be provided.

– the Location in which it intends to operate.

– the Philosophy that will guide the employees.

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Analysis of the Mission

•Strategic Constituencies Analysis

What is the organization’s commitment to it’s stakeholders:

Employees, Stockholders, Suppliers, Creditors, Communities

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Analysis of Core Values

•Values The broad based beliefs about what is or is not appropriate.

•Corporate Culture The predominate value system for the organization.

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Analysis of Core Values

• Through corporate cultures, the values of managers and other individuals are shaped and pointed in common directions.

• It defines the character of an organization to both itself and its external stakeholders.

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Analysis of Objectives

•Operating Objectives

–Direct activities toward key and specific results.

–Shorter term targets against which actual performance results can be measured as indicators of progress and continuous improvement.

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Analysis of Objectives

– Profitability

– Market Standing

– Human Resources

– Quality

– Social Responsibility

– Cost Efficiency

– Financial Resources

– Innovation

Operating Objectives

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Analysis of the Organization(SWOT)

Strengths?

• Mfg’ing Efficiency

• Skilled Workforce

• Good Market Share

• Strong Financing

• Superior Reputation

Weaknesses?

• Outdated Facilities

• Inadequate R&D

• Obsolete Tech

• Weak Management

• Past Planning Failures

Internal Assessment of the Organization

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Analysis of the Organization(SWOT)

Opportunities?

• New Markets

• Strong Economy

• Weak Rivals

• Emerging Tech.

• Growth of Market

Threats?

• New Competition

• Shortage of Resources

• Changing Mkt Taste

• New Regulations

• Substitute Products

External Assessment of the Environment

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Levels Of Strategy• Corporate

Sets the overall strategic direction.• Business

Sets the strategic direction for a single division or strategic business unit (SBU).

• FunctionalSets functional directions for supporting business and corporate strategies. A strategy that guides activities within specific functional areas.

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Types of Strategies

• Growth Strategy–Seeking greater size and the expansion

of current operations. This objective can be pursued in a number of different ways through two basic strategies:

Concentration and Diversification

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Types of Strategies

• Retrenchment– Sometimes called defensive strategies,

involves decisions to reduce operations and cut back in order to gain efficiencies and improve performance.

There are three basic approaches:

Turnaround - Divestiture Liquidation

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Types of Strategies

• Stability– Maintains the present course of action

without commitment to any major operating changes.

– Typically pursued when an organization is doing well in a receptive environment, when low risk is important ….. and/or when time is needed to consolidate strengths …….

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Types of Strategies

• Combination Strategies– Simultaneously employs more than one

of the other strategies. – This often reflects different strategic

approaches among subsystems.

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Strategy Formulation Models

• Portfolio Planning– Seeks the best mix of investments among

alternative business opportunities.

– It is most useful for addressing corporate-level strategy in multibusiness or multiproduct situations.

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Strategy Formulation Models

• The BCG Matrix– A Portfolio planning approach offered

by the Boston Consulting Group.

– It ties strategy formulation to an analysis of business opportunities according to Market Growth Rate and Market Share.

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Strategy Formulation Models

• The BCG Matrix– It ties strategy formulation to four

possible business states:

– Stars - High share/high growth

– Cash Cows - High share/low growth

– Question Marks - Low share/high growth

– Dogs - Low share/low growth

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Strategy Formulation Models

• Porter's Competitive Strategies– This approach begins with an analysis

of an organization's competitive environment.

– He identifies five strategic forces affecting industry competition:

Customers - Suppliers - New Entrants

Substitute Products - Industry Competitors

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Strategy Formulation Models

• Porter's Competitive Strategies– Next Porter identifies three generic

strategies that organizations may pursue to gain strategic advantage:

Product Differentiation

Cost Leadership

Focus

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Strategy Formulation Models

• The Adaptive Model

Organizations should pursue product/market strategies that are congruent with the nature of their external environments.

– Prospector Strategies - Taking risk, seeking opportunities, innovation, and growth.

– Defender Strategy - Avoiding change, seeking stability and perhaps retrenchment.

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Strategy Formulation Models

– Analyzer Strategy - Maintaining stability, while exploring limited innovation.

– Reactor Strategy - Responding to events, but without a guiding strategy.

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Strategy Formulation Models

• Product Life CyclesA series of stages a product or service goes through in the life of it marketability.

– Introduction– Growth– Maturity– Decline

Suggests that different business strategies should be used to support products in different stages of their life.

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Strategy Implementation

The Incremental-Emergent View

• Not all strategies are clearly formulated at one point in time and then implemented step-by-step.

• They take shape, change, and develop over time as modest adjustments to past

patterns.

• It is called Logical Incrementalism in which incremental changes in strategy occur as managers learn from experience.

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Strategy Implementation

• Strategic Planning Pitfalls

• Failures of Substance Reflects a lack of attention to the major strategic planning elements. • Failure of Process Reflects poor handling of the ways in which the various aspects of strategic planning were accomplished.

•Insufficient Participation Error•Goal Displacement

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The Nature of Entrepreneurship

A term used to describe risk-taking behavior that results in the creation of new opportunities for individuals and/or organizations.

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Typical Characteristics of

Entrepreneurs

• Internal Locus of Control• High Need for Achievement• Tolerance for Ambiguity• Self-Confidence• Action-Oriented

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Entrepreneurs

• Businesses depend on entrepreneurial managers willing to assume risk and encourage the creativity and innovation so important to continued success.

– Intrapreneurship– Skunk works