Mason Carpenter, Talya Bauer, and Berrin Erdogan

Principles of Management

Chapter 5 Strategizing

See how strategy fits in the P-O-L-C framework

Better understand where strategy comes from

Understand the concept of strategic focus

Conduct internal analysis to develop strategy

Conduct external analysis to develop strategy

Formulating organizational and personal strategy with the strategy diamond

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Understand How Strategy Fits in the P-O-L-C Framework

Where Strategy Fits in “Planning”

Mission &

Vision

Strategy

Goals & Objectives

Mission &

Vision

Strategy

Goals & Objectives

The strategy is how the firm aims to realize its mission and vision

Goals and objectives are the indicators of how well the strategy is succeeding

Strategic Management Process

The process by which a firm manages the formulation and implementation of its strategy

The coordinated means by which an organization achieves its goals and objectives

Strategizing in P-O-L-C

Strategy ImplementationStrategy Formulation

Planning

1. Vision & Mission

2. Strategizing

3. Goals & Objectives

Organizing

1. Organization Design

2. Culture

3. Social Networks

Leading

1. Leadership

2. Decision Making

3. Communications

4. Groups/Teams

5. Motivation

Controlling

1. Systems/Processes

2. Strategic Human Resources

Corporate & Business Strategy

Corporate Strategy

Str

ateg

izin

g

What business or business should we be in?

How does being in one business help us compete in our other businesses?

Business Strategy

How should we compete?

Corporate Strategy

Synergy

Diversification

SWOT Analysis An _______ of the company's _______ workings and an examination of external __________ and

__________

(1) what can we

do?

(2) what do we

want to do?

(3) what might we

do?

(4) what do others expect us

to do?

SWOT Analysis

SWOT

Strengths

Weaknesses

Opportunities

Threats

Effective strategies

Sustainable competitive advantage

• take advantage of strengths

• minimize the disadvantages posed by any weaknesses

• An organization’s strengths cannot be easily duplicated or imitated by other firms

Strengths and Opportunities (SO) – How can you use your strengths to take advantage of the opportunities?

Strengths and Threats (ST) – How can you take advantage of your strengths to avoid real and potential threats?

Weaknesses and Opportunities (WO) – How can you use your opportunities to overcome the weaknesses you are experiencing?

Weaknesses and Threats (WT) – How can you minimize your weaknesses and avoid threats?

Internal Analysis Tools

Value chain

VRIO

External Analysis Tools

PESTEL

Industry analysis

Discussion• What is the difference between strategy formulation and

strategy implementation?• What is the difference between business strategy and

corporate strategy?• What are some of the forms of diversification and what

do they mean?• What do you learn from a SWOT analysis?• In SWOT analysis, what are some of the tools you might

use to understand the internal environment (identify strengths and weaknesses)?

• In SWOT analysis, what are some of the tools you might use to understand the external environment (identify opportunities and threats)?

Strategy provides managers with an organizational compass and a

roadmap for the future

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Various Factors can undermine a strategy

the plan is poorly constructed

competitors undermine the advantages envisioned by the plan

the plan was good, but poorly executed

Intended, Deliberate, Realized, and Emergent Strategies

Mintzberg’s Conclusion

The realized strategy is a consequence of

deliberate and emerging factors

Discussion• What is an intended strategy?• What is a realized strategy?• Why is it important to understand the difference between

intended and realized strategies?• Why is there not a perfect match-up between realized

and intended strategies?• What might interfere with the realization of an intended

strategy? • How might you manage the balance between design and

emergence strategizing processes in an organization?

What is Strategic Focus?

strategy as __________

strategy as __________

Strategic focus is seen when an organization is

very _____ about its mission and vision, and has a _________, well-articulated _______ for

achieving them

Porter’s Generic Strategies

Differentiation or Price Leadership Strategy?

Southwest Airlines has combined cost

cutting measures with differentiation,

proving that it is possible to succeed using combination

strategies© 2010 Jupiterimages Corporation

What are Value Disciplines?

Operational excellence

Product leadership

Customer intimacy

Only One Discipline

Discussion• What is strategic focus and why is it important?• What are Porter’s three generic strategies?• Can a firm simultaneously pursue a low-cost and a

differentiation strategy?• What are the three value disciplines?• What four rules underlie the three value

disciplines?• How do Porter’s generic strategies differ from

other approaches?

DEVELOPING STRATEGY THROUGH INTERNAL ANALYSIS

_______ analysis tells the strategist what is _____ the organization

An internal analysis helps answer the question, “what _________ can

we _________?”

Measuring Value with Core Competencies

Product’s performance

characteristics

Attributes for which

customers are willing to pay

Value

The Value Chain

Building Blocks (VRIO) of Building and Maintaining Competitive Advantage

Value Rarity

Inimitability Organization

Discussion• What is the objective of internal analysis?• What is the difference between a resource and a

capability?• What is the difference between a tangible and an

intangible resource or capability?• What is a core competency?• What framework helps you identify those

resources, capabilities, or core competencies that provide competitive advantage?

• Why might competitive advantage for a firm be fleeting?

DEVELOPING STRATEGY THROUGH EXTERNAL ANALYSIS

An external analysis tells the strategist what is outside the organization.

Begin with the general environment

Continue toward the focal industry

An external analysis

helps answer the question, “what opportunities can we exploit?”

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Six General Environment SegmentsPESTLE Analysis

political

economic

socialtechnical

environmental

legal

AN ORGANIZATION’S MICRO-ENVIRONMENT

• A group of firms producing products that are close substitutesIndustry

• industries that provide the raw material or inputs for the focal industry

Upstream Markets

• industries (sometimes consumer segments) that consume the industry outputs

Downstream Markets

Porter’s Five ForcesNew Entrants

Buyers

Substitutes

Suppliers Rivalry

New Entrants

Buyers

Substitutes

Suppliers Rivalry

Porter’s Attractiveness and Profitability Analysis

Likely to Profit

Is the industry ______ to enter?

Is there limited _______?

Are buyers relatively ________?

Are suppliers relatively weak?

Are there _______ substitutes?

Challenges to Profit Is the industry _______ to

enter? Is there a ______ _______

of rivalry between firms within the industry?

Are buyers ________? Are suppliers strong? Is it easy to ________ to

alternatives?

Discussion• What are the six dimensions of the environment that are of

broad concern when you conduct a PESTLE analysis?• Which of the PESTLE dimensions do you believe to be most

important, and why?• What are the key dimensions of a firm’s micro-environment?• What is the difference between a monopoly and an

oligopoly?• What are the five forces referred to in the Porter framework?• Is there a dimension of industry structure that Porter’s model

appears to omit?

ORGANIZATIONAL AND PERSONAL STRATEGY WITH THE STRATEGY DIAMOND

Arenas Differentiators Economic Logic

The Strategy Diamond

Planning and Your Personal Growth and Development Strategy

Personal Mission

&Vision

Personal Strategy

for Growth&

Development

Personal Goals & Objectives

•__________

•__________

•__________

•__________

•__________

What type of work do I want to do?What leisure activities do I like?Where do I want to live?What capabilities (differentiators) do I need to participate in these arenas?What organizations value these capabilities (differentiators)?What capabilities (differentiators) do I want to have and excel in?

Discussion• What are the five facets of the Hambrick & Fredrickson

strategy diamond?• What is the relationship between arenas and

differentiators if the strategy yields a positive economic logic?

• If a firm is performing poorly financially, what might this say about the differentiators, arenas, or both?

• Why is it important to consider vehicles as part of an organization’s strategy?

• What is the difference between staging and pacing in terms of the strategy diamond?

• What are some ways that you might apply staging and pacing to an organization’s strategy?