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MGS 526
WINNING STRATEGIES FOR REAL WORLD SUCCESS
BUSINESS WEALTH CREATIONAND
STRATEGIC STAKEHOLDER MANAGEMENT
1.0: STRATEGY DEFINITIONS & THEORIES
2.0: STRATEGY PROCESS MODELS RE: MICRO & MACRO ENVIRONMENTAL SCANNING
MODELS DEVELOPMENT FORMULATION -
IMPLEMENTATION
3.0: THE STRATEGIC DILEMMA
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1.0: STRATEGY DEFINITIONS
1.1: QUOTATIONS
Strategy is about setting yourself apart from the competition. Its not a matterof being better at what you do its a matter of being different at what you do.~ Michael Porter
A satisfied customer is the best business strategy of all.
Michael Leboeuf
Leaders establish the vision for the future and set the strategy for getting there; they cause change.They motivate and inspire others to go in the right direction and they, along with everyone else,sacrifice to get there.
John Kotter
There will be hunters and hunted, winners and losers. What counts in global competition is the rightstrategy and success.
Heinrich von Pierer
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http://thinkexist.com/quotes/michael_leboeuf/http://thinkexist.com/quotes/john_kotter/http://thinkexist.com/quotes/heinrich_von_pierer/http://thinkexist.com/quotes/john_kotter/http://thinkexist.com/quotes/heinrich_von_pierer/http://thinkexist.com/quotes/michael_leboeuf/8/6/2019 Mgs 526 Ch.1 Definitions,Models and the Dillema
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BUSINESS WEALTH CREATION AND STRATEGIC STAKEHOLDERMANAGEMENT
THE WHY THIS COURSE
This course is designed to provide Business Faculty students with the opportunity to
understand how strategic business battles are won or lost by studying real world
examples as to "how and why" various corporations succeeded or failed resultant of
their managerial competencies to effectively deploy resource assets to achieve
pluralistic stakeholder objectives.
THERFORE IT IS ESSENTIAL T/B EXPOSED TO
THE DYNAMICS-THE MODELS AND THE PROCESS
RE:STRATEGIC DECISION MAKING
WHY?
TO COMPREHEND COMPARATIVE REAL WORLD EXAMPLES RE:THE IMPACT OF REAL WORLD STRATEGIC APPLICATIONS
CONSEQUENTLY:
WHAT WORKED -----WHAT DIDNTMORE IMPORTLANTLYUNDERSTANDING THE WHY
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BUSINESS WEALTH CREATION AND STRATEGIC STAKEHOLDERMANAGEMENT
1.2: THEORIESStrategy According to Kenneth Andrews
Kenneth Andrews presents this lengthy definition of strategy in his book, The Concept of CorporateStrategy[4]:
"Corporate strategy is the pattern of decisions in a company that determines and reveals itsobjectives, purposes, or goals, produces the principal policies and plans for achieving those goals,and defines the range of business the company is to pursue, the kind of economic and human
organization it is or intends to be, and the nature of the economic and non-economic contribution itintends to make to its shareholders, employees, customers, and communities."
Strategy According to George Steiner
. Steiner also points out that there is very little agreement as to the meaning of strategy in thebusiness world. Some of the definitions in use to which Steiner pointed include the following:
Strategy is that which top management does that is of great importance to the organization.
Strategy refers to basic directional decisions, that is, to purposes and missions.
Strategy consists of the important actions necessary to realize these directions.
Strategy answers the question: What should the organization be doing?
Strategy answers the question: What are the ends we seek and how should we achieve them?
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BUSINESS WEALTH CREATION AND STRATEGIC STAKEHOLDERMANAGEMENT1.2: THEORIES
Strategy According to Henry Mintzberg
Henry Mintzberg, in his 1994 book, The Rise and Fall of Strategic Planning[3], points out that peopleuse "strategy" in several different ways, the most common being these four:
1. Strategy is a plan, a "how," a means of getting from here to there.
2. Strategy is a pattern in actions over time; for example, a company that regularly markets veryexpensive products is using a "high end" strategy.
3. Strategy is position; that is, it reflects decisions to offer particular products or services inparticular markets.
4. Strategy is perspective, that is, vision and direction.
Mintzberg argues that strategy emerges over time as intentions collide with and accommodate achanging reality. Thus, one might start with a perspective and conclude that it calls for a certainposition, which is to be achieved by way of a carefully crafted plan, with the eventual outcome andstrategy reflected in a pattern evident in decisions and actions over time. This pattern in decisionsand actions defines what Mintzberg called "realized" or emergent strategy.
STRATEGY ACCORDING TO HP CEO LEWIS PALTT
STRATEGY is defensive self-destruction and renewal. We have to be willing to cannibalize whatwe're doing today in order to ensure our leadership in the future....
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BUSINESS WEALTH CREATION AND STRATEGIC STAKEHOLDERMANAGEMENT1.2: THEORIES:
The concept of strategy has been borrowed from the military and adapted for use inbusiness
A strategy is a long term plan of action designed to achieve a particular goal, most often "winning". Strategy isdifferentiated from tactics or immediate actions with resources at hand by its nature of being extensivelypremeditated, and often practically rehearsed.
The word derives from the Greek wordstratgos, which derives from two words:stratos (army) and ago(ancient Greek for leading).Stratgos referred to a 'military commander' during the age ofAthenian
Democracy.
PER GEORGE PATTON THE FAMOUS AMERICAN WORLD WAR 11 GENERAL
NO POOR DUMB BASTARD EVER WON A WAR BY DYING FOR HIS COUNTRY-----HE
WON IT BY MAKING THE OTHER POOR DUMB BASTARD DIE FOR HIS COUNTRY
IN THE BUSINESS SCENARIO----THE ULTIMATE WIN IS ACHIEVING MONOPOLY
THAT IS
RESULTANT OF WINNING THE CUSTOMERS ABSOLUTE FRANCHAISE
COMPETING WITH BASICALLY ZERO COMPETITION
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BUSINESS WEALTH CREATION AND STRATEGIC STAKEHOLDERMANAGEMENT
2.0: STRATEGY PROCESS MODELS
2.1: THE GENERAL STANDARD MODEL
DEFINING THE MISSION
IDENTIFYING OBJECTIVES
SITUATION ANALYSIS
STRATEGY FORMULATION IMPLEMENTATION
CONTROL
2.11:DEFINING THE MISSION
The Companys mission must expressed clearly its Raison detre i.e. Its reason for being.The mission is typically communicated in the form of a Mission Statement that is geared to convey
a sense of purpose to the Company employees and also project the desired Company image to the
Companys Target Market----effectively the Mission Statement crystallizes where the Company is
going.
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BUSINESS WEALTH CREATION AND STRATEGIC STAKEHOLDERMANAGEMENT2.0: STRATEGY PROCESS MODELS
2.12: IDENTIFYING OBJECTIVES/GOALS
Objectives are specific goals that the Company wants to achieve over a specified time spectrum.
For example: MARKET SHARE, EXPANSION, PROFTS,and MARGINS ETC.
The defined objectives s/b expressed in qualitative and quantitative terms so that over the
prescribed period of achievement, performance can be monitored for feedback and appropriate
reactive correction.
2.13: CONDUCTING A SITUATIONAL ANALYSIS
An environmental scan to identify market place opportunities in conjunction with an examination
of the Companys capabilities and its limitations in order to select the appropriate opportunities it
can realistically capitalize on with a high probability of success.
The situational scan should include macro and micro analyses to examine the Companys
positioning status as related to the general environment plus its positioning as related to its
competitive environment and within the context of its own assets.
SITUATIONAL ANALYTICAL MODELS
SWOT REF. EXHIBIT B
PORTER-REF. EXHIBIT C
PEST- REF. EXHIBIT D
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BUSINESS WEALTH CREATION AND STRATEGIC STAKEHOLDERMANAGEMENT2.0: STRATEGY PROCESS MODELS
2.14: STRATEGY FORMULATION
STRATEGY FORMULATION DEFINED
Strategy formulation is the process of determining appropriate courses of action
for achieving organizational objectives and thereby accomplishing organizational
purpose.
FOR EXAMPLE
Sustainable competitive advantage--- allows the maintenance and improvement of theenterprise's competitive position in the market. It is an advantage that enablesbusiness to survive against its competition over a long period of time.
PROCESS
The strategy you formulate should reflect your environmental analyses lead tofulfillment of your organizational mission, and result in reaching organizational
objectives.Tools you can use to assist you in formulating strategies should/could include
SWOT analysis,
PEST analysis
Porter's model for industry analysis
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BUSINESS WEALTH CREATION AND STRATEGIC STAKEHOLDERMANAGEMENT2.0: STRATEGY PROCESS MODELS
Organizations effective at strategy implementation successfully managesix strategy supporting factors:
1. Action Planning
First, organizations successful at strategy implementation develop detailed actionplans... chronological lists of action steps (tactics) which add the necessary detail to
strategies. And assign responsibility to a specific individual for accomplishing each ofthose action steps. Also, they set a due date and estimate the resources required toaccomplish each of their action steps. Thus they translate their broad strategystatement into a number of specific work assignments.
2. Organization StructureSuccessful implementers give thought to their organizational structure... and ask if
their intended strategy is appropriate for that current structure. And they ask adeeper question as well... "Is the organizational structure appropriate to the intendedstrategy?"
3. Human ResourcesOrganizations successful at implementation consider the human resource factorin making strategies happen
2.15: STRATEGY IMPLEMENTATION
By Bill Birnbaum,CMC
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BUSINESS WEALTH CREATION AND STRATEGIC STAKEHOLDERMANAGEMENT2.0: STRATEGY PROCESS MODELS
Organizations effective at strategy implementation successfully managesix strategy supporting factors CONTD:
4. The Annual Business PlanOrganizations successful at implementation are aware of their need to fund their
intended strategies--- they "dollarize" the necessary financial commitment early inthe planning process. First, they "ballpark" the financial requirements when they firstdevelop their strategy... and later when developing their action plans, they "firm up"that commitment; they link their strategic plan to their annual business plan (andtheir budget). And they eliminate the "surprises" they would otherwise receive atbudgeting
5. Monitoring and ControlMonitoring and controlling the plan includes a periodic look to see if you're on course...and it also includes a list of options to get back on course if you should veer off. Thoseoptions include changing the schedule, changing the action steps, changing thestrategy or (as a last resort) changing the objective
2.15: STRATEGY IMPLEMENTATION
By Bill Birnbaum, CMC
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BUSINESS WEALTH CREATION AND STRATEGIC STAKEHOLDERMANAGEMENT
3.0: THE STRATEGIC DILEMMA
MOST COMPANIES HAVE STRATEGIES, BUT FAR FEWER ACHIEVE THEM. VARIOUSSTUDIES SUPPORT THIS VIEW, FOR EXAMPLE:
A Fortune Magazine study suggested that 70% of 10 CEOs who fail do sonot because of bad strategy, but because of bad execution. (Source: Why
CEOs Fail - R Charan & G Colvin, Fortune Magazine, 21 Jun 1999.)
In another study of 200 companies in the Times 1000, 80% of directorssaid they had the right strategies but only 14% thought they wereimplementing them well, no doubt linked to the finding that despite 97%of directors having a 'strategic vision', only 33% reported achieving
'significant strategic success'. (Source: Why do only one third of UKcompanies achieve strategic success? - I Cobbold & G Lawrie, 2GC Ltd.,May 2001.)
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BUSINESS WEALTH CREATION AND STRATEGIC STAKEHOLDERMANAGEMENT
3.0: THE STRATEGIC DILEMMA---STRATEGY IMPLEMENTATION FAILURE
Why Strategy Implementation Fails.
The most common reasons for failure include:
People don't want to make the strategy work.
Ineffective communication.
Failure to analyze the implications of the strategy on the Organization.
Changing too much at once. Lack of 80/20 focus.
Mixed messages.
Lack of role clarity who? must do what--by when.
Lack of action! Focus on knowing rather than doing. Being 'put off' by resistance to change.
Failing to remove or step around barriers to implementation.
Lack of perseverance. Things get worse before they get better.
Implementation is seen as negative and stressful rather than creative and exciting.
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BUSINESS WEALTH CREATION AND STRATEGIC STAKEHOLDERMANAGEMENT
THE WHY THIS COURSE
This course is designed to provide Business Faculty students with the opportunity to
understand how strategic business battles are won or lost by studying real world
examples as to "how and why" various corporations succeeded or failed resultant of
their managerial competencies to effectively deploy resource assets to achieve
pluralistic stakeholder objectives.
HAVING BEEN EXPOSED TO
THE DYNAMICS-THE MODELS AND THE PROCESS
RE:STRATEGIC DECISION MAKING
NOW YOU ARE IN A BETTER POSTION
TO STUDY COMPARATIVE REAL WORLD EXAMPLES RE:THE IMPACT OF REAL WORLD STRATEGIC APPLICATIONS
SPECIFCALLY:
WHAT WORKED -----WHAT DIDNTMORE IMPORTLANTLYUNDERSTANDING THE WHY
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BUSINESS WEALTH CREATION AND STRATEGIC STAKEHOLDERMANAGEMENTSTRATEGY PROCESS MODEL EXHIBITS
ANALYTICAL MODELS
SWOT REF. EXHIBIT B
PAGE:13-17
PORTER-REF. EXHIBIT C
PAGE:18-22
PEST- REF. EXHIBIT D
PAGE:2-25
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EXHIBIT B
SWOT REPRESENTS
StrengthsWeaknessesOpportunitiesThreatsFor a organizations strategy to be well conceived,it must be matched to both
Taking advantage of its internal strengthswhile defending against its weaknessIdentifying thebest market opportunitiesWHILE SIMULTANEOUSLYMINIMIZING OR ELIMINATINGexternal threats to its well-being.
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SWOT Analysis: What to Look ForPotential Resource Strengths
Powerful strategy Strong financial condition Strong brand name image/reputation Widely recognized as market leader Proprietary technology Cost advantages Strong communications Product innovation Good customer service Better product quality No clear strategic direction
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SWOT Analysis: What to Look For
Potential Resource Weaknesses
Obsolete facilities Weak balance sheet; excess debt Higher overall costs than rivals Missing some key skills/competencies Internal operating problems Falling behind in R&D Too narrow product line Weak marketing
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SWOT Analysis: What to Look For
Potential Opportunities
Serving additional customergroups Expanding to new geographic areas Expanding product line
Transferring skills to new products or services Vertical integration Take market share from rivals Alliances or acquisitions Openings to exploit new technologies
Openings to extend brand name/image
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SWOT Analysis: What to Look For
Potential External Threats
Entry of potent new competitorsSubstitute products or services
Slowing market growth Adverse shifts in political or economic conditions Costly new regulations Growing leverage of customers or suppliers
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EXHIBIT C
Porter 5 forces analysis
Porter's 5 forces analysis is a framework for industry analysis and business strategy development developed by
Michael E. Porterin 1979 ofHarvard Business School. It uses concepts developed in IndustrialOrganization (IO) economics to derive 5 forces that determine the competitive intensity and thereforeattractiveness of a market. Porter referred to these forces as the micro environment, to contrast it with the more
general term macro environment. They consist of those forces close to a company that affect its ability to serveits customers and make a profit. A change in any of the forces normally requires a company to re-assess the
marketplace.
] Porter's Five Forces
Five forces include three forces from 'horizontal' competition: threat of substitute products, the
threat of established rivals, and the threat of new entrants; and two forces from 'vertical'
competition: the bargaining power of suppliers, bargaining power of customers.
1: The threat of substitute products
The existence of close substitute products increases the propensity of customers to switch to
alternatives in response to price increases (high elasticity of demand).
buyer propensity to substitute
relative price performance of substitutes
buyer switching costs
perceived level of product differentiation
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Porter's Five Forces -CONTD
2:The threat of new entrants
Profitable markets that yield high returns will draw firms. The result is that many new entrants,which will effectively decrease profitability. Unless the entry of new firms can be blocked by
incumbents, the profit rate will fall towards a competitive level (perfect competition).
the existence of barriers to entry (patents, rights, etc.)
economies of product differences
brand equity
switching costs or sunk costs
capital requirements
access to distribution
absolute cost advantages
learning curve advantages
expected retaliation by incumbents
government policies
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Porter's Five Forces -CONTD
3: The intensity of competitive rivalry
For most industries, this is the major determinant of the competitiveness of the industry.
Sometimes rivals compete aggressively and sometimes rivals compete in non-price dimensions suchas innovation, marketing, etc.
number of competitors
rate of industry growth
intermittent industry overcapacity
exit barriers diversity of competitors
informational complexity and asymmetry
fixed cost allocation per value added
level of advertising expense
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Porter's Five Forces -CONTD
4: The bargaining power of customers
Also described as the market of outputs. The ability of customers to put the firm under pressure
and it also the customer's affects the sensitivity to price changes.
buyer concentration to firm concentration ratio
bargaining leverage
buyer volume
buyer switching costs relative to firm switching costs
buyer information availability
ability to backward integrate
availability of existing substitute products
buyer price sensitivity
price of total purchase
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Porter's Five Forces -CONTD
5: The bargaining power of suppliers
Also described as market of inputs. Suppliers of raw materials, components, and services (such as
expertise) to the firm can be a source of power over the firm. Suppliers may refuse to work withthe firm, or e.g. charge excessively high prices for unique resources.
supplier switching costs relative to firm switching costs
degree of differentiation of inputs
presence of substitute inputs
supplier concentration to firm concentration ratio threat of forward integration by suppliers relative to the threat of backward
integration by firms
cost of inputs relative to selling price of the product
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EXHIBIT D
PEST ANALYSIS FRAMEWORK
This is a tool to assist in analysing the overall business context an Organization isoperating in and covers five (5) primary dimensions encompassing the business arena.
Political
Environmental Economic Social
Technology
Examples of what could/should be considered in each area are:
1: Political Factors
Political stability
Legal framework for contractual enforcement
Intellectual property enforcement Trade regulations & tariffs
Price regulations
Wage legislation
Environmental legislation
Product labeling
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PEST ANALYSIS FRAMEWORK CONTD
2: Environmental Factors Kyoto protocol
Biodiversity
Climate Change\
Desertification
Nuclear test Ban\ Ozone layer protection
Safety and health Environmentally responsible corporate citizens
3: Economic Factors
Economic system operable (socialism capitalism-communism-dictatorship)
Government intervention in the marketplace
Comparative advantage of host country
Exchange rates
Labour costs
Business cycle stage
Discretionary income
Unemployment rates
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PEST ANALYSIS FRAMEWORK
4: Social Factors
Demographics
Class Structure
Education
Culture
5: Technology Factors
Information management development
Privacy of data
Reliability Updates on technology
Hurdles of acceptance
Lack of history in new technology Protection of intellectual property Ease of transferring funds with technology
Resourcing
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