1 should we import? should we import? will nafta affect our firm? will nafta affect our firm? should...

1

Should weimport?

Should weimport?

Will NAFTA affect our firm?Will NAFTA

affect our firm?Should we

export?Should we

export?

Should I learn a foreign

language?

Should I learn a foreign

language?

Global Considerations Impact Virtually All Strategic Decisions

©1999 Prentice Hall

2

Should we outsource MIS?

Should we outsource MIS?

Should we buyour sales staff

laptops?

Should we buyour sales staff

laptops?

Should we upgrade our

PCs?

Should we upgrade our

PCs?

Should we setup a Web site?Should we setup a Web site?

Information Technology Has Become A Vital Strategic Management Tool


3

Should werecycle?

Should werecycle?

Will Congresspass tougher

laws?

Will Congresspass tougher

laws?

Should weburn low-sulfur

coal?

Should weburn low-sulfur

coal?

Is our firmenvironmentally

friendly?

Is our firmenvironmentally

friendly?

Preserving the Natural Environment is an Important

Strategic Issue


4

The Stages and Activities in the Strategic Management Process

The Stages and Activities in the Strategic Management Process

Stages Activities

Strategy formulation

Strategy evaluation

Strategy implementation

Conduct research

Establish annual

objectives

Review internal and external

factors

Integrate intuition with

analysis

Devise policies

Measure performance

Make decisions

Allocate resources

Take corrective

action©1999 Prentice Hall

5

The Basis for Good Strategic DecisionsThe Basis for Good Strategic Decisions

Intuition + Analysis

Effective Strategic Decisions©1999 Prentice Hall

6

Ten Key External ForcesTen Key External Forces

EconomicEconomic

SocialSocial

CulturalCultural

DemographicDemographic EnvironmentalEnvironmental

PoliticalPolitical

LegalLegal

GovernmentalGovernmental

TechnologicalTechnological

CompetitiveCompetitive


7

Fourteen Key Internal ForcesFourteen Key Internal Forces

ManagementManagement

MarketingMarketing

DistributionDistribution

Production/

Operations

Production/

Operations

Research & DevelopmentResearch & Development

PurchasingPurchasing

ManufacturingManufacturing


8

Key Internal Forces (cont.)Key Internal Forces (cont.)

Finance/AccountingFinance/Accounting

PackagingPackaging

Computer Information

Systems

Computer Information

Systems

Vendor RelationsVendor

Relations

PromotionPromotion

Human Resource

Management

Human Resource

Management

Employee/ Manager Relations

Employee/ Manager Relations


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Business MissionBusiness Mission

Strategy FormulationStrategy Formulation

External Opportunities and Threats

External Opportunities and Threats

Internal Strengths and Weaknesses

Internal Strengths and Weaknesses

Keys to Formulating Strategies


10

A Comprehensive Strategic Management ModelA Comprehensive Strategic Management Model

DevelopMission

Statement

DevelopMission

Statement

Establish Long-term

Objectives

Establish Long-term

Objectives

Generate,Evaluate,

andSelect

Strategies

Generate,Evaluate,

andSelect

Strategies

Establish Policies and

AnnualObjectives

Establish Policies and

AnnualObjectives

AllocateResources

AllocateResources

Measureand

EvaluatePerformance

Measureand

EvaluatePerformance

PerformExternal

Audit

PerformExternal

Audit

PerformInternalAudit

PerformInternalAudit

Feedback

Strategy Formulation Strategy Implementation Strategy Evaluation©1999 Prentice Hall

11

Benefits of Strategic ManagementBenefits of Strategic Management

- Improved Communication

- Increased Understanding

- Enhanced Commitment

- Greater Productivity

- More Effective Strategies

- Higher Productivity

- Allow Firm to Influence, Initiate, and Anticipate

- Be Proactive Rather Than Reactive©1999 Prentice Hall

12

The Communications Benefits of Engaging In Strategic ManagementThe Communications Benefits of

Engaging In Strategic Management

Managers from all functional areas listen and discuss their views in strategic management meetings. This interaction yields learning, appreciation, and understanding among managers who otherwise do not communicate with each other


13

Porter’s Generic Strategies DefinedPorter’s Generic Strategies Defined

Cost Leadership

A Strategy Aimed at Producing Standardized Products at Low Per-Unit Cost for Consumers Who are Price-Sensitive

DifferentiationA Strategy Aimed at Producing Products and Services Considered Unique Industrywide and Directed at Consumers Who are Relatively Price-Insensitive


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Porter’s Generic Strategies (cont.)Porter’s Generic Strategies (cont.)

Focus

A Strategy Aimed at Producing Products and Services That Fulfill the Needs of Small Groups of Customers


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Why is a Mission Statement Important?Why is a Mission Statement Important?

- To Insure Unanimity of Purpose

- To Provide a Basis for Allocating Resources

- To Serve as a Focal Point for Individuals

- To Reconcile Differences Among Stakeholders

- To Resolve Divergent Views Among Managers

- To Arouse Positive Feelings About the Firm

- To Provide a Basis for Goals and Strategies

- To Provide Direction


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Mission Statement Answers the Question

Mission Statement Answers the Question

“What is Our Business?”

“What is Our Business?”

Vision Statement Answers the Question

Vision Statement Answers the Question

“What Do We Wantto Become?”

“What Do We Wantto Become?”

Vision Versus Mission


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Components of a Mission StatementComponents of a Mission Statement

Customers

Products or Services

Markets

Technology

Concern for Survival and Growth

Philosophy

Self-Concept

Concern for Public Image

Concern for Employees©1999 Prentice Hall

18

Key External ForcesKey External Forces

Economic

Governmental DemographicEnvironmental

Political

Social

Legal

Cultural

Technological

Competitive


19

Importance of External Environment on Firm Behavior

Changes in the External

Environment

Changes in the External

Environment

Changes in Consumer Demand

Changes in Consumer Demand

Changes in the Products and

Services a Firm Offers

Changes in the Products and

Services a Firm Offers


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CompetitorsSuppliersCreditorsCustomersEmployeesCommunitiesManagersStockholdersLabor unionsGovernmentsTrade associationsSpecial interest groupsProductsServicesMarketsNatural environment

CompetitorsSuppliersCreditorsCustomersEmployeesCommunitiesManagersStockholdersLabor unionsGovernmentsTrade associationsSpecial interest groupsProductsServicesMarketsNatural environment

AN ORGANIZATION’S OPPORTUNITIES AND

THREATS

AN ORGANIZATION’S OPPORTUNITIES AND

THREATS

Economic Forces

Social, cultural, demographic, and

environmental forces

Technological forces

Competitive forces

Economic Forces

Social, cultural, demographic, and

environmental forces

Technological forces

Competitive forces

Relationship Between Key External Forces and an Organization


21

Who are ourcompetitors?Who are ourcompetitors?

Where are ourcompetitors

located?

Where are ourcompetitors

located?

What areCompetitors’

Strengths?

What areCompetitors’

Strengths?

What areCompetitors’Objectives?

What areCompetitors’Objectives?

How Vulnerableare we to ourCompetitors’Strategies?

How Vulnerableare we to ourCompetitors’Strategies?

What are Competitors’Weaknesses?

What are Competitors’Weaknesses?

Key Questions About Competitors


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Porter’s “Five-Forces” Model of Competition

Potential developmentof substitute

products

Potential developmentof substitute

products

Rivalry among

competingfirms

Rivalry among

competingfirms

Potential entry of new

competitors

Potential entry of new

competitors

Bargainingpower ofsuppliers

Bargainingpower ofsuppliers

Bargainingpower of

consumers

Bargainingpower of

consumers


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A Definition of Distinctive Competencies

A firm’s strengths that cannot be easily matched or imitated by competitors


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Developing Strategies That Use An Organization’s Strengths To

Developing Strategies That Use An Organization’s Strengths To

Take full advantage of

external opportunities

Take full advantage of

external opportunities

Reduce the effects of external threatsReduce the effects of external threats

Improve an organization’s

weaknesses

Improve an organization’s

weaknesses

Formulating Strategies Based on Key Internal Factors


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The Management FunctionsThe Management Functions

Planning Organizing

Motivating Staffing

Controlling


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The Three Levels of Planning

Top Management

CEO

President

Vice-Presidents

General Managers

Division Managers

Middle ManagementDivisional Managers

Product Line Managers

Department Managers

Plant Managers

Lower Management

Functional Managers

Unit Managers

Supervisors

Foreman

Typical Planning Horizon

Two to five years

Six months to two years

One week to six months


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Why Are Clear Objectives Needed?Why Are Clear Objectives Needed?

To Provide Direction To Provide Purpose

To Allow Synergy To Aid in Evaluations

To Establish Priorities To Reduce Uncertainty

To Minimize Conflicts To Stimulate Exertion

To Allocate Resources To Design Jobs

To Motivate Managers & Employees


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The TOWS Matrix (Figure 6-3)

List strengths List weaknesses

STRENGTHS - S WEAKNESSES - W

OPPORTUNITIES - O SO STRATEGIES WO STRATEGIES

THREATS - T ST STRATEGIES WT STRATEGIES

List opportunitiesUse strengths to take

advantage of opportunities

Overcome weaknesses by taking advantage

of opportunities

List threats Use strengths to avoid threats

Minimize weaknesses and avoid threats


29

The BCG MatrixThe BCG Matrix

Relative Market Share Position in the Industry

Industry Sales Growth Rate (Percent)

High +20

Medium 0

Low -20

High Medium Low

1.0 .50 0.0

Question Marks (I)

Dogs (IV)

Stars (II)

Cash Cows (III)

?


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Why Should We Begin of Expand Our Foreign Operations?

Why Should We Begin of Expand Our Foreign Operations?

95% of the world’s population lives

outside the U.S.

Gain economies of scale

Use excess capacity

Capitalize on lower taxes, wage rates,

inflation

Locate near natural resources

NAFTA., GATT, NATO

English Channel tunnel is completed©1999 Prentice Hall

31

Some Attributes of American Managers Compared to Foreign Managers

Some Attributes of American Managers Compared to Foreign Managers

- Have a Lower Tolerance for Silence

- Are More Action-Oriented

- Place Greater Emphasis on Short-Term Results

- Use First Names More Quickly in Doing Business

- Place a Higher Priority on Time

- Place More Significance on Material Wealth

- Emphasize Competitiveness and Individualism More than Modesty, Team Spirit, & Patience


32

Comparing Management Styles Across Countries

Comparing Management Styles Across Countries

West Germany

Switzerland

Spain

Italy

Denmark

Japan

France

Netherlands

India

United States

Great Britain

High Conformity

High Individualism©1999 Prentice Hall

33

Marketing Variables of Central Importance to Strategy Implementation

Marketing Variables of Central Importance to Strategy Implementation

Market Segmentation

The subdividing of a market into distinct subsets of customers

according to need and buying habits.

Product Positioning

Entails developing schematic representations that reflect how a firm’s products or services compare to competitors’ on dimensions most important to success in its industry.


34

Establish a World Wide Web Site

Use Newsgroups

Use E-Mail

Information Technology Perspective - Three Ways to Advertise on the InternetInformation Technology Perspective -

Three Ways to Advertise on the Internet


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Financial Implementation ToolsFinancial Implementation Tools

Pro Forma Financial Statements

Pro forma (projected) financial statement analysis is a central strategy-implementation technique because it allows an organization to examine the expected results of various actions and approaches

Financial Budgets

A financial budget is a document that details how funds will be obtained and spent for a specific period of time.


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Activity One: Review Underlying Bases of Strategy

Prepare revised Internal Factor Evaluation Prepare revised External Factor

Matrix Matrix

Compare revised versus existing Internal Compare revised versus existing External

Evaluation Matrix Evaluation Matrix

Do significant differences occur?

No

Activity Two: Measure Organizational Performance:

Compare planned versus actual progress toward meeting

stated objectives

Do significant differences occur?

No

Continue present course

Yes

Yes

Activity Three:

Take

Corrective

Actions

A Strategy-Evaluation Framework


37

Information Technology Perspective on How to Change Your Business Location

Using the Internet

1. Establish a World Wide Web Site

2. Join a Cybermall


38

Make Comparisons

to Past Periods and to Industry

Averages for the Company

Make Comparisons

to Past Periods and to Industry

Averages for the Company

By Product

By Division

By Department

By Geographic Area

By Salesperson

By Strategic Business Unit

By Product

By Division

By Department

By Geographic Area

By Salesperson

By Strategic Business Unit

Measure Organizational Performance


1 should we import? should we import? will nafta affect our firm? will nafta affect our firm? should...

Documents

prentice hall slide

strategic management

external audit

annual objectives

important strategic

term objectives

external factors

performance measure