Spring 2007 Strategic Management 1

Strategic Management

Spring 2007 Strategic Management 2

Strategic Management

• The larger vision that guides the activities of managers and other employees in an organization

• The set of decisions and actions used to formulate and implement strategies that will provide a competitively superior fit between the organization and its environment so as to achieve organizational goals

• The process of establishing and sustaining competitive advantage

Spring 2007 Strategic Management 3

Competitive Advantage

• What is it?• An edge over your rivals

• Traditional sources• Product and process technology• Protected and regulated markets• Access to financial resources• Economies of scale

• New source• People !!!

Spring 2007 Strategic Management 4

Levels of Strategy

• Grand strategy• Where are we going?

• Corporate• What business are we in?

• Business-level• How do we compete?

Spring 2007 Strategic Management 5

The Strategic Management Process

Implementstrategies

Identify missionand strategies

Analyzeenvironment

Analyzeorganization

Identify OT

Identify SW

Formulatestrategies

Feedback

Spring 2007 Strategic Management 6

SWOT Analysis

Strength

Weakness

Opportunity

Threat

Where are we going?

Spring 2007 Strategic Management 7

Grand Strategies

• Growth

• Stability

• Retrenchment

Spring 2007 Strategic Management 8

WalMart…Growth (Number of Stores)

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

1968 1973 1978 1983 1988 1993 1998 2003

24

6,141

Spring 2007 Strategic Management 9

Paths to Growth: WalMart

• Direction of growth• New stores in existing markets• Enter new markets• New product lines

• Means of growth• Greenfield• Acquisition

Spring 2007 Strategic Management 10

WalMart…International Expansion and Acquisitions

Mexico 1991

Puerto Rico 1992

2003 (A) Supermercados Amigo

Canada

1994 (A)Woolco

Argentina 1995

Brazil 1995

China 1996

Germany

1997-8 (A)

Wertkauf, Interspar *

Korea 1998 (A) Makro, Kim’s Club *

U.K. 1999 (A) Asda

Japan 2002 (A) Seiyu (37% ownership) **

*Bailed out

** Not profitable

Spring 2007 Strategic Management 11

General Electric – Overall Stability

$0

$5,000

$10,000

$15,000

$20,000

$25,000

Ear

ning

s B

efor

e T

axes

($M

)

Spring 2007 Strategic Management 12

Kmart -- Decline

-$4,000

-$2,000

$0

$2,000

Ear

ning

s B

efor

e Ta

xes

($M

)

Spring 2007 Strategic Management 13

Global Strategy: Four Choices

GlobalStrategy

TransnationalStrategy

Multi domesticStrategy

High

Cost and efficiency pressures

Low

Low High

HomeReplication

Strategy

Pressures for local responsiveness

Note that text combines global and home replication strategies

Spring 2007 Strategic Management 14

Corporate Level Strategy

• Strategic business units

• Diversification• Single business• Diversified• Vertical Integration• Conglomerate

• BCG Matrix

Spring 2007 Strategic Management 15

Dell Products

• PowerEdge servers• PowerVault and Dell |

EMC storage products

• Services•  PowerConnect

switches• OptiPlex desktops• Latitude notebooks

• Dell Precision workstations

• Inspiron notebooks• Dimension desktops• Dell monitors• Dell printers• Axim handhelds• Software and Peripherals

Spring 2007 Strategic Management 16

ThyssenKrupp

Spring 2007 Strategic Management 17

Alcoa at a Glance• Alcoa is the world’s leading producer of primary aluminum,

fabricated aluminum, and alumina and is active in all major aspects of the industry.

• Alcoa serves the aerospace, automotive, packaging, building and construction, commercial transportation, and industrial markets, bringing design, engineering, production, and other capabilities of Alcoa’s businesses as a single solution to customers.

• In addition to aluminum products and components, Alcoa also markets consumer brands including Reynolds Wrap® aluminum foil, Alcoa® wheels, and Baco® household wraps. Among its other businesses are vinyl siding, closures, precision castings, and electrical distribution systems for cars and trucks.

Spring 2007 Strategic Management 18

Sara Lee

Household Products

Headquarters

Food and Beverage

Intimates and Underwear

Spring 2007 Strategic Management 19

Another Conglomerate

Aircra ft Eng ines C om m ercia l F inance

C onsum er F inance C onsum er P roducts

Equ ipm ent M anagem ent Industria l System s

Insurance M edica l System s

N BC G E P lastics

G E Power System s Specia lty M ateria ls

Transporta tion System s

G enera l E lectric

Spring 2007 Strategic Management 20

BCG Matrix

Stars

Cash Cows Dogs

Problem

Children

Mark

et

Gro

wth

Low

High

Market Share LowHigh

Spring 2007 Strategic Management 21

What Business Are We In?

1. What are our core competencies?

2. Who are our customers?

3. Economies of scale

4. Economies of scope

Spring 2007 Strategic Management 22

Business-Level Strategy

• Porter’s Five Forces

• Generic strategies

• Value chain

Spring 2007 Strategic Management 23

Porter’s Five Forces

• Bargaining power of suppliers

• Bargaining power of buyers

• Threat of substitutes

• Potential new entrants to the market

• Rivalry among current competitors

Spring 2007 Strategic Management 24

Porter’s Five Generic Strategies

• Low-cost leadership

• Broad differentiation

• Best-cost provider

• Focused or market niche / cost

• Focused or market niche / differentiation

Spring 2007 Strategic Management 25

Value Chain Analysis

• How are we creating value for customers?

• Where can costs be reduced?

Spring 2007 Strategic Management 26

The Value Chain

Operations

Sales andMarketing

RawMaterials

Distribution

CustomerService

Product R &D, Technology, Systems DevelopmentHuman Resource Management

General Administration

Support Activities

Spring 2007 Strategic Management 27

Strategy Implementation

• Leadership

• Structure and design

• Information and control systems

• Human resources