A Strategic Framework

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What is a framework ?. A hypothetical description of a complex entity or process A structure supporting or containing something A basic conceptual structure In software: A set of software (compile/run-time elements, libraries, tools, services), documentation, policies, procedures, that supports t

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A Strategic Framework

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1. A Strategic Framework

2. What is a framework ? A hypothetical description of a complex entity or process A structure supporting or containing something A basic conceptual structure In software: A set of software (compile/run-time elements, libraries, tools, services), documentation, policies, procedures, that supports the implementation of technology specific higher level software elements.

3. What are the components of a strategic framework? A vision for the future A mission statement that defines what the organisation does A statement about the current position of the organisation and how its progress towards its goals and objectives will be measured A means of generating and selecting the strategies to achieve those goals Implementation of the processes to achieve the strategies A control mechanism to monitor and get feedback from implemented processes

4. Strategic framework

5. Vision and Mission statements Vision statement: A statement that captures the long-term picture of what the organization wants to become A mission statement defines in a paragraph or so any entity's reason for existence. It embodies its philosophies, goals, ambitions and mores. Any entity that attempts to operate without a mission statement runs the risk of wandering through the world without having the ability to verify that it is on its intended course.

6. Sample vision statements "Our vision is to be earth's most customer centric company; to build a place where people can come to find and discover anything they might want to buy online." Amazon.com “To organize the world's information and make it universally accessible and useful“ - Google

7. Sample mission statements "To build a place where people can come to find and discover anything they might want to buy online" – Amazon To promote openness, innovation, and opportunity on the web - Mozilla Nasa: To improve life here, To extend life to there, To find life beyond.

8. Internal and external audits Internal RBV Core Competencies Value Chain External 5 Forces Competitor Analysis EFE Matrix

9. Internal Audit Look at Internal strengths/weaknesses

10. RBV- resource based view Internal resources are more important than external factors. They are the basis for competitive advantage. Identify all key resources Evaluate resources Protect the resources you identify as high value.

11. Core Competencies What a firm does that is strategically valuable They are Valuable Rare Costly to imitate Non substitutable

12. Value Chain A value chain describes the categories of activities within and around an organisation, which together create a product or service. The goal of these activities is to create value that exceeds the cost of providing the product or service, generating a profit margin.

13. Purpose of External Audit Identify Opportunities Threats

14. Porter’s Five Forces Five-Forces Analysis is a framework for analyzing a particular industry. Yet, the five forces affect all the other businesses in that industry. Five forces do not determine whether a specific firm can be successful

15. Porter’s Five Forces

16. Competitor Analysis An assessment of the strengths and weaknesses of current and potential competitors.

17. External Factor Evaluation Matrix (EFE Matrix) Tool to visualize and prioritize the opportunities and threats that a business is facing External factors assessed in the EFE matrix are the ones that are subjected to the will of social, economic, political, legal, and other external forces

18. EFE Process List factors Divide factors into two groups: opportunities and threats. Assign Weights Rate Factors Multiple weights by ratings Total all weighted scores

19. EFE example

20. Establishing Long Term Objectives Quantifiable Measurable Realistic Understandable Challenging Hierarchical Obtainable

21. Performance Measures by organisational level

22. Competitive strategies Generic strategies were used initially in the early 1980s, and seem to be even more popular today. They outline the three main strategic options open to organization that wish to achieve a sustainable competitive advantage. Cost Leadership Differentiation Focus or Niche strategy

23. Cost leadership A type of competitive strategy with which the organization aggressively seeks, efficient facilities, cut cost, and employs tight cost control to be more Efficient than competitors. The low cost leader in any market gains competitive advantage from being able to many to produce at the lowest cost. Low cost mean company can undercut competitors.

24. Differentiation A type of competitive strategy with which the organization seek to distinguish its product or services from competitors. The organization may use advertising, distinctive product features exceptional service or new technology to achieve a product perceived as unique. This strategy may be profitable because customer will pay high price for the product.

25. Focus The type of competitive strategy that emphasizes concentration on a specific regional market or buyer group. The premises is that the need of a group can be better serviced by focusing entirely on it.

26. Generate & Evaluate Strategies BCG matrix PESTLE SWOT

27. BCG growth matrix A concept developed by the Boston Consulting Group that evaluates SBU’s with respect to the dimension of business growth rate and market share

28. BCG growth matrix

29. BCG matrix Dogs. These are products with a low share of a low growth market. These are the canine version of 'real turkeys!'. They do not generate cash for the company, they tend to absorb it. Get rid of these products. Cash Cows. These are products with a high share of a low growth market. Cash Cows generate more than is invested in them. So keep them in your portfolio of products for the time being.

30. BCG matrix Problem Children. These are products with a low share of a high growth market. They consume resources and generate little in return. They absorb most money as you attempt to increase market share. Stars. These are products that are in high growth markets with a relatively high share of that market. Stars tend to generate high amounts of income. Keep and build your stars.

31. PESTLE PESTLE analysis - an audit of an organisation's environmental influences Purpose of using this information to guide strategic decision-making. If the organisation is able to audit its current environment and assess potential changes, it will be better placed than its competitors to respond to changes.

32. PESTLE PESTLE stands for – Political Economic Sociological Technological Legal Environmental

33. SWOT Analysis A method of studying organizational resources and capabilities to assess the firm’s strengths and weaknesses and scanning its external environment to identify opportunities and threats. Provides you with a critical view of the internal and external environment Helps you evaluate your ability to accomplish your mission.

34. SWOT matrix Strengths Weaknesses Opportunities Threats

35. Strategy Implementation Action stage (put formulate strategy into action) Establish annual objectives Devise policies Motivate employees Redirecting marketing efforts Prepare budgets

36. Formulation vs implementation Formulation focuses on effectiveness Implementation focuses on efficiency Shift in responsibilities from strategists to divisional or functional managers

37. Management Issues Annual objectives Policies Resources Organizational Structure Restructuring Rewards/Incentives

38. Management Issues Resistance to change Natural environment Supportive culture Production/ operations Human resources

39. The nature of strategy implementation Strategy implementation means change Less than 10% of strategies formulated are successfully implemented!

40. Strategy Implementation Failure Failing to segment markets appropriately Paying too much for a new acquisition Falling behind competition in R&D Not recognizing benefit of computers in managing information

41. Successful Strategy Implementation Market goods & services well Raise needed working capital Produce technologically sound goods Sound information systems

42. Strategy review and evaluation – Strategies become obsolete – Internal environments are dynamic – External environments are dynamic

43. Strategy Evaluation Vital to the organization’s well-being Alert management to potential/actual problems in a timely fashion Erroneous strategic decisions can have severe negative impact on organizations

44. Three basic activities in strategic review Examine the underlying bases of a firm’s strategy. Compare expected to actual results. Identify corrective actions to ensure that performance conforms to plans.

45. Difficulties in Strategy Evaluation Increase in environment’s complexity Difficulty predicting future with accuracy Increasing number of variables Rate of obsolescence of plans Domestic and global events Decreasing time span for planning certainty

46. Strategy Evaluation Should – Initiate managerial questioning Trigger review of objectives & values Stimulate creativity in generating alternatives

47. The product life cycle The Product Life Cycle (PLC) is based upon the biological life cycle. For example, a seed is planted (introduction); it begins to sprout (growth); it shoots out leaves and puts down roots as it becomes an adult (maturity); after a long period as an adult the plant begins to shrink and die out (decline).

48. Product Life Cycle

49. Introduction Stage In Introduction stage, sales are low as a new idea is first introduced to a market.  Customers aren't looking for the product, and may not be aware of its benefits or advantages over current offerings. In fact, they may not even know about it.  Informative promotion is needed to tell potential customers about the new product concept. Even though a firm promotes its new product, it takes time for customers to learn that the product is available.  Money is invested in developing the market in anticipation of future profits.

50. The Growth Stage The Growth stage, industry sales grow quickly - but industry profits rise and then start falling.  The innovator begins to make big profits as more and more customers buy.  But competitors see the opportunity and enter the market.  Some just copy the most successful product, or try to improve it to compete better.  Others try to refine their offerings to do a better job of appealing to some target markets.  The new entries result in much product variety.

51. Maturity Stage Maturity occurs when industry sales level off.  Competition gets tougher as aggressive competitors have entered the race for profits.  Industry profits continue to go down during maturity because promotion costs rise and competitors continue to cut prices to attract more business. New firms may still enter the market during this stage.  These late entries skip the early life cycle stages, including the profitable growth stage.  They must try to take market share from established firms, which is difficult and expensive in a saturated, flat market.   Customers who are satisfied with their current relationship won't be interested in switching to an unknown brand.

52. Decline Stage During the Sales Decline stage, new products replace the old.  Price competition from dying products becomes more vigorous, but firms with strong brands may make profits until the end because they successfully differentiated their products. They may also keep some sales by appealing to the most loyal customers or those who are slow to try new ideas.  These buyers might switch later, smoothing the sales decline.

53. Continuous assessment 1 Due 03/11/10

54. CA 1 group assignments Compare and contrast the strategies of two competing IT companies (a list is provided below) reviewing in particular their previous 5 to 10 years of business. The report should provide a critical review of what the companies set out to achieve and what they actually achieved. Support your observations with correctly referenced sources and propose the future trajectory of each company providing recommendations on how they should proceed for the next 5 years. Your report should be written in the style of an external consultant asked by an investor for advice on which of the two companies to invest in.

55. Group assignment 10 Slides – 15 minutes & Questions Write a 5,000 Word Report Submit via Webcourses only

56. Group assignment Google vs Microsoft Apple vs Nokia HP vs Dell Microsoft vs Mozilla VMWare vs Citrix Google vs Facebook

57. Paper to review Paper 1 “What is Strategy” – Porter, 1996 Read for next class! Available on website

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