L O-The Strat. Mgt. Process

1. L O-The Strat. Mgt. Process • Define Strategic Management State similarities among strat. mgt. models • Reconstruct “class” strat. mgt. model • Define parts of model • Define fit • Provide example of fit • Define synergy • Provide example of synergy • Define feedback • Provide examples of feedback • Know parts of a SWOT anal. and how to perform • Know purpose of SWOT analysis

2. STRATEGIC MANAGEMENT Definition: The process of forming and implementing a mission, strategies, and objectives to enhance organizational performance.

3. STRATEGIC MANAGEMENT MODEL Mission D E S I R E D POSS IBLE Internal Environment External Environment Strategy & Objectives Feedback Implementation

4. Parts of the Model • Mission- Broad outline of orgs. activity and business make up. Includes product scope, market scope, & technology. • External Environment -Conditions outside of the firm. • Internal Environment- Conditions within the firm. • Strategy- How an organization attempts to achieve its objectives. • Objectives- Desired results- What SPECIFICALLY the organization wants to achieve (goals). • Implementation- All activities associated with putting the strategy in place.

5. Define Fit • 1 part of model is logically connected to other parts

6. Provide Example of Fit • Mention and give example of part of model for a specific company (e.g. Strategy). • Mention/give example for another part for company (e.g. Implementation) • Explain why the two examples support each other.

7. Define synergy • Sum of parts of system produce greater total when working together than when working alone. • 1+1=3

8. Provide Example Synergy • Use real business example • Not ridiculous • Identify distinct parts • How much independently • How much together • Why more together

9. Define Feedback& Give Example • Define • Collection of post implementation results to enhance future decision making. • Example • State • strategy or objective • result • how affect future decisions

10. Parts and Performance of a SWOT Analysis • Identify mission (goals) • Isolate Opportunities and Threats • External Conditions • Isolate Strengths and Weaknesses • Internal Conditions • Choose strategies to avoid (or minimize) W&T and utilize (or maximize) S & O. • Explain how strategy accomplishes above.

11. Purpose of SWOT Analysis • Identifying a strategy to achieve your mission (goals) which utilizes your strengths and opportunities and avoids your weaknesses and threats.

12. Revising Comp.Strategy 1) Identify Mission 2) Analyze External Environment 3)Analyze Internal Environment 4)List current LT strategy and LT objectives 5)  Evaluate Current Strategy 6) Consider new strategies; Type of strategy 7) Evaluate new strategies 8)  Re-evaluate long-term objective. 9)  Implement new strategy a.Consider remaining draw backs strategy 10) Feedback

13. Paper 1. Pick 4 of the items from the list below (One of the items must be item 1 and another item 2). For the each of the items chosen you must find an article from the Internet, newspapers, or magazines about a current business situation. The article must be less than 8 months old. Specifically, the articles (4 in all) should discuss companies or industries that illustrate the items. Write one or two paragraphs that clearly explain how the article illustrates the item. Although the paper should be understandable even if someone has not read the article, you still must include the article with your paper. Attach all the articles at the very end of your paper. You must type your paper and make sure it clearly indicates which item you are answering. Discuss each of the four items independently. Be sure to indicate which of the questions you are answering!I will grade you on writing style and content. Your write-up should clearly show that you understand the concepts you are using, clearly explain how the article illustrates the concept, and clearly be closely tied to points made in the relevant course pack reading or lecture on that concept.Mandatory items:Item 1. From the lecture on five forces or the reading on "How competitive forces shape strategy" explain how one of the underlying factor's we discussed is strengthening a force and how the company has adjusted its strategy to cope with the underlying factor.Item 2. Provide an example of a company's international strategy. Is the strategy multicountry or global? Why? Using points in the course pack (read pages 109, 110, 112, 113), as well as details in the current event business article explain whether it makes more sense to pursue a multi-country strategy or a global strategy in the particular case mentioned in the business article.Pick any two of the items below:Item 3. Explain how a firm is effectively aligning it strategy to avoid threats or weaknesses.Item 4. Explain how a lower or mid-level employee clearly influenced the overall strategic direction of the entire firm.Item 5. On page 6 of the course pack, the second paragraph under long-term objectives, lists how to increase the value of objectives. Find an example of an objective and explain whether or not it meets at least three of criteria in the article (The list of criteria is, motivating, measurable, achievable, and consistent with the other objectives of the firm). Item 6. On page 14 through 22 the reading mentions "tight" fit, "early" fit and the "fragility" of fit. Find an article that illustrates any of these three concepts. Item 7. Explain how a firm has modified its strategy to better fit one of the elements in the remote environment. Item 8. According the reading starting on page 96, explain how a firm is using a strategy that is consistent with its industry environment (i.e., emerging industries, high velocity markets, maturing industries, declining industries, or fragmented industries). Be sure your paragraph clearly shows which of the industry environments the company is in, as well as, explaining how the strategy the firm is using is consistent with that environment.

14. L O-Mission • Define a mission. • Know what a mission includes. • Compare and contrast a mission statement and a mission. • Know why a mission is needed. • Know what to keep in mind when designing a mission. • Evaluate a mission. • Define “stakeholder.” • Know how to reconcile the conflicting needs of stakeholders.

15. What is Mission, What Includes • What is it. • Purpose • Unique • Values of decision makers • Includes • Product scope-Needs satisfied • Market • Technology • Stakeholders • Importance • Claims

16. Mission Needed Communicated in multiple ways What is being supported. Few organizations have. Content same Mission Statement Helpful Written or Oral communication One potential form of support Many organizations have. Content same Compare Contrast: Mission and Mission Statement

17. Why Needed • Purpose • Screening • Guide • Resource allocation • Strategy • Tone

18. Keep in Mind whenDesigning a Mission • Duration • Unique • Motivating • Permeate Organization • Realistic • Mean it.

19. Evaluate a Mission • Make sure to: • Include needed parts. • Meet needs. • Keep everything in mind.

20. Define Stakeholder • Any group that has a justifiable reason for expecting a firm will satisfy their claims in a responsible manner.

21. Reconciling the Needs of Stakeholders • Decide importance. • Understand specific claims. • Have mission reflect importance and claims. • Be willing to reassess. • Try not to antagonize any stakeholder.

22. LO: The External Environment • Define and distinguish among three levels of environment. • Understand the need to assess the external environment. • List the five elements within the remote environment. • Define key success factors. • Know errors regarding KSFs. • Define & give example of industry specific ratios. • List five forces and know the difference among the forces. • Define underlying factors. • Know how underlying factors affect the strength of a force. • Know how to use information from five force analysis to form strategy. • Perform a five force analysis • Know the three types of conclusions derived from a five force analysis. • Know major point about operating environments.

23. Define and Distinguish among the 3 Levels of Environment. Remote Environment - Economic - Social - Ecological - Political - Technological Industry Environment Key Success Factors Industry Specific Ratios Five Force Model Driving Forces Operating Environment Strategic Group Labor Creditor Customers Suppliers The Firm

24. Define Levels of Environment & Know Differences • Define • Remote Environment: Originates beyond, & irrespective of a firm’s operation. Difficult for 1 firm to influence. • Industry Environment: Collection of firms offering similar products or services, & the entities directly related to those firms (Includes five forces.) • Operating Environment: Those entities that the specific firms deals with. • Distinguish • As one moves from remote to operating environment: • More control • More immediate surroundings • There are fewer participants • Lines between is blurred.

25. Remote Environment: Five Elements • Elements • Economic: Disposable income, inflation, interest rates, etc. • Social: Collective beliefs, values, attitudes, opinions & lifestyles reflected by society. • Political: Taxes, laws, gov. as customer and competitor. • Technological: Computers, faxes etc. • Ecological: Pollution, fewer resources.

26. Industry Environment: Key Success Factors • Definition • Skills, resources, & activities. • Especially important to survival of almost all participants in a specific industry. • Does not assure success. • Relationship to Performance • Missing KSF--- Firm Failure • Threshold Level of KSF -- Possible Survival • High level -- Survival to superior performance. • Sometimes need something more than KSFs for superior performance

27. Manager Errors: Key Success Factors • Believe having a threshold level on all KSFs is enough for high performance. • Below a threshold level on 1 or more. • Investing (time, effort, $, etc.) in a KSF beyond point of meaningful return.

28. Define/Give Example of Industry Specific Ratio • A ratio especially important to a specific industry. • Helps determine profitability. • Often captures utilization of scarce resource.

29. Finding A Prom Date Movies Redwings Students at School Tuxes, Dresses Dates Nearby University

30. Industry Environment: Five Forces • Competitive Rivalry (Sellers)- Other firms within the industry. • Potential Entrants - Companies formerly not in the industry. • Substitutes - Firms from other industries that offer products or services fulfilling similar needs. • Suppliers - Those companies who supply the industry with products or services. • Buyers - Those companies or individuals who purchase the industry’s product or service.

31. Define Underlying Factors • Underlying factors: Conditions that increase the power of a given force. • Each force has its own unique set of conditions or underlying factors.

32. UNDERLYING FACTORS THAT MAKE FORCES STRONGER Competitive rivalry (jockeying for position) is a powerful force given the following underlying factors: 1. Many competitors (Compared to other industries) 2. Competitors equal in size and/or very large 3. Slow growth in demand 4. High fixed costs 5. Undifferentiated products 6. High exit barriers Potential entrants are a powerful force given the following underlying factors: (NOTE: If potential entrants are powerful, it is easier for outsiders to enter the industry. This is favorable to those not in the industry, but makes the industry less desirable to those participating in it.) 1. The industry has few economies of scales 2. Easy access to technology and know-how 3. Little product differentiation (no loyalty) 4. Low capital requirements 5. Few cost disadvantages independent of size 6. Easy access to distribution channels 7. Few government rules that deter entry Substitute products are a powerful force given the following underlying factors: 1. The price of substitutes is low compared to your industry 2. The benefits are high compared to your industry 3. There are low switching costs when purchasing substitutes Buyers are a powerful force given the following underlying factors: 1. They purchase in large volume or there are few buyers 2. Your products are undifferentiated 3. Your products represent a significant percentage of a buyer's total costs 4. The buyer is not very profitable 5. Quality of your product is not important to buyer 6. Your product does not save buyer money 7. The buyer can integrate backward Suppliers are a powerful force given the following underlying factors: 1. There are few suppliers -they are more concentrated than your industry 2. The suppliers' product is differentiated 3. Supplier product has few substitutes 4. The supplier can integrate forward

33. Using information from five force analysis to form strategy • Identify industry (Where in the distribution chain does it fall). Who are the suppliers and buyers? • Identify a strong force (Porters 5 Force Model) relative to the industry • Clearly identify underlying factor that makes the force strong (If doing as part of paper 1, question 1, provide specific support from the article) • Mention the specific firm within the industry (center box, competitive rivalry) • State what is being done to contend with the underlying factor. (If doing as part of paper 1, question 1, provide specific support from the article)

34. Performing A Five Force Analysis 1. Specify industry 2. List all five forces 3. For each force, indicate important underlying factors 4. Summarize the strength of each force based upon the number and importance of underlying factors.

35. Performing A 5 Force Analysis

36. 3Types of Conclusion Derived from 5 Force Analysis 1. Determine the strongest forces e.g., Competitive Rivalry & New Entrants 2. Determine which underlying factors are most important by determining the ones that have greatest influence on the strongest forces. e.g., High fixed costs, Undifferentiated products. 3. Determine industry attractiveness & comp. riv. based upon strength of forces combined e.g., Industry not attractive. Rivalry intense.

37. Major Point about Operating Environments • General conditions in an industry (e.g., power of a force or underlying factors) may differ from the conditions within a specific operating environment within the industry.

38. Strategic Group Map Shoe Industry High Quality Low Low High Marketing Expenditure

39. Why Conduct Strategic Analysis? • Simplifies analysis. • Ident. competitors • Finds uncovered spaces. • Isolates factors that might hurt/help some groups more than others.

40. L O-Internal Environment • Know parts of value chain and how to conduct a value chain analysis. • Know the definition of a core competence. • The attributes of a core competence. • Know what makes a strength or weakness relevant.

41. Parts of Value ChainConducting Analysis • Parts (In book) • Primary activities parallels flow of goods. • Support activities affect each of primary activities • Effectiveness/efficiency in activities affects profit margin. • Conducting Analysis • Mention one part of value chain • Describe activity as it relates to company (For support activity, describe how affects several primary activities). • Specify whether activity differs from others in industry • Indicate likely affect on profit margin

42. Core Competence:Def. & Attributes • Core competence: A company’s skills, capabilities or resources that serve as a basis for building a sustainable competitive advantage. • Attributes • Valuable • Rare • Imperfectly imitable

43. LO: Competitive Advantage (CA)& Generic Strategies (GSs) • Define competitive advantage (CA) • Know the relationship between CA and core competencies. • Define Porter’s generic strategies (GSs) • Know Porter’s recommendation regarding the GSs. • Know the relationship between Porter’s GSs and CA. • Define best cost provider • Know the proposed relationship between a best cost provider and CA. • Decide whether you think Porter’s recommendations should be followed.

44. Define Competitive Advantage (CA) & Relate to Core Competence • CA: A fairly SUSTAINABLE advantage over competitors resulting in above average performance • Relationship Strategy Selection Competitive Advantage Core Competence

45. Define Porter’s GSs • Differentiation: The product or service is unique. Appeals to a broad segment of the market because of superior features or attributes. May cost more to produce but company can charge more. • Low cost provider: The product or service is basic. Appeals to a broad section of the market. The company has a lower cost structure than all rivals. • Focus: Focuses on a narrow customer group and differentiates its offering based upon the unique needs of that group or is able to develop a lower cost structure due to unique attributes of that group.

46. Porter’s Recommendations Regarding GSs • Use just 1 GS • All efforts towards 1 GS. • Zero tradeoffs • Avoid stuck in middle. • Occasionally can find win win & advance in more than one strategic direction

47. The Relationship between GSs and CA • Passionately pursuing 1 GS ---> CA. • Superior profits • Differentiation -- Higher price compensates for higher cost. • Low cost - Same price as competitor but bigger profit margin or lower price same margin per unit but more volume so greater profits. • Focus -- Either of the above but characteristics of segment allows. • Different skills & core competencies • Differentiation • Low cost • Focus • Relationship Different GSs Competitive Advantage Different Core Competence

48. $10 Auction • Playing for real money!!!! If you are not willing to possibly lose money do not become involved!!!!!! • Absolutely no talking once bidding begins. Use hands to indicate bids. • Bidding starts at 50 cents and increases in increments of 50 cents. • You can’t bid twice in a row. • The highest bidder will get the $10 but must also give me their bid. • The second highest bidder must pay me what they bid.

49. The Relationship between GSs and CA • In part, to gain CA • Signal • Retaliate • Resources in one direction • Be only one seriously competing in that way. • Develop unassailable position.

50. Best Cost ProviderDef & Relationship to CA • Def: Product or service is not unique and is not basic. Represents a better value than competitive products. Lower price for similar benefits or same price for more benefits. Company must have cost advantage over CLOSE compets. This strategy was not mentioned by Porter in his original work. • Book says can lead to CA. Greater market share, possible more profits per unit. • What would Porter say? Why?