Transcript INFO 3020

Concepts Of Strategic
Management
The study of strategic
management
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Strategic management Definition
 Strategic management is that set of
managerial decisions and actions that
determines the long-run performance of a
corporation.
 Strategic management includes:
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Environmental scanning (both external and internal).
Strategy implementation.
Evaluation and control.
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How has strategic management
evolved
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Strategic management within a firm generally
evolves through four sequential phases:
Basic financial planning.
Forecast-based planning.
Externally oriented planning (strategic planning).
Strategic management.
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Initiation of strategy:
Triggering events
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A triggering event is something that stimulates a
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change in strategy. Some of the possible triggering events
are:
New CEO.
Intervention by an external institution.
Threat of a changing in ownership.
Management’s recognition of a performance gap.
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External Assessment
 “If you're not faster than your competitor,
you’re in a tenuous position, and if you’re
only half as fast, you’re terminal.”
 —George Salk—
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External Assessment (Cont’d)
 “The idea is to concentrate our strength
against our competitor’s relative weakness.”
 —Bruce Henderson—
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External Assessment (Cont’d)
 External Strategic-Management Audit
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Industry analysis
Environmental scanning
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External Assessment (Cont’d)
 External audit:
 Focuses on identifying & evaluating events
beyond the immediate control of the firm
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External Assessment (Cont’d)
 External audit focuses on:
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Increased foreign competition
Population shifts
Demographics (e.g., aging population)
Information technology
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External Assessment (Cont’d)
 External audit reveals:
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Key opportunities
Key threats
 Managers then formulate strategies:
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Take advantage of opportunities
Avoid/reduce impact of threats
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External Assessment (Cont’d)
 External Audit
 Aimed at identifying key variables that offer
actionable responses
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External Assessment (Cont’d)
 Key External Forces
 Five (5) broad categories:
 Economic forces
 Social, cultural, demographic, &
environmental forces
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External Assessment (Cont’d)
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Key External Forces (Cont’d)
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Five (5) broad categories:
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Political, governmental, & legal forces
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Technological forces
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Competitive forces
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External Assessment (Cont’d)
Key external forces
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Competitors
Competitors
Suppliers
Suppliers
Distributors
Distributors
Creditors
Creditors
Customers
Customers
Employees
Employees
Communities
Communities
Managers
Managers
Stockholders
Stockholders
Labor
Unions
Labor
Unions
Special Interest
Special
InterestGroups
Groups
Products
Products
Services
Ibrahim Elbeltagi
OPURTUNITIES
&threats
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External Assessment (Cont’d)
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Process of External Audit:
Involve as many managers & employees as possible
Gather competitive intelligence
Information about social, demographic, cultural,
environmental, etc.
Monitor sources of information (key magazines, articles,
etc.)
Utilization of Internet
Suppliers, distributors, customers as sources of
information
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External Assessment (Cont’d)
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Process of External Audit:
Key External Factors:
Involve as many managers & employees as possible
Gather competitive intelligence
Information about
social,
demographic,
Vary
over
time cultural,
environmental, etc.
& (key magazines, articles,
Monitor sources of information
etc.)
Vary by industry
Utilization of Internet
Suppliers, distributors, customers as sources of
information
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External Assessment (Cont’d)
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Key External Factors:
Process of External Audit:
Involve as many managers & employees as possible
Gather competitive intelligence
Important
to
achieving
long-term
objectives
Information about social, demographic, cultural,
environmental, etc.
Measurable
Monitor sources of information (key magazines, articles,
etc.)
Applicable
to all competing firms
Utilization of Internet
Hierarchical
Suppliers, distributors, customers as sources of
information
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External Assessment (Cont’d)
 Examples of Key External Factors:
 Market share
 Breadth of competing products
 World economies
 Proprietary & key account advantages
 Price competitiveness
 Technological advancements
 Interest rates
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Economic Forces
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Monitor Key Economic Variables:
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Availability of credit
Level of disposable income
Interest rates
Inflation rates
Money market rates
Government budget deficits
Gross domestic product trend
Consumption patterns
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Economic Forces (Cont’d)
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Monitor Key Economic Variables: (Cont’d)
Unemployment trends
Worker productivity levels
Value of the dollar in world markets
Stock market trends
Foreign countries’ economic conditions
Import/export factors
Demand shifts for goods/services
Income differences by region/customer
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Economic Forces (Cont’d)
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Monitor Key Economic Variables: (Cont’d)
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Price fluctuations
Exportation of labor & capital
Monetary policies
Fiscal policies
Tax rates
ECC policies
OPEC policies
LDC policies
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Social & Environmental Forces
 Social, cultural, demographic, and
environmental changes:
 Major impact on:
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Products
Services
Markets
Customers
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Social & Environmental Forces
 World population > 6 billion
 U.K. population < 60 million
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Great potential for domestic production expansion to
other markets
 Domestic only is a risky strategy
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Social & Environmental Forces
Country
Asia
1998
2050
% Increase
3.6 b
5.3 b
47.22
Africa
749 m
1.8 b
140.32
Latin America
504 m
809 m
60.52
Europe
628 m
729 m
16.08
North America
305 m
392 m
28.52
30 m
46 m
53.33
Oceania
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Social & Environmental Forces
 E-commerce Perspective
 Question:
 “Is the Internet Revolution Bypassing Poor,
Minorities?”
 Answer:
 Yes!
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Social & Environmental Forces
 Internet revolution is widening the gap
between rich & poor
 42% U.S. households have personal
computers
 80% of them are in households w/family
income > $75,000
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Social & Environmental Forces
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Internet usage lowest (3%) among Americans
earning $10K or less
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26.7% of White Americans use Internet at home
compared to 9.2% Blacks & 8.8% of Hispanics
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90% shares of common stock of American
companies held by the wealthiest 10% of
Americans
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Social & Environmental Forces
 Key social, cultural, demographic, &
environmental variables:
 Childbearing rates
 Number of special-interest groups
 Number of marriages
 Number of divorces
 Number of births
 Number of deaths
 Immigration & emigration rates
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Social & Environmental Forces
 Key social, cultural, demographic, &
environmental variables: (Cont’d)
 Life expectancy rates
 Per capita income
 Attitudes toward business
 Average disposable income
 Buying habits
 Ethical concerns
 Attitudes toward saving
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Social & Environmental Forces
 Key social, cultural, demographic, &
environmental variables: (Cont’d)
 Racial equality
 Average level of education
 Government regulation
 Attitudes toward customer service
 Attitudes toward product quality
 Energy conservation
 Social responsibility
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Social & Environmental Forces
 Key social, cultural, demographic, &
environmental variables: (Cont’d)
 Value placed on leisure time
 Recycling
 Waste management
 Air & water pollution
 Ozone depletion
 Endangered species
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Political, Govt., & Legal Forces
 Government Regulation
 Key opportunities & key threats
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Antitrust legislation (Microsoft)
Tax rates
Lobbying efforts
Patent laws
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Political, Govt., & Legal Forces
 Increasing Global Interdependence
 Impact of political variables
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Formulation of strategies
Implementation of strategies
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Political, Govt., & Legal Forces
 Increasing Global Interdependence
 Strategists in a global economy
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Forecast political climates
Legalistic skills
Diverse world cultures
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Political, Govt., & Legal Forces
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Globalization of Industry
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Worldwide trend toward similar consumption patterns
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Global buyers & sellers
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E-commerce
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Instant transmission of money & information across
continents
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Political, Govt., & Legal Forces
 Key Political, govt., & legal variables:
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Government regulation/deregulation
Tax law changes
Special tariffs
Political Action Committees (PACs)
Voter participation rates
Number of patents
Changes in patent laws
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Political, Govt., & Legal Forces
 Key Political, govt., & legal variables:
(Cont’d)
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Environmental protection laws
Equal employment legislation
Level of government subsidies
Antitrust legislation/enforcement
Sino-American relationships
Russian-American relationships
European-American relationships
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Political, Govt., & Legal Forces
 Key Political, govt., & legal variables:(Cont’d)
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Ethnic minorities relationships
Import-export regulations
Monetary policy
Political conditions in other countries
Government budgets
World oil, currency, & labor markets
Location and severity of terrorist activities
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Technological Forces
 Technological Change
 Dramatic effect on business
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Fiber optics
Biometrics
EFT
Computer engineering
Superconductivity advancements
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Technological Forces (Cont’d)
 Internet impact on opportunities & threats:
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Altering life cycles of products
Increasing speed of distribution
Creating new products & services
Erasing limitations of traditional geographic
markets
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Technological Forces (Cont’d)
 Internet impact on opportunities & threats:
(Cont’d)
 Altering economies of scale
 Changing entry barriers
 Redefining relationships
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Industries & suppliers, creditors, customers, and
competitors
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Technological Forces (Cont’d)
 Capitalizing on Information Technology (IT)
 Chief Information Officer (CIO)
 Chief Technology Officer (CTO)
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Competitive Forces
 External Audit & Competing Firms
 Identifying rival firms
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Strengths
Weaknesses
Capabilities
Opportunities
Threats
Objectives
Strategies
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Competitive Forces
 Competitor Information
 Sources:
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Moody’s Manuals
Standard Corporation Descriptions
Value Line Investment Surveys
Dun’s Business Rankings
Standard & Poor’s Industry Surveys
Industry Week
Forbes, Fortune, Business Week
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Competitive Forces
 Most competitive firms in America
 Seven Characteristics
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Market share matters
Understand what business you are in
Broke or not, fix it
Innovate or evaporate
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Competitive Analysis: Porter’s
Five-Forces Model
Potential development
of substitute products
Bargaining power
of suppliers
Rivalry among
competing firms
Bargaining power
of consumers
Potential entry of new
competitors
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Global Challenge
 Differences U.S. and MNCs
 Affect strategic management:
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Language
Culture
Politics
Economy
Government interference
Labor relations
Trade barriers
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Reference
 For more details about this lecture see
Chapter 3 in:
 Strategic Management: Concepts and Cases,
9/e
Fred David
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