Transcript Slajd 1 - Supernat

Managing Strategy
dr. hab. Jerzy Supernat
Institute of Administrative Studies
University of Wrocław
Managing Strategy
Strategic management is a comprehensive and ongoing management process aimed at 1) formulating effective strategies and 2) implementing effective strategies.
Effective strategies are those that promote a superior
alignment between the organization and its environment
and the achievement of strategic goals.
dr hab. Jerzy Supernat
Managing Strategy
Four components of strategy:
 scope (domain)
 resource allocation/deployment
 distinctive competence (competitive advantage)
 synergy
dr hab. Jerzy Supernat
Managing Strategy
Scope (domain)
The scope of strategy specifies the range of markets in
which an organization will compete.
?
Some organizations, called conglomerates,
dozens or even hundreds of markets.
compete in
dr hab. Jerzy Supernat
Managing Strategy
Resource allocation/deployment
Resource allocation denotes the distribution of organization’s resources across the areas in which it competes.
dr hab. Jerzy Supernat
Managing Strategy
Distinctive competence (competitive advantage)
Distinctive competence is something the organization
does exceptionally well.
dr hab. Jerzy Supernat
Managing Strategy
Synergy
H. Igor Ansoff (1918-2002) – The Father of
Strategic Management. According to him:
Synergy is any effect which can produce a combined return on the firm’s resources greater than the sum of its
parts.
dr hab. Jerzy Supernat
Managing Strategy
Levels of strategy (and strategic management)
Most organizations develop strategies at two distinct levels: business and corporate. These levels provide a rich
combination of strategic alternatives for organizations.
Business-level strategy is the set of strategic alternatives
that an organization chooses from as it conducts business
in a particular industry or market.
Corporate-level strategy is the set of strategic alternatives
that an organization chooses from as it manages its operations simultaneously across several industries and several markets.
dr hab. Jerzy Supernat
Managing Strategy
Strategy formulation and implementation
Strategy formulation is the set of processes involved in
creating or determining the strategies of the organization.
Strategy implementation is the methods by which strategies are operationalized or executed within the organization.
Sometimes the processes of formulating and implementing strategies
are rational, systematic, and planned. This approach is often referred
to as a deliberate strategy. Other times, however, organizations use an
emergent strategy – a pattern of action that develops over time in an
organization in the absence of missions and goals, or despite mis-sions
and goals.
dr hab. Jerzy Supernat
Managing Strategy
SWOT analysis
The starting point in formulating strategy is usually SWOT
analysis.
SWOT analysis is careful evaluation of an organization’s
 internal strengths and weaknesses
 environmental/external opportunities and threats.
In SWOT analysis, the best strategies accomplish an organization’s
mission by:
•
•
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exploiting an organization’s opportunities and strengths
neutralizing its threats
avoiding or correcting its weaknesses
dr hab. Jerzy Supernat
Managing Strategy
A. Thompson, A. J. Strickland:
SWOT Analysis is grounded on the principle that strategy
must produce a strong fit between a company’s internal
capability (its strengths and weaknesses) and its external
situation (reflected in part by its opportunities and
threats).
One of the “trade secrets” of first-rate strategic management is launching initiatives internally to turn a company
strength into a distinctive competence. A distinctive competence is something a company does especially well in
comparison to its competitors.
dr hab. Jerzy Supernat
Managing Strategy
Organization’s strengths
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common strengths
distinctive competencies
A common strength is an organizational capability possessed by a
large number of competing firms. Competitive parity exists when
large numbers of competing firms are able to formulate and implement the same strategy. In this situation organizations generally
attain only average economic performance.
A distinctive competence is a strength possessed by only a small
number of competing firms. Organizations that exploit their distinctive competences often obtain a competitive advantage and attain
above-normal economic performance.
dr hab. Jerzy Supernat
Managing Strategy
Strategic imitation
Strategic imitation is the practice of duplicating another
organization’s distinctive competence and thereby implementing a valuable strategy.
When a distinctive competence cannot be imitated (when all attempts at strategic imitation have ceased), strategies that exploit
these competences generate sustained competitive advantages.
Strategic imitation might not be possible for three reasons:
 the acquisition or development of the distinctive competence may
depend on unique historical circumstances that other organizations
cannot replace
 competing organizations might not know or understand the nature
and character of the distinctive competence
 a distinctive competence can be based on complex social phenomena (e.g. organizational culture) and difficult to imitate
dr hab. Jerzy Supernat
Managing Strategy
Organizations weaknesses
Organizations weaknesses are skills and capabilities that
do not enable an organization to choose and implement
strategies that support its mission.
Organizations that fail either to recognize or overcome
their weaknesses are likely to suffer from competitive disadvantages. An organization has a competitive disadvantage when it is not implementing valuable strategies that
are being implemented by competing organizations. Organizations with a competitive disadvantage can expect to
attain below-average economic performance.
dr hab. Jerzy Supernat
Managing Strategy
Porter’s generic business-level strategies
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differentiation
A strategy in which an organization seeks to distinguish
itself from competitors through the quality of its products
or services.
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overall cost leadership
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focus
A strategy in which an organization attempts
to gain a competitive advantage by reducing
its costs below the costs of competing firms.
A strategy in which an organization concentrates on a
specific regional market, product line or group of buyers.
dr hab. Jerzy Supernat
Managing Strategy
Corporate-level strategies
The most important strategic issue at the corporate level
concerns the extent and nature of organizational diversification.
Diversification describes the number of different businesses that an organization is engaged in and the extent to
which these businesses are related to one another. The
three types of diversification strategies are:
 single-product/concentration strategy
 related diversification
 unrelated diversification
dr hab. Jerzy Supernat
Managing Strategy
» Don't put all your eggs in one basket.
» Don't venture all your eggs in one basket.
» Tis the part of a wise man to keep himself today for
tomorrow, and not venture all his eggs in one basket
(Miquel de Cervantes, 1547-1616).
» Venture not all in one bottom (bottom = a ship).
4000-3000 B.C. – Bottomry contracts were known to merchants in Babylon during this time period. Bottomry is a maritime contract: the ship's owner borrows money to outfit
and repair his vessel and pledges the ship as security. But if
the ship is lost during the voyage or specified time, the lender loses his money. (Brittanica.com)
» Put all your eggs in the one basket and watch that
basket (Mark Twain, 1835-1910).
» The way to become rich is to put all your eggs in
one basket and then watch that basket (Andrew Carnegie, 1835-1919).
dr hab. Jerzy Supernat
Managing Strategy
Single-product/concentration strategy
An organization that pursues a single product strategy:
• manufactures just one product or service
• sells it in a single geographic market
The single-product strategy has one major strength and one
major weakness:
 by concentrating its efforts completely on one product and
market, a firm is likely to be very successful in manufacturing
and marketing the product
 but if the product is not accepted by the market or is replaced by a new one, the firm will suffer
dr hab. Jerzy Supernat
Managing Strategy
Related diversification
Given the disadvantages of the single-product strategy
most large organizations today operate in several different
businesses, industries, or markets. If the organization’s
businesses (strategic business units – SBUs) are somehow
linked with one another, that organization is implementing
a strategy of related diversification.
Bases of relatedness:
• similar technology
• common distribution and marketing skills
• common brand name and reputation
• common customers
dr hab. Jerzy Supernat
Managing Strategy
Advantages of related diversification
reduces an organization’s dependence on any one of its
business activities and thus reduces economic risk
•
reduces the overhead costs associated with managing
any one business
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allows an organization to exploit its strengths and capabilities in more than one business (synergy)
•
dr hab. Jerzy Supernat
Managing Strategy
Unrelated diversification
Organizations that implement a strategy of unrelated diversification operate multiple businesses that are not logically associated with one another. Even if there are important potential synergies between their different businesses, organizations implementing a strategy of unrelated diversification do not attempt to exploit them.
dr hab. Jerzy Supernat
Managing Strategy
Disadvantages of unrelated diversification
corporate level managers usually do not know enough
about the unrelated businesses to provide helpful strategic guidance or to allocate capital appropriately
•
organizations fail to exploit important synergies and
hence they are at a competitive disadvantage compared
to organizations that use related diversification
•
For the above reasons, almost all organizations have
abandoned unrelated diversification as a corporatelevel strategy (unrelated diversification was a very
popular strategy in the 1960s and early 1970s).
dr hab. Jerzy Supernat
Managing Strategy
Becoming a diversified organization
 internal development of new products and services
 replacement of suppliers and customer
 backward vertical integration
 forward vertical integration
 purchasing another organization
• merger
• acquisition
dr hab. Jerzy Supernat
Concluding Remark
However beautiful the strategy,
you should occasionally look at the results.
Winston Churchill
dr hab. Jerzy Supernat