Principles of Management

Mason Carpenter, Talya Bauer, and Berrin Erdogan

Chapter 5

Strategizing
See how strategy fits in the P-O-L-C framework Better understand where strategy comes from Understand the concept of strategic focus Conduct internal analysis to develop strategy Conduct external analysis to develop strategy Formulating organizational and personal strategy with the strategy diamond

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Understand How Strategy Fits in the P-O-L-C Framework

Where Strategy Fits in Planning

The strategy is how the firm aims to realize its mission and vision

Mission & Vision

Strategy

Goals & Objectives

Goals and objectives are the indicators of how well the strategy is succeeding

Strategic Management Process

The process by which a firm manages the formulation and implementation of its strategy The coordinated means by which an organization achieves its goals and objectives

Strategizing in P-O-L-C
Planning Organizing Leading Controlling

1. Vision & Mission 2. Strategizing 3. Goals & Objectives

1. Organization Design 2. Culture 3. Social Networks

1. Leadership 2. Decision Making 3. Communications 4. Groups/Teams 5. Motivation

1. Systems/Processes 2. Strategic Human Resources

Strategy Formulation

Strategy Implementation

Corporate & Business Strategy

Corporate Strategy
What business or business should we be in? How does being in one business help us compete in our other businesses?

Strategizing

Business Strategy

How should we compete?

Diversification

Synergy

Corporate Strategy

SWOT Analysis
An _______ of the company's _______ workings and an examination of external __________ and __________
(1) what can we do? (2) what do we want to do? (4) what do others expect us to do?

(3) what might we do?

SWOT Analysis
Strengths

Threats

SWOT

Weaknesses

Opportunities

Effective strategies Sustainable competitive advantage

take advantage of strengths minimize the disadvantages posed by any weaknesses An organizations strengths cannot be easily duplicated or imitated by other firms

Strengths and Opportunities (SO) How can you use your strengths to take advantage of the opportunities? Strengths and Threats (ST) How can you take advantage of your strengths to avoid real and potential threats? Weaknesses and Opportunities (WO) How can you use your opportunities to overcome the weaknesses you are experiencing? Weaknesses and Threats (WT) How can you minimize your weaknesses and avoid threats?

Internal Analysis Tools Value chain VRIO

External Analysis Tools

PESTEL
Industry analysis

Discussion
What is the difference between strategy formulation and strategy implementation? What is the difference between business strategy and corporate strategy? What are some of the forms of diversification and what do they mean? What do you learn from a SWOT analysis? In SWOT analysis, what are some of the tools you might use to understand the internal environment (identify strengths and weaknesses)? In SWOT analysis, what are some of the tools you might use to understand the external environment (identify opportunities and threats)?

Strategy provides managers with an organizational compass and a roadmap for the future

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Various Factors can undermine a strategy

the plan is poorly constructed

competitors undermine the advantages envisioned by the plan

the plan was good, but poorly executed

Intended, Deliberate, Realized, and Emergent Strategies

Mintzbergs Conclusion

The realized strategy is a consequence of deliberate and emerging factors

Discussion
What is an intended strategy? What is a realized strategy? Why is it important to understand the difference between intended and realized strategies? Why is there not a perfect match-up between realized and intended strategies? What might interfere with the realization of an intended strategy? How might you manage the balance between design and emergence strategizing processes in an organization?

What is Strategic Focus?

Strategic focus is seen when an organization is very _____ about its mission and vision, and has a _________, wellarticulated _______ for achieving them
strategy as __________

strategy as __________

Porters Generic Strategies

Differentiation or Price Leadership Strategy?

Southwest Airlines has combined cost cutting measures with differentiation, proving that it is possible to succeed using combination strategies
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What are Value Disciplines?

Operational excellence Customer intimacy Product leadership Only One Discipline

Discussion
What is strategic focus and why is it important? What are Porters three generic strategies? Can a firm simultaneously pursue a low-cost and a differentiation strategy? What are the three value disciplines? What four rules underlie the three value disciplines? How do Porters generic strategies differ from other approaches?

DEVELOPING STRATEGY THROUGH INTERNAL ANALYSIS

_______ analysis tells the strategist what is _____ the organization

An internal analysis helps answer the question, what _________ can we _________?

Measuring Value with Core Competencies

Products performance characteristics

Value
Attributes for which customers are willing to pay

The Value Chain

Building Blocks (VRIO) of Building and Maintaining Competitive Advantage

Value

Rarity

Inimitability

Organization

Discussion
What is the objective of internal analysis? What is the difference between a resource and a capability? What is the difference between a tangible and an intangible resource or capability? What is a core competency? What framework helps you identify those resources, capabilities, or core competencies that provide competitive advantage? Why might competitive advantage for a firm be fleeting?

DEVELOPING STRATEGY THROUGH EXTERNAL ANALYSIS

An external analysis tells the strategist what is outside the organization.

Continue toward the focal industry Begin with the general environment

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An external analysis
helps answer the question, what opportunities can we exploit?

Six General Environment Segments PESTLE Analysis

legal

political

environmental

economic

technical

social

AN ORGANIZATIONS MICRO-ENVIRONMENT

Industry Upstream Markets Downstream Markets

A group of firms producing products that are close substitutes

industries that provide the raw material or inputs for the focal industry industries (sometimes consumer segments) that consume the industry outputs

Porters Five Forces

New Entrants

Suppliers

Rivalry

Buyers

Substitutes

Porters Attractiveness and Profitability Analysis

Likely to Profit
Is the industry ______ to enter? Is there limited _______? Are buyers relatively ________? Are suppliers relatively weak? Are there _______ substitutes?

Challenges to Profit
Is the industry _______ to enter? Is there a ______ _______ of rivalry between firms within the industry? Are buyers ________? Are suppliers strong? Is it easy to ________ to alternatives?

Discussion
What are the six dimensions of the environment that are of broad concern when you conduct a PESTLE analysis? Which of the PESTLE dimensions do you believe to be most important, and why? What are the key dimensions of a firms micro-environment? What is the difference between a monopoly and an oligopoly? What are the five forces referred to in the Porter framework? Is there a dimension of industry structure that Porters model appears to omit?

ORGANIZATIONAL AND PERSONAL STRATEGY WITH THE STRATEGY DIAMOND

Arenas

Differentiators

Economic Logic

The Strategy Diamond

Planning and Your Personal Growth and Development Strategy

What type of work do I want to do? What leisure activities do I like? Where do I want to live? What capabilities (differentiators) do I need to participate in these arenas? What organizations value these capabilities (differentiators)? What capabilities (differentiators) do I want to have and excel in?

Personal Mission & Vision

Personal Strategy for Growth & Development

Personal Goals & Objectives __________ __________ __________ __________ __________

Discussion
What are the five facets of the Hambrick & Fredrickson strategy diamond? What is the relationship between arenas and differentiators if the strategy yields a positive economic logic? If a firm is performing poorly financially, what might this say about the differentiators, arenas, or both? Why is it important to consider vehicles as part of an organizations strategy? What is the difference between staging and pacing in terms of the strategy diamond? What are some ways that you might apply staging and pacing to an organizations strategy?