Strategic Management

BMTM413-ACN1 By: Edwin S.Rustia

Professor: Ms. Nilma Y. Garchitorena, Ph.D

b. Typical Problems IX. Strategic Management: Evaluation and Control a. Measure & Performance b. Guidelines for proper control c. Strategic information system X. Strategic Issues in Business Organization a. Local Issues b. Global Issues

3 KEY CORPORATE GROUPS SDM Course Description: This course is concerned with proper formulation, documentation, evaluation of strategies for the effective & 1. Strategic Planning Staff 2. Divisional or SBU efficiency of business enterprises. It includes study of 3. Managers of Functional Departments. strategic management process being adopted by MODES OF STRATEGY FORMULATION companies including study of process, offsetting and 1. Entrepreneurial Mode resetting the goals of the organization: the corresponding 2. Adaptive Mode crafting of the strategy, implementation, evaluation and 3. Planning Mode control process. 3 BASIC SKILLS IN STRATEGIC MANAGEMENT At the end of the course, students are expected to: 1. Technical Skills 2. Human Skills Learn the relevance of strategic management and 3. Conceptual Skills effective& efficient operation of the business. Strategic Planning Staff-headed by senior VP or director of Gain an understanding in implication of strategic corporate planning, monitor both internal/ management of the operation of the business. external environments. Developing strategic plan of chosen business enterprise Create an entrepreneurial culture with focus on strategic Divisional or SUB- initiates proposals and request for proposal for implementation. planning as this is crucial in the long run operation of the Managers of functional Department-reports directly to business. their divisional managers or top management. COURSE OUTLINE Entrepreneurial Mode-focuses on opportunities and problems. I. Introduction to Strategic Management Adaptive Mode- characterized by reactive solutions to a. Evolution reactive problems. II. Corporate Governance Planning Mode- includes both proactive search for new a. Roles & Responsibilities of Board of Directors. opportunities and reactive solutions. b. Roles & Responsibilities of Top Management Logical Incrementalism Approach- synthesis of planning. c. Social Responsibility of Strategic Decision makers Technical Skills- pertain to what is done. III. Environmental Scanning Human Skills- pertain to how something is done. a. Environmental Scanning & Industry Analysis Conceptual Skills- pertain to why something is done. b. Internal Scanning: Organizational Analysis Strategic Audit- takes corporation-wide perspective and IV. Strategy Formulation: Situational Analysis and Business provides a comprehensive assessment of Strategy strategic situation. a. Situational Analysis/ SWOT Analysis Chapter IV b. Alternative Strategies using TOWS Matrix c. Business Strategies Internal Scanning: V. Strategy Formulation: Corporate Strategies Organizational Analysis: a. Corporate Strategies A resource-based Approach to Organizational Analysis b. Portfolio Analysis Internal Strategic Factors- are those critical strengths and c. Corporate Parenting weaknesses that are likely to determine if the firm will VI. Strategy Formulation: Functional Strategies be able to take advantage of opportunities while a. Functional Strategies avoiding threats. b. Strategies to avoid. Resource is an asset competency process skills or c. Selection of the best strategy knowledge controlled by the corporation. VII. Strategic Implementation Determining the Sustainability of an advantage. a. Organizing for action b. Problem in Strategy Implementation Durability is the rate at which a firms underlying VIII. Strategic Importance resources and capabilities depreciate or become a. Staffing & Directing obsolete. 1

Four Sets of Possible Strategic Alternatives: Internal/External Strengths Weaknesses Factor Opportunities SO Strategies WO Strategies Threats ST Strategies WT Strategies SO Strategies- are generated by thinking of ways in which a company or business unit could use it strengths to take advantage of opportunities. ST Strategies- consider a companys or unit strengths as a way to avoid threats. WO Strategies- attempt to take advantage of opportunities by overcoming weaknesses. WT Strategy- are basically defensive and primarily act to PIMS Analysis(Profit Impact of Market Stratgey) minimize weaknesses and avoid threats. -the quality of its product and services is the single BUSINESS STRATEGIES most important factor affecting a business units Business Strategy- focuses on improving the competitive performance relative to its competitors. position of a companys or business units products or Value Chain Analysis- a way of examining the nature of services within the specific industry or market segment the synergies among the internal activities of the that the company or business unit serves. corporation. Michael Porters two generic competitive strategies: Functional Analysis- a companys skills nd resources can be organized into competence profile according to a. Lower Cost Strategy- is the ability of a company or a typical business function. business unit to design, produce, and market a comparable product more efficiently than its STRUCTURE competitors. b.Differentiation Strategy- is the ability to provide unique Simple and superior value to the buyer in terms of product Functional quality, special features, or after-sale service. Divisional Cost Leadership- is a low-cost competitive strategy that Conglomerate aims at the broad mass market and requires aggressive construction of efficient scale facilities, vigorous INFORMATION SYSTEM pursuit of cost reductions from experience, tight cost, and overhead control, avoidance of marginal customer Purposes-provide early warning signals of accounts and cost minimization. problems that originate both externally and Differentiation- is aimed at the broad mass market and internally. involves the creation of product or service that is Phases of Development perceived throughout its industry as unique. SWOT- is an acronym used to describe the particular Cost focus- is a low cost competitive strategy that focuses Strengths, Weaknesses, Oppurtunities, and Threats that on a particular buyer group or geographic market and are strategic factors for a specific company. attempts to serve only the niche, to the exclusion of Distinctive Compentencies- the particular capabilities and others. resources that a firm possesses and the superior way in Differentiation Focus- like cost focus, concentrates on a which they are used. particular buyer group, product line segment, or SFAS Matrix(Strategic Factors Analysis Summary)geographic market. summarizes an organizations strategic factors by INDUSTRY STRUCTURE AND COMPETITIVE STRATEGY combining the external factors with the internal factors. Fragment Industry- small-and-medium sized local Propitious Niche an extremely favorable niche that is so companies compete for relatively small shares of the well suited to the firms internal and external total market. environment that other corporations are not likely to Consolidated Industry- dominated by few large challenge or dislodge it. companies. Strategic Window a unique market opportunity that is TACTIC- is a specific operating plan detailing how a strategy available only for a particular time. is to be implemented in terms of when and where it is TOWS Matrix- (TOWS is another way of saying SWOT) to be put into action. illustrates how the external opportunities and threats First Mover- the first company to manufacture and sell a facing a particular corporation can be matched with that new product or service. companys internal strengths and weaknesses to result in Late Movers- has the advantage to imitate the four sets of possible strategic alternatives. technological advances of others. 2

Imitability- is the rate at which a firms underlying resources and capabilities can be duplicated by others. Transparency; is the speed with which other frims can understand the relationship of resources and capabilities supporting a successful firms strategy. Transferability-is the ability of the competitors to gather the resources and capabilities necessary to support a competitive challenge. Repilcability- is the ability of competitors to use duplicated resources and capabilities to imitate the others firms success. Approaches to Internal Scanning and Analysis

Offensive Tactic- usually takes place in an established competitors market location. Some of the method to attack competitors position: Frontal Assault-attacking firm goes head to head. Flanking Maneuver- a firm may attack part of the market where competitor is weak. Bypass Attack- offering new product that makes competitors product unnecessary. Encirclement- attacking company encircles the competitors position in terms of products or markets or both. Guerrila Warfare-a firm may choose to hit and run. DEFENSIVE TACTICS- aim to lower the probability of attack, diverts attack to less threatening avenues, or lessen the intensity of an attack. Raise Structural Barriers- entry barriers act to block a challengers logical avenues of attack. Increase Expected Retaliation- this tactic is any action that increases the perceived threat of retaliation for an attack. Lower the inducement for Attack- to reduce challengers expectation of future profits in the industry. COOPERATIVE STRATEGIES- is being used to gain competitive advantage within an industry by working with the other firms. 2 General Types of Cooperative Strategies: Collusion- is the active cooperation of firms within an industry to reduce output and raise prices in order to get around the normal economic law of supply and demand. Strategic Alliance- is a partnership of two or more corporation or business units to achieve strategically significant objectives that are mutually beneficial. Reason for Strategic Alliance: To obtain technology and/or manufacturing capabilities. To obtain access to specific markets. To reduce financial risk. To reduce political risk. To achieve or ensure competitive advantage. Mutual Service Consortium- is a partnership of similar companies in similar industries who pool their resources to gain a benefit that is too expensive to develop alone. Joint Venture- is a cooperative business activity, formed by two or more separate organizations for strategic purposes that creates independent entity and allocates of ownership. Licensing Arrangement- is an agreement in which the licensing firm grants rights to another firm in another country or market to produce/sell product. Value-Chain Partnership-is a strong and close alliance in which one company or unit forms a long term arrangement with a key supplier or distributor for mutual advantage.

Examination of the current and anticipated factors associated with customers and competitors(external and internal environment) Envisioning a new or effective role for the firm a creative manner. Aligning policies, practices and resources to realize that vision. 3 Key Issues facing by the corporation: Directional Strategy Portfolio Strategy Parenting Strategy DIRECTIONAL STRATEGY: 1. Growth Strategies- expand the companys activities. Concentration Vertical Growth Horizontal Growth Diversification Concentric Conglomerate 2. Stabilty Strategies Pause/Proceed with Caution Strategy-timeout No Change Strategy Profit Strategy 3. Retrenchment Strategies Turnaround Strategy Captive Company Strategy Sell-out/Divestment Strategy Bankruptcy/Liquidation Strategy PORFOLIO ANALYSIS: Model: ( BCG Growth-Share Matrix & GE Business Screen) CORPORATE PARENTING-views the corporation in terms of resources and capabilities that can be used to deal business unit value as well as synergies across business units. PARENTING-FIX MATRIX-summarizesthe various judgement regarding corporate/business units fit for the corporation as a whole. o Edge of Heartland o Ballast Business o Alien Territory business o Value Trap Business

Chapter V

Corporate Strategy- approach to future that involves: 3