Strategic Management: Achieving Competitive Advantage

Strategic Management Definition

• Strategic Management, as defined by Fred David, involves the art and science of formulating, implementing, and evaluating cross-functional decisions to achieve organizational objectives.

Competitive Advantage

• The purpose of strategic planning is to create a competitive advantage, differentiating a small business from competitors and establishing a unique market position.

Features of Strategic Management

• Involves a short planning horizon
• It is informal and flexible
• Includes employees and external parties for input
• Prioritizes customer needs
• Emphasizes strategic thinking over rigid objective setting
• Combines long-term goals with daily operations

Strategic Planning

• Strategic Planning involves documenting and providing a clear mission, vision, goals, and action plans through assessing the business's current state and future direction.

10 Steps of Strategic Management

• Establish a clear vision and create a mission statement
• Define core competencies, target market, market segmentation, and market positioning
• Assess the firm's strengths and weaknesses
• Analyze external opportunities and threats
• Determine critical success factors
• Examine the competition
• Define company goals and objectives
• Develop and select strategic options
• Implement strategic plans into action plans
• Establish and monitor controls

Vision Statement

• Answers the question of what the company aspires to become
• Should express the type of business the organization operates in
• Represents the entrepreneur's desired future outcome

Vision Statement Tips

• Be concise
• Focus on the future (5-10 years)
• Use the present tense
• Set ambitious goals, focus on business success
• Reflect the entrepreneur's values and goals
• Be inspirational and passionate

Mission Statement

• A formal declaration by the organization that explains its purpose
• It serves as the foundation for the entire planning process

Elements of a Mission Statement

• Articulates the organization's beliefs and values
• Defines the company's target market
• Lists offered services and products
• Explains the value delivered to customers
• Highlights competitive advantages
• Decides targeted market
• Identifies key stakeholders and their impact

Components of a Mission Statement

• Identify customers
• Define products or services
• Outline geographic markets and market positioning
• Describe technological stance
• Define survival, growth, and profitability aims
• State philosophical beliefs, values, and priorities
• Define the firms self-concept
• Discuss the public image
• Emphasize the value of employees

Writing Tips for a Mission Statement

• Keep it simple
• Encourage participation
• Keep it current
• Reflect organizational values and culture
• Represent employee valued beliefs
• Address future concerns
• Keep a positive tone

Clear Mission and Vision Benefits

• Provides clarity for employees and managers
• Gives direction for planning activities
• Creates a focal point for stakeholders
• Resolves differing views among stakeholders
• Promotes shared expectations
• Supports project-oriented, motivated actions

Core Competencies

• Core competencies represent the resources and capabilities that provide a business with strategic advantages
• They involves lasting capabilities like innovation, quality, service, flexibility and team-building
• Competency should be difficult to copy and offer valuable customer benefits

Questions for Identifying Core Competencies

• Who are our target customers, and what traits do they possess?
• Why are our goods and services preferred?
• What resources improve customers' lives?
• How can we provide unique customer value?
• How loyal are customers to current suppliers?
• What skills are needed?

Evaluating Strengths and Weaknesses

• Strengths are positive internal factors for achieving the mission, goals, and objectives
• Weaknesses are negative internal factors hindering their achievement

Analyzing External Opportunities and Threats

• Entrepreneurs must analyze the external environment of opportunities and threats
• Opportunities are positive options for achieving the mission, goals, and objectives
• Threats are negative forces hindering achievement

Determining Key Success Factors

• Key factors are factors influencing a firm's competitive ability

SWOT Analysis Matrix

• Strengths: internal positive factors
• Weaknesses: internal negative factors
• Opportunities: external positive factors
• Threats: external negative factors

Scrutinizing the Competition

• Entrepreneurs should surpass competitors in quality, price, and design

Competitive Intelligence Program Goals

• Avoid competitive surprises
• Recognize new market rivals
• Shorten reaction time and improve strategy
• Anticipate competitor actions

Competitive Intelligence Improvement

• Identify major market competitors, their location, and threats
• Identify unique competencies developed by competitors
• Compare price structures
• Analyze sales methods

Knowledge Management

• Knowledge Management is the process of creating, sharing, organizing, and managing collective knowledge to enhance organizational goals and competitive advantage

Steps for Knowledge Management

• Assess the company's competitive advantage
• Organize and share essential knowledge throughout the company

Goals and Objectives

• Goals are broad guidelines indicating desired business achievements
• Objectives define implementation steps that are more specific for those targets

Well-Written Objective Characteristics

• Specific
• Measurable
• Assignable
• Realistic
• Time-bound

Strategic Options Include

• Cost leadership
• Differentiation
• Focus

Cost Leadership involves

• Establishing the lowest operational costs
• Gaining competitive advantage through prices

Differentiation involves

• Providing unique value compared to competitors

Focus involves

• Targeting a niche market

Strategy in Action

• Small business strategies are associated with their competitive advantages
• Strategic advantage can lead to aggressive growth

Small Company Strategies

• Respond fast to needs
• Stay flexible
• Seek emerging segments
• Innovate constantly
• Be willing to take risks and build loyalty

Converting Strategic Plans

• Entrepreneurs should turn plans into daily operating plans
• Managers should divide the plan into projects, defining each by scope, purpose, contribution and resources

Monitoring Controls

• Compare real vs projected results
• Monitor deviated results
• Use output, inventory and accounting to control tasks

Balanced Scorecard

• A measurement system to include financial and operational measures
• Gives managers a view of financial and operational aspects

Market Segmentation

• The strategy of dividing the target market into smaller categories of customers based on common characteristics like location

Positioning

• Influencing customers' perceptions to create a desired and clear business image

Business Plan definition

• It gives an overview of a venture with operational procedures

Business Plan Characteristics

• Gives clear image of venture
• Introduces strategies
• Presents operational procedures

Business Plan Function

• Helps set goals for the organization

Business Plan Values

• Provide road map for business
• Guides direction of the organization

Essential Functions of a Business Plan

• provides operational guide
• attracts investors
• attracts lenders

Provides Operational Guide

• Creates tools to support organizations

Attract Investors and Lenders

• Essential to secure loans

Addresses of Good Business Plan

• Describes the customer base
• Provides details of demographics
• Describes customer profile
• Explain customer purchase
• Showcases customer needs
• Differentiates customer in mindset

Business plan elements

• Executive Summary
• Company Description
• Industry Analysis
• Marketing Plan
• Market Analysis
• Financial Projections
• Operations Plan
• Management Team

Executive Summary

• Contains a synopsis
• Briefly explains owner and employees
• Describes the target market
• Includes data analysis

Company Description

• Contains a summary
• Provides details of company history
• Shows mission statement
• Legal status

Mission Statement Definition

• Vision of entrepreneur and business
• Details products

Industry Analysis

• Intended to familiarize investors
• Provides industry points of reference

Contains a well developed market analysis

• Identifies target market
• Contains price/ location analysis
• Identifies trends

Identifies Competitors

• Includes product comparisons
• Shows relative pricing

Section IV-B

• Contains product price/promotion guidelines

Well Developed Management Plan

• Details the company structure

Well Developed Operation Plan

• Addresses the approach
• Contains business location
• Lists financial assets

Well Developed Production Design

• Lists development of products
• Identifies risks

Well Developed Financial Design

• Analysis of sources used
• Pro-Forma use of assets

Impressing Investors

• Involves an information business plan
• Demonstrates visual data

Simplify presentations

• Show few points
• Avoid terms

Reality Test

• Show a real market
• Prove product demand
• Contain relevant information

Test for Competitiveness

• Position relating for competitors

Value Test

• Show how loan payoffs can succeed
• Attract investments