The Nature of Strategic Management

The Nature of Strategic Management

• Strategy is a comprehensive plan for achieving organizational goals
• Strategic management is an ongoing process of forming and using effective strategies, and approaching business challenges
• Effective strategies align the organization with its environment and help achieve key goals

Components of Strategy

• Distinctive competence is an organizational strength that few others possess
• Scope specifies the range of markets
• Resource deployment involves distributing resources across the areas of competition

Levels of Strategy

• Business-level strategy involves choosing a strategic approach within a particular industry or market
• Corporate-level strategy involves selecting strategic possibilities for managing operations across multiple industries and markets

Strategy Formulation vs Implementation

• Strategy formulation involves creating or identifying strategies, focusing on content.
• Strategy implementation operationalizes strategies, focusing on the processes for achieving them

Deliberate vs Emergent Strategy

• Deliberate strategy is a planned action to support goals; it is rational and systematic
• Emergent strategy develops over time, even without explicit goals, and may allocate resources without prior planning

SWOT Analysis

• SWOT analysis is an acronym for strengths, weaknesses, opportunities, and threats
• SWOT is about evaluating internal and external factors that influence accomplishing the best strategies
• Best strategies aim to exploit opportunities and strengths, neutralize threats, and avoid or correct weaknesses

Strengths and Weaknesses

• Organizational strengths are skills or capabilities that help implement strategies
• Organizational weaknesses prevent an organization from carrying out mission-supporting strategies

Opportunities and Threats

• An organizational opportunity is an environmental element that can improve performance if used well
• An organizational threat can make it harder for an organization to do as well

Porter's Generic Strategies

• Differentiation strategy is when an organization seeks to stand out by quality of its products
• Cost leadership strategy is when an organization attempts to gain competitive advantage by reducing costs below competitors'
• Focus strategy is when an organization concentrates on a specific regional market, product line, or group of buyers

Implementing Porter's Strategies

• A Differentiation strategy can be implemented through the emphasis on quality, funds without creativity, and creativity and response to customer needs
• An overall cost leadership strategy can be implemented through low-cost customer needs, tight cost controls, and improving efficiencies
• A focus strategy for implementation can be through the customer needs of the region, the allocated resources, and needs of specific customers

Miles and Snow Typology

• Prospector strategy encourages creativity and flexibility with some decentralization
• Defender strategy focuses on lowering costs and improving products
• Analyzer strategy maintains current business and remains innovative
• Reactor strategy lacks a consistent approach to creating business plans

Implementing Miles and Snow's Strategy

• Decentralization helps promote growth with prospectors
• Prospectors can often switch to defenders for better efficiency
• Defenders focus on downplaying creativity and focusing on cost and improving performance
• Analyzers maintain current business, staying innovative in the current market

Strategies Based on the Product Life Cycle

• Introduction stage features high demand, managers focus on production speed without quality loss
• Growth stage consists of more firms producing the product, sales still grow
• Maturity stage features slow growth, product differentiation and new products become essential
• Decline stage sees demand and production decline, low costs are key to survival

Formulating Corporate Level Strategies

• Decisions about which businesses, industries, and markets that are entered helps guide corporate strategy
• Organizational diversification is the most important strategic issue at the corporate level

Diversification Strategies

• A single-product strategy is when an organization makes one product or service and sells it in one place
• Related diversification is when an organization operates in one place
• Unrelated diversification is when an organization operates in many businesses that are not logically associated with one another

Strategies (continued)

• Single-product success comes from complete focus, but it's threatened if the product isn't accepted
• Related diversification reduces reliance on one business and lowers risk
• Unrelated diversification can achieve stable performance but may lack synergy

Diversified Firm

• Most do not start out as completely diversified
• Diversified firms often develop products, replace suppliers, or go through acquisition

Diversified Firm (continued)

• Acquisitions can be used to incorporate complimentary products or services
• Synergies are often the main goal
• Merger occurs after the purchase of around the same size
• Acquisitions purchased by firms often disappear

Portfolio Management Techniques

• Methods determine which businesses to engage in to maximize profits

International and Global Strategies

• Managers of international firms face more complexity and uncertainty when formulating strategies
• Three sources of competitive advantage: global efficiencies, multimarket flexibility, worldwide learning