Management - Chapter 10 Strategy & Strategic Management (5th Canadian)

Management Fifth Canadian Edition John R. Schermerhorn, Bachrach, Jr. Barry Wright Chapter 10 Strategy and Strategic Management This slide deck contains animations. Please disable animations if they cau...

Management Fifth Canadian Edition John R. Schermerhorn, Bachrach, Jr. Barry Wright Chapter 10 Strategy and Strategic Management This slide deck contains animations. Please disable animations if they cause issues with your device. Copyright ©2021 John Wiley & Sons Canada, Ltd. Learning Objectives 10.1 Discuss the process and importance of strategic management. 10.2 Identify the essential elements in strategic analysis. 10.3 Compare alternative corporate strategies. 10.4 Explain alternative business-level strategies. 10.5 Describe the foundations for strategy implementation. Copyright ©2021 John Wiley & Sons 2 Canada, Ltd. Strategic Management (1 of 9) Basic concepts of strategy: Competitive advantage — ability to do something so well that one outperforms competitors Sustainable competitive advantage — one that is difficult or costly for competitors to imitate Copyright ©2021 John Wiley & Sons 3 Canada, Ltd. Strategic Management (2 of 9) Sources of competitive advantage Technology Cost and quality Knowledge and speed Barriers to entry Financial resources Copyright ©2021 John Wiley & Sons 4 Canada, Ltd. Strategic Management (3 of 9) Basic concepts of strategy: Strategy o a comprehensive plan guiding resource allocation to achieve long-term organization goals Strategic intent o focusing all organizational energies on a unifying and compelling goal Copyright ©2021 John Wiley & Sons 5 Canada, Ltd. Strategic Management (4 of 9) Levels of strategies Corporate o Sets long-term direction for the total enterprise Business o How a division or strategic business unit will compete in its product or service domain Functional o Guides the use of resources within one specific area of operations Copyright ©2021 John Wiley & Sons 6 Canada, Ltd. Strategic Management (5 of 9) The three levels of strategy in organizations Copyright ©2021 John Wiley & Sons 7 Canada, Ltd. Strategic Management (6 of 9) Strategic Management Process: Strategic management o the process of formulating and implementing strategies to accomplish long-term goals and sustain competitive advantage Strategic analysis o process of analyzing the organization, the environment, its competitive positioning, and current strategies Copyright ©2021 John Wiley & Sons 8 Canada, Ltd. Strategic Management (7 of 9) Major elements in the strategic management process Copyright ©2021 John Wiley & Sons 9 Canada, Ltd. Strategic Management (8 of 9) Strategy formulation The process of developing a new or revised strategy Involves assessing existing strategies, organization, and environment to create new strategies and strategic plans capable of delivering future competitive advantage Copyright ©2021 John Wiley & Sons 10 Canada, Ltd. Strategic Management (9 of 9) Strategy implementation The process of allocating resources and putting strategies into action All organizational and management systems must be mobilized to support and reinforce the accomplishment of strategies Copyright ©2021 John Wiley & Sons 11 Canada, Ltd. Essentials of Strategic Analysis (1 of 15) Strategic Questions: What is our business mission? Who are our customers? What do our customers value? What have been our results? What is our plan? Copyright ©2021 John Wiley & Sons 12 Canada, Ltd. Essentials of Strategic Analysis (2 of 15) Analysis of mission: The reason for an organization’s existence Good mission statements identify: o What are we moving to? o What is our dream? o What kind of difference do we make? o What do we want to be known for? Copyright ©2021 John Wiley & Sons 13 Canada, Ltd. Essentials of Strategic Analysis (3 of 15) Stakeholders Individuals and groups directly affected by the organization and its strategic accomplishments An important test of the mission is how well it serves the organization’s stakeholders Copyright ©2021 John Wiley & Sons 14 Canada, Ltd. Essentials of Strategic Analysis (4 of 15) External stakeholders as strategic constituencies in an organization’s mission Copyright ©2021 John Wiley & Sons 15 Canada, Ltd. Essentials of Strategic Analysis (5 of 15) Analysis of Core values: Broad beliefs about what is or is not appropriate behaviour Organizational culture reflects the predominant value system of the organization as a whole Copyright ©2021 John Wiley & Sons 16 Canada, Ltd. Essentials of Strategic Analysis (6 of 15) Analysis of objectives: Operating objectives are specific results that organizations try to accomplish Copyright ©2021 John Wiley & Sons 17 Canada, Ltd. Essentials of Strategic Analysis (7 of 15) Typical operating objectives of a business include: Profitability Sustainability Social responsibility Financial health Cost efficiency Copyright ©2021 John Wiley & Sons 18 Canada, Ltd. Essentials of Strategic Analysis (8 of 15) Typical operating objectives of a business include: Customer service Product quality Market share Human capacity Innovation Copyright ©2021 John Wiley & Sons 19 Canada, Ltd. Essentials of Strategic Analysis (9 of 15) Analysis of organizational resources and capabilities: Core competency is a special strength that gives an organization competitive advantage An important goal of the organization is assessing core competencies Copyright ©2021 John Wiley & Sons 20 Canada, Ltd. Essentials of Strategic Analysis (10 of 15) Potential core competencies: Special knowledge or expertise Superior technology Efficient supply chains Unique product distribution systems Copyright ©2021 John Wiley & Sons 21 Canada, Ltd. Essentials of Strategic Analysis (11 of 15) SWOT Analysis Examination of an organization’s current position by looking at o Internal strengths and weaknesses o Environmental opportunities and threats Copyright ©2021 John Wiley & Sons 22 Canada, Ltd. Essentials of Strategic Analysis (12 of 15) SWOT analysis of strengths, weaknesses, opportunities, and threats Copyright ©2021 John Wiley & Sons 23 Canada, Ltd. Essentials of Strategic Analysis (13 of 15) Porter’s model of five strategic forces affecting industry competition Copyright ©2021 John Wiley & Sons 24 Canada, Ltd. Essentials of Strategic Analysis (14 of 15) Porter’s Model of Five Strategic Forces Affecting Competition: Industry competition o Intensity of rivalry among firms and their competitive behaviour New entrants o Threat of new competitors entering the market Substitute products or services o Threat of substitute products or services Copyright ©2021 John Wiley & Sons 25 Canada, Ltd. Essentials of Strategic Analysis (15 of 15) Porter’s Model of Five Strategic Forces Affecting Competition: Bargaining power of suppliers o Ability of resource suppliers to influence the cost of products or services Bargaining power of customers o Ability of customers to influence the price they will pay for products or services Copyright ©2021 John Wiley & Sons 26 Canada, Ltd. Corporate-Level Strategy Formulation (1 of 13) Corporate-level strategy formulation Portfolio planning model: o Portfolio planning seeks the best mix of investments among alternative business opportunities BCG Matrix analyzes business opportunities according to market growth rate and market share Copyright ©2021 John Wiley & Sons 27 Canada, Ltd. Corporate-Level Strategy Formulation (2 of 13) BCG matrix Ties strategy formulation to analysis of business opportunities according to … o Industry or market growth rate Low versus high o Market share Low versus high Copyright ©2021 John Wiley & Sons 28 Canada, Ltd. Corporate-Level Strategy Formulation (3 of 13) The BCG Matrix approach for portfolio planning in corporate- level strategy formulation Copyright ©2021 John Wiley & Sons 29 Canada, Ltd. Corporate-Level Strategy Formulation (4 of 13) BCG matrix — business conditions and related strategies: Stars o High share/high growth businesses o Preferred strategy — growth Cash cows o High share/low growth businesses o Preferred strategy — stability or modest growth Copyright ©2021 John Wiley & Sons 30 Canada, Ltd. Corporate-Level Strategy Formulation (5 of 13) BCG matrix—business conditions and related strategies: Question marks o Low share/high growth businesses o Preferred strategy — growth for promising question marks and restructuring or divestiture for others Dogs o Low share/low growth businesses o Preferred strategy — retrenchment/divestiture Copyright ©2021 John Wiley & Sons 31 Canada, Ltd. Corporate-Level Strategy Formulation (6 of 13) Growth strategies — Seek an increase in size and the expansion of current operations Types of growth strategies: Concentration strategies o Grow within the same business area Copyright ©2021 John Wiley & Sons 32 Canada, Ltd. Corporate-Level Strategy Formulation (7 of 13) Types of growth strategies: Diversification: Grow by acquiring or investing in new and different business areas o Related diversification o Unrelated diversification Integration: Acquiring suppliers or distributors o Vertical integration – (backward or forward) Copyright ©2021 John Wiley & Sons 33 Canada, Ltd. Corporate-Level Strategy Formulation (8 of 13) Retrenchment and restructuring strategies: Pursue radical changes to solve problems Chapter 11 bankruptcy o Protects a firm from creditors while management re-organizes to restore solvency Copyright ©2021 John Wiley & Sons 34 Canada, Ltd. Corporate-Level Strategy Formulation (9 of 13) Types of retrenchment and restructuring strategies Liquidation o Business closes and sells assets to pay creditors Downsizing o Decreases size of operations Copyright ©2021 John Wiley & Sons 35 Canada, Ltd. Corporate-Level Strategy Formulation (10 of 13) Types of retrenchment and restructuring strategies Divestiture o Sells off parts of the organization to refocus attention on core business areas Turnaround Strategy o Tries to fix specific performance problems Copyright ©2021 John Wiley & Sons 36 Canada, Ltd. Corporate-Level Strategy Formulation (11 of 13) Global strategies: Globalization strategy o World is one large market; standardize products and advertising as much as possible Multidomestic strategy o Customize products and advertising to fit local markets as much as possible Transnational strategy o Balance efficiencies in global operations and responsiveness to local markets Copyright ©2021 John Wiley & Sons 37 Canada, Ltd. Corporate-Level Strategy Formulation (12 of 13) Cooperative strategies Strategic alliances — two or more organizations partner to pursue an area of mutual interest Types of strategic alliances: o Outsourcing alliances o Supplier alliances o Distribution alliances Copyright ©2021 John Wiley & Sons 38 Canada, Ltd. Corporate-Level Strategy Formulation (13 of 13) Co-opetition – working with rivals on projects of mutual benefit Copyright ©2021 John Wiley & Sons 39 Canada, Ltd. Business-Level Strategy Formulation (1 of 6) Business-level strategy formulation Good strategies help achieve above average returns Key question is “How can we best compete for customers in our market and with our products or services?” Copyright ©2021 John Wiley & Sons 40 Canada, Ltd. Business-Level Strategy Formulation (2 of 6) Porter’s competitive strategies model Business-level strategic decisions are driven by: o Market scope o Source of competitive advantage Market scope and source of competitive advantage combine to generate three generic strategies Copyright ©2021 John Wiley & Sons 41 Canada, Ltd. Business-Level Strategy Formulation (3 of 6) Porter’s competitive strategies framework with soft-drink industry examples Copyright ©2021 John Wiley & Sons 42 Canada, Ltd. Business-Level Strategy Formulation (4 of 6) Porter’s generic strategies for gaining competitive advantage: Differentiation strategy Cost leadership strategy Focus strategy: o Focused cost leadership o Focused differentiation Copyright ©2021 John Wiley & Sons 43 Canada, Ltd. Business-Level Strategy Formulation (5 of 6) Differentiation strategy Seeks competitive advantage through uniqueness Cost leadership strategy Seeks competitive advantage by operating with lower costs than competitors Copyright ©2021 John Wiley & Sons 44 Canada, Ltd. Business-Level Strategy Formulation (6 of 6) Focus strategy Concentrates on a special market segment Two types: o Focused differentiation – offers a unique product to a special market segment o Focused cost leadership – seeks the lowest cost of operations within a special market segment Copyright ©2021 John Wiley & Sons 45 Canada, Ltd. Strategy Implementation (1 of 6) Strategy implementation Must be supported in every aspect of management o Planning o Controlling o Organizing o Leading Copyright ©2021 John Wiley & Sons 46 Canada, Ltd. Strategy Implementation (2 of 6) Strategic planning failures that hinder strategy implementation: Failures of substance o Inadequate attention to major strategic planning elements Failures of process o Poor handling of strategy implementation Lack of participation error Goal displacement error Copyright ©2021 John Wiley & Sons 47 Canada, Ltd. Strategy Implementation (3 of 6) Strategic control Makes sure strategies are well implemented and that poor strategies are scrapped or modified Corporate governance System of control and monitoring of top management Copyright ©2021 John Wiley & Sons 48 Canada, Ltd. Strategy Implementation (4 of 6) Corporate governance: Intended to ensure that strategic management of the organization is successful Done by boards of directors and other major stakeholder representatives Controversies regarding roles of inside directors and outside directors Increasing emphasis on corporate governance in contemporary businesses Consideration for more diversity in the Boardroom Copyright ©2021 John Wiley & Sons 49 Canada, Ltd. Strategy Implementation (5 of 6) Strategic leadership Inspires people to continually change, refine, and improve strategies and their implementation Copyright ©2021 John Wiley & Sons 50 Canada, Ltd. Strategy Implementation (6 of 6) Critical tasks of strategic leadership Maintain strategic control Be the guardian of trade-offs Create a sense of urgency Ensure that everyone understands the strategy Be a teacher Copyright ©2021 John Wiley & Sons 51 Canada, Ltd. Copyright Copyright © 2021 John Wiley & Sons Canada, Ltd. All rights reserved. Reproductions or translations of this work beyond that permitted by Access Copyright (The Canadian Copyright Licensing Agency) is unlawful. Requests for further information should be addressed to the Permissions Department, John Wiley & Sons Canada, Ltd. The purchaser may make back-up copies for his or her own use only and not for distribution or resale. The author and the publisher assume no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information contained herein. Copyright ©2021 John Wiley & Sons 52 Canada, Ltd.