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STRATEGIC MANAGEMENT Face to Face August 19 ,2024  LESSON 1 – INTRODUCTION TO STRATEGIC MANAGEMENT LESSON II –ANALYZING THE EXTERNAL ENVIRONMENT LESSON III- ASSESSING THE INTERNAL ENVIRONMENT Lesson 1 : Introduction to Strategic Management in Tourism, Hospitality and Events Organizations...

STRATEGIC MANAGEMENT Face to Face August 19 ,2024  LESSON 1 – INTRODUCTION TO STRATEGIC MANAGEMENT LESSON II –ANALYZING THE EXTERNAL ENVIRONMENT LESSON III- ASSESSING THE INTERNAL ENVIRONMENT Lesson 1 : Introduction to Strategic Management in Tourism, Hospitality and Events Organizations Strategic management- consists of the analyses, decisions, and actions an organization undertakes in order to create and sustain competitive advantages (Dess, McNamara, Eisner, Lee, 2019). Strategy is a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors (Rothaermel, 2019). A good strategy needs to start with a clear and critical diagnosis of the competitive challenge 3. Levels of Strategic Decisions  Strategic Level Decisions Strategic decisions normally have a number of Strategic decisions (which characteristic features in are our primary focus) are concerned with: that they: The acquisition of are made by senior leaders sustainable competitive affect the whole advantage The setting of long-term organization objectives are medium to long-term in The formulation, evaluation, nature selection and monitoring of are complex and often strategies to achieve these objectives based upon certain or incomplete information  3. Levels of Strategic Decisions Tactical Level Decisions Tactical decisions are concerned with how strategic level objectives are to be met and how strategies are implemented. They are dependent upon overall strategy and involve fine tuning and adjustment.  3. Levels of Strategic Decisions Operational Level Decisions Operational decisions are concerned with the short-term objectives of the business and with its day-to-day management. They are dependent upon strategy and tactics.  Organizational Vision, Mission and Strategic Objectives Organizational Vision A vision is a goal that is massively inspiring, overarching, and long term. Vision statement answers the question “What do we want to become?”and often considered the first step in strategic planning. Organizational Vision, Mission and Strategic Objectives Mission Statements A company’s mission statement differs from its vision in that it encompasses both the purpose of the company and the basis of competition and competitive advantage. It describes what an organization actually does, that is the product and services it plans to provide, and the markets in which it will compete.  Organizational Vision, Mission and Strategic Objectives Strategic Objectives Strategic objectives are used to operationalize the mission statement. That is, they help to provide guidance on how the organization can fulfill or move toward the “higher goals” in the goal hierarchy-the mission and the vision.  Organizational Vision, Mission and Strategic Objectives For objectives to be meaningful, they need to satisfy several criteria. An objective must be:. Specific - This provides a clear message as to what needs to be accomplished Measurable - There must be at least one indicator (or yardstick) that measures progress against fulfilling the objective. Appropriate - It must be consistent with the organization's vision and mission. Realistic - It must be an achievable target given the organization's capabilities and opportunities in the environment. In essence, it must be challenging but doable. Timely - There must be a time frame for achieving the objective.  There are two main elements that go to the heart of the field of strategic management. First: The strategic management of an organization entails three ongoing processes: 1. Analysis of strategic goals (vision, mission, and strategic objectives) along with the analysis of the internal and external environments of the organization. 2. Strategic decisions –these decisions broadly speaking, address two basic questions: what industries should we compete in? How should we compete in those industries? 3. Actions that must be taken. Firms must take the necessary actions to implement their strategies-the ideas, decisions, and actions that enable a firm to succeed. Second: The essence of strategic management is the study of why some firms outperform others. Thus, managers need to determine how a firm is to compete so that it can obtain advantages that are sustainable over a long period of time. That means focusing on two fundamental questions: 1. How should we compete in order to create competitive advantages in the marketplace? 2. How can we create competitive advantages in the market place that are unique, valuable, and difficult for rivals to copy or substitute?  The Four Key Attributes of Strategic Management Directs the organization toward overall goals and objectives  Includes multiple stakeholders in decision making  Needs to incorporate short-term and long term perspectives  Recognizes trade-offs between efficiency and effectiveness  The Four Key Attributes of Strategic Management First, strategic management is directed toward overall organizational goals and objectives. Second, strategic management includes multiple stakeholders in decision making. Third, strategic management requires incorporating both short-term and long-term perspectives. Fourth, strategic management involves the recognition of trade-offs between effectiveness and efficiency. The Strategic Management Process A successful strategy details a set of actions that managers take to gain and sustain competitive advantage. Effectively managing the strategy process is the result of three broad tasks: 1. Analyze (A) 2. Formulate (F) 3. Implement (I)  The tasks of analyze, formulate, and implement are the pillars of research and knowledge about strategic management. Why do we often refer to strategy as a process? The answer is that it is never a once-and-for all event---it goes on and on Strategic Analysis The purpose of strategic analysis is to gather information and to analyze it systematically and thoroughly. Strategic analysis includes the following: 1. Analyzing Organizational Goals and Objectives : A firm’s vision, mission, and strategic objectives form a hierarchy of goals that range from broad statement s of intent and bases for competitive advantage to specific, measurable strategic objectives For objectives to be meaningful, they need to satisfy several criteria. An objective must be: Specific - This provides a clear message as to what needs to be accomplished Measurable - There must be at least one indicator (or yardstick) that measures progress against fulfilling the objective. Appropriate - It must be consistent with the organization's vision and mission. Realistic - It must be an achievable target given the organization's capabilities and opportunities in the environment. In essence, it must be challenging but doable. Timely - There must be a time frame for achieving the objective.  2. Examination of an organization’s internal environment (internal analysis). The purpose on internal analysis is to establish the organization’s strengths and weaknesses. 3. Examination of the organization’s external. environment (external analysis). This takes the form of a thorough analysis of two layer’s of external environment-the micro and the macro environment. Lesson 2: Analyzing the External Environment of the Firm 1. Explain why environmental scanning, environmental monitoring, and collecting competitive intelligence are critical inputs to forecasting. 2. Discuss the impact of the general environment on a firm's strategies and performance 3. Explain how forces in the competitive environment can affect profitability, and how a firm can improve its competitive position by increasing its power vis-a-vis these forces. View  2. The General Environment (PESTEL Framework) 2.1 The PESTEL Framework A PESTEL analysis is a tool or framework for marketers. You can use it if you are seeking to analyze and screen the external marketing environment of your company. The strategic management tool gauges macro-environmental factors. The results make decision-making much easier. Image Source: http://bitly.ws/g9BG  Political Factors Politics plays an important role in business. This is because there is a balance between systems of control and free markets. As global economics supersedes domestic economies, companies must consider numerous opportunities and threats before expanding into new regions Economic Factors Economic factors are metrics that measure the health of any economic region. The economic state will change a lot of times during the firm’s lifetime. You have to compare the current levels of inflation, unemployment, economic growth, and international trade. This way, you can carry out your strategic plan better Social Factors Social factors assess the mentality of individuals or consumers in a given market. These are also known as demographic factors. Social indicators like exchange rates, GDP, (Gross Domestic Product ) and inflation are critical to management. Technological Factors This step entails recognizing the potential technologies that are available. Technological advancements can optimize internal efficiency and help a product or service from becoming technologically obsolete. Environmental Factors Both consumers and governments penalize firms for having an adverse effect on the environment. Governments levy huge fines upon companies for polluting. Companies are also rewarded for having a positive impact on the environment The consumers are willing to switch brands if they find a business is ignoring its environmental duties. Legal Factors This step involves learning about the laws and regulations in your region. It is critical for avoiding unnecessary legal costs. This is the last factor in the PESTEL framework. These factors overview the legal elements. Often, start-ups link these elements to the political framework. Many legal issues can affect a company that does not act responsibly. It is common to conduct a PESTEL analysis before serious decisions. Managers might conduct it before any large projects are undertaken. Understanding all the influencing factors is the first step to addressing them. Remember, there are many factors other than these which can have an effect on business success. The evaluation is a one-to- one process. Each company should do it for themselves and find the key drivers of change. You must identify the factors which have strategic and competitive consequences.. The Competitive Environment (Porter's Five Forces Model) 2.2 Porter’s Five Forces Model  Airline Industry BUYER POWER Threat of New Entrants - LOW HIGH – The barriers to entry in the airline When buyers industry are remarkably high. have many The operating costs are massive, and choices the government regulations a LOW – company must navigate are When there are numerous and exceedingly complex. few choices Airline Industry Industry Competition - HIGH The level of competition in the airline industry is high. The big airlines essentially fly to the same places out of the same airports for about the same prices. The amenities, or lack of amenities, they offer are similar, and the seats in coach are just as cramped no matter which airline you choose. Bargaining Power of Buyers - HIGH Buyers have immense bargaining power over airlines because the cost and effort required to switch from one carrier to another is minimal. The emergence and raging popularity of third-party trip-booking websites and smartphone apps exacerbate this issue for the airlines. Most travelers do not contact an airline directly to book a flight. They access sites or apps that compare rates across all carriers, enter their trip itineraries, and then choose the least expensive deal that accommodates their schedules. Bargaining Power of Suppliers - HIGH The power of Suppliers in the airline industry is categorized as HIGH with reference to the three inputs that airlines have (fuel, aircraft, and labor) which are all affected by external environment Price of aviation fuel is subject to the fluctuations in the global market for oil which can spin wildly because of geopolitical and other factors Labor is subject to the power of unions who often bargain and get unreasonable and costly concessions from the airlines Airline companies needs aircraft which depends on the two biggies, Airbus and Boeing Threat of Substitutes – LOW to Moderate A substitute, as defined by the Five Forces model, is not a product or service that competes directly with the company's offerings but acts as a substitute for it. Examples of substitutes are making the trip by train, car, or bus. Until a new technology comes along that supplants air travel as the fastest and most convenient way to travel long distances, airline companies faces little threat from substitute methods of travel.  Porter’s Five Forces Analysis For both small and big businesses, managing business effectively is difficult. One of the most essentials skills needed is the ability to assess the competitive environment. Entrepreneur and managers must comprehend the competitive environment of the business. Supplier power Supplier Power is the ability of vendors to increase prices of your inputs. Often, the first step is to assess how Buyer power refers to the easy it is for the suppliers to increase customers’ power drive down prices of inputs. This depends on the prices. Competitive rivalry is the following factors: strength of competition. The threat of substitution is the The number of suppliers of the key degree to which different input products and services can be How unique their product or service used instead of your offering. is The threat of new entry is how Their strengths and how much easily new competitors can enter the market. control they have over you The cost of switching from one to another Fewer number of supplier choices means you need suppliers’ help more powerful. Buyer Power When assessing buyer Competitive Rivalry power, you have to ask The critical thing to consider yourself how easy it is for the customers to bring here is the number and prices down. This capability of your business depends on the following factors: competitors. If there are many The number of buyers competitors and if they offer The importance of each equally appealing products and customer to a business The cost to consumers services, you will perhaps have switching from your very little power. This is because offering to products and services by another suppliers and buyers will choose company. the competing companies if If you handle only some they do not like the deal you are powerful purchasers, they often dictate the terms to offering. you. Threat of Substitution The ability of your buyers to find an alternative is considered here. If you provide unique software which automates a significant process, consumers can easily substitute by conducting the process manually. They may choose to outsource it as well. If the substitution is easy and viable, it weakens your business. Factors you can assess are: Performance of the substitute product Cost of change Threat of New Entry Other’s ability to enter the market can affect power too. The below factors affect this: Time and cost of entering the market and competing If there are few economies of scale in place The amount of protection for the key technologies The new businesses can swiftly enter the market and weaken your position. How does Porter’s Five Forces SWOT can be described a more Model vary from SWOT general and overall assessment. SWOT is one of the most Typically, the Five Forces model commonly used businesses focuses on a single growth tool. Both the analyses in decision. SWOT is often used to discussion can portray the get a picture of firm’s current strengths and weakness of position. After conducting the your business. However, there SWOT analysis, you can consider are some major distinctions. future strategic options. Five The level of specificity, Forces assesses the viability of a competition and time specific product or service. orientation are some differences. SWOT focuses on your business and its position while you can use Five Forces to analyze competitors. Porter’s Five Forces helps find out how competitors could inhibit you. Time orientation is another factor which differentiates SWOT and the Five Forces model. SWOT primarily assesses your current position and the future endeavors.