CBAC102 Notes PDF

STRATEGIC MANAGEMENT Controls – can be established to focus on actual performance results, activities that - a set of managerial decisions and actions that determines the long-run generate the performance, or resources...

STRATEGIC MANAGEMENT Controls – can be established to focus on actual performance results, activities that - a set of managerial decisions and actions that determines the long-run generate the performance, or resources used in performance. performance of a corporation. - management by objective. Participative on/from all levels of organization Types Of Control Basic Model Of Strategic Management 1. Feedforward control - It is a preventive control such as policy and operational manual. 1. ENVIRONMENTAL SCANNING – the monitoring, evaluating, and 2. Concurrent control - control occurs when the activity is still in the disseminating of information from the external and internal environments to key process people within the corporation. 3. Feedback control - happens after activities are completed. 2. STRATEGY FORMULATION – is the development of long-range plans for the STRATEGIC DECISION MAKING effective management of environmental opportunities and threats, in light of corporate strengths and weaknesses (SWOT). Characteristics: 1. Rare - uniqueness, uneasy to imitate, expensive. 3 Types of Strategy 2. Consequential - commitment in other levels of organization. 3. Directive - from top management. a. Corporate Strategy – describes a company’s overall direction in terms of its general attitude toward growth & the management of its Mintzberg's Modes or Approaches of Strategic Decision-Making various businesses and product lines. 1. Entrepreneurial Mode - The focus is on opportunities, problems are secondary. b. Business Strategy – occurs at the business unit or product level and 2. Adaptive Mode - characterized by reactive solutions to existing problems, it emphasizes improvement of the competitive position of a rather than proactive search for new opportunities. corporation’s products or services in the specific industry served by that business unit. 3. Planning Mode - involves the systematic gathering of appropriate information for situation analysis, the generation of feasible alternative strategies, and the c. Functional Strategy – is the approach taken by a functional area to rational selection of the most appropriate strategy. achieve corporate and business unit objectives and strategies by maximizing resource productivity. 4. Logical Incrementalism - a synthesis of the planning, adaptive, and to a lesser extent entrepreneurial modes. 3. STRATEGY IMPLEMENTATION – is a process by which strategies and policies are put into action through the development of programs, budgets, and PHASES OF STRATEGIC MANAGEMENT procedures. 1. Basic Financial Planning - undergoes the process of assessing the current Programs – is a statement of activities or steps needed to accomplish a financial situation of a business to identify future financial goals and how to single-use plan. achieve them. Annual financial plan, deliberation. Budget – It is a detailed cost of each program. 2. Forecast Based Planning - is usually 3-5 years and impact is an effective resource planning, it is historical. Procedures – are a system of sequential steps or techniques that describe in detail how a particular task or job is to be done. 3. Externally Oriented Strategic Planning - top management takes control of the planning process with the consultant who often provides sophisticated and 4. EVALUATION & CONTROL – is a process in which corporate activities and innovative techniques performance results are monitored so that actual performance can be compared with desired performance. 4. Strategic Management - implement plans and focus on the execution, evaluation, and control. Strategic Decisions - Strategic goals have to be specific. Has to conduct the EVALUATION & CONTROL IN STRATEGIC MANAGEMENT evaluation of the previous. How policy/guidelines affect the business 8 STEPS on STRATEGIC DECISION-MAKING PROCESS 1. Evaluate current performance results 3. Expert Opinion - is a non-quantitative technique in which experts in a 2. Review corporate governance particular area attempt to forecast likely developments. 3. Scan and asses the external environment 4. Scan and assess the internal environment 4. Delphi Technique - in which separated experts independently assess the 5. Analyse strategic (SWOT) factors likelihoods of specified events. 6. Generate, evaluate, and select the best alternative strategy. 7. Implemented selected strategies 5. Statistical Modelling - a quantitative technique that attempts to discover 8. Evaluate implemented strategies causal or explanatory factors that link two or more time series together. ENVIRONMENTAL SCANNING 6. Prediction Markets - is a recent forecasting technique enabled by easy access to the internet. External Environment a. Natural Environment 7. Scenario Writing - scenarios are focused descriptions of different likely future presented in a narrative fashion. b. Societal Environment - general forces that influence its long-run performance I. Economic Forces EXTERNAL FACTOR ANALYSIS SUMMARY (EFAS) II. Technological Forces III. Political Forces 1. List 8-10 combined opportunities and threats. (Eg. Economic GDP, Inflation, IV. Socio-Cultural Forces Currency, GNP) c. Task Environment - includes those elements/groups that directly affect a 2. Rating: corporation and in turn, are affected by it. 1.0 - Poor 2.0 - Below Average STEEP ANALYSIS - called PESTEL analysis and is the scanning of the 3.0 - Average socio-cultural, technological, economic, ecological, and political-legal environment. 4.0 - Above Average 5.0 - Outstanding Scanning The Environment Strategic Types - is a category of firms based on a common strategic orientation and a combination of structure, culture & processes consistent with that strategy. 4 CATEGORIES / GENERAL TYPES 1. Defenders – companies with a limited product line that focuses on improving the efficiency of their existing operations. 2. Prospectors - are companies with fairly broad product lines that focus on product innovation and market opportunities 3. Analyzers – are corporations that operate in at least two different product-market areas. 3. Assign a rating to each factor based on that particular company's specific 4. Reactors – are corporations that lack a consistent strategy-structure-culture response to that particular factor. relationship. FORECASTING Forecasting Techniques PORTER’S FIVE FORCES ANALYSIS 1. Extrapolation - the extension of present trends into the future. 1. Threat of new entrants 2. Bargaining power of suppliers 2. Brainstorming - is a non-quantitative approach that requires simply the 3. Bargaining power of buyers presence of people with some knowledge of the situation to be predicted. 4. Threat of substitute products or services 5. Switchboard Model - a firm acts as an intermediary to connect multiple sellers 5. Rivalry among existing competitors - Looking at the number and strength of to multiple buyers. your competitors. 6. Time Model - product research and development and speed are the keys to COMPETITIVE PROFILE MATRIX (CPM) success in this model. ▸ is a tool that compares the firm and its rivals and reveals their relative strengths 7. Efficiency Model - In this model, a company waits until a product becomes and weaknesses. standardized and then enters the market with a low-priced, low-margin product RATING: that appeals to the mass market. 4 = major strength 8. Blockbuster Model - the focus is on high investment in a few products with 3 = minor strength high potential payoffs. 2 = minor weakness 1 = major weakness 9. Profit Multiplier Model - it develops a concept that may or may not make money on its own but through synergy. 10. Entrepreneurial Model - a company offers specialized products/services to market niches that are too small to be worthwhile to large competitors but have the potential to grow quickly. 11. De Facto Industry Standard Model - a company offers products free or at a very low price to saturate the market & become the industry standard. SCANNING FUNCTIONAL RESOURCES & CAPABILITIES Critical Success Factors - One of the key areas, which must be performed at the Basic Organizational Structure highest possible level of excellence if organizations want to succeed in the particular industry. a. Simple Structure - appropriate for a small entrepreneur-dominated company with one or two product lines. Internal Scanning & Organizational Analysis Resources – an organization’s assets b. Functional Structure - appropriate for a medium-sized firm with several a. Tangible assets product lines in 1 industry. b. Intangible assets Capabilities – refer to a corporation’s ability to exploit its resources. c. Divisional Structure - is appropriate for a large corporation with many product Competency – is a cross-functional integration and coordination of capabilities. lines in several related industries. Core competency - is a collection of competencies that crosses divisional d. Strategic Business Units - are divisions or groups of divisions composed of boundaries, is widespread within the corporation and something that the independent product market segments that are given primary responsibility & corporation can do exceeding well. authority for the management of their functional areas. BUSINESS MODEL e. Conglomerate Structure - is appropriate for a large corporation with many ▸ is a company’s method for making money in the current business environment. product lines in several unrelated industries. 1. Customer Solution Model - a consulting model Corporate Culture 2. Profit Pyramid Model - it closes out any niche where a competitor might find - is the collection of beliefs, expectations, and values learned by a corporation’s a position. members & transmitted from one generation of employees to another. 3. Multi-component system/Installed base model - the product is thus a 2 Distinct Attributes of Corporate Culture system with one component providing most of the profits. 1. Cultural Integrity - the degree to which members of a unit accept the norms, 4. Advertising Model - offers its product free to make money on advertising. values, or other cultural content associated with the unit. 2. Cultural Integration - the extent to which units throughout an organization share a common culture. Strategic Marketing Issues A. Market Position - refer to the selection of specific areas for marketing concentration. B. Market Segmentation - refers to aggregating of perspective buyers into groups that have common needs & will respond similarly to a marketing action. C. Marketing Mix - Refers to the particular combination of key variables under a corporation’s control that can be used to affect demand & to gain competitive advantage. D. Product Life Cycle - Is a graph showing time plotted against the monetary sales of product as it moves. Strategic Financial Issues a. Allocation of Financial Resources b. Procurement of Funds c. Efficient & Effective Utilization of Financial Resources d. Financial Leverage Strategic Research & Development Issues a. Roles of Research & Development Manager b. Research & Development Intensity - A principal means of gaining market share is global competition. Strategic Operations Issues Strategic Human Resource Issues Mission Statement Components a. Increasing Use of Teams 1. Customer Cross-Functional Teams - Composed of members from different areas of 2. Products or services work responsibility. 3. Market Project Teams - Are convened for a particular task or project & disband once it is completed. 4. Technology Virtual teams - Are group of geographically and organizationally dispersed 5. Concern for survival, growth, and profitability co-workers that are assembled using a combination of telecommunications & 6. Philosophy information technologies to accomplish an organizational task. b. Human Diversity - Refers to the mix in the workplace of people from different races, 7. Self-concept cultures & background. 8. Concern for public image c. Improve Quality of Work Life of Human Resources 9. Concern for employees Strategic Information System - This is the design & manage the flow of information in an organization Goals and Objectives in ways that improve productivity & decision making. Intermittent system - Item is normally processed sequentially but the work & sequence of Goal: Increase sales the process vary. Objective: Increase 20% sales on the 2nd quarter of 2022 over the 1st quarter of Continues system - Are those laid out as lines on which products can be continuously 2022. assembled or processed. Technology Transfer - The process of taking a new technology from the laboratory to the marketplace. IQ 2Q Actual Internal Factor Analysis Summary (IFAS) 2M 2.4M 2.2M OBJECTIVES - To formulate goals and objectives of the functional department. Desired Characteristics of Objectives I. Quantitative II. Measurable III. Realistic IV. Understandable V. Challenging VI. Hierarchical VII. Obtainable  VIII. Congruent across departments A. Exporting - shipping goods produced in the company’s IX. Associated with timeline home country to other countries for marketing. B. Licensing - grants rights to another firm in the host country STRATEGY FORMULATION: CORPORATE STRATEGY to produce and sell a product. C. Franchising - rights to another company to open a retail Cooperative Strategies - to gain competitive advantage within an industry by store using the franchiser’s name and operating system working with other firms. D. Joint Ventures - between a foreign corporation & a 2 GENERAL TYPES domestic company is the most popular strategy used to enter a new country. 1. Collusion - the active cooperation of firms within an industry to reduce output E. Acquisition - purchasing another company. and raise prices to get around the normal economic law of supply and demand. F. Greenfield Development - the company doesn’t want to purchase another company’s problems along with its assets 2. Strategic Alliances - a long-term cooperative arrangement between two or and build its own manufacturing plant and distribution more independent firms or business units that engage in business activities for system. mutual economic gain. G. Production Sharing - the process of combining the higher labor skills and technology available in developed countries 3 GENERAL ORIENTATION OF DIRECTIONAL STRATEGY with the lower cost. H. Turnkey Operations - are typically contracts for the A. GROWTH STRATEGIES construction of operating facilities in exchange for a fee. B. STABILITY STRATEGIES I. Management Contracts - a corporation can use some of its C. RETRENCHMENT STRATEGIES personnel to assist a firm in a host country for a specified fee GROWTH STRATEGIES and period. 2 Basic Growth Strategies (Concentration & Diversification Strategies) 2. Diversification Strategies - this happens when growth opportunities are depleted. 1. Concentration Strategies Two Basic Diversification Strategies 2 Basic Concentration Strategies a. Concentric Diversification - by focusing on its distinctive competence & uses I. Vertical Growth - it grows by making its own supplies and/or by it for diversification. distributing its own products. A. Backward integration - seeking ownership or increased b. Conglomerate Diversification - diversifying to an industry unrelated to its control of the firm’s suppliers. current one. B. Forward integration- gaining ownership or increased STABILITY STRATEGIES control over distributors or retailers. - continuing its current activities without any significant change in direction. C. Full Integration - a firm internally makes 100% of its key supplies and completely controls its distributors. 3 Stability Strategies D. Taper Integration (concurrent sourcing) - a firm internally produces less than half of its requirements and buys the rest 1. Pause/ proceed with caution strategy - an opportunity to rest before from outside suppliers. continuing a growth or retrenchment strategy. E. Quasi-Integration - a company does not make any of its 2. No-change Strategy - is a decision to do nothing new key supplies but purchases most of its requirements from 3. Profit Strategy – is a decision to do nothing new in a worsening outside suppliers that are under its partial control. situation but instead to act as though the company’s problems are only F. Long Term Contracts - are agreements between two firms temporary. to provide agreed-upon goods and services to each other for a specified period of time. RETRENCHMENT STRATEGIES II. Horizontal Growth – expanding its operations into other geographic - it is applicable when it has a weak competitive position in some or all of its locations and/or increasing the range of products & services offered to product lines resulting in poor performance. current markets. Retrenchment strategy - strategic decision of a company to downsize its operations, reduce costs, and focus on its core competencies to improve its overall performance. 4 Retrenchment Strategies 1. Turnaround Strategy - emphasizes improving operational efficiency and is probably most appropriate when a corporation’s problems are pervasive but not yet critical. 2. Captive Company Strategy - involves giving up independence in exchange for security. 3. Sell out/Divestment Strategy - the corporation has multiple business lines & it chooses to sell off a division with low growth potential. 4. Bankruptcy/Liquidation Strategy - involves giving up the management of the firm to the courts in return for some settlement of the corporation’s obligations. PORTFOLIO ANALYSIS - top management views its product lines & business units as a series of Requirements for Generic Competitive Strategies investments from which it expresses a profitable return. ADVANTAGES OF PORTFOLIO ANALYSIS 1. It encourages top management to evaluate each of the corporation’s businesses individually & to set objectives and allocate resources for each. 2. It stimulates the use of externally oriented data to supplement management’s judgment. 3. It raises the issue of cash flow availability for use in expansion & growth. CORPORATE PARENTING – it views a corporation in terms of resources & capabilities that can be used to build business unit value as well as generate synergies across business units. 3 Analytical Steps In Developing A Corporate Parenting Strategy TACTICS – is a specific operating plan that details how a strategy is to be implemented in 1. Examine each business unit in terms of its strategic factors. terms of when & where it is to be put into action. 2. Examine each business unit in terms of areas in which performance can be improved. TACTICS USED TO IMPLEMENT COMPETITIVE STRATEGIES 3. Analyze how well the parent corporation fits with the business unit. 1. Timing Tactics – first mover/pioneer that establishes a reputation as an industry leader. Business Strategies 2. Market Location Tactics – deals with where a company implements a strategy. 2 Generic Competitive Strategies by Michael Porter METHODS USED TO ATTACK COMPETITOR’S POSITION 1. Lower Cost Strategy – is the ability of a company or a business unit to I. Frontal Assault – the attacking firm goes head to head with its design, produce, and market a comparable product more efficiently competitor. than its competitors. II. Flacking Maneuver – a firm may attack a part of the market where 2. Differentiation Strategy – is the ability of a company to provide the competitor is weak. unique and superior value to the buyer in terms of product quality, special features, or after-sales service.  III. Bypass attack – this tactic attempts to cut the market out from under Hyper Competition - The frequency, boldness, and aggressiveness of dynamic the established defender by offering a new type of product that makes movement by the players accelerates to create a condition of constant the competitor’s product unnecessary. disequilibrium and change. IV. Encirclement - occurs when an attacking company or unit encircles the competitor’s position in terms of products, market, or both. Directional Strategy - Sensitive to the signal coming from the internal & external V. Guerilla warfare - It accepts small gains and avoids pushing the environment. established competitor to the point that it must respond, else lose face. Scientific Management - Focus on efficiency same with defender. STRATEGY IMPLEMENTATION Changing Structural Characteristics Of Modern Care Advanced Types Of Organizational Structures 1. Matrix Structure – functional & product forms are combined simultaneously at the same level of the org. 2. Network Structure/Virtual structure – a series of independent firms or business units linked together by computers in an information system that designs, produces, and markets a product or service. Reengineering – is the radical redesign of business processes to achieve major gains in cost, service, or time Six Sigma – is an analytical method for achieving near-perfect results on a production line. Job Design - refers to the study of individual tasks in an attempt to make them more relevant to the company and to the employee. Job Design Techniques A. Job enlargement - combining tasks to give a worker more of the same type of duties to perform. B. Job Rotation - moving workers through several jobs to increase variety. C. Job Enrichment - altering the jobs by giving the worker more autonomy & control over activities.