Strategic Management Finals Reviewer FIN221 PDF

STRATEGIC MANAGEMENT FINALS REVIEWER FIN221 Topics: 2 Minor Weakness - Internal Assessment 3 Minor Strength - Value Chain Analysis - TOWS Matrix 4 Major Strength - SPACE Matrix - BCG...

STRATEGIC MANAGEMENT FINALS REVIEWER FIN221 Topics: 2 Minor Weakness - Internal Assessment 3 Minor Strength - Value Chain Analysis - TOWS Matrix 4 Major Strength - SPACE Matrix - BCG Matrix - Integration Strategies Regardless of how many factors are - QSPM included in an Internal Factor Exam Type: Evaluation (IFE) Matrix, the total weighted score can range from a low of - Identification 1.0 to a high of 4.0, with the average - Enumeration - Analysis score being 2.5. Total weighted scores well below 2.5 THE INTERNAL ASSESSMENT characterize organizations that are weak internally, whereas scores THE PROCESS OF PERFORMING AN significantly above 2.5 indicate a INTERNAL AUDIT strong internal position. Internal Factor Evaluation An IFE Matrix should include from 10 to a strategy tool used to evaluate firm’s 20 key factors. internal environment and to reveal its strengths as well as weaknesses When a key internal factor is both a strength and a weakness, the factor should be included twice in the IFE Matrix, and a weight and rating should be assigned to each statement. The Internal Factor Evaluation (IFE) Matrix together with the External Factor Evaluation (EFE) Matrix is a strategy-formulation tool that can be utilized to evaluate how a company is performing regarding identified internal strengths and weaknesses of a Rates (IFE) company. 1 Major Weakness STRATEGIC MANAGEMENT FINALS REVIEWER FIN221 The Internal Factor Evaluation (IFE) Secondary: Matrix is very similar to the External Factor Evaluation (EFE) Matrix. The major difference between the IFE matrix and the EFE matrix is the type of factors that are included in the model. VALUE CHAIN ANALYSIS STEPS 1 Determine your value chain While the IFE matrix deals with internal activities factors, the EFE matrix is concerned (Primary and secondary may be solely with external factors different depending on nature of business) VALUE CHAIN ANALYSIS 2 Identify the strengths and weaknesses in the value chain activities by Michael E. Porter, Competitive advantage, creating and sustaining 3 Analyze whether any of the superior performance, 1985 strengths are sustainable competitive advantages using The value chain disaggregates a firm VRIO framework into its strategically relevant activities 4 Assess the strategic implications in order to understand the behavior of of our analysis costs and the existing and potential sources of differentiation. VRIO FRAMEWORK A firm gains competitive advantage by Valuable Does it create value performing these strategically for the firm? important activities more cheaply or Decrease costs better than its competitors. or increase customers Primary and Secondary Activities willingness to pay? within the value chain Rare Do few or no other Primary: competitors have the capability or the resource? STRATEGIC MANAGEMENT FINALS REVIEWER FIN221 Inimitable Is it difficult to MATRIX, BCG MATRIX imitate or substitute? TOWS MATRIX Organizational Is the right Support organization infrastructure, assets and culture in place to leverage the capability or resource? External External Opportunities Threats sustainable competitive advantage (O) (T) Strategic Implications of VRIO SO ST Maxi-Maxi Maxi-mini Weaknesses Strategy strategy Internal Strategies Strategies How can we obtain the resources and Strength that use that use capabilities we need to overcome our s (S) strengths to strengths to weaknesses? maximize minimize opportunities threats Temporary Advantages WO WT How can we best extend and defend our Mini-maxi Mini-mini temporary advantages? strategy strategy Internal Strategies Strategies Weaknes that minimize that Sustainable competitive advantages ses weaknesses minimize How can we best exploit and reinforce (W) by taking weaknesses our sustainable competitive advantage of and avoid opportunities threats advantages? TOWS MATRIX, SPACE SPACE MATRIX STRATEGIC MANAGEMENT FINALS REVIEWER FIN221 The following are a few model technical The SPACE matrix is a management tool assumptions: used to analyze a company. It is used to By definition, the CA and IS values in determine what type of a strategy a the SPACE matrix are plotted on the X company should undertake. axis. (horizontal) The Strategic Position & ACtion CA values can range from -1 to -6. Evaluation matrix or short a SPACE IS values can take +1 to +6. matrix is a strategic management tool The FS and ES dimensions of the that focuses on strategy formulation model are plotted on the Y axis. especially as related to the competitive (vertical) position of an organization. ES values can be between -1 and -6. - FS values range from +1 to +6. The SPACE matrix is broken down to INTEGRATION STRATEGIES four quadrants where each quadrant suggests a different type or a nature of Horizontal integration and vertical a strategy: integration are growth strategies that Aggressive companies use to consolidate their Conservative positions and set themselves apart from Defensive their competitors. Competitive Both involve the acquisition of other The SPACE matrix calculates the businesses. importance of each of these dimensions and places them on a Cartesian graph While either strategy can help with X and Y coordinates. companies expand, there are important differences between the two. STRATEGIC MANAGEMENT FINALS REVIEWER FIN221 HORIZONTAL INTEGRATION a strategy that involves growth through the acquisition of a producer, a business grows by purchasing vendor, supplier, distributor, or other related businesses—namely, its related company that the acquirer competitors may already be doing business with. Companies that choose to integrate a growth strategy that many vertically do so to strengthen their companies use to boost their position supply chain, reduce their production within their industries costs, capture upstream or and get an edge on their competition downstream profits, or access new distribution channels They do this by taking over another company that operates at the same level of the value chain. This means Examples of Vertical Integration: both companies offer similar (if not *can’t remember yung nabanggit ni ms huhu the same) goods and services, and sawry deal with a similar customer base. San Miguel Corporation - agriculture If a department store chain wants to and raw material production, retail expand its footprint, buying another networks and franchises chain in a different city, state, or Jollibee Foods Corporation - Zenith country is one way to go about it. Foods, a commissary that Doing so would provide the purchaser manufactures food product, with more revenue and allow it to franchised and company-owned reach a wider market stores Universal Robina Corporation - own Examples of Horizontal Integration: plantations and sugar mills, own Citibank - union bank distribution networks and UCPB - coco bank partnerships with retailers *correct me if im wrong here pero eto nakasulat sa notes ko hahaha Other examples: HYBE acquiring TWO TYPES OF VERTICAL PLEDIS, Source Music, ADOR, INTEGRATION Belift Lab, etc BACKWARD FORWARD INTEGRATION INTEGRATION VERTICAL INTEGRATION when a company when a company a business acquires another company decides to buy decides to take in order to give it greater control over another business control of some the stages in its supply or distribution that makes an aspect of the chain input product for post-production STRATEGIC MANAGEMENT FINALS REVIEWER FIN221 the acquiring process. share creation of a company's Less monopoly product. So, that car competition Possibility of manufacturer Economies of higher prices For example, a might acquire an scale and and fewer car manufacturer automotive reduced options for pursues backward dealership to sell production consumers integration when the vehicles it costs New company it acquires a tire produces. This may be more manufacturer gets the bureaucratic, manufacturer less nimble closer to the consumer and Specifically: provides it with additional Merging two companies in the same revenue. industry cuts down on competition and can reduce the choices available toconsumers. Advantages and It may lead to a monopoly where Disadvantages of Horizontal one company controls the Integration availability, prices, and supply of products and services. Primary Advantages The new, larger company may take Access to a larger customer base advantage of its dominance by Greater revenue raising prices and narrowing product Reduced costs through economies of options. scale Taking a competitor off the playing Advantages and field Disadvantages of Vertical Integration ADVANTAGES AND DISADVANTAGES OF HORIZONTAL INTEGRATION Primary Advantages Pros Cons Reduce costs across different stages of its production process Larger High level of Maintain tighter quality control and customer base scrutiny from a better flow of information across Increased government revenue agencies the supply chain Greater market Potential Increase sales STRATEGIC MANAGEMENT FINALS REVIEWER FIN221 Improve profits BCG = Boston Consulting Group, a Reduce or eliminate the leverage wellrespected management that certain suppliers have over the consulting firm company (backward integration) a tool used internally by management to assess the current state of value of a firm's units or ADVANTAGES AND DISADVANTAGES OF VERTICAL INTEGRATION product lines growth-share matrix aids the Pros Cons company in deciding which products or units to either keep, sell, or invest Increased sales Concentration Reduced costs of resources in more in across various one approach contains four distinct categories: parts of Increased risk dogs, cash cows, stars, and question production during marks Tighter quality uncertain times helps companies decide how to control Potentially high prioritize their various business Better flow of organizational activities information and across the coordination supply chain costs More control over production volume Specifically: A concentration of resources in one approach Star Question Mark Increased risk when market In the upper left Questionable environments are uncertain quadrant are opportunities are High costs to coordinate the stars, which those in high strategy, including the potential of generate high growth rate additional debt income but also markets but in consume large which the amounts of company does BCG MATRIX company cash. not maintain a large market share. Question marks are in the STRATEGIC MANAGEMENT FINALS REVIEWER FIN221 upper right QSPM (QUANTITATIVE STRATEGIC portion of the PLANNING MATRIX) STEPS grid. They typically grow 1 identify key strategic factors fast but consume large amounts of This can be done using, for company example, the EFE matrix and IFE resources matrix. Cash Cow Pets/Dogs 2 After we identify and analyze key strategic factors as inputs for Products that are If a company’s QSPM, we can formulate the type in lowgrowth product has a low of the strategy we would like to areas but for market share and pursue. This can be done using the which the is at a low rate of stage 2 strategic management company has a growth, it is tools, for example the SWOT relatively large considered a dog analysis (or TOWS), SPACE matrix market share are and should be analysis, BCG matrix model, or the considered cash sold, liquidated, IE matrix model. cows, and the or repositioned company should 3 the task is to compare in QSPM thus milk the cash Dogs, found in the alternative strategies and decide cow for as long as lower right which one is the most it can. Cash cows, quadrant of the suitable for our goals seen in the lower grid, don't left quadrant, are generate much The stage 1 strategic management typically leading cash for the methods provided us with key strategic products in company since markets that are they have a low factors. Based on their analysis, we mature market share and formulated possible strategies in stage little to no growth. 2. This QSPM compares two alternatives. QSPM MATRIX Based on strategies in stage 1 (IFE, EFE) Quantitative Strategic Planning Matrix and stage 2 (BCG, SPACE, IE), company executives determined that this attempts to objectively select the company XYZ needs to pursue an best strategy using input from other aggressive strategy aimed at management techniques and some development of new products and easy computations further penetration of the market. STRATEGIC MANAGEMENT FINALS REVIEWER FIN221 They also identified that this strategy can be executed in two ways. One strategy is acquiring a competing company. The other strategy is to expand internally. They are now asking which option is the better one.