Strategic Management PDF

Strategic Management Dr. Tamer Khalil 1  Contents Organizational Development Strategic Management” concept - Benefits Strategic Management Model Strategy analyses internal Environment...

Strategic Management Dr. Tamer Khalil 1  Contents Organizational Development Strategic Management” concept - Benefits Strategic Management Model Strategy analyses internal Environment External Analysis Porter’s Analysis approach Competitive advantage Pestel Analysis Strategic Decision-Making Process  axes of Organizational Development Strategic management Human resource tasks and processes Organizational Development organizational structure technology Strategic Management Defined: Set of managerial decisions and actions that determines the long- run performance of a corporation. 4 Benefits of Strategic Management ⚫ Clearer sense of strategic vision ⚫ Sharper focus on what is strategically important ⚫ Improved understanding of rapidly changing environment 5 Three Key Strategic Questions ⚫ Where is the organization now? ⚫ If no changes are made, where will the organization be in one, two, five or ten years? Are the answers acceptable? ⚫ If the answers are not acceptable, what specific actions should management undertake? What are the risks and payoffs involved? 6 Composition of Strategic Management Strategic Management is Composed of 1.Environmental scanning 2.Strategy formulation 3.Strategy implementation 4.Evaluation and control 7 Basic Model of Strategic Management Four Basic Elements 8  Strategic Management Model Strategy analyses Strategy Strategy Evaluation Evaluation and Control Formulation Implementation and and Control Control Environmental Scanning Mission &vision External Objectives Reason for What results opportunities existence to Strategies accomplish & dream Challenges by when methodology or general Policies framework to achieve Broad objectives guidelines for Internal decision Programs Process making to monitor Activities performance Execution needed to Budgets and take weakness method accomplish corrective a plan action Cost of the Procedures & time plan strength programs Sequence of steps needed to do the programs Performance Feedback/Learning 9  Environmental Scanning - A set of steps to analyze the internal and external environment of the organization, to identify the supporting elements and potential obstacles that affect the achievement of the organizational target’s. - its purpose to identify strategic factors – those external and internal elements that will determine the future of the organization. 10  Environmental Scanning S W SWOC Analysis O OS OW Strengths: Internal capabilities that S support the achievement of targets and withstand challenges. C CS CW Weaknesses: Internal deficits that W prevent the achievement of targets. Opportunities: External circumstances or O trends that facilitate reaching a targets. Matching (SO) Challenges: External conditions and trends that affect the achievement of C targets. S O Matching (SW) Matching (OC) Strengths Opportunities W C Weakness Challenges Environmental Variables Societal Environment Sociocultural Task Economic Forces Environment Forces (Industry) Shareholders Suppliers Governments Internal Employees/ Environment Special Labor Unions Interest Structure Groups Culture Resources Competitors Customers Trade Associations Creditors Political-Legal Communities Technological Forces Forces 12 internal Environment Composed of ⚫ Groups in environment that directly affect or are affected by the organization’s operations ⚫ (Often called industry) 13 Structure The way a corporation is organized in terms of communication, authority, and workflow 14 Corporate Culture Collection of beliefs, expectations, and values learned and shared by members and transmitted from one generation of employees to another 15 Resource An asset, competency, process, skill, or knowledge controlled by the corporation 16 External Environment External Analysis: Industry ⚫ What are the drivers in the industry? Driver are the key elements that may cause the uncertainty Each of the following categories listed can be considered industry drivers External Analysis ⚫ Industry and Government analysis ⚫ Demographic analysis ⚫ Regulatory analysis ⚫ Competitive analysis ⚫ Cultural and social analysis ⚫ Economic analysis ⚫ Labor Market analysis Further Industry Analysis ⚫ What are the technological trends? ⚫ What changes are anticipated from the State, the Governor? ⚫ What changes are anticipated from other constituents? Economic Analysis ⚫ How does the economy of the state affect your department/business Economic analysis ⚫ Trends in the national economy ⚫ Inflation ⚫ Interest rates ⚫ Possible changes in government spending Changes affect And possibly Medicare payments ⚫ Affects consumer decisions with regard to health coverage and funding Demographics ⚫ National demographic changes deal with overall resources—baby-boomers, elderly—how can that affect the State Declining birth rates Increasing life span ⚫ Local demographic changes and population trends look at allocations Retirement communities Unemployment could increase indigent care needed  Regulatory Analysis ⚫ A change in this legislation or the introduction of another can place constraints on the industry or provide new opportunities Regulatory Analysis ⚫ Changes in minimum wage ⚫ What is on the horizon? Give me some other examples  Competitive Analysis ⚫ Identification of competition Direct Indirect— ⚫ Where are they located geographically? ⚫ What differentiates them from you? Competitive Analysis ⚫ Where are your competitors located geographically? ⚫ What is the demographic make-up of the competition? ⚫ What is your market position? Competitive Analysis ⚫ Entry or exit of major competitors ⚫ What differentiates you from your competition?  Cultural/Social ⚫ Are their any social implications surrounding your work?  Market Demand Analysis ⚫ What is the demand for the service that you provide?  Labor Market Analysis ⚫ Availability of someone in a specialized field ⚫ Who is available and how much will it cost you Labor Market analysis ⚫ Is your business labor intensive ⚫ Who is available and how much will it cost you ⚫ In the public health arena how might labor market affect you? ⚫ In other areas?  Societal Environment Important Variables Economic Technological Political-Legal Socio-cultural GDP trends Total government Antitrust regulations Lifestyle changes spending for R&D Interest rates Environmental protection Career expectations Total industry spending laws Money supply Consumer activism for R&D Tax laws Inflation rates Rate of family formation Focus of technological Special incentives Unemployment levels efforts Growth rate of population Foreign trade regulations Wage/price controls Patent protection Age distribution of Attitudes toward foreign population Devaluation/revaluation New products companies Regional shifts in Energy availability and New developments in Laws on hiring and population cost technology transfer from promotion lab to marketplace Life expectancies Disposable and Stability of government discretionary income Productivity Birth rates improvements through automation  Industry Analysis Industry A group of firms producing a similar product or service, such as soft drinks or financial services. 34 Industry Analysis 35  Industry Analysis Porter’s approach: Assess the six forces -- challenges of new entrants Rivalry among existing firms Threat of substitute products Bargaining power of buyers Bargaining power of suppliers Relative power of other stakeholders 36  Industry Analysis challenges of New Entrants -- Barriers to entry: Economies of Scale Product Differentiation Capital Requirements Switching Costs Access to Distribution Channels Government Policy 37  Industry Analysis compete Among Existing Firms -- Intense compete related to: Number of competitors Rate of Industry Growth Produce or Service Characteristics Amount of Fixed Costs Capacity Diversity of competitors 38 Industry Analysis challenges of Substitute Products/Services Substitute Products: Those products that appear to be different but can satisfy the same need as another product. To the extent that switching costs are low, substitutes can have a strong effect on an industry. 39  Industry Analysis Bargaining Power of Buyers -- Buyer is powerful when: Buyer purchases large proportion of seller’s products Buyer has the potential to integrate backward Alternative suppliers are plentiful Changing suppliers costs very little Purchased product represents a high percentage of a buyer’s costs Buyer earns low profits Purchased product is unimportant to the final quality or price of a buyer’s products 40 Industry Analysis Bargaining Power of Suppliers -- Supplier is powerful when: Supplier industry is dominated by a few companies but sells to many Its product is unique and/or has high switching costs Substitutes are not readily available Suppliers are able to integrate forward and compete directly with present customers Purchasing industry buys only a small portion of the supplier’s goods. 41 Industry Analysis Fragmented Industry – No firm has large market share and each firm serves only a small piece of the total market in competition with others. Consolidated Industry – Dominated by a few large firms, each of which struggles to differentiate its products from the competition. 42 43 44 45 46 47 48 49 50 51  Strategic Decision-Making Process 3(a) 3(b) Scan and Analyze Assess External External Factors: Environment: · Opportun- · Societal ities · Task · Challenges 1(a) 1(b) 2 5(a) 5(b) 6(a) 6(b) 7 8 Examine and Evaluate the Review Select Generate Current: Corporate Strategic Review and and Select Implement Evaluate Mission Revise as and Strategies: Evaluate Current Governance: Factors Evaluate Performance · Vision · Board of (SWOC) Necessary: Strategic Recommend · Programs and Results · Objectives Directors throw · Mission Alterna- Best · Budgets Control · Strategies · Top Man- Current · Vision tives Alternative · Procedures · Policies agement Situation Objectives 4(a) 4(b) Scan and Assess Analyze Internal Internal Environment: Factors: · Structure · Strengths · Culture · Weak- · Resources nesses Strategy analyses & Strategy Evaluation Formulation: Implementation and Steps 1 – 6 Step 7 Control: Step 8 52