Concepts Of Strategic Management

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Concepts Of Strategic Management

• The study of strategic management

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Strategic management Definition

• Strategic management is that set of managerial
  decisions and actions that determines the
  long-run performance of a corporation.
• Strategic management includes
• Environmental scanning (both external and
  internal).
• Strategy implementation.
• Evaluation and control.

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How has strategic management evolved

• Strategic management within a firm generally
  evolves through four sequential phases
• Basic financial planning.
• Forecast-based planning.
• Externally oriented planning (strategic
  planning).
• Strategic management.

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Initiation of strategy Triggering events

• A triggering event is something that stimulates a
  change in strategy. Some of the possible
  triggering events are
• New CEO.
• Intervention by an external institution.
• Threat of a changing in ownership.
• Managements recognition of a performance gap.

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External Assessment

• If you're not faster than your competitor,
  youre in a tenuous position, and if youre only
  half as fast, youre terminal.
• George Salk

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External Assessment (Contd)

• The idea is to concentrate our strength against
  our competitors relative weakness.
• Bruce Henderson

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External Assessment (Contd)

• External Strategic-Management Audit
• Industry analysis
• Environmental scanning

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External Assessment (Contd)

• External audit
• Focuses on identifying evaluating events beyond
  the immediate control of the firm

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External Assessment (Contd)

• External audit focuses on
• Increased foreign competition
• Population shifts
• Demographics (e.g., aging population)
• Information technology

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External Assessment (Contd)

• External audit reveals
• Key opportunities
• Key threats
• Managers then formulate strategies
• Take advantage of opportunities
• Avoid/reduce impact of threats

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External Assessment (Contd)

• External Audit
• Aimed at identifying key variables that offer
  actionable responses

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External Assessment (Contd)

• Key External Forces
• Five (5) broad categories
• Economic forces
• Social, cultural, demographic, environmental
  forces

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External Assessment (Contd)

• Key External Forces (Contd)
• Five (5) broad categories
• Political, governmental, legal forces
• Technological forces
• Competitive forces

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External Assessment (Contd)
Competitors Suppliers Distributors Creditors Custo
mers Employees Communities Managers Stockholders L
abor Unions Special Interest Groups Products

• Competitors
• Suppliers
• Distributors
• Creditors
• Customers
• Employees
• Communities
• Managers
• Stockholders
• Labor Unions
• Special Interest Groups
• Products
• Services

OPURTUNITIES threats
Key external forces
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External Assessment (Contd)

• Process of External Audit
• Involve as many managers employees as possible
• Gather competitive intelligence
• Information about social, demographic, cultural,
  environmental, etc.
• Monitor sources of information (key magazines,
  articles, etc.)
• Utilization of Internet
• Suppliers, distributors, customers as sources of
  information

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External Assessment (Contd)
Key External Factors Vary over time Vary by
industry

• Process of External Audit
• Involve as many managers employees as possible
• Gather competitive intelligence
• Information about social, demographic, cultural,
  environmental, etc.
• Monitor sources of information (key magazines,
  articles, etc.)
• Utilization of Internet
• Suppliers, distributors, customers as sources of
  information

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External Assessment (Contd)

• Key External Factors
• Important to achieving long-term objectives
• Measurable
• Applicable to all competing firms
• Hierarchical

• Process of External Audit
• Involve as many managers employees as possible
• Gather competitive intelligence
• Information about social, demographic, cultural,
  environmental, etc.
• Monitor sources of information (key magazines,
  articles, etc.)
• Utilization of Internet
• Suppliers, distributors, customers as sources of
  information

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External Assessment (Contd)

• Examples of Key External Factors
• Market share
• Breadth of competing products
• World economies
• Proprietary key account advantages
• Price competitiveness
• Technological advancements
• Interest rates

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Economic Forces

• Monitor Key Economic Variables
• Availability of credit
• Level of disposable income
• Interest rates
• Inflation rates
• Money market rates
• Government budget deficits
• Gross domestic product trend
• Consumption patterns

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Economic Forces (Contd)

• Monitor Key Economic Variables (Contd)
• Unemployment trends
• Worker productivity levels
• Value of the dollar in world markets
• Stock market trends
• Foreign countries economic conditions
• Import/export factors
• Demand shifts for goods/services
• Income differences by region/customer

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Economic Forces (Contd)

• Monitor Key Economic Variables (Contd)
• Price fluctuations
• Exportation of labor capital
• Monetary policies
• Fiscal policies
• Tax rates
• ECC policies
• OPEC policies
• LDC policies

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Social Environmental Forces

• Social, cultural, demographic, and environmental
  changes
• Major impact on
• Products
• Services
• Markets
• Customers

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Social Environmental Forces

• World population gt 6 billion
• U.K. population lt 60 million
• Great potential for domestic production expansion
  to other markets
• Domestic only is a risky strategy

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Social Environmental Forces
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Social Environmental Forces

• E-commerce Perspective
• Question
• Is the Internet Revolution Bypassing Poor,
  Minorities?
• Answer
• Yes!

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Social Environmental Forces

• Internet revolution is widening the gap between
  rich poor
• 42 U.S. households have personal computers
• 80 of them are in households w/family income gt
  75,000

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Social Environmental Forces

• Internet usage lowest (3) among Americans
  earning 10K or less
• 26.7 of White Americans use Internet at home
  compared to 9.2 Blacks 8.8 of Hispanics
• 90 shares of common stock of American companies
  held by the wealthiest 10 of Americans

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Social Environmental Forces

• Key social, cultural, demographic,
  environmental variables
• Childbearing rates
• Number of special-interest groups
• Number of marriages
• Number of divorces
• Number of births
• Number of deaths
• Immigration emigration rates

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Social Environmental Forces

• Key social, cultural, demographic,
  environmental variables (Contd)
• Life expectancy rates
• Per capita income
• Attitudes toward business
• Average disposable income
• Buying habits
• Ethical concerns
• Attitudes toward saving

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Social Environmental Forces

• Key social, cultural, demographic,
  environmental variables (Contd)
• Racial equality
• Average level of education
• Government regulation
• Attitudes toward customer service
• Attitudes toward product quality
• Energy conservation
• Social responsibility

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Social Environmental Forces

• Key social, cultural, demographic,
  environmental variables (Contd)
• Value placed on leisure time
• Recycling
• Waste management
• Air water pollution
• Ozone depletion
• Endangered species

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Political, Govt., Legal Forces

• Government Regulation
• Key opportunities key threats
• Antitrust legislation (Microsoft)
• Tax rates
• Lobbying efforts
• Patent laws

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Political, Govt., Legal Forces

• Increasing Global Interdependence
• Impact of political variables
• Formulation of strategies
• Implementation of strategies

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Political, Govt., Legal Forces

• Increasing Global Interdependence
• Strategists in a global economy
• Forecast political climates
• Legalistic skills
• Diverse world cultures

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Political, Govt., Legal Forces

• Globalization of Industry
• Worldwide trend toward similar consumption
  patterns
• Global buyers sellers
• E-commerce
• Instant transmission of money information
  across continents

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Political, Govt., Legal Forces

• Key Political, govt., legal variables
• Government regulation/deregulation
• Tax law changes
• Special tariffs
• Political Action Committees (PACs)
• Voter participation rates
• Number of patents
• Changes in patent laws

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Political, Govt., Legal Forces

• Key Political, govt., legal variables (Contd)
• Environmental protection laws
• Equal employment legislation
• Level of government subsidies
• Antitrust legislation/enforcement
• Sino-American relationships
• Russian-American relationships
• European-American relationships

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Political, Govt., Legal Forces

• Key Political, govt., legal variables(Contd)
• Ethnic minorities relationships
• Import-export regulations
• Monetary policy
• Political conditions in other countries
• Government budgets
• World oil, currency, labor markets
• Location and severity of terrorist activities

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Technological Forces

• Technological Change
• Dramatic effect on business
• Fiber optics
• Biometrics
• EFT
• Computer engineering
• Superconductivity advancements

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Technological Forces (Contd)

• Internet impact on opportunities threats
• Altering life cycles of products
• Increasing speed of distribution
• Creating new products services
• Erasing limitations of traditional geographic
  markets

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Technological Forces (Contd)

• Internet impact on opportunities threats
  (Contd)
• Altering economies of scale
• Changing entry barriers
• Redefining relationships
• Industries suppliers, creditors, customers, and
  competitors

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Technological Forces (Contd)

• Capitalizing on Information Technology (IT)
• Chief Information Officer (CIO)
• Chief Technology Officer (CTO)

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Competitive Forces

• External Audit Competing Firms
• Identifying rival firms
• Strengths
• Weaknesses
• Capabilities
• Opportunities
• Threats
• Objectives
• Strategies

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Competitive Forces

• Competitor Information
• Sources
• Moodys Manuals
• Standard Corporation Descriptions
• Value Line Investment Surveys
• Duns Business Rankings
• Standard Poors Industry Surveys
• Industry Week
• Forbes, Fortune, Business Week

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Competitive Forces

• Most competitive firms in America
• Seven Characteristics
• Market share matters
• Understand what business you are in
• Broke or not, fix it
• Innovate or evaporate

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Competitive Analysis Porters Five-Forces Model
Potential development of substitute products
Rivalry among competing firms
Bargaining power of suppliers
Bargaining power of consumers
Potential entry of new competitors
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Global Challenge

• Differences U.S. and MNCs
• Affect strategic management
• Language
• Culture
• Politics
• Economy
• Government interference
• Labor relations
• Trade barriers

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Reference

• For more details about this lecture see Chapter 3
  in
• Strategic Management Concepts and Cases,
  9/eFred David