Strategic Management for MBA: ADM 807

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University of North-WestGraduate School of
Business and Government Leadership

• Strategic Management for MBA ADM 807

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Table of Contents

• What is Strategy
• Hierarchy of strategy
• Corporate level strategies
• Business level strategies
• Functional level strategies
• Corporate Governance, ethics and social
  responsibility
• Individual Ethics in organisations
• Social responsibility and ethics
• Organisational approaches to social
  responsibility
• Managing social responsibility

• Strategic Planning Process
• Industry Analysis
• Environmental Scanning
• Strategy Formulation
• Strategy Implementation
• Evaluation and Control
• The Strategic Audit Process
• The 8 stages of strategic Audit

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What is Strategy

• Strategic Management for MBA ADM 807

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What is strategy
Defined, strategy is The execution of a set of
choices based on customer Needs, which identifies
the essential positioning, Competitive
advantages, and configuration of Activities
necessary to create value superior To competition
and generate superior returns
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Operational Effectiveness

• Achievement of the best practices through
• Using state of the art technology
• Eliminate waste
• Continuous organisational improvement
• Providing superior service
• Increased productivity

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The Model of Strategy

• Unique competitive position
• Activities tailored to strategy
• Making clear tradeoffs or choices
• Creating a strategic fit across activities
• A sustainability of a system not parts
• Continuity
• OE as a given

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Tradeoffs

• The need to choose is reflected by
  incompatibilities
• between positions
• More of A necessitates less of B
• Overlap between competitive positions is limited
• Without tradeoffs, only OE is attained
• Seek tradeoffs and accentuate them
• Be able to choose what not to do

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Hierarchy of Strategy

• Strategic Management for MBA ADM 807

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Hierarchy of Strategy
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Hierarchy of Strategy

• Corporate Strategy
• Overall business direction (e.g. Diversify into a
  different industry)
• Business Strategy
• Business Unit Level Decision making (e.g.
  Increase market share)
• Functional Strategy
• Functional areas level (e.g. Increase sales level)

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Corporate Level Business Decisions
Michael Porters 5 Forces of Competitive Analysis
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Corporate Level Business Strategies
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Business Level Strategic Decisions
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Business Level Strategic Decisions
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Functional Strategic Level Decisions

• Manage info flow
• to manage
• Early warning
• Automation
• MIS

• Process RD
• Product RD
• Tech competence

• Job/Skill Match
• Job analysis

e.g STP Mix Life Cycle

• Capital
• budgeting
• Leverage

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Practical Example
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Corporate Governance, ethics and Social
Responsibility

• Strategic Management for MBA ADM 807

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Ethics

• Business-Society interactive relationship
• Forces in the societal or general environment
  affect business decisions through groups in the
  task environment.
• There is therefore need for business to be
  constantly aware of variables and forces in both
  the task and societal environment.
• Lack of SR and ethical business dealing can cause
  conflict.

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Ethics
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SR and Ethics

• Carrolls responsibilities of business
• Economic ROI
• Legal Abide by all laws and govt. regulations
• Social Discretionary
• Ethical Good corporate citizenship as expected
  by society

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Approached to SR
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Industry Analysis

• Strategic Management for MBA ADM 807

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The Strategic Management Process
Industry Analysis
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Industry Analysis Porters 5 Forces
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Threat of Potential Entrants

• This force is influenced by barriers to entry
• Economies of scale
• Product differentiation
• Capital requirements
• Switching Costs
• Access to distribution channels
• Cost disadvantages independent of size
• Government policy

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Rivalry among existing firms

• This force is influenced by
• Number of competitors
• Rate of industry growth
• Product or service characteristics
• Amount of fixed costs
• Capacity
• Height of exit barriers
• Diversity of rivals

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Threat of substitute products or services
Substitute products appear to be different but
can satisfy potential returns of an industry
by placing a ceiling on the prices, firms in the
industry can profitably charge. To the extent
that switching costs are low, substitutes may
have a strong effect on an industry.
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Bargaining power of buyers

• This force is influenced by
• Large purchases
• Backward integration Producing the product
  itself
• More suppliers in the industry
• Low costs for changing suppliers
• A product constituting a large of consignment,
  
• encouraging shopping for a lower price
• Sensitivity to cost and service differences

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Bargaining power of suppliers

• This force is influenced by
• Few suppliers in an industry
• Less of substitutes
• Forward integration by suppliers
• Purchases being a small portion of a
• supplier groups goods

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Strategic Planning Process

• Strategic Management for MBA ADM 807

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Environmental Scanning External and Internal
Environmental Scan

• Strategic Management for MBA ADM 807

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The Strategic Management Process
Industry Analysis
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2 Categories of the external environment

• Societal environment
• General environmental factors like
• Socio-cultural, economic, political/legal and
  technological forces
• Task environment
• Groups affecting the corporation and whom the
  corporation affects
• Government, shareholders, suppliers, customers,
  creditors, competitors, unions and community.

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Internal Scanning and analysis RBV of the firm

• Resource Based View (RBV) of the firm
• Emphasizes the core competence as a unifying
  factor among a firms businesses.
• Identifies core competency as a value creation
  tool
• Uses the firms resources (In)tangible and
  capabilities as primary determinant of its
  strength and weaknesses

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RBV Approach to strategy analysis

• 5 activities are involved
• Identify and classify resources in terms of
  strengths and weaknesses
• Combine different core competencies into a
  unified whole
• Appraise resources based on their appropriability
  (Ability to harvest profits resulting from the
  use of resources)
• Select the best strategy
• Upgrade weaknesses to fill resource gaps

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Characteristics of resources, important in
sustaining competitive advantage

• Durability At what rate does the resource
  depreciate or become obsolete?
• Transparency How easy is it for other firms to
  understand the coherence of your resources?
• Transferability How easy can your resources be
  transferred to competitors?
• Replicability How easy is it for competitors to
  duplicate your success?

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Functional Analysis SCR Analysis

• Areas of Focus are
• Structure
• Divisional, Simple or conglomerate
• Culture
• Gives a sense of identity and fulfills the
  following
• Gives a sense of identity
• Encourages commitment
• Adds stability
• Provides a frame of reference and guide for
  appropriate behaviour

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The Strategic Management Process
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SWOT Analysis Bridge between Enviro Scan and
Strategy Formulation

• Analysis of the corporations Strength,
  Weaknesses, Opportunities and Threats
• Its aimed at identifying the corporations
  distinctive competence
• Internal Factor Analysis, External Factor Analysis

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Review of the mission and objectives

• Mission A broad statement indicating why the
  business exists
• Goals Broad open-ended statements of where the
  business intends to be in the future
• Objectives Measurable, precise and quantifiable
  statements indicating where the business intends
  to be in a specified point in time

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Corporate Strategies
There are 3 grand strategies that can be taken _at_
a corporate level, Growth, Stability and
Retrenchment Strategies
R, t
R, b
R, c
W
G
G
A
G
G
S
S
Industry Attractiveness
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Growth strategies

• Concentration
• Vertical Integration Growth through taking over
  functions previously performed by others
  (Backward or forward integration)
• Horizontal Integration Growing in other
  geographic locations or increasing product ranges
• Diversification
• Concentric diversification Diversifying into
  related industries
• Conglomerate diversification Diversifying into
  unrelated industries

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Stability Strategies

• Pause or proceed with caution
• No significant change in corporate strategy
• If industry is facing an uncertain future, a
  company may pause its growth initiatives to
  consolidate its resources
• A company my proceed with caution and not make
  sudden moves or take unjustified moves in an
  industry even if it has a strong competitive
  advantage
• No change or profit strategy
• A company may have no obvious opportunity/threat
• When there are few aggressive new competitors
• A no change strategy is appropriate when theres
  no significant change in the companys situation
• A company in a matured industry with a declining
  profit and sales level may follow a profit
  strategy, which helps it to get through the
  financial difficulty period by cutting expenses
  in the short run

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Retrenchment Strategies

• Turnaround
• Contract
• Consolidate
• Captive company
• Captive company
• Sell out
• Bankruptcy
• Liquidation
• Bankruptcy

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Business/Competitive Strategy

• Focuses on improving the competitive position of
  a firms products/services
• Addresses the HOW and not the WHAT
• Following the corporate strategy formulation,
  decisions will be taken pertaining to
• Basis to competition, cost reduction/differentiati
  on
• Scope of competing, i.e Niche or Industry-wide

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Business Level Strategic Decisions
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3 Generic Strategies

• Low cost Ability operate more efficiently than
  the competition
• Differentiation Provide a superior service
• Focus Providing superior service to a
  particular target only
• Low cost and differentiation are industry-wide
  strategies. Focus is for a segment

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Functional Strategic Level Decisions

• Market Dev Strategy
• Mkt penetration
• Dev new mkts
• for current goods
• Product dev Strategy
• Push/pull strategy
• Pricing

• Manage info flow
• to manage
• Early warning
• Automation
• MIS

• Process RD
• Product RD
• Tech competence

• Job/Skill Match
• Job analysis

• Capital
• budgeting
• Leverage

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Example
A REAL LIFE EXAMPLE OF DEVELOPING A FUNCTIONAL
STRATEGY FOR THE INFORMATION TECHNOLOGY OF THE
S.A POST OFFICE
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Strategic Management Process Strategy
Implementation

• Strategic Management for MBA ADM 807

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The Strategic Management Process
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Implementation

• Who implements strategy
• Everyone implements, though at different levels
• To foot dragging, involve everyone
• What must be done
• Develop programs, budgets and procedures
• Strategy must be action oriented and standardised
• Strive for synergy
• Bettered outcomes from a combination of functions
  than would be individually

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How strategy is implemented

• The following are primary considerations
• Organising Structure
• Structure follows strategy
• Organizational life cycle
• 4 Stages
• Birth
• Growth
• Maturity
• Decline
  
  

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Product Life Cycle
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The Strategic Management Process
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Evaluation and Control Process
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The Strategic Audit

• Strategic Management for MBA ADM 807

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8 Stages of the Strategic Audit

• Evaluate the current situation
• Financial Analysis
• The strategic posture
• Evaluate the strategic Managers
• Conduct an external environmental scan
• Conduct an internal environmental scan
• Perform a SWOT analysis
• Develop alternatives and recommend the best
• Outline the implementation of the chosen
  alternative
• Define the evaluation and control process for
  checking the success of your chosen alternative