Place Slide Title Text Here JOHN R SCHERMERHORN

Place Slide Title Text Here JOHN R. SCHERMERHORN, JR. MANAGEMENT 12 th Edition Chapter 10 Strategy and Strategic Management © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -

Place Slide Title — Text Here 10 Study Questions Planning Ahead Chapter 1. What is strategic management? 2. What are the essentials of strategic analysis? 3. What are corporate-level strategies, and how are they formulated? 4. What are business-level strategies and how are they formulated? 5. What are the foundations for strategy implementation? © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -2

Place Slide Title 10 Text Here Dashboard Chapter Learning 1. Strategic Management 1. 2. 3. 4. Competitive advantage Strategy and strategic intent Levels of strategy Strategic management process 2. Essentials of Strategic Analysis 1. 2. 3. 4. Analysis of mission, values, objectives SWOT analysis of organization and environment Five forces analysis of industry attractiveness Strategic management process © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -3

Place Slide Title 10 Text Here Dashboard Chapter Learning 3. Corporate-Level Strategy Formulation 1. 2. 3. 4. 5. Portfolio planning model Growth and diversification strategies Retrenchment and restructuring strategies Global strategies Cooperative strategies 4. Business-Level Strategy Formulation 1. 2. 3. 4. Competitive strategies model Differentiation strategy Cost leadership strategy Focus strategy © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -4

Place Slide Title 10 Text Here Dashboard Chapter Learning 5. Strategy Implementation 1. 2. 3. Management practices and systems Strategic control and corporate governance Strategic leadership © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -5

Place. Takeaway Slide Title 1: Text Here Management Strategic • Basic concepts of strategy: – Competitive advantage — ability to do something so well that one outperforms competitors – Sustainable competitive advantage — one that is difficult or costly for competitors to imitate © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -6

Place. Takeaway Slide Title 1: Text Here Management Strategic • Sources of competitive advantage – Technology – Cost and quality – Knowledge and speed – Barriers to entry – Financial resources © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -7

Place. Takeaway Slide Title 1: Text Here Management Strategic • Basic concepts of strategy: – Strategy • a comprehensive plan guiding resource allocation to achieve long-term organization goals – Strategic intent • focusing all organizational energies on a unifying and compelling goal © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -8

Place. Takeaway Slide Title 1: Text Here Management Strategic • Levels of strategies – Corporate • Sets long-term direction for the total enterprise – Business • How a division or strategic business unit will compete in its product or service domain – Functional • Guides activities within one specific area of operations © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -9

Place Slide Title Text Here Figure 10. 1 Three levels of strategy in organizationscorporate, business, functional strategies © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -10

Place. Takeaway Slide Title 1: Text Here Management Strategic • Strategic Management Process: – Strategic management • the process of formulating and implementing strategies to accomplish long-term goals and sustain competitive advantage – Strategic analysis • process of analyzing the organization, the environment, its competitive position and current strategies © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -11

Place Slide Title Text Here Figure 10. 2 Strategy formulation and implementation in the strategic management process © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -12

Place. Takeaway Slide Title 1: Text Here Management Strategic • Strategy formulation – The process of creating strategy – Involves assessing existing strategies, organization, and environment to develop new strategies and strategic plans capable of delivering future competitive advantage © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -13

Place. Takeaway Slide Title 1: Text Here Management Strategic • Strategy implementation – The process of allocating resources and putting strategies into action – All organizational and management systems must be mobilized to support and reinforce the accomplishment of strategies © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -14

Place Slide Title Text Hereof Strategic Analysis Takeaway 2: Essentials Drucker’s strategic questions for strategy formulation: • What is our business mission? • Who are our customers? • What do our customers consider value? • What have been our results? • What is our plan? © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -15

Place Slide Title Text Hereof Strategic Analysis Takeaway 2: Essentials • Analysis of mission: – The reason for an organization’s existence – Good mission statements identify: • • What are we moving to? What is our dream? What kind of difference do we make? What do we want to be known for? – An important test of the mission is how well it serves the organization’s stakeholders © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -16

Place Slide Title Text Hereof Strategic Analysis Takeaway 2: Essentials • Stakeholders – Individuals and groups directly affected by the organization and its strategic accomplishments – An important test of the mission is how well it serves the organization’s stakeholders © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -17

Place Slide Title Text Here Figure 10. 3 How external stakeholders can be valued as strategic constituencies in an organization’s mission statement © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -18

Place Slide Title Text Hereof Strategic Analysis Takeaway 2: Essentials • Analysis of Core values: – Broad beliefs about what is or is not appropriate behavior – Organizational culture reflects the predominant value system of the organization as a whole © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -19

Place Slide Title Text Hereof Strategic Analysis Takeaway 2: Essentials • Analysis of objectives: – Operating objectives are specific results that organizations try to accomplish © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -20

Place Slide Title Text Hereof Strategic Analysis Takeaway 2: Essentials Typical operating objectives of a business include: • Profitability • Sustainability • Social responsibility • Financial health • Cost efficiency • Product quality • Market share • Human talent • Innovation © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -21

Place Slide Title Text Hereof Strategic Analysis Takeaway 2: Essentials • Analysis of organizational resources and capabilities: – Core competency is a special strength that gives an organization competitive advantage – Important goal of assessing core competencies © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -22

Place Slide Title Text Hereof Strategic Analysis Takeaway 2: Essentials Potential core competencies: • Special knowledge or expertise • Superior technology • Efficient supply chains • Unique product distribution systems © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -23

Place Slide Title Text Hereof Strategic Analysis Takeaway 2: Essentials • SWOT Analysis – Examination of an organization’s current position by looking at • Internal strengths and weaknesses • Environmental opportunities and threats © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -24

Place Slide Title Text Here Figure 10. 4 SWOT analysis of strengths, weaknesses, opportunities, and threats © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -25

Place Slide Title Text Here Figure 10. 5 Porter’s model of five strategic forces affecting industry competition © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -26

Place Slide Title Text Hereof Strategic Analysis Takeaway 2: Essentials Porter’s Model of Five Strategic Forces Affecting Competition: Industry competition Intensity of rivalry among firms and their competitive behavior New entrants Threat of new competitors entering the market Substitute products or services Bargaining power of suppliers Bargaining power of customers Threat of substitute products or services Ability of resource suppliers to influence the cost of products or services Ability of customers to influence the price they will pay for products or services © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -27

Takeaway Corporate-Level Place Slide 3: Title Text Here Strategy Formulation • Corporate-level strategy formulation – Portfolio planning model: • Portfolio planning seeks the best mix of investments among alternative business opportunities – BCG Matrix analyzes business opportunities according to market growth rate and market share © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -28

Takeaway Corporate-Level Place Slide 3: Title Text Here Strategy Formulation BCG matrix – Ties strategy formulation to analysis of business opportunities according to … • Industry or market growth rate – Low versus high • Market share – Low versus high © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -29

Place Slide Title Text Here Figure 10. 6 The BCG matrix approach to corporate strategy formulation © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -30

Takeaway Corporate-Level Place Slide 3: Title Text Here Strategy Formulation BCG matrix — business conditions and related strategies: – Stars • High share/high growth businesses • Preferred strategy — growth – Cash cows • High share/low growth businesses • Preferred strategy — stability or modest growth © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -31

Takeaway Corporate-Level Place Slide 3: Title Text Here Strategy Formulation BCG matrix—business conditions and related strategies (cont. ): – Question marks • Low share/high growth businesses • Preferred strategy — growth for promising question marks and restructuring or divestiture for others – Dogs • Low share/low growth businesses • Preferred strategy — retrenchment/divestiture © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -32

Takeaway Corporate-Level Place Slide 3: Title Text Here Strategy Formulation Growth strategies • Seek an increase in size and the expansion of current operations – Types of growth strategies: • Concentration strategies – Grow within the same business area © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -33

Takeaway Corporate-Level Place Slide 3: Title Text Here Strategy Formulation Types of growth strategies continued – Diversification and integration strategies • Diversification: Grow by acquiring or investing in new and different business areas – Related diversification – Unrelated diversification • Integration: Acquiring suppliers or distributors – Vertical integration – (backward or forward) © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -34

Takeaway Corporate-Level Place Slide 3: Title Text Here Strategy Formulation Retrenchment and restructuring strategies: – Pursue radical changes to solve problems – Chapter 11 bankruptcy • Protects a firm from creditors while management reorganizes to restore solvency © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -35

Takeaway Corporate-Level Place Slide 3: Title Text Here Strategy Formulation Types of retrenchment and restructuring strategies – Liquidation • Business closes and sells assets to pay creditors – Downsizing • Decreases size of operations © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -36

Takeaway Corporate-Level Place Slide 3: Title Text Here Strategy Formulation Types of retrenchment and restructuring strategies – Divestiture • Sells off parts of the organization to refocus attention on core business areas – Turnaround Strategy • Tries to fix specific performance problems © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -37

Takeaway Corporate-Level Place Slide 3: Title Text Here Strategy Formulation Global strategies: Globalization strategy Multidomestic strategy Transnational strategy World is one large market; standardize products and advertising as much as possible Customize products and advertising to local markets as much as possible Balance efficiencies in global operations and responsiveness to local markets © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -38

Takeaway Corporate-Level Place Slide 3: Title Text Here Strategy Formulation Cooperative strategies – Strategic alliances — two or more organizations partner to pursue an area of mutual interest – Types of strategic alliances: • Outsourcing alliances • Supplier alliances • Distribution alliances © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -39

Takeaway Corporate-Level Place Slide 3: Title Text Here Strategy Formulation Co-opetition – working with rivals on projects of mutual benefit © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -40

Takeaway Business-Level Place Slide 4: Title Text Here Strategy Formulation Business-level strategy formulation – Good strategies help achieve above average returns – Key question is “How can we best compete for customers in our market and with our products or services? ” © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -41

Takeaway Business-Level Place Slide 4: Title Text Here Strategy Formulation Porter’s competitive strategies model – Business-level strategic decisions are driven by: • Market scope • Source of competitive advantage – Market scope and source of competitive advantage combine to generate three generic strategies © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -42

Place Slide Title Text Here Figure 10. 7 Porter’s competitive strategies framework: soft-drink industry examples © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -43

Takeaway Business-Level Place Slide 4: Title Text Here Strategy Formulation Porter’s generic strategies for gaining competitive advantage: – Differentiation strategy – Cost leadership strategy – Focus strategy: Focused cost leadership Focused differentiation © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -44

Takeaway Business-Level Place Slide 4: Title Text Here Strategy Formulation • Differentiation strategy – Seeks competitive advantage through uniqueness • Cost leadership strategy – Seeks competitive advantage by operating with lower costs than competitors © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -45

Takeaway Business-Level Place Slide 4: Title Text Here Strategy Formulation Focus strategy – Concentrates on a special market segment – Two types: Focused differentiation – offers a unique product to a special market segment Focused cost leadership – seeks the lowest cost of operations within a special market segment © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -46

Place Slide Title 5: Text Here Implementation Takeaway Strategy implementation – Must be supported in every aspect of management • • Planning Controlling Organizing Leading © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -47

Place Slide Title 5: Text Here Implementation Takeaway Strategy • Strategic planning failures that hinder strategy implementation: – Failures of substance • Inadequate attention to major strategic planning elements – Failures of process • Poor handling of strategy implementation – Lack of participation error – Goal displacement error Management 12 e Chapter © 2013 John Wiley & Sons, Inc. All rights reserved. 48 10 -48

Place Slide Title 5: Text Here Implementation Takeaway Strategy Corporate governance: – System of control and performance monitoring of top management – Done by boards of directors and other major stakeholder representatives – Controversies regarding roles of inside directors and outside directors – Increasing emphasis on corporate governance in contemporary businesses © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -49

Place Slide Title 5: Text Here Implementation Takeaway Strategy • Strategic control – Makes sure strategies are well implemented and that poor strategies are scrapped or modified • Corporate governance – Control and monitoring of top management © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -50

Place Slide Title 5: Text Here Implementation Takeaway Strategic leadership – Inspires people to continually change, refine, and improve strategies and their implementation © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -51

Place Slide Title 5: Text Here Implementation Takeaway Strategy Critical tasks of strategic leadership – Maintain strategic control – Be the guardian of trade-offs – Create a sense of urgency – Ensure that everyone understands the strategy – Be a teacher © 2013 John Wiley & Sons, Inc. All rights reserved. 10 -52