2. Learning Outcomes:
1. Explain the role of strategic management.
2. Describe the role of managers in each
strategic management step.
3. Describe organizational strategies.
4. Describe current strategic management
issues.
3. The Importance of Strategic
Management
What is Strategic Management?
The set of managerial decisions and
actions that determines the long-
run performance of an
organization.
4. Strategies:
Plans for how an organization will do
what it’s in business to do, how it will
compete successfully, and how it will
attract and satisfy its customers in
order to achieve its goals.
The Importance of Strategic
Management
5. Business model:
A strategic design for how a
company intends to profit from its
strategies, work processes, and
work activities.
The Importance of Strategic
Management
6. Why is Strategic Management
Important?
1. It results in higher organizational
performance.
2. It requires that managers examine
and adapt to business environment
changes.
The Importance of Strategic
Management
7. 3. It coordinates diverse
organizational units, helping
them focus on organizational goals.
4. It is involved in the managerial
decision-making process.
The Importance of Strategic
Management
8. The Strategic Management Process
Identify the
organization’s
current mission,
goals, and strategies
Internal
Analysis
Strengths
Weaknesses
External Analysis
Opportunities
Threats
Formulate
Strategies
Evaluate
Results
Implement
Strategies
9. Step 1: Identify the Organization’s Current
Mission, Objectives, and Strategies
Mission: the firm’s reason for being
The scope of its products and services
Goals: the foundation for further planning
Measurable performance targets
The Strategic Management Process
10. Mission (Present State)
Apple is committed to bringing the best personal computing
experience to students, educators, creative professionals and
consumers around the world through its innovative hardware,
software and Internet offerings.
Google’s mission is to organize the world‘s information and make it
universally accessible and useful.
To offer a wide range of home furnishing items of good design and
function, excellent quality and durability, at prices so low that the
majority of people can afford to buy them .
Examples:
11. Steps 2 and 3
External
Analysis:
Environmental
Assessment
•Macro
•Industry
•Competitive
Threats and
Opportunities
(Top 3 - 4)
Internal
Analysis:
Corporate
Assessment
•People
•Money
•Technology
•Information
Strengths and
Weaknesses
(Top 3 - 4)
Basis for
Future Direction
•Vision
•Mission
•Goals
•Objectives
+ =
14. Step 3: Conduct an Internal Analysis
Assessing organizational
resources, capabilities, activities, and
culture:
Strengths (core competencies) create value
for the customer and strengthen the
competitive position of the firm
Weaknesses (things done poorly or not at
all) can place the firm at a competitive
disadvantage.
The Strategic Management Process
15. SWOT:
Steps 2 and 3 combined are called a
SWOT analysis.
(Strengths, Weaknesses, Opportunities
, and Threats)
The Strategic Management Process
17. Step 4: Formulate Strategies
Develop and evaluate strategic alternatives
Select appropriate strategies that provide
relative advantage over competitors
Match organizational strengths to
environmental opportunities
Correct weaknesses and guard against
threats
The Strategic Management Process
18. Step 5: Implement Strategies
Implementation: effectively fitting
organizational structure and activities to
the environment
The environment dictates the chosen
strategy;
Effective strategy implementation requires
an organizational structure matched to its
requirements
The Strategic Management Process
20. Step 6: Evaluate Results
How effective have strategies been?
What adjustments, if any, are
necessary?
The Strategic Management Process
21. New Product / Service Opportunities
Organizational Strategies
New Market Existing Market
New Product
Existing
Product
“New Products for
New Customers”
Extremely Difficult
“New Products to
Existing Customers”
Next Easiest Sales
Opportunity
“Existing Products to
New Customers”
Second Most Difficult
“Bigger Piece of the Pie”
Easiest Sales
Opportunity
24. Types of Corporate Strategies
Growth: expansion into new products
and markets
Stability: maintenance of the status quo
Renewal: addresses organizational
weaknesses that are leading to
performance declines
Corporate portfolio analysis: involves
a number of businesses; guides resource
allocation
Types of Organizational
Strategies
28. Vertical Integration:
Backward vertical integration: attempting
to gain control of inputs (become a self-
supplier).
Forward vertical integration: attempting
to gain control of output through the
distribution channel and/or provide
customer service activities (eliminating
intermediaries).
Types of Organizational
Strategies
29. Horizontal Integration:
Combining operations with another
competitor in the same industry to
increase competitive strengths and
lower competition among industry
rivals.
Types of Organizational
Strategies
30. Diversification:
Related Diversification - Expanding by
merging with or acquiring firms in
different, but related industries that are
“strategic fits”.
Unrelated Diversification - Growing by
merging with or acquiring firms in
unrelated industries where higher financial
returns are possible.
Types of Organizational
Strategies
31. Corporate-Level Strategies
Stability Strategy:
A strategy that seeks to maintain the status
quo to deal with the uncertainty of a
dynamic environment, when the industry
is experiencing slow- or no-growth
conditions, or if the owners of the firm
elect not to grow for personal reasons.
Types of Organizational
Strategies
32. Retrenchment Strategy:
Reduces the company’s activities or
operations
Retrenchment strategies include:
Cost reductions
Layoffs
Closing underperforming units
Closing entire product lines or service
Types of Organizational
Strategies
33. Corporate Portfolio Analysis
BCG Matrix
Developed by the Boston Consulting Group
Considers market share and industry growth rate
Classifies firms/products as:
Cash cows: low growth rate, high market share
Stars: high growth rate, high market share
Question marks: high growth rate, low market
share
Dogs: low growth rate, low market share
Types of Organizational
Strategies
35. These products are at
the end of the product
cycle.
These products are at
the introduction stage
of the product cycle.
These products are at the
growth stage of the
product cycle.
These products are at the
maturity stage of the
product cycle.
BCG Matrix Examples
37. Business-Level Strategy:
A strategy that seeks to determine
how an organization should compete
in each of its SBUs (strategic business
units). (Example: Unilever’s Dove vs.
Axe)
Types of Organizational
Strategies
38. Competitive Advantage:
An organization’s distinctive
competitive edge that is sourced
and sustained in its core
competencies. Is what sets an
organization apart. (Example:
Apple)
Types of Organizational
Strategies
39. Forces Driving Industry Competition
Potential New
Entrants
The Industry of
Rivalry among
competitors
Suppliers Customers
Substitutes
Bargaining Bargaining
Power Power
Threat of
Substitute
Products
Buyers/
Distributors
Threat of
New Entrants
40. Competitive Strategies:
Five Competitive Forces
1. Threat of New Entrants
The ease or difficulty with which new
competitors can enter an industry.
2. Threat of Substitutes
The extent to which switching costs and
brand loyalty affect the likelihood of
customers adopting substitute products and
services.
41. 3. Bargaining Power of Buyers
The degree to which buyers have
the market strength to hold sway
over and influence competitors
in an industry.
Types of Organizational
Strategies
42. 4. Bargaining Power of Suppliers
The relative number of buyers to
suppliers and threats from substitutes
and new entrants affect the buyer-
supplier relationship.
Types of Organizational
Strategies
43. 5. Current Rivalry
Intensity among rivals increases
when industry growth rates
slow, demand falls, and product
prices descend.
Types of Organizational
Strategies
44. Competitive Strategies
Cost Leadership Strategy
Seeking to attain the lowest total overall
costs relative to other industry
competitors
Differentiation Strategy
Attempting to create a unique and
distinctive product or service for which
customers will pay a premium
Types of Organizational
Strategies
45. Focus Strategy
Using a cost or differentiation advantage to
exploit a particular market segment rather than
a larger market
Stuck in the Middle
Organizations that are unable to develop a cost
or differentiation advantage
Types of Organizational
Strategies
46. Functional-level strategies support the
business-level strategy.
• Marketing, human resources, research
and development, and finance all support
the business-level strategy
• Problems occur when employees or
customers don’t understand a company’s
strategy
Types of Organizational
Strategies
47. Strategic Flexibility:
The ability to recognize major external
environmental changes, to quickly
commit resources, and to recognize
when a strategic decision was a mistake.
Current Strategic Management
Issues
48. New Directions in Organizational Strategies:
E-Business Strategies:
Online activities: bidding, order processing,
inventory control, recruitment, and hiring.
Internet-based knowledge systems, online
ordering, and customer support.
Chat rooms and discussion boards, targeted
web sites.
Current Strategic Management Issues
49. Current Strategic Management
Issues
Customer Service Strategies:
Giving the customers what they want
Communicating effectively with them
Providing employees with customer
service training
50. Current Strategic Management
Issues
Innovation Strategies:
Possible Events
Radical breakthroughs in products
Application of existing technology to new
uses
Strategic Decisions about Innovation
Basic research
Product development
Process innovation
51. Team Assignment
In your teams, please discuss the Johnson’s Case and be
prepared to share your views on the following questions:
• What are the company’s 3 major strengths (they must
not lose)?
• What are the company’s 3 major weaknesses (must get
rid of these)?
• If David can only address 3 -4 major strategic initiatives
successfully during the next 12-18 months, what should
these be?
52. Team Assignment
In your teams, please discuss the Johnson’s Case and be
prepared to share your views on the following questions:
• What are the major ‘macro-trends’ that will influence
the company’s future strategy?
• What are the major industry and competitive trends that
will influence the company’s strategy?
• As at the time of the case, what do you see as the three
biggest opportunities for Johnson to create growth and
profitability? What do you see as the 3 biggest threats to
the company?
