Highly useful in understanding the basic concepts related to the field of strategic management

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STRATEGIC MANAGEMENT
UNIT COVERAGE
1. BUSINESS/SERVICE STRATEGY AND
SUSTAINABLE COMPETITIVE ADVANTAGE
2. STRATEGIC BUSINESS UNIT (SBU)
3. STRATEGIC MANAGEMENT: DEVELOPMENT,
CHARACTERISTICS, TRENDS, AND NEEDS
4. COMPONENTS AND PROCESS OF STRATEGIC
MANAGEMENT

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Business/Service Strategy
O The means an organization uses to achieve its
objectives
O Serves as a tool for the implementation of
management’s concept of business scope, mission,
purpose, and objectives
O Guiding framework in running overall institutional
operations
O A direction for the organization both in shorter as well
as long run

3. Components of Corporate/Institutional Strategy
1. Scope, mission, and intent
2. Objectives
3. Development strategy
4. Resources allocation
5. Source of synergy

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1. Scope, mission, and intent
 What business/service should the firm be in?,
 What customer needs, market segments,
and/or technologies should the firm focus on?,
and
 What should be the end purpose or the intent
of the firm?

5. Market
Oriented
Fit Market
Environment
Motivating Realistic
Distinctive
Competencies
Specific
Characteristics
of Good Mission
Statements
Mission Statements

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2. Objectives
* What performance dimensions should the
firm’s service/business units and employees
focus on?,
* What is the target level of performance to be
achieved on each dimension?, and
* What is the timeframe in which each target
should be attained?

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The Characteristics of Objectives
Every business/service objective should be:
S = Specific
M = Measurable
A = Achievable
R = Realistic
T = Time-bounded

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3. Development Strategy
 How can the firm achieve the desired level of
growth over time?,
 Can the desired growth be attained by
expanding the firm’s current business or
service?, and
 Will the institution have to diversify into new
businesses or product or service markets to
achieve its future growth objectives?

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4. Resources Allocation
* How should the firm’s limited financial
resources be allocated across its business and
services to produce the highest returns? and
* Of the alternative strategies that each business
or service might pursue, which will produce
the greatest returns for the money invested?

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5. Sources of Synergy
* What competencies, knowledge, and customer based
intangibles (e.g., brand recognition, reputation,
loyalty, etc.) might be developed and shared across
the firm’s operations?, and
* What operational resources, facilities, or functions
(e.g., plants, R&D, salesforce, etc.) might the firm’s
operations share to increase their efficiency?

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A Business/Service Strategy Specification
Includes the determination of:
1. The product market in which the business is to compete
2. The level of investment
3. The functional area strategies needed to compete in the
selected product market
4. The strategic assets or competencies that underline the
strategy and provide sustainable competitive advantage (SCA)
Multiple Businesses/Services
5. The allocation of resources over the business/service units
6. The development of synergistic effects across the
business/service centers -the creation of value by having
business units that support and complement each other.
SMART

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A Model of Business/Service Strategy
Business/Service Strategy
Product-Market
Investment Decision
* Product market scope
* Investment intensity
* Resources allocation
over business units
Functional Area
Strategies
* Product
* Price
* Distribution
* Promotion, etc.
Basis of SCAs
* Assets/competencies
* Synergies
SMART

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The Search for SCAs
Sources of
Advantage
* Superior skills
* Superior resources
* Superior controls
Positional
Advantages
* Superior
customer value
* Lower relative
costs
Performance
Outcomes
* Satisfaction
* Loyalty
* Market share
* Profitability
Investment of profits to sustain advantage

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Strategic Business Unit (SBU)
¤ SBU is an organizational unit that has distinctly
defined business strategy and a manager with
sales and profit responsibility.
¤ The concept of SBU makes business units more
autonomous and strategy development less
centralized.
¤ An SBU should be formed either at the brand
level (e.g., KU MBA), or at the category level
(e.g., KU management study center)

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What are the bases of setting up SBUs?
The appropriate level of aggregation for an SBU
fully relies on judgments. The judgment may be
done on TWO bases. They are:
1.Commonality of the products/service to be
kept within one SBU, and
2.Necessary size of the organization to support
SBU
In many cases, an SBU may have a variety of product/service
lines.

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Strategic Management
° Integral part of strategic management process.
° Planning process to deal with the rapid change in the
environment.
° Has close associations with budgeting (early 1990s),
long-range planning (1950s), and strategic planning
(1960s), and is developed since mid 1980s.
° A proactive and future oriented management process
in marketing.
° Emphasizes the strategy development needs to be
driven by the market and its environment rather than
an internal orientation.

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Strategic Management Aims at:
° How to influence the external factors and
make them supportive to the organizational
operations, and how to most efficiently and
effectively use the internal forces whereby the
resources (strengths) are best utilized to
achieve the highest possible rate of
productivity for the organization.

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Some Strategic Challenges to Managers:
° Management has a distinctive and farsighted view,
rather than a conventional and reactive view, about
the future.
° Senior management focuses regenerating core
strategies rather than reengineering core processes.
° Competitors view the institution as a rule maker
rather than a rule follower.
° The institution’s strength is on innovation and
growth rather than on operational efficiency.
° The institution is mostly out in front rather than
catching up.

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Development of Strategic Management
° Developed along with the evolution of various
management systems.
° Follows the evolution of Budgeting, Long-
Range Planning, and Strategic Planning.
° Sometimes all these terms are used
interchangeably.

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Characteristics and Trends of Strategic Management
The following are some of the major thrusts or trends
emerged in the field of strategic management:
1. External, Market Orientation
2. Proactive Strategies
3. Emphasis on Information System
4. On-Line Analysis and Decision Making
5. Entrepreneurial Thrust
6. Strategic Fitness in Implementation
7. Matching with the Global Realities
contd…

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Characteristics and Trends contd…
8. Longer Time Horizon
9. Empirical Research Based
10. Interdisciplinary Developments
Marketing
Organizational Behavior
Finance and Accounting
Economics
Strategy

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Needs/Importance of Strategic Management
Despite the involvement of high cost, strategic
management has the potential to:
• Precipitate the concept of strategic choices,
• Force a long-range view,
• Make visible the resources allocation decision,
• Aid strategic analysis and decision making,
• Provide a strategic management and control system,
• Provide both horizontal and vertical communication
and coordination systems, and
• Help a business/institution cope with changes.

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Needs/Importance …
George Yip studied strategy development in 13 firms
and concluded that strategic market management
approaches have particular value for businesses that -
* Need multifunctional strategies; one marketing
oriented firm used them to provide a strategic role
for functions other than marketing,
* need to achieve synergy among multiple markets,
* need to coordinate the strategies of multiple
brands, and
* are involved in complex markets where
multiple or layered channels, regional variations, or
multiple elements of marketing mix are involved.

24. External Analysis
1. Customer analysis
2. Competitor analysis
3. Market analysis
4. Environmental analysis
Strengths, weaknesses, stg. problems,
constraints, and uncertainties
Opportunities, threats, trends,
and strategic uncertainties
Internal Analysis
1. Performance analysis
2. Determinants of strategic options
Strategy Identification and Selection
Determination of Functional Strategies
Planning, Implementation and Control
Review of Strategic Thrusts
Situation Analysis
Strategic
Management
Process