Mason Carpenter, Talya Bauer, and Berrin Erdogan
Principles of Management
Chapter 5 Strategizing
See how strategy fits in the P-O-L-C framework
Better understand where strategy comes from
Understand the concept of strategic focus
Conduct internal analysis to develop strategy
Conduct external analysis to develop strategy
Formulating organizational and personal strategy with the strategy diamond
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Understand How Strategy Fits in the P-O-L-C Framework
Where Strategy Fits in “Planning”
Mission &
Vision
Strategy
Goals & Objectives
Mission &
Vision
Strategy
Goals & Objectives
The strategy is how the firm aims to realize its mission and vision
Goals and objectives are the indicators of how well the strategy is succeeding
Strategic Management Process
The process by which a firm manages the formulation and implementation of its strategy
The coordinated means by which an organization achieves its goals and objectives
Strategizing in P-O-L-C
Strategy ImplementationStrategy Formulation
Planning
1. Vision & Mission
2. Strategizing
3. Goals & Objectives
Organizing
1. Organization Design
2. Culture
3. Social Networks
Leading
1. Leadership
2. Decision Making
3. Communications
4. Groups/Teams
5. Motivation
Controlling
1. Systems/Processes
2. Strategic Human Resources
Corporate & Business Strategy
Corporate Strategy
Str
ateg
izin
g
What business or business should we be in?
How does being in one business help us compete in our other businesses?
Business Strategy
How should we compete?
Corporate Strategy
Synergy
Diversification
SWOT Analysis An _______ of the company's _______ workings and an examination of external __________ and
__________
(1) what can we
do?
(2) what do we
want to do?
(3) what might we
do?
(4) what do others expect us
to do?
SWOT Analysis
SWOT
Strengths
Weaknesses
Opportunities
Threats
Effective strategies
Sustainable competitive advantage
• take advantage of strengths
• minimize the disadvantages posed by any weaknesses
• An organization’s strengths cannot be easily duplicated or imitated by other firms
Strengths and Opportunities (SO) – How can you use your strengths to take advantage of the opportunities?
Strengths and Threats (ST) – How can you take advantage of your strengths to avoid real and potential threats?
Weaknesses and Opportunities (WO) – How can you use your opportunities to overcome the weaknesses you are experiencing?
Weaknesses and Threats (WT) – How can you minimize your weaknesses and avoid threats?
Internal Analysis Tools
Value chain
VRIO
External Analysis Tools
PESTEL
Industry analysis
Discussion• What is the difference between strategy formulation and
strategy implementation?• What is the difference between business strategy and
corporate strategy?• What are some of the forms of diversification and what
do they mean?• What do you learn from a SWOT analysis?• In SWOT analysis, what are some of the tools you might
use to understand the internal environment (identify strengths and weaknesses)?
• In SWOT analysis, what are some of the tools you might use to understand the external environment (identify opportunities and threats)?
Strategy provides managers with an organizational compass and a
roadmap for the future
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Various Factors can undermine a strategy
the plan is poorly constructed
competitors undermine the advantages envisioned by the plan
the plan was good, but poorly executed
Intended, Deliberate, Realized, and Emergent Strategies
Mintzberg’s Conclusion
The realized strategy is a consequence of
deliberate and emerging factors
Discussion• What is an intended strategy?• What is a realized strategy?• Why is it important to understand the difference between
intended and realized strategies?• Why is there not a perfect match-up between realized
and intended strategies?• What might interfere with the realization of an intended
strategy? • How might you manage the balance between design and
emergence strategizing processes in an organization?
What is Strategic Focus?
strategy as __________
strategy as __________
Strategic focus is seen when an organization is
very _____ about its mission and vision, and has a _________, well-articulated _______ for
achieving them
Porter’s Generic Strategies
Differentiation or Price Leadership Strategy?
Southwest Airlines has combined cost
cutting measures with differentiation,
proving that it is possible to succeed using combination
strategies© 2010 Jupiterimages Corporation
What are Value Disciplines?
Operational excellence
Product leadership
Customer intimacy
Only One Discipline
Discussion• What is strategic focus and why is it important?• What are Porter’s three generic strategies?• Can a firm simultaneously pursue a low-cost and a
differentiation strategy?• What are the three value disciplines?• What four rules underlie the three value
disciplines?• How do Porter’s generic strategies differ from
other approaches?
DEVELOPING STRATEGY THROUGH INTERNAL ANALYSIS
_______ analysis tells the strategist what is _____ the organization
An internal analysis helps answer the question, “what _________ can
we _________?”
Measuring Value with Core Competencies
Product’s performance
characteristics
Attributes for which
customers are willing to pay
Value
The Value Chain
Building Blocks (VRIO) of Building and Maintaining Competitive Advantage
Value Rarity
Inimitability Organization
Discussion• What is the objective of internal analysis?• What is the difference between a resource and a
capability?• What is the difference between a tangible and an
intangible resource or capability?• What is a core competency?• What framework helps you identify those
resources, capabilities, or core competencies that provide competitive advantage?
• Why might competitive advantage for a firm be fleeting?
DEVELOPING STRATEGY THROUGH EXTERNAL ANALYSIS
An external analysis tells the strategist what is outside the organization.
Begin with the general environment
Continue toward the focal industry
An external analysis
helps answer the question, “what opportunities can we exploit?”
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Six General Environment SegmentsPESTLE Analysis
political
economic
socialtechnical
environmental
legal
AN ORGANIZATION’S MICRO-ENVIRONMENT
• A group of firms producing products that are close substitutesIndustry
• industries that provide the raw material or inputs for the focal industry
Upstream Markets
• industries (sometimes consumer segments) that consume the industry outputs
Downstream Markets
Porter’s Five ForcesNew Entrants
Buyers
Substitutes
Suppliers Rivalry
New Entrants
Buyers
Substitutes
Suppliers Rivalry
Porter’s Attractiveness and Profitability Analysis
Likely to Profit
Is the industry ______ to enter?
Is there limited _______?
Are buyers relatively ________?
Are suppliers relatively weak?
Are there _______ substitutes?
Challenges to Profit Is the industry _______ to
enter? Is there a ______ _______
of rivalry between firms within the industry?
Are buyers ________? Are suppliers strong? Is it easy to ________ to
alternatives?
Discussion• What are the six dimensions of the environment that are of
broad concern when you conduct a PESTLE analysis?• Which of the PESTLE dimensions do you believe to be most
important, and why?• What are the key dimensions of a firm’s micro-environment?• What is the difference between a monopoly and an
oligopoly?• What are the five forces referred to in the Porter framework?• Is there a dimension of industry structure that Porter’s model
appears to omit?
ORGANIZATIONAL AND PERSONAL STRATEGY WITH THE STRATEGY DIAMOND
Arenas Differentiators Economic Logic
The Strategy Diamond
Planning and Your Personal Growth and Development Strategy
Personal Mission
&Vision
Personal Strategy
for Growth&
Development
Personal Goals & Objectives
•__________
•__________
•__________
•__________
•__________
What type of work do I want to do?What leisure activities do I like?Where do I want to live?What capabilities (differentiators) do I need to participate in these arenas?What organizations value these capabilities (differentiators)?What capabilities (differentiators) do I want to have and excel in?
Discussion• What are the five facets of the Hambrick & Fredrickson
strategy diamond?• What is the relationship between arenas and
differentiators if the strategy yields a positive economic logic?
• If a firm is performing poorly financially, what might this say about the differentiators, arenas, or both?
• Why is it important to consider vehicles as part of an organization’s strategy?
• What is the difference between staging and pacing in terms of the strategy diamond?
• What are some ways that you might apply staging and pacing to an organization’s strategy?