managing strategy and strategic planning chapter 08 peshawar city institute of modern sciences

Managing Strategy and Strategic Planning

Chapter 08

Peshawar City Institute Of Modern Sciences

Managing Strategy and Strategic Planning 2

The Nature of Strategic ManagementStrategyA way of approaching business opportunities and challenges.Strategic Management A comprehensive and ongoing management process aimed at formulating and implementing effective strategies; a way of approaching business opportunities and challenges.Effective StrategyA strategy that promotes a superior alignment between the organization and its environment and the achievement of strategic goals.



The Nature of Strategic ManagementThe Components of Strategy

Distinctive CompetenceAn organizational strength possessed by only a small number of competing firms.

ScopeWhen applied to strategy, it specifies the range of markets in which an organization will compete.

Recourse DeploymentHow an organization distributes its resources across the areas in which it competes.



The Nature of Strategic ManagementTypes of Strategic AlternativesBusiness-Level StrategiesThe set of strategic alternatives from which an organization chooses as it conducts business in a particular industry or market.Corporate-Level StrategiesThe set of strategic alternatives from which an organization chooses as it managers its operations simultaneously across several industries and several markets.



The Nature of Strategic ManagementStrategy Formulation and Implementation

Strategy FormulationThe set of processes involved in creating or determining the strategies of the organization; it focuses on the content of strategies.

Strategy ImplementationThe methods by which strategies are operationalized or executed within the organization; it focuses on the processes through which strategies are achieved.



The Nature of Strategic ManagementStrategy Formulation and Implementation

Deliberate StrategyA plan of action that an organization chooses and implements to support specific goals.

Emergent StrategyA pattern of action that develops over time in an organization in the absence of mission and goals or despite mission and goals.



Using SWOT Analysis to Formulate Strategy

Strengths Weaknesses

Opportunities Threats

Internal Analysis

External Analysis




Evaluating an Organization’s Strengths Organizational Strength: A skill or

capability that enables an organization to conceive of and implement its strategies. Strategic Imitation: The practice of duplicating

another organization’s distinctive competence and thereby implementing a valuable strategy.

Sustained Competitive Advantage: A competitive advantage is a competitive advantage that exists after all attempts at strategic imitation have ceased.




Evaluating an Organization’s Weaknesses

Organizational Weakness: A skill and capability that does not enable an organization to choose and implement strategies that support its mission. Competitive Disadvantage: A situation in

which an organization is not implementing valuable strategies that are being implemented by competing organizations.




Evaluating an Organization’s Opportunities and ThreatsOrganizational Opportunities: An area in the environment that, if exploited, may generate high performance.Organizational Threats: An area in the environment that increases the difficulty of organization's achieving high performance



MissionAn organization’s fundamental purpose

SWOT AnalysisTo formulate strategies that support the strategies

Those that support the mission and•Exploit opportunities and strengths•Neutralize threats•Avoid weaknesses

Internal Analysis External Analysis

Strengths

Weaknesses Threats

Opportunities

Good Strategies

SWOT Analysis



Formulating Business-Level Strategies

Three Important Classification of Business Level Strategies:

1. Porter’s Generic Strategies2. Miles and Snow Typology3. Strategies Based on Product Life Cycle

(PLC)



Formulating Business-Level StrategiesPorter’s Generic Strategies

1. Differentiation StrategyA strategy in which an organization seeks to distinguish itself from competitors through the quality of its products or services.

2. Overall Cost Leadership Strategy A strategy in which an organization attempts to gain competitive advantage by reducing its costs below the costs of competing firms.

3. FocusA strategy in which an organization concentrates on a specific regional market, product line, or group of buyers.



Formulating Business-Level StrategiesThe Miles and Snow Typology

1. Prospector StrategyA strategy in which the firm encourages creativity and flexibility and is often decentralized.

2. Defender StrategyA strategy in which a firm focuses on lowering costs and improving the performance of current products.

3. Analyzer StrategyA strategy in which the firm attempts to maintain its current business and to be somewhat innovative in new businesses.

4. Reactor StrategyA strategy in which a firm has no consistent approach to strategy.


Managing Strategy and Strategic Planning


ProspectorStress innovation and growth; seek

new opportunities

Dynamic, growingenvironment characterized

by high uncertaintyand risk

Moderately stableenvironment withsome uncertainty

and risk

Very stableenvironment withlittle uncertainty

and risk

ReactorLittle consideration

of environment; drift with little

concern for strategy

AnalyzerStress maintenance of status quo with

moderate innovation and growth

DefenderStress stability, conservatism,

and maintenance of status quo




Strategies Based on Product Life Cycle (PLC)Product Life CycleA model that portrays how sales volume for products changes over the life of products.




Introduction

Time

Stages

Growth Maturity Decline

High

Low

Sale

s V

olu

me



Implementing Business-Level Strategies

Implementing Porter’s Generic Strategies Differentiation Strategy

Marketing should focus on high quality and high-value image of the organization.

Accounting and finance should focus on control on funds without discouraging creativity.

Organization culture should focus on creativity, innovation and response to customer needs in every function of the organization..



Implementing Business-Level StrategiesImplementing Porter’s Generic Strategies

Overall Cost Leadership Strategy Marketing should focus on simple product

attributes and should reduce the cost for achieving economies of scale.

Accounting and finance should focus on tight accounting and financial control.

Manufacturing should focus on buying raw material at cheaper prices, minimize manufacturing waste and achieving economies of scale.

Organization culture should focus on improving efficiency in every function of the organization.



Implementing Business-Level Strategies

Implementing Miles and Snow Strategies Prospector Strategy

Prospector strategy can be achieved through innovation, seek new market opportunities, and take numerous risks.

Defender Strategy Defender strategy can be achieved through protecting the

market from new competitors. Low prices and improved performance of the product can be an effective strategy.

Analyzer Strategy Analyzer strategy can be used to maintain current business

and innovate new ones. Effective marketing, tight accounting systems and strong culture should be maintained while search for new markets should be a focus too.



Formulating Corporate-Level Strategies

Most large organizations are engaged in several businesses, industries, and markets. Each business or set of business within such an origination is frequently referred to as a Strategic Business Unit (SBU).DiversificationThe number of different businesses that an organization is engaged in and the extent to which these businesses are related to one another.




Single-Product StrategyA strategy in which organization manufactures just one product or service and sells in in a single geographic market.




Related DiversificationA strategy in which an organization operates several businesses that are linked to one another.

Bases of Relatedness Similar technology Common distribution and

marketing skills Common brand name and

reputation Common customers

Advantages1. Reduce organization’s

dependencies2. Reduce overhead cost3. Exploitation of strengths

and capabilities in more then one business




Unrelated DiversificationA strategy in which an organization operates several businesses that are not associated.Advantages

1. If one business is in the decline stage the other business may enjoy growth stage. So resources can be used in the business where they have the high potential

2. Using different unrelated business may create greater synergy.



Implementing Corporate-Level Strategies

Becoming a Diversified Firm Development of New Products Replacement of Suppliers and

Customers Backward Vertical Integration: An

organization's beginning the business activities formally conducted by its suppliers.

Forward Vertical Integration: An organization's beginning the business activities formally conducted by its customers.

Mergers and Acquisitions Merger: The purchase of one form by another

firm of approximately the same size. Acquisition: The purchase of a firm by a firm

considerably larger.




Managing DiversificationPortfolio Management TechniqueA method that diversified organizations use to determine which business to engage in and how to manage these businesses to maximize corporate performance.Two important portfolio management techniques are:

BCG Matrix GE Business Screen




StarsQuestionMarks

DogsCash Cows

Relative Market Share

RelativeMarketGrowth

High

Low

High

Low

The Boston Consulting Group (BCG) Matrix

Managing Diversification



Implementing Corporate-Level Strategies Managing Diversification

Competitive Position1.Market share2.Technological know-how3.Product quality4.Service network5.Price competitiveness6.Operating costs

Industry Attractiveness1.Market growth2.Market size3.Capital requirements4.Competitive intensity

Winner

Winner

ProfitProducer

WinnerQuestion

Mark

Average Business

Loser Loser

Loser

Good Medium Poor

Medium

High

Low

Competitive Position

IndustryAttractiveness

The General Electric (GE) Business Screen


managing strategy and strategic planning chapter 08 peshawar city institute of modern sciences

Documents

strategic planningchapter

achievement of strategic

city university of science

effective strategya

effective strategies

content of strategies

business opportunities

specific goals