marketing manager course - chapter 07

z Link external and internal environment data to determine a firm’s strategic intent and mission.. Analyze the external and internal environmentsDefine strategic intent and mission For

Chapter

Strategic Management

Learning Objectives

After reading this chapter, you should be able to:

z Implement the steps in the strategic management

process.

z Conduct an analysis of the firm’s strengths,

weaknesses, opportunities, and threats.

z Identify the factors that create a sustained competitive

advantage.

z Link external and internal environment data to

determine a firm’s strategic intent and mission.

z Choose appropriate business strategies at the

The Strategic Management Process

z It is the job of top level management to

chart the course of the entire enterprise.

z It consists of:

¾ Analysis of the internal and external environment of the firm.

¾ Definition of the firm’s mission.

¾ Formulation and implementation of strategies to create or

continue a competitive advantage

The Strategic Management Process

(continued)

z Strategic management involves both long-range

thinking and adaptation to changing conditions.

z Strategies should be designed to generate a

sustainable competitive advantage.

z Competitors should be unable to duplicate what

the firm has done or should find it too difficult or

expensive.

Analyze the external and internal environments

Define strategic intent

and mission Formulate strategies

Implement strategies Assess strategic

Components of the Strategic Management Process:

SWOT Analysis

z Commonly used strategy tool: SWOT

¾ Strengths, Weaknesses, Opportunities, Threats

z Step 1: Analyze the organization’s internal environment,

identifying its strengths and weaknesses

z Step 2: Analyze the organization’s external environment,

identifying its opportunities and threats

z Step 3: Cross-match

¾ Strengths with opportunities

¾ Weaknesses with threats

¾ Strengths with threats

¾ Weaknesses with opportunities

The External Environment

z Company leaders must study the external

environment in order to:

¾ Identify opportunities and threats in the marketplace.

¾ Avoid surprises.

¾ Respond appropriately to competitors’ moves.

z A major challenge is to gather accurate market

intelligence in a timely fashion, and transform it

into usable knowledge to gain a competitive

advantage.

Components of External Analysis

Forecasting

A ssessing

Scope of the External Analysis

G eneral Environm ent

The Segments of the General Environment

Demography Economic Condition Economic Condition s s

Political/Legal Forces

Socio - cultural Conditions

Porter’s Framework for Analyzing

the Industry Environment

among competitors

The Internal Environment

z Each company has something that it does well

These are called “core competencies.”

z Company executives should identify the resources,

capabilities, and knowledge the firm has that may

be used to exploit market opportunities and avoid

potential threats.

z Resource-based view: Basing the strategy on what

the firm is capable of doing

Resources Capabilities

Strategy

Potential for sustainable competitive advantage

1 Identify the firm’s

resources and locate areas of strength and

2 Identify the firm’s

capabilities (What can the firm do?)

3 Appraise the profit

generating potential of resources/capabilities in terms of creating,

sustaining, and exploiting competitive advantage.

4 Select a strategy that best

exploits the firm’s capabilities relative to external opportunities.

5 Identify resource gaps

that need to be filled

Invest in replenishing and augmenting the firm’s resource base.

Core Competencies and Market Opportunities

Resource Types:

Tangible Resources

z Assets that can be quantified and observed.

z Include financial resources, physical assets, and

workers.

z Strategic assessment of tangible resources should

enable management to efficiently use tangible

resources to support the company and

to expand the volume of business.

Analyzing the Firm’s Capabilities

Functional A nalysis

V alue C hain A nalysis

B enchm arking

Analyzing Capabilities by

Functional Areas

Functional Area Capability

Corporate Management Effective financial control systems

Expertise in strategic control of diversified corporation Effectiveness in motivating and coordinating divisional and business-unit management

Management of acquisitions Values-driven, in-touch corporate leadership Information Management Comprehensive and effective MIS network, with strong central

coordination

Research and Development Capability in basic research

Ability to develop innovative new products Speed of new product development

Analyzing Capabilities by Functional Areas (continued)

Functional A rea C apability

Manufacturing Efficiency in volume manufacturing

Capacity for continual improvements in production processes Flexibility and speed of response

Product Design Design capability

Marketing Brand management and brand promotion

Promoting and exploiting reputation for quality Responsive to market trends

Sales and Distribution Effectiveness in promoting and executing sales

Efficiency and speed of distribution Quality and effectiveness of customer service

A Simple Value Chain

Technology Product Design Manufacturing Marketing Distribution Service

Channels Integration Inventory Warehousing Transport

Warranty Dealer Support Availability Speed Prices

Prices Advertising Promotion Sales Force Package Brand

Integration Raw Materials Capacity Location Procurement Parts Production

Brand

Benchmarking Involves Four Stages:

„ Identifying activities or functions that are weak

and need improvement.

„ Identifying firms that are known to be at the

leading edge of these activities or functions.

„ Studying the leading-edge firms by visiting them,

talking to managers and employees, and reading trade publications.

„ Using the information gathered to redefine goals,

modify processes, and acquire new resources to

Strategic Intent and Mission

z The primary guides to strategic management are

formal statements of strategic intent and mission

z Strategic intent is internally focused, defining how

the firm uses its resources, capabilities, and core

competencies

z Strategic mission is externally focused, defining what

will be to produced and marketed, utilizing its internal

core competencies

Corporate-Level Strategy

z The corporation’s overall plan concerning the:

¾ Number of businesses the corporation holds.

¾ Variety of markets or industries it serves.

¾ Distribution of resources among those businesses.

z This diversification strategy may be analyzed in terms of:

Portfolio Analysis

z The basic idea is to classify the businesses of a

diversified company within a single framework.

z Two of the most widely applied include:

¾ The McKinsey-General Electric Portfolio Analysis Matrix

¾ The Boston Consulting Group’s Growth Share Matrix

The McKinsey-General Electric

Portfolio Analysis Matrix

Business-Unit Position

1) Harvest

High

The Boston Consulting Group’s

Growth Share Matrix

Earnings: high stable, growing

Cash Flow: neutral Strategy: invest for growth

?

Earnings: high, stable Cash Flow: high stable Strategy: milk

COW

Earnings: low, unstable Cash Flow: neutral or negative

¾ Acquisition

¾ Merger

z International strategy

Business-Level Strategy

z Deals with how to compete in each business area

or market segment.

z Firms have two basic choices:

¾ Cost leadership strategy

¾ Differentiation strategy

Strategy Implementation

O rganizational Structure and

C ontrols

C ooperative Strategies

H um an

R esource Strategies

Strategic Outcomes

z Company leaders should periodically assess

whether the outcomes meet expectations.

z A firm must first and foremost cater to the desires

of its primary stakeholders.

z The firm should also consider the desires of other

stakeholders affected by its performance.

z Some of the standard measures of strategic success includes:

Applications: Management Is Everyone’s

Business—For the Manager

z An effective manager must be proactive in responding

to evolving challenges and opportunities rather than being overtaken by events.

z Learning to think strategically forces managers to:

¾ Be alert for changes in the external and internal environments.

¾ Modify the firm’s strategic intent, mission, and formulated strategy when

necessary.

¾ Effectively implement the new or redesigned strategies.

Applications: Management Is Everyone’s

Business—For Managing Teams

z The strategic management process generally

involves teams of managers and employees from

different areas who bring their perspectives and

expertise to bear on issues facing the firm.

z A key factor is how well the firm can mobilize and

integrate the efforts of team members.

Applications: Management Is Everyone’s

Business—For Individuals

z Individual employees are more likely to make

greater contributions to the firm if they engage in

activities that have strategic value.

z Employees can be attuned to changes in their area

of expertise and advise management on the

strategic implications of those changes.

z Employee success depends on the ability to adapt

to the firm’s strategic change.