PowerPoint Slides t/a Management: A Pacific Rim Focus Enhanced Edition.. PowerPoint Slides t/a Management: A Pacific Rim Focus Enhanced Edition.. 2 Lecture summary • The concept of strat
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Slides t/a Management: A Pacific Rim Focus
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1
CHAPTER 7
STRATEGIC MANAGEMENT
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Lecture summary
• The concept of strategic management
• Role of competitive analysis in strategy formulation
• Formulating corporate level strategy
• Formulating business level strategy
• Formulating functional level strategy
• Strategy implementation
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Enhanced Edition Slides prepared by David
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Concept of strategic
management
• Strategic management process
• Importance of strategic management
• Levels of strategy
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Concept of strategic
management
Strategic management process:
‘Process through which managers formulate and implement strategies geared to optimising strategic goal achievement, given available environmental and internal conditions.’
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– Identify mission & goals
– Competitive situation analysis (external & internal)
– Develop/formulate strategies to achieve identified goals
• Strategy implementation
– Implement plans
– Control/monitor execution of plans
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Strategic management process
Environmental analysis
Strategic control
Strategy formulation
Strategy implementation
Conduct SWOT analysis
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Importance of strategic
management
Important because:
• Helps organisations develop a competitive
advantage (significant edge over competition in dealing with competitive forces).
• Provides a sense of long-term direction for
organisation members.
• Highlights need for innovation.
• Process involves members and fosters
understanding of goals/strategy.
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Levels of strategy
Corporate level strategy:
‘Type of strategy addressing what businesses the organisation will operate, how strategies of those businesses will be co-ordinated to strengthen the organisation’s competitive
position, and how resources will be allocated among
businesses.’
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Levels of strategy
Business level strategy:
‘Type of strategy concentrating on the best means of
competing within a particular business while also supporting corporate level strategy.’
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Levels of strategy
Functional level strategy:
‘Type of strategy focussing on action plans for managing a particular functional area within a business in a way that supports business level strategy.’
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Competitive analysis in strategy formulation
Before managers devise an effective strategy
for getting a competitive edge, they must
analyse the organisation’s competitive
situation
This is done through:
• Environmental analysis (external)
• Organisational assessment (internal)
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Human Resources Analysis
Industry &
Market
Analysis
Competitor Analysis
Economic
Analysis
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2 Bargaining power of customers
3 Bargaining power of suppliers
4 Threat of new entrants
5 Threat of substitute products/services
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Formulating corporate level
strategy
Corporate level strategy is the overall strategy
an organisation follows Its development
involves selecting a grand strategy and using
portfolio-strategy approaches to determine the
various businesses making up the organisation:
• Grand strategy
• Portfolio-strategy approaches.
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• Product–market evaluation matrix
Compares businesses’ strength against product/market cycle
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Product-market evaluation
matrix
Business unit’s competitive position
Strong Average Weak
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Formulating business level
strategy
Generic business strategies:
Porter outlined three generic business level strategies to gain competitive advantage over other firms operating in the same industry
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Formulating business level
strategy
Generic business strategies (Porter):
• Cost leadership strategy
Emphasises operational efficiency i.e overall costs are lower than competitors
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Formulating functional level
strategy
Functional level strategies spell out specific
ways that functional areas can bolster business
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• Formulating business level strategy
– Porter generic strategies: cost, differentiation & focus
• Formulating corporate level strategy
• Strategy implementation
– Control systems & adjustments