Chapter 7

Strategic Management: Planning for Long-Term Success

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Chapter Outline

Strategic Management = Strategic Planning + Implementation + Control

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Chapter Outline
(continued)

Thinking Strategically
Synergy Porters Generic Competitive Strategies Business Ecosystems: A New Strategic Perspective Strategy.com

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Chapter Outline
(continued)

The Strategic Management Process

Formulation

of a Grand Strategy Formulation of Strategic Plans

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Chapter Outline
(continued)

Strategic Implementation and Control

Implementation of Strategic Plans Strategic Control Corrective Action Based on Evaluation and Feedback

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Chapter Outline
(continued)

Forecasting
Types of Forecasts Forecasting Techniques

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DIFFERENT STRATEGY-MAKING MODES

Table 7.2

Traditional Modes:
Command (Commanders and Soldiers) Symbolic (Coaches and Players) Rational (Bosses and Subordinates)

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DIFFERENT STRATEGY-MAKING MODES

(continued)

Modern Modes:
Transactive (Facilitators and Participants) Generative (Sponsors and Entrepreneurs)

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STRATEGIC MANAGEMENT = STRATEGIC PLANNING + IMPLEMENTATION + CONTROL Strategic management: the ongoing process of
ensuring a competitively superior fit between an organization and its changing environment.

Strategy: the pattern of decisions a firm makes.

The strategic management perspective is the product of a historical evolution and is now understood to include budget control, long-range planning, and strategic planning.
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SYNERGY (Thinking Strategically)

Synergy: occurs when two or more variables

(for example, chemicals, drugs, people, organizations) interact to produce an effect greater than the sum of the effects of the variables acting independently.

The 1 + 1 = 3 effect The whole is greater than the sum of its parts
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SYNERGY (Thinking Strategically)

(continued)

Four Kinds of Synergy:

Market synergy Cost synergy Technological synergy Management synergy

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SYNERGY (Thinking Strategically)

(continued)

Individual Exercise: What kinds of synergy

have you achieved in your personal affairs?

Team Exercise: How many examples of

synergy in the business world can you identify in five minutes?
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Figure 7.1 Porters Generic Competitive Strategies

Source: Reprinted with permission of The Free Press, a Division of Simon & Schuster, Inc. from The Competitive Advantage of Nations by Michael E. Porter. Copyright 1990, 1998 by Michael E. Porter.

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PORTERS GENERIC COMPETITIVE STRATEGIES (Thinking Strategically) Differentiation: the ability to provide unique and superior value to the buyer in terms of product quality, special features, or after-sale service.

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PORTERS GENERIC COMPETITIVE STRATEGIES (Thinking Strategically)

(continued)

Cost Leadership Strategy

Competitive scope: Broad target Competitive advantage: Lower cost

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PORTERS GENERIC COMPETITIVE STRATEGIES (Thinking Strategically)

(continued)

Differentiation Strategy

Competitive scope: Broad target Competitive advantage: Differentiation

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PORTERS GENERIC COMPETITIVE STRATEGIES (Thinking Strategically)

(continued)

Cost Focus Strategy

Competitive scope: Narrow target Competitive advantage: Lower cost

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PORTERS GENERIC COMPETITIVE STRATEGIES (Thinking Strategically)

(continued)

Focused Differentiation Strategy

Competitive scope: Narrow target Competitive advantage: Differentiation

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BUSINESS ECOSYSTEMS (Thinking Strategically) Business ecosystem: an economic community

of organizations and all their stakeholders, including suppliers and customers. Key theme: Organizations need to be as good at cooperating as they are at competing if they are to succeed.

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BUSINESS ECOSYSTEMS (Thinking Strategically)

(continued)

James F. Moore: the major factor today limiting the spread of realized innovation is not a lack of good ideas, technology, or capital. It is the inability to command cooperation across broad, diverse communities of players who must become intimate parts of a far-reaching process of coevolution.
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BUSINESS ECOSYSTEMS (Thinking Strategically)

(continued)

Individual or Team Exercise: Pick a well-known organization and identify members of its ecosystem. What organization is dominant in that ecosystem?
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STRATEGY.COM (Thinking Strategically)

E-Commerce Strategy Lessons: Different types and combinations of revenue sources will require different business models. Loyal customers still expect a personal touch and some hand holding when they have questions, problems, or suggestions. Identify core competencies to decide which bricks-and-mortar facilities earn their keep.
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STRATEGY.COM (Thinking Strategically)

(continued)

E-Commerce Strategy Lessons: E-commerce sometimes requires a quick revolution, rather than slow evolution. (Start with a blank sheet of paper. Cannibalism may pay.) E-commerce customers increasingly want high ethical standards throughout the supply chain. Only the paranoid survive. (Everyone is a potential competitor in e-commerce.
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Figure 7.2 The Strategic Management Process

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CONDUCTING A SWOT ANALYSIS (A Team Exercise)

Instructions: Select a well-known organization and complete the following SWOT analysis. (Tip: Work on one variable at a time.) Next, outline a strategic direction for the organization, based on your SWOT analysis.

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CONDUCTING A SWOT ANALYSIS (A Team Exercise)

(continued)

Organization:_____________________
Organization

Strengths

Weaknesses

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CONDUCTING A SWOT ANALYSIS (A Team Exercise)

(continued)

Environment Opportunities Threats

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Figure 7.3 Determining Strategic Direction Through Situational (SWOT) Analysis

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FORECASTING

Forecasts: predictions, projections, or estimates of future events or conditions in the environment in which the organization operates.

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FORECASTING
(continued)

Types of Forecasts
Event

outcome forecasts: used when strategists want to predict the outcome of highly probable future events. Event timing forecasts: predict when, if ever, given events will occur. Time series forecasts: seek to estimate future values in a sequence of periodically recorded statistics.
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FORECASTING
(continued)

Forecasting Techniques

Informed judgment Scenario analysis (Longitudinal and cross-sectional scenarios) Surveys Trend analysis
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