Strategic

Strategic Management
Management
and
and the
the Entrepreneur
Entrepreneur

Chapter 3: Strategic Management Copyright 2002 Prentice Hall Publishing Company 1

 Strategic Management
■ Crucial to building a successful business.
■ Involves developing a game plan to guide a
company as it strives to accomplish its
mission, goals, and objectives, and to keep it
on its desired course.

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 Is Strategic Planning Really That
Important?
■ Study of 500 small companies:
 One of the most significant factors in
distinguishing growing companies from
those in decline: use of a written business
plan.
■ Another study:
 Only 12% of small companies had a long-
range plan in writing.

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 Strategic Management and
Competitive Edge
■ Developing a strategic plan is crucial to
creating a competitive advantage, the
aggregation of factors that sets a company
apart from its competitors and gives it a
unique position in the market.
■ Example: Stardust Technologies, Inc.

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 Strategic Management Process
Step 1: Develop a vision and translate it into a
mission statement.
Step 2: Define core competencies and target
market and identify desired market position.
Step 3: Assess strengths and weaknesses.
Step 4: Scan environment for opportunities
and threats.
Step 5: Identify key success factors.

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 Strategic Management Process
(continued)

Step 6: Analyze competition.

Step 7: Create goals and objectives.
Step 8: Formulate strategies.
Step 9: Translate plans into actions.
Step 10: Establish accurate controls.

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 Knowledge Management
■ The practice of gathering, organizing, and
disseminating the collective wisdom and
experience of a company’s employees for the
purpose of strengthening its competitive position.
■ Knowledge management involves:
 Taking inventory of the special knowledge the people
in the company possess.
 Organizing that knowledge and disseminating it to
those who need it.

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 Step 1: Develop a Vision and
Create a Mission Statement
■ Vision – an expression of what an
entrepreneur stands for and believes in.
■ A clearly defined vision:
 Provides direction
 Determines decisions
 Motivates people

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 Step 1: Develop a Vision and
Create a Mission Statement
■ The Mission Statement addresses question:
“What business are we in?”
■ The mission is a written expression of how
the company will reflect the owner’s values,
beliefs, and vision.
■ The company’s mission depicts its character,
identity, and scope of operation in enough
detail to distinguish the company in the
marketplace.

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 Vision and Mission
(Review – different view)

Vision: An overall picture of where the entire

organization would like to be in the
future

Mission: A statement of what the various

organizational units do and what they
hope to accomplish in alignment with
the organizational vision

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 Prime Inc.
Mission and Values
Mission Prime Values
Customers—Finding, servicing,
To prosper while providing and keeping customers
excellent service to our guarantees our existence.
customers
Service—We will provide quality
service that meets or exceeds our
customers’ requirements.

Value—We will price our service

at rates that are a true value to
our customers.

Profit—To remain free and

provide security for our company
and associates, we must earn a
profit.

© 2001 by Prentice Hall, Inc.

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 The Bama Companies, Inc.
Mission and Vision

Mission Vision
People helping people be To delight our customers with
successful. the Bama experience…again
and again by setting the
standard, and being the best
in our products, our service,
and our people.

© 2001 by Prentice Hall, Inc.

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 Aire-Master
Mission and Values

Mission Values
To provide invaluable Positive mental attitude
services that enhance the Teamwork and communication
customer’s image of quality. Concern for others
Going the extra mile
Innovative thinking
Training and education
Honesty
Reliability
Excellence
Constant improvement

© 2001 by Prentice Hall, Inc.

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 Important Components of
Organizational Vision

Organizational Summary of What Broad Goals

Purpose Organization Does

Core Values and Beliefs

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 Components of Organizational
Vision and Mission Statements

Concern for
Philosophy Markets
Employees

Concern for
Public Image Customers Technology

Concern for
Products or
Self-concept Survival, Profits,
Services and Growth

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 Step 2: Define Core Competencies
and Market Position
■ Company must define its set of core
competencies that enable it to serve
customers better than rivals.
■ Core Competencies – a unique set of
capabilities a company develops in key
operational areas that allow it to vault past
competitors.
 They are what a company does best.
 Best to rely on a natural advantage (often
linked to the company’s size).

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 Step 2: Define Core Competencies
and Market Position

■ Market segmentation – carving up the mass

market into smaller, more homogenous units
and then attacking certain segments with a
specific marketing strategy.
■ Proper positioning – creating the desired
image for the business in the customer’s
mind.

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 Step 3: Assess Company Strengths

and Weaknesses
■ Strengths
 Positive internal factors that
contribute to accomplishing the
mission, goals, and objectives.
■ Weaknesses
 Negative internal factors that inhibit
the accomplishment of the mission,
goals, and objectives.

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 Step 4: Scan for Opportunities
and Threats
■ Opportunities
 Positive external factors the company can
employ to accomplish its mission, goals, and
objectives.
■ Threats
 Negative external factors that inhibit the firm’s
ability to accomplish its mission, goals, and
objectives.

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 Step 5: Identify Key Success
Factors
■ Key success factors:
relationships between a
controllable variable and a
critical factor that influence a
company’s ability to compete
in the market.
■ The keys to unlocking the
secrets of competing
successfully in a particular
market segment.
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 Step 6: Analyze Competitors
Analyzing key competitors allows an entrepreneur
to:
 avoid surprises from existing competitors’ new
strategies and tactics.
 identify potential new competitors and the
threats they pose.
 improve reaction time to competitors’ actions.
 anticipate rivals’ next strategic moves.

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 Step 6: Analyze Competitors
Techniques that do not require unethical behavior:
 Monitor industry and trade publications.
 Talk to customers and suppliers.
 Listen to employees, especially sales representatives and
purchasing agents.
 Attend trade shows and conferences.
 Study competitors’ literature and “benchmark” their products
and services.
 Get competitors’ credit reports.
 Check out the local library.
 Use the World Wide Web to learn more about competitors.
 Visit competing businesses to observe their operations.

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 Step 7: Create Company Goals
and Objectives
■ Goals – broad, long-range attributes to be
accomplished.
■ Objectives – more detailed, specific targets of
performance that are S.M.A.R.T.
 Specific
 Measurable
 Attainable
 Realistic (yet challenging)
 Timely

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 Why Have Goals?

Goals:
1. Direct all organizational work toward a
common and unified purpose
2. Act as targets for motivating people
3. Serve as criteria against which work
accomplishments are measured

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 Types of Goals

Areas of
Organizational Work Breadth
❐ Technology and ❐ Organization-
operations wide
❐ Marketing ❐ Operational
❐ Financial

Specificity Time Frame

❐ Specific ❐ Long term
❐ Directional ❐ Short term

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 Characteristics of Good
Goals

❏ Written in terms of outcomes rather than actions

❏ Measurable and quantifiable
❏ Clear as to a time frame
❏ Challenging yet attainable
❏ Written down
❏ Communicated to all organizational members

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 The Goal-Setting Process

Steps:
1. Review the organizational vision and mission(s)
2. Evaluate available resources
3. Determine broad, long-term, organization-wide goals
4. Write down the organization-wide goals
5. Determine specific, short-term operational goals
6. Write down the operational goals
7. Review results

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 Relationship Between
Organizational Goals and Strategies

Organizational
Vision and Mission(s)

Organization-wide Goals

Operational Goals

Operational Strategies

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 Step 8: Formulate Strategies
■ Strategy – a “road map” to guide the company
through a turbulent environment as it seeks to
fulfill its mission, goals, and objectives. It is the
company’s game plan for winning.
■ Three basic strategies:
Cost
Cost leadership
leadership

Strategy? Differentiation
Differentiation

Focus
Focus
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 Strategic Options

Competitive Advantage
Uniqueness Perceived Low Cost
by the Customer Position

Industry Differentiation
Differentiation Low
Low Cost
Cost
Target
Market
Differentiation
Differentiation Cost
Cost
Niche
Focus
Focus Focus
Focus
 Differentiation
■ Company seeks to build customer loyalty by
positioning its goods or services in a unique or
different fashion.
■ Idea is to be special at something customers
value.
■ Key: Build basis for differentiation on a
distinctive competence, something that the
small company is uniquely good at doing in
comparison to its competitors.

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 Focus
■ Company selects one or more customer
segments in a market, identifies customers’
special needs, wants, or interests, and then
targets them with a product or service designed
specifically for them.
■ Strategy builds on differences among market
segments.
■ Rather than try to serve the total market, the
company focuses on serving a niche (or several
niches) within that market.

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 Cost Leadership
■ Goal: to be the low-cost producer in the industry
(or market segment).
■ Low-cost leaders have an advantage in reaching
buyers who buy on the basis of price, and they
have the power to set the industry’s price floor.
■ Works well when:
 buyers are sensitive to price changes.
 competing firms sell the same commodity products.
 a company can benefit from economies of scale.

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 Financial and Accounting Strategies
for Entrepreneurial Ventures
Evaluating Financial Performance
❏ What type of analysis?
❏ How much analysis?
❏ How often to analyze?
Financing Mix
❏ Short-term versus long-term
funding sources
❏ Permanent or temporary sources
Chapter 3: Strategic Management Copyright 2002 Prentice Hall Publishing Company
Forecasting, Planning, and Budgeting
❏ What type of forecast?
❏ How often to forecast?
Other Financial Management Decisions
❏ Capital budgeting
❏ Stock dividend policy
❏ Cash flow management
❏ Cash and securities management
❏ Receivable and inventory management
❏ Term loans and leases
34
 Information Systems Strategies
for Entrepreneurial Ventures

Systems Technology Types of Information System

❏ Manual ❏ Transaction processing system
❏ Computer based ❏ Office automation system
❏ Knowledge work system
❏ Management information system
❏ Decision support system
❏ Executive support system

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 Step 9: Translate Strategies
into Action Plans
■ Create projects by defining:
 Purpose
 Scope
 Contribution
 Resource requirements
 Timing

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 Step 10: Establish Accurate Controls
■ The plan establishes the standards against
which actual performance is measured.
■ Entrepreneur must:
 identify and track key performance
indicators.
 Take corrective action.

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 Balanced Scorecards

■ A set of measurements unique to a company

that includes both financial and operational
measures
■ Gives managers a quick, yet comprehensive,
picture of a company’s overall performance.

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 Balanced Scorecards

■ Four Perspectives:
 Customer: How do customers see us?
 Internal Business: At what must we excel?
 Innovation and Learning: Can we continue
to improve and create value?
 Financial: How do we look to shareholders?

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 Dimensions of
Organizational Culture

Stability People Orientation

Aggressiveness Innovation and Attention to

Risk-Taking Detail

Outcome
Team Orientation
Orientation

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 Organizational Culture

How Organizational Culture Is Learned:

❐ Stories

❐ Rituals

❐ Material Symbols
❐ Language

❐ Role of Physical Surroundings

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 Building a Healthy Culture

Guidelines:
1. Change has to start at the top.
2. Think about your culture when hiring.
3. Two-way communication is important.
4. If you don’t believe in it, don’t fake it.

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