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Chapter 7

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Department
Global Management Studies
Course
GMS 200
Professor
Masoomeh Moharrer
Semester
Winter

Description
What is strategic management? 4/11/2013 5:42:00 PM COMPETITIVE ADVANTAGE: Competitive advantage — operating with an attribute or set of attributes that allows an organization to outperform its rivals. Sustainable competitive advantage — one that is difficult for competitors to imitate. Strategy — a comprehensive action plan that identifies long-term direction for an organization and guides resource utilization to accomplish organizational goals with sustainable competitive advantage. Strategic intent — focusing all organizational energies on a unifying and compelling goal. Goal of strategic management is to create above-average returns for investors.  Returns exceeding those for alternative opportunities at equivalent risk.  Earning above-average returns depends in part on the organization’s competitive environment. STRATEGIC MANAGEMENT PROCESS: Strategic management — the process of formulating and implementing strategies to accomplish long-term goals and sustain competitive advantage. Strategic analysis – process of analyzing the organization, the environment, its competitive position and current strategies Strategy formulation – the process of crafting strategies to guide allocation of resources Strategy implementation – putting strategies into action Figure 7.2 Strategy formulation and implementation in the strategic management process. What are the essentials of strategic analysis? 4/11/2013 5:42:00 PM Drucker’s strategic questions for strategy formulation: 1. What is our business mission? 2. Who are our customers? 3. What do our customers consider value? 4. What have been our results? 5. What is our plan? ANALYSIS OF MISSION:  The reason for an organization’s existence.  An important test of the mission is how well it serves the organization’s stakeholders. Figure 7.3 How external stakeholders can be valued as strategic constituencies of organizations. Analysis of core values:  Values are broad beliefs about what is or is not appropriate.  Organizational culture reflects the predominant value system of the organization as a whole. Strong Core Values:  Helps build organizational identity.  Gives character to the organization in the eyes of employees and external stakeholders.  Backs up the mission statement.  Guides the behaviour of organizational members in meaningful and consistent ways. Analysis of Objectives: Operating objectives direct activities toward key and specific performance results.  Profitability- operating w/ net profit  Market share - gaining good share of possble customers  Human talent- recruiting/maintaing +quality workforce  Financial health - acquiring capital/earning positive returns  Cost efficiency- acquiring capital/earning positive returns  Product quality - producing high quality goods  Innovation- developing new process/prodcts  Social responsibility- making positive contribution to society STRENGTHS WEAKNESSES  Manufacturing efficiency?  Outdated facilities?  Skilled workforce?  Inadequate research and development?  Good market share?  Obsolete technologies?  Strong financing?  Weak management?  Superior reputation?  Past planning failures? OPPORTUNITIES THREATS  Possible new markets?  New competitors?  Strong economy?  Shortage of resources?  Weak market rivals?  Changing market tastes?  Emerging technologies?  New regulations?  Growth of existing market?  Substitute products Analysis of organizational resources and capabilities: Core competency is a special strength that gives an organization competitive advantage Important goal of assessing core competencies. Potential core competencies:  Special knowledge or expertise.  Superior technology.  Efficient manufacturing approaches.  Unique product distribution systems. Analysis of Organization and Environment: Figure 7.5 Porter’s model of five strategic forces affecting industry competition. 1. Industry competition the intensity of rivalry among firms and their competitive behaviour 2. New entrants the threat of new competitors entering the market 3. Substitute products or services the threat of substitute products or services 4. Bargaining power of suppliers the ability of resource suppliers to influence the cost of products or services 5. Bargaining power of customers the ability of customers to influence the price they will pay for products or services What are corporate strategies and how are they formulated? 4/11/2013 5:42:00 PM LEVELS OF STRATEGIES: 1. Corporate strategy sets long-term direction for the total enterprise 2. Business strategy identifies how a division or strategic business unit will compete in products or services 3. Functional strategy guides activities within one specific area of operations Questions addressed by different strategic level: 1. Corporate strategy In what industries and markets should we compete? 2. Business strategy How are we going to compete for customers in this industry and market? 3. Functional strategy How can we best utilize resources to implement our business strategy? Figure 7.1 Three levels of strategy in organizations- corporate, business, functional strategies. GRAND OR MASTER STRATEGIES: Growth strategies: seek an increase in size and the expansion of current operations. Stability strategy: ma
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