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Chapter 7

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Global Management Studies
GMS 200
Ricardo Reyes

Chapter 7 – Strategy and Strategic Management Strategic Management Competitive Advantage – operating with an attribute or set of attributes that allows an organization to outperform its rivals Typical sources of competitive advantage include: o Cost and quality o Knowledge and speed o Barriers to entry o Financial resources 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 unifying and compelling goal Goals of strategic management is to create above-average returns for investors o Returns exceeding those for alternative opportunities at equivalent risk o Earning above-average returns depends in part on the organization’s competitive environment Levels of Strategy • Corporate-Level Strategy o Sets long-term direction for the total enterprise o In what industry and markets should we compete? • Business-Level Strategy o Identifies how a division or strategic business unit will compete in its product or service domain o How are we going to compete for customers in this industry and market? • Functional Strategy o Guides activities within one specific area of operations o How can we best utilize resources to implement our business strategy? 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 1 • Strategy Implementation – Putting strategies into action Drucker’s Strategic Questions for Strategy Formulation: • What is our business mission? • Who are our customers? • What do our customers consider value? • What have been our results? • What is our plan? Essentials of Strategic Analysis Analysis of Mission and Stakeholders: • The reason for an organization’s existence • An important test of the mission is how well it serves the organization’s stakeholders • Stakeholders – Individuals and groups directly affected by the organization and its strategic accomplishment • Strategic Constituencies Analysis – Assesses interests of stakeholders and how well the organization is responding to them Analysis of Core Values: • Values are broad beliefs about what is or is not appropriate • Organizational culture reflects the dominant value system of the organization as a whole • Behaviour in and by organizations will always be affected in part by core values • Strong core values: o Helps build organizational identity o Gives character to the organization in the eyes of employees and external stakeholders o Backs up the mission statement o Guides the behavior of organizational members in meaningful and consistent ways Analysis of Objectives • Operating objectives direct activities toward key and specific performance results • Typical objectives: o Profitability o Market share o Human talent 2 o Financial health o Cost efficiency o Product quality o Innovation o Social responsibility SWOT Analysis of Organization and Environment Strengths: Weaknesses: • Outdated facilities • Manufacturing efficiency • Inadequate R&D • Skilled workforce • Obsolete • Good market share technologies • Strong financing • Superior reputation Opportunities: Threats: • Possible new markets • New companies • Strong economy • Shortage of resources • Weak market rivals • Changing market tastes • Emerging technologies • New regulations • Growth of existing market 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: o Special knowledge or expertise o Superior technology o Efficient manufacturing approaches o Unique product distribution systems Analysis of Rivalry and Industry Attractiveness • Ideal condition for a firm is to operate in monopoly conditions as the only player in an industry, if no rivals to compete with for resources or customers Porter’s Model of 5 Strategic Forces Affecting Competition: 3 • Industry competition o The intensity of rivalry among firms and their competitive behavior • New entrants o The threat of new competitors entering the market • Substitute products or services o The threat of substitute product or services • Bargaining power of suppliers o The ability of resource suppliers to influence the cost of products or services • Bargaining power of customers o The ability of customers to influence the price they will pay for products or services Grand or Master Strategies: • Growth Strategies o Seek an increase in size and the expansion of current operations • Stability strategy o Maintains current operations without substantial changes • Renewa
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