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StrategicManagementChapter8StrategicManagement•Whatmanagersdotodeveloptheorganization’sstrategies.Strategies•Thedecisionsandactionsthatdeterminethelong-runperformanceofanorganization.StrategicManagement(cont’d)•BusinessModel–Isastrategicdesignforhowacompanyintendstoprofitfromitsstrategies,workprocesses,andworkactivities.–Focusesontwothings:•Whethercustomerswillvaluewhatthecompanyisproviding.•Whetherthecompanycanmakeanymoneydoingthat.WhyisStrategicManagementImportant1.Itresultsinhigherorganizationalperformance.2.Itrequiresthatmanagersexamineandadapttobusinessenvironmentchanges.3.Itcoordinatesdiverseorganizationalunits,helpingthemfocusonorganizationalgoals.4.Itisverymuchinvolvedinthemanagerialdecision-makingprocess.Exhibit8–1TheStrategicManagementProcessStrategicManagementProcess•Step1:Identifyingtheorganization’scurrentmission,goals,andstrategies–Mission:thefirm’sreasonforbeing•Thescopeofitsproductsandservices–Goals:thefoundationforfurtherplanning•Measurableperformancetargets•Step2:Doinganexternalanalysis–Theenvironmentalscanningofspecificandgeneralenvironments•FocusesonidentifyingopportunitiesandthreatsExhibit8–2ComponentsofaMissionStatementSource:BasedonF.David,StrategicManagement,11ed.(UpperSaddleRiver,NJ:PrenticeHall,2007),p.70.StrategicManagementProcess•Step3:Doinganinternalanalysis–Assessingorganizationalresources,capabilities,andactivities:•Strengthscreatevalueforthecustomerandstrengthenthecompetitivepositionofthefirm.•Weaknessescanplacethefirmatacompetitivedisadvantage.–Analyzingfinancialandphysicalassetsisfairlyeasy,butassessingintangibleassets(employee’sskills,culture,corporatereputation,andsoforth)isn’taseasy.•Steps2and3combinedarecalledaSWOTanalysis.(Strengths,Weaknesses,Opportunities,andThreats)Exhibit8–3CorporateRankings(partiallists)Sources:“America’sMostAdmiredCompanies,”Fortune,February22,2006,p.65;“The100BestCompaniestoWorkFor,”Fortune,January11,2006,p.89;R.Alsop,“RankingCorporateReputations,”WallStreetJournal,December6,2005,p.B1;and“The100TopBrands,”BusinessWeek,August1,2005,p.90.Interbrand/BusinessWeek100TopGlobalBrands(2005)1.Coca-Cola2.Microsoft3.IBM4.GeneralElectric5.IntelHarrisInteractive/WallStreetJournalNationalCorporateReputation(2005)1.Johnson&Johnson2.Coca-Cola3.Google4.UnitedParcelService5.3MCompanyHayGroup/FortuneAmerica’sMostAdmiredCompanies(2006)GreatPlacetoWorkInstitute/Fortune100BestCompaniestoWorkFor(2006)1.GeneralElectric2.FedEx3.SouthwestAirlines4.Procter&Gamble5.Starbucks1.Genentech2.Wegman’sFoodMarkets3.ValeroEnergy4.GriffinHospital5.W.L.Gore&AssociatesStrategicManagementProcess(cont’d)•Step4:Formulatingstrategies–Developandevaluatestrategicalternatives–Selectappropriatestrategiesforalllevelsintheorganizationthatproviderelativeadvantageovercompetitors–Matchorganizationalstrengthstoenvironmentalopportunities–CorrectweaknessesandguardagainstthreatsStrategicManagementProcess•Step5:Implementingstrategies–Implementation:effectivelyfittingorganizationalstructureandactivitiestotheenvironment.–Theenvironmentdictatesthechosenstrategy;effectivestrategyimplementationrequiresanorganizationalstructurematchedtoitsrequirements.•Step6:Evaluatingresults–Howeffectivehavestrategiesbeen?–Whatadjustments,ifany,arenecessary?TypesofOrganizationalStrategies•CorporateStrategies–Topmanagement’soverallplanfortheentireorganizationanditsstrategicbusinessunits•TypesofCorporateStrategies–Growth:expansionintonewproductsandmarkets–Stability:maintenanceofthestatusquo–Renewal:redirectionofthefirmintonewmarketsExhibit8–4LevelsofOrganizationalStrategyCorporateStrategies•GrowthStrategy–Seekingtoincreasetheorganization’sbusinessbyexpansionintonewproductsandmarkets.•TypesofGrowthStrategies–Concentration–Verticalintegration–Horizontalintegration–DiversificationGrowthStrategies•Concentration–Focusingonaprimarylineofbusinessandincreasingthenumberofproductsofferedormarketsserved.•VerticalIntegration–Backwardverticalintegration:attemptingtogaincontrolofinputs(becomeaself-supplier).–Forwardverticalintegration:attemptingtogaincontrolofoutputthroughcontrolofthedistributionchannelorprovidecustomerserviceactivities(eliminatingintermediaries).GrowthStrategies(cont’d)•HorizontalIntegration–Combiningoperationswithanothercompetitorinthesameindustrytoincreasecompetitivestrengthsandlowercompetitionamongindustryrivals.•RelatedDiversification–Expandingbycombiningwithfirmsindifferent,butrelatedindustriesthatare“strategicfits.”•UnrelatedDiversification–Growingbycombiningwithfirmsinunrelatedindustrieswherehigherfinancialreturnsarepossible.GrowthStrategies(cont’d)•StabilityStrategy–Astrategythatseekstomaintainthestatusquotodealwiththeuncertaintyofadynamicenvironment,whentheindustryisexperiencingslow-orno-growthconditions,oriftheownersofthefirmelectnottogrowforpersonalreasons.GrowthStrategies(cont’d)•RenewalStrategies–Developingstrategiestocounterorganizationweaknessesthatareleadingtoperformancedeclines.•Retrenchment:focusingofeliminatingnon-criticalweaknessesandrestoringstrengthstoovercomecurrentperformanceproblems.•Turnaround:ad