This document discusses the differences between general management and strategic management. General management focuses on the internal processes of planning, organizing, leading and controlling an organization. Strategic management additionally considers how an organization can gain a competitive advantage in its external environment through the formulation, implementation and evaluation of long-term strategies. The document then provides definitions and frameworks for analyzing an organization's strategy, including its mission statement, the external macro environment using PEST analysis, national competitiveness using Porter's Diamond model, industry attractiveness using Porter's 5 Forces model, and the organization's internal resources and competencies through value chain, business functions and core competencies analyses. SWOT analysis is also introduced as a tool to classify internal strengths and weaknesses and external opportunities
2. General management vs. strategic
management
General management:
Is the process of acheiving organizational goal by engaging in four major
functions of planing, organizing, leading and contolring.
Bartol, Kathryn m 2006, Management: A Pacific Rim Focus, McGraw-Hill/Irwin
GM concerns about the process to manage the company internally –
(operational effectiveness),
GM is not focusing on exploring competitiveness in relation to ext. envir.
GM does not include the strategy
Strategic management:
Strategy is focusing on the competitivness of the company by performing
different activities from rivals or performing similiar activities in different
ways
Porter, Michael E. 1996. What is Strategy? Harvard Business Review. Nov/Dec 1996.
Strategic management is the process of 3 primary activities:
1. Formulation: Organization Mission, Competitive Situations,
Strategy Development
2. Implementation: Organization alignment that should be considered for
changing the organization to support the operations based on
the formulated strategies
3. Controling and Evaluation:
financial perspective, customer perspective, internal
process perspective, and learning and growth perspective.
Suksriwong, Sakorn 2007, Management : From the Executive’s Viewpoint, Bangkok
3. What is the strategy?
Ethymological fundament - Greek language “stratçgos”; „Stratus“ –
army, „ago” – move, run, lead
"Strategy is the direction and scope of an organisation over the
long-term: which achieves advantage for the organisation through
its configuration of resources within a challenging environment, to
meet the needs of markets and to fulfil stakeholder expect“
Johnson and Scholes (Exploring Corporate Strategy)
Direction: Where is the business trying to get to in the
long-term?
Scope of act. : Which markets should a business
compete in and what kind of activities
are involved in such markets?
Advantage: How can I perform the business better
than the others?
Resources: What resources are abilities are required?
Environment: What external environmental factors affect the
ability to compete?
Stakeholders: What are the values and expectations of those
who have power?
4. Strategy definitions:
The Strategy is over the space and the time
tactical and purpose-build configuration and
exploration of organizational resources,
planed and managed based on actual,
planed and forecasted conditions of the
internal and external environment of the
organization, providing most efficient way
for organizational objectives achievements,
with limited or acceptable consequences
from third parties reactions.
7. Strategy formulation:
Mission statement:
Reason / reasons to exist
Scope of operations
Analysing the situation (how particular factors support or depress
the organization) :
External Environment (factors):
Macro environment
National competetiveness (2BCognituss Wiena, De Deught Swizerland)
Industry attractiveness
External analysis builds on an economics perspective of industry structute
and how a firm can make the most of competing in trhat structure.
Internal Environment (factors):
Correlation among the organization activities and business functions
Core competencies of the organization exploration
The internal analysis based on operation activities and its competencies with
in the organization.
Set of strategies that gain supportive environments and prevent
obstructive factors
Grand strategy (corporate strategy) – growth, stabilisation, exit
Business strategy – differentiation (by value, by price)
Functional strategy – related to the business functions of the company
8. Basic methods for strategic analyses
Mission - Evaluation sheet method
External Environment:
Macro Environment – 5 major functions model
National Competitiveness - The Diamond of
National Advantage
Industry Attractiveness - 5 forces model
Internal analysis:
Value Chain Analysis,
Business Function Analysis,
Core Competencies Analysis.
9. Organization Mission
The organization’s purpose or fundamental reason for
existence, expressed by Mission statement
Broad declaration of the basic, unique purpose and scope of
operations that distinguish the organization from other of it type.
Bartol, Kathryn M 2006, Management: A Pacific Rim Focus, McGraw-Hill/Irwin.
9 components to formulate mission statement:
1. Customers - Who are the organization’s customers?
2. Products or services. What are the organization’s major?
3. Location. Where does the organization compete?
4. Technology. What is the firm’s basic technology?
5. Concern for survival. What is the organization’s commitment to
economic objectives?
6. Philosophy. What are the basic belief, values, aspirations, and
philosophical priorities of the organization?
7. Self-concept. What are the organization’s major strengths and
competitive advantages?
8. Concern for public image. What are the organization’s public
responsibilities,and what image is desired?
9. Concern for employees. What is the organization’s attitude toward its
employees?
10. Concern for
Self-concept.
Concern for
public image
Starbucks
Concern for
Employeeso
Technology.
Philosophy.
Products or
Customers.
Location.
Services
Missions and
Survival
Components
The premier purveyor of the
finest coffee in the world while X X X X X
maintaining our uncompromising
principles as we grow.
Provide a great work
environment and treat each X X
other with respect and dignity
Embrace diversity as an
essential component in the way X
we do business.
Apply the highest standards of
excellence to the purchasing, X X
roasting and fresh delivery of
our coffee.
Develop enthusiastically Satisfied
customers all of the time X
Contribute positively to our X
communities and our Environment
Recognize that profitability is Zdroj: Internetové materiály spoločnosti Starbucks
11. Macro Environment
C ompetitive situation:
affects overall of the business situation.
Consideration of 5 major factors as the
information for developing the strategy
according to the host country :
Legislation and Regulations,
General Economic Conditions,
Societal Values and Lifestyles,
Population Demographics,
Technology
12. PEST Analysis:
•external analysis that investigates four macro-environment factors:
Political Economic Social Technology
Political Banking system Dominant religion R&D activities
stability Interest rates Minorities Automation
Tax policies Exchange rates Attitude towards Technology
Tariffs Earning per foreign products incentives
Regulations capita Leisure hours
Justice system Gross Domestic Education
Product (GDP) Working skills
Inflation rate Age distribution
Supports better understanding the risk and pitfalls for the environment you operate in.
Good tool to identify macro-environment level opportunities and threats in SWOT
Can be combined with SWOT
13. 4P4C Analysis:
Product Price Promotion Place
Feature and Customer
Suitable pricing Moste desired
Consumer. qualities of responded
schemes sales channel
product wanted promotion
Pricing
Product Competitors
schemes Types of
Competitor features offerd sales
eployed by promotion
by competition channels
competitors
Features and Current
Current pricing Current sales
Company qualities offerd promotion
strategies chanels
by company plan
Pricing
Community Favourable Allowed
strategies
Community Features promotion distribution
encouraged
Pathers strategies channels
and supported
•Anables to:
•refine company’s current marketing mix in respect with consumer needs,
•respond to competitors’ actions,
•know the limitations for various strategies within the community.
14. National
Competitiveness:
the company should analyze the competiveness in the
state level in order to find the opportunities and threats
influenced on the industry that firm challenges
national competitiveness is created and sustained through
a highly localized process. It differences in national values,
culture, economic structures, institutions, and histories all
contribute to competitive success.
The Diamond of National Advantage:
1.Factor Conditions. The nation’s position in factors of production,
such as skilled labour or infrastructure, necessary to compete in a
given industry.
2.Demand Conditions. Home-market demand for the industry’s
product or service.
3.Related and Supporting Industries. The presence or absence in
the nation of supplier industries and other related industries that
are internationally competitive.
4.Firm Strategy, Structure and Rivalry. The conditions in the
nation governing how companies are created, organized, and
managed, as well as the nature of domestic rivalry.
17. Industry Attractiveness - 5 forces model
Porter, Michael E. 2008, “The Five Competitive Forces That Shape Strategy”, Harvard
Business Review, January 2008
Vertical line:
•Is about the competition
in the certain industry
regarding 3 factors;
•Industry Competitors,
•New Entrants,
•Substitutes
Horisontal line:
•Iis about the industry
operation showing the
correlation among:
• suppliers, producers,
• merchandises, and
buyerss
18. Korean Cosmetics
Attractiveness
1. Rivalry among competitors: High
- Large number of brands in the mkt.
- Industry growth: + 3.4% over 2006
- Low product differences
2. Rarriers to entry: High
- Brand Identity preferencees
- Government restrictions
- Large nubmer of brands in the mkt.
3. Threat of substitutes: Low
- Substituted product avalaiability
4. Bargaining power of suppplier: Moderate
- Differentiation of input
- Impacct of inputs on costs
- Threath of forward integration
5. Bragaining power of buyer: High
- Buyers needs
- Market size
- Brand Identity
- Product differentiation
19. Value Chain Analysis
Porter, Michael E. 1985, How Information Gives You Competitive
Advantage, Free Press, New York
a systematic tool to analyze the interaction among all the
activities a firm performs
it emphasizes that competitive advantage can come not
just from great products or services, but from anywhere
along the value chain
it is also important to understand how a firm fits into the
overall value system, which includes the value chains of its
suppliers, channels, and buyers.
This concept divides a company’s activities, value activities,
into the technology and economically distinct activities it
performs to do business.
21. Business functions
analysis:
tools to investigate the organization
performance by focusing on organizvational
functions,
Examples:
Marketing analysis – investigation about companies
market share, customer satisfaction, customer
preferencees
Productions analysis – investigation about
productivity product quality, ...
Human resource management analysis –
investigation about personel competencies,
organizational structure, ...
Finantial analysis – investigation about profitability
and liquidity
22. Core Competencies Analysis:
Bartol, Kathryn M 2006, Management: A Pacific Rim Focus, McGraw-Hill/Irwin
Exmination of the resources, capabilities and competencies
which are considered as a major and most importat ones in the
organization.
„CC’s“ are:
Variouse assets of the company, which are different from competitors
ones, and is difficult to distinguish and imitate them. F.e.:
Financial resources: debt, equity, retained earnings, money reserves.
Physical resources: buildings, machinery, vehicles, raw materials.
Human resources: skills, abilities, experience, organiyational chart.
part of highly protected know-how of the company
supposed to be the fountain of the organizational competetive
advantage
collective learning in the organization how to coordinate diverse
production skills and integrate multiple streams of technology.
Company should identify the organization regarding 3 factors;
a potential access to wide variety of markets,
a significant contribution to end user value,
difficulty for competitors to imitate
Examples:
Sony - miniaturization.
Canon - microprocessor controls copiers, printers, cameras, and image
23. SWOT Analysis:
The tool to classify the environment effecting the organization by
identification of internal and external factors with the favourable
and unfavourable impact to the organization, dividing them in to 4
groups:
1. Strengths - organization’s strong points in internal environment,
comming from resources and competencies available within the
organiyation, with a potential to create a competetive advantage
2. Weaknesses - organization’s weak points in internal environment,
comming from resources and competencies available within the
organiyation, with a potential a competetive disadvantage
3. Opportunities – acciedntal external invironment factors with the
potential to support organization activities.
4. Threats – acciedntal external invironment factors with the potential to
diminish organization activities
ADVANTAGE DISADVANTAGE
INTERNAL ENVIRONMENT Strengths Weaknesses
EXTERNAL ENVIRONMENT Opportunities Threats
STRATEGIC ACTION Move on, GO! Protect, Improve, Quit
24. Misterious SWOT history?
1960-1970, Albert Humphrey, Stanford University, research
project US Fortune 500. Humphrey developed Team Action
Model (TAM) - a management concept that enables groups
of executives to manage change. SWOT was to have
originated from his ‘Stakeholders Concept and SWOT
Analysis.’
1960, Harward University (Haberberg, 2000)
1987, Igor Ansoff, Ansoff’s Matrix fame (Turner (2002)
Existed publications relates names to SWOT rather users
then inventors (http://www.marketingteacher.com/swot/history-of-swot.html).
Koch (2004) comments he recognised that a series of SWOT/TOWS
analyses had the advantages of a single arbitrary matrix.
Wheelan and Hunger (1998) used SWOT to look for gaps and
matches between competences and resources and the business
environment.
Dealtry (1992) considered SWOT in terms or groups and vectors with
common themes and interactions.
Shinno et al (2006) amalgamated SWOT analysis with an Analytic
Hierarchy Process (AHP) which ranked and prioritised each element
using software.
29. HP SWOT
Opportunities:
Analysis: Cloud computing market
The global spending on cloud computing is forecast
Strenghts: to cross a value of over $40 billion by 2012
Bratislava – center for cloud computing
Brand name Printing solutions:
11th most recognizable brand commercial printing and capturing high-value pages
40% MKT over world share in printer for industrial applications, outdoor signage, and
graphic arts
market 3D printing
30% MKT over world shere in server
market Threats:
Strategic allaiences: over world IT MKT recession:
Compaq Computer Corporation in 8% decline by 2011 worldwide
2002, Worldwide economical recession
Mercury Interactive in 2006 Severe competition in consumer goods
market
Electronic Data Systems Dell, Toshiba, Lenova Group and Aver – all of them
Corporation (EDS) in 2008. worldwide
3Com in 2009 Lots of l ocal competitors
Thomson eXimius Severe competition in core business market:
IBM, EMC Corporation, Dell (standard servers) Sun
Microsystems (UNIX-based servers),
Weaknesses: Canon USA, Lexmark International, Xerox
Corporation, Seiko Epson Corporation, Samsung
MKT segment integration: Electronics and Dell – in printing and imaging
Lack of particular SW products
Lack of management consulting
servicies
Complicated organiyational structure
High labor costs
30. POWER SWOT:
P – Personal experience
Explore own personal and profesional experience
O – Order
Distinguish between
Strengths and opportunities
Threats and weaknesses
The opportunity can become the threat and v.v.
W – Weighting
Weight SWOT elements.
Count final weight of SWOT part
E – Emphasize detail
Every element (factor) should be preciselly described, reasoned and
justified by expected conseqencees.
R – Ranking
Give the SWOT analysis the strategic meaning by ranking and
prioritizing factors
Rephrase threats as opportunities and find out how to turn weaknesses
in to strengths (Use Gap Analysis)
36. The GE/McKinsey Matrix
A sort of portfolio analysis used for classifying product lines
or strategic business
Developed by McKinsey for General Electrics
Criteria for the business areas assessment:
The attractiveness of the industry/market concerned
The strength of the business
Vertical axis:
Industry attractiveness
Explains the attrectiveness to a firm of entering, remaining or
quiting of particular industry, based on particular factors of the
industry
Horisontal axis:
Strength of the business unit – how strong the SBU is in terms of
the market
Explain the strengths of the company in terms of supplying the
market
39. BCG matrix versus GE
matrix
Similarities:
The focus is the future strategy for the particular area of the business
Two dimensions and usually three levels at each dimension
Differences
Dimensions are.
Industry attractiveness (instead market share)
Business strength (instead market growth)
Each cell represents particular strategy – more strategies to choose
BSG is focusing on products within the company, GE is focusing on a
strategic business units.
SBU:
The particular market portfolio with own business plan
Part of the company with own market and target group
The company unit with responsibility for strategic management of
particular product
The organizational part of the company
BCG is part of GE matrix.
Market growth is an element of industry attractvness
Market growth is an element in business strength
40. Market attractiveness
criteria
Market Size Availability of:
Market Growth Market intelligence
Work force
Sector profitability Other resources
Profit margins Infrastructure
Overall returns of Global opportunities
industry Bank system
Industry fluctuation Legal system
Variabiliyty of Political system
demand
Natural resources
Entry and exit
barriers
Regulatory policy
41. SBU internal strengths
criteria:
Market share Marketing:
(MS) Skills
Distribution network
Growth in MS
Sales force
Product Management:
uniqueness Competence, skills
Company image Work force skills
Service quality
Brand recognition
Production:
Customer loyalty Capacity
SBU reliability Flexibility
Costs/Profitability
Quality
42. GE / McKinsey SBU internal strength
Matrix High Medium Low
M High attractiveness X1 Y2 Y3
A
R Medium attractiveness Y4 Y5 Y6
K
Low attractiveness
E
T
Y7 Y8 Z9
X– Successful SBU – strong business, attractive industry
Y – Mediocre SBU – medium business, industry less attractive
Z – Disappointing SBU – weak business, unattractive business
1 – Protect position 4 – Harvest 7 – Reorganize
2 – Motivation 5 – Think over 8 – Reorg/Harv
3 - Reorganisation 6 – Invest 6 – Quit
Grow - Strong SBU units in attractive business
-Strong SBU in average business or in attractive business
Hold -Strong SBU in weak business
-Average SBU in average business
-Weak SBU in attractive business
Quit -Average SBU in unattractive business
-Weak SBU in average business or in unattractive business
43. Cell no.1:
Highly attractive market & hight SBU strength
Invest for other growth, Search for global opportunities, Maximise
market share, Seek market dominance, Secure position,
Cells 2, 4:
SBU strength and industry attractiveness are in high rating in one,
and medium in the other.
Invest for growth, Invest to expand, Search for new segments,
Invest to maintain sompetitiveness, Invest to motivate
Cells 3,5,7:
The level of the SBU is balanced by market attractiveness
Invest for earnings, Invest selectively, Maintain position, Defend
position, Conctentrate for selected segments, Specialise in
products where strengths can be built, Identify niches
Cells 6, 8:
In each cell either MA or SBU strangth is low, and the otrher one is
medium
Manage for cash, Do not invest unless it is necessary, Move to
more profitable segments, Identify niches,
Cell 9:
No strength within SBU & very unattractive market
Quit with reasonable procedure
47. GE / McKinsey SBU internal strength
Matrix – case study
High Medium Low
9,00
M A
A T High
R R 6,00
K A
E C
T T Medium
I
V 3,00
I
T Low
Y 0,00
9,00 6,00 3,00 0,00
48. Differentiation strategy
in One Star Hotel – value
curve
Typical 1*H setlement Customer expectation Differetiation strategy:
49. Účasť na tvorbe
stratégie
Legálnosť účasti na tvorbe stratégie
Legitímnosť účasti na tvorbe stratégie
Berie sa do úvahy vplyv:
Neformálnych organizačných štruktúr
Individuálnych záujmov
50. Legálnosť účasti na
tvorbe stratégie
Miera legálnej účasti na tvorbe stratégie,
prípadne voľnosti v procese tvorby stratégií je
daná mierou inštitucionalizovanej autonómnosti
ale hlavne zodpovednosti v rozhodovaní.
Úplná účasť:
SZČO
Konateľ obchodnej spoločnosti ak je zároveň aj jediný
vlastník
Viazaná a obmedzená účasť:
Konateľ obchodnej spoločnosti
Štatutárny orgán verejnoprávnej organizácie
Predstavenstvo obchodnej spoločnosti a družstva
Splnomocnenec v rozsahu splnomocnenia
Žiadna účasť:
Líniový a funkčný manažér
Radový zamestnanec
51. Legitímnosť účasti na tvorbe
stratégie
Nie je determinovaná legálnosťou, t.j. subjekt,
ktorý sa chce podieľať na tvorbe stratégie
nenesie za jej tvorbu žiadnu zodpovednosť,
nemá za úlohu participovať na tvorbe stratégie
Je determinovaná
kompetenciami subjektu (odbornosťou a schopnosťami)
súladom
pohnútok, osobných zámerov subjektu
dôsledkov ním navrhovanej, resp. realizovanej
stratégie
s cieľmi organizácie