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Str ate gic
management
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
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?
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.
Strategic management
process
Strategy formulation
 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
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.
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?
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
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
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
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.
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.
Thailand National Competitiveness
Thai Automotive Competitiveness
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
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
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.
Malaysian national airline value
chain analysis
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
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
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
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.
Strengths:
 1. Advantages of proposition?
 2. Capabilities?
 3. Competitive advantages?
 4. Marketing - reach, distribution, awareness?
 5. Innovative aspects?
 6. Location and geographical?
 7. Price, value, quality?
 8. Accreditation, qualifications, certifications?
 9. USP's (unique selling points)?
 10.Resources, Assets, People?
 11.Experience, knowledge, data?
 12.Financial reserves, likely returns?
 13.Processes, systems, IT, communications?
 14.Cultural, attitudinal, behavioral?
 15.Management cover, succession?
Weaknesses:
 1. Disadvantages of proposition?
 2. Gaps in capabilities?
 3. Lack of competitive strength?
 4. Reputation, presence and reach?
 5. Financials?
 6. Own known vulnerabilities?
 7. Timescales, deadlines and pressures?
 8. Reliability of data, plan predictability?
 9. Morale, commitment, leadership?
 10.Accreditation, etc?
 11.Cashflow, start-up cash-drain?
 12.Continuity, supply chain robustness?
 13.Effects on core activities, distraction?
 14.Processes and systems, etc?
 15.Management cover, succession?
Opportnities:
 1. Market developments?
 2. Competitors' vulnerabilities?
 3. New USP's?
 4. Tactics - surprise, major contracts, etc?
 5. Business and product development?
 6. Information and research?
 7. Partnerships, agencies, distribution?
 8. Industry or lifestyle trends?
 9. Technology development and innovation?
 10.Global influences?
 11.New markets, vertical, horizontal?
 12.Niche target markets?
 13.Geographical, export, import?
 14.Volumes, production, economies?
 15.Seasonal, weather, fashion influences?
Threats:
1. Political effects?
2. Legislative effects?
3. Obstacles faced?
4. Insurmountable weaknesses?
5. Environmental effects?
6. IT developments?
7. Competitor intentions - various?
8. Loss of key staff?
9. Sustainable financial backing?
10.Market demand?
11.New technologies, services, ideas?
12.Vital contracts and partners?
13.Sustaining internal capabilities?
14.Economy - home, abroad?
15.Seasonality, weather effects?
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
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)
GAP Analysis
External & Internal factors evaluation matrix:
13 14 strategic_management
Value chain SWOT
analysis:
    SALES   MKT   HRM   Produciton   Warehouse   Logistics



S


W


O


T
SWOT Diagram Software
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
BCG Analysis

 Growth-share matrix
13 14 strategic_management
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
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
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
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
 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
GE/McKinsey matrix
example
Market attractiveness Factors Weight Rating Value
                              in %   1 - 10
Market size                           15   5   0,75
Market growth                         20   6    1,2
Sector profitability                  10   8    0,8
Profit margins                        10   8    0,8
Industry fluctuaction                 5    4    0,2
Variability of demand                 10   9    0,9
Global opportunity                    10   9    0,9
Availability of Mark. intelligence    5    6    0,3
Distribution structure                10   9    0,9
Regulatory policy                     5    7   0,35
TOTAL                                100       7,1
SBU Strength Factors          Weight Rating Value
                              in %   1-9
Market share                    15     2       0,3
Growth in market share          10     6       0,6
Product uniqeness               20     8       1,6
Customer loyality               5      1      0,05
Marketing skills                10     7       0,7
Managerial skills               10     9       0,9
Product quality                 15     9      1,35
Production flexibility          5      7      0,35
Research&Development skills     5      4       0,2
Labour costs                    5      8       0,4
TOTAL                          100           6,45
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
Differentiation strategy
in One Star Hotel – value
curve
Typical 1*H setlement   Customer expectation   Differetiation strategy:
Účasť na tvorbe
stratégie
  Legálnosť účasti na tvorbe stratégie
  Legitímnosť účasti na tvorbe stratégie

  Berie sa do úvahy vplyv:
    Neformálnych organizačných štruktúr
    Individuálnych záujmov
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
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

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13 14 strategic_management

  • 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.
  • 20. Malaysian national airline value chain analysis
  • 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.
  • 25. Strengths: 1. Advantages of proposition? 2. Capabilities? 3. Competitive advantages? 4. Marketing - reach, distribution, awareness? 5. Innovative aspects? 6. Location and geographical? 7. Price, value, quality? 8. Accreditation, qualifications, certifications? 9. USP's (unique selling points)? 10.Resources, Assets, People? 11.Experience, knowledge, data? 12.Financial reserves, likely returns? 13.Processes, systems, IT, communications? 14.Cultural, attitudinal, behavioral? 15.Management cover, succession?
  • 26. Weaknesses: 1. Disadvantages of proposition? 2. Gaps in capabilities? 3. Lack of competitive strength? 4. Reputation, presence and reach? 5. Financials? 6. Own known vulnerabilities? 7. Timescales, deadlines and pressures? 8. Reliability of data, plan predictability? 9. Morale, commitment, leadership? 10.Accreditation, etc? 11.Cashflow, start-up cash-drain? 12.Continuity, supply chain robustness? 13.Effects on core activities, distraction? 14.Processes and systems, etc? 15.Management cover, succession?
  • 27. Opportnities: 1. Market developments? 2. Competitors' vulnerabilities? 3. New USP's? 4. Tactics - surprise, major contracts, etc? 5. Business and product development? 6. Information and research? 7. Partnerships, agencies, distribution? 8. Industry or lifestyle trends? 9. Technology development and innovation? 10.Global influences? 11.New markets, vertical, horizontal? 12.Niche target markets? 13.Geographical, export, import? 14.Volumes, production, economies? 15.Seasonal, weather, fashion influences?
  • 28. Threats: 1. Political effects? 2. Legislative effects? 3. Obstacles faced? 4. Insurmountable weaknesses? 5. Environmental effects? 6. IT developments? 7. Competitor intentions - various? 8. Loss of key staff? 9. Sustainable financial backing? 10.Market demand? 11.New technologies, services, ideas? 12.Vital contracts and partners? 13.Sustaining internal capabilities? 14.Economy - home, abroad? 15.Seasonality, weather effects?
  • 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)
  • 32. External & Internal factors evaluation matrix:
  • 34. Value chain SWOT analysis: SALES MKT HRM Produciton Warehouse Logistics S W O T
  • 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
  • 45. Market attractiveness Factors Weight Rating Value in % 1 - 10 Market size 15 5 0,75 Market growth 20 6 1,2 Sector profitability 10 8 0,8 Profit margins 10 8 0,8 Industry fluctuaction 5 4 0,2 Variability of demand 10 9 0,9 Global opportunity 10 9 0,9 Availability of Mark. intelligence 5 6 0,3 Distribution structure 10 9 0,9 Regulatory policy 5 7 0,35 TOTAL 100 7,1
  • 46. SBU Strength Factors Weight Rating Value in % 1-9 Market share 15 2 0,3 Growth in market share 10 6 0,6 Product uniqeness 20 8 1,6 Customer loyality 5 1 0,05 Marketing skills 10 7 0,7 Managerial skills 10 9 0,9 Product quality 15 9 1,35 Production flexibility 5 7 0,35 Research&Development skills 5 4 0,2 Labour costs 5 8 0,4 TOTAL 100 6,45
  • 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