Strategic Management

Mr. Jack
March 10, 15 (1st meeting)
Objective :
- Definition
- Benefit
- Element
- Visions
Strategic Management is an object of research and study, the result
of peoples efforts in trying to think competitively, know the way to
be successful, analyze the pattern of success, and maintain the
successes.
Example of surviving company:
GE : General Electric
Mc Donald
Why? The Cutting edge technology.
Search Engines, Excite, Lycos, Archie (1990).
Archie is a more exclusive search engine.
Excite was put down by yahoo.
Google (1998)
Facebook (2004)
Alibaba (China Online Shop)
What do they have in common to stay in the business?
Strategic Management : Set of managerial decision and actions that
determines the long run performance of a corporation (Operation).
Strategic management comprise of :
- corporate strategy (set of decision and action toward vision)
- business strategy (to Ensure the achievement big goal)
- Functional Strategy (Small short term strategy of
technicalities)
Blue Ocean Strategy (90s): Small to medium size companys
strategy
Case Study of FORD
There is a single-mindedness to the business plan and the product
execution Jim Farley,
Group VP of Marketing and Communication (Toyota Veteran)

Benefit of Strategic Management:

- Provide Vision of the company: What we are trying to do and
to achieve
- Alert the whole management of the wind of change and
development.
o Competitive
o Dynamic (Flexible changes)
o Complex
- Provide a platform of reasoning of where the budget should be
allocated
- Unify Decisions
o There are many decisions and things to do, little
decisions. Because the numbers, sometimes it
conflicted.
o Many Bosses, many orders, One boss, One voice
- Make a Proactive and Initiate the people to move towards the
goal, either in the task or not. To do more that what was told,
do what is intended.
Reasons of not doing Strategic Management:
- Lack of Knowledge(experience, Fear of Unknown)
- Poor reward Structure
- Firefighting Crisis oriented, only move when troubles come
- Waste of Time Seems to be no tangible proof/product
- Too Expensive can not see the future, does not intend to
invest
- Content Feeling enough
- Fear of Risk/Failures
- Trauma Prior bad experiences
- Self Interest Afraid to take risk due to conflict of interest
- Honest Difference in opinion Disagreement on which plan is
the best
- Suspicion Lack of Trust towards the management.
Processes of Strategic Management

Strategy
Formulation

Strategy
Implementati
on

Strategy
Evaluation

Strategy Formulation: To Formulate the Strategy, theres a need to

analyze the environment, there are 2 environment, the internal and
external.
- Internal (In Control)
o Aware of the Strengths and Weakness. Know the
limitation, know the position

o Capabilities, Resources, Competencies, Competitive

Advantages
- External (Out of Control)
o See the Threats and Opportunities.
These 2 will provide direction for the organization and the set of
appropriate strategies to achieve the organizational goal
Strategy Implementation: Create the functional Strategies, systems,
structures, processes needed by the organizational, to ensure the
strategies are carried out efficiently and effectively.
Strategy Evaluation: to see the value of the achieved goals, in terms
of how it is aligned or in line with the plan; The problems, what
should have been done in that particular problem or to avoid that
problem; Create/come up corrective actions. (Corrective Actions
costs Billions).

Vision and Mission Statements

Vision: Statement of a companys long-term goals. (Good ones are
enduring, inspirational, clear and link with company beliefs and
values.)
Mission: Statement of the organizations values and what they
would like to achieve. It is the basis for following the organizations
goals and plans.
A business mission is the foundation for priorities, strategies, plans and
work assignments. It is the starting point for the design of material jobs, and
above all, for the design of managerial structure. Peter Drucker
Mission Statements are to provide motivation, general direction, an image,
a tone, and philosophy to guide the enterprise. It facilitates flexibility in
implementation. George Steiner

March 12th, 2015 (2nd Meeting)

Plan is not as flexible with management; in the 50s, the corporation
uses Strategic Plan instead of Strategic Management, creating caseto-case possibilities and anticipations, which is rigid.
Mission statement is not rigid, but flexible and not intended for too
much details nor SOP; it is very much remains abstract.
It is the customers who determines what a business is. It is the customer
alone whose willingness to pay for a good or service converts economic resources
into wealth and things into goods. Peter Drucker

Old time thinking was, if I manufacture it, they will come. Modern
thinking is, if they need it, I produce.
What the customer value is the value of the product. It is always utility,
meaning what a produce or service does for the customer Peter Drucker

2 Approaches of creating strategy: Visionary and Learning

March 17th, 2015 (3rd Meeting)

External Environment Analysis
Know thyself. Know thy enemy. A hundred battles. A hundred victories.
Sun Tze, The Art of War

Key Components: (page 35-37)

- Scanning
o Identify early signals of changes and trends
o See all changes about to and currently happening
- Monitoring
o Detecting meaning through ongoing observations of
environmental changes and trends
o Observe important changes in the spotted aspects on
the scanning.
- Forecasting
o Developing projections of anticipated outcomes based
on monitored changes and trends
o Brainstorm on possibilities (+/-) might occur in the
future time in or outside of the point of time of Scanning
and Monitoring.
- Assessing
o Determining the timing and importance of
environmental changes and trends for firms strategies
and their management
o Implying the understood condition and specify it to an
applicable or suggestive course of action
Layers of Business Environment

Macro Environment
Task Environment
Internal
Environment

Analyze the macro environment using PEST/PESTLE Analysis (page

34)
P: Political-Legal
E: Economical
S: Sociocultural
T: Technological
60-70 USD for 1 barrel of Shale Oil

Preferential taxation/subsidies
China normal tax reaches up to 33,3%.
Regional Shift in population (Demographic changes,
Urbanization/Migration)
PEST Analysis of Curtain wall industry in China
(P) Laws and Regulations needs to be faced:
- Have license for production installation and design. (G20
Meeting Standard establishment)
- Abide with the codes on reduction of pollution of light.
(Glasses reflects light and dangerous for the drivers)
(E) Economic factor challenges:
- Economy Growth Rate of China
- Urbanization rate
- Open bidding for projects both domestic and international
- Price Fluctuation of raw material
(T) Technological Environment that China now leads in:
- Designs of BCW
- Point-fixed Curtain wall fitting tech
- Double layered curtain walls

- Sun screening of glasses

(S) Sociocultural factors impacts the BCW industry
- New beautiful designs (instead of Structural function)
- High standards on energy conservation and environmentally
friendly building material
- More comfort and ease of use in building structures

Michael Porter 5 forces framework

Threats
of new
entrant

Bargainin
g Power
of
Supplier

Rivalry
among
existing
firms

Bargaini
ng Power
of Buyer

Threat of
Substitute
s

Threats of New Entrants (Entry Barrier):

- The Economies of Scale: More experience = More efficient
o The more you produce, the cheaper your cost.
- Product Differentiation (Preferred loyalty on certain competitor
brand)
- Capital Requirement (New industries required much capital)

o Great initial cost

Switching Cost (Cost in modifying/changing certain factors)
o New factors price (developing brand, OS)
o Training Cost
o Customization cost
o Distribution Cost
o Equipment Cost
o Legal Documents
o Etc.
Access to distribution Channels
o Existing firms already have distribution channel, do you?
Cost Disadvantages independent of scale/size
Government Policy

Rivalry among Existing Firms

- Number of Competitors
- Rate of Industry Growth
- Product or Service Characteristics
- Amount of Fixed Cost
- Capacity
- Height of Exit Barrier (Cost of exiting the market/competition)
- Diversity of Rivals

March 24th, 2015 (4th Meeting)

5 Forces Framework
Threats
of new
entrant

Bargainin
g Power
of
Supplier

Rivalry
among
existing
firms

Threat of
Substitute
s

Some forms of competition

- Price Discount
- Introduction of new products
- Advertising campaigns

Bargaini
ng Power
of Buyer

Service improvement

Intensity of rivalry is greatest if

- Competitors are numerous and/or roughly equal in size
o Nobody is big enough to overlook
o No standard to improve/grow
- Industry growth is slow
o Fast growth = new customers. Slow growth = fighting
over a loaf of bread
- Exit barriers are high
o Technological & Skill Specialization = no alternative
utility for alternative job.
o Invest too much, no one exist to lose investment
- Rivals are highly committed to business and have ambition for
leadership
o Bosses, CEOs, Top Management too committed and
stubborn to try and change.
o Dont want to create or try new lane of the business
5 slow-growing industries in the West:
- Metal and Mineral
o No new innovation, at the high end point, no room for
Better
- Gas station
o Same as above
- Groceries Stores
o Constant demand, only groceries and nothing else
o Unable to make it to the E-Commerce
- Jewelry, luggage and leather goods stores
o Bad economies, no one buy luxuries, no one travels.
- Paper and paper products merchants and wholesalers
o Constant demand, no product differentiation.
Substitute products
Performs the same or in a similar function as an industry product by
a different means. Phone for: Camera, Calculator, Computers, Clock,
Calendar, Pagers, and Torch/Flashlight.
Video Conference for travels.
Bargaining Power of Buyers
The ability to force down prices, demand higher quality or more
services
Buyer or distributor is powerful if:
- They buy a large portion of the sellers product or service
o Buy lots with low price
- A buyer decides to integrate backward by producing the
product itself
o Mc Donalds and KFCs Chicken

Alternative suppliers are plentiful because the product is

standard or undifferentiated
o Drinking Water Supplier are lots because it is
standardized and undifferentiated
Changing suppliers cost very little
o
The purchased product represents a high percentage of a
buyers cost, thus providing the incentive to shop around for a
lower price
o Bakery Sells Bread buys flours, quality is very important
as the MAIN COMPONENT, Buy Big amount, be careful
with the supplier, quality and price.
A buyer earns low profits and is thus very sensitive to costs
and service difference
o Low Margin profit
o Raw Materials price is Important
The purchased product is unimportant to the final quality or
price of a buyers products or services and thus can be easily
substituted without adversely affecting the final products
o Restaurant buying cleaning utensil. Any product doesnt
have adverse effect for the main operation and final
goods.

Bargaining power of suppliers

The ability to rise prices or reduces quality of the purchased goods
and services.
Supplier is powerful if:
- The supplier industry is dominated by few companies, but it
sells too many
- The product or service is unique or it has built up switching
cost
o Skills on MS Office
- Substitutes are not readily available
- Suppliers can integrate forward and compete directly with
their present customers
o Get rid of middleman. Directly to the end customer
- A purchasing industry buys only a small portion of the supplier
groups goods or services and is thus unimportant to the
supplier
o No Bargaining power

Relative power of other stakeholders

- Government
- Local Communities
- Creditors
- Trade Association
- Special Interest Group
- Shareholders
- Complementary Product
Important points
- Fast-Growing industry does not necessarily profitable
o Computer Makers
- Hi tech does not guarantee high profit
- Government involvement could have a positive or negative
impact on a company
o Government do copyright, increases entry barrier and
profit margin
- Complements can be important when they affect the overall
demand for an industrys product.
Significance of 5 forces approach:
The starting point for developing strategy.
Reveals why industry profitability is as it is.
Provide baseline for sizing up a company strength and weakness.
Help to anticipate and exploit shifts/changes in the forces.

March 31st, 2015 (5th Meeting)

Internal Environment Analysis
In the previous study, weve learnt of the Analysis of the External
Environment, now we will study on the Analysis on the Internal Analysis.

Organization resources:
- Human Resource
o Strong leadership
o Experienced Managers
o Motivated Employees
- Physical Resources
o Machine,
o Locations
o Raw Materials

o Patents, Trademarks, Secret

Financial Resources
o Strong cash flow
o Strong balance sheet
o Capacity to borrow
Knowledge and Learning Resources
o Superior Tech development
o R&D Program
o Innovation
o Internal entrepreneurship
Organizational Resources
o Reputation
o Brand
o Management system

Organizational Resources and Capabilities Leading to Competitive

Advantage.
-

Potential for CA: Are those 5 above valuable/unique? If not

then maybe they are worthless.
Realization: Is the firm taking advantage of the potential?
They are valuable, how can we put it to use?
Sustainability: Is it difficult to imitate? Will something as
valuable/unique appear soon?

Core Competencies
The collective learning in the organization especially how to
coordinate diverse production skills and integrate multiple streams
of technologies. A communication, involvement, and a deep
commitment to working across organizational boundaries.
- An ability
- Does not diminish with use, like experience
- Capability of the whole corporation
Value Chain Management includes finance and general
management, all parts of the core business essential segments as
the support activity. (creating value = inbound logistic, operation,
outbound logistic, marketing and sales, service ; value closely
related with cost association).
Vertical Integration: strategic moves that a company takes to bring
under its own control every activity in the value chain (doing both
forward and backward integration)
- Lower Cost
- Create more customer value
Horizontal analysis: Benchmarking

Corporate Outsourcing: Purchase of value creating activity from an

external supplier.
Examples:
- IT outsourcing
- E businesses outsource the handling of online orders
- American Companies outsource their calling centers to India
- Third party who manage business applications for companies
so that theu can focus on their core businesse`