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Long-term directions.
Deals with organizations scope.
Provide with competitive
advantage skills, resources,
possession.
Fit in a dynamic / changing
environment being flexible
somehow.
Build and use resources and
competencies.
Meet expectations and values of
shareholders.
Strategic thinking:
States how the functions of the whole organization relate to each other within
their internal and external environments, both now and in the Future.
Strategic thinking features:
Proactive.
Think out of the box.
Think long-term.
Use the Intuition and Analysis.
Strategic Management:
Strategic Management
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Task Environment:
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Model.
Internal Environment:
internal analysis.
The tool used in analyzing the Internal Environment is called SWOT analysis.
I.
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II.
III.
IV.
Strategy Formulation:
The anatomy of strategy formulation is called: VMOSA
V: Vision.
M: Mission.
O: Objectives.
S: Strategies.
A: Actions & Tactics.
Stratgy Implementation: Programs, Budgets, Procedures.
Evaluation & control: Monitoring performance, check which the strategy
achieved the objectives or not.
Strategic analysis.
Strategy Formulation / Strategy planning.
Stratgy Implementation.
Strategic evaluation & control.
Vision:
Dream, what do we want to be?
Mission:
What were as a business?
Basic components should exist in the Mission statement:
1.
2.
3.
4.
5.
6.
7.
8.
9.
Customers.
Product & service.
Market.
Technology.
Survival, growth, profits.
Philosophy (Code of ethics, values, and beliefs).
Self-concept (Competitive advantage).
Public image (Social / environment responsible).
Employees.
Lecture - 2
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Environmental analysis
Ext. assessment (audit)
Industry analysis
Features:
1.
2.
3.
4.
Starting pts.
Inputs (O & T).
Ending pts.
Outputs.
Hard to control relatively.
Has a high element of uncertainty.
Note:
Expected value of any decision = the value attributable to this decision the probability of
making that decision from the historical data
Uncertainty: probability & value are missing, so we use the intuition to make
decision.
Certainty: probability & value exist, like the routine or day to day decisions.
Risk: probability exist but & value is missing or known but not guaranteed, so
we do risk analysis.
The Societal Environment analyzed by the PEST factors, or sometimes called PESTC factors where
C indicates to Competitive Intelligence (CI) which are some programs that studying the
competitors.
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The more industry profit, the greater the firms enter the market.
The less industry profit, the fewer the firms enter the market (till we reach to
market equilibrium).
So we make some strategies to prevent firms to enter the market, which
called Barriers to Entry Strategies:
-
Relation
Relation
Monopsony.
Monopoly.
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Oligopoly.
Relation
Buyer is powerful if
Buyer is weak if
Many suppliers.
Concentrated buyers.
Low switching cost.
Standardized products.
Many substitutes.
Backward integration taking control
Limited suppliers.
Fragmented buyers.
High switching cost.
Differentiated products.
Low / limited substitutes.
Forward integration.
Supplier is powerful if
Supplier is weak if
Limited suppliers.
Fragmented buyers.
High switching cost.
Differentiated products.
Low / limited substitutes.
Forward integration.
Many suppliers.
Concentrated buyers.
Low switching cost.
Standardized products.
Many substitutes.
Backward integration.
Mega Environment
The steps of making the Mega Environment Analysis:
1. Strategic Myopia:
A process of filtration, i.e. eliminating all the external factors that dont have
direct impact or unfamiliar trends on the organization.
2. Prioritization:
A process of giving priority to the factors by the Issue Priority Matrix.
The probability of occurrence
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L
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All the factors (Opportunities & Threats) with low will be eliminated.
Medium & high factors will be considered & quantificated.
3. Quantification:
A process of giving weights and rates to the selected factors.
Conducted by, The EFAS Matrix (External Factors Analysis Summery) / EFE
Matrix (External Factors Evaluation).
Weight
(0 1)
Rate
(1 4)
Weighted
score
(W R)
0.05
0.10
0.15
0.15
0.20
Opportunities:
O-1 (e.g. population
increase by 8 %
annually).
O-2 (e.g. acquiring of
weak company).
O-3:
O-4:
.
.
.
.
Threats:
T-1 (e.g. low employee
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morale).
T-2:
T-3:
.
.
.
.
=1
= TWS
Note:
Weight:
0
Rate:
Poor responding.
Average.
Above average.
Superior.
Lecture - 3
Revision:
Outcomes
Societal Env.
Env. Analysis
Ext. Assess.
O&T
Task Env.
Industry Analysis
==============================
Internal Assess.
Org. analysis
Outcomes (S & W)
- Structure
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- Culture
- Resources
- Values
- Competencies
Core
Competencies
Distinctive
Ex: branding loyalty "strengths"
Competencies: (2 levels)
Distinctive
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Core
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Note:
Core
strength.
2. Resources:
How the organization use or utilize its resources in a way to gain comp.
advantage.
After this we will value the organization resources to know what a source of
strength is.
Benefit.
Scarcity.
Durability / sustainability.
Measurable.
There're 4 criteria that tell us which the resource is valuable or not (i.e. does
it provide us with comp. advantage or not).
We do it by using VRIO Frame work:
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i.
ii.
iii.
iv.
Value
does this resources add a value to org.?
Rarity
can other provide it or not? If rare
Strength.
Inimitability
can other imitate?
Organization
can the org. utilizes this resource efficiently well and
gain a maximum benefit (so its not an idle resource).
3. Value chain:
Porter said that any organization should have a value chain / supply chain.
5 primary activities need to be supported by sub-activities.
4. Organizational culture:
High fear
Low
freedom
High
freedom
Creativity
Acceptance of change
Low fear
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Every quadrant has its strength and weakness, and this is the best one.
Quantification of S & W:
Conducted by, The IFE Matrix (Internal Factors Evaluation) / IFAS Matrix
(Internal Factors Analysis Summary).
Note:
As we did previously in the Mega Environment, we must first filter the
strengths & weaknesses and eliminate all the factors (with low-priority) that
dont have direct impact on the organization (Strategic Myopia), as well give
.priority to the factors (Prioritization)
IFE Matrix
:Strengths
S-1: Brand Loyalty
S-2:
S-3:
.
.
.
Weaknesses:
W-1:
W-2:
W-3:
Strategic Management
Weight (0 1)
Rate (1 4)
The
perception
of the
internal factors S / W, i.e.
how the internal factors S /
W are being perceived - a
major or minor
Weighted Score
(W R)
0.3
.
.
.
.
3
.
.
.
.
0.9
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
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.
.
.
TWS =
1=
Note:
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Note:
Int.
Task
All the factors (Int. & Ext.) are changeable or beyond our control, so we
must do the strategic audit (Int. & Ext.) simultaneously.
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Lecture - 4
Wrapping up
I. Where are we now?
1) Environmental Scanning
(St. Audit / St. Analysis)
Mega (PEST Analysis)
Ext. Env.
O&T
Task (Porters 5 Forces Model)
Int. Env.
EFE/EFAS (T.W.S)
II.
Input
Define strategies
2. 2
Matching
- B.C.G
- IE Matrix
2. 3
Decision
by
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V
M
O
Define strategies
A
Objective
Financial Obj.
Strategic Obj.
Ex.
Revenue by 6% long-term
engaged with
Market share
Specific
Measurable
Time bounded
==============================
Define strategies
Types of strategies
Corporate / Grand Strategies
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Integration St.
Intensive St.
Diversification St.
Defensive St.
A) Integration Strategies
Growth Strategies
Called
Motives:
Quality of suppliers.
Just in time.
Cost & control.
Outsourcing is de-integration activity; its not an integration activity because it
provides with business function outside value chain.
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B. V. Integration St.
"Suppliers"
Upstream Integration
Company
Horizontal Integration
"Competitors"'
Downstream Integration
F. V. Integration St.
"Distributers"
==============================
B) Intensive Strategies
Called
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Behavioral.
Geographical.
Psycho-graphic.
Demographic.
Motives :
Growth.
New untargeted market segments.
Profit.
Excess production.
When changing or adding one or more developed product into the same
market.
Motives:
Growth
Targeting new market.
Original product @ maturity extended product Life cycle.
C) Diversification Strategies
Strategies
Called
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Seasonal sales
Existing product @ decline phase.
Competitor better prices.
Horizontal:
Conglomerate:
Tough competition.
New market.
Increase profit.
Synergy.
D) Defensive Strategies
1. Retrenchment strategy:
Its a cutting cost strategy.
e.g.
Laying-off (Redundancy)
Reasons / motives:
Weak position.
Fail to meet objectives.
2. Divestiture strategy:
Partial liquidation; selling the weakest unit / division in the organization and
supporting the other units.
This strategy is applied or conducted when the retrenchment strategy failed.
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3. Complete liquidation:
Selling the company assets for its tangible worth.
This strategy is applied or conducted when the divestiture strategy failed.
Business Strategies
Making each single unit in the organization have or gain competitive
advantage by developing some strategies.
How the organization gain competitive advantage in position positionaladvantage; a good position that permits the org. to gain competitive
advantage in
1. Low cost:
Provide the same / standardized product or service with the same
benefits (of competitors) @ the lowest possible cost (economy of
scale)
2. Differentiation:
Provide a unique product or service with benefits exceeding competitors
benefits @ the best value
advantage.
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the breadth
of the market.
Competitive scope
3. Broad market
4. Narrow market: (Niche)
needs.
If we put the previous 4 each other
Business Strategies:
1. Cost Leadership Strategy:
Providing
standardized
product
service
with
the
same
benefits
as
2. Differentiation Strategy:
The ability to provide a unique product / service with benefits exceeding
competitors to a broad range of customers whose prices are insensitive with
the best possible value.
One and only one of the grand strategies will help:
The Product Development strategy.
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Differentiation
strategy
but
for
a
to
narrow
range
of
customers.
whose prices are insensitive with the best possible value. E.g. Rolls Royce /
Bentley.
3 & 4 called Focus Strategies.
Type of Grand Strategies will help:
All the Intensive strategies:
Market penetration.
Market development.
Product development.
Lecture - 5
2. 2
Matching
SWOT / TOWS
Space Matrix.
Grand Strategy Matrix.
B.C.G
IE Matrix.
2. 3
Decision QSPM.
=====================
SWOT / TOWS
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Strengths:
IFE
EFE
S1:
S2:
S3:
Weaknesses:
W1:
W2:
W3:
Opportunities:
O1:
O2:
O3:
SO Strategies
Maxi - Max
WO Strategies
Mini - Max
ST Strategies
Maxi - Mini
WT Strategies
Mini - Mini
Threats:
T1:
T2:
T3:
Note:
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SWOT / TOWS Matrix; is one of the basic matching tools, theres no doing of
analysis without doing SWOT / TOWS.
====================
Strengths
1.
2.
3.
4.
$128.
Employee morale is excellent.
In-store promotions = 20% increase in
5.
sales.
Newspaper advertising expenditures
6.
down 10%.
Revenues from repair / service in-store
7.
up 16%.
In-store technical support persons have
8.
Weaknesses
1.
2.
3.
4.
5.
6.
7.
8.
days.
Customer checkout process too slow.
9.
MIS degrees.
Store's debt-to-total assets ratio down
34%.
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Opportunities
1.
2.
3.
4.
1kilometer away.
Vehicle traffic passing Store up 12%.
Vendors average six new Products /
5.
6.
7.
year.
Senior citizen use of computers up 8%.
Small business growth in area up 10%.
Desire for web sites up 18% by
8.
Realtors.
Desire for web sites up 12% by small
SO Strategies
1.
WO Strategies
1.
2.
3.
4.
firms.
Threats
ST Strategies
WT Strategies
1.
1.
2.
2.
3.
4.
5.
6.
Strengths (S)
Factors
Internal
Weaknesses (W)
W1 Processoriented R&D.
S2 Experienced top
W2 Distribution channels.
management.
External Factors
W3 Financial position.
S3 Vertical integration.
W4 Global positioning.
S4 Employee relations.
W5 Manufacturing facilities.
SO Strategies
Opportunities (O)
O1 Economic integration Of
European Community.
O2 Demographics favor quality.
Market development.
S3+O5:
Forward integration.
WO Strategies
W2+O4.
W4+O1+O4+O3 solution.
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Threats (T)
T1 Increasing government
regulation.
T2 Strong U.S competition.
T3 Whirlpool and Electrolux
ST Strategies
WT Strategies
W1+W3+T4: Defensive
strategy divestiture.
Improving all weaknesses
by getting acquired by T3
& T5.
Internal Factors
Weakness (W)
(IFAS Table 5-2)
External Factors
(EFAS Table 4-5)
Opportunities (O)
WO Strategies
Strategic Management
Strengths (s)
SO Strategies
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Threats
WT Strategies
ST Strategies
st.
divestiture st.
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6
2
SPACE Matrix
Strategic Position
& Action
2 internal
External
EX
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Comparing to Competitors
)X-axis (+ ve
Y-
)axis (- ve
)(IFE
Internal strategic position
)Comp. position (CP
-1
* Liquidity
-2
* Leverage
* Cash Flow
* Mkt share
5
* Product quality
6
* Customer loyalty
7
-3
-6
8
20
AV. = - 2
AV. = 5
Y-axis
)(EFE
External st. Position
)stability Position (SP
* Demand Elasticity.
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Industry Position IP
6
* Growth Potential.
-2
Strategic Management
* Profitability.
-1
* Tech. Changes.
* Productivity.
-4
* Inflation.
15
AV. =5
AV. =2.3
x-axis = -2 + 5 =
(x,y) = (3,2.7)
y-axis = 5 + (-2.3) = 2.
7
FP(int)
Conservative
st. position
Agressive
* Integ.
* Intensive
* Intensive st.
6-
* Rel. div.
5-*
* Div
Directional
Vector
4Action Evaluation
2CP (int.)
IP(ext.)
-6
1-5
-4
-3
-2
-1
6
-1
Defensive
* Defensive
Strategic Management
-2
Competitive
* Integ.
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* unrelated Div.
Intensive
-3
*
-4
Defensive
-5
-6
SP(ext.)
Q2 Conservative:
The org. Should stick to its basic competencies don't take
excessive Risks
Need to stabilize your self.
Q3 Defensive:
The org. must defend its position as much as it can ( improve
weakness and
avoid threats).
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Q4 Competitive:
The org. is competing in changing Env.
==================================================
3
============
Grand st. matrix:-
Q1
intensive st.
* Integration
Mor. Integ.
*excess Res.
*stress more
Integ.
intensive
On market
Weak comp.
strong comp
*Comitt to a
unrel
position
*CA
unrel.dive
Strategic Management
*unrel. div.
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*Defensive
or
*Mor. Integ.
by merging
Acquiring
Space matrix
===============================================
==============
Example Strategy Profiles
Aggressive Profiles
FP
FS
FS
(+4,+4)
(+1,+5)
CA
IS
cp
Strategic Management
IS ip
CA
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ES sp
AH int.
ES
FS
Conservative Profiles
FS
Mkt penetration
mkt develop (-5,+2)
(-2,+4)
CA
IS
IS
CA
ES
ES
FS
Competitive Profiles
CA
IS
IS
FS
CA
(+5,-1)
(+1,-4)
Get acquired
ES
ES
defensive
FS
CA
IS
Defensive Profiles
IS
(-5,-1)
Def.
ES
FS
CA
(-1,-5)
unrel.div
ES
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7
BCG
Portfolio Analysis
IE
Page 37 of 49
Mkt share
growth rate
mkt
(cash generation)
consumption)
(cach
BCG matrix
Mkt Growth
rate
Stars
(cash
consumpitio
n)
Cash
cows
low
Question
Weak
(problem child)
Dogs
(Pets)
Question mark :- if it still as it is it will lose money and will be total loss.
This is a product line or bunnies unit has low mkt share and competing in a
High growing market .
There is a 2 options :
a). heavy amusements and change it to stars by only mkt Penetration st.
b). change it to dogs using the Divest defensive st.
starts :
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business
Low cash generation & low cash consumption which is every weak int.
fext. Position we have no option but Divest Defensive st.
BCG not only (not rely alone) to make strategic decision
* limitations :1- the position of business unit on the BCG. (if its in the tassectliue
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2- there're other dimensions to judge other than mkt share and mkt growth ,it's
competitive position of the unit.
3- we can't make aur strategic decision analy pathetical relationship
(the mkt share
cash generation) .
======================================
Strong
3-4
Strategic Management
AV.
2:2.9
9
1:1.9
2 9
Weak
3
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* Harvest or Divest :
Strategies
Defensive .
8
Decision Stage
weigh
t
Strategic Management
Mkt
penetration
( sales in
present mkt)
AS
TAS
Related
AS
TAS
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OPP.
Pop 10%
annual
0.10
0.30
0.20
0.10
Threats
Rival
nearby
Strength.
Weaknes
s.
STAS
3.72
STAS
4.10
STAS
3.97
1:5
1:6
4.10
STAS
STAS
3.72 ( plan C) .
=========================
Till here we've finished the second stage ( St. formulation )St.
. thinking
===========================
* St. Implementation
( operation stage )
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St. formulation
Good
Good F.
Good Imp.
Oct. 1973 war
Bad
Bad F.
Good Imp.
H1N1
Good
St. Imp.
Good F.
Bad Imp
Bad
2 models
One of this
Triangulation: ( to manage one org. culture) homogeneous cult.
a) Observation.
b) Self-administered Question.
c) Personal interviews.
In a question
Page 43 of 49
Acquirer
US
Acquired
French
Preservation of acquired firm
To its own culture
Not at all
Very
attract
Very
v. high
Integration
culture
Separation
culture
Decultration
( lock of integration)
Perception of
acquired to
acquirer's culture
unattract
Segmentation
Product positioning
STP
them
(customer with unsatisfied need)
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Positioning map
Sony
Acer
Dell
price
EFE EFAS
(env. Analysis)
Task
(industry analysis)
O&T
Ext.
T.W.S
written control
S&W
Int.
V
M
O
S
A
St. Formulation
Strategic Management
IFAS
Int. T.W.S.
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space
Similar
Grand
Strategies
BCG
IE
Decision
will be
3) How to go there ?
3) st. Implementation
4) Are WR there yet or not ?
4) St. evaluation & control
Test of the implemented st. in terms the objectives
Six sigma: help in efficient implementation
Its outcome is to reach me near perfect result
To reach the six sigma we must have:
3.4 detect/ mv. output.
WR have 2 models of six sigma
analyze
reactive
DMAIC
define
measure
control
DMADV
proactive
improve
difference between them is when you apply the six sigma in your product
line.
define or decide
analyze
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DMADV
(DFSS)
define for six sigma
design
verify
then stop
Then go to
5- Corrective action.
==========================
* Evaluating from strategic perspective:
ACT.1:
Revised EFE
Revise IFE
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Cost
Value
(mkt leader)
(mkt leader)
M
O
S
Gap
A
1
Financial Performance:
blocked by BSC
Financial ratios
Customer knowledge
How should
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KPIS
3
Satisfaction, loyalty.
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