Strategic Management

Spring 2007

Strategic Management

Strategic Management
The larger vision that guides the activities of managers and other employees in an organization The set of decisions and actions used to formulate and implement strategies that will provide a competitively superior fit between the organization and its environment so as to achieve organizational goals The process of establishing and sustaining competitive advantage

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Competitive Advantage
What is it?
An edge over your rivals

Traditional sources
Product and process technology Protected and regulated markets Access to financial resources Economies of scale

New source
People !!!

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Levels of Strategy
Grand strategy
Where are we going?

Corporate
What business are we in?

Business-level
How do we compete?

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The Strategic Management Process

Analyze
environment Identify mission and strategies Analyze Identify OT Formulate strategies

organization

Identify SW

Implement
strategies

Feedback

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SWOT Analysis
Strength Opportunity

Where are we going?

Weakness Threat

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Grand Strategies
Growth Stability Retrenchment

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Strategic Management

WalMartGrowth (Number of Stores)

6,141
7,000 6,000 5,000 4,000 3,000 2,000 1,000 0
1968 1973 1978 1983 1988 1993 1998 2003

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Paths to Growth: WalMart

Direction of growth
New stores in existing markets Enter new markets New product lines

Means of growth
Greenfield Acquisition

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WalMartInternational Expansion and Acquisitions

Mexico 1991

Puerto Rico
Canada Argentina Brazil China Germany Korea U.K. Japan
*Bailed out ** Not profitable
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1992 2003 (A)

1994 (A) 1995 1995 1996 1997-8 (A) 1998 (A) 1999 (A) 2002 (A)

Supermercados Amigo Woolco

Wertkauf, Interspar * Makro, Kims Club * Asda Seiyu (37% ownership) **

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General Electric Overall Stability

Earnings Before Taxes ($M)

$25,000 $20,000 $15,000 $10,000 $5,000 $0

19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05

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Earnings Before Taxes ($M)

$2,000

Kmart -- Decline

-$4,000 $0

-$2,000

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19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02

Note that text combines global and home replication strategies

Global Strategy: Four Choices

High

Global Strategy

Transnational Strategy

Cost and efficiency pressures Low Low

Home Replication Strategy

Multi domestic Strategy

High Pressures for local responsiveness

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Corporate Level Strategy

Strategic business units Diversification
Single business Diversified Vertical Integration Conglomerate

BCG Matrix

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Dell Products
PowerEdge servers PowerVault and Dell | EMC storage products Services PowerConnect switches OptiPlex desktops Latitude notebooks
Dell Precision workstations Inspiron notebooks Dimension desktops Dell monitors Dell printers Axim handhelds Software and Peripherals

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ThyssenKrupp

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Alcoa at a Glance Alcoa is the worlds leading producer of primary aluminum, fabricated aluminum, and alumina and is active in all major aspects of the industry. Alcoa serves the aerospace, automotive, packaging, building and construction, commercial transportation, and industrial markets, bringing design, engineering, production, and other capabilities of Alcoas businesses as a single solution to customers. In addition to aluminum products and components, Alcoa also markets consumer brands including Reynolds Wrap aluminum foil, Alcoa wheels, and Baco household wraps. Among its other businesses are vinyl siding, closures, precision castings, and electrical distribution systems for cars and trucks.

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Sara Lee
Headquarters

Food and Beverage

Intimates and Underwear

Household Products

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Another Conglomerate
General Electric Aircraft Engines Consumer Finance Equipment Management Insurance NBC GE Power Systems Transportation Systems
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Commercial Finance Consumer Products Industrial Systems Medical Systems GE Plastics Specialty Materials

BCG Matrix
High

Stars

Problem Children

Market Growth

Low

Cash Cows
High

Dogs Market Share Low

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What Business Are We In?

1. 2. 3. 4. What are our core competencies? Who are our customers? Economies of scale Economies of scope

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Business-Level Strategy
Porters Five Forces Generic strategies Value chain

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Porters Five Forces

Bargaining power of suppliers Bargaining power of buyers Threat of substitutes Potential new entrants to the market Rivalry among current competitors

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Porters Five Generic Strategies

Low-cost leadership Broad differentiation Best-cost provider Focused or market niche / cost Focused or market niche / differentiation

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Value Chain Analysis

How are we creating value for customers? Where can costs be reduced?

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The Value Chain

Raw Materials

Operations

Distribution Sales and Marketing Customer Service

Support Activities

Product R &D, Technology, Systems Development Human Resource Management General Administration
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Strategy Implementation
Leadership Structure and design Information and control systems Human resources

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