DESIGNING A COMPETITIVE BUSINESS MODEL & BUILDING A SOLID STRATEGIC PLAN

Chapter 3: Strategic Mgt

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Learning Objectives

Understand the importance of strategic management to a small business Explain why and how a small business must create a competitive advantage in the market Develop a strategic plan for a business using the nine steps in the strategic planning process Discuss the characteristics of low-cost, differentiation and focus strategies and know when to employ them Understand the importance of control such as balanced scorecard in the planning process

Chapter 3: Strategic Mgt

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

A Major Shift. . .
Todays global competitive not thinking strategically is extremely vulnerable.

Knowledge is a critical factor of production.

Intellectual capital is a source of competitive advantage in market place.

Chapter 3: Strategic Mgt

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

A Major Shift. . .
Intellectual capital comprises of 3 components: Human capital Structural capital: Customer capital:

Chapter 3: Strategic Mgt

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Strategic Management

Is crucial to building a successful business. Involves developing a game plan

Chapter 3: Strategic Mgt

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Strategic Management and Competitive Advantage

Developing a strategic plan is crucial to creating a competitive advantage Example: Blockbuster Video chain gained significant advantage over rival: negotiated a deal with major movie studios to purchase videos just $6 each, plus 40 cent of rental fees. This could lower Blockbuster cost of its inventory compared to its rival paying $65 per video.
Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Chapter 3: Strategic Mgt

Key: Core Competencies

Building competitive advantage alone is not enough.This is gained through ability to develop a set of core competencies.
They are what a company does best. Best to rely on a natural advantage (often linked to a companys smallness).

Chapter 3: Strategic Mgt

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

BUILDING COMPETITIVE ADVANTAGE

Successful small companies able to build strategies that exploit all of the competitive advantages that their sizes gives them by:

* Responding quickly to customers needs * Providing personalized customer service * Remaining flexible & willing to change

* Constantly searching for new, emerging market segments * Building & defending market niches * Switching cost incur by switching a competitor's product/service
through personal service & loyalty

*Remaining entrepreneurial & willing to take risk & act with

lightning speed

*Constantly innovating
Chapter 3: Strategic Mgt Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Strategic Management Process

Step 1. Develop a vision and translate it into a meaningful mission statement. Step 2. Assess strengths and weaknesses. Step 3. Scan environment for opportunities and threats. Step 4. Identify key success factors.

Chapter 3: Strategic Mgt

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

Strategic Management Process...

(continued)

Step 5. Analyze competition. Step 6. Create goals & objectives. Step 7. Formulate strategies. Step 8. Translate plans into actions. Step 9. Establish accurate controls.

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Step 1: Develop a Vision and Create a Mission Statement

Vision an expression of what an entrepreneur stands for and believes in. A clearly defined vision:
Provides direction: able to focus everyones attention on the future & determine path the buss will take to get there Determines decisions Motivates people: clear vision excites & ignites people to action

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Addresses question:"What business are we in?

Step 1: Develop a Vision and Create a Mission Statement

The mission is a written expression of how the company will reflect the owners values, beliefs, and vision more than just making money. Example: Roti Segars mission to provide the customers the finest & best bread and cakes while promoting a healthy lifestyle. We exist to attract and maintain customers.When we adhere to this maxim, everything else will fall into place. Our services will exceed the expectations of our customers. We will continue to provide the best & only best products to our customers.
Copyright 2005 Prentice Hall Inc. A Pearson Education Company

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Step 1: Develop a Vision and Create a Mission Statement

Universiti Teknologi PETRONAS vision: To be a leader in technology education & center for creativity & innovation Mission: UTP is an institute of higher learning. We provide opportunities for the pursuit of knowledge & expertise for the advancement of engineering, science & technology to enhance the nations competitiveness.

Apple vision: "Man is the creator of change in this world. As such he should be above systems and structures, and not subordinate to them."
Copyright 2005 Prentice Hall Inc. A Pearson Education Company

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Conclusion
The strategic planning process: Begins with the nine steps. Becomes more efficient each time. Teaches entrepreneurial discipline for a higher chance of survival.

Chapter 3: Strategic Mgt

Copyright 2005 Prentice Hall Inc. A Pearson Education Company

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