Summary PDF version book Strategic Management, Summaries of Strategic Management

Download Summary PDF version book Strategic Management and more Summaries Strategic Management in PDF only on Docsity! AMSIB Amsterdam School of International Business Summary PDF Strategic Management International Business: Year 4 1 Table of Contents Lecture 01: Introducing the concepts ................................................................................ 2 Lecture 02: The Context – Managing Strategically ............................................................. 5 Lecture 03: The External Factor Evaluation (EFE) Matrix .................................................. 8 Lecture 4: Doing an internal analysis ................................................................................ 9 Lecture 5: Functional & Competitive Strategies ................................................................12 Lecture 6: Corporate Strategies ........................................................................................16 Lecture 7: International Strategies:...................................................................................21 4 Guiding principles of corporate governance: 1. The primary duty of a board of directors is to select a CEO and to oversee the CEO and senior management in the competent and ethical operation of the corporation on a day-to- day basis. 2. It is the responsibility of management to operate the corporation effectively and ethically to produce long–term value for shareholders. 3. It is the responsibility of management to develop and implement the corporation’s strategic plans and to identify, evaluate, and manage the risks inherent in the corporation’s strategy. 4. It is the responsibility of management to produce promptly financial statements that fairly represent the financial condition and results of corporate operations. 5. It is the responsibility of the board to engage an independent accounting firm to audit the financial statements, issue an opinion that those statements are conducted by Generally Accepted Accounting Principles, and oversee the corporation’s relationship with the outside auditor. 6. It is the responsibility of the board to adopt and oversee the implementation of compensation policies, establish goals for performance-based compensation, and determine the compensation of the CEO and senior management. 7. It is the responsibility of the board to respond appropriately to shareholders' concerns. 8. It is the responsibility of the corporation to deal with its employees, customers, suppliers, and other constituencies fairly and equitably. Financial reporting: • Disclosure and transparency of financial information. • Auditing of internal financial statements by independent auditors. • Acquire a certification of the accuracy of financial statements, signed by senior managers. 5 Lecture 02: The Context – Managing Strategically Strategic management in action: Situation analysis Analyzing current situation Strategy formulation Deciding on strategies Strategy implementation Putting strategies in action Strategy evaluation Evaluating and changing current strategies Competitive advantage: What set’s an organization apart from other organizations. The Industrial / Organizational view: The I/O view focuses on the structural forces within an industry, the competitive environment of firms, and how these influence competitive advantage. The I/O view is external. The industrial / organization approach: Getting and keeping competitive advantage by analyzing external forces and basing strategic decisions on that analysis. Resource – based view: Gaining a competitive advantage from the firm’s resources. Therefore, resource – based view is internal. An organization will gain success if it has the most appropiate resources for its business. Managing strategically according to the resource – based view: Developing and exploiting and organization’s unique resources and capabilities, Resources according to the R/B view are all assets like: • Financial • Physical • Human • Intangible • Structural / cultural. These assets are used by an organization to develop, produce, and deliver products or services to its customers. Value: An organizational resource is unique if it adds value. However, a resource is only valuable in the context of what’s happening in the external environment. Depending on customer’s taste’s, wants and needs, technology and trends. What makes organizational resources unique in order to create a competitive advantage? • Does it add value? • It is rare? • Can a firm exploit it? • Is it hard to duplicate and substitute? 6 Guerrilla view: According to the guerilla view an organization’s competitive advantage is temporary due to constant changes in the market and unexpected external events. Therefore, strategic managers should respons quickly and beat their competitors like a “guerilla”. They do these by implementing strategically effective actions. Three critical forces that drive the business environment are: The information revolution Technology Globalization. Drivers of the new business environment: Implications: • Continual change. • Reduced need for physical assets. • Vanishing distance and compressed time. • Vulnerability: hackers, virusses, terrorist attacks, natural disasters. Drivers of the new business environment: Critical success factors: • Ability to embrace change. • Creativity and innovation capabilities. • Being a world – class organization. Globalization influences strategic management in two ways: • Global markets: Geographic boundries do not constrain an organization’s strategic decisions and actions. • Global competitors: As global markets open up, competitors can come from everywhere. Charateristics of World – Class organizations: • Strong customer focus • Continual learning and improvement • Flexible organization structure • Egalitarian climate • Significant technological support. Two important organizational elements are a source of guidance: • Organizational vision and mission: o Vision: An organizational vision is a broad comprehensive picutre of what a leader wants an organzation to become. It’s a statement of what the organization stand for, what is believes, and why it exists. It presents a view beyond what the organization “is” to what the organization “could be”. o The four components of an organization’s vision: ▪ The organization’s core values and beliefs. ▪ The purpose of the organization. ▪ A brief summary of what the organization does and how it’s planning to fulfill the purpose. ▪ Specifying broad goals. 9 Lecture 4: Doing an internal analysis Strategic management in action: • Situation analysis: Analyzing current situation • Strategy formulation: Deciding on strategies • Strategy implementation: Putting strategies into action • Strategy evaluation: Evaluation and change strategies. Organizational resources: • Financial: Debt capacity, credit lines, available equity, cash reserves, financial holdings. • Physical: Tangible assets such as buildings, equipments, fixtures, raw materials, office supplies, manufacturing facilities, machines. • Human: Experiences, skills, knowledge, judgements, accumlated wisdom and competencies pof the organizations employees. Programming skills. • Intangible: Brand names, patents, trademarks, databases, copyrights, registered designs. • Structural – Cultural Organizational history, culture, work systems, policies, relationships, how the organizational structure is being used. Organizational capabilities: • Organizational processes and routines • Accumlated knowledge • Actual work activities. • Turning existing resources into core compentences • The interactions between people • The interactions between people and resources. Distinctive organizational capabilities: Are the special and unique capabilities that distinguish an organizations from its competitors. Charateristics of distinctive organizational capabilities: • Contributes to superior customer value • Can be used in a variety of ways • Is difficult for competitors to imitate. Three different techniques to do an internal analysis: • Value chain • Internal audit • Capabilities assessement profile. 10 Value chain analysis: The value chain analysis consists of 3 areas: • The product is unique and different. • The product is low – priced. • The product meets the needs of a specific group of customers quickly and efficiently. Michael Porter: 9 activities that contribute to the value chain analysis: Primary activities: • Inbound logistics • Operations • Outbound logistics • Marketing and Sales • Customer service. Support activities: • Acquiring and handling resources. • Processing resources into good / services. • Getting products to customers. • Marketing goods and services to customers. • Servicing customers. Assessing the organizational activities that reinforce the others: • Purchasing • Research & Development • Human Resources • Other organizational activities, processes and procedures. An internal audit looks at 6 organizational functional areas: • Production – operations • Marketing • Research & Development • Financial Accounting • Management • Information systems. Internal audit of other organizational elements: • Assessing strategic managers (Board of Directors and Top Managers). • Assessing the organizational structure. • Assessing the organizational cultures. Capabilities asssesment profile: • The capabilities assesment profile consists of two phases: • Identifying capabilities. • Developing and levaraging these distinctive capabilities. Identifying distinctive organizational capabilities: • Step 1: Prepare current product – market profile. • Step 2: Identify sources of competitive advantage and disadvantage in the main product – market segments. • Step 3: Describe all the organizational capabilities and competencies. • Step 4: Sort the core capabilities and competencies according to strategic importance. 11 • Step 5: Identify and agree on the key capabilities and competencies. Criteria to jugde organizational strenghts and weaknesses: • Past performance trends. • Comparison against competitors. • Specific Goals or targets. • Personal opinions of strategic decision makers of consultants. Two reasons why doing an internal analysis is important: • It’s the only way to identify an organization’s strengths and weaknesses. • It’s needed for making good strategic decisions. 14 Integrated low cost – differentiation strategy: Using a strategy that is both based on differentiation and low costs leadership. Such as MacDonalds for example. To use integrated low cost -differentiation is only possible due: Technology. Mintzberg’s generic competitive strategies: Differentiation based on: • Price • Marketing image • Product design • Product quality • Product support • Undifferentiated. Implementing competitive strategy: Creating, implementing, and exploiting a strategy that has sustainable and competitive advantages. Which stems from an organization’s distinctive capabilities. The role of functional strategies: Functional strategies are based on the organization’s resources and capabilities. And skills. Once the organization’s competitive strategy is determined, the resources, capabilities, and competences found in the various functional areas are how the competitive strategy is implemented. The functional strategies support the competitive strategies. Skills, resources, and capabilities needed for competitive strategies: • Low-cost leader • Differentiator • Focuser. Competitive actions: Competing against other organizations vying for their customers, market share or other desired objects our outcomes. Competitive action moves: • Offensive moves: An organization’s attempts to exploit and strengthen its competitive position through attacks on a competitor’s position. o Offensive tactics: ▪ Attacking the competitor’s weaknesses. ▪ Copying the competitor’s prices, promotion, product, features, and distribution channel. ▪ Offering products or products features the competitor is unable to do. ▪ Avoiding direct, head-on competitive challenges by manoeuvring around competitors and subtly changing the rules of the game. ▪ The guerrilla attack: Small, intermitted, random assaults on competitor’s markets. 15 • Defensive moves: An organization’s attempt to protect its competitive advantage and turf. This move is implemented when an organization is attacked or threatened by other organizations. o Defensive tactics: ▪ Preventing challengers from attacking by not giving them any areas to attack. ▪ Increase competitor’s belief that significant retaliation can be expected if competitive attacks are initiated. ▪ Lowering the incentive for a competitor to attack and to make it less appealing to compete with the organization. Evaluating and changing competitive strategy: The organization’s competitive actions and responses being implemented through the various functional strategies must be monitored and evaluated for performance effectiveness and efficiency. Plus, determining what happened and why by pinpointing areas of competitive weaknesses. The questions that one should when evaluating a competitive strategy are: • What the results of the various strategies? • Are they having the intended effect? • Are we successfully exploiting our competitive advantage? 16 Lecture 6: Corporate Strategies Single – business organization: A business in just one organization. A multiple – business organization: Is in more than one organization. The reason why the distinction between a single – business and multiple – business organization is important: Is because it influences an organization’s overall strategic direction, what corporate strategy is used, and how that strategy is implemented and managed. Strategic decision makers can choose from 3 corporate strategic directions: • Moving an organization forward. • Keeping an organization as it is. • Reversing an organization’s decline. Stability strategy: Choosing a growth strategy (or strategies) that are appropriate given the situation. Keeping an organization as is means it is not growing, but also is not falling behind. Renewal strategy: When there are problems in an organization or situation, and there is decline. Implement a strategy that reverses the decline and improves the situation. 3 types of corporate strategies: • Growth • Stability • Renewal. Concentration strategy: Is a growth strategy in which an organization concentrates on its primary line of businesses and looks for ways to meet its growth by expanding its core business. Possible growth strategies: • International • Concentration • Diversification • Horizontal integration • Vertical integration. Product – market exploitation: Attempts by organizations to increase sales of its current product(s) in its current market(s). Product – development option: When organizations create new products to sell to its current market (customers). New products are considered: • New product with new features. • Improved or modified versions of existing products. 19 Possible causes of corporate decline: • Inadequate financial controls. • Uncontrollable costs or too excessive costs. • New competitors. • Unpredicted shifts in consumer demand. • Slow or now response to significant external or internal changes. • Overexpansion or too rapid growth. Signs of declining performance: • Excess number of personnel. • Unnecessary and cumbersome administrative procedures. • Fear of conflict or taking risks. • Tolerating work incompetence at any level or in any area of the organization. • Lack of sharp vision, mission, or goals. • Ineffective or poor communication within various units and between various units. Two renewal strategies: • Retrenchment • Turnaround. Retrenchment strategy: Is a short – run renewal strategy designed to address organizational weaknesses that are leading to performance declines. Turnaround strategy: A renewal strategy that is designed for situations in which the organization’s performance problems are more serious. Implementing renewal strategies: • Cutting costs • Restructuring. Divestment: Selling a business unit to another organization where it will continue as an ongoing business. Spin – off: Remove a business unit and set it up as a separate, independent business by distributing its shares of stock. Making downsizing effective: • Communicate openly and honestly about needed actions. • Clarify goals and expectations before, during, and after downsizing. • Eliminate unnecessary work activities rather than making across-the-board cuts in people. • Outsource work if it can be done more inexpensively and more effectively elsewhere. • Provide whatever assistance is appropriate to downsized individuals. • Counsel, communicate with, and seek input from those employees not downsized. • Ensure that those individuals remaining after downsizing know they are a valuable and much-needed organizational resource. 20 Evaluating Corporate Strategies: Evaluation techniques: • Corporate goals • Efficiency, effectiveness, and productivity measures • Benchmarking • Portfolio analysis. Types of corporate goals: • Increased earnings • Maximized stockholder wealth • Increased market share • Strong global presence • Increased productivity • Positive reputation – image • Strong customer satisfaction • High product quality • Increased revenues. Three specific organizational measures that can be used in evaluating an organization's corporate strategy are: • Efficiency • Effectiveness • Productivity. Benchmarking: Benchmarking is the search for best practices inside or outside an organization. Portfolio Analysis: An organization's various business units. Please note: if an organization has just one business unit, portfolio analysis is pointless. Three main portfolio analysis approaches: • BCG matrix • McKinsey-GE stoplight matrix • Product-market evolution matrix. BCG matrix: The BCG matrix (also known as the growth-share matrix) was created by the Boston Consulting Group as a way to determine whether a business unit was a cash producer or a cash user. It is a simple, four-cell matrix. The McKinsey-GE Stoplight Matrix: Was developed by McKinsey and Company for GE. This nine-cell matrix provides a more comprehensive analysis of a business unit's internal and external factors. The product-market evolution matrix: Was developed by C. W. Hofer and is based on the product life cycle, which serves as the Y axis. The six stages in the product life cycle include Development, Growth, Competitive Shakeout, Maturity, Saturation, and Decline. The X axis (internal analysis of the business unit) is the same analysis of competitive position as used in the McKinsey matrix. 21 Lecture 7: International Strategies: What exactly is an international strategy? It is a corporate strategy that describes companies that do business in multiple countries simultaneously. Potential Advantages and Drawbacks of Being International: Advantages: • Interdependencies among multiple countries can be exploited . • Way to learn more about a particular market or world region. • Strategically locate for tax benefits and regulations. • Potentially lower operational costs. • Way to supplement or strengthen domestic growth. • Can lead to achieving benefits of economies of scale. • Become a stronger competitor, both domestically and internationally. Drawbacks: • Protectionism, especially in scenarios with continued high unemployment and economic malaise. • Disruptions in supply times/supply chains. • Quality issues. • Differences in language, culture, and value systems. • Ethnic, religious, and cultural tensions. • Disruptive changes such as terrorist attacks, natural disasters, disease outbreaks. • Financial and economic risks. • More complex and challenging process of managing strategically. • Difficulty in finding similarities in markets or operational capabilities. • Difficulty in capturing and exploiting advantages. • Increased global competition for jobs, markets, arid talents. • Greater need for cross-cultural understanding and savvy. Economic systems: • Free market economy: A free market economy is one in which resources are primarily owned and controlled by the private sector. • Planned economy: A planned economy is one in which economic decisions are planned by a central government. Strategic decisions could be affected by: • Currency exchange rates. • Inflation rates • Diverse tax policies. • Governmental intervention and controls. Global sourcing: Purchasing materials or labour from around the world wherever it is cheapest. The goal: Take advantage of lower costs in order to be more competitive.