Chapter 6 (Strategic Management)

Business Plan
It is important because it sets the goals and strategies to achieve them. Without one the business is going to be less likely to survive.
*Strategy, Strategic Management, & Strategic Planning*
“the big picture” where it’s going and how to get there
an action plan that sets the direction for an organization
Strategic Management
involves managers from all different parts of the organization to formulate and implement the strategies and strategic goals
Strategic Planning
where an organization is going over the next year or more, how it’s going to get there and how it’ll know if it got there or not
*Why strategic management and strategic planning are important…*
1. provide direction and momentum.
help people to focus on the most critical problems, choices, and opportunities

2. encourage new ideas.

3. develop a sustainable competitive advantage.
– staying ahead: in being responsive to customers, in innovating, in quality, in effectiveness

Strategic Positioning
Performing different activities from rivals, or performing similar activities in different ways.
*Three principles of strategic positioning*
*What is an effective strategy?*
1. Strategy is the creation of a unique & valuable position
(few needs/many customers, broad needs/few customers, broad needs/many customers)

2. Strategy requires trade-offs in competing

3. Strategy involves creating a “fit” among activities

*Five steps of the strategic-management process*
1. establish the mission & the vision
2. establish the grand strategy
3. formulate strategic plans
4. carry out the strategic plans
5. maintain strategic control: the feedback loop
(1) Characteristics of a good mission & vision statement
Mission statement is based on the organizations purpose or reason for being

Vision statement is based on an organizations long-term goal and what it wants to become and its strategic intentions

(2) grand strategies
growth, stability, and defensive

analysis of where an organization is presently headed and then to determine where it should be headed

SWOT analysis and forecasting are used to establish a grand strategy

growth strategy
involves expansion — sales revenues, market share, number of employees, number of customers or (for nonprofits) clients served
stability strategy
little or no significant change
defensive strategy
“retrenchment strategy” reduction in an organization’s efforts
(3) formulate strategic plans
grand strategies are now translated into specific strategic plans which should be *SMART*
(specific, measurable, attainable, results-oriented, & target dates)
strategy formulation
choosing among different strategies and altering them to best fit the organization’s needs
(4) Carry out the strategic plans
strategy implementation – putting strategic plans into effect
(5) Maintain strategic control: feedback
strategy control is monitoring the execution of strategy and making adjustments, if necessary
engage people, keep it simple, stay focused, keep moving
*Establishing the grand strategy*
competitive intelligence, SWOT analysis, and forecasting
competitive intelligence
gaining information about one’s competitors’ activities so that you can anticipate their moves and react appropriately
public prints & advertising, investor information, and informal sources
SWOT analysis (situational analysis)
search for (inside matters) strengths, weaknesses, (outside matters) opportunities, and threats affecting the organization
forecasting (two types)
trend analysis: hypothetical extension of a past series of events into the future.
For example, time-series forecast which predicts the future data based on patterns of historical data.

contingency planning (scenario planning/analysis): creation of alternative hypothetical but equally likely future conditions

*Formulating Strategy: four techniques*
porter’s competitive forces
porter’s competitive strategies
diversification & synergy
BCG matrix
Porter’s Five competitive forces
(porter’s model for industry analysis)
1. threats of new entrants
ex. kraft mac & cheese vs store brand
2. bargaining power of suppliers
ex. Surftech used resin instead of foam
3. bargaining power of buyers
ex. car buyers can use the internet to scout
4. threats of substitute products or services
ex. oil companies
5. rivalry among competitors
ex. cellphones, MP3 players, videogames
Porter’s four competitive strategies (generic strategies)
Wide Markets:
1. cost-leadership
(wide variety of customers as inexpensively as possible)
walmart – wide range/low prices

2. differentiation
different product/service allows you to charge more
coca-cola vs. store house brand

Narrow Markets:
3. cost-focus
(low-end products sold in discount stores)
etsy, expect discount, dollar store

4. focused-differentiation
(fewer buyers for more expensive products)

Single-Product strategy versus diversification strategy
SPS – company makes and sells one product within its market.

DS – operating several businesses in order to spread the risk

Benefit: focusing allows you to be able to repair, upgrade product, scout competition, advertising/sales
Vulnerability: putting all your eggs in one basket can be dangerous because if a product fails then all others fail. For example, if you manufacture a iphone, ipad, and macbook all in the same place they will all go down together.
Unrelated: operating several businesses under one ownership that are not related to one another
(General Electric)
Related: operating separate businesses under one ownership that are related to one another
(stop N shop)

– reduced risk
– management efficiencies

BCG Matrix
Boston Consulting Group, evaluating strategic business units on the basis of
1. their business growth rates
2. their share of the market
*Implementing & controlling strategy: execution*
Execution – consists of using questioning, analysis, and follow through to mesh strategy with reality, align people with goals, and achieve the results promised
Three core processes of business
people, strategy, and operations

effective execution requires managers to build a foundation for execution within these three processes

7 types of behavior to building a foundation of execution
1. know your people & your business “engage intensely with your employees
2. insist on realism “don’t let others avoid reality
3. set clear priorities ” focus on a few rather than many goals”
4. follow through “establish accountability & check on results
5. reward the doers “show top performers that they matter
6. expand people’s capabilities “develop the talent”
7. know yourself “do the hard work of understanding who you are”