Because Norm asked1 A Few Business Basics IT-390 Since Norm asked.

Because Norm asked 1

A Few Business Basics

IT-390

Since Norm asked


Strategic Management

• The aim to achieve competitive advantage– Interrelated nature of business function– Cross-functional in nature– Requires Strategic formulation, implementation

& evaluation– Requires both: Intuition & analysis– Adapting to change is a key for business

survival



• According to Webster’s New World Dictionary, strategy is:

– “The science of planning and directing large scale military operations, of maneuvering forces into the most advantageous position prior to actual engagement of the enemy”

– I.E. Achieve competitive advantage.



• 3 Stages of the Strategic Management Process

– 1. Strategy Formulation– 2. Strategy Implementation– 3. Strategy Evaluation



• Deming’s Cycle

– Plan– Do– Check– Act



• 10 key External Forces

– Competitive - Technological– Economic - Government– Social - Political– Cultural - Environment– Demographic - Legal


Competitive Analysis

• Porter’s “Five-Forces” Model of Competition



• Competitive Analysis

– Rivalry among competitive firms– Potential entry of new competitors– Potential development of substitute products– Bargaining powers of consumers– Bargaining power of suppliers



• Rivalry among competitive firms– Number of competitors– Rate of industry growth– Amount of fixed costs– Capacity– Height of exit barriers– Diversity of rivals



• Potential entry of new competitors– Economies of scale– Product differentiation– Capital requirements– Switching costs– Access to distribution channels– Government policy– Barriers to entry



• Potential development of substitute products

– Tea for coffee– Plastic vs. glass– Fountain pens for ballpoint pens– Computers replaced typewriters



• Bargaining power of consumers• When consumers affect an industry through their

ability to force down prices,, bargain for more services or higher quality, play competitors against each other

• Powerful if consumers purchases large portion of output - alternative suppliers are plentiful

• Rival firms may offer extended warranties or special services


Competitive Analysis• Bargaining power of suppliers

– Powerful if:• Supplier industry is dominated by a few companies

but sells to many

• Product or service is unique or it has built up switching costs

• Substitutes are not readily available

• Purchasing industry buys only a small portion of the supplier group goods and are thus unimportant to the supplier.



• 14 Key Internal Forces– Management - Marketing– Manufacturing - R & D– Prod. Ops. - Purchasing– Distribution - Fin/Acctg– Packaging - Promotion– Emp/Mgr relations - HR Management– Vendor Relations - I.S.


Types of Strategies

• Business strategy is sometimes termed as Competitive Strategy

– Integration Strategies– Intensive Strategies– Diversification Strategies– Defensive Strategies


Types of Strategies

• Business Strategy should include:– The product-market in which the business is to

compete– The level of investment– The sustainable competitive advantage– The distinctive competencies or assets relied on– The objectives to guide strategic decision

making


Types of Strategies

• Integration Strategies

– Forward Integration• Strategies dealing w/distributors or retailers

– Backward Integration• Strategies dealing with suppliers

– Horizontal Integration• Strategies dealing with competitors


Types of Strategies

• Intensive Strategies

– Market Penetration• Existing markets, existing products/services

– Market Development• Existing product/services, new geographical area

– Product Development• Improving or modifying existing products/services


Types of Strategies

• Diversification Strategies– Concentric Diversification

• Adding new but related products/services

– Horizontal Diversification• Adding new unrelated products/services, existing

customers

– Conglomerate Diversification• Adding new unrelated products/services


Types of Strategies

• Defensive Strategies– Joint Venture

• Form temporary partnership or consortium

– Retrenchment• Regroups with cost and asset reductions

– Divestiture• Selling a division or part of the organization

– Liquidation• Selling all the company’s assets


Types of Strategies

• Other strategies:– Combination– Mergers– Acquisitions– Takeover or hostile takeover– Leveraged Buyouts (LBO’s)– Regulation & other Political Activity– Executive Recruitment


Types of Strategies

• Porter’s Generic Strategies Defined– Cost Leadership

• A strategy aimed at producing standardized products at low per-unit cost for cunsumers who are price-sensitive.

– Differentiation• A strategy aimed at producing products and services

considered unique industrywide and directed at consumers who are relatively price insensitive.


Types of Strategies

• Porter’s Generic Strategies (cont.)

– Focus (Niche Market)

• A strategy aimed at producing products and services that fulfill the needs of small groups and customers.


Types of Strategies

• Other Porter Strategies:– Value Chain

• Total revenues minus total costs yields value. To be profitable, total revenues must exceed total costs. A firm must try to understand the competitor’s value chain

– Competitive Advantage of Nations• Various nations differ in what they have to offer

businesses. I.e. cheap labor, natural resources, etc.


Types of Strategies

• Bottom Line:

– Do things faster, better, cheaper than the competition

Because Norm asked1 A Few Business Basics IT-390 Since Norm asked.

Documents

entry slide

act slide

strategy evaluation

power of suppliers slide

business survival slide

companys assets slide

strategic management

strategic formulation