Ch2 The Strategi The Strategi Managemen Managemen Proces Proces Chapter 3 Internal Environment Chapter 2 External Environment Strategic Intent Strategic Mission Strategy Formulation Strategy Implementation Chapter 4 Business-Level Strategy Chapter 5 Competitive Dynamics Chapter 6 Corporate-Level Strategy Chapter 8 International Strategy Chapter 9 Cooperative Strategies Chapter 7 Acquisitions & Restructuring Chapter 10 Corporate Governance Chapter 11 Structure & Control Chapter 12 Strategic Leadership Chapter 13 Entrepreneurship & Innovation Strategic Inputs Feedback Strategic Outcomes Strategic Strategic Actions Actions Strategic Competitiveness Above Average Returns
Strategic Management Process
Nov 18, 2014
strategic management
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Ch2-1
The StrategicThe StrategicManagementManagement
ProcessProcess
The StrategicThe StrategicManagementManagement
ProcessProcessChapter 3Chapter 3InternalInternal
EnvironmentEnvironment
Chapter 2Chapter 2ExternalExternal
EnvironmentEnvironmentStrategic IntentStrategic Intent
Strategic MissionStrategic Mission
Strategy FormulationStrategy Formulation Strategy ImplementationStrategy Implementation
Chapter 4Chapter 4Business-LevelBusiness-Level
StrategyStrategy
Chapter 5Chapter 5CompetitiveCompetitiveDynamicsDynamics
Chapter 6Chapter 6Corporate-LevelCorporate-Level
StrategyStrategy
Chapter 8Chapter 8InternationalInternational
StrategyStrategy
Chapter 9Chapter 9CooperativeCooperative
StrategiesStrategies
Chapter 7Chapter 7Acquisitions &Acquisitions &RestructuringRestructuring
Chapter 10Chapter 10CorporateCorporate
GovernanceGovernance
Chapter 11Chapter 11StructureStructure& Control& Control
Chapter 12Chapter 12StrategicStrategic
LeadershipLeadership
Chapter 13Chapter 13Entrepreneurship & InnovationEntrepreneurship & Innovation
Str
ateg
icIn
puts
Feedback
Str
ateg
icO
utc
omes
Str
ateg
icS
trat
egic
Act
ion
sA
ctio
ns
StrategicStrategicCompetitivenessCompetitivenessAbove AverageAbove Average
ReturnsReturns
Ch2-2
Political/Legal
Political/Legal
EconomicEconomic
TechnologicalTechnological
GlobalGlobal
DemographicDemographicSocioculturalSociocultural
CompetitiveCompetitiveEnvironmentEnvironment
Industry Environment
Industry Environment
Components of the General EnvironmentComponents of the General Environment
Ch2-3
Components of the General EnvironmentComponents of the General Environment
Ch2-4
External Environmental AnalysisExternal Environmental Analysis
The external environmental analysis process should be The external environmental analysis process should be conducted on a continuous basis. This process includes conducted on a continuous basis. This process includes four activities:four activities:
ScanningScanning
MonitoringMonitoring
ForecastingForecasting
AssessingAssessing
Identifying early signals of environmental Identifying early signals of environmental changes and trendschanges and trends
Detecting meaning through ongoing observations Detecting meaning through ongoing observations of environmental changes and trendsof environmental changes and trends
Developing projections of anticipated outcomes Developing projections of anticipated outcomes based on monitored changes and trendsbased on monitored changes and trends
Determining the timing and importance of Determining the timing and importance of environmental changes and trends for firms' environmental changes and trends for firms' strategies and their managementstrategies and their management
Ch2-5
Top 10 U.S. States MovingTop 10 U.S. States MovingToward Digital EconomyToward Digital Economy
States in the top 10 of those that are trying to transform themselves to the realities and needs of a digital economy may experience an influx of high-tech companies and skilled workers as well as increases in tax revenues
External Environmental AnalysisExternal Environmental Analysis
Ch2-6
Threat of New
Entrants
Threat of New
Entrants
Threat of New
Entrants
Threat of New
Entrants
Porter’s Five Forces Model of CompetitionPorter’s Five Forces Model of Competition
Ch2-7
Threat of New EntrantsThreat of New Entrants
Barriers to Entry
Barriers to Entry
Expected Retaliation(revenge)Expected Retaliation(revenge)
Government PolicyGovernment Policy
Economies of ScaleEconomies of Scale
Product DifferentiationProduct Differentiation
Capital RequirementsCapital Requirements
Switching CostsSwitching Costs
Access to Distribution ChannelsAccess to Distribution Channels
Cost Disadvantages Independent Cost Disadvantages Independent of Scaleof Scale
Ch2-8
Bargaining Power of Suppliers
Bargaining Power of Suppliers
Threat of New
Entrants
Threat of New
Entrants
Threat of New
Entrants
Porter’s Five Forces Model of CompetitionPorter’s Five Forces Model of Competition
Ch2-9
Bargaining Power of SuppliersBargaining Power of Suppliers
Suppliers exert power in the industry by:Suppliers exert power in the industry by:
* Threatening to raise* Threatening to raiseprices or to reduce qualityprices or to reduce quality
Powerful suppliers can squeeze industry profitability if firms are unable to recover cost increases
Powerful suppliers can squeeze industry profitability if firms are unable to recover cost increases
Suppliers are likely to be powerful if:Suppliers are likely to be powerful if:
Supplier industry is dominated by a Supplier industry is dominated by a few firmsfew firms
Suppliers’ products have few substitutesSuppliers’ products have few substitutes
Buyer is not an important customer to Buyer is not an important customer to suppliersupplier
Suppliers’ product is an important Suppliers’ product is an important input to buyers’ productinput to buyers’ product
Suppliers’ products are differentiatedSuppliers’ products are differentiated
Suppliers’ products have high Suppliers’ products have high switching costsswitching costs
Supplier poses credible threat of Supplier poses credible threat of forward integrationforward integration
Ch2-10
Bargaining Power of Buyers
Bargaining Power of Buyers
Threat of New
Entrants
Threat of New
Entrants
Threat of New
Entrants
Bargaining Power of Suppliers
Bargaining Power of Suppliers
Porter’s Five Forces Model of CompetitionPorter’s Five Forces Model of Competition
Ch2-11
Bargaining Power of BuyersBargaining Power of Buyers
Buyers compete with the supplying
industry by:
Buyers compete with the supplying
industry by:
* Bargaining down prices* Bargaining down prices
* Forcing higher quality* Forcing higher quality
* Playing firms off of* Playing firms off ofeach othereach other
Buyer groups are likely to be powerful if:Buyer groups are likely to be powerful if:
Buyers are concentrated or purchases Buyers are concentrated or purchases are large relative to seller’s salesare large relative to seller’s sales
Products are undifferentiatedProducts are undifferentiated
Buyers face few switching costsBuyers face few switching costs
Buyers’ industry earns low profitsBuyers’ industry earns low profits
Buyer presents a credible threat of Buyer presents a credible threat of backward integrationbackward integrationProduct unimportant to qualityProduct unimportant to quality
Buyer has full informationBuyer has full information
Ch2-12
Threat of Substitute Products
Threat of Substitute Products
Threat of New
Entrants
Threat of New
Entrants
Threat of New
Entrants
Bargaining Power of Buyers
Bargaining Power of Buyers
Bargaining Power of Suppliers
Bargaining Power of Suppliers
Porter’s Five Forces Model of CompetitionPorter’s Five Forces Model of Competition
Ch2-13
Threat of Substitute ProductsThreat of Substitute Products
Products with similar function limit the prices firms can charge
Products with similar function limit the prices firms can charge
Keys to evaluate substitute products:Keys to evaluate substitute products:
Products with improving Products with improving price/performance tradeoffs price/performance tradeoffs relative to present industry relative to present industry productsproducts
Example:Example:
Electronic security systems in Electronic security systems in place of security guardsplace of security guards
Fax machines in place of Fax machines in place of overnight mail deliveryovernight mail delivery
Ch2-14
Threat of Substitute Products
Threat of Substitute Products
Threat of New
Entrants
Threat of New
Entrants
Threat of New
Entrants
Rivalry Among Competing Firms
in Industry
Rivalry Among Competing Firms
in Industry
Bargaining Power of Buyers
Bargaining Power of Buyers
Bargaining Power of Suppliers
Bargaining Power of Suppliers
Porter’s Five Forces Model of CompetitionPorter’s Five Forces Model of Competition
Ch2-15
Rivalry Among Existing CompetitorsRivalry Among Existing Competitors
Intense rivalry often plays out in the following ways:Intense rivalry often plays out in the following ways:
Jockeying for strategic positionJockeying for strategic position
Using price competitionUsing price competition
Staging advertising battlesStaging advertising battles
Making new product introductionsMaking new product introductions
Increasing consumer warranties or serviceIncreasing consumer warranties or service
Occurs when a firm is pressured or sees an opportunityOccurs when a firm is pressured or sees an opportunity
Price competition often leaves the entire industry worse offPrice competition often leaves the entire industry worse off
Advertising battles may increase total industry demand, but Advertising battles may increase total industry demand, but may be costly to smaller competitorsmay be costly to smaller competitors
Ch2-16
CutthroatCutthroat competitioncompetition is more likely to occur when: is more likely to occur when:
Rivalry Among Existing CompetitorsRivalry Among Existing Competitors
Numerous or equally balanced competitorsNumerous or equally balanced competitors
Slow growth industrySlow growth industry
High fixed costsHigh fixed costs
Lack of differentiation or switching costsLack of differentiation or switching costs
High storage costsHigh storage costs
Capacity added in large incrementsCapacity added in large increments
High strategic stakesHigh strategic stakes
High exit barriersHigh exit barriers
Diverse competitorsDiverse competitors
Ch2-17
High exit barriersHigh exit barriers are economic, strategic and are economic, strategic and emotional factors which cause companies to remain emotional factors which cause companies to remain in an industry even when future profitability is in an industry even when future profitability is questionable.questionable.
Specialized assetsSpecialized assets
Fixed cost of exit (e.g., labor agreements)Fixed cost of exit (e.g., labor agreements)
Emotional barriersEmotional barriers
Government and social restrictionsGovernment and social restrictions
Strategic interrelationshipsStrategic interrelationships
Rivalry Among Existing CompetitorsRivalry Among Existing Competitors
Ch2-18
Effects of Entry Barriers and Exit Barriers on Industry Profits
Effects of Entry Barriers and Exit Barriers on Industry Profits
Entry Barriers
Exit Barriers
High
Low
HighLow
Ch2-19
Low, Stable Returns
Low, Stable Returns
Entry Barriers
Exit Barriers
High
Low
HighLow
Effects of Entry Barriers and Exit Barriers on Industry Profits
Effects of Entry Barriers and Exit Barriers on Industry Profits
Ch2-20
High, Stable Returns
High, Stable Returns
Entry Barriers
Exit Barriers
High
Low
HighLow
Low, Stable Returns
Low, Stable Returns
Effects of Entry Barriers and Exit Barriers on Industry Profits
Effects of Entry Barriers and Exit Barriers on Industry Profits
Ch2-21
Low, Risky Returns
Low, Risky Returns
Entry Barriers
Exit Barriers
High
Low
HighLow
Low, Stable Returns
Low, Stable Returns
High, Stable Returns
High, Stable Returns
Effects of Entry Barriers and Exit Barriers on Industry Profits
Effects of Entry Barriers and Exit Barriers on Industry Profits
Ch2-22
High, Risky Returns
High, Risky Returns
Entry Barriers
Exit Barriers
High
Low
HighLow
Low, Stable Returns
Low, Stable Returns
High, Stable Returns
High, Stable Returns
Low, Risky Returns
Low, Risky Returns
Effects of Entry Barriers and Exit Barriers on Industry Profits
Effects of Entry Barriers and Exit Barriers on Industry Profits
Ch2-23
Competitor AnalysisCompetitor Analysis
The follow-up to Industry Analysis is The follow-up to Industry Analysis is effective analysis of a firm’s effective analysis of a firm’s CompetitorsCompetitors
CompetitiveCompetitiveEnvironmentEnvironment
Industry Environment
Industry Environment
Ch2-24
Competitor AnalysisCompetitor Analysis
AssumptionsAssumptionsWhat assumptions do our competitors hold about the future of industry and themselves?
Current StrategyCurrent StrategyDoes our current strategy support changes in the competitive environment?
Future ObjectivesFuture ObjectivesHow do our goals compare to our competitors’ goals?
CapabilitiesCapabilitiesHow do our capabilities compare to our competitors?
ResponseResponseWhat will our competitors do in the future?
What will our competitors do in the future?
Where do we have a competitive advantage?
Where do we have a competitive advantage?
How will this change our relationship with our competition?
How will this change our relationship with our competition?
Ch2-25
Future ObjectivesFuture ObjectivesHow do our goals compare to our competitors’ goals?
How do our goals compare to our competitors’ goals?Where will emphasis be placed in the future?Where will emphasis be placed in the future?
What is the attitude toward risk?What is the attitude toward risk?
What Drives the competitor?
Competitor AnalysisCompetitor Analysis
Ch2-26
What is the competitor doing?
What can the competitor do?
Future ObjectivesFuture ObjectivesHow do our goals compare to our competitors’ goals?
How do our goals compare to our competitors’ goals?Where will emphasis be placed in the future?Where will emphasis be placed in the future?
What is the attitude toward risk?What is the attitude toward risk?
Current StrategyCurrent StrategyHow are we currently competing?How are we currently competing?
Does this strategy support changes in the competitive structure?
Does this strategy support changes in the competitive structure?
Competitor AnalysisCompetitor Analysis
Ch2-27
What does the competitor believe about itself and the industry?
Future ObjectivesFuture ObjectivesHow do our goals compare to our competitors’ goals?
How do our goals compare to our competitors’ goals?Where will emphasis be placed in the future?Where will emphasis be placed in the future?
What is the attitude toward risk?What is the attitude toward risk?
Current StrategyCurrent StrategyHow are we currently competing?How are we currently competing?
Does this strategy support changes in the competition structure?
Does this strategy support changes in the competition structure?
Do we assume the future will be volatile?Do we assume the future will be volatile?
Are we assuming stable competitive conditions?Are we assuming stable competitive conditions?
What assumptions do our competitors hold about the industry and themselves?
What assumptions do our competitors hold about the industry and themselves?
AssumptionsAssumptions
Competitor AnalysisCompetitor Analysis
Ch2-28
What are the competitor’s capabilities?
Future ObjectivesFuture ObjectivesHow do our goals compare to our competitors’ goals?
How do our goals compare to our competitors’ goals?Where will emphasis be placed in the future?Where will emphasis be placed in the future?
What is the attitude toward risk?What is the attitude toward risk?
Current StrategyCurrent StrategyHow are we currently competing?How are we currently competing?
Does this strategy support changes in the competition structure?
Does this strategy support changes in the competition structure?
Do we assume the future will be volatile?Do we assume the future will be volatile?
Are we operating under a status quo?Are we operating under a status quo?
What assumptions do our competitors hold about the industry and themselves?
What assumptions do our competitors hold about the industry and themselves?
AssumptionsAssumptions
What are my competitors’ strengths and weaknesses?What are my competitors’ strengths and weaknesses?
How do our capabilities compare to our competitors?
How do our capabilities compare to our competitors?
CapabilitiesCapabilities
Competitor AnalysisCompetitor Analysis
Ch2-29
Future ObjectivesFuture ObjectivesHow do our goals compare to our competitors’ goals?
How do our goals compare to our competitors’ goals?Where will emphasis be placed in the future?Where will emphasis be placed in the future?
What is the attitude toward risk?What is the attitude toward risk?
Current StrategyCurrent StrategyHow are we currently competing?How are we currently competing?
Does this strategy support changes in the competition structure?
Does this strategy support changes in the competition structure?
Do we assume the future will be volatile?Do we assume the future will be volatile?
Are we operating under a status quo?Are we operating under a status quo?
What assumptions do our competitors hold about the industry and themselves?
What assumptions do our competitors hold about the industry and themselves?
AssumptionsAssumptions
ResponseResponseWhat will our competitors do in the future?What will our competitors do in the future?
Where do we have a competitive advantage?Where do we have a competitive advantage?
How will this change our relationship with our competition?
How will this change our relationship with our competition?
CapabilitiesCapabilities
What are my competitors’ strengths and weaknesses?What are my competitors’ strengths and weaknesses?
How do our capabilities compare to our competitors?
How do our capabilities compare to our competitors?
Competitor AnalysisCompetitor Analysis
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