Unit 3 - Strategy

8/13/2019 Unit 3 - Strategy

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Introduction toBusinessConceptsUnit 3: Strategy

Prepared by: Lecturer,Ouch Phanhavisoth


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Strategy

1. What is strategy?

Strategy is the direction and scope of anorganization over the long-term:

- To achieves advantage for the

organization through its configuration of

resources within a challenging environment

- To meet the needs of markets

- To fulfill stakeholder expectations


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Vision, Strategy, Planning and

Tactics

Vision:

- What you want the organization tobe; your dream.

- A vision must be sufficiently clearand concise that everyone in theorganization understands it and can buyinto it with passion.


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(Cont)

Strategy

- What you are going to do toachieve your vision

- Your strategy is one or more plansthat you will use to achieve your vision.


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(Cont)

Planning

- Is the process of thinking about andorganizing the activities required to achievea desired goal.

- Planning is the conscious, systematicprocess of making decisions about goals

and activities that an individual, group,work unit, or organization will pursue in thefuture.


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(Cont)

Tactics

- How you will achieve your strategyand when

- Your tactics are the specific actions,sequences of actions, and schedules youwill use to fulfill your strategy.


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The basic planning process


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(Cont)Step 1: Situational AnalysisExample: Clothes shop

- What kind of clothes should I sell?- Where can I establish my business?- who will buy my clothes?

Step 2: Alternative Goals and Plans

- I will sell adult clothes or kid clothes?- I will go and get the clothes in Thailand orChina?

- How can I achieve my goals?


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(Cont)

Step 3: Goal and Plan Evaluation

- If I sell adult clothes, will there bebuyers or if I sell kid clothes, will there becustomers according to my situation?

- If I go to gather the clothes inThailand or China, what will be the cost and

quality from those two countries?

- If I face any risks, how will I solve it?


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(Cont)

Step 4: Goal and Plan Selection

- I will sell adult clothes

- I will go to China

- I will ask my father for help if I faceany risks

Step 5: ImplementationThe owner has selected the goals and

plans, he/she must implement the plansdesigned to achieve the goals.


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(Cont)

Step 6: Monitor and Control

- Income statement

- Lost and profit account

- Should I continue or dis-continue?

- Should I keep my business the same

or update it or completely change mybusiness?


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Strategic Management

Process

Step 1:Establishment of Mission, Vision, andStrategic Goals

Step 2:Analysis of ExternalEnvironment/PESTLE Analysis

Step 3:Analysis of Internal Environment

Step 4:SWOT Analysis

Step 5:Strategy Implementation

Step 6:Strategic Control


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Step 1: Establishment ofMission, Vision, and Strategic

Goals


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Step 2: Analysis of External

Environment/PESTLE Analysis

describes a framework of macro-environmentalfactors used in the environmentalscanning component of strategic management.

Theyre included:

1.Political: factors are how and to what degreea government intervenes in the economy.

2.Economic:factors include economicgrowth, interest rates, exchange rates andthe inflation rate.

3.Social:factors include the cultural aspects andinclude health consciousness, population growthrate, age distribution, career attitudes and emphasison safety.


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(Cont)

4. Technological:factors include technological

aspects such as R&D activity, automation,

technology incentives and the rateof technological change.

5. Environmental:factors include ecological

and environmental aspects such as weather,

climate, and climate change.

6. Legal:factors include discrimination

law, consumer law, antitrust law, employment

law, and health and safety law.


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Step 3: Analysis of Internal

Environment

The internal business environment hasa direct impact on the business such as theCompany Structure, Culture, Resources,Financial Analysis, Marketing Research, HRMand Competencies.


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1. Company Structure


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2. Culture

The culture of internal businessenvironment is a collection of beliefs,values and assumptions shared bymembers of an organization, which isoften taken for granted.


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3. Resource

Company Resources are Profitability, sales,product quality brand associations, existingoverall brand, relative cost of this newproduct, employee capability.


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4. Financial Analysis

Examines financial strengths andweaknesses through financial statementssuch as a balance sheet and an incomestatement or profit and lost account.


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5. Marketing Research While it applies to a wide range of situations, marketing research gives

decision-makers the information they need to find solutions to businessproblems, such as the following:

1. How satisfied are customers with your product and service offering?

2. How will customers react to a decision to change a price or product?

3. What are service representatives hearing from customers?

4. What responses to competition will bring you success in a givenmarket?

Simply put, the solution to most business problems canbe found through marketing research.


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6. Human Resource

Management

Examines strengths and weakness of all

levels of management and employees andfocuses on key human resources activities,including recruitment, Selection,Placement, Training and development,

relationship, and quality of work.


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7.Competencies

The next last of internal businessenvironment is Identifying resources and

competencies that your company owns. Itcan be tangible (i.e. financial), intangible(i.e. reputation) or human (i.e. skills &knowledge).


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Step 4: SWOT Analysis

SWOT analysis(alternately SWOT Matrix) is

a structured planning method used toevaluate the Strengths, Weaknesses,

Opportunities, and Threats involved in aproject or in a business venture.


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Step 6: Strategic Control

The final component of the strategic

management process is strategic control. AStrategic Control System is designed tosupport managers in evaluating theorganizations progress with its strategy and,

when discrepancies exist, taking correctiveaction


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Five Forces Model

Five forces interact with one another to

determine the setting in which companies

compete and, hence, the attractiveness ofthe industry:

1.Rivalry among companies in the

industry

2.Bargaining power of suppliers

3.Bargaining power of buyers

4.Threat of new entrants

5.Threat of substitute products or services


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(Cont)


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Rivalry among existing firms

Strongest of the five forces

Industry is more attractive when:

1. Number of competitors is small orlow

2. Competitors are not similar in size orcapacity

3. Industry is growing fast

4. Opportunity to sell a differentiatedProduce or service exists


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Bargaining Power of Suppliers

The greater the leverage of suppliers, theless attractive the industry.

Industry is more attractive when:

1. Many suppliers sell a commodityproduct

2. Switching costs are available

3. Items account for a small portion ofthe cost of finished products


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Bargaining power of buyers Buyers influence is high when number of

customers is small and cost of switching toa competitors product is high or a lot.

Industry is more attractive when:1. Customers switching costs are low or a few2. Number of buyers is large

3. Customers want differentiated products

4. Customers find it difficult to collectinformation for comparing suppliers

5. Items account for a small portion ofcustomers finished products


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Threat of New Entrants The larger the pool of potential new entrants,

the less attractive an industry is.

Industry is more attractive to new entrantswhen:

1. Advantages of economies of scale areabsent.

2. Capital requirements to enter are high

3. Buyers are loyal to existing brands4. Governments business requirements arerestricted to the entrance of new companies


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Unit 3 - Strategy

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