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Chapter8

StrategicManagementPresentedby:

MayaSonjiMaya.sonji@.auLecture4StrategicmanagementStudyquestions:Whatarethefoundationsofstrategiccompetitiveness?Whatisstrategicmanagement?Whattypesofstrategiesareusedbyorganisations?Howarestrategiesformulated?Whatarethecurrentissuesinstrategyimplementation?WhatisSustainability?SustainabilityTheuseofresourcestoenablesocietytosatisfycurrentneeds,withoutcompromisingtheabilityoffuturegenerationstomeettheirneeds.Sustainabilitycanenhanceproductivityandprofites.WhatisSustainability?The‘quadruplebottomline’approacharguesthatorganisationsshouldfocusonthelong-termmaintenanceandreproductionofenvironmental,economic,socialandculturalsystems.SustainableStrategicCompetitivenessAcompetitiveadvantageallowsanorganisationtodealwithmarketandenvironmentalforcesbetterthanitscompetitors.Theaimforanyorganisationisnotjusttoachievecompetitiveadvantagebuttomakeitsustainableinspiteofcompetitors’attemptstocopyorduplicateasuccessstory.Sustainablecompetitiveadvantageexiststhroughrealisingcostandquality,knowledgeandspeed,creatingamarketstrongholdandprotectingfinancialresources.Majoropportunitiesforcompetitiveadvantagearefoundin:CostandqualityKnowledgeandspeedBarrierstoentryFinancialresources.SustainableStrategicCompetitivenessEnvironmentsandCompetitiveAdvantageMonopolyenvironmentOnlyoneorganisationandnocompetition.Mostaregovernment-ownedorganisations.OligopolyenvironmentAsmallnumberofcompetitorsfeelthemselvestobeconstrainedmorebytheactionsoftheirrivalsthanbythoseoftheircustomers.petitionEnvironmentinwhichthereareatleastseveralplayerswhodirectlycompetewithoneanother,e.g.fast-foodindustry.WhatisOrganisationalStrategy?Organisationalstrategy‘Apatterninastreamoforganisationaldecisions’(HenryMintzberg).StrategicintentFocusesandappliesorganisationalenergiesonaunifyingandcompellinggoal.Strategiesmaychangeasenvironmentalconditionschange.LevelsofstrategyinorganisationsLevelsofStrategyCorporatestrategySetslong-termdirectionforthetotalenterprise.(Inwhatindustriesandmarketsshouldwecompete?)BusinessstrategyIdentifieshowadivisionorstrategicbusinessunitwillcompeteinitssingleunit,productlineorservicedomain.(Howarewegoingtocompeteforcustomersinthisindustry&market?)FunctionalstrategyGuidesactivitieswithinonespecificareaofoperations.(Howcanwebestuseresourcestoimplementourbusinessstrategy?)Strategicbusinessunit(SBU)Amajorbusinessareathatoperateswithsomeautonomy.StrategicManagementStrategicmanagementTheprocessofformulatingandimplementingstrategiestoplishlong-termgoalsandsustaincompetitiveadvantage.Essentiallyinvolves:lookingahead;understandingtheenvironmentandtheorganisation;andpositioningtheorganisationforcompetitiveadvantageinchangingtimes.TheStrategicManagementProcessStrategyformulationProcessofcreatingstrategy.Involvesassessingexistingstrategies,organisationandenvironmenttodevelopnewstrategies/planscapableofdeliveringfuturecompetitiveadvantage.StrategyimplementationProcessofallocatingresourcesandputtingstrategiesintoaction.Oncestrategiesarecreated,mustbeactedontoachievethedesiredresults.TheStrategicManagementProcessPeterDruckerassociatestheformulationprocess(whichistheprocessofcreatingastrategy)

withasetoffive(5)strategicquestions;1-Whatisourmission?2-Whoareourcustomers?3-Whatdoourcustomersconsidervalue?4-Whathavebeenourresults?5-Whatisourplan?Mission,valuesandobjectivesThemissionorpurposeofanorganisationmaybedescribedasitsreasonforexistenceinsociety.MissionstatementIdentifiesthedomaininwhichtheorganisationintendstooperate,includingcustomers,productsand/orservices,andlocation.Shouldcommunicatetheunderlyingphilosophythatwillguideemployees.ExternalStakeholdersandtheMissionStatement

MissionStatements-examplesTobetheworld’sleadingproducersandprovidersofentertainmentandinformationToorganisetheworld’sinformationandmakeituniversallyaccessibleandusefulTobethemostsuccessfulcomputercompanyintheworldatdeliveringthebestcustomerexperienceinmarketsweserveTogivepeopletoshareandmaketheworldmoreopenandconnectedWeareaglobalfamilywitaproudheritagepassionatelycommittedtoprovidingpersonalmobilityforpeoplearoundtheworldMoreexamplescanbefoundinyourtextbookStrategicManagementGoalsMichaelPorterarguesthattheultimategoalforabusinessshouldbesuperiorprofitability!Thiscreatesvalueforshareholdersintheformofabove-averagereturns.AtPepsiCo,thisgoalisstatedas:‘Toincreasethevalueofourshareholder’sinvestment.’Mission,valuesandobjectivesOperatingobjectivesdirectactivitiestowardsspecificperformancesresults.Theymightinclude:1.Profitability2.Marketshare3.Humantalent4.Financialhealth5.Costefficiency6.Productquality7.Innovation8.SocialresponsibilityPorter’sGenericStrategies‘Usingmotorvehicleindustryexamples’StrategyFormulationAdifferentiationstrategyoffersproductsthatareuniqueanddifferentfromthecompetition.(whatisyourUSP:UniqueSellingPoint)?Acostleadershipstrategyseekstooperatewithlowercoststhancompetitors.Afocuseddifferentiationstrategyoffersauniqueproducttoaspecialmarketsegment.Afocusedcostleadershipstrategyseeksthelowestcostsofoperationswithinaspecialmarketsegment.AdaptiveStrategiesTheMilesandSnowadaptivemodel:AProspectorstrategypursuesinnovationandnewopportunitieswithprospectsforgrowth.ADefenderstrategyemphasisesexistingproductsandmarketsharewithoutseekinggrowth.AnAnalyserstrategymaintainsthestabilitywhileexploringselectiveopportunities.AReactorstrategyrespondstocompetitivepressuresinordertosurvive.SWOTAnalysisAnalysisofindustry&environmentHighcompetition&rivalry=UnattractiveindustryGrowthandDiversificationStrategiesGrowthstrategiesinvolveexpansionoftheorganisation’scurrentoperations.Growththroughconcentration

iswithinthesamebusinessarea.Growththroughdiversificationisbyacquisitionoforinvestmentinnewanddifferentbusinessareas.Growththroughverticalintegrationisbyacquiringsuppliers(Backward)ordistributors(Forward).IntegrationStrategiesRestructuringandDivestitureStrategiesLiquidationiswhenoperationsceaseduetothecompletesaleofassets/bankruptcy.Restructuringchangesscaleand/ormixofoperationstoimproveefficiency/performance.Downsizingdecreasesthesizeofoperationswiththeintentionofingmorestreamlined.Divestituresellsoffpartsoforganisationtofocusattentionandresourcesoncorebusinessareas.Whenanorganisationhasperformanceproblems

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