Strategizing
Strategic Management
5.1. Strategic Management in the P-O-L-C Framework
5.2. How Do Strategies Emerge?
5.3. Strategy as Trade-Offs, Discipline, and Focus
5.4. Developing Strategy Through Internal Analysis
5.5. Developing Strategy Through External Analysis
5.6. Formulating Organizational and Personal Strategy With the
Strategy Diamond
What Is Strategic Management?
Strategic management reflects what a firm is doing
to achieve its mission and vision, as seen by its
achievement of specific goals and objectives.
Strategic management is:
•the process by which a firm manages the formulation
and implementation of its strategy.
•the coordinated means by which an organization
achieves its goals and objectives.
•the pattern of resource allocation choices and
organizational arrangements that result from managerial
decision making.
Planning and strategy formulation sometimes
called business planning, or strategic
planning, have much in common, since
formulation helps determine what the firm
should do.
Strategy implementation tells
managers how they should
go about putting the desired
strategy into action.
The P-O-L-C Framework
If mission and vission are the heart and soul of
planning, strategy formulation is the brain
Corporate strategy answers strategy questions related to
• “What business or businesses should we be in?” and
• “How does our business X help us compete in business Y,
and vice versa?”
Corporate and Business Strategy
Corporate strategy looks at an organization as a portfolio of things
Business strategy focuses on how a given business needs to
compete to be effective.
Corporate Strategy
The logic behind corporate strategy
is one of synergy and diversification.
The idea of synergy is that the combination of
certain businesses is stronger than they would
be individually because they either do things
more cheaply or of higher quality as a result of
their coordination under a common owner.
• Synergy • Diversification
Corporate Strategy
Diversification is where an organization
participates in multiple businesses that are
in some way distinct from each other.
The purpose of diversification is to spread
out risk and opportunities over a larger set
of businesses.
• Synergy • Diversification
Corporate Strategy
Diversification
There are three major diversification strategies:
1. concentric diversification, where the new business produces
products that are technically similar to the company’s current
product but that appeal to a new consumer group;
2. horizontal diversification, where the new business produces
products that are totally unrelated to the company’s current
product but that appeal to the same consumer group; and
3. conglomerate diversification, where the new business
produces products that are totally unrelated to the
company’s current product and that appeal to an entirely new
consumer group.
Strategic Inputs
Strategic Inputs
SWOT analysis helps you identify strategic alternatives that
address the following questions:
1. Strengths and Opportunities (SO) - How can you use your
strengths to take advantage of the opportunities?
2. Strengths and Threats (ST) - How can you take advantage of
your strengths to avoid real and potential threats?
3. Weaknesses and Opportunities (WO) - How can you use your
opportunities to overcome the weaknesses you are
experiencing?
4. Weaknesses and Threats (WT) - How can you minimize your
weaknesses and avoid threats?
Internal Analysis Tools
Value chain determines internal areas
of strengths in a company (tbsl)
VRIO helps determine whether those
strength will give the company a
competitive advantage (tbsl)
External Analysis Tools
PESTEL stands for political, economical,
sociocultural, technological, environmental, and
legal environments
Industry analysis maps out relationships that the
organization might have with suppliers, customers,
and competitors
Intended Strategy VS Realized
Strategy
Deliberate Design VS Emergence
Strategy Making combines deliberate design and emergence
Deliberate Design is a top-down process
Emergence is a bottom-up process
Organizations with a relatively stable environment can plan
their strategy in some detail
Organizations with unstable environments cannot plan many
strategic principles; they have to emerge as circumstances
unfold
Strategic Focus
A marketing strategy in which a
company concentrates its resources on
entering or expanding in a narrow
market or industry.
Strategy as Trade-Offs
Overall cost leadership – a firm’s competitive
advantage is based on the bet that it can
develop, manufacture, and distribute goods
more efficiently than its competitors
Differentiation – competitive advantage is based
on superior goods or services
Competitive scope – the breadth of a
company’s target market (either mass or niche
market)
Four Rules to Formulating a
Strategy
1. Provide the best offer in the marketplace
2. Maintain threshold standards on other
dimensions of value
3. Dominate your market by improving the
value year after year
4. Build a well-tuned operating model
dedicated to delivering unmatched value
Strategy as Discipline
Internal Analysis
Core competencies are resources and
capabilities that serve as a source of a firm’s
competitive advantage over rivals
By drawing on internal analysis and
emphasizing core competencies when
formulating strategies, companies learn to
compete primarily on the basis of firm-
specific differences
Resources and Capabilities
Resources cover a spectrum of individual, social, and
organizational phenomena
Tangible resources – financial, organizational,
physical, and technological
Intangible resources – human, innovation, and
reputational
Capabilities are the firm’s capacity to deploy resources
that have been purposely integrated to achieve a
desired end state
Value Chain
VRIO Analysis
To lead to a sustainable competitive advantage, a resource or capability should be
valuable, rare, inimitable (including nonsubstitutable), and organized
External Analysis
The general environment is composed of dimensions that
influence an industry and the firms within it
These dimensions are grouped in PESTEL
Upstream markets are the industries that provide the raw
material or inputs for the focal industry, while
Downstream markets are the industries that consume the
industry outputs
The industry microenvironment consists of stakeholder groups
that a firm has regular dealings with the way these relationships
develop can affect the costs,quality,and overall success of a
busniss
Porter’s Five-Forces Analysis of
Market Structure
Porter’s model attempts to analyze the
attractiveness of an industry by considering
five forces within a market
According to Porter, the likelihood of firms
making profits in a given industry depends on
five factors: (1) barriers to entry and new
entry threats, (2) buyer power, (3) supplier
power, (4) threat from substitutes, and (5)
rivalry
Porter’s Five-Forces Analysis of
Market Structure
The Strategy Diamond
bibliography
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