Post on 07-Apr-2018
8/4/2019 bh_ppt01in 2ed
1/31
What is Strategy
and the StrategicManagement
Process?
1-1Copyright 2008 Pearson Prentice Hall. All rights reserved.
Chapter 1
8/4/2019 bh_ppt01in 2ed
2/31
The Tools of Strategic Analysis
1-2Copyright 2008 Pearson Prentice Hall. All rights reserved
1984 Profits: $242 Million
Theme Park Operations: 77 percent of profits
Consumer Products: 22 percent of profits
Filmed Entertainment: 1 percent of profits
Walt Disney Company
8/4/2019 bh_ppt01in 2ed
3/31
The Tools of Strategic Analysis
1-3Copyright 2008 Pearson Prentice Hall. All rights reserved
Hired Michael Eisner - 1984
1. Increased admission prices at theme parks1984 - $186 m 1989 - $787 m
2. Focused on movie studios (character development)1984 - $2.42 m 1994 - $845 m
3. Diversified into television (ABC), hotels, retail stores,
sport team, cruise line, publishing, consumerproducts, licensing, etc. (Huey & McGowan, 1995)
Walt Disney Company
Market Cap: 1984 = $2 billion 1994 = $28 billion
8/4/2019 bh_ppt01in 2ed
4/31
The Tools of Strategic Analysis
1-4Copyright 2008 Pearson Prentice Hall. All rights reserved
Definition of Strategy
Strategy: A firms theory about how to gaincompetitive advantage
Eisners theory may have been:
People will pay a premium price for extraordinary
entertainment. We have the necessary resources tocreate extraordinary entertainment. Therefore, letsredeploy our resources in a different way and offersomething extraordinary to people.
8/4/2019 bh_ppt01in 2ed
5/31
The Tools of Strategic Analysis
1-5Copyright 2008 Pearson Prentice Hall. All rights reserved
Mission Objectives
ExternalAnalysis
InternalAnalysis
StrategicChoice
StrategyImplementation
CompetitiveAdvantage
The Strategic Management Process
8/4/2019 bh_ppt01in 2ed
6/31
The Tools of Strategic Analysis
1-6Copyright 2008 Pearson Prentice Hall. All rights reserved
The Strategic Management Process
Objectives
ExternalAnalysis
InternalAnalysis
Strategic
Choice
Strategy
Implementation
Competitive
Advantage
Mission
8/4/2019 bh_ppt01in 2ed
7/31
The Tools of Strategic Analysis
1-7Copyright 2008 Pearson Prentice Hall. All rights reserved
The Strategic Management Process
Objectives:
specific, measurable targets
the things a firm needs to do to achieveits mission
should influence other elements in the strategicmanagement process
Example: Steelcons mission & objectives
8/4/2019 bh_ppt01in 2ed
8/31
The Tools of Strategic Analysis
1-8Copyright 2008 Pearson Prentice Hall. All rights reserved
The Strategic Management Process
External and Internal Analysis
External Analysis
Systematic Examination
of the Environment
Internal Analysis
interest rates
demographics
social trends
technology
human resources
(knowledge) manufacturing
abilities
technology
8/4/2019 bh_ppt01in 2ed
9/31
The Tools of Strategic Analysis
1-9Copyright 2008 Pearson Prentice Hall. All rights reserved
The Strategic Management Process
Strategic Choice
External
Analysis
Internal
AnalysisStrategicChoice
Business
Level
Corporate
Level
positioninga business
whichbusinesses?
Example:TATA SKY OR Ramdev MasalaCOLGATE & PALMOLIVE INDIA LTD.
8/4/2019 bh_ppt01in 2ed
10/31
The Tools of Strategic Analysis
1-10Copyright 2008 Pearson Prentice Hall. All rights reserved
The Strategic Management Process
Strategy Implementation
howstrategies are carried out
whowill do what
organizational structure and control
who reports to whom
how does the firm hire, promote, pay, etc.
8/4/2019 bh_ppt01in 2ed
11/31
The Tools of Strategic Analysis
1-11Copyright 2008 Pearson Prentice Hall. All rights reserved
A Strategy Is Only As Good As Its Implementation
Strategy Implementation
The Strategic Management Process
every strategic choice has strategy implementationimplications
strategy implementation is just as important asstrategy formulation
Example: Gen. Lee at Gettysburg
h l f l
8/4/2019 bh_ppt01in 2ed
12/31
The Tools of Strategic Analysis
1-12Copyright 2008 Pearson Prentice Hall. All rights reserved
The Strategic Management Process
Competitive Advantage
Definition: the ability to create more economic valuethan competitors
all other elements of the strategic managementprocess are aimed at achieving competitive advantage
Mission Objectives
ExternalAnalysis
Internal
Analysis
StrategicChoice
StrategyImplementation
CompetitiveAdvantage
Th T l f S i A l i
8/4/2019 bh_ppt01in 2ed
13/31
The Tools of Strategic Analysis
1-13Copyright 2008 Pearson Prentice Hall. All rights reserved
Competitive Advantage
The Ability to Create More EconomicValue Than Competitors
there must be something different about a firmsoffering vis--vis competitors offerings
if all firms strategies were the same, no firmwould have a competitive advantage
competitive advantage is the result of doingsomething different and/or better than competitors
Th T l f St t i A l i
8/4/2019 bh_ppt01in 2ed
14/31
The Tools of Strategic Analysis
1-14Copyright 2008 Pearson Prentice Hall. All rights reserved
Competitive Advantage
Two Types of Difference
1) Preference for the firms output
2) Cost advantage vis--vis competitors
people choose the firms output over others
people are willing to pay a premium
lower costs of production/distribution
Example: IIPM, Kingfisher Airlines, Tata Sky and
BigCinema and CCD
Example: Indigo & Spice Jet Airlines & Maruti etc.
Th T l f St t i A l i
8/4/2019 bh_ppt01in 2ed
15/31
The Tools of Strategic Analysis
1-15Copyright 2008 Pearson Prentice Hall. All rights reserved
Competitive Advantage
External
Analysis
InternalAnalysis
StrategicChoice
StrategyImplementation
CompetitiveAdvantage
identify and exploit differences that may leadto competitive advantage
Example: Apples iPod
The Strategic Management Process
Th T l f St t i A l i
8/4/2019 bh_ppt01in 2ed
16/31
The Tools of Strategic Analysis
1-16Copyright 2008 Pearson Prentice Hall. All rights reserved
Q
P
D
MR
D
ATC
MC
Q
P
(D=MR=Price)
Imperfect Competition Perfect Competition
Competitive Advantage
ATC
MC
Competitive Advantage
Economic Models
Th T ls f St t i An l sis
8/4/2019 bh_ppt01in 2ed
17/31
The Tools of Strategic Analysis
1-17Copyright 2008 Pearson Prentice Hall. All rights reserved
Competitive Advantage
Temporary & Sustainable
competition limits the duration of competitiveadvantage in most cases
profits attract competition
competitive advantage typically results in high profits
Therefore,
most competitive advantage is temporary
competitors imitate the advantage or offer
something better
The Tools of Strategic Analysis
8/4/2019 bh_ppt01in 2ed
18/31
The Tools of Strategic Analysis
1-18Copyright 2008 Pearson Prentice Hall. All rights reserved
Competitive Advantage
Temporary & Sustainable
Some competitive advantages are sustainable if:
competitors are unable to imitate the sourceof advantage
no one conceives of a better offering
Of course,
in time, even sustainable competitive advantagemay be lost
The Tools of Strategic Analysis
8/4/2019 bh_ppt01in 2ed
19/31
The Tools of Strategic Analysis
1-19Copyright 2008 Pearson Prentice Hall. All rights reserved
Competitive Advantage
Competitive Parity
the firms offerings are average
people do not have a preference for the firms offering
the firm does not have a cost advantage over others
some things that may lead to competitive parity maystill be critical to success (e.g., telephones)
The Tools of Strategic Analysis
8/4/2019 bh_ppt01in 2ed
20/31
The Tools of Strategic Analysis
1-20Copyright 2008 Pearson Prentice Hall. All rights reserved
Competitive Advantage
Competitive Disadvantage
people may have an aversion to the firms offering
the firm may have a cost disadvantage
a firm may have outdated technology/equipment
a firm may have a negative reputation
Example: Wal-Marts Labor & Location Policies, DishTV, Resell Value of Bajaj, TVS,AIWA etc
The Tools of Strategic Analysis
8/4/2019 bh_ppt01in 2ed
21/31
The Tools of Strategic Analysis
1-21Copyright 2008 Pearson Prentice Hall. All rights reserved
Competitive Advantage
Measuring Competitive Advantage
Superior Economic Performance Is Viewed as
Evidence of Competitive Advantage
it is rather easy to see the evidence ofcompetitive advantage
measuring the source of the advantage per seis typically impossible
its difficult to measure technology
The Tools of Strategic Analysis
8/4/2019 bh_ppt01in 2ed
22/31
The Tools of Strategic Analysis
1-22Copyright 2008 Pearson Prentice Hall. All rights reserved
Two Classes of Measures:
1) Accounting Measures
2) Economic Measures
Competitive Advantage
Measuring Competitive Advantage
ROA, ROS, ROE, etc. that exceed industryaverages
earning a return in excess of the costof capital
The Tools of Strategic Analysis
8/4/2019 bh_ppt01in 2ed
23/31
The Tools of Strategic Analysis
1-23Copyright 2008 Pearson Prentice Hall. All rights reserved
Competitive Advantage
Competitive Advantage
Disadvantage
Parity
Advantage
Below Normal
Normal
Above Normal
Economic Returns
exceeding expectations
meeting expectations
failing expectations
The Tools of Strategic Analysis
8/4/2019 bh_ppt01in 2ed
24/31
The Tools of Strategic Analysis
1-24Copyright 2008 Pearson Prentice Hall. All rights reserved
Competitive Advantage &
The Strategic Management ProcessEmergent vs. Intended Strategies
the strategic management process leads managerstointendedstrategies
However,
conditions often change or new information
becomes available
managers respond and adopt emergentstrategies
Example: Honda Motorcycles
The Tools of Strategic Analysis
8/4/2019 bh_ppt01in 2ed
25/31
The Tools of Strategic Analysis
1-25Copyright 2008 Pearson Prentice Hall. All rights reserved
The Strategic Management Process
in the International Setting
Consistent Logic
important questions remain the same, but theanswers may be different
a firm would still ask about social trends, butsocial trends may be moving in different
directions in different markets
culture and infrastructure differences mustbe taken into account throughout the strategicmanagement process
The Tools of Strategic Analysis
8/4/2019 bh_ppt01in 2ed
26/31
The Tools of Strategic Analysis
1-26Copyright 2008 Pearson Prentice Hall. All rights reserved
The Strategic Management Process
in the International Setting
Adopting a Global View
many firms explicitly encourage internationalexperience
managers need to learn to think about strategy
in a global context
observed phenomena have different meaningin different parts of the world
you need to know how the competition seesthe world
The Tools of Strategic Analysis
8/4/2019 bh_ppt01in 2ed
27/31
The Tools of Strategic Analysis
1-27Copyright 2008 Pearson Prentice Hall. All rights reserved
The Strategic Management Process
Summary
Firms could achieve competitive parity and survive
they would face a flat demand curve
their cost structure would be the industry average
they would need to adapt their strategy overtime just to survive
they would fail if they didnt adapt their strategy
The Tools of Strategic Analysis
8/4/2019 bh_ppt01in 2ed
28/31
he ools of Strateg c Analys s
1-28Copyright 2008 Pearson Prentice Hall. All rights reserved
The Strategic Management Process
Summary
This course is not about mere survival, it is aboutthrivingachieving competitive advantage
the strategic management process helps managersachieve competitive advantage
competitive advantage depends on differences
strategy is about discovering and exploitingthese differences
The Tools of Strategic Analysis
8/4/2019 bh_ppt01in 2ed
29/31
f g y
1-29Copyright 2008 Pearson Prentice Hall. All rights reserved
Q
P
D
MR
D
ATC
MC
Q
P
(D=MR=Price)
ATC
MC
The Strategic Management Process
Thriving! Surviving
The Tools of Strategic Analysis
8/4/2019 bh_ppt01in 2ed
30/31
g y
1-30Copyright 2008 Pearson Prentice Hall. All rights reserved
The Strategic Management Process
Applying Strategy to Your Career
a solid understanding of strategy concepts willhelp set you apart from other job candidates
you can use the process to identify andexploit difference between you and others
you can use the process to determine if youwant to stay with a company
The Tools of Strategic Analysis
8/4/2019 bh_ppt01in 2ed
31/31
g y
The Strategic Management Process
& Competitive Advantage
Strategy Matters!
success and failure, between mediocrity and excellence
Strategy is often the difference between:
a great manager and average managers
stumbling through life and moving ahead with purpose