04-Strategic Management

Strategic Management
Lecture Notes for Business and Management

Dr. Fahmy Radhi, MBA
Business Challenges
 Challenges in the Economic Environment
 Challenges in the Competitive Environ-
ment
 Challenges in the Social and Culture Envi-
ronment
 Challenges in the Political-Legal Environ-
ment
 Challenges in the Technological Environ-
ment
Business Strategyy
 Corporate strategy is a way a company creates
value through the configuration and coordina-
tion of its multi-market activities
 The process of setting goals and deciding on
the strategy and tactic for achieving the firm’s
objectives and how to implement them
 The Managerial process of forming a strategic
vision, setting objectives, crafting a strategy,
implementing and executing the strategy, and
evaluating them
Main component of Strategic
Management
Developing a Crafting a Evaluating

Strategy to Implementing
strategic vi- Setting Ob- Performance,
achieve the and executing
sion and jectives Monitoring
objectives the strategy
business mis- new devel-
sion opment, and
initiating
corrective
adjustment
Revise as Revise as Improve/Change Improve/Change

As needed Recycle
needed needed As needed
The Strategy-making Pyramid
Corporate strategy is the overall managerial

game plan for a diversified company; it extends
companywide – an umbrella over all a diversi-
fied company’s business.
Business strategy refers to the managerial

game plan for a single business. It is mirrored
in the pattern of approaches and moves crafted
by management to produce successful perfor-
mance in one specific line of business.
The Strategy-making Pyramid
Functional strategy concerns the managerial

game plan for running a major functional activ-
ity or process within business.
Operating Strategy concern how to manage

frontline organizational units within a business
(plant, sales distribution centers) and how to
perform strategically significant operating tasks
(material purchases, inventory control, mainte-
nance, shipping, advertising campaign)
Corporate Strategic
Company
Vision
Mission
Business
Strategy
Functional
Functional Area
Area
Strategies
Marketing Operations Fin./Acct.

Decisions Decisions Decisions
Setting Goals and Formulating
Strategy
8
Strategy
Mission – broad organizational goal based on
planning premises which justifies an organiza-
tional existence
Goal – objective that a business hopes and plans
to achieve divided into
 Long-term goals – a period of five years or more
 Intermediate goals – a period of one to five years
 Short-term goals - less than one year
9
Vision
 3M: “Be innovative and satisfy our cus-

tomers”
 Microsoft: “Information at your fingertips”
 GE: To be number one or two in every
business”
 Federal Express: “When it absolutely, posi-
tively, must get there overnight, use
FedEx”
10
Mission
Polaroid Corp. (late 1970s)
 Polaroid manufactures and sell photographic products based ion in-
ventions of the company in the field of one-step instants photogra-
phy and light polarizing products, utilizing the company’s inventions
in the field of polarized light. The company considers itself to be en-
gaged in one line of business
Polaroid Corp. (mid 1980s)

 Polaroid designs, manufactures, and markets worldwide a variety of
products based on inventions, primarily in the photographic field.
These include instant photographic cameras and films, light polariz-
ing filters and lenses, and diversified chemical, optical, and com-
mercial products. The principal products of the company are used in
amateur and professional photography, industry, science, medic,
and education
11
Strategy
Deficient of Annual Ob- Measurable criteria for performance
jective
To improve the business’s Conducting a public opinion poll on
image dimensions of corporate responsibil-
ity by October 2003
To improve morale in the Reducing employees turnover, absen-

division teeism, number of reject by 10 per-
cent by December 2003
Assumption: Morale is related to
measurable outcome
12
Strategy
13
SWOT Analysis to Strategy For-
mulation
Mission
Internal External
Strengths Opportunities
Strategy
Internal External
W eaknesses Threats
Competitive
Advantage
How It Works
If competitive ad- Distinctive compe-
vantage, leads to Company
tencies affect
Mission
achieving
Business
Strategy
Functional Area
Strategies
Marketing Operations Fin./Acct.

Decisions Decisions Decisions
Strategies for Competitive Ad-
vantage
 Differentiation and Diversification
 Cost leadership
 Quick response
 Flexibility
A Company’s Macro-environment
Macro-environment
The economy at large Legislation and regulations
Immediate industry and competitive environment

Suppliers Substitutes
technology company
Rival Firms Buyers
New Entrants
Societal values and lifestyles Population demographic

Competitive Strategy
Competitive
Advantage
Strategic
Assets
Market achievement
Core and distinctive competencies
Competitive capabilities
Company resources
Value Chain Strategy
Primary activities and costs
Purchased Distribution
Supplies And Sales
Operations outbound and Service Profit
and Margin
Inbound logistics marketing
logistics
Product R&D, technology, and Systems Development

Human Resources Management
General Administration
Support activities and costs

The Five forces Model of Competition: A Key Analytical Tool for
Diagnosing the Competitive Environment
Firms in other
Industries Offering
Substitute products
Competitive pressures coming from the market attempts

of outsiders to win buyers over to their products
Suppliers Competitive Competitive

Of raw Ma- pressures
Rivalry among competing sellers pressures
terials stemming stemming Buyers
from Competitive pressures created by
Parts, com- from seller-
supplier- Jockeying for better market position
buyer
ponents, seller and competitive advantage collaboration
Or Other collaboration and bargaining
and
Resource bargaining
inputs Competitive pressures coming from
The threat of entry of new rivals
Potential
New entrants
Corporate Objectives
Citigroup (strategic objective)
To attain one billion customers worldwide.
McDonald’s (strategic objective)

To achieve 100 percent total customer
satisfaction . . . everyday . . . in every
restaurant . . . for every customer.
Corporate Financial Objectives
Motorola (financial objectives)
 Self-funding revenue growth of 15% an-
nually.
 An average return on assets of 13 to
15%.
 An average return on shareholders’ eq-
uity investment of 16 to 18%.
 A strong balance sheet.
The Five Generic Competitive Strategies
TYPE OF COMPETITIVE
ADVANTAGE BEING PURSUED
Lower cost Differentiation
A broad Overall Broad

MARKET TARGET
Cross-section Low cost leadership differentiation

Of buyers strategy strategy
Best-cost
Provider
Focused strategy Focused
A narrow
Buyer segment Low cost differentiation
(or market niche) strategy strategy
SEKIAN

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Strategic Management

Lecture Notes for Business and Management

Developing a Crafting a Evaluating

Revise as Revise as Improve/Change Improve/Change

Corporate strategy is the overall managerial

Business strategy refers to the managerial

Functional strategy concerns the managerial

Operating Strategy concern how to manage

Marketing Operations Fin./Acct.

 3M: “Be innovative and satisfy our cus-

Polaroid Corp. (mid 1980s)

To improve morale in the Reducing employees turnover, absen-

Marketing Operations Fin./Acct.

The economy at large Legislation and regulations

Immediate industry and competitive environment

Rival Firms Buyers

Societal values and lifestyles Population demographic

Core and distinctive competencies

Product R&D, technology, and Systems Development

Support activities and costs

Competitive pressures coming from the market attempts

Suppliers Competitive Competitive

To attain one billion customers worldwide.

McDonald’s (strategic objective)

Lower cost Differentiation

A broad Overall Broad

Cross-section Low cost leadership differentiation

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