c
 


 



 


  


 



R Most significant form of management decision

making

R We are concerned about:

a process: planning
a product: strategy

The thinking about both is called strategic

management
 { 



R ?t is not an exact science

R ?t cannot be calculated
R There are no cook-book approaches

R Proposed definition:

Strategy is the pattern of resource allocation decisions made

throughout an organization.
These encapsulate both desired goals and beliefs about what
are acceptable and, most critically, unacceptable means for
achieving them.
 { 

 



R Strategic management is concerned with

deciding on strategy and planning how that
strategy is to be put in effect via :
Strategic analysis
Strategic choice
Strategic ?mplementation

R Several levels
Corporate strategy
Business strategy: within business unit
Functional Strategy: e.g. ?S strategy





R Process by which an organization establishes

answers to questions such as:
What business are we in exactly ?
Who is it competing with us?
How are we performing ?
How are the business and its markets changing ?
Where within the industry want we to be?
What must be done to achieve our objectives?
 0


 0

 



R The strategy needs to :

be used proactively;
recognize that there are severe limits to the
predictability of the future;
take account of the organizational, political, and
psychological dimensions of corporate life;
be accepted by the majority of those concerned with
strategy to be a realistic relevant tool for more
effectively coping with the future.

 

 

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Expectations
objectives and
The power:culture
Environment Resources

Strategic
Analysis
Generation Resource
of options Planning

Strategic Strategic
Choice ?mplemen-
tation
Evaluation Organization
of options structure

Selection People
of strategy and systems
 
 



 
 
R Strategic decisions are :
broad in their scope;
enduring in their effects;
difficult in their reversal;
worth devoting time and resources
R Factors that determine the nature of strategic
problems
the nature of the industry;
the nature of the enterprise;
the current circumstances;
the organization¶s environment.
  

 

R Analytical School
assumes strategists can be trained to anticipate complexity
assumes strategy can be designed using a range of models
based on normative principles
but models are based upon somewhat dubious assumptions
assumes predictable environment
offer a range of techniques
R Pattern School
strategy of the resource allocation
evolves on a trial-and-error basis
successful actions are pursued ( Japan )
problem of understanding the relation between resource
allocation and result.
 
 

  


Planning element Plan component Key question

· Mission What should we be doing?

Strategic
Analysis
Goals Where are we going?

Strategic What routes have we

Choice
Strategies selected?

·
Policies How do we guide our
collective decisions?
Strategic
?mplementation Decisions What choices do we have?

Actions Shall we do it?



 
c  
 
R Organizational Development
Societal Environment

Socio-Cultural Task Economic

forces environment forces

Demand ?nternal Government

Environment
- Structure
- Cultural web
- Resources
Market
Technology
structure
Political-legal
forces Technological
forces
 ‰

  


c  


Socio-cultural Economic Technological Political-Legal

Life-style changes GNP trends Organizational Commercial
spending on R&D regulations
Career expectations ?nterest rates Total industry Environmental
spending on R&D protection laws
Consumer activism Money supply Focus of Tax laws
technological efforts
Growth rate of ?nflation rates Patent protection Special incentives
population
Age distribution Unemployment levels New products Foreign trade
regulations
Regional shifts in Wage/price control Technology transfer Attitude towards
population from lab to market foreign companies
Life expectancies Devaluation Productivity improve- Laws on hiring and
ment via automation promotion
Birth rates Energy availability Stability of
and cost government
 
 
 
 

Continuity ?ncremental Flux Global

Established strategy May make good No clear
remains unchanged sense but the world direction to
may change faster the change
than the strategy
Change of this scale
happens at times of
crisis when the
organisation is out of
step with the world
  

 


 

 !

R Define the scope: time scale, products, area, technologies, «

R ?dentify major involved parties
R ?dentify basic trends
R ?dentify uncertainties
R Construct initial scenario themes
R Check for consistency and plausibility (e.g. trend vs time scale )
R Develop learning scenarios ( good name for each scenario )
R ?dentify research needs
R Develop quantitative models
R Evolve towards decision scenarios
The significant skills required are diffused throughout the organization
c
 

Text book
  
"
  


R variety of potential uses is as broad as the industry
R managers need a framework to facilitate planning

strategic view on use of computer and communications
R Michael Porter¶s industry and competitive analysis
State of competition depends on five forces
bargaining power of suppliers
bargaining power of buyers
threat of new entrants into the industry segment
threat of substitute products or services
positioning of traditional intra-industry rivals
R very useful to consider impact of ?T
 

# 
 



?mpact of competitive forces

Thread of
new
entrants

Bargaining Rivalty Bargaining

power of amongst power of
suppliers existing buyers
competitors

Thread of
substitute
products
or services
   
 

"

Ô
 
  

    
Threat of new entrants New capacity Provide entry barriers:
Substantial resources - economies of scale
Reduced prices or inflation - switching costs
of incumbents¶ costs - access to distribution channels

Buyers¶ bargaining power Prices forced down Buyer selection

High quality Switching costs
More services Differentiation
Competition encouraged Entry barriers

Suppliers¶ bargaining power Prices raised Selection

Reduced quality and services Threat of backward integration

Threat of substitute products Potential returns limited ?mprove price/performance

or services Ceiling on prices Redfine products and services

?ntra-industry rivals Competition: Cost-effectiveness

Price/Product/ Market access differentiation:
distribution and services Product/Services/Firm
   

  
Specific actions to implement generic strategy vary widely
R competitive advantage is the goal of any strategy

define type of required competitive advantage

Ô
 

 Ô 



  Ô  



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Porters value chain model

Support activities
Administration and infrastructure
Human resource management
Product/technology/development
Value
Procurement added -
cost =
?nbound Operations Outbound Sales and Services MARG?N
logistics logistics marketing

Primary activities
   ' 
R ?nbound logistics:materials receiving, storing, distribution
ü to manufacturing premises
just-in-time on-line ordering in major distribution company
 cut-down on warehousing needs for incoming materials
 reduced disruption on inventory shortfalls
 safetystocks are passed to supplier
 scan supplier databases for lowest price
 changing vendors has become more difficult
large department store linked to textile suppliers
 improved delivery
 inventory reduction
 flexibility to meet changing demands
 easier to deal with domestic suppliers
 % ' 
R Outbound Logistics : storing and distributing products

R ?T has great impact on the way products are delivered

to customers.
reservation-systems links to travel agents

automatic teller machines

theatre-ticket machines , gaz stations

R Outbound for one company is inbound for another

 
  



R Marketing and sales: promotion and sales force

on-line order-entry for pharmacies

industrial air-conditioning company has build a computer-

based modeling system prefered by architects

competitor made a similar on-line system also providing cost

information

farmers information system by agricultural chemical company

with build-in decision support system

R Marketing systems became important with the laptop

  
(




) 

R After sale service
reduction of repair costs and increased customer satisfaction
by installing flight-recording devices in elevators
on-line maintenance expert systems reduced service visits
R Corporate infrastructure
on-line link for outlying travel agents to deliver documents
 * % growth in sales
financial service company used information in database to
refine commission sytem
 less comission for first sale
 more for service extension
R Enhanced management control and coordination via
voice mail, e-mail , videotext
location of airplanes improved connections for delayed fligths
 %
 
R Human resources
head-hunters
information on skills and experience
R Technology development
access to large computing facilities (generation gap )
CAD/CAM
seed company : computer support is most important
technology expenditure for genetic planning
( data on thousands of plants , molecular simulatiom models )
R Procurement
on-line electronic bulletin boards
access to production scedules of suppliers
 $
   
 


Supporting
activities
?nfrastructure M?S, DSS, E?S, ES multimedia, VR
HRM ES, DSS, M?S
Technology DSS, ES, GSS, CASE
Procurement ED?, DSS, Voice technology
Robots ED? Laptops
ED? CAD/CAM ED? CD/ROM Wireless
E-mail Simulation DSS Tracking
MRP
Multimedia
VR DSS
C?M G?S
Scheduling ?nternet
?nbound Operations Outbound Marketing Services

Primary activities

   



Key problem: - success in narrow technical sense

- disastrous organisational and
competitive consequences
Nine topics focus on strategic vulnerabilities
Systems that : change the basis of competition negatively
Systems that : lower entry barriers
Systems that : bring on litigation or regulation
Systems that : increase customers¶ or suppliers¶ power to the
detriment of the innovator
Bad timing
?ndefensible investments that fail to bring lasting advantages
Systems that pose a threat to large, established competitors
?nadequate understanding of buying dynamics across market
Cultural lag and perceived transfer of power
 
 

Two phase process:
describe in detail the industry-level changes invoked
determine potential impact on the company
R increasing use of ?T not always inevitable
some technological advances remain embryonic for reasons of
cost, ?T capability , user acceptance , lack of support from
established industry (e.g. home banking )
R consider motivation for the new system
R software from nonexclusive source gives no lasting advantage
R mobility between ?T personnel results in rapid proliferation of
ideas
R long-term commitment of top management required before start
R clear view on long range strategy is absolute must
R resources and capabilities of competitors must be examined
 
 

R broad ?T-management - user dialog plus imagination

R potential benefits are subjective and not easily verified

R RO? focus may turn attention towards a narrow focus

R most companies are in support or factory quadrant of

strategic grid and organisation is set up accordingly

R playing cath-up can be difficult and expensive

 '

 

Four stages in life cycle of a product or industry:

R ?ntroduction

early adopters
demand unknown
R Growth
entry of competitors
fight for share, undifferentiated products and services
R Maturity
saturation of users
fight to maintain share, emphasis on efficiency and cost
R Decline
demand < supply

{% 

R A SWOT analysis defines the relationship between

internal and external appraisal in strategic analysis

?nternal factors

Strengths Weaknesses

Opportunities Opportunities
External
factors Strengths Weaknesses

Threats Threats