StrategicManagement

1. Identify Mission and Objectives2. Analyze Internal and External

Environment3. Formulate Strategy4. Implement Strategy5. Evaluate Results and Control

Strategic Planning Process

Figure 9.1: Strategy formulation and implementation in the strategic management process.

3

2. Analyze Internal and External Environment

The SWOT Analysis provides information that is helpful in matching the firm’s resources and capabilities to the competitive environment

Identifies:StrengthsWeaknessesOpportunitiesThreats

SWOTStrengths

Resources and capabilities that can be used as a basis for developing its competitive advantage

Examples: Manufacturing efficiency Skilled workforce Superior reputation among customers Good market share Strong financing Patents Strong brand names Favourable access to distribution networks Exclusive access to high grade natural resources

SWOTWeaknesses

The absence of certain strengths may be viewed as a weakness

Examples: Lack of patent protection Weak brand name Inexperienced staff Limited storage space Outdated facilities Obsolete technologies

May be the flip side of a Strength

SWOTOpportunities

The external environment analysis may reveal certain new opportunities for profit and growth.

Examples:An unfulfilled customer needArrival of new technologiesLoosening of regulatuionsRemoval of international trade barriersWeak market rivalsGrowing geographical area

SWOTThreats

Changes in the external environment also present threats to firms

Example:Shifts in consumer tastesEmergence of substitute productsNew competitors Increased trade barriersEconomical/World issuesNew regulations

SWOT Matrix

A competitive advantage can be developed by :oFinding a fit between a business’ strengths and upcoming opportunities

oUsing their strengths to create strategies that take advantage of these opportunities and minimize threats

SWOT Matrix

S-O Strategies Pursue opportunities that are a good fit with company’s strengths

W-O Strategies Overcome weaknesses to pursue opportunities

S-T Strategies Identify ways that the company can use its strengths to reduce its vulnerability to external threats

W-T Strategies Establish a defensive plan to prevent the firm’s weaknesses from making it highly susceptible to external threats

Personal SWOT Analysis - Example

Complete table

Answer the following questionsHow can you capitalize on your strengths and pursue

opportunities?How can you overcome your weaknesses to be able

to pursue opportunities? Identify ways that you can use your strengths to

reduce vulnerability to external threats?What can you do to prevent your weaknesses from

making you susceptible to external threats?

For Career Planning

Internal

Your Strengths Your Weaknesses

External

Opportunities in your career field

Threats in your career field

PEST Analysis - Link  is a tool to examine the external factors that

provide opportunities and threats to an organization that are beyond the organization’s control.

PEST AnalysisPolitical factors include: political stability, trade

regulations, taxation, labour laws, and safety regulations. These factors vary widely from country to country.

Economic factors include: economic growth, stagnation, recession, interest rates, exchange rates, and inflation.

Social factors include: demographics and cultural aspects, e.g., health consciousness, population growth, age distribution, education, and attitudes to work and leisure.

Technological factors include: new discoveries and developments, rates of technological obsolescence, changes in information technology, and research and development activity.

PEST Analysis is useful for four main reasons:1. It helps you to spot business or personal

opportunities, and it gives you advanced warning of significant threats.

2. It reveals the direction of change within your business environment. This helps you shape what you're doing, so that you work with change, rather than against it.

3. It helps you avoid starting projects that are likely to fail, for reasons beyond your control.

4. It can help you break free of unconscious assumptions when you enter a new country, region, or market; because it helps you develop an objective view of this new environment.

16

Figure 9.4 Porter’s model of five strategic forces affecting industry competition. LINK

Source: Developed from Michael E. Porter, Competitive Strategy (New York: Free Press, 1980).VIDEO

Porter's Five ForcesPorter’s model develops strategies to meet opportunities

and threats in the organization’s external environment.  Five competitive forces that shape every industry and

every market.Competitors are the existing competitive rivalry within the

industry.New entrants involve the threat from new market

entrants.Customers mean the bargaining power of buyers.Suppliers are the bargaining power of suppliers.Substitutes are the threat of substitute products which

includes technology change

Types of strategic plansGrowth Strategy 

involves expanding current operations. Concentration - expanding in the same industry,

e.g., Tim Horton’s opens more stores, all of them selling the same products.

Vertical integration which means expansion by buying suppliers or distributors, e.g., a meat processing company buying farms

(suppliers) or grocery stores (distributors). Diversification which means buying or starting

businesses in other industries.Rogers Communications Inc. is an example of a

diversified Canadian corporation.

Types of strategic plansRetrenchment Strategy 

used when an organization is in crisis.

It seeks to correct weaknesses by making changes to current business practices. 

Restructuring and downsizing are two commonly used terms for retrenchment strategies.

Types of strategic planse-business Strategy

the use of the Internet to become more successful.

Businesses can use Internet technology to buy materials from their suppliers and to sell products to their customers.

Even businesses who don’t sell goods or services online will use the Internet for advertising, collecting information, and distributing information.

3. Strategy FormulationWhere are the major opportunities for achieving sustainable competitive advantage?

1.Cost and Quality2.Knowledge (innovation) and Speed3.Barriers to Entry4.Financial resources

3. Strategy Formulation1. Differentiation – make our products appear different from competitors

2. Cost Leadership – minimize costs to operate more efficiently than the competition.

3. Focused Differentiation - concentrate on one special market segment to offer a unique product

4. Focused low cost – concentrate on one special market segment and be the provider with the lowest cost

4. Strategy Implementation

Involves organization of the firms resources and motivation of the staff to achieve objectives

Care must be taken to communicate the strategy and reasoning behind it

5. Evaluation and Control1. Define parameters to be

measured2. Define target values for those

parameters3. Perform measurements4. Compare measured results to

the pre-defined standard5. Make necessary changes

Critical tasks of Strategic Leadership

Be a guardian of tradeoffsCreate a sense of urgencyEnsure that everyone understands

the strategyBe a teacherBe a great communicator

Case StudiesRead the case study assigned to your group.

As a group, discuss the answers to the questions included at the end of each case.

Decide on a format to present the results of your work to your teacher and peers. website, a slideshow presentation, or a video.

The presentation must present a brief introduction to the business and its situation, as well as answers to the questions. Be sure to use the concepts and terms you studied.