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The Definition of Strategic Management The Art and Science of Formulating, Implementing, and Evaluating Cross-Functional Decisions That

Enable an Organization to Achieve Its Objectives


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The Basis for Good Strategic Decisions Intuition + Analysis

Effective Strategic Decisions


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Keys to Formulating Strategies


Business Mission Business Mission

External External Opportunities Opportunities and Threats and Threats

Internal Internal Strengths and Strengths and Weaknesses Weaknesses

Strategy Formulation Strategy Formulation


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A Comprehensive Strategic Management Model A Comprehensive Strategic Management Model


Feedback

Perform Perform External External Audit Audit

Develop Develop Mission Mission Statement Statement

Establish Establish LongLongterm term Objectives Objectives

Generate, Generate, Evaluate, Evaluate, and and Select Select Strategies Strategies

Establish Establish Policies and Policies and Annual Annual Objectives Objectives

Allocate Allocate Resources Resources

Measure Measure and and Evaluate Evaluate Performance Performance

Perform Perform Internal Internal Audit Audit

Strategy Formulation

Strategy Implementation
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Strategy Evaluation

A Strategic Management Framework


V a lu e C r e a tio n d r iv e s th e s tr a te g y p r o c e s s D e v e lo p M is s io n & V is io n

C u sto m e rs

P e r fo r m S it u a t io n A n a ly s is

V a lu e C r e a t io n

O w n e rs

S et O b je c t iv e s & C r a ft S tr a t e g y

E m p lo y e e s

I m p le m e n t S tr a t e g y

E ffe c tiv e s tr a te g ic m a n a g e m e n t c r e a te s v a lu e

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A ssess V a lu e C r e a t io n & P r o v id e Feed b ack

The Stages and Activities in the Strategic Management Process


Stages
Strategy formulation Conduct research

Activities
Integrate intuition with analysis Make decisions

Strategy implementation

Establish annual objectives


Review internal and external factors

Devise policies Measure performance

Allocate resources
Take corrective action
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Strategy evaluation

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Forces Influencing Design of Strategic Management Systems


Organization
Small one-plant companies Large companies
Toward more formality and more details

Management Styles
Policy maker Democratic-permissive Authoritarian Day-to-day operational thinker Intuitive thinker Experienced in planning Inexperienced in planning
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Toward less formality and fewer details

Forces Influencing Design of Strategic Management Systems


Complexity of Environment
Toward more formality and more details Stable environment Turbulent environment Little competition Many markets and customers Single market and customer Competition severe
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Toward less formality and fewer details


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Forces Influencing Design of Strategic Management Systems


Complexity of Production Process
Toward more formality and more details
Long production lead times Short production lead times Capital intensive Labor intensive Integrated manufacturing processes Simple manufacturing processes High technology Low technology Market reaction time for new product is short Market reaction time is long
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Toward less formality and fewer details


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Forces Influencing Design of Strategic Management Systems


Nature of Problems Facing new, complex, tough problems having long-range aspects Facing tough short-range problems Purpose of Planning System Coordinate division activities Train managers
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Toward more formality and more details

Toward less formality and fewer details

Levels of Strategic Decisions


Corporate Level
What business to be in?

Business Level
How to compete in a chosen Business

Functional Level
Support at each function
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Intended or Realized Strategy


Intended Intended Strategy

Deliberate Deliberate
Strategy

Realized Realized Strategy

Unrealized Strategy

Emergent Emergent Strategy

FIO Decisions Decisions Financing

byInvesting Operations Organization


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Vision Versus Mission


Mission Statement Mission Statement Answers the Question Answers the Question Vision Statement Vision Statement Answers the Question Answers the Question

What is Our What is Our Business? Business?

What Do We Want What Do We Want to Become? to Become?

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The Growth Matrix


Market Penetration
Present Products Present Markets

Product Development
New Products Present Markets

Market Extension
Present Products New Markets

Diversification
New Products New Markets
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Expansion Strategies

Market Penetration Seeking Increased Market Share For Present Products or Services in Present Markets Market Development Introducing Present Products or Services into New Geographic Areas Product Development Seeking Increased Sales by Improving Present Products/Services or Developing New Ones
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Expansion Strategies

Diversification Strategies Related Diversification


Adding New, But Related, Products or Services Adding New, Unrelated Products or Services for Present Customers

Unrelated Diversification
Adding New, Unrelated Products or Services
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What Else Besides Growth


Staying the Course Reduction in operations

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Retrenchment Strategies
Cost-Cutting
Reducing the use of allocation of resources for a specific function

Liquidation
Closing all operations

Divestment
Selling a Division or Part of an Organization
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Key External Forces Key External Forces


Economic Social Cultural Demographic Legal Competitive Technological Governmental Political Environmental
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Key Internal Forces Key Internal Forces


Management Marketing Packaging Research & Development Production/Operations Finance/Accounting

Manufacturing

Computer Information Systems Purchasing

Human Resource Management

Distribution
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Formulating Strategies Based on Key Internal Factors


Developing Strategies That Use An Organizations Strengths To

Take full advantage of external opportunities

Reduce the effects of external threats


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Improve an organizations weaknesses


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Overview of the External Environment


Macroenvironment: the set of broad forces and factors that affect the behavior of key players in the task environment Task Environment: the key players whose behavior directly impacts the firm and its prospects for success
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SOCIETAL (MACRO)
TECHNOLOGICAL TASK (MICRO)
Suppliers, Competitors, Customers

ECONOMIC

INTERNAL Other Stakeholders

POLITICAL/ LEGAL

Demographic and Socioeconomic


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Industry Analysis
Market Share Analysis
Definition of market Definition of competitors

Financial Analysis
Sales Net Income Other Indicators Ratios
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Competitor Analysis

Who are the existing and potential competitors? What strategic groups can be identified? What are their levels of sales, share and profits? What are their growth trends? What are their strengths, weaknesses, strategies?
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The SWOT Matrix


STRENGTHS - S WEAKNESSES - W

OPPORTUNITIES - O

SO STRATEGIES

WO STRATEGIES

Use strengths to take advantage of opportunities


THREATS - T ST STRATEGIES

Overcome weaknesses by taking advantage of opportunities


WT STRATEGIES

Use strengths to avoid threats

Minimize weaknesses and avoid threats

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So What Matters?
Idea of SWOT analysis Just a basic tool This is a starting point for strategic analysis Identifying long term and Short term trends in macro environment economic, socio-cultural, legal-political and knowledge-technology in task environment customers, competition, and suppliers
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Sustainable Competitive Advantage is Based on:


Assets and Skills People and Culture Processes and Systems R&D Capability Manufacturing or Service Capability
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Sustainable Competitive Advantage


SCAS Should Be: Substantial...Enough to Make a Difference Sustainable...In the Face of Inevitable Changes, Competitive Actions Leveraged...Into Viable Business Attributes That Will Influence Customers
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Sustainable Competitive Advantage


SCA Based a Combination of Strategic Thrusts:
Differentiation Low Cost Focus

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Differentiation Strategies
Characteristics: Provide Customer Value Be Difficult to Copy

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Approaches to Differentiation

Invest in Quality Focus on Customer Satisfaction Build Strong Brands

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Low Cost Strategies


Bases: No Frills Product / Service Sourcing Design Operations Experience Curves Economies of Scale Low Cost Culture
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Scale Economies
Natural Efficiencies Associated With Size -Can Spread Fixed Costs -Can Support Specialized Assets and/or Activities

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Focus Strategies
Product and or Market Concentration Benefits: Avoids Strategy Dilution, Distraction Minimizes Impact of Limited Resources Potential to Bypass Competitor Assets/Skills e.g.. Private Label Producers Niche Strategy

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Focus Strategies - Options


Note: These Are Not Mutually Exclusive Focus Product Line Enhance Technical Superiority; Exciting, Innovative, High Quality Target a Segment Target a Geographical Area Target Low-Share Competitors
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Cross-Functional Integration
Level III Functional
Marketing/ Sales Strategy
Operational Operational Strategy Strategy

SBU Strategy

Human Resources Strategy

R&D Strategy

Accounting/ Control Strategy


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Behavioral Aspects Strategic Choices


Senior Management Team Organizational Culture Personal Ethics Corporate Social Responsibility

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Barriers to Implementation
Reasons for Resistance Unclear strategy loss of control management style fear of the unknown lack of coordination lack of confidence to learn resistance to change increasing workload
past resentment or distrust loss of status or security and others

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Overcoming Resistance
Establish a sense of urgency Communicate and involve Create a shared vision Anticipate and remove barriers Reinforce and institutionalize new approaches
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A Case Study
Using Internet: an Indian Firm In a very unlikely industry Innovative marketing tool Use of HRM

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WWW.SURATDIAMOND.COM

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eBay and SDJ


Surat Diamond Jewellery is one of the few players who have secured a firm footing in this internationally reputed e-commerce site. It goes a long way in proving the credibility and goodwill to its customers

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Comments
Great Item, fast delivery, easy transaction, A+++++++++++++++++++ from Buyer dsg143 ( 249)
ebay auction 4901680135

NICE, NICE ITEMS FROM THIS SELLER AND THEY ARE APPRECIATED VERY MUCH! From Buyer steppingstones4489 (134) ebay auction
4112106777

Sent item as described


ebay auction 4111213756

from Buyer hollyrose50 ( 87)

good communication, well packed and shipped. good transaction, thank you, from Buyer wambamela ( 50)
ebay auction 4901274266
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How SDJ did it?


Competitive intelligence Hard work Feedback from customers but key ingredient: HR

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Strategy and Value for Owners


P TC = Profit, a contribution to value for owners P = Price paid by customer TC = Total Cost of making and delivering the product/service
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Value for Employees


Financial Non-financial

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Value for Employees (2)


Attraction and retention Company cash flow and tax incentives Awareness of success of the company More employee commitment to the company and greater satisfaction Better organizational performance

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Customer Value
Benefits derived from solving the customers problem, a function of product service quality . Relative to . The total cost of the acquisition and use of the product, including out of pocket expense, time, effort, etc.
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Customer Value
Operational Excellence Customer Intimacy Product Leadership People in the organization
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