STRATEGIC MANAGEMENT REVISION

FINAL EXAM

1. Low Risk Portfolio Analysis: SOFAC, TASLIF and DELTA

Sofac: Provides personal lending and financial services. Private. 300 employees.
Taslif: Public company, operates since 1997 within the diversified financial sectors
Delta 4 industries: Multinational private. Mettalurgy, infrastructure,
environmental and water, para-chemistry. 5000 employees. Sustainable
development and constant innovation. Optimal quality.-Make a list of factors.
Choose the competitive strength factors from our list or add your own factors.-
Assign weights. Weights indicate how important a factor is in achieving
sustainable competitive advantage. A number from 0.01 (not important) to 1.0
(very important) should be assigned to each factor. The sum of all weights should
equal to 1.0.-Rate the factors. Rate each factor for each of your product or business
unit. Choose the values between ‘1-5’ or ‘1-10’, where ‘1’ indicates the weak
strength and ‘5’ or ‘10’ powerful strength.-Calculate the total scores.

here are different investment implications you should follow,

depending on which boxes your business units have been plotted. There are 3
groups of boxes: investment/grow, selectivity/earnings and harvest/divest boxes.
Each group of boxes indicates what you should do with your
investments.Invest/Grow box. Companies should invest into the business units
that fall into these boxes as they promise the highest returns in the
future.Selectivity/Earnings box. You should invest into these BUs only if you have
the money left over the investments in invest/grow business units group and if you
believe that BUs will generate cash in the future.Harvest/Divest box. The business
units that are operating in unattractive industries, don’t have sustainable
competitive advantages or are incapable of achieving it and are performing
relatively poorly fall into harvest/divest boxes.

2. Nature of the environment

Porter's 5 Forces
Is an analytical model used to help identify the structure of an industry and to help
companies determine their competitive strategies. The model can be applied to
any segment of the economy.
As the name suggests, there are five factors that make up Porter's 5 Forces. They
are all external, so they have little to do with the internal structure of a
corporation:
Industry competition. A higher degree of competition means the power of
competing companies decreases. When competition is low, companies can do
whatever they need to in order to increase their profits.
New players in the industry. New (and more) entrants into the market means a
company's power also decreases. Most companies prefer to operate in a market or
industry where there are fewer players.
Supplier power. This factor examines how suppliers can use their power to increase
the price of goods and services. The fewer suppliers there are in the market means
they have more power.
Buyer power. When consumers have more bargaining power, they may be able to
affect the price of goods and services, driving them down.
Threat of substitutes. Products and services by a rival that can easily be substituted
are also a threat to a business' profitability.
When a company's management uses the five forces, it can create ways to take
better advantage of a situation of strength, overcome a situation of weakness, and
avoid making mistakes that would provide someone else a competitive edge.

PEST Analysis
PESTLE stands for political, economic, sociocultural, technological, legal, and
environmental. It is an analytical tool available to companies to determine how
external factors influence their operations and make them more competitive in the
market.
PESTLE is a variation of PEST, which takes only the first four factors into account.
Political factors include government policy and legislative changes that affect the
economy, such as tax and employment laws.
Economic factors such as inflation, exchange rates, recessions, and supply and
demand make up this category.
Sociocultural factors including consumer demographics, culture, and lifestyle.
Technology includes factors like changes in technology, how technology is used in
different sectors and industries, and research.

Entry ModesJoint Venture: Two businesses combine resources to sell products or

services. Many countries with tightly controlled economies, such as China, often
require foreign companies to partner with a local company if they wish to sell
products to their residents. Although joint ventures provide foreign companies
with a partner experienced in the foreign market, these partnerships can be
difficult to manage and require a splitting of profits.Licensing Agreement: In the
licensing mode of entry, companies sign contracts with foreign businesses, called
"licensees," that allow the foreign companies to legally manufacture and sell the
company's products. Licensing allows a company to enter a market quickly and
inexpensively, but provides little control over the product's foreign marketing and
sales.Exporting Directly: Some companies will simply sell their products to
distributors overseas, who will sell the products to consumers. Exporting means
the company avoids having to invest the money in developing manufacturing
facilities in the foreign market, but transportation costs and restrictive tariffs may
make this mode uneconomical for certain products.
Online Sales: Many companies will attempt to enter foreign markets indirectly, by
targeting foreign consumers on the internet. Similar to exporting, companies
retain their physical operations in their native countries, but ship products
overseas. Purchasing Foreign Assets: Many companies, rather than launching an
entirely new venture in a foreign market, will simply purchase or invest in a foreign
company. While often more expensive, direct investment allows the investing
company to reap the profits of a business that is already well integrated into the
local market.

Porter´s Learning Curve

Porter´s learning curve: Michael Porter has suggested three generic competitive
strategies: cost leadership, differentiation and focus strategy. Each strategy is
designed to secure a long-term sustainable advantage in a competitive market,
and each attempt to pursue that goal in quite distinctive ways.Cost-leadership
strategy involves becoming the lowest-cost organisation in a domain of
activity.Differentiation involves uniqueness along some dimension that is
sufficiently valued by customers to allow a price premium.A focus strategy targets
a narrow segment of domain of an activity and tailors its products or services to the
needs of that specific segment to the exclusion of others.
The experience curve shows that the cost of doing a repetitive task decreases by a
fixed percentage each time the total accumulated volume of production (in units)
doubles.

Resources Based Value: There are two types of resources: tangible and intangible.
Tangible assets are physical things like land, buildings and machinery. Companies
can easily by them in the market so tangible assets are rarely the source of
competitive advantage. On the other hand, intangible assets, such as brand
reputation, trademarks, intellectual property, unique training system or unique
way of performing tasks, can’t be acquired so easily and offer the benefits of
sustained competitive advantage. Therefore, to find valuable, rare and costly to
imitate resources, you should first look at company’s intangible assets.VRIO
framework :Identify valuable, rare and costly to imitate resources: Your company
has achieve the ultimate goal of sustained competitive advantage when it has
successfully identified al four components of the VRIO framework.

3. Culture alignment to strategy and change management.

In a very simple way we can say the culture of an organization is the typical way of
doing things in the organization. It particularly relates to the behaviour pattern
and the relationship. The culture of an organization develops as an evolution of
long time. It is normally created by the people who work in the organization both
the managers and the workforce.
The organization culture and change management process are interrelated. There
are many impact cultural impacts for change management process. Ever
organization has unique culture, so management system also adapted
surrounding that culture and if they implement any change process they have to
adapt that change process with their culture, otherwise they have to change
organization culture.
Kotter´s 8 step Model of Change:
1.Create an Urgency: Identifying threats and their consequencences if there is no
intervention.
2.Forming Powerful Guiding Coalitions: Identifying the change leaders in your
organizations and also their stakeholders, requesting their involvement and
commitment towards the entire process.
3.Developing a vision and a strategy: Determining the core values and defininf the
ultimate vision and strategies for realizing a change in the organization.
4. Communicating the Vision: Communicate the change in the vision very often
powerfully and convincingly.
5. Removing obstacles: Continuously check for barriers or people who are resisting
change.
6. Creating Short Term Wins: Creating short term targets
7. Consolidating Gains: Analysing the success stories indidividualy and improving
from those individual experiences.
8. Make change stick: Ensure that the change becomes an integral part in the
organization.

4. Characteristics of strategic decisions and strategic process.

Strategic management process is a method by which managers conceive of and
implement a strategy that can lead to a sustainable competitive advantage.
Strategic planning process is a systematic or emerged way of performing strategic
planning in the organization through initial assessment, thorough analysis,
strategy formulation, its implementation and evaluation: 5 stages of strategic
planning process:
Initial Assessment: At this phase managers must clearly identify the company’s
vision and mission statements. Business' vision answers the question: What does
an organization want to become? Mission describes company’s business. It informs
organization’s stakeholders about the products, customers, markets, values,
concern for public image and employees of the organization Situation Analysis:
This includes evaluating an organization’s external and internal environments and
analyzing its competitors. During an external environment analysis managers look
into the key external forces. PEST represent all the e macro environment factors
that influence the organization in the global environment. Macro environment
affects the company in its industry. It is analyzed using Porter’s 5 Forces
Framework. Internal analysis includes the assessment of the company’s resources,
core competencies and activities. An organization holds both tangible resources:
capital, land, equipment, and intangible resources: culture, brand equity,
knowledge, patents, copyrights and trademarks. When analyzing the company’s
activities managers look into the value chain and the whole production process. As
a result, situation analysis identifies strengths, weaknesses, opportunities and
threats for the organization and reveals a clear picture of company’s situation in
the market.Strategy Formulation: In an organization, strategies are chosen at 3
different levels:
Business level strategy. This type of strategy is used when strategic business units
(SBU), divisions or small and medium enterprises select strategies for only one
product that is sold in only one market.
Corporate level strategy. At this level, executives at top parent companies choose
which products to sell, which market to enter and whether to acquire a competitor
or merge with it.
Global/International strategy. The main questions to answer: Which new markets
to develop and how to enter them? How far to diversify? Strategy Implementation:
At this stage managerial skills are more important than using analysis.
Communication in strategy implementation is essential as new strategies must get
support all over organization for effective implementation. Strategy Monitoring:
Implementation must be monitored to be successful. Due to constantly changing
external and internal conditions managers must continuously review both
environments as new strengths, weaknesses, opportunities and threats may arise.
If new circumstances affect the company, managers must take corrective actions
as soon as possible.