Strat ma processes

1. Environmental Scanning- Environmental scanning refers to a process of collecting, scrutinizing

and providing information for strategic purposes. It helps in analyzing the internal and external
factors influencing an organization. After executing the environmental analysis process,
management should evaluate it on a continuous basis and strive to improve it.
2. Strategy Formulation- Strategy formulation is the process of deciding best course of action for
accomplishing organizational objectives and hence achieving organizational purpose. After
conducting environment scanning, managers formulate corporate, business and functional
strategies.
3. Strategy Implementation- Strategy implementation implies making the strategy work as
intended or putting the organization’s chosen strategy into action. Strategy implementation
includes designing the organization’s structure, distributing resources, developing decision
making process, and managing human resources.
4. Strategy Evaluation- Strategy evaluation is the final step of strategy management process. The
key strategy evaluation activities are: appraising internal and external factors that are the root of
present strategies, measuring performance, and taking remedial / corrective actions. Evaluation
makes sure that the organizational strategy as well as it’s implementation meets the
organizational objectives.

The Internal Analysis of strengths and weaknesses focuses on internal factors

that give an organization certain advantages and disadvantages in meeting
the needs of its target market. Strengths refer to core competencies that give
the firm an advantage in meeting the needs of its target markets. Any analysis
of company strengths should be market oriented/customer focused because
strengths are only meaningful when they assist the firm in meeting customer
needs. Weaknesses refer to any limitations a company faces in developing or
implementing a strategy. Weaknesses should also be examined from a
customer perspective because customers often perceive weaknesses that a
company cannot see. Being market focused when analyzing strengths and
weaknesses does not mean that non-market oriented strengths and
weaknesses should be forgotten. Rather, it suggests that all firms should tie
their strengths and weaknesses to customer requirements. Only those
strengths that relate to satisfying a customer need should be considered true
core competencies.

The following area analyses are used to look at all internal factors affecting a
company:

 Resources: Profitability, sales, product quality brand associations,

existing overall brand, relative cost of this new product, employee
capability, product portfolio analysis
 Capabilities: Goal: To identify internal strategic strengths, weaknesses,
problems, constraints and uncertainties
The External Analysis takes a look at the opportunities and threats existing in
your organization’s environment. Both opportunities and threats are
independent from the organization. Differentiating between
strengths/weaknesses and opportunities/threats is to ask this essential
question: Would this be an issue if the organization didn’t exist? If yes, it is an
issue that is external to the organization. Opportunities are favorable
conditions in an organization’s environment that can produce rewards if
leveraged properly. Opportunities must be acted on if the organization wants
to benefit from them. Threats are barriers presented to an organization that
prevent them from reaching their desired objectives.

The following area analyses are used to look at all external factors affecting a
company:

 Customer analysis: Segments, motivations, unmet needs

 Competitive analysis: Identify completely, put in strategic groups,
evaluate performance, image, their objectives, strategies, culture, cost
structure, strengths, weakness
 Market analysis: Overall size, projected growth, profitability, entry
barriers, cost structure, distribution system, trends, key success factors
 Environmental analysis: Technological, governmental, economic,
cultural, demographic, scenarios, information-need areas Goal: To
identify external opportunities, threats, trends, and strategic
uncertainties

The Differentiation Strategy

Differentiation involves making your products or services different from and
more attractive than those of your competitors. How you do this depends on
the exact nature of your industry and of the products and services themselves,
but will typically involve features, functionality, durability, support, and also
brand image that your customers value.

To make a success of a Differentiation strategy, organizations need:

 Good research, development and innovation.

 The ability to deliver high-quality products or services.
 Effective sales and marketing, so that the market understands the
benefits offered by the differentiated offerings.
Large organizations pursuing a differentiation strategy need to stay agile with
their new product development processes. Otherwise, they risk attack on
several fronts by competitors pursuing Focus Differentiation strategies in
different market segments.

The Cost Leadership Strategy

Porter's generic strategies are ways of gaining competitive advantage – in
other words, developing the "edge" that gets you the sale and takes it away
from your competitors. There are two main ways of achieving this within a
Cost Leadership strategy:

 Increasing profits by reducing costs, while charging industry-average

prices.
 Increasing market share by charging lower prices, while still making a
reasonable profit on each sale because you've reduced costs.
You, therefore, need to be confident that you can achieve and maintain the
number one position before choosing the Cost Leadership route. Companies
that are successful in achieving Cost Leadership usually have:

 Access to the capital needed to invest in technology that will bring costs
down.
 Very efficient logistics.
 A low-cost base (labor, materials, facilities), and a way of sustainably
cutting costs below those of other competitors.
The greatest risk in pursuing a Cost Leadership strategy is that these sources
of cost reduction are not unique to you, and that other competitors copy your
cost reduction strategies. This is why it's important to continuously find ways
of reducing every cost. One successful way of doing this is by adopting the
Japanese Kaizen  philosophy of "continuous improvement."
A strategic alliance is an arrangement between two companies that have
decided to share resources to undertake a specific, mutually beneficial
project. A strategic alliance is less involved and less binding than a joint
venture, in which two companies typically pool resources to create a separate
business entity. In a strategic alliance, each company maintains its autonomy
while gaining a new opportunity.

The Purpose of Strategic Alliances

Strategic alliances allow two organizations, individuals or other entities to work
toward common or correlating goals. The idea is for all parties to benefit in the
short term, long term or both. The agreement may be formal or informal, but
each party’s responsibilities must be clear. Further, the agreement may be in
place over the short or long term depending on the needs and goals of the
parties involved.

Often, strategic alliances allow involved organizations to pursue opportunities

at a faster rate than if the organizations functioned alone. An alliance provides
access to additional knowledge and resources owned by the other party,
which may ease the learning curve for the new pursuit and relieve setup time
and costs.

This strategy provides more flexibility than joint ventures because the involved
parties do not need to merge any assets or funds to proceed. Instead,
parties remain autonomous, which can help ease the functioning of the
agreement when the two entities' business practices are highly varied.

The Risks of Strategic Alliances

Although the arrangement is typically clear for both parties, the differences in
how the businesses operate can cause conflict. Further, if the alliance
requires informing one party of the other party’s proprietary information, there
must be a high level of trust between the leadership of the alliance entities.

In the case of long-term strategic alliances, the involved parties may become
mutually dependent. While the risk is lower if the dependency is experienced
by both parties, the risk can increase significantly if the dependence becomes
one-sided because one party will gain an advantage.

Example of Strategic Alliances

An oil and natural gas company might form a strategic alliance with a research
laboratory to develop more commercially viable recovery processes. A
clothing retailer might form a strategic alliance with a single clothing
manufacturer to ensure consistent quality and sizing. A major website could
form a strategic alliance with an analytics company to improve its marketing
efforts.

What's the Difference Between a Merger and an Acquisition?

Although they are often uttered in the same breath and used as though they
were synonymous, the terms merger and acquisition mean slightly different
things.

A merger occurs when two separate entities (usually of comparable size)

combine forces to create a new, joint organization in which – theoretically –
both are equal partners. For example, both Daimler-Benz and Chrysler
ceased to exist when the two firms merged, and a new company,
DaimlerChrysler, was created.

An acquisition refers to the purchase of one entity by another (usually, a

smaller firm by a larger one). A new company does not emerge from an
acquisition; rather, the acquired company, or target firm, is often consumed and
ceases to exist, and its assets become part of the acquiring company.
Acquisitions – sometimes called takeovers – generally carry a more negative
connotation than mergers, especially if the target firm shows resistance to
being bought. For this reason, many acquiring companies refer to an
acquisition as a merger even when technically it is not.

Legally speaking, a merger requires two companies to consolidate into a new

entity with a new ownership and management structure (ostensibly with
members of each firm). An acquisition takes place when one company takes
over all of the operational management decisions of another. The more
common interpretive distinction rests on whether the transaction is friendly
(merger) or hostile (acquisition).

In practice, friendly mergers of equals do not take place very frequently. It's

uncommon that two companies would benefit from combining forces and two
different CEOs agree to give up some authority to realize those benefits.
When this does happen, the stocks of both companies are surrendered and
new stocks are issued under the name of the new business identity.

Since mergers are so uncommon and takeovers are viewed in a derogatory

light, the two terms have become increasingly conflated and used in
conjunction with one another. Contemporary corporate restructurings are
usually referred to as merger and acquisition (M&A) transactions rather than
simply a merger or acquisition. The practical differences between the two
terms are slowly being eroded by the new definition of M&A deals. In other
words, the real difference lies in how the purchase is communicated to and
received by the target company's board of directors, employees and
shareholders. The public relations backlash for hostile takeovers can be
damaging to the acquiring company. The victims of hostile acquisitions are
often forced to announce a merger to preserve the reputation of the acquiring
entity.