MNGT23C – Strategic Business Analysis

LECTURE 1
Competitiveness, Strategy, And Productivity Reasons for the failure
Competitiveness 1) Nokia’s technology was inferior to Apple’s
2) The arrogance among top-level managers
 Companies must be competitive to sell their 3) Lack of vision
goods and services in the marketplace.
 Competitiveness is an important factor in
determining whether a company prospers, The Failure of Kodak
barely gets by, or fails.
 Kodak was founded in the late 1880s and it
Influence of operations on competitiveness became a giant in the photography industry in
the 1970s. It filed for bankruptcy in 2012.
Product and
Cost Location
 For almost a hundred years, Kodak was at the
service design forefront of photography.
Reasons for the failure
Quick
Quality Flexibility
response
1) They missed opportunities in digital
photography
Inventory Supply chain After sales 2) Digital photography replaced Kodak’s
management management service
established film-based business

Why some organizations fail? Mission

1) Neglecting operations strategy  An organization’s mission is the reason for its

2) Failing to take advantage of strengths and existence
opportunities  Missions vary from organization to organization,
3) Putting too much emphasis on short-term depending on the nature of business
financial performance  It serves as the basis for organizational goals
4) Neglecting investments on human resources
Selected portions of company mission statements
5) Failing to establish good internal
communications and cooperation among
different functional areas
6) Failing to consider customer wants and needs

The Failure of Nokia

 In October 1998, Nokia became the best-selling Strategies

mobile phone brand in the world
 The best-selling mobile phone of all time, the  Strategies can be the main reason for the
Nokia 1100, was created in 2003 success or failure of an organization.
 Had a built-in flashlight  There are 3 basic business strategies:
 Can hold 50 text messages
 With cool collection of ringtones
 In 2017, Apple introduced the iPhone. By the end Low cost Responsiveness Differentiation
of 2017, half of smartphones sold in the world
were Nokia’s, while Apple’s iPhone had a mere
5 percent of the global market.
 The quality of Nokia’s high-end phones
continues to decline. Nokia’s decline accelerates
by 2011 and is acquired by Microsoft in 2013.
 MNGT23C – Strategic Business Analysis
Examples of different strategies an organization Productivity
might choose from
 One of the primary responsibilities of a manager
Scale-based is to achieve productive use of an organization’s
Low cost Specialization resources.
strategies
 Productivity is an index that measures output
Flexible relative to input.
Newness High quality
operations

Service Sustainability

External Factors to Consider in Choosing a Strategy

Economic Political Legal

conditions conditions environment

Technology Competition Markets

Competition: the case of SMC’s telecom capability

1) San Miguel Corporation planned to launch a
third mobile operator in the country
2) It announced it is selling its telecoms assets to
PLDT and Globe Telecom
3) The two operators took 50 percent stake and
paid PHP 52.8 billion to SMC
Internal Factors to Consider in Choosing a Strategy

Financial
Human Facilities and
resources and
Resources equipment
suppliers

Products and
Customers Technology
services
 MNGT23C – Strategic Business Analysis
LECTURE 2
The Nature of Strategic Management Key Terms in Strategic Management
Strategic Management –Defined  Competitive advantage
 Strategists
 Art & science of formulating, implementing,
 Vision and mission statements
and evaluating, cross-functional decisions that
 External opportunities and threats
enable an organization to achieve its objectives
 In essence, the strategic plan is a company’s  Internal strengths and weaknesses
game plan  Long-term objectives
 Strategies
3 Stages of the Strategic Management Process  Annual objectives
1) Strategy formulation  Policies
2) Strategy implementation Strategic Management is Gaining and Maintaining
3) Strategy evaluation Competitive Advantage

 Anything that a firm does especially well

compared to rival firms

Vision and Mission Statements

Vision Statement

 What do we want to become?

Mission Statement

 What is our business?

External Opportunities and Threats

Analysis of Trends

 Economic
 Social
 Cultural
 Demographic/Environmental
 Political, Legal, Governmental
 Technological
 Competitors
 MNGT23C – Strategic Business Analysis
Strategies
Basic Tenet of Strategic Management  Means by which long-term objectives are
achieved
 Examples
 Geographic expansion
 Diversification
 Acquisition
 Product development
 Market penetration
 Retrenchment
 Divestiture
 Liquidation
Internal Strengths and Weaknesses  Joint venture
 Controllable activities performed especially well
or poorly Annual Objectives
 Determined relative to competitors
 Short-term milestones that firms must
 Typically located in functional areas of the firm achieve to reach long-term objectives
 Management
 Marketing Policies
 Finance/Accounting
 Production/Operations  Means by which annual objectives will be
 Research & Development achieved
 Management Information Systems
Assessing the Internal Environment

Long-Term Objectives
Strategic Management Model
 Specific results that an organization seeks to
achieve in pursuing its basic mission Strategic Management Process
 Long-term means more than one year  Dynamic & continuous
 Essential for ensuring the firm’s success  More formal in larger organizations
 Provide direction
 Aid in evaluation Strategic Management
 Create synergy
 Communication is a key to successful strategic
 Reveal priorities
management
 Focus coordination
 Provide basis for planning, organizing,
motivating, and controlling
 MNGT23C – Strategic Business Analysis
Benefits of Strategic Management

Benefits of Strategic Management

 Nonfinancial Benefits
 Enhanced awareness of threats
 Improved understanding of competitors’
strategies
 Increased employee productivity
 Reduced resistance to change
 Clearer understanding of performance-
reward relationship
 Enhanced problem-prevention capabilities

Why Some Firms Do No Strategic Planning

 Lack of knowledge of strategic planning

 Poor reward structures
 Fire fighting
 Waste of time
 Too expensive
 Laziness
 Content with success
 Fear of failure
 Overconfidence
 Prior bad experience
 Self-interest
 Fear of the unknown
 Honest difference of opinion
 Suspicion
 MNGT23C – Strategic Business Analysis
LECTURE 3
The Business Vision & Mission Developing Vision & Mission
Vision  A clear mission is needed before alternative
strategies can be formulated and implemented
 Agreement on the basic vision for which the firm
 Participation by as many managers as possible
strives to achieve in the long term is especially
is important in developing the mission because
important.
through involvement people become committed
 “What do we want to become?”
to an organization
Steps to Developing Vision & Mission Statements
1) Have managers read related articles
2) Have managers prepare a vision and
mission statement for the organization
3) Merge the documents into one and distribute
4) Gather feedback from managers
5) Meet to revise the final document
Benefits of Mission Statements
Mission Statement
 Better financial results
 Answers the question:  Unanimity of purpose
“What is our business?”  Resource allocation
 Reveals:  Establishment of culture
what the organization wants to be  Focal point for individuals
whom we want to serve  Establishment of work structure
 An enduring statement of purpose that  Basis of assessment and control
distinguishes one organization from other similar  Resolution of divergent views
enterprises
 A declaration of an organization’s “reason for
being”
Mission Statements are also called

 Creed statement
 Statement of purpose
 Statement of philosophy
 Statement of beliefs
 Statement of business principles
 A statement “defining our business”

Resolution of Divergent Views

Vision & Mission
 A genuine decision must be based on divergent
 Great benefits can be achieved if an organization views to have a chance to be a right and effective
 Systematically revisits their vision and decision
mission statement  Considerable disagreement over vision and
 Treats them as living documents mission statements can cause trouble if not
 Considers them to be an integral part of resolved
the firm’s culture
 Profit & vision are necessary to effectively
motivate a workforce
 Shared vision creates a community of interests
 MNGT23C – Strategic Business Analysis
Vision & Mission Statements Utility of Firm’s Products to Customers

 Provide unity of direction  Do not offer me things.

 Promote shared expectations  Do not offer me clothes. Offer me attractive
 Consolidate values looks.
 Project a sense of worth and intent  Do not offer me shoes. Offer me comfort for my
 Affirm the company’s commitment to feet and the pleasure of walking.
responsible action  Do not offer me a house. Offer me security,
comfort, and a place that is clean and happy.
 Do not offer me books. Offer me hours of
Declaration of Attitude
pleasure and the benefit of knowledge.
 Broad in scope  Do not offer me CDs. Offer me leisure and the
 Generate strategic alternatives sound of music.
 Not overly specific  Do not offer me tools. Offer me the benefits and
 Reconciles interests among diverse the pleasure that come from making beautiful
stakeholders things.
 Finely balanced between specificity & generality  Do not offer me furniture. Offer me comfort and
 Arouse positive feelings & emotions the quietness of a cozy place.
 Motivate readers to action  Do not offer me things. Offer me ideas,
 Generate favorable impression of the firm emotions, ambience, feelings, and benefits.
 Reflect future growth  Please, do not offer me THINGS.
 Provide criteria for strategy selection
 Basis for generating & evaluating strategic
options
 Dynamic in nature

Mission & Customer Orientation – Vern

McGinnis

 Define what the organization is

 Define what it aspires to be
 Limited to exclude some ventures
 Broad enough to allow for growth
 Distinguishes firm from all others
 Framework for evaluating activities
 Stated clearly – understood by all

Mission & Customer Orientation

 An effective mission statement:

o Anticipates customer needs
o Identifies customer needs
o Provides product/service to satisfy needs
o Identifies the utility of a firm’s products to its
customers
 MNGT23C – Strategic Business Analysis
LECTURE 4
The External Assessment Social, Cultural, Demographic & Environmental
Forces
External Strategic Management Audit
U.S. Facts
 Identify & Evaluate factors beyond the control of
a single firm  Aging population
 Increased foreign competition  Less Caucasian
 Population shifts  Widening gap between rich & poor
 Information technology  2025 = 18.5% population >65 years
Key External Forces & the Organization  2075 = no ethnic or racial majority
Key Social, Cultural, Demographic & Environmental
Variables

 Childbearing rates
 Number of special interest groups
 Number of marriages & divorces
 Number of births & deaths
 Immigration & emigration rates

Political, Government & Legal Forces

Performing External Audit Globalization of Industry

 Worldwide trend toward similar consumption

patterns
 Global buyers and sellers
 E-commerce
 Technology for instant currency transfers

Competitive Forces
Identifying Rival Firms
I/O Perspective Firm Performance
 Strengths
 Weaknesses
 Capabilities
 Opportunities
 Threats
 Objectives
 Strategies

7 Characteristics of most Competitive U.S. Firms:

1) Market share matters
2) Understand what business you are in
3) Broke or not, fix it
4) Innovate or evaporate
5) Acquisition is essential to growth
6) People make a difference
7) No substitute for quality
 MNGT23C – Strategic Business Analysis
The Five-Forces Model of Competition Industry Analysis: Competitive Profile Matrix
(CPM)

 Identifies firm’s major competitors and their

strengths & weaknesses in relation to a sample
firm’s strategic positions

The Global Challenge

Faced by U.S. Firms

 Gain & maintain exports to other nations

 Defend domestic markets against imported
goods

Industry Analysis: The External Factor

Evaluation (EFE) Matrix
Summarize & Evaluate
 MNGT23C – Strategic Business Analysis
LECTURE 5
The Internal Assessment

Nature of an Internal Audit

 Basis for Objectives & Strategies

 Internal strengths/weaknesses
 External opportunities/threats
 Clear statement of mission
Internal Audit

 Parallels process of external audit

 Information from:
 Management
 Marketing
 Finance/accounting
 Production/operations
 Research & Development
 Management Information Systems

Resource Based View (RBV)

Approach to Competitive Advantage

 Internal resources are more important than

external factors
Three All Encompassing Categories
1) Physical resources
2) Human resources
3) Organizational resources
Empirical Indicators

 Rare
 Hard to imitate
 Not easily substitutable Management

Integrating Strategy & Culture

Organizational Culture

 Pattern of behavior developed by an

organization as it learns to cope with its problem
of external adaptation and internal
integration…is considered valid and taught to
new members
 MNGT23C – Strategic Business Analysis
Marketing  User-friendly
 E-commerce
Customer Needs/Wants for Products/Services
1) Defining
Managerial Questions Checklist
2) Anticipating
3) Creating  Does the firm use strategic-management
4) Fulfilling concepts?
Marketing Functions  Are company objectives and goals measurable
and well communicated?
1) Customer analysis  Do managers at all hierarchical levels plan
2) Selling products/services effectively?
3) Product & service planning  Do managers delegate authority well?
4) Pricing  Is the organization’s structure appropriate?
5) Distribution  Are job descriptions and specifications clear?
6) Marketing research  Is employee morale high?
7) Opportunity analysis  Are employee turnover and absenteeism low?
 Are organizational reward and control
Finance/Accounting mechanisms effective?

Finance/Accounting Functions
Marketing Audit Checklist
1) Investment decision (Capital budgeting)
2) Financing decision  Are markets segmented effectively?
3) Dividend decision  Is the organization positioned well among
4) Financial analysis – Key financial ratios competitors?
 Has the firm’s market share been increasing?
 Are present channels of distribution reliable and
Production/Operations
cost-effective?
Production/Operations Functions  Does the firm have an effective sales
organization?
 Process  Does the firm conduct market research?
 Capacity  Are product quality and customer service good?
 Inventory  Are the firm’s products and services priced
 Workforce appropriately?
 Quality  Does the firm have an effective promotion,
advertising, and publicity strategy?
Research & Development  Are marketing planning and budgeting effective?
 Do the firm’s marketing managers have
Research & Development Functions adequate experience and training?
 Development of new products before
competitors Accounting Audit Checklist
 Improving product quality
 Improving manufacturing processes to reduce  Where is the firm financially strong and weak as
costs indicated by financial ratio analysis?
 Can the firm raise needed short-term capital?
 Can the firm raise needed long-term capital
Management Information Systems through debt and/or equity?
 Information Systems  Does the firm have sufficient working capital?
 CIO/CTO  Are capital budgeting procedures effective?
 Security  Are dividend payout policies reasonable?
 MNGT23C – Strategic Business Analysis
 Does the firm have good relations with its 3) How does each ratio compare with key
investors and stockholders? competitors?
 Are the firm’s financial managers experienced
and well trained?
Production/Operations Audit Checklist

 Are suppliers of raw materials, parts, and

Accounting Ratios
Liquidity ratios measure a firm’s ability to
meet maturing short-term obligations.
 Current ratio
 Quick (acid-test) ratio
Leverage ratios measure the extent to which a
firm has been financed by debt.
 Debt-to-total-assets ratio
 Debt-to-equity ratio
 Long-term debt-to-equity ratio
 Times-interest-earned (coverage) ratio
subassemblies reliable and reasonable?
 Are facilities, equipment, machinery, and offices
in good condition?
 Are inventory-control policies and procedures
effective?
 Are quality-control policies and procedures
effective?
 Are facilities, resources, and markets
strategically located?
 Does the firm have technological competencies?
Carroll’s four responsibility of business.

Activity ratios measure how effectively a firm is

using its resources.

 Inventory turnover
 Fixed assets turnover
 Total assets turnover
 Accounts receivable turnover
 Average collection ss as shown by returns
generated on sales and investment. period
Profitability ratios measure management’s
overall effectiveness

 Gross profit margin

 Operating profit margin
 Net profit margin
 Return on total assets
 Return on stockholders’ equity
 Earnings per share
 Price-earnings ratio
Growth ratios measure the firm’s ability to
maintain its economic position in the growth of the
economy and industry.

 Sales
 Net income
 Earnings per share
 Dividends per share
1) How has each ratio changed over time?
2) How does each ratio compare to industry
norms?