Del

taAi
rl
ines

By2002,
Delt
afacedcompeti
tiv
et hr
eatt
oit
smar
ketposi
ti
on:
whi
ch
i
slowcostcar
ri
ersLCCs t
hreat.

I
t’
slow-
costcompet
it
ionf
rom compani
esl
i
keJet
BlueorSout
hwest
.

Del
ta'
sunitcost
sar
ehi
ghert
hant
hoseofSout
hwest
,Ai
rTr
anand
Jet
Blue.

Del
ta'
sabil
it
ytocompeteeffect
ivel
ywi t
hlow-costcarr
iersdepends,
i
npart,oni
tsabi
li
tytoachi
eveoperatingcostsperavai
lableseat
mil
e("uni
tcost
s")t
hatarecompet i
ti
vewiththosecarri
ers.

ThetaskforceconsideredDel
ta’
sopti
ons,Amongtheopt
ionsonthe
tabl
ewast hepossibil
i
tythat:
Deltawoul
dlaunchi
tsownlow-cost
subsi
diar
y

ButWe’venev
erseenahi
gh-
costcar
ri
ert
ransf
ormi
tsel
fint
oal
ow-
costcar
ri
er

They
’l
lst
il
lbeahi
gh-costcar
ri
ersel
l
ingcheapseat
s

Buttheprobl
em i
snearl
yallmaj
orair
li
neshaddonet
his
unsuccessf
ull
y,
 pr
ovedunsust
ainabl
eovert
ime

Ther
ear
ethr
eest
rat
egi
copt
ionst
hatar
eav
ail
abl
e:

-Modi
fi
cat
ioni
ntheDel
taExpr
ess.

-Rei
ntegr
atewi
tht
hepr
imar
yDel
tabr
and.

-l
aunchanewl owcostsubsidi
arythatrequi
rest
ensofmill
ionsof
dol
larsf
orthesetupcostandtheexplanati
ontotheshar
eholder
sas
wel
l ast
otheindustr
yanalyst
s.
I
ndust
ryanal
ysi
s

Bar
gai
ningpowerofsuppli
ershighThr
eatofnewent r
ants
l
owBargai
ningpowerofbuyerslowThreatofsubst
it
utes
moder
ateForcesofi
ndust
ryrival
ryhi
gh

St
rat
egi
cal
ter
nat
ives

Est
abl
ishthenewLLCdi
vi
sion,
Thi
sst
rat
egyneedcont
rol
overcost
andhi
ghloadfact
or.

Don'
tfol
lowLCC'sandfocusonval
ueaddedser
vicesbyusi
ngt
he
avai
l
ablecapabi
l
iti
esanddif
fer
enti
atet
hemsel
ves.

Usehubandspokest rategyandworkwithLCC'sairl
i
nesby
acquisit
ionorpart
ner
ships,Del
tacoul
dhav emorelongdistances
fl
ightswhichreducet
het ot
alcost
,anditcoul
dhav eahigherload
factorsothethi
rdoneistherecommendedstrategyfrom my
perspectiv
e
Recommendat
ion

-Del
ta shoul
dtrytobui
l
dst
rongr
elat
ionshi
pwi
thuni
onsaswel
las
l
owerthelaborcost.

-Thecompanyshouldalsostr
engt
hentheassoci
ati
onbetweent
he
marketi
ngandsalesdepart
mental
ongwithdif
fer
enti
ati
ngthe
ser
vicesthant
hoseofthecompeti
tor
s.

-I
tisimportantf
orthe 
company 
tohav
ea  costadv
ant
age 
aswellas
adif
ferent
iati
onstr
ategyinor
dert
oovercomet hei
ncr
easi
ngt
hreat
oft
hel owcostcompet i
tor
.

-pr
ovi
det
heonl
i
nespeci
aldi
scountof
fer
s

-Thecompanycanint
roducehol
idaypackageal
ongwi
tht
he
faci
l
iti
est
oit
sloyal
customers 

-DeltaAirl
i
nesneedstof
ocuscontinuousl
yonthei
nnov
ati
onand
enhancethecust
omerservi
cetocompet ewit
hthegr
owing
competit
ionfr
om thel
owcostcarr
iers.

-Itisalsorecommendedt hatt
heboardofDelt
aAir
li
nesneedsto
developattr
acti
vepromot i
onprogramsfort
hecustomersthatmay
i
ncludepromot i
onrelatedtothefr
equentf
lyerandmembershipcar
d
l
ongwi ththespeci
al faci
li
ti
es.
Envir
onment alScanningisthemoni t
oring,ev aluatingand
di
ssemi nati
ngofinformati
onf r
om theex ternal andi nter
nal
envir
onment stokeypeoplewi t
hint
heor ganizat i
on.Strategy
Formulati
on: t
hedevelopmentoflong-rangepl ansf ortheeffect
ive
managementofenv ir
onment al
opportuniti
esandt hreatsinli
ghtof
organiz
ationalst
rengthsandweaknesses( SWOT) .

Str
at egyf ormulati
on-concer
nsdevelopingacorporat
ion’
smi ssion,
objecti
v es,str
ategi
esandpolici
esSit
uat i
onAnaly
sis-t
hepr ocessof
fi
ndingast rat
egicfi
tbetweenexter
nal oppor
tuni
ti
esandi nter
nal
str
engt hswhi l
ewor ki
ngaroundexternalandint
ernalweaknesses

Poli
cies-thebr
oadguidel
i
nesfordeci
sionmakingthatl
i
nkst
he
for
mul at
ionofastr
ategywit
hit
simplementat
ion.

Str
ategyimpl
ementat
ion:t
heprocessbywhichst
rat
egi
esand
pol
ici
esareputi
ntoacti
onthr
oughthedevel
opmentofprogr
ams,
budgetsandpr
ocedur
es.

Eval
uati
onandcontr
ol:t
heprocessi
nwhichcorpor
ateact
ivi
ti
esand
perf
ormancer
esul
tsaremonitor
edsothatact
ualper
for
mancecan
becomparedt
odesiredper
formance

Tri
ggeri
ngevent:somet hingthatactsasast i
mulusforachangei
n
str
ategyandcaninclude:NewCEO, Ext
ernali
nter
venti
on,Thr
eatof
changeofownership,Performancegap, Str
ategi
cinf
lect
ionpoi
nt.
Strat
egicaudi
tpr
ovidesacheckl
i
stofquest
ions,
byareaori
ssue,
thatenabl
esasyst
emat i
canal
ysi
stobemadeofv ar
iouscor
porat
e
functi
onsandact
ivi
ti
es.

Corporati
on:amechani sm est
abl
ishedtoall
owdifferentpar
tiesto
contri
butecapit
al,
experti
seandlaborfort
heirmutual
benefit
Corporat
ionisgovernedbytheboardofdi
rectorsthat
overseestopmanagementwi t
htheconcurr
enceoft heshareholder
s.

Corporategov
ernance:t
herel
ati
onshi
pamongt heboar
dof
di
rectors,t
opmanagementandshareholdersindet
ermi
ningt
he
di
recti
onandperformanceoft
hecorporation

RESPONSI
BILI
TYOFTHEBOARD

SETTI
NGCORPORATESTRATEGYHI RI
NGANDFI RI
NGTHECEO
ANDTOPMANAGENET. CONTROLLING,MONITORI
NGOF
SUPERVI
SINGTOPMANAGEMENT. REVIEWI
NGANDAPPROVING
THEUSEOFRESOURCES.LOOKI
NGAFTERTHEI NTERESTOF
STALKHOLDERS.

Theboar
drol
eist
ocar
ryoutt
hreebasi
ctasks:

1)Monit
ori
ng–Moni
tordev
elopment
sinsi
deandout
sidet
he
cor
porat
ion

2)Ev
aluat
e&I
nfl
uence-
-Rev
iewpr
oposal
s,adv
ise,
prov
ide
suggest
ionsandal
ter
nat
ives

3)I
nit
iat
e&Det er
mine-
-Del
i
neat
ecor
por
ati
on’
smi
ssi
onandspeci
fy
st
rat
egicopt
ions

I
dent
if
yingExt
ernalEnv
ironment
alVar
iabl
est
hrough:

Indust
ryanaly
sis-ani
n-dept
hexami
nat
ionofkeyf
act
orswi
thi
na
corpor
ati
on’staskenv
ironment

I
dent
if
yingExt
ernalEnv
ironment
alVar
iabl
es

STEEPAnal ysis-moni t
ori
ngtrendsinthesocietalandnat ur
al
envir
onment sSociocult
ural
-Technol
ogical
-Economi c-Ecol
ogical
-
Poli
ti
cal-
legalforcesCompet i
ti
veadvantagecomesf rom:knowledge
ofenvir
onment wi l
l
ingnesstotakeri
sksCannibalizati
onofown
product
s

Businessmodels-acompany’smet hodformakingmoneyi nthe

curr
entbusi
nessenv i
ronment
IncludesWhothecompanyser vesWhat
thecompanyprovidesHowthecompanymakesmoney Howt he
companydif
ferenti
atesandsustainscompeti
ti
veadvantageHowt he
companyprovi
desi t
sproduct
/serv i
ce

Valuechain-ali
nkedsetofv aluecreati
ngact iv
iti
esthatbegi
nwith
basicrawmat er
ial
scomi ngfrom suppli
er s,movingontoaser i
esof
val
ue-addedacti
v i
ti
esinvol
vedi nproducingandmar kingaproduct
orservice,
andendingwithdistri
butorsget t
ingthefi
nalgoodsinto
thehandsoftheul t
imateconsumer
I
ndust
ryVal
ueChai
nAnal
ysi
s

Thev aluechainsofmosti ndustri

escanbespl i
tint
ot wosegment s,
upstream anddownst ream.I nthepet r
oleum industry,
forexample,
upstream referstooil explorat
ion,dr i
ll
ing,andmov ingthecrudeoil
tother efi
nery,anddownst r
eam ref er
st orefi
ningtheoilpl
us
transporti
ngandmar ket i
nggasol ineandr ef
inedoiltodist
ri
butors
andgasst at
ionr et
ail
er s.Eventhoughmostl argeoilcompaniesare
compl etel
yintegrated, t
heyof t
env aryintheamountofexper t
ise
theyhav eateachpar toft hevaluechai n

Val
uechai
nsegment
sincl
ude:
Upst
reamDownst
ream

Centerofgrav
ity
-thepartofthechai
nthati
smosti mpor
tanttothe
companyandt hepointwhereit
scorecompetenci
esli
eVert
ical
i
ntegrat
ion

Val
uechai
nanal
ysi
s

Pr
imar
yact
ivi
ti
es

Inboundlogi
sti
cs,
Oper
ati
ons,
Out
boundl
ogi
sti
cs,
Mar
ket
ingand
sales,Servi
ce

Suppor
tact
ivi
ti
es

Pr
ocurement
,Technol
ogydevelopment
,Humanr
esour
ce
management
,Fir
mi nf
rast
ruct
ure
Cor
por
ateCul
tur
e:TheCompanyWay

Corpor
atecul
ture-thecol
l
ect i
onofbeli
efs,expectat
ionsandval
ues
l
earnedandsharedbyacor porati
on’
smember sandt r
ansmi
tt
ed
fr
om onegenerati
onofempl oyeestoanother
.

Cul
tural
int
ensi
ty-t
hedegreeofwhichmember sofauni
tacceptt
he
nor
ms, val
uesandothercul
tur
alcont
entassoci
atedwi
ththe
uni
tShowsthedepthofthecul
tur
e

Cultur
ali
ntegr
ati
on-t
heex
tentofwhichuni
tsthr
oughoutt
he
organi
zat
ionshareacommoncult
ureShowsthebreadt
hofthe
cult
ure

Marketi
ngMi x-thepart
icul
arcombi
nat
ionofkeyvar
iabl
esundera
cor
porati
on’scontrolt
hatcanbeusedt
oaffectdemandandtogain
competi
tiv
eadv antage

SFASsummar izesanorganizat
ion’
sst
rat
egicfact
orsbycombini
ng
theexter
nalf
actorsf
rom theEFASTablewiththei
nter
nalfact
ors
from t
heIFASTableTodeal wit
hswotcri
ti
sism

Propi
ti
ousni che-wher
eanor gani
zat
ioncanuseitscore
competenciestotakeadvant
ageofaparti
cularmarketoppor
tuni
ty
andthenicheisjustl
argeenoughforonefi
rmt osat
isfyi
tsdemand

St
rat
egi
csweetspot-acompanyi
sabl
etosat
isf
ycust
omer
s’needs
i
nawaythatr
ival
scannot
Str
ategi
cwindow-auni
quemar
ketoppor
tuni
tyt
hati
sav
ail
abl
efora
par
ticul
art
ime

TOWSMat ri
x-i
l
lustr
ateshowt heext
ernal
oppor
tuni
ti
esandthr
eats
canbematchedwithinternalstr
engt
hsandweaknessest
oresul
tin
4possi
blest
rat
egicalternati
ves

Pr
ovi
desameanst
obr
ainst
orm al
ter
nat
ivest
rat
egi
es

Forcesmanager
stocreat
evar
iouski
ndsofgr
owt
hand
ret
renchmentst
rat
egi
es

Usedt
ogener
atecor
por
ateaswel
lasbusi
nessst
rat
egi
es
Businessst
rat
egyfocusesonimprov
ingthecompeti
ti
veposi
ti
onof
acompany ’
sorbusi
nessunit’
spr
oductsorserv
iceswi
thi
nthe
specif
ici
ndust
ryormarketsegmenti
tserves

Quest
ions:

l
owercostordi
ff
ract
ion?

Headt
oheadwi
thourcompet
it
orsorf
ocusonadesi
redni
ch?

Tacti
c-aspeci
fi
coper
ati
ngpl
anthatdet
ail
showastrat
egyi
sgoing
tobeimplement
edint
ermsofwhenandwhereiti
stobeputi
nto
act
ion

Nar
roweri
nscopeandshor
teri
nti
mehor
izont
hanst
rat
egi
es

Str
ategi
cAlli
ances-al ong-
ter
m cooperati
vear r
angementbet ween
twoormor eindependentfi
rmsorbusinessuni t
st hatengagein
busi
nessactivi
ti
esformut ual
economicgai nUsedt o:
Obtainorlear
n
newcapabili
ti
esObtainaccesstospeci
ficmar ketsReducefinanci
al
ri
skReducepolit
icalr
isk

Whati
saSt
rat
egyMap?

Astrategymapi sasimpl egraphicthatshowsal ogi

cal,
cause-and-
eff
ectconnect i
onbetweenst rat
egicobjecti
ves(shownasov alson
themap) .Iti
soneoft hemostpower ful
elementsinthe 
balanced
scorecard 
met hodol
ogy,asitisusedt oquickl
ycommuni catehow
val
uei screatedbytheorganizati
on.

HowDoesSt
rat
egyMappi
ngHel
panOr
gani
zat
ion?

St
rat
egymappi
ngcanv
ast
lyi
mpr
oveanyst
rat
egycommuni
cat
ion
effort.Mostpeopl earev isual
learner
sandsoapi ct
ureofy our
strategywi l
l beunderstoodbymanymor eemployeesthanawr it
t en
narrative.Plustheprocessofdev elopingastr
ategymapf orcest he
team t oagreeonwhatt heyaret r
yingtoaccomplishinsimpl e,easy-
to-under st
andt er
ms.Wi thawell-
designedstr
ategymap, ever y
empl oyeecanseehowt heycontr
ibutetotheachievementoft he
organi zati
on’sobject
ives.

WhatDoesaSt
rat
egyMapLookLi
ke?

Theex ampl ebel owdemonst rat

eshowabusi nessmi ghtorganize
theirstrategicobj ecti
v esacrossthefour  
perspect ives of
the balancedscor ecar d.Arr
owsar eusedt oi ll
ust r
atet hecause-and-
effectr el
ationshipbet weent heobjectives.Byf ol
lowingt hepathof
thear rows, youcanseehowt heobjectivesint hel owerper specti
ves
dri
v ethesuccessoft hehi gherones.Thesecausal r
elationshi
psar e
cent r
al tothei deaofst r
ategi
cplanningandmanagementwi tha
balancedscor ecar d.Ifyou I
mprov eKnowl edgeandSki ll
s and
Impr oveTool sandTechnol ogy 
(i
nt heOr ganiz ati
onal Capacity
perspect ive),youwi ll
mor eeasi
ly
 IncreasePr ocess
Effici
ency  and LowerCy cleTime 
(intheI nternal Process
Per spective).Ifyoudot hosethi
ngs, youwi ll
mor eeasi ly
 LowerWai t
Time, andsoon.

HowDoYouDev
elopaSt
rat
egyMap?

Strat
egyMapdev elopmenthappensdur i
ngStepFouroft he 
Nine
Stepst oSuccess™.Att hispoint,t
heor gani
zati
onshouldhav e
compl etedaf ullstrategyassessmentanddev elopedhighlevel
strat
egyel ement slikeMi ssion,VisionandThemes/ Goals.The
organizati
on’sbusi nessmodel wil
l hel
pthem choosethe
ri
ght perspectiv
e  namesandor der.Themappingpr ocessbegins
whent heor ganizationi denti
fi
escont i
nuousi
mpr ovementobjecti
ves
neededtoachieveitsvisi
onandgoals.Wer ecommendobj ectiv
es
thataresi
mple,easytounderst
and,andt hatimpl
ycont i
nuous
i
mpr ovement.Objecti
vesarei
dent
if
iedf orall
fourperspect
ivesand
thencause-
effectarr
owsar edr
awnt oindicat
etheflowofv alue
creat
ion.

Corpor
atest
rat
egy-t
hechoiceofdirect
ionofthefir
m asawhole
andthemanagementofi
tsbusinessorproductportf
oli
oand
concer
ns:
Dir
ecti
onal
str
ategyPort
fol
ioanalysi
sParenti
ngst
rat
egy

Di
rect
ionalstr
ategy-t
hefi
rm’
sov
eral
lor
ient
ati
ont
owar
dgr
owt
h,
st
abil
i
ty,orret
renchment
Portf
oli
oanal
ysis-i
ndust
ri
esormarketsi
nwhi
cht
hef
ir
m compet
es
thr
oughitspr
oductsandbusi
nessuni
tes

Parentingst
rat
egy-themannerinwhichmanagementcoordi
nat
es
acti
vit
iesandtr
ansfersresour
cesandcul
ti
vat
escapabil
i
tiesamong
productli
nesandbusinessunit
s

Turnar
oundstr
ategy-emphasi
zest
hei
mprov
ementofoper
ati
onal
ef
fi
ciencywhenthecorpor
ati
on’
spr
obl
emsareper
vasi
vebutnot
cr
it
ical

Contracti
on-ef
for
ttoqui
ckl
y“st
opthebl
eedi
ng”acr
osstheboard
butinsizeandcost
sConsol
i
dati
on-st
abi
l
izat
ionoft
henewleaner
corporati
on

Functionalst
rategy -t
heappr oachaf unct
ional areatakest
oachi eve
corporateandbusi nessunitobjecti
vesandst rategiesbymax i
mi zi
ng
resourceproducti
v i
tyReengineeri
ng-theradical r
edesignofbusiness
processestoachi evemaj orgainsincost,servi
ce, orti
meProgram to
i
mpl ementat urnaroundst r
ategy

St
rat
egi
cManagement

Manager
ial
deci
sions&acti
onst
hatdet
ermi
nest
hel
ong-
run
per
for
manceofabusiness.
Apr
ocessofmanagi
ngaf
ir
m’sr
elat
ionshi
pwi
thi
tsenv
ironment
:

St
rat
egi
cpl
anni
ng

Capabi
l
itypl
anni
ng

Managi
ngchange

PHASESOFSTRATEGI
CMANAGEMENT

4Ty
pesofSt
rat
egi
cManagement

Basi
cfi
nanci
alpl
anni
ng(
upt
o1y
ear
)

For
ecast
-basedpl
anni
ng(
1to5y
ear
s)

Ext
ernal
l
y-or
ient
edpl
anni
ngSt
rat
egi
cmanagement

FocusofStr
ategicManagement:
Longter
m or
ientat
ionandf
it
betweenenv
ironment,
str
ategy
,st
ruct
ureandprocessesmayleadt
o
competi
ti
veadv ant
age

St
rat
egi
es-f
orm acompr
ehensi
vemast
erpl
ant
hatst
ateshowt
he
cor
por
ati
onwi
l
lachi
evei
tsmi
ssi
onandobj
ect
ives

Hi
erar
chyofst
rat
egy

-Cor
porat
e:ov
eral
ldi
rect
ionofcompanyandmanagementofi
ts
busi
ness

-
Busi
ness:
compet
it
iveandcooper
ati
vest
rat
egi
es

-
Funct
ionalmaxi
mizer
esour
cepr
oduct
ivi
ty

Durabi
l
ity
-therateatwhi
chafir
m’sunderl
yingr
esources,
capabi
l
iti
es,orcorecompet
enci
esdepreci
ateorbecomeobsol
ete
Imit
abi
li
ty-t
her at
eatwhichaf i
rm’
sunder
lyi
ngresources,
capabi
l
iti
es,orcorecompetenci
escanbedupli
catedbyother
s

Transparency-thespeedatwhichotherfi
rmsundertherelat
ionship
ofresourcesandcapabili
ti
essupportasuccessfulst
rat
egyGill
ette’
s
razordesignsareverydi
ffi
cul
ttocopy,part
lybecausethe
manuf act
uringequipmentneededtoproduceiti
ssoex pensi
veand
complicated

Transf
erabi
li
ty-t
heabili
tyofcompet
it
orst
ogat
hertheresour
ces
andcapabil
i
tiesnecessaryt
osuppor
tacompet
it
ivechal
lenge

Repli
cabili
ty-theabi
li
tyofcompet it
orstousedupl i
cat
edresources
andcapabi l
i
tiestoimitat
etheotherf i
rm’ssuccess.Forexample,
eventhoughmanycompani eshavet r
iedtoimitateProct
er&
Gambl e’
ssuccesswi thbrandmanagementbyhi r
ingbrand
manager sawayf rom P&G,theyhaveof tenfail
edtodupli
cateP&G’s
success.Thecompet itorsfai
l
edt oidentif
ylessvisi
bleP&G
coordi
nationmechani smsort oreal
izethatP&G’ sbrand
managementst yl
econf l
i
ctedwiththecompet i
tor
’sowncorporate
cult
ure

Expl
ici
tknowledge-knowl
edget
hatcanbeeasi
l
yar
ti
cul
atedand
communicated
Tacitknowledge-knowledget
hati
snoteasi
lycommunicat
ed
becauseiti
sdeepl yroot
edinempl
oyeeexperi
enceori
nthe
company ’
scultur
e

Vert
icalgrowth-takingovert
hef unctionprevi
ouslyprovi
dedbya
suppli
erorbyadi stri
butor
Vert
icalintegrat
ion-thedegreetowhicha
fi
rm operatesvert
icall
yinmult
iplelocati
onsonani ndust
ry’
sv al
ue
chai
nf r
om ex t
racti
ngr awmaterial
st omanuf actur
ingtoretai
l
ing

Backwardi
ntegr
ati
on-assumi
ngaf
unct
ionpr
evi
ousl
ypr
ovi
dedbya
suppl
ier

For
war dint
egr
ati
on-assumi
ngaf
unct
ionpr
evi
ousl
ypr
ovi
dedbya
di
str
ibutor

Hori
zont
algrowth-expansionofoperat
ionsint
oothergeographi
c
l
ocati
onsand/orincr
easingtherangeofproductsandserv
ices
of
fer
edtocurrentmarketsHori
zontalgr
owthisachievedt
hrough:

I
nter
nal
dev
elopment

Acqui
si
ti
onsSt
rat
egi
cal
l
iances

Hori
zontali
ntegrat
ion-thedegr
eetowhichaf
irm oper
atesi
n
mult
ipl
egeogr aphi
clocati
onsatthesamepoi
ntonanindust
ry’
s
val
uechain

Horizontalst
rat
egy-cutsacr
ossbusi nessunitboundari
estobui
ld
synergyacrossbusi
nessunitsandtoi mprovecompet i
ti
veposi
ti
on
i
noneofmor ebusinessunit
sMult
ipointcompet i
ti
on-lar
gemulti
-
businesscorpor
ati
onscompet eagainstotherlar
gemul t
i-
busi
ness
f
ir
msi
nanumberofmar
ket
s

Marketdevel
opmentstrat
egy-provi
destheabil
it
yto:Capt
urea
l
argermarketshar
eMarketsatur
ati
onMarketpenetr
ati
onDevel
op
newusesand/ ormar
ketsforcurr
entpr
oductsP&g-col
ogat
e-
pal
molive

Pr
oductdevel
opmentstr
ategy-provi
destheabi
li
tyto:Devel
opnew
pr
oduct
sforexist
ingmar
ketsDevelopnewproductsfornewmar ket
s

Outsourcingpur
chasingfrom someoneel
seaproductorser
vice
thathadbeenpreviouslyprov
idedi
nter
nal
l
yAvoi
doutsourci
ng
dist
inct
ivecompetencies

Off
shor
ing-t
heoutsour
cingofanacti
vit
yoraf unct
iontoawholl
y-
ownedcompanyoranindependentpr
ovideri
nanothercount
ry

Di
sadv
ant
agesofout
sour
cingandof
fshor
ing

Customercomplai
ntsLong-t
erm contract
sAbi
li
tyt
olear
nnewskil
l
s
anddev el
opnewcorecompet enci
esLackofcostsavi
ngsPoor
productqual
i
tyI
ncr
easedt r
ansportat
ioncosts

STRATEGI
CAUDI
TOFACORPORATI
ON
1-CURRENTSI
TUATI
ON:

STRATEGI
CPOSTURE

MI
SSI
ON

OBJECTI
VES

STRATEGI
ESPOLI
CIES

2-CORPORATEGOVERNANCE:

BOARDOFDI
RECTORS

TOPMANAGEMENT

3-EXTERNALENVI
RONMENT:

GENERALENVI
RONMENT:

ECONOMI
C

TECH

POLI
TICAL

SOCI
OCULTURAL

4-TASKENVI
RONMENT:

COMPETI
TORS

NEW ENTRANTS

SUPPLI
ERS

SUBSTI
TUTES

UNI
ONS-
GOV.

I
NTERESTGROUPS
SUMMARYOFE.
F(EFASMATRI
X)P1744

I
NTERNALENVI
RONMENT:

STRENGTHANDWEAKNESSES:

STRUCTURECULTURERESOURCES:

MARKETI
NGFI
NANCE

R&D

OPERATI
ONANDLOGI
STI
CS

HUMANRESOURCES

I
NFORMATI
ONTECH

SUMMARYOFI
NTERNALFACTORS(
IFASP.
212)

5-ANALYSI
SOFSTRATEGI
CFACTORS:

SI
TUATI
ONALANALYSI
S(SFASMATRI
XP.
226-
227.

6-REVI
EW OFMI
SSI
ONANDOBJECTI
VES.

7-STRATEGI
CALTERNATIVESANDRECOMMENDATI
ONS:
STRATEGICALTERNATI
VES(TOWSMATRIXP.
230

RECOMMENDEDSTRATEGY

CaseSt
udy

HowdoIpr epar
e, analyzeanddi scusscasepr obl
ems? Prepar
ingfor
i
n-classdi
scussionTr yfi
rsttogetaqui cksenseoft hewholecaseIf
thi
si sacaserequiringadeci si
on, whoisthekeydeci si
onmaker ?
Rereadthecasef orunder li
ningorhi ghl
i
ghti
ngkeyf actsandtryto
i
dent i
fyt
hekeypr obl emsWhatar et hepossibl
ecoursesofact i
onfor
thedecisi
onmaker ? Di scussioninclassBepreparedtopr esentyour
i
deaswi thconv iction,andt osupportthem withcareDonotwai tt
oo
l
ongt ogeti nvolvedi nthedi scussionIfyouwantt oraiseani ssue
thati
scompl etelydifferentf r
om theonet heclassisdiscussing,
considerwai t
ingunt ilthecl assisreadytomov et oanotherissue.
Trytobeal erttokeept hecl assdiscussionmov ingtoward
construct
ivesol utionst ot hecase.Don’thesit
atetoadmi tyouar e
confused,needcl ari
fi
cat ion,orsimplybewr ong.

Astr
ategicmanagement( SM)casest udydescri
besanorganiz
ation’
sext
ernalandint
ernalcondit
ionandraisesissuesconcer
ningthe
fi
rm’
smi ssi
on,st
rategi
es,object
ivesandpolici
es.
SM casesmor e
comprehensi
vethaninothercourses

Poi
ntst
obecov
eredi
ncasedi
scussi
onsandpr
esent
ati
ons

Externalopportuni
ti
esandthr eatsMaj orstr
engt hsandweaknesses
oforganizati
onFinanci
alconditionExisti
ngst r
ategiesand
objecti
vesFir
m’scompet i
torsandt heirstr
ategiesRecommended
objecti
vesandst rat
egi
eswi t
hr easoni ngWay sofi mpl
ementi
ngy our
recommendat ion;li
kel
yproblemsencount eredandhowt oavoi
d
them

I
ndust
ry-agr
oupoff
ir
mst
hatpr
oducesasi
mil
arpr
oductorser
vice

Por
ter
’s5f
orces:

Thr
eatofnewent
rant
sRi
val
ryamongexi
sti
ngf
ir
msThr
eatof
subst
itutepr
oductsBar
gai
ningpowerofbuyersBargai
ningpowerof
suppl
iersRel
ati
vepowerofotherst
akehol
ders(added)

Threatofnewentr
ant
s-newent
rantstoanindustr
ybringnew
capacit
y,adesi
ret
ogainmar
ketshareandsubstanti
alresour
ces

Ent
rybar
ri
er-anobst
ruct
iont
hatmakesi
tdi
ff
icul
tforacompanyt
o
ent
erani
ndustr
y

Economi
esofscal
e

Pr
oductdi
ff
erent
iat
ion

Capi
tal
requi
rement
s

Swi
tchi
ngcost
s

Accesst
odi
str
ibut
ionchannel
s

Costdi
sadv
ant
agesduet
osi
ze

Gov
ernmentpol
i
cies

Rival
ryAmongExi stingFir
ms-newent r
antstoani ndustr
ybringnew
capacity,adesiretogainmarketshareandsubst ant
ial
resourcesNumberofcompet i
tor
sRateofindustrygrowthProductor
servi
cechar acteri
sti
csAmountoffixedcostsCapacit
y Hei
ghtofexit
barri
ersDiversi
tyofrival
s

Thr
eatofSubstit
uteProductsorSer
vices-pr
oductsthatappear
di
ff
erentbutcansati
sfythesameneedasanot herpr
oduct
Bargaini
ngPowerofBuy ers-abi
li
tyofbuy erstoforcepri
cesdown,
bargai
nf orhi
gherquali
ty,playcompet i
torsagainsteachother
Large
purchasesBackwardint
egr ati
onAl
ternati
v esuppli
ersLowcostto
changesupplier
sProductrepresentsahi ghpercentageofbuyer’
s
costBuyerearnsl
owpr ofi
tsProductisuni mport
antt obuy
er

Bargaini
ngPowerofSuppl
ier
s-abi
l
ityofsuppl
i
erst
orai
sepr
icesor
reducequal
it
y

I
ndust
ryi
sdomi
nat
edbyaf
ewcompani
es

Uni
quepr
oductorser
vice

Subst
it
utesar
enotr
eadi
l
yav
ail
abl
e

Abi
l
ityt
ofor
war
dint
egr
ate

Uni
mpor
tanceofpr
oductorser
vicet
othei
ndust
ry

Rel
ati
vePowerofOt
herSt
akehol
der
s

Gov
ernment

Local
communi
ti
es

Cr
edi
tor
s

Tr
adeassoci
ati
ons

Speci
ali
nter
estgr
oups

Uni
ons

Shar
ehol
der
s
Compl
ement
ors-pr
oduct
sthatwor
kwel
lwi
thaf
ir
m’spr
oduct

St
rat
egi
cTy
pes

Def
ender
s-f
ocusoni
mpr
ovi
ngef
fi
ciency

Pr
ospect
ors-f
ocusonpr
oducti
nnov
ati
onandmar
ketoppor
tuni
ti
es

Anal
yzer
s-f
ocusonatl
eastt
wodi
ff
erentpr
oductmar
ketar
eas

React
ors-l
ackaconsi
stentst
rat
egy
-st
ruct
ure-
cul
tur
erel
ati
onshi
p

Compet it
iveintel
ligence(busi
nessintell
igence)-af ormalprogr
am of
gatheri
nginformat iononacompany ’scompet itorsSourcesof
compet i
ti
veintell
igence:I
nfor
mationbr okersI
nternetIndust
ri
al
espionageInvesti
gat or
yservi
ces

Moni
tor
ingCompet
it
orsf
orSt
rat
egi
cPl
anni
ng

Pri
mar yacti
vit
yofcompetit
ivei
ntel
li
genceist
omoni t
or
compet i
tor
sCompet i
tor
sorgani
zati
onsthatof
fersame,si
mil
ar,
or
substi
tuteproduct
sorservi
cesinthebusi
nessareasi
nwhicha
part
icul
arcompanyoper at
es

Organi
zat
ionalanal
ysi
s-concer
nedwi
thident
if
yinganddev
elopi
ng
anorgani
zati
on’
sresour
cesandcompetenci
es

Cor
eandDi
sti
nct
iveCompet
enci
es

Resour
ces-anor
gani
zat
ion’
sasset
s
Tangi
ble

I
ntangi
ble

Capabi
l
iti
es-acor
por
ati
on’
sabi
l
ityt
oex
ploi
tit
sresour
ces

Cor
eandDi
sti
nct
iveCompet
enci
es

Competency-acr
oss-
funct
ional
int
egr
ati
onandcoor
dinat
ionof
capabi
l
iti
es

Corecompetency-acol
l
ect
ionofcompet
enci
est
hatcr
ossdi
vi
sional
boundar
ies,
iswide

-spr
eadthroughoutt
hecorporat
ionandi
ssomet
hingt
hecor
por
ati
on
doesexceedingl
ywell
Dist
inct
ivecompet
ency

-cor
ecompet
enci
est
hatar
esuper
iort
othoseoft
hecompet
it
ion

Cor
eandDi
sti
nct
iveCompet
enci
es

VRI
Ofr
amewor
k(Bar
ney
)

Val
ue,
Rar
e,I
mit
abi
l
ity
,andOr
gani
zat
ion

Por
ter
’scompet
it
ivest
rat
egi
es

Twogener
icst
rat
egi
es:

Lowercoststrat
egy-t
heabil
it
yofacompanyorabusi
nessunitt
o
design,pr
oduceandmarketacompar
abl
eproductmor
eeffi
cient
ly
thanitscompeti
tor
s
Dif
ferentiat
ionst rategy-theabil
i
tyofacompanyorabusi
nessunit
toprovi
deauni queorsuper i
orvaluet
othebuyeri
nter
msofproduct
qual
ity,special
f eatures,oraft
ersaleser
vice

Costl eadershi
p-al ower-
costcompet itivestr
ategythataimsatt he
broadmassmar ketandrequir
esef f
icientscalefacil
it
ies,cost
reductions,costandov er
headcont r
ol; avoidsmarginalcustomer s,
costmi nimi
zati
oninR&D, ser
vice,salesf orceand
advertising.
eg.
WALMART, DELL,ALAMO, ALDIProvi
desadef ense
againstcompet it
orsProvi
desabar ri
ert oent r
yGeneratesincreased
mar ketshare

Dif
ferentiati
on-invol
vest hecreati
onofapr oductorserv
icethati
s
perceivedthroughoutt heindustr
yasuni que.Canbeassoci at
edwith
design,brandimage, technology,feat
ures,dealernetwor
k,or
customer .Eg:walt
-di
sney ,Maytage,Ni
ke,Apple
com. ,
Mer cedesLowerscust omerssensi t
ivi
tytopriceI
ncr
easesbuyer
l
oyaltyBarri
ertoent r
yCangener atehigherprofi
ts

CostFocus-l ow-costcompet i
ti
vest rat
egythatfocusesona
parti
cularbuyergrouporgeogr aphicmar ketandattemptstoserve
onlythi
sni chetotheexclusionofot hersservi
ce.
eg:pot
lack(t
oil
et
ti
ssue)housebr andf orsavwayv s.P&G: samequalityf
orlowercost
byred.adv.Cost.

Di
ff
erent
iat
ionFocus-concent
rat
esonapar
ti
cul
arbuy
ergr
oup,
productl
inesegment
,orgeographi
cmar kett
oservet
heneedsofa
narrowstrat
egi
cmarketmoreeffect
ivel
ythanit
scompet
it
ors.
eg.
Mor ganMotors(
Bri
ti
sh spor
tcars)-
ethni
cgrocery

Fulli
ntegr
ation-afir
mi nt
ernall
ymakes100%ofi t
skeysuppli
ersand
completel
ycont r
olsit
sdistr
ibutor
sTaperint
egr
ati
on-af
irminter
nall
y
produceslessthanhalfofit
sownr equir
ementsandbuystherest
fr
om outsi
desuppl i
ers

Quasi-
integrati
on-acompanydoesnotmakeanyofi tskeysuppli
es
butpurchasesmostofi tsrequir
ement sfr
om outsidesupplier
sthat
areunderitsparti
alcontrol
Long-t
erm contr
acts-agreements
between2f irmstoprovideagreed-upongoodsandser v
icestoeach
otherf
oraspeci fi
cperiodoftime

Di
ver
sif
icat
ionSt
rat
egi
es
Concent
ri
c(Rel
ated)Diver
sif
icat
ion-gr
owthint
oarel
atedindust
ry
whenafir
m hasastrongcompetiti
veposi
ti
onbutat
tr
acti
venessis
l
ow

Syner
gy-whentwobusi
nesseswi
l
lgener
atemor
epr
ofi
tst
oget
her
thant
heycoul
dseparat
ely

Conglomer ate(Unrelated)Diversif
icati
on-growthint
oanunr el
ated
i
ndustryManagementr eal
izesthatt hecurr
entindust
ryis
unat
tracti
veFi r
ml acksout standingabil
it
iesorskil
lsthati
tcoul
d
easi
l
yt ransfertorel
at edproductsorser vi
cesinotherindust
ri
es

Stabi
lit
yStrategi
es-conti
nuingacti
vi
ti
eswi t
houtanysigni
fi
cant
changeindirecti
onPause/Proceedwit
hcautionstrat
egy-an
opportuni
tytorestbefor
econt i
nui
ngagr owthorretr
enchment
str
ategyNochangest rat
egy-conti
nuanceofcurr
entoperati
onsand
poli
cies

Profi
tStr
ategies-todonothingnewinawor seningsit
uati
onbut
i
nsteadtoactast houghthecompany ’spr
oblemsar eonly
temporar
yRetrenchmentStrategi
es-usedwhent hefi
rm hasaweak
competit
ivepositi
oninsomeoral lofit
sproductli
nesfrom poor
perf
ormance

Capti
veCompanyStrat
egy-companygi
vesupindependencein
exchangef
orsecur
it
ySel
l-
outst
rat
egy-managementcanstil
lobtai
n
agoodpri
cefori
tssharehol
der
sandt heempl
oyeescankeepthei
r
j
obsbysell
i
ngthecompanyt oanotherf
ir
mDiv
estment-sal
eofa
di
vi
sionwi
thlowgrowthpotent
ial

Portfol
ioanalysi
s-managementviewsi
tsproductl
inesandbusi
ness
uni
tsasaser iesofinvest
mentsf
rom whichi
texpectsaprof
it
abl
e
ret
urnPopularportf
oli
oanaly
sist
echni
quesincl
ude:
BCGMat ri
xGE
BusinessScreen

Quest
ionmarks-newproductswi
tht
hepot
ent
ial
forsuccessbut
r
equir
ealotofcashfordevel
opment

Star
s-marketleadersatthepeakoftheirproductcycl
eandareabl
e
togenerat
eenoughcasht omaint
aintheirhi
ghmar ketshar
eand
usual
lycontr
ibutetothecompany’sprofi
ts

Cashcows-productsthatbr
ingi
nfarmor
emoneyt
hani
sneededt
o
maint
aint
heirmarketshare

Dogs-pr
oduct
swi
thl
owmar
ketshar
eanddonothav
ethepot
ent
ial
t
obringi
nmuchcash
Corporateparenting-viewsacor porati
onintermsofresourcesand
capabili
ti
esthatcanbeusedt obuil
dbusinessunitval
ueaswel las
generatesynergi
esacr ossbusinessunit
sGeneratescorpor
ate
str
ategybyf ocusingont hecorecompetenciesoftheparent
corporati
onandt hev aluecreatedfrom t
herelat
ionshi
pbetweent he
parentanditsbusi nesses

Strategyimplement ati
on-thesum totalofall
acti
vi
ti
esandchoices
requiredfortheexecutionofastrategi
cplanWhoar ethepeopl
eto
carryoutthest r
ategicplan?Whatmustbedonet oal
igncompany
operat i
onsintheintendeddirect
ion?Howi sever
yonegoingtowork
togethertodowhati sneeded?

Act
ionpl
an-whatact
ionsar
egoingtobet
aken,bywhom,
dur
ing
whatt
imefr
ame,andwi t
hwhatexpect
edr
esult
s

Evaluati
onandContr
olensur
esthatacompanyi
sachi
evi
ngwhati
t
setouttoaccompl
ishbycomparingper
for
mancewi
thdesi
red
result
sandtaki
ngcorr
ecti
veact
ionasneeded

Benchmarki
ng-theconti
nualprocessofmeasuri
ngproduct
s,
ser
vicesandpracti
cesagai
nstthetoughestcompet
it
orsorthose
companiesrecogni
zedasindustr
yleader
s

Bal
ancedscor
ecar
d–combi
nesf
inanci
almeasur
est
hatt
ell
resul
ts
ofactionsal
readytakenwithoperat
ional
measuresoncustomer
sat
isfacti
on,
inter
nalprocessesandthecorpor
ati
on’
sinnov
ationand
i
mpr ovementacti
viti
es

Fi
nanci
al

Cust
omer

I
nter
nal
busi
nessper
spect
ive

I
nnov
ati
onandl
ear
ning

MarketValueAdded( MVA)-measuresthedif
ferencebetweenthe
marketvalueofacorpor
ati
onandt hecapit
alcontri
butedby
sharehol
dersandlender
sMeasuresthestockmar ket
’sesti
mateof
thenetpresentval
ueofafi
rm’spastandexpectedcapi t
al
i
nvestmentpr oj
ect
s

Sharehol
derVal
ue-thepresentval
ueoftheant
ici
patedf
uture
str
eamsofcashf l
owsfrom thebusi
nessplust
hev al
ueofthe
companyifli
qui
dated

EconomicValueAdded(EVA)-measur
esthedi
ff
erencebet
weent
he
pre-
str
ategyandpost
-st
rat
egyval
uesfort
hebusiness

Pr
imar
yMeasur
esofCor
por
atePer
for
mance

Ret
urnonI
nvest
ment(
ROI
)

Ear
ningspershar
e(EPS)
Ret
urnonequi
ty(
ROE)

Oper
ati
ngcashf
lowFr
eecashf
low

Out
putcontr
ols-speci
fywhati
stobeaccompl
i
shedbyf
ocusi
ngon
t
heendresul
t

Behavi
orcontr
olsspeci
fyhowsomethi
ngisdonethr
oughpolici
es,
rul
es,
standar
doperati
ngprocedur
esandorder
sfr
om super
visors

I
nputcont
rol
semphasi
zer
esour
ces

St
eer
ingcont
rol
smeasur
evar
iabl
est
hati
nfl
uencef
utur
epr
ofi
tabi
l
ity

Costperpassengermi
l
e(ai
rl
ines)

I
nvent
oryt
urnov
err
ati
o(r
etai
l
)

Cust
omersat
isf
act
ion

TotalQual
it
yManagement( TQM)-phil
osophythati
scommi
tt
edt
o
customersat
isf
act
ion andcont
inuousimprovement

ManagementbyObj ect
ives(
MBO) -encouragespart
ici
pat
ive
decisi
onmakingthr
oughsharedgoalsett
ingandperformance
assessmentbasedonachiev
ingst
atedobj ect
ives

Pr
ogr
amsmakest
rat
egi
esact
ion-
ori
ent
ed

Budget
-pr
ovi
dest
hel
astr
eal
checkont
hef
easi
bil
i
tyoft
hest
rat
egy

Pr
ocedur
es(
organi
zat
ional
rout
ines)
-det
ail
thev
ari
ousact
ivi
ti
es
t
hatmustbecar
ri
edoutt
ocompl
eteacor
por
ati
on’
spr
ogr
ams

Er
ror
sinOut
sour
cingEf
for
ts

Out
sour
cingt
hewr
ongact
ivi
ti
es

Sel
ect
ingt
hewr
ongv
endor

Poorcont
ract
s

Per
sonnel
issues

Lackofcont
rol

Hi
ddencost
s

Lackofanexi
tst
rat
egy

Risk-composednotonl yoftheprobabil
i
tythatthestr
ategywil
lbe
effecti
vebutal sooftheamountofasset sthecorpor
ationmust
al
locat etothestrategyandthel
engthoft i
met heassetswil
lbe
unav ai
labl
ef orotherusesI
ndust
ryStructur
eandCompet i
ti
ve
Strategy

Fragment
edindustry
-manysmall
-andmedium-si
zedcompani
es
competeforr
elat
ivel
ysmal
lshar
esofthet
otalmarket

Pr
oduct
sar
ety
pical
l
yinear
lyst
agesofpr
oductl
i
fecy
cle

Focusst
rat
egi
esar
eused

Consol
i
dat
edi
ndust
ry-domi
nat
ionbyaf
ewl
argecompani
es
Emphasi
soncostandser
vice

Economi
esofscal
e

Regi
onal
andnat
ional
brands

Sl
owergr
owt
hov
ercapaci
ty

Knowl
edgeabl
ebuy
ers

Resour cesar eanor gani

zati
on’sasset sandar ethusthebasic
buildi
ngbl ocksoft heorgani
zation.Theyi ncl
udet angi
bleassets
(suchasi t
splant,equipment,f
inances, andlocati
on),humanassets
(thenumberofempl oyees,t
heirskil
ls,andmot iv
at i
on),
and
i
nt angibleassets(suchasi t
stechnol ogy[patent
sandcopy right
s],
culture,andreputation)

Capabi
li
ti
esrefertoacorporati
on’sabil
it
ytoex pl
oititsresources.
Theyconsi
stofbusinessprocessesandr outi
nesthatmanaget he
i
nter
acti
onamongr esour
cestoturninputsint
oout puts.Forex ample,
acompany’smar keti
ngcapabi
lit
ycanbebasedont heinteracti
on
amongitsmarketingspeci
ali
sts,di
str
ibuti
onchannel s,and
sal
espeopl
e.

Acapabi l
ityi
sfuncti
onallybasedandisresidentinapar t
icular
functi
on.Thus,ther
earemar keti
ngcapabil
i
ties,manufacturing
capabil
it
ies,andhumanr esour cemanagementcapabi l
it
ies.When
thesecapabili
ti
esareconstant l
ybei
ngchangedandr econfiguredt
o
maket hem mor eadapti
vetoanuncer tai
nenv i
ronment,theyar e
call
eddy namiccapabil
i
ties.
Acompet
encyi
sacr
oss-
funct
ional
int
egr
ati
onandcoor
dinat
ion

ofcapabil
i
ties.Forexampl e,
acompet encyinnewproduct
devel
opmenti nonedi vi
sionofacorporati
onmaybet he
consequenceofi ntegr
ati
nginfor
mationsy st
emscapabil
it
ies,
marketi
ngcapabi li
ti
es,R&Dcapabil
i
ties,andproduct
ioncapabi
li
ti
es
wit
hinthedivisi
on.

Acor ecompet encyisacol

lecti
onofcompetenci
esthatcrosses
di
v i
sionalboundari
es,i
swidespreadwi
thi
nthecorporat
ion,andis
somet hi
ngt hatt
hecorpor
ationcandoexceedi
nglywell
.Thus,new
productdevelopmentisacorecompetencyifi
tgoesbeyondone
di
v i
sion.

Forexample,acor ecompet encyofAvonProductsisi

tsexper
ti
sein
door-
to-
doorselling.FedExhasacor ecompetencyini
tsappli
cat
ion
ofinf
ormati
ont echnologytoallit
soperati
ons.Acompanymust
conti
nual
lyrei
nv estinacorecompet encyorri
skit
sbecomingacore
ri
gidi
tyordefi
ciency—t hati
s,astr
engththatovert
imematuresand
becomesaweakness.

Alt
houghitisty
pical
lynotanassetint heaccounti
ngsense,acor
e
competencyisav er
yv aluabl
ecapabi
l
ity—itdoesnot“wearout
”with
use.Ingener
al,t
hemor ecorecompetenciesareused,
themore
ref
inedtheyget
,andt hemor eval
uabl
et heybecome.

Whenuniquer esourcesand/ orcor

ecompet enci
esar esuperiorto
thoseofthecompet it
ion,t
heyar ecall
eddi
stinct
ivecompet encies.
Forexample,GeneralElect
riciswellknownforit
sdi st
inct
ive
competencyinmanagementdev el
opment.It
sex ecuti
vesaresought
outbyothercompani eshir
ingt opmanagers.5
Resourcesandcapabil
it
iesareonl
yofv al
ueiftheypr ovidethe
organiz
ati
onanabil
itytomakeex tr
aor di
naryreturns.Ther esource-
basedapproachisawell-r
esear
ched, veryeff
ectivemeansof
analyzi
ngresour
cesandcapabili
ti
esi nordertodet erminewhi ch
mightprovi
detheorganizat
ionwit
hr ealcompet it
iveadv antages.

St
rat
egy
:Def
ini
ngt
heCompet
it
iveAdv
ant
ages

Anor gani
zati
onmustexami
netheext
ernal
envi
ronmenti
nordert
o
det
ermi newhoconsti
tut
est
heperf
ectcust
omerfort
hebusi
nessas
i
texiststoday,whot
hemostdi
rect

competit
orsar
eforthatcustomer,whatthecompanydoesthati
s
necessar
ytocompete,andwhatt hecompanydoesthattr
ulyset
sit
apartf
rom i
tscompeti
tors.Theseelements

canber ephrasedintothest
rengthsofthebusiness,t
he
understandingofit
sweaknessesr el
ativet
oitscompetit
ors,what
opportunit
ieswouldbemostpr udent,andwhatthreat
smi ghtaf
fect
thebusiness’spri
mar ycompeti
ti
veadv ant
ages.

Ast r
ategyofabusi nessformsacompr ehensi
vemast erapproach
thatstateshowt hebusinesswil
lachi
eveitsmissionandobjecti
ves.
I
tmax i
mi zescompetit
iveadvant
ageandmi nimizescompetit
ive
disadvantage.

Scanni
ngandanalyzingtheexternalenv
ironmentf oroppor t
unit
ies
andthr
eatsisnecessaryfort
hef ir
mt obeabl etounderstandits
competi
ti
veenvir
onmentandi t
splaceinthatenv i
ronment .I
tisthe
absol
utestar
ti
ngplacef orst
rategi
canalysis.Howev er
,inorderfor
theor gani
zationt othr
ive,t
heseni orl
eadershipteam mustl ook
withinthecorpor ati
onitsel
ftoidentif
yinternalst
rategicfactors—
cri
ticalstr
engt hsandweaknessest hatarelikel
ytodet er
mi ne
whet herafirm willbeabletotakeadv antageofoppor tunit
ieswhile
avoidingthreats.Thisinter
nalscanning,oftenreferr
edt oas
organizati
onal analysi
s,isconcernedwi t
hidentif
y i
ng,developing,
andt akingadv antageofanor ganizat
ion’
sr esourcesand
compet encies.

Usi
ngResour
ces/
Capabi
li
ti
est
oGai
nCompet
it
iveAdv
ant
age

Wheredotheser
esour
ces/compet
enci
escomefr
om?Acorpor
ati
on
cangai
naccesstoadi
sti
nctiv
ecompet
encyi
nfourway
s:

■■ Itmaybeanassetendowment ,
suchasakeypat ent
,comi
ng
f
rom thefoundi
ngofthecompany.Suchwast hecasewithXer
ox,
whi
chgr ewonthebasisofi
tsor
iginalcopy
ingpatent
.

■■ Itmaybeacqui
redf
rom someoneelse.Di
sneyboughtPi
xari
n
or
dertor
eest
abli
shi
tsel
fint
heanimatedmov i
emarket.

■Itmaybeshar edwi
thanot
herbusinessuni
toral
li
ancepartner
.LG
hastakenitselectr
oni
csandproducti
onexpert
isei
ntoappl
iances
wit
hast oni
shingsuccessi
nthemar ket.

■■ Itmaybecar eful
l
ybuiltandaccumulatedoverti
mewithi
nt he
company.Forexample,Hondacareful
lyextendedi
tsexper
ti
sein
smallmotormanufactur
ingfrom motorcy
clestoautos,
boatengines,
gener
ator
s,andlawnmower s.

Scanni
ngFunct
ionalResour
cesandCapabi
li
ti
es
Thesi mplestwayt obeginananal ysisofacor poration’
svaluechain
i
sbycar ef
ullyexaminingit
straditi
onal functi
onal areasforpotenti
al
strengt hsandweaknesses.Funct i
onal resourcesandcapabi l
i
ties
i
ncl udenotonl yt hefi
nancial
,physical,andhumanasset sineach
areabutal sotheabili
tyofthepeopl eineachar eat ofor
mul at
eand
i
mpl ementt henecessar yf
unctionalobj ecti
ves,strategi
es,and
policies.Theser esourcesandcapabi li
tiesincl
udet heknowledgeof
anal yti
calconcept sandprocedural t
echni ques

commont oeachar ea,aswel l astheabili

tyoft hepeopl eineach
areatouset hem effect
ively.Ifusedpr operl
y,theser esourcesand
capabil
it
iesserveasst rengthst ocarryoutv al
ue- addedact i
vi
ti
esand
supportstr
ategicdecisions.Inaddi t
iontot heusual business
funct
ionsofmar keting,fi
nance, R&D, operati
ons, humanr esources,
andinformationsystems/ technology, wealsodi scussst r
uctur
eand
cult
ureaskeypar tsofabusi nesscor porati
on’
sv al
uechai n.

Basi
cOr
gani
zat
ionalSt
ruct
ures

Althoughtherei sanal mostinfinit

ev arietyofstruct
ural f
orms,
certai
nbasi ctypespr edominatei nmoder ncompl exor ganizati
ons.
Figure5–3i l
lustratesthreebasicor gani zat
ionalstr
uctures.The
conglomer atestructureisav ari
antoft hedi vi
sionalstructureandis
thusnotdepi ctedasaf ourt
hst ruct
ur e.Ifoneoft hebasi cstruct
ures
doesnoteasi lysuppor tastrategyunderconsi derat
ion, t
op
managementmustdeci dewhet herthepr oposedstrategyi sfeasi
ble
orwhet herthest ruct
ureshoul d

bechangedt oamor ecompl i

catedstr
uct
uresuchasamatr
ixor
network.(Otherst
ructuraldesi
gnsincl
udi
ngthematri
xandnet
work
arediscussedinChapt er9.)
General
lyspeaking,eachst
ruct
uret
endst
osuppor
tsomecor
por
ate
st
rategi
esbetterthanother
s:

■■ Si mplestructurehasnof uncti
onalorpr oductcat
egoriesandi
s
appropri
ateforasmal l
,entr
epreneur-
domi natedcompanywi thone
ortwopr oductlinesthatoperat
esinar easonablysmall,easi
ly
i
dentif
iablemar ketniche.Employeestendt obegenerali
stsand
j
acks-of-
all-
tr
ades.I ntermsofstagesofdev el
opment(tobe
di
scussedi nChapt er9),thi
sisaStageIcompany .

Funct
ionalstr
uct
urei
sappr
opr
iat
eforamedi
um-
sizedf
ir
m wi
th
sever
alproduct

l
inesi
noneindust
ry.Empl
oyeest
endt
obespeci
ali
stsi
nthe
busi
nessf
uncti
ons

t
hatareimportantt
ot hati
ndustry,
suchasmanufact
uri
ng,mar
ket
ing,
f
inance,andhumanr esources.I
ntermsofst
agesofdevel
opment
(
discussedinChapter9),t
hisisaStageI
Icompany.

■■ Di v
isionalstruct
ureisappropri
ateforalargecorporati
onwith
manypr oductlinesinsever
alrelat
edindustr
ies.Employeestendto
befunctionalspecial
ist
sorganizedaccordi
ngt oproduct
/ market
di
sti
ncti
ons.TheCl oroxCompany

i
smadeupoff
ivebi
gdi
vi
sions:
(1)Cl
eani
ng)
;

2)Househol
d;(
3)Li
fest
yle

4)
;Pr
ofessi
onal
;and(
5)I
nter
nat
ional

26.Managementat
tempt
stof
indsomesy
ner
gyamongdi
vi
sional