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Strategic Management and the Entrepreneur

Chapter 3: Strategic Management

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Strategic Management

Crucial to building a successful business. Involves developing a game plan to guide a company as it strives to accomplish its mission, goals, and objectives, and to keep it on its desired course.

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Is Strategic Planning Really That Important?

Study of 500 small companies:


One of the most significant factors in distinguishing growing companies from those in decline: use of a written business plan.

Another study:
Only 12% of small companies had a longrange plan in writing.

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Strategic Management and Competitive Edge

Developing a strategic plan is crucial to creating a competitive advantage, the aggregation of factors that sets a company apart from its competitors and gives it a unique position in the market. e.g. Facebook- mission is to make the world more open and connected.

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Strategic Management Process


Step 1: Develop a vision and translate it into a mission statement. Step 2: Define core competencies and target market and identify desired market position. Step 3: Assess strengths and weaknesses. Step 4: Scan environment for opportunities and threats. Step 5: Identify key success factors.

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Strategic Management Process


(continued)

Step 6: Analyze competition. Step 7: Create goals and objectives. Step 8: Formulate strategies. Step 9: Translate plans into actions. Step 10: Establish accurate controls. Revise plans/steps as need or if necessary

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Knowledge Management

The practice of gathering, organizing, and disseminating the collective wisdom and experience of a companys employees for the purpose of strengthening its competitive position. Knowledge management involves:
Taking inventory of the special knowledge the people in the company possess. Organizing that knowledge and disseminating it to those who need it.

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Step 1: Develop a Vision and Create a Mission Statement


Vision an expression of what an entrepreneur stands for and believes in. A clearly defined vision:
Provides direction Determines decisions Motivates people

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Step 1: Develop a Vision and Create a Mission Statement


The Mission Statement addresses question: What business are we in? The mission is a written expression of how the company will reflect the owners values, beliefs, and vision. The companys mission depicts its character, identity, and scope of operation in enough detail to distinguish the company in the marketplace.
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Vision and Mission (Review different view)


Vision: An overall picture of where the entire organization would like to be in the future A statement of what the various organizational units do and what they hope to accomplish in alignment with the organizational vision

Mission:

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Paymaster Mission and Values


Mission To offer a speedy, efficient and convenient multipayment and business services which utilise superior customer service to ensure satisfaction for Client Companies, Business Partners and Customers while maximizing shareholders' value.
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Core Values Integrity (and reliability) Caring Innovativeness Dynamism Accountability Utilizing superior customer service to ensure satisfaction

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MBCC Vision, Mission & Core Values


Vision

Committed to being the University College of choice providing world class multi-disciplinary education and training for lifelong learning satisfying the needs of a dynamic global marketplace.

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MBCC Vision, Mission & Core Values


Mission

Through strong leadership, a culture of research, excellent customer service, and quality delivery using modern technology, we will satisfy the changing needs of the community for highly competent, innovative and socially responsible agents of transformation. We will collaborate with other institutions and stakeholders to provide relevant and affordable programmes while fostering the holistic development of our students in a safe, caring environment.
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Chapter 3: Strategic Management

MBCC Vision, Mission & Core Values


Core Values
Excellence Team Work Respect Accountability Integrity Civic responsibility
Caring
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Important Components of Organizational Vision

Organizational Purpose

Summary of What Organization Does

Broad Goals

Core Values and Beliefs

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Components of Organizational Vision and Mission Statements

Concern for Employees Concern for Public Image

Philosophy

Markets

Customers

Technology

Self-concept

Products or Services

Concern for Survival, Profits, and Growth

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Step 2: Define Core Competencies and Market Position

Company must define its set of core competencies that enable it to serve customers better than rivals. Core Competencies a unique set of capabilities a company develops in key operational areas that allow it to vault past competitors.
They are what a company does best. Best to rely on a natural advantage (often linked to the companys size).

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Step 2: Define Core Competencies and Market Position

Market segmentation carving up the mass market into smaller, more homogenous units and then attacking certain segments with a specific marketing strategy. Proper positioning creating the desired image for the business in the customers mind.

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Step 3: Assess Company Strengths and Weaknesses

Strengths
Positive internal factors that contribute to accomplishing the mission, goals, and objectives.

Weaknesses
Negative internal factors that inhibit the accomplishment of the mission, goals, and objectives.

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Step 4: Scan for Opportunities and Threats

Opportunities
Positive external factors the company can employ to accomplish its mission, goals, and objectives.

Threats
Negative external factors that inhibit the firms ability to accomplish its mission, goals, and objectives.

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Step 5: Identify Key Success Factors

Key success factors: relationships between a controllable variable and a critical factor that influence a companys ability to compete in the market. The keys to unlocking the secrets of competing successfully in a particular market segment.
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Step 6: Analyze Competitors


Analyzing key competitors allows an entrepreneur to: avoid surprises from existing competitors new strategies and tactics. identify potential new competitors and the threats they pose. improve reaction time to competitors actions. anticipate rivals next strategic moves.

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Step 6: Analyze Competitors


Techniques that do not require unethical behavior:
Monitor industry and trade publications. Talk to customers and suppliers. Listen to employees, especially sales representatives and purchasing agents. Attend trade shows and conferences. Study competitors literature and benchmark their products and services. Get competitors credit reports. Check out the local library. Use the World Wide Web to learn more about competitors. Visit competing businesses to observe their operations.
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Step 7: Create Company Goals and Objectives


Goals broad, long-range attributes to be accomplished. Objectives more detailed, specific targets of performance that are S.M.A.R.T.
Specific Measurable Attainable Realistic (yet challenging) Timely

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Why Have Goals?


Goals: 1. Direct all organizational work toward a common and unified purpose

2. Act as targets for motivating people


3. Serve as criteria against which work accomplishments are measured

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Types of Goals
Areas of Organizational Work Technology and operations Marketing Financial

Breadth Organizationwide Operational

Specificity Specific Directional

Time Frame Long term Short term

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Characteristics of Good Goals


Written in terms of outcomes rather than actions Measurable and quantifiable Clear as to a time frame

Challenging yet attainable


Written down Communicated to all organizational members

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The Goal-Setting Process


Steps:
1. Review the organizational vision and mission(s) 2. Evaluate available resources 3. Determine broad, long-term, organization-wide goals 4. Write down the organization-wide goals 5. Determine specific, short-term operational goals 6. Write down the operational goals 7. Review results
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Relationship Between Organizational Goals and Strategies


Organizational Vision and Mission(s) Organization-wide Goals Operational Goals Operational Strategies
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Step 8: Formulate Strategies

Strategy a road map to guide the company through a turbulent environment as it seeks to fulfill its mission, goals, and objectives. It is the companys game plan for winning. Three basic strategies: Cost leadership Strategy? Differentiation

Focus
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Differentiation

Company seeks to build customer loyalty by positioning its goods or services in a unique or different fashion. Idea is to be special at something customers value. Key: Build basis for differentiation on a distinctive competence, something that the small company is uniquely good at doing in comparison to its competitors.

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Focus

Company selects one or more customer segments in a market, identifies customers special needs, wants, or interests, and then targets them with a product or service designed specifically for them. Strategy builds on differences among market segments. Rather than try to serve the total market, the company focuses on serving a niche (or several niches) within that market.

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Cost Leadership

Goal: to be the low-cost producer in the industry (or market segment). Low-cost leaders have an advantage in reaching buyers who buy on the basis of price, and they have the power to set the industrys price floor. Works well when:
buyers are sensitive to price changes. competing firms sell the same commodity products. a company can benefit from economies of scale.

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Step 9: Translate Strategies into Action Plans

Create projects by defining:


Purpose Scope Contribution Resource requirements Timing

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Step 10: Establish Accurate Controls


The plan establishes the standards against which actual performance is measured. Entrepreneur must: identify and track key performance indicators. Take corrective action.

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Balanced Scorecards

Four Perspectives:
Customer: How do customers see us? Internal Business: At what must we excel? Innovation and Learning: Can we continue to improve and create value? Financial: How do we look to shareholders?

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