Strategic Management

Spring 2007 Strategic Management 1

 Strategic Management
• The larger vision that guides the activities of managers
and other employees in an organization

• The set of decisions and actions used to formulate and

implement strategies that will provide a competitively
superior fit between the organization and its environment
so as to achieve organizational goals

• The process of establishing and sustaining competitive

advantage

Spring 2007 Strategic Management 2

 Competitive Advantage
• What is it?
• An edge over your rivals
• Traditional sources
• Product and process technology
• Protected and regulated markets
• Access to financial resources
• Economies of scale
• New source
• People !!!

Spring 2007 Strategic Management 3

 Levels of Strategy

• Grand strategy
• Where are we going?
• Corporate
• What business are we in?
• Business-level
• How do we compete?

Spring 2007 Strategic Management 4

 The Strategic Management
Process

Analyze
Identify OT
environment
Identify mission Formulate
and strategies strategies
Analyze
Identify SW
organization

Implement
strategies

Feedback

Spring 2007 Strategic Management 5

 SWOT Analysis

Strength Opportunity

Where
are we
going?

Weakness Threat

Spring 2007 Strategic Management 6

 Grand Strategies

• Growth
• Stability
• Retrenchment

Spring 2007 Strategic Management 7

 WalMart…Growth (Number of Stores)

6,141
7,000
6,000
5,000
4,000
3,000
2,000
1,000
24
0
1968 1973 1978 1983 1988 1993 1998 2003

Spring 2007 Strategic Management 8

 Paths to Growth: WalMart

• Direction of growth
• New stores in existing markets
• Enter new markets
• New product lines
• Means of growth
• Greenfield
• Acquisition

Spring 2007 Strategic Management 9

 WalMart…International Expansion and Acquisitions
Mexico 1991
Puerto Rico 1992 Supermercados Amigo
2003 (A)
Canada 1994 (A) Woolco

Argentina 1995
Brazil 1995
China 1996
Germany 1997-8 (A) Wertkauf, Interspar *

Korea
*Bailed out 1998 (A) Makro, Kim’s Club *
U.K.** Not profitable 1999 (A) Asda
Spring 2007 Strategic Management 10
Japan 2002 (A) Seiyu (37% ownership) **
 General Electric – Overall Stability

$25,000
Earnings Before Taxes ($M)

$20,000

$15,000

$10,000

$5,000

$0
94

96

98

00

01

02

03

04

05
95

97

99
19

19

19

20

20

20

20

20

20
19

19

19

Spring 2007 Strategic Management 11

Spring 2007
Earnings Before Taxes ($M)

19

$0
90
$2,000

-$4,000
-$2,000
19
91
19
92
19
93
19
94
19
95
Kmart -- Decline

19
96

Strategic Management
19
97
19
98
19
99
20
00
20
01
20
02
12
Note that text combines global and
home replication strategies

Global Strategy: Four Choices

High
Global Transnational
Strategy Strategy

Cost and
efficiency Home
Multi domestic
pressures Replication
Strategy
Strategy
Low

Low High
Pressures for local responsiveness

Spring 2007 Strategic Management 13

 Corporate Level Strategy
• Strategic business units

• Diversification
• Single business
• Diversified
• Vertical Integration
• Conglomerate

• BCG Matrix

Spring 2007 Strategic Management 14

 Dell Products
• PowerEdge servers • Dell Precision
• PowerVault and Dell | workstations
EMC storage • Inspiron notebooks
products • Dimension desktops
• Services • Dell monitors
• PowerConnect • Dell printers
switches • Axim handhelds
• OptiPlex desktops • Software and Peripherals
• Latitude notebooks

Spring 2007 Strategic Management 15

 ThyssenKrupp

Spring 2007 Strategic Management 16

 Alcoa at a Glance
• Alcoa is the world’s leading producer of primary aluminum,
fabricated aluminum, and alumina and is active in all major aspects of
the industry.
• Alcoa serves the aerospace, automotive, packaging, building and
construction, commercial transportation, and industrial markets,
bringing design, engineering, production, and other capabilities of
Alcoa’s businesses as a single solution to customers.
• In addition to aluminum products and components, Alcoa also
markets consumer brands including Reynolds Wrap® aluminum
foil, Alcoa® wheels, and Baco® household wraps. Among its other
businesses are vinyl siding, closures, precision castings, and electrical
distribution systems for cars and trucks.

Spring 2007 Strategic Management 17

 Sara Lee
Headquarters

Food and Intimates and Household

Beverage Underwear Products

Spring 2007 Strategic Management 18

 Another Conglomerate
G e n e r a l E le c t r ic

A ir c r a f t E n g C i no em s m e r c ia l F in a
C o n s u m e r F C i n o a n n s cu e m e r P r o d
E q u ip m e n t M Ia n n d a u g s e t r m i a e l nS t y s t e m
I n s u r a n c e M e d ic a l S y s t e m
N B C G E P la s t ic s
G E P o w e r S S y sp t e e c m i a s l t y M a t e r i
T r a n s p o r t a t io n S y s t e m s

Spring 2007 Strategic Management 19

 BCG Matrix
High
Stars Problem
Children
ht wor G t ekr a M

Cash
Cows Dogs
Low
High Market Share Low

Spring 2007 Strategic Management 20

 What Business Are We In?

1. What are our core competencies?

2. Who are our customers?
3. Economies of scale
4. Economies of scope

Spring 2007 Strategic Management 21

 Business-Level Strategy

• Porter’s Five Forces

• Generic strategies
• Value chain

Spring 2007 Strategic Management 22

 Porter’s Five Forces

• Bargaining power of suppliers

• Bargaining power of buyers
• Threat of substitutes
• Potential new entrants to the market
• Rivalry among current competitors

Spring 2007 Strategic Management 23

 Porter’s Five Generic Strategies

• Low-cost leadership
• Broad differentiation
• Best-cost provider
• Focused or market niche / cost
• Focused or market niche / differentiation

Spring 2007 Strategic Management 24

 Value Chain Analysis

• How are we creating value for

customers?
• Where can costs be reduced?

Spring 2007 Strategic Management 25

 The Value Chain
Raw
Materials

Operations

Distribution

Sales and Customer

Marketing Service

Support Product R &D, Technology, Systems Development

Activities Human Resource Management
General Administration

Spring 2007 Strategic Management 26

 Strategy Implementation

• Leadership
• Structure and design
• Information and control systems
• Human resources

Spring 2007 Strategic Management 27