IT364 Module 2

‫الجامعة السعودية االلكترونية‬
‫الجامعة السعودية االلكترونية‬
‫‪26/12/2021‬‬
‫‪1‬‬
College of Computing and Informatics
Bachelor of Science in Information Technology
IT364
IT Entrepreneurship and Innovation
2
Module 2:
Strategic Management and the Entrepreneur
3
1. Strategic Management and the Entrepreneur
2. Building a Competitive Advantage
3. The Strategic Management Process
Contents
4
1. Understand the importance of strategic management to a
small business and to explain why and how a small business
must create a competitive advantage in the market.
2. Develop a strategic plan for a business using the nine steps
in the strategic planning process and discuss the
characteristics of three basic strategies: low-cost,
differentiation, and focus.
Weekly 3. Understand the importance of controls such as the balanced
scorecard in the planning process.
Learning
Outcomes
5
1. Strategic Management and the Entrepreneur
6
• World’s economy has shifted from a base of financial to intellectual capital.
• Intellectual capital refers to the knowledge and information a company acquires and
uses to create a competitive advantage in its market segment.
• The key is learning how to utilize the knowledge a company accumulates over time as
a strategic resource and as a competitive weapon.
7
This Presentation is mainly dependent on the textbook: effective SMALL BUSINESS management, AN ENTREPRENEURIAL APPROACH, 10 th
• Knowledge management is the practice of gathering, organizing, and disseminating

the collective wisdom and experience of a company’s employees for the purpose of
strengthening its competitive position.
• Small businesses have advantage over large companies due to their size and simplicity
when it comes to knowledge management.
8
• Intellectual capital has three components.
• Human capital refers to the talents, skills, and abilities of a company’s workforce.
• Structural capital refers to the accumulated knowledge and experience in its industry
and in business in general that company possesses. It may include processes, software,
patents, copyrights etc.
• Customer capital refers to the established customer base, positive reputation, ongoing
relationships, and goodwill a company builds up over time with its customers.
9
• Strategic management is a process that involves developing a game plan to guide the
company as it strives to accomplish its vision, mission, goals, and objectives and to
keep it from straying off its desired course.
• The idea is to give the entrepreneur a blueprint for matching the company’s strengths
and weaknesses to the opportunities and threats in the environment.
10
2. Building a Competitive Advantage
11
Building a Competitive Advantage
• Competitive advantage is the aggregation of factors that differentiates a small

business from its competitors and gives it a unique and superior position in the
market.
• The key to business success is to develop a unique competitive advantage that
• Creates value for customers
• Is sustainable
• Is difficult for competitors to duplicate

12
• Core competencies refer to a unique set of skills, knowledge, or abilities that a company develops in key areas
including
• Superior quality
• Customer service
• Innovation
• Engineering
• Team-building
• Flexibility
• Speed
• Responsiveness 13
• Core competencies are built in no more than three to five areas.
• The key to success is to build core competencies and concentrate them on providing
superior service and value for a company’s target customers.
• In order to develop core competencies, an entrepreneur is required to use Creativity,

Imagination, Experience, and Vision to identify or develop those things that the
business does best and that are most important to its target customers.
14
• The strategic management procedure for a small business should include the following
features:
• Use a relatively short planning horizon – 2 years or less for most small companies
• Be informal and not overly structured; a “shirt-sleeve” approach is ideal
• Encourage the participation of employees and outside parties to improve the

reliability and creativity of the resulting plan
15
• The strategic management procedure for a small business should include the following
features:
• Do not begin with setting objectives because extensive objective-setting early on may
interfere with the creative process of strategic management
• Maintain flexibility; competitive conditions change too rapidly for any plan to be
considered permanent
• Focus on strategic thinking, not just planning, by linking long-range goals to day-to-day
operations
16
3. The Strategic Management Process
17
The Strategic Management Process
Strategic management is a continuous process that consists of nine steps:
• Step 1. Develop a clear vision and translate it into a meaningful mission statement
• Step 2. Assess the company’s strengths and weaknesses
• Step 3. Scan the environment for significant opportunities and threats facing the business
• Step 4. Identify the key factors for success in the business
• Step 5. Analyze the competition
• Step 6. Create company goals and objectives
• Step 7. Formulate strategic options and select the appropriate strategies
• Step 8. Translate strategic plans into action plans
• Step 9. Establish accurate controls

18
Step 1. Develop a clear vision and translate it into
a meaningful mission statement
• A vision statement addresses the question “What kind of company do we want to
become?”
• Vision is the organizational sixth sense that tells us why we make a difference in the
world.
• A vision is the result of an entrepreneur’s dream of something that does not exist yet
19
• A clearly defined vision helps a company in four ways:
• Vision provides direction
• Vision determines decisions
• Vision motivates people
• Vision allows a company to persevere in the face of adversity
20
• Vision is based on an entrepreneur’s values to guide his business
• Teamwork (people-focused)
• Integrity (highest ethical standards)
• Commitment (client-driven)
21
• A mission statement addresses the first question of any business venture: “What
business am I in?”
• Establishing the purpose of the business in written-form gives the company a sense of
direction.
• Mission statement answers the questions: “why we are here” and “where we are
going.”
• Mission statement reflects the company’s core values.

22
• Elements of a mission statement:
• The purpose of the company
• The business we are in
• The values of the company
23
Step 2. Assess the company’s strengths and
weaknesses
• Strengths are positive internal factors that contribute a company’s ability to achieve
its mission, goals, and objectives.
• Weaknesses are negative internal factors that inhibit the accomplishment of its
mission, goals, and objectives.
• Strengths should be exploited, and weaknesses should be compensated while

developing a competitive strategy.
24
weaknesses
• One effective technique for taking a strategic inventory is to prepare a balance sheet of
the company’s strengths and weaknesses.
• The positive side should reflect important skills, knowledge, or resources that
contribute to the company’s success.
• The negative side should record honestly any limitations that detract from the
company’s ability to compete.
• See Table 2.1 on the next slide

25
weaknesses
• All key performance areas of the business
should be analyzed that include:
• Human resources
• Finance
• Production
• Marketing
• Product development
• Organization
26
Step 3. Scan the environment for significant
opportunities and threats facing the business
• Opportunities are positive external options that the company can exploit to accomplish its
mission, goals, and objectives.
• The number of potential opportunities is limitless, but an entrepreneur should focus only on a small
number of opportunities tha are consistent with the company’s vision, core values, and mission.
• Threats are negative external forces that hamper a company’s ability to achieve its mission, goals,
and objectives.
• Threat may include a new competitor entering the local market, a government mandate regulating a
business activity, an economic recession, rising interest rates etc.
27
• Table 2.2 provides a form that
allows entrepreneurs to take a
strategic inventory of the
opportunities and threats facing
their companies.
28
• Table 2.3 provides an analytical tool that is designed to help entrepreneurs to identify
the threats that pose the greatest danger to their companies.
29
30
Step 4. Identify the key factors for success in the
business
• Key success factors come in a variety of different patterns depending on the industry.
• These factors determine a company’s ability to compete successfully in an industry.
31
Step 4. Identify the key factors for success in the
business
• Table 2.4 presents a form to help
entrepreneurs identify the most
important success factors and
their implications for the
company.
32
Step 5. Analyze the competition
• Business is like any battlefield. If you want to win the war, you have to know who you are up against.
• The primary goal of a competitive intelligence program include:
• Avoid surprises from existing competitors’ new strategies and tactics
• Identifying potential new competitors
• Improving reaction time to competitors’ actions
• Anticipating rivals’ next strategic moves
• Improving your ability to differentiate your company’s products and services from those of your competitors
• Defining your company’s competitive edge
33
• Direct competitors offer the same products and services, and customers often compare prices, features, and
deals from the competitors as they shop.
• Significant competitors offer some of the same products and services.
• Indirect competitors offer the same or similar products or services only in a small number of areas, and their
target customers seldom overlap yours.
• An entrepreneur should
• Monitor the actions of direct competitors
• Maintain a solid grasp of where the significant competitors are heading
• Spend minimal resources while tracking indirect competitors

34
• A competitive profile matrix allows entrepreneurs to evaluate their companies

against the major competitor on the key success factor for their market segments (see
Table 2.4).
• The first step is to list the key success factors identified in Step 4 of the strategic
planning process and to attach weights to them reflecting their relative importance.
• Table 2.5 shows a sample competitive profile matrix for a small company.
35
• The next step is to identify the

company’s major competitors and to rate
each one (and your company) on each of
the key success factors.
• Once the rating is completed, the owner

simply multiplies the weight by the rating
for each factor to get a weighted score.
• Then add up each competitor’s weighted

scores to get a total weighted score.
36
Step 6. Create company goals and objectives
• Goals are the broad, long-range attributes that a business seeks to accomplish/ they tend to be general and sometimes even
abstract.
• Objectives are more specific targets of performance. They define the things that entrepreneurs must accomplish if they are to
achieve their goals and overall mission. Well-written objectives are
• Specific
• Measurable
• Assignable
• Realistic
• Timely
• Written down
37
Step 7. Formulate strategic options and select the
appropriate strategies
• A strategy is a road map an entrepreneur draws up of the actions necessary to fulfill a
company’s mission, goals, and objectives.
• Mission, goals, and objectives spell out the ends, and the strategy defines the means
for reaching them.
• A strategy is the master plan that must be action-oriented.
• Flawed strategy vs successful strategy
38
• The number of strategies are infinite.
• Three basic strategic options include
• Cost leadership
• Differentiation
• Focus
39
• Figure 2.1 Three Strategic Options
• Cost leadership strategy strives to be the

lowest-cost producer
• Differentiation strategy seeks to build

customer loyalty by positioning its goods or
services in a unique or different fashion.
• Focus strategy recognizes that not all markets

are homogenous.
40
Step 8. Translate strategic plans into action plans
• Implement the strategy: To make the plan workable, business owners should divide the
plan into projects, carefully defining each one by the following:
• Purpose
• Scope
• Contribution
• Resource requirement
• Timing
41
Step 8. Translate strategic plans into action plans
When putting their strategic plans into action, small companies must exploit all of the competitive advantages of their size by:
• Responding quickly to customers’ needs
• Remaining flexible and willing to change
• Continually searching for new emerging market segments
• Building and defending market niches
• Erecting “switching costs” through personal service and special attention
• Remaining entrepreneurial and willing to take risks
• Acting with lightning speed to move into and out of markets as they ebb and flow
• Constantly innovating
42
Step 9. Establish accurate controls
• Planning without control has little operational value
• Everyone in the organization needs to understand and to be involved in planning and

controlling process.
• Controlling projects and keeping them on schedule means that the owner must identify and
track key performance indicators.
• Balanced scorecard is a set of measurements unique to a company that includes both

financial and operational measures and gives managers a quick yet comprehensive picture of
the company’s total performance against its strategic plan.
43
• The balanced scorecard looks at a business from five important perspectives:
• Customer perspective
• Internal business perspective
• Innovation and learning perspective
• Financial perspective
• Corporate citizenship
44
• Figure 2.2
The Balanced Scorecard
45
This Presentation is mainly dependent on
the textbook:
Chapter 2 : Strategic Management and
the Entrepreneur.
(Effective Small Business management,
AN ENTREPRENEURIAL APPROACH,
10th Edition by Norman M. Scarborough)
46
Thank You
47

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‫الجامعة السعودية االلكترونية‬

‫الجامعة السعودية االلكترونية‬

• World’s economy has shifted from a base of financial to intellectual capital.

• Knowledge management is the practice of gathering, organizing, and disseminating

• Intellectual capital has three components.

• Competitive advantage is the aggregation of factors that differentiates a small

• The key to business success is to develop a unique competitive advantage that

• Creates value for customers

• Is difficult for competitors to duplicate

• Core competencies are built in no more than three to five areas.

• In order to develop core competencies, an entrepreneur is required to use Creativity,

• Be informal and not overly structured; a “shirt-sleeve” approach is ideal

• Encourage the participation of employees and outside parties to improve the

• Step 2. Assess the company’s strengths and weaknesses

• Step 4. Identify the key factors for success in the business

• Step 5. Analyze the competition

• Step 6. Create company goals and objectives

• Step 7. Formulate strategic options and select the appropriate strategies

• Step 8. Translate strategic plans into action plans

• Step 9. Establish accurate controls

• Vision provides direction

• Vision determines decisions

• Vision motivates people

• Vision allows a company to persevere in the face of adversity

• Integrity (highest ethical standards)

• Mission statement reflects the company’s core values.

• The purpose of the company

• The business we are in

• The values of the company

• Strengths should be exploited, and weaknesses should be compensated while

• See Table 2.1 on the next slide

• These factors determine a company’s ability to compete successfully in an industry.

• The primary goal of a competitive intelligence program include:

• Avoid surprises from existing competitors’ new strategies and tactics

• Identifying potential new competitors

• Improving reaction time to competitors’ actions

• Anticipating rivals’ next strategic moves

• Defining your company’s competitive edge

• Significant competitors offer some of the same products and services.

• Monitor the actions of direct competitors

• Maintain a solid grasp of where the significant competitors are heading

• Spend minimal resources while tracking indirect competitors

• A competitive profile matrix allows entrepreneurs to evaluate their companies

• The next step is to identify the

• Once the rating is completed, the owner

• Then add up each competitor’s weighted

• A strategy is the master plan that must be action-oriented.

• Flawed strategy vs successful strategy

• Three basic strategic options include

• Cost leadership strategy strives to be the

• Differentiation strategy seeks to build

• Focus strategy recognizes that not all markets

• Responding quickly to customers’ needs

• Remaining flexible and willing to change

• Continually searching for new emerging market segments

• Building and defending market niches

• Erecting “switching costs” through personal service and special attention

• Remaining entrepreneurial and willing to take risks

• Planning without control has little operational value

• Everyone in the organization needs to understand and to be involved in planning and

• Balanced scorecard is a set of measurements unique to a company that includes both

• The balanced scorecard looks at a business from five important perspectives:

• Internal business perspective

• Innovation and learning perspective