marketing manager course - chapter 07

McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
7
Chapter
Strategic Management
Strategic Management
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives
After reading this chapter, you should be able to:
z Implement the steps in the strategic management
process.
z Conduct an analysis of the firm’s strengths,
weaknesses, opportunities, and threats.
z Identify the factors that create a sustained competitive
advantage.
z Link external and internal environment data to
determine a firm’s strategic intent and mission.
z Choose appropriate business strategies at the
corporate and business-unit levels.
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
The Strategic Management Process
z It is the job of top level management to
chart the course of the entire enterprise.
z It consists of:
¾ Analysis of the internal and external environment of the
firm.
¾ Definition of the firm’s mission.
¾ Formulation and implementation of strategies to create or
continue a competitive advantage
.
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
The Strategic Management Process

(continued)
z Strategic management involves both long-range
thinking and adaptation to changing conditions.
z Strategies should be designed to generate a
sustainable competitive advantage.
z Competitors should be unable to duplicate what
the firm has done or should find it too difficult or
expensive.
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Analyze the external and
Analyze the external and
internal environments
internal environments
Define strategic intent
Define strategic intent
and mission
and mission
Formulate strategies
Formulate strategies
Implement strategies
Implement strategies
Assess strategic
Assess strategic
outcomes
outcomes
Components of the Strategic Management
Components of the Strategic Management
Process:
Process:
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

SWOT Analysis
z Commonly used strategy tool: SWOT
¾ Strengths, Weaknesses, Opportunities, Threats
z Step 1: Analyze the organization’s internal environment,
identifying its strengths and weaknesses.
z Step 2: Analyze the organization’s external environment,
identifying its opportunities and threats.
z Step 3: Cross-match
¾ Strengths with opportunities
¾ Weaknesses with threats
¾ Strengths with threats
¾ Weaknesses with opportunities
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
The External Environment
z Company leaders must study the external
environment in order to:
¾ Identify opportunities and threats in the marketplace.
¾ Avoid surprises.
¾ Respond appropriately to competitors’ moves.
z A major challenge is to gather accurate market
intelligence in a timely fashion, and transform it
into usable knowledge to gain a competitive
advantage.
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Components of External Analysis
Scanning
Scanning
Monito ring
Monito ring
Forecasting

Forecasting
A ssessing
A ssessing
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Scope of the External Analysis
General
General
Enviro n m e n t
Enviro n m e n t
The Industry
The Industry
Strategic
Strategic
Groups
Groups
Com petito r
Com petito r
Analysis
Analysis
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The Segments of the General Environment
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McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Porter’s Framework for Analyzing
the Industry Environment

Threat of new
Threat of new
entrants
entrants
Threat of
Threat of
substitutes
substitutes
Suppliers
Suppliers
Customers
Customers
Intensity of rivalry
Intensity of rivalry
among competitors
among competitors
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
The Internal Environment
z Each company has something that it does well.
These are called “core competencies.”
z Company executives should identify the resources,
capabilities, and knowledge the firm has that may
be used to exploit market opportunities and avoid
potential threats.
z Resource-based view: Basing the strategy on what
the firm is capable of doing
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Resources
Resources
Capabilities

Capabilities
Strategy
Strategy
Potential for
Potential for
sustainable
sustainable
competitive
competitive
advantage
advantage
1.
1.
Identify the firm
Identify the firm
’
’
s
s
resources and locate
resources and locate
areas of strength and
areas of strength and
weakness relative to
weakness relative to
competitors.
competitors.
2.
2.
Identify the firm

Identify the firm
’
’
s
s
capabilities
capabilities
(What can the firm do?)
(What can the firm do?)
3.
3.
Appraise the profit
Appraise the profit
generating potential of
generating potential of
resources/capabilities in
resources/capabilities in
terms of creating,
terms of creating,
sustaining, and exploiting
sustaining, and exploiting
competitive advantage.
competitive advantage.
4.
4.
Select a strategy that best
Select a strategy that best
exploits the firm
exploits the firm
’

’
s
s
capabilities relative to
capabilities relative to
external opportunities.
external opportunities.
5.
5.
Identify
Identify
resource gaps
resource gaps
that need to be filled.
that need to be filled.
Invest in replenishing
Invest in replenishing
and augmenting the
and augmenting the
firm
firm
’
’
s resource base.
s resource base.
Core Competencies and
Core Competencies and
Market Opportunities
Market Opportunities
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Resource Types:
Tangible Resources
z Assets that can be quantified and observed.
z Include financial resources, physical assets, and
workers.
z Strategic assessment of tangible resources should
enable management to efficiently use tangible
resources to support the company and
to expand the volume of business.
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Resource Types:
Intangible Resources
z Difficult to quantify and included on a balance
sheet
z Often provides the firm with a strong competitive
advantage.
z Competitors find it difficult to purchase or imitate
these resources.
z Strategically most important intangibles:
¾ Reputation
¾ Technology
¾ Human Capital
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Analyzing the Firm’s Capabilities
Functional Analysis
Functional Analysis
Value Chain Analysis
Value Chain Analysis
Benchm arking
Benchm arking

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Analyzing Capabilities by
Functional Areas
Functional Area Capability
Corporate Management
Effective financial control systems
Expertise in strategic control of diversified corporation
Effectiveness in motivating and coordinating divisional and
business-unit management
Management of acquisitions
Values-driven, in-touch corporate leadership
Information Management Comprehensive and effective MIS network, with strong central
coordination
Research and Development Capability in basic research
Ability to develop innovative new products
Speed of new product development
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Analyzing Capabilities by
Functional Areas
(continued)
Functional Area Capability
Manufacturing
Efficiency in volume manufacturing
Capacity for continual improvements in production processes
Flexibility and speed of response
Product Design Design capability
Marketing Brand management and brand promotion
Promoting and exploiting reputation for quality
Responsive to market trends
Sales and Distribution Effectiveness in promoting and executing sales

Efficiency and speed of distribution
Quality and effectiveness of customer service
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
A Simple Value Chain
Technology
Technology
Product
Product
Design
Design
Manufacturing
Manufacturing
Marketing
Marketing
Distribution
Distribution
Service
Service
Channels
Channels
Integration
Integration
Inventory
Inventory
Warehousing
Warehousing
Transport
Warranty
Warranty
Dealer Support

Dealer Support
Availability
Availability
Speed
Speed
Prices
Prices
Prices
Advertising
Advertising
Promotion
Promotion
Sales Force
Sales Force
Package
Package
Brand
Integration
Integration
Raw Materials
Raw Materials
Capacity
Capacity
Location
Location
Procurement
Procurement
Parts Production
Parts Production
Assembly

Source
Source
Sophistication
Sophistication
Patents
Patents
Product Process
Product Process
Product Choices
Product Choices
Function
Function
Physical
Physical
Characteristics
Characteristics
Aesthetics
Aesthetics
Quality
Quality
Transport Prices
Brand
Assembly
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Benchmarking Involves Four Stages:
 Identifying activities or functions that are weak
and need improvement.
 Identifying firms that are known to be at the
leading edge of these activities or functions.
 Studying the leading-edge firms by visiting them,

talking to managers and employees, and reading
trade publications.
 Using the information gathered to redefine goals,
modify processes, and acquire new resources to
improve the firm’s functions.
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Strategic Intent and Mission
z The primary guides to strategic management are
formal statements of strategic intent and mission.
z Strategic intent is internally focused, defining how
the firm uses its resources, capabilities, and core
competencies.
z Strategic mission is externally focused, defining what
will be to produced and marketed, utilizing its internal
core competencies.
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Strategy Formulation
z The design of an approach to achieve the firm’s
mission.
z Takes place at:
¾ Corporate-Level
¾ Business-Level
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Corporate-Level Strategy
z The corporation’s overall plan concerning the:
¾ Number of businesses the corporation holds.
¾ Variety of markets or industries it serves.
¾ Distribution of resources among those businesses.
z This diversification strategy may be analyzed in terms
of:

¾ Portfolio mix
¾ Type of diversification
¾ Process of diversification
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Portfolio Analysis
z The basic idea is to classify the businesses of a
diversified company within a single framework.
z Two of the most widely applied include:
¾ The McKinsey-General Electric Portfolio Analysis
Matrix
¾ The Boston Consulting Group’s Growth Share Matrix
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.