THE STRATEGIC MANAGEMENT PROCESS [or How to Analyze a Case]

1. THE STRATEGIC MANAGEMENT PROCESS[or How to Analyze a Case] Dr. Laura Whitcomb Mgmt 497

2. Strategic Management Definition = The process whereby managers establish an organization’s long-term direction. This involves: 1) Setting Mission & Goals 2) Strategy Formation --internal capabilities --external environment --selection of strategy 3) Strategy Implementation 4) Strategy Evaluation

3. How to Analyze a Case • Mission/Vision & Objectives • Current Strategy • Industry Analysis • S.W.O.T. Analysis • Recommendations

4. MISSION Defined Answers the question “What business are we in?” or “Why do we exist?” --Customer Needs: What is being satisfied? --Customer Groups: Who is being satisfied? --Distinctive Competencies: How are customer needs being satisfied?

5. To be the world's premier consumer products company focused on convenient foods and beverages.  To Refresh the World...in body, mind, and spirit. To Inspire Moments of Optimism... through our brands and our actions. To Create Value and Make a Difference... everywhere we engage. Pepsico vs. Coke?

6. Vision Statements • Future-oriented; transformative • Mission = what is; vision = what will be • Companies may have mission or vision or both • Mission and/or vision often accompanied by statement of company values

7. GOALS = a desired future state that a company attempts to realize. Should be: - precise & measurable - addressing important issues - challenging but realistic - set for a specific time period - consistent with each other

8. Types of Goals • Financial • Profitability • Revenue growth • Long-term shareholder value • Customer • Product/service attributes; relationship; image • Internal Process • Operations, customers, innovation • Corporate social responsibility • Learning & growth • Human, information, & organization resources

10. Levels of Strategy & Organization Structure • Corporate Strategy ------>Corporate Head Office • Business Strategy ------>Business Divisions • Functional Strategy ------>R&D, HR, Finance, Operations, Marketing/Sales

11. Corporate StrategyGeneric Alternatives/Grand Strategies • Stability • Expansion • Retrenchment • Combination

12. Expansion/RetrenchmentGeneric Choices • How? • Internal • External • Alliances • What? • Vertical integration • Horizontal integration • Diversification: related/unrelated

13. Nestle’s Corporate Strategy • 2001 Acquired Purina pet food • 2002/5 Acquired Dreyer’s Ice Cream • 2006 Acquired Novartis nutrition business & Jenny Craig diet products • 2007 Acquired Gerber baby foods

14. Porter’s Generic Competitive Strategies Purpose: achieve above-average long-run ROI for your industry. • Competitive Advantage • Cost Leadership • Differentiation • Competitive Scope • Broad Target • Narrow Target (Focus/Niche)

15. Porter’s Generic Competitive Strategies

16. Tesla Goals & Strategy (summer 2007)Auto co. based in Silicon Valley • Begin producing $98,000 electric sports car in Oct. 2007 • Tesla engineers focus on the battery, computer software, & proprietary motor; outsource the rest • Uses lithium ion batteries, used in laptops, vs. nickel metal hydride • Development center in Detroit, with engineers hired away from Big 3 • Future: Sedan called White Star, $55-68,000; in 5 years, Blue Star, $30,000

17. Corporate Culture = Collection of beliefs, expectations, and values learned and shared by members and transmitted from one generation of employees to another. = Collective mental programming.

18. Functions of Corporate Culture • Conveys a sense of identity • Generates employee commitment • Adds to organizational stability • Serves as a frame of reference

19. Industry Analysis:Porter’s 5 Competitive Forces Purpose: understand why some industries have higher profit margins & what factors can change long-run industry profitability. • Risk of New Entry • Rivalry Among Established Firms • Bargaining Power of Buyers • Bargaining Power of Suppliers • Threat of Substitute Products

20. ENTRY Barriers • Brand Loyalty • Absolute Cost Advantages • patents • access to raw materials • superior production techniques • Economies of Scale • Government Regulation

21. Factors Affecting Intensity of RIVALRY • Competitive Structure • number of firms • relative market share • Demand conditions • growth • decline • Exit barriers

22. Factors Affecting BARGAINING POWER • Number of firms in buyer vs. supplier industries • Quantity or % of total orders • Switching costs • Standardization vs. specialization of input • Threat of vertical integration

23. SUBSTITUTES = products from OTHER industries that serve consumers’ needs in a way that is similar to those being served by your industry. Example: coffee vs. tea vs. soft drinks NOTE: Substitutes are very difficult to monitor, because they can involve technological changes in industries that did not pose any threat in the past.

24. Company Situation Analysis • INTERNAL: Strengths & Weaknesses • financial position: relative & changes over time • functional capabilities: sustainable? distinctive? • EXTERNAL: Opportunities & Threats • demographic & socio-cultural changes • economic & political/legal changes • industry & technological changes

25. RECOMMENDATIONS Shift from Analysis--->Synthesis • Is a fundamental shift in strategy required or not? • How do your recommendations line up with your SWOT analysis? • Is this a feasible, creative solution that is supported by your analysis?