Strategic Management chap03

Strategic Management chap03

• 1.
  Chapter 3
• 2.
  Can We Maintain the StatusQuo?
• 3.
  “Change is persuading massivenumbers of people to stop what they have been doing and start doing something that they probably don’t want to do.” - David Nadler, Champions of Change There are three things we can know about change. First, it is going to happen – the future will not be like the past. Second, it won’t happen exactly the way we expect it to. Lastly, it will happen much faster than we expect.
• 4.
  • Provides basicinput information for the matching and decision stage matrices. • Requires strategists to quantify subjectivity early in the process. • Good intuitive judgment is needed in determining appropriate weights & ratings. The Input Stage Internal Factor Evaluation Matrix (IFE) External Factor Evaluation Matrix (EFE) Competitive Profile Matrix (CPM) Identifies a firm's major competitors and their particular strengths and weaknesses in relation to a sample firm's strategic position. Evaluate economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive information. Evaluates the major strengths and weaknesses in the functional areas of a business
• 5.
  Focuses on identifying& evaluating events beyond the immediate control of the firm • Increased foreign competition • Population shifts • Demographics (e.g., aging population) • Information technology
• 6.
  • Key opportunities •Key threats • Take advantage of opportunities • Avoid/reduce impact of threats Aimed at identifying key variables that offer actionable responses
• 7.
  Five (5) broadcategories: 1. Economic forces 2. Social, cultural, demographic, & environmental forces 3. Political, governmental, & legal forces 4. Technological forces 5. Competitive forces
• 8.
  Competitors Suppliers Distributors Creditors Customers Employees Communities Managers Stockholders Labor Unions Special InterestGroups Products Services Key External Forces Opportunities & Threats
• 9.
  • Availability ofcredit • Level of disposable income • Interest rates • Inflation rates • Federal government budget deficits • Gross domestic product trend • Consumption patterns • Unemployment trends • Stock market trends • Foreign countries’ economic conditions • Demand shifts for goods/services • Income differences by region/customer • Price fluctuations • Exportation of labor & capital • Monetary policies • Fiscal policies • Tax rates • ECC policies • OPEC policies
• 10.
  Social, cultural, demographic,and environmental changes can have major impact on Products, Services, Markets, Customers • Childbearing rates • Number of marriages & divorces • Number of births & deaths • Life expectancy rates • Per capita income • Attitudes toward business • Buying habits • Ethical concerns • Attitudes toward saving • Average level of education • Energy conservation • Social responsibility • Recycling • Waste management • Air & water pollution • Ozone depletion • Endangered species
• 11.
  • Government regulation/deregulation •Tax law changes • Special tariffs • Voter participation rates • Environmental protection laws • Equal employment legislation • Level of government subsidies • Antitrust legislation/enforcement • Import-export regulations • Monetary policy • Political conditions in other countries • Government budgets • World oil, currency, & labor markets • Location and severity of terrorist activities
• 12.
  Dramatic effect onbusiness • Fiber optics • Biometrics • Computer engineering • Superconductivity advancements
• 13.
  Generic Competition Form Competition Industry Competition Brand Competition
• 14.
  Generic competition -e.g. Honda against Silver Sea Cruise for the same consumer dollars Form competition - e.g. Toyota against manufacturers of other vehicles that provide the same service such as Yamaha (motorcycle) Industry competition - e.g. Honda against Mercedes, Lexus etc who make the same products or class of products (different prices) Brand competition - e.g. Honda against Toyota, Nissan etc. who offer similar products and service to the same customers at similar prices
• 15.
  7 Characteristics ofmost Competitive U.S. Firms: 1. Market share matters 2. Understand what business you are in 3. Broke or not, fix it 4. Innovate or evaporate 5. Acquisition is essential to growth 6. People make a difference 7. No substitute for quality
• 16.
  Developed by MichaelE. Porter of Harvard Business School in 1979. It refers to the overall industry profitability. An "unattractive" industry is one in which the combination of these five forces acts to drive down overall profitability. A very unattractive industry would be one approaching "pure competition", in which available profits for all firms are driven down to zero.
• 18.
  1. List keyexternal factors (10-20) Opportunities & threats 2. Assign weight to each (0 to 1.0) Sum of all weights = 1.0 3. Assign 1-4 rating to each factor Firm’s current strategies response to the factor 4. Multiply each factor’s weight by its rating Produces a weighted score 5. Sum the weighted scores for each Determines the total weighted score for the organization. Total weighted score for the organization Highest 4.0 (Organization response is outstanding to threats/ weaknesses) ; Lowest 1.0 (Firm’ not capitalizing on opportunities or avoiding threats) Average = 2.5
• 19.
  EFE – GatewayComputers Key External Factors Weight Rating Weighted Score Opportunities 1. Global PC market expected to grow 20% in 2004 0.10 3 0.30 2. Cost of PC component parts expected to decrease 10% - 2004 0.10 3 0.30 3. Internet use growing rapidly 0.05 2 0.10 4. China entered WTO; lowered taxes for importing PC’s 0.10 1 0.10 5. The average income for PC worker has declined from $40K/yr to $30k/yr 0.05 3 0.15 6. Modernization of business firms and government agencies 0.05 2 0.10 7. U.S. (& world) economies recovering 0.05 3 0.15 8. 30% of Chinese population can afford a PC; only 10% of homes have a PC 0.05 1 0.05
• 20.
  EFE – GatewayComputers (Continued) Key External Factors Weight Rating Weighted Score Threats 1. Intense rivalry in industry 0.10 1 0.05 2. Severe price cutting in PC industry 0.10 2 0.20 3. Different countries have different reguiremnt & infrastructure for PC’s 0.05 1 0.05 4. Palm & PDA becoming substitutes 0.05 3 0.15 5. Demand exceeds supply of experienced PC workers 0.05 4 0.20 6. Birth rate in U.S. declining annually 0.05 3 0.15 7. U.S. consumers and businesses delaying purchase of PC’s 0.05 2 0.10 8. PC firms diversifying into consumer electronics 0.05 3 0.15 Total 1.00 2.40
• 21.
  Identifies firm’s majorcompetitors and their strengths & weaknesses in relation to a sample firm’s strategic positions
• 22.
  Gateway Apple Dell CSF’sWeight Rating Weighted Score Rating Weighted Score Rating Weighted Score Market share 0.15 3 0.45 2 0.30 4 0.60 Inventory sys 0.08 2 0.16 2 0.16 4 0.32 Fin position 0.10 2 0.20 3 0.30 3 0.30 Prod. Quality 0.08 3 0.24 4 0.32 3 0.24 Cons. Loyalty 0.02 3 0.06 3 0.06 4 0.08 Sales Distribution 0.10 3 0.30 2 0.20 3 0.30 Global Exp. 0.15 3 0.45 2 0.30 4 0.60 Org. Structure 0.05 3 0.15 3 0.15 3 0.15 Prod. Capacity 0.04 3 0.12 3 0.12 3 0.12 E-commerce 0.10 3 0.30 3 0.30 3 0.30 Customer Service 0.10 3 0.30 2 0.20 4 0.40 Price competitive 0.02 4 0.08 1 0.02 3 0.06 Mgt. experience 0.01 2 0.02 4 0.04 2 0.02 Total 1.00 2.83 2.47 3.49