STRATEGIC MANAGEMENT
Corporate strategy – what kind of business:
1. Planning school – to start business with strategic plan,
2. Positioning school – “-“ with position in an industry,
3. Skills school – “-“ with unique features,
4. Identity school – “-“ with strong (identity) differentiation.
Planning school.
Started by Alfred Chandler.
1) Assumptions (for utilization of the school):
• Here is a future (perception of the reality),
• You can predict the future,
• You can influence the future (but there are other forces that may also affect the future and sometimes you can fail).
2) Limitations:
• The future is unpredictable,
• Apathy of employees (here are feelings),
• Planning mistakes,
• Inertion – entrepreneurial instinets,
• Irrationality.
3) strategic response:
• you change nothing,
• invest into additional information,
• producing cheaper,
• strategy of optimal behavior (invest in many things with little time, and if smth. Works, invest there more and drop not working out).
• Simple rules strategy.
4) Tools:
• SWOT analysis (strength , weakness, opportunities),
• PESTEL analysis (political, economical, social, technical environmental, legal things).
Positioning school.
Started by Michael Porter. 1980 “Competitive strategy analysis of industry & competitors”.
1) Assumptions:
• You change the position.
2) Limitations:
• You can’t always change the position, because you must have smth., for exmp. resources (insufficient resources),
• Your position may change without or despite your efforts (independently on your actions).
3) Tools:
• 5 forces model
New entrants:
• economics of scale (the more you produce, the cheaper it becomes; unit cost decline with the experience),
• switching costs (when you switching from one product to another),
• access to distribution,
• cost disadvantages beyond those of scale,
• governmental policy (in certain areas of business government puts some limits in investments of competitors.
Suppliers: (burdening power suppliers)
• dominated by a few suppliers,
• no substitutes,
• Thread of forward integration.
Buyers:
• Concentrated,
• Low switching costs,
• thread of backward integration (buyers can buy you),
• buyers have all the information.
Rivalry:
• numerous rivals (equally balanced),
• slow growth,
• high fixed costs,
• low differentiation.
Tools:
• generic strategies:
o variety based positioning,
o needs base positioning,
o access-based positioning.
Example. Generic strategies: 1. cost leadership (lower prices).
2. differentiation (distinguish yourself).
3. focus (on a particular segment).
You can achieve success
Choose of right industry to enter
Competitive advantage
5 Forces Model (5FM)
GS, skill school
Skill school.
Chris Argyris in 1978 published “Organizational learning”.
Strategy – creation of unique competence of an organization.
Key question – how to create a competence which is hard to imitate?
Key competence – smth. that company is very good at (unique products, which hard to copy).
Assumption of a school:
• an organization is a set of important and unrepeatable knowledge and capacities,
• the most valuable knowledge is tacit (tacit is smth. not describable in words, net of relationship).
• The competence can be created (it is not a product of historical circumstances).
Limitations:
• Probably there are no things that can’t be imitated. If you understand how smth. works, in principle you can imitate it.
Application:
• KSF (Key Success Factor) analysis. (For different industries the factor influencing success are different.)
• VRIO model:
Resources A B C …
Valuable
Rear
Un-imitable
Well Organized
! In business are very important:
• Connections.
Identity School: (similar to skill school)
Strategy – an identity of an organization its stable attributes determining what an organization is and what is it striving (stengiasi) to become.
Key question – what comprises individuality?
Assumption – reputation is a key to identity.
Reputation institute – in 2002 the companies with the best reputation: Philips, Daimler, Chrysler< Ford, VW, Peugeot, Renault, Coca-Cola, Siemens, BMW, …
Limitations:
• Reputation is easy to loose.
Tools of creation: How to create identity?
• By observing the changes in tastes, values, believes and attitudes.
Tendencies to distinguish in nowadays:
• Aging society. Segment of people above 60 is becoming lager,
• Environmental consciousness,
• Increase the number of single people.
Identity.
1) Mission and Vision.
You create identity in many aspects. Missions and Visions are similar.
“I have a dream…”-Mark Luter King. Mahatma Gandhi.
2) Values. Also related to identity. St, Augustine “If you love God do what ever you want”
MARKETING MANAGEMENT
Consumers Behavior
Falls into marketing management.
Consumer Behavior – that consumer displays in searching for, purchasing, using, evaluating and disposing of products, services and ideas.
• What consumer buys?
• Why they buy it?
• When they buy it? Values, beliefs and attitudes of consumers
• How often they buy it?
• How often
they use it?
Without demand, no company is of any value
The winners are the companies, which find out the needs of customers.
How people make decisions to buy something?
External
Influence
Perception (information)
Perceive – overlook
Understand –misunderstand
Exaggerate – underestimate