Mgt302 Strategic

8/3/2019 Mgt302 Strategic

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MGT302_STRATEGICMANAGEMENT

WEEK 2

BY

FARRUKH IDREES


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Presentation Sections

Introduction: Aim of the lecture, Some

Concepts about environmental scanning Details: External assessment (Factors

related to PEST)

Conclusion: Summary


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Corporate goals:

Profitability

Growth

Resource Utilization (ROI, ROE)

Market Leadership


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Strategic Management

Systematic analysis of the factors associated

with customers and competitors (the externalenvironment) and the organization itself (the

internal environment) to provide the basis for

rethinking the current management practices.

Its objective is to achieve better alignment ofcorporate policies and strategic priorities.


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Strategic Decision Making

Distinctions

It is marked by four key distinctions

It is based on a systematic, comprehensiveanalysis of internal attributes, and factors external

to the organisation

It is long term and future oriented-usually several

years to a decade or longer-but built onknowledge about the past or present.


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Third it is distinctively opportunistic, always

seeking to take advantage of facorable situationsthat occur outside the organisation.

Strategic thinking involves choices


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Aim of the session

Practical framework for gathering,

assimilating, and analyzing externalinformation.

Over view of I/O approach of strategic

management


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Environmental Scanning

External Assessment/Industry Analysis/External Audit

It focuses on identifying and evaluating trends and events

beyond the control of a single firm, such as increased foreign

competition, population shift, stock market volatility etc..

It reveals the key opportunities and threats confronting an

organization so that managers can formulate strategies to take

advantage of the opportunities and avoid or reduce the impact

of threats.


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Importance of Environmental

Scanning

Strategy is a problem of allocating resources.

If strategy is to be successful, it must allocatesuperior resources against a decisive

opportunity

The idea is to concentrate our strength

against our competitors relative weakness.

Its not the strongest of the species that

survive, not the most intelligent, but the one

most responsive to change.


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Sources for Environmental Scanning

Internet

Key magazines,

Trade Journals

Newspapers

Suppliers

Distributors

Sales persons


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Sources for environmental scanning

Customers

Competitors Communities

Managers

Stockholders

Labor Unions

Trade Associations

Creditors

Consultants


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Industrial Organisation approach

(I/O)

The industrial organisation approach to

competitive advantage advocates thatexternal (industry) factors are more important

than internal factors in a firm achieving

competitive advantage.


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I/O

Porters five forces model is an example of

I/O perspective, which focuses on analysingexternal forces and industry variables as a

basis for getting and keeping competitive

advantage.

Firms performance is based on industryproperties e.g. economies of scale, barriers

to entry, product differentiation, and level of

competitiveness than on internal resources,

capabilities, structures, and operations.


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I/O

it is not a question of whether external or

internal factors are more important in gainingand maintaining competitive advantage.

Effective integration and understanding of

both external and internal factors is the key

to securing and keeping a competitiveadvantage.


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Components ofCompanys

External Environment

All companies operate in a macro

environment shaped by influencesemanating from the economy at large;

population demographics; societal values

and life styles; governmental legislations and

regulations; technological factors; and, closeto home, the industry and competitive arena

in which the company operates


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Components of Companys External

Environment

Macro Environment

PEST

Immediate Industry and Competitive

Environment

Suppliers

Substitute Products

Buyers

New Entrants

Rival Firms


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Competitive Forces

If a firm detects weakness in a competitor, no

mercy at all is shown in capitalizing on itsproblems.

Collecting and evaluating information on

competitors is essential for successful

strategy formulation. Identifying majorcompetitors is not always easy because

many firms have divisions that compete in

different industries.


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Key Questions about Competitors

What are the major competitors

strengths/Weaknesses? What the major competitors objectives and

strategies?

How will the major competitors most likely

respond to current economic, social, cultural,demographic, environmental, political,

governmental, legal, competitive trends

affecting our industry?


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How vulnerable are the major competitors to

our alternative company strategies? How are our products or services positioned

relative to major competitors?

To what extent are new firms entering and

old firms leaving this industry?


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What key factors have resulted in our present

competitive position in this industry? What is the sales and profitability ranking of major

competitors in the industry?

What is the nature of suppliers and distributor

relationships in this industry?

To what extent could substitute products or services

be a threat to competitors in this industry?


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Competitive Intelligence (CI)

It is a systematic and ethical process for gathering

and analyzing information about the competitions

activities and general business trends to further a

businesss goals.

Good CI in business, as in the military, is one of the

keys to success. The more informationa nd

knowledge a firm can obtain about its competitors,the more likely it is that it can formulate and

implement effective strategies.


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Misconceptions about CI

Requires lots of resources

Violates law Unethical business practice


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Objectives of CI Program

To provide a general understanding of a

company and its competitors To identify areas in which competitors are

vulnerable and to assess the impact strategic

actions would have on competitors

To identify potential moves that a competitormight take that would endanger a firms

position in the market


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Marriott and Motorolla agree that all the

information you could wish for can becollected without resorting to unethical

tactics. They keep their intelligence staffs

small, usually under five people, and spend

less than 200K dollars per year on gatheringcompetitive intelligence.


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Key Social Factors:

Birth Rate

Death Rate

Attitude Towards Business

Buying Habits

Average level of Education

Waste Management Air Pollution

Recycling

Attitude towards Product Quality

Attitude towards leisure time


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Key Political Variables:

Changes in Tax Laws Number of Patents

Changes in Patents Laws

Lobbying Activities

Size of Government Budgets World Oil

Pak-American Relations

Import Export Regulations

Level of Governmental Subsidies

Mgt302 Strategic

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