Strategic Management Strategic Management and the Entrepreneur

8/14/2019 Strategic Management Strategic Management and the Entrepreneur

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Chapter 3: Strategic Management 1Copyright 2002 Prentice Hall Publishing Company

Strategic Managementand the Entrepreneur

Strategic Managementand the Entrepreneur


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Strategic ManagementStrategic Management

s Crucial to building a successful business.Crucial to building a successful business.

s Involves developing a game plan to guide aInvolves developing a game plan to guide a

company as it strives to accomplish itscompany as it strives to accomplish itsmission, goals, and objectives, and to keep itmission, goals, and objectives, and to keep it

on its desired course.on its desired course.


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Is Strategic Planning Really ThatIs Strategic Planning Really That

Important?Important?

s Study of 500 small companies:Study of 500 small companies:

One of the most significant factors inOne of the most significant factors in

distinguishing growing companies fromdistinguishing growing companies fromthose in decline: use of a written businessthose in decline: use of a written business

plan.plan.

s Another study:Another study:

Only 12% of small companies had a long-Only 12% of small companies had a long-

range plan in writing.range plan in writing.


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Strategic Management andStrategic Management and

Competitive EdgeCompetitive Edge

s Developing a strategic plan is crucial toDeveloping a strategic plan is crucial to

creating acreating a competitive advantagecompetitive advantage, the, the

aggregation of factors that sets a companyaggregation of factors that sets a company

apart from its competitors and gives it aapart from its competitors and gives it a

unique position in the market.unique position in the market.

s Example:Example: Stardust Technologies, Inc.Stardust Technologi

es, Inc.


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Strategic Management ProcessStrategic Management Process

Step 1Step

1: Develop a vision and translate it into a: Develop a vision and translate it into a

mission statement.mission statement.

Step 2Step

2: Define core competencies and target: Define core competencies and target

market and identify desired market position.market and identify desired market position.

Step 3Step

3: Assess strengths and weaknesses.: Assess strengths and weaknesses.

Step 4Step

4: Scan environment for opportunities: Scan environment for opportunities

and threats.and threats.Step 5Step

5: Identify key success factors: Identify key success factors..


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Strategic Management ProcessStrategic Management Process

Step 6Step

6: Analyze competition: Analyze competition..

Step 7Step

7: Create goals and objectives.: Create goals and objectives.

Step 8Step

8: Formulate strategies: Formulate strategies..

Step 9Step

9: Translate plans into actions: Translate plans into actions..

Step 10Step

10: Establish accurate controls: Establish accurate controls..

(continued)(continued)


7/43Chapter 3: Strategic Management 7Copyright 2002 Prentice Hall Publishing Company

Knowledge ManagementKnowledge Management

s

The practice of gathering, organizing, andThe practice of gathering, organizing, anddisseminating the collective wisdom anddisseminating the collective wisdom and

experience of a companys employees for theexperience of a companys employees for the

purpose of strengthening its competitive position.purpose of strengthening its competitive position.

s Knowledge management involves:Knowledge management involves: Taking inventory of the special knowledge the peopleTaking inventory of the special knowledge the people

in the company possess.in the company possess.

Organizing that knowledge and disseminating it toOrganizing that knowledge and disseminating it to

those who need it.those who need it.



Step 1:Step 1:Develop a VisionDevelop a Vision andand

Create a Mission StatementCreate a Mission Statement

s Vision an expression of what anVision an expression of what an

entrepreneur stands for and believes in.entrepreneur stands for and believes in.

s

A clearly defined vision:A clearly defined vision: Provides directionProvides direction

Determines decisionsDetermines decisions

Motivates peopleMotivates people



Step 1: Develop a Vision andStep 1: Develop a Vision and

Create a Mission StatementCreate a Mission Statement

s The Mission Statement addresses question:The Mission Statement addresses question:

What business are we in?What business are we in?

s

The mission is a written expression of howThe mission is a written expression of howthe company will reflect the owners values,the company will reflect the owners values,

beliefs, and vision.beliefs, and vision.

s The companys mission depicts itsThe companys mission depicts its charactercharacter,,

identityidentity, and, andscope of operationscope of operation in enoughin enoughdetail to distinguish the company in thedetail to distinguish the company in the

marketplace.marketplace.



Vision and MissionVision and Mission

(Review different view)(Review different view)

Vision:Vision: An overall picture of where the entireAn overall picture of where the entire

organization would like to be in theorganization would like to be in the

futurefuture

Mission:Mission: A statement of what the variousA statement of what the various

organizational units do and what theyorganizational units do and what they

hope to accomplish in alignment withhope to accomplish in alignment with

the organizational visionthe organizational vision


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Prime Inc.Prime Inc.Mission and ValuesMission and Values

MissionMission

To prosper while providingTo prosper while providing

excellent service to ourexcellent service to our

customerscustomers

2001 by Prentice Hall, Inc.

Prime ValuesPrime ValuesCustomersFinding, servicing,CustomersFinding, servicing,and keeping customersand keeping customersguarantees our existence.guarantees our existence.

ServiceWe will provide qualityServiceWe will provide qualityservice that meets or exceeds ourservice that meets or exceeds ourcustomers requirements.customers requirements.

ValueWe will price our serviceValueWe will price our serviceat rates that are a true value toat rates that are a true value toour customers.our customers.

ProfitTo remain free andProfitTo remain free andprovide security for our companyprovide security for our companyand associates, we must earn aand associates, we must earn aprofit.profit.


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The Bama Companies, Inc.The Bama Companies, Inc.Mission and VisionMission and Vision

MissionMission

People helping people bePeople helping people be

successful.successful.


VisionVision

To delight our customers withTo delight our customers with

the Bama experienceagainthe Bama experienceagainand again by setting theand again by setting the

standard, and being the beststandard, and being the best

in our products, our service,in our products, our service,

and our people.and our people.


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Aire-MasterAire-MasterMission and ValuesMission and Values

MissionMission

To provide invaluableTo provide invaluable

services that enhance theservices that enhance thecustomers image of quality.customers image of quality.


ValuesValues

Positive mental attitudePositive mental attitude

Teamwork and communicationTeamwork and communicationConcern for othersConcern for others

Going the extra mileGoing the extra mile

Innovative thinkingInnovative thinking

Training and educationTraining and education

HonestyHonestyReliabilityReliability

ExcellenceExcellence

Constant improvementConstant improvement


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Important Components ofImportant Components of

Organizational VisionOrganizational Vision

OrganizationalPurpose

Broad Goals

Core Values and Beliefs

Summary of WhatOrganization Does


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Components of OrganizationalComponents of Organizational

Vision and Mission StatementsVision and Mission Statements

Markets

Technology

Concern for

Survival, Profits,

and Growth

Products orServices

Self-concept

Concern forPublic Image

Concern for

EmployeesPhilosophy

Customers


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Step 2:Step 2:Define Core CompetenciesDefine Core Competencies

and Market Positionand Market Position

s Company must define its set of coreCompany must define its set of corecompetencies that enable it to servecompetencies that enable it to serve

customers better than rivals.customers better than rivals.

s Core CompetenciesCore Competenciesa unique set ofa unique set ofcapabilities a company develops in keycapabilities a company develops in key

operational areas that allow it to vault pastoperational areas that allow it to vault past

competitors.competitors.

They are what a company does best.They are what a company does best. Best to rely on aBest to rely on a natural advantagenatural advantage (often(often

linked to the companys size).linked to the companys size).


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Step 2: Define Core CompetenciesStep 2: Define Core Competencies

andandMarket PositionMarket Position

s Market segmentation carving up the massMarket segmentation carving up the mass

market into smaller, more homogenous unitsmarket into smaller, more homogenous units

and then attacking certain segments with aand then attacking certain segments with a

specific marketing strategy.specific marketing strategy.

s Proper positioningProper positioningcreating the desiredcreating the desired

image for the business in the customersimage for the business in the customersmind.mind.

St 3 A C St thSt 3 A C St th


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Step 3: Assess Company StrengthsStep 3: Assess Company Strengths

and Weaknessesand Weaknessess StrengthsStrengths Positive internal factors thatPositive internal factors that

contribute to accomplishing thecontribute to accomplishing the

mission, goals, and objectives.mission, goals, and objectives.

s WeaknessesWeaknesses

Negative internal factors that inhibitNegative internal factors that inhibit

the accomplishment of the mission,the accomplishment of the mission,

goals, and objectives.goals, and objectives.


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Step 4: Scan for OpportunitiesStep 4: Scan for Opportunities

and Threatsand Threats

s OpportunitiesOpportunities Positive external factors the company canPositive external factors the company can

employ to accomplish its mission, goals, andemploy to accomplish its mission, goals, and

objectives.objectives.

s ThreatsThreats Negative external factors that inhibit the firmsNegative external factors that inhibit the firms

ability to accomplish its mission, goals, andability to accomplish its mission, goals, and

objectives.objectives.


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Step 5: Identify Key SuccessStep 5: Identify Key Success

FactorsFactors

s Key success factors:Key success factors:

relationships between arelationships between a

controllable variable and acontrollable variable and a

critical factor that influence acritical factor that influence acompanys ability to competecompanys ability to compete

in the market.in the market.

s The keys to unlocking theThe keys to unlocking the

secrets of competingsecrets of competing

successfully in a particularsuccessfully in a particular

market segment.market segment.


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Step 6: Analyze CompetitorsStep 6: Analyze Competitors

Analyzing key competitors allows an entrepreneurAnalyzing key competitors allows an entrepreneurto:to:

avoid surprises from existing competitors newavoid surprises from existing competitors new

strategies and tactics.strategies and tactics.

identify potential new competitors and theidentify potential new competitors and the

threats they pose.threats they pose.

improve reaction time to competitors actions.improve reaction time to competitors actions.

anticipate rivals next strategic moves.anticipate rivals next strategic moves.


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Step 6: Analyze CompetitorsStep 6: Analyze Competitors

Techniques that doTechniques that do notnotrequire unethical behavior:require unethical behavior:

Monitor industry and trade publications.Monitor industry and trade publications.

Talk to customers and suppliers.Talk to customers and suppliers.

Listen to employees, especially sales representatives andListen to employees, especially sales representatives and

purchasing agents.purchasing agents.

Attend trade shows and conferences.Attend trade shows and conferences.

Study competitors literature and benchmark their productsStudy competitors literature and benchmark their productsand services.and services.

Get competitors credit reports.Get competitors credit reports.

Check out the local library.Check out the local library.

Use the World Wide Web to learn more about competitors.Use the World Wide Web to learn more about competitors.

Visit competing businesses to observe their operations.Visit competing businesses to observe their operations.


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Step 7: Create Company GoalsStep 7: Create Company Goals

and Objectivesand Objectivess GoalsGoalsbroad, long-range attributes to bebroad, long-range attributes to be

accomplished.accomplished.

s ObjectivesObjectivesmore detailed, specific targets ofmore detailed, specific targets of

performance that are S.M.A.R.T.performance that are S.M.A.R.T. SSpecificpecific

MMeasurableeasurable

AAttainablettainable

RRealistic (yet challenging)ealistic (yet challenging)

TTimelyimely


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Why Have Goals?Why Have Goals?

Goals:Goals:

1. Direct all organizational work toward a1. Direct all organizational work toward a

common and unified purposecommon and unified purpose

2. Act as targets for motivating people2. Act as targets for motivating people

3. Serve as criteria against which work3. Serve as criteria against which work

accomplishments are measuredaccomplishments are measured


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Types of GoalsTypes of Goals

SpecificitySpecificity

SpecificSpecific

DirectionalDirectional

Areas ofAreas of

Organizational WorkOrganizational Work

Technology andTechnology and

operationsoperations

MarketingMarketing

FinancialFinancial

Time FrameTime Frame

Long termLong term

Short termShort term

BreadthBreadth

Organization-Organization-

widewide

OperationalOperational

C f GCh t i ti f G d


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Characteristics of GoodCharacteristics of Good

GoalsGoals

tWritten in terms of outcomes rather than actionsWritten in terms of outcomes rather than actions

tMeasurable and quantifiableMeasurable and quantifiable

t Clear as to a time frameClear as to a time frame

t Challenging yet attainableChallenging yet attainable

tWritten downWritten down

t Communicated to all organizational membersCommunicated to all organizational members


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The Goal-Setting ProcessThe Goal-Setting Process

Steps:Steps:

1. Review the organizational vision and mission(s)1. Review the organizational vision and mission(s)

2. Evaluate available resources2. Evaluate available resources

3. Determine broad, long-term, organization-wide goals3. Determine broad, long-term, organization-wide goals

4. Write down the organization-wide goals4. Write down the organization-wide goals

5. Determine specific, short-term operational goals5. Determine specific, short-term operational goals6. Write down the operational goals6. Write down the operational goals

7. Review results7. Review results


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Relationship BetweenRelationship Between

Organizational Goals and StrategiesOrganizational Goals and Strategies

OrganizationalOrganizational

Vision and Mission(s)Vision and Mission(s)

Organization-wide GoalsOrganization-wide Goals

Operational GoalsOperational Goals

Operational StrategiesOperational Strategies


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Step 8: Formulate StrategiesStep 8: Formulate Strategies

s

StrategyStrategy

a road map to guide the companya road map to guide the company

through a turbulent environment as it seeks tothrough a turbulent environment as it seeks to

fulfill its mission, goals, and objectives. It is thefulfill its mission, goals, and objectives. It is the

companys game plan for winning.companys game plan for winning.

s Three basic strategies:Three basic strategies:

Strategy?

Cost leadershipCost leadership

DifferentiationDifferentiation

FocusFocus


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Strategic OptionsStrategic Options

Competitive AdvantageCompetitive Advantage

TargetTarget

MarketMarket

IndustryIndustry

NicheNiche

Uniqueness PerceivedUniqueness Perceived

by the Customerby the Customer

Low CostLow Cost

PositionPosition

DifferentiationDifferentiation Low CostLow Cost

DifferentiationFocus

DifferentiationFocus

CostFocus

CostFocus


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DifferentiationDifferentiation

s

Company seeks to build customer loyalty byCompany seeks to build customer loyalty bypositioning its goods or services in a unique orpositioning its goods or services in a unique or

different fashion.different fashion.

s Idea is to be special at something customersIdea is to be special at something customers

value.value.

s Key: Build basis for differentiation on aKey: Build basis for differentiation on a

distinctive competence, something that thedistinctive competence, something that the

small company is uniquely good at doing insmall company is uniquely good at doing incomparison to its competitors.comparison to its competitors.


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FocusFocus

s

Company selects one or more customerCompany selects one or more customersegments in a market, identifies customerssegments in a market, identifies customers

special needs, wants, or interests, and thenspecial needs, wants, or interests, and then

targets them with a product or service designedtargets them with a product or service designed

specifically for them.specifically for them.

s Strategy builds onStrategy builds on differencesdifferences among marketamong marketsegments.segments.

s Rather than try to serve the total market, theRather than try to serve the total market, the

company focuses on serving a niche (or severalcompany focuses on serving a niche (or severalniches) within that market.niches) within that market.


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Cost LeadershipCost Leadership

s Goal: to beGoal: to be thethe low-cost producer in the industrylow-cost producer in the industry(or market segment).(or market segment).

s Low-cost leaders have an advantage in reachingLow-cost leaders have an advantage in reaching

buyers who buy on the basis of price, and theybuyers who buy on the basis of price, and they

have the power to set the industrys price floor.have the power to set the industrys price floor.s Works well when:Works well when:

buyers are sensitive to price changes.buyers are sensitive to price changes.

competing firms sell the same commodity products.competing firms sell the same commodity products.

a company can benefit from economies of scale.a company can benefit from economies of scale.

Fi i l d A ti St t iFi i l d A ti St t i


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Financial and Accounting StrategiesFinancial and Accounting Strategies

for Entrepreneurial Venturesfor Entrepreneurial Ventures

Evaluating Financial PerformanceEvaluating Financial Performance

t What type of analysis?What type of analysis?

t How much analysis?How much analysis?

t How often to analyze?How often to analyze?

Forecasting, Planning, and BudgetingForecasting, Planning, and Budgeting

t What type of forecast?What type of forecast?

t How often to forecast?How often to forecast?

Financing MixFinancing Mix

tShort-term versus long-termShort-term versus long-termfunding sourcesfunding sources

t Permanent or temporary sourcesPermanent or temporary sources

Other Financial Management DecisionsOther Financial Management Decisions

t Capital budgetingCapital budgeting

t Stock dividend policyStock dividend policy

t Cash flow managementCash flow management

t Cash and securities managementCash and securities management

t Receivable and inventory managementReceivable and inventory management

t Term loans and leasesTerm loans and leases

I f ti S t St t iInformation S stems Strategies


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Information Systems StrategiesInformation Systems Strategies

for Entrepreneurial Venturesfor Entrepreneurial Ventures

Systems TechnologySystems Technology

t ManualManual

t Computer basedComputer based

Types of Information SystemTypes of Information System

t Transaction processing systemTransaction processing system

t Office automation systemOffice automation system

t Knowledge work systemKnowledge work systemt Management information systemManagement information system

t Decision support systemDecision support system

t Executive support systemExecutive support system


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Step 9: Translate StrategiesStep 9: Translate Strategies

into Action Plansinto Action Plans

s Create projects by defining:Create projects by defining:

PurposePurpose

ScopeScope

ContributionContribution

Resource requirementsResource requirements

TimingTiming


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Step 10: Establish Accurate ControlsStep 10: Establish Accurate Controls

s The plan establishes the standards againstThe plan establishes the standards against

which actual performance is measured.which actual performance is measured.

s Entrepreneur must:Entrepreneur must:

identify and track key performanceidentify and track key performance

indicators.indicators.

Take corrective action.Take corrective action.


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Balanced ScorecardsBalanced Scorecards

s A set of measurements unique to a companyA set of measurements unique to a company

that includes both financial and operationalthat includes both financial and operational

measuresmeasures

s Gives managers a quick, yet comprehensive,Gives managers a quick, yet comprehensive,

picture of a companys overall performance.picture of a companys overall performance.


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Balanced ScorecardsBalanced Scorecards

s Four Perspectives:Four Perspectives:

Customer: How do customers see us?Customer: How do customers see us?

Internal Business: At what must we excel?Internal Business: At what must we excel?

Innovation and Learning: Can we continueInnovation and Learning: Can we continue

to improve and create value?to improve and create value?

Financial: How do we look to shareholders?Financial: How do we look to shareholders?

Di i fDi i f


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Dimensions ofDimensions of

Organizational CultureOrganizational Culture

Attention toDetail

Outcome

OrientationTeam Orientation

Aggressiveness

Stability People Orientation

Innovation and

Risk-Taking


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Organizational CultureOrganizational Culture

How Organizational Culture Is Learned:How Organizational Culture Is Learned:

StoriesStories

RitualsRituals

Material SymbolsMaterial Symbols

LanguageLanguageRole of Physical SurroundingsRole of Physical Surroundings


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Building a Healthy CultureBuilding a Healthy Culture

Guidelines:Guidelines:

1. Change has to start at the top.1. Change has to start at the top.

2. Think about your culture when hiring.2. Think about your culture when hiring.

3. Two-way communication is important.3. Two-way communication is important.

4. If you dont believe in it, dont fake it.4. If you dont believe in it, dont fake it.


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Strategic Management Strategic Management and the Entrepreneur

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