AEM1200-1015ToPost - AEM1200, Introduction to Business...

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Unformatted text preview: AEM1200, Introduction to Business Management. AEM1200, Friday 10/15 Strategic Management Strategy and difference Frameworks for strategic management The Business Environment and Planning: The 5F’s, SWOT 5F’s, Organizing: core competencies and the BCG product Organizing: portfolio matrix portfolio Leading: generic strategies, mergers and acquisitions Strategy Strategy “Competitive strategy is about being Competitive different. It means deliberately choosing a different set of activities to deliver a unique mix of value” deliver Michael Porter, “What is strategy?”, HBR, Nov-Dec 1996 Defining competitive advantage Defining A firm is said to have a sustained competitive firm advantage when it is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors and when these other firms are unable to duplicate the benefits of this strategy (Barney, 1991) (Barney, An enterprise has a Competitive Advantage if it is able An to create more economic value than the marginal (breakeven) competitor in its product market. The Economic Value created by an enterprise in the course of providing a good or service is the difference between the perceived benefits gained by the purchasers of the good and the economic cost to the enterprise. (Peteraf and Barney, 2003) (Peteraf Some Elements of Strategic Management Some Planning Michael Porter’s Five Forces Analysis SWOT Analysis Core competencies Organizing Leading Corporate vision / Mergers and Acquisitions Controlling Corporate culture The DuPont model SWOT Analysis SWOT Strengths Weaknesses Unique or distinct advantages Unique that make your organization stand out in the crowd; stand What makes the customers What choose your organization over the competition; the Products or services which Products your competition cannot imitate (now and in the future). (now Operations or procedures Operations in need of streamlining; in Areas in which competitors Areas are better, how and why. are Areas that you or your Areas organization may be avoiding; avoiding; Market segments from Market which your organization is shut-out. shut-out. Areas in which competition Areas is forcing action that is harmful to the organization; harmful Changes in customer Changes demand; demand; Changes in technology. Opportunities Threats Attractive choices within your Attractive marketplace: where and what; marketplace: Emerging trends; Potential new products and Potential capabilities. capabilities. Conceptual Structure of the SWOT Framework Framework Internal Factors External Factors Favorable Factors Strengths Opportunities Unfavorable Factors Weaknesses Threats Core Competencies Core Bundle of skills and technologies that enables a Bundle company to provide a particular benefit to customers; company Examples Sony, “pocketability” and miniaturization; FedEx, on-time delivery and logistics management; Wal-Mart, the choice-availability-value trilogy and logistics Wal-Mart, management. management. Tangible and Intangible Resources Tangible Financial resources Organizational resources Cash Access to financial Access markets markets Facilities Equipment Access to raw materials Patents Trademarks Employees’ individual Employees’ expertise and skill expertise Physical resources Culture Shared visions and values Routines Working relationships Customer and competitor Customer information information Strategic alliances Relations with stakeholders Brands Informational resources Legal resources Relational Reputational resources Human resources BCG Product Matrix - Definitions BCG Stars Stars are high growth businesses or products competing in markets where they Stars are relatively strong compared with the competition. Often they need heavy investment to sustain their growth. Eventually their growth will slow and, assuming they maintain their relative market share, will become cash cows. assuming Cash cows are low-growth businesses or products with a relatively high market Cash share. These are mature, successful businesses with relatively little need for investment. They need to be managed for continued profit - so that they continue to generate the strong cash flows that the company needs for its Stars. to Question marks are businesses or products with low market share but which Question operate in higher growth markets. This suggests that they have potential, but may require substantial investment in order to grow market share at the expense of more powerful competitors. Management have to think hard about "question marks" - which ones should they invest in? Which ones should they allow to fail or shrink? or Unsurprisingly, the term "dogs" refers to businesses or products that have low Unsurprisingly, relative share in unattractive, low-growth markets. Dogs may generate enough cash to break-even, but they are rarely, if ever, worth investing in. cash Cash Cows Question marks Dogs Porter’s Generic Competitive Strategies Porter’s For example For Differentiation Porsche Mercedes-Benz (BMW) Toyota (Volkswagen) Broad Cost Honda Focus External Corporate Growth External Merger/Acquisition Horizontal: Arcelar/Mittal (J.P. Morgan/Bear Stearns?) Horizontal: (J.P. Vertical: Oracle (databases) / Sun Microsystems (hardware, OS, Vertical: languages) languages) Conglomerate: Tata Group (Tetley , Corus Steel, Conglomerate: Jaguar/LandRover) Jaguar/LandRover) Leveraged Buyout (LBO) An attempt by employees, management, or a group of investors An to purchase an organization primarily through borrowing. to KKR / RJR-Nabisco (Barbarians at the Gates) KKR (Barbarians Blackstone Group / Hilton Worldwide (2007) Mergers and Acquisitions: Why? Why Not? Mergers Entering a new market Entering or business or Consolidating an Consolidating industry industry Speeding the Speeding development of a new product or service. product High expenditure, of High money and time; money Legal and tax Legal complications; complications; Difficulties in merging Difficulties two very different cultures. cultures. Making a Merger Work Making Due diligence Clear strategy and vision Quick and through planning and implementation “Chemistry” at the top Take-aways Take-aways Strategy is about uniqueness; Uniqueness is achieved through the Uniqueness development of core competencies and unique combinations of opportunities and capabilities; combinations In order to successfully develop core competencies, it is imperative to understand a firm’s industry. ...
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