Interrelationship Among Value
Chain activities within and across organizations: interrelationships collaborative and
strategic exchange relationships between value-chain activities either:
(a) Within firms
(b) Between firms.
Strategic exchange relationshi
Diversity at the Workplace
Enhancing the human capital: Diversity at workplace
o Diversity at the workplace could be profitable for the Firm because:
1. Cost: of hiring everyone is lower than just hiring a particular group because
2. Resource acquisition
Marketing and Sales
Marketing and sales activities that are associate with purchase of products. To add value here
we need to:
Have highly motivated and competent sales force (how?)
Innovative approaches to MKT and ADV (how?)
Find out what customers reall
Attracting Human Capital
o How to attract the HC? Read Strategy spotlight 4.1: going green
o Hire for attitude and train for skills
Example: Southwest Airline
o Sound recruiting approaches and networking
Example: Southwest Airline, Microsoft, and GE
The three big financial statements:
o Income statement
o Balance sheet
o Cash flow statements (called the book-value) used to be 95% of the value of the
firm assets but, today, it is only 28% of the book value of the firm in the US.
Review: using ProCD Company as an example for weakness of SWOT analysis:
o Strengths: first mover advantage and low labor costs
o Weaknesses: inexperienced new company with no proprietary information
o Opportunities: high demand for e
1. Procurement function of purchasing input(s).
To add value here we need to:
Buy raw material that optimizes quality/minimizes cost (how?)
Develop a win-win situation with suppliers (how?)
Analyze alternatives for inputs (how?)
Value Chain Analysis
1. Inbound logistics activities that are associated with receiving, storing, distribution,
material handling etc. To add value here:
Minimize shipping time
Have an excellent material & inventory control system
SWOT analysis is both internal and external:
o Strengths - internal
o Weaknesses - internal
o Opportunities - external
o Threats external
Lego corporation: What happened?
They found out that kids now a days were not as entertained with
Creating Competitive Advantage
1. What is exciting about strategic management and why should we study it? Creating
2. Why out of 500 companies in 1950s in S&P 500, less than 71 of them are still there?
Lost competitive advantage *lea
Corporate governance the relationship among various participants in determining the
direction and performance of corporations.
The primary participants are
o (1) The shareholders
o (2) The management (led by the chief executive office
The bargaining power of the buyer: Can the buyers force the firm to have lower profit?
If a firm has a single buyer: buyers have more power
If firms product is a commodity: buyers have more power
If buyers have lower switching cost than
Predicting and detecting changes in our environment such as:
o Time to market - How can we help it?
o Shifting roles and responsibilities - Engineering jobs
Monitoring the evolution and the se
Sociocultural segment: includes the values and beliefs and lifestyle.
More women at work , more business clothes, cooking
More temp workers
Better life style (dual income)
Health and fitness
Daycare and having children later in life
Making Strategic Decisions and the Impacts on Them
Some key driving forces to involve the entire organization in the firms strategic decisions:
Globalization branches all over the world new ideas, new technology, new customers
o All business now is global
The External Environment
Chinas growing market of consumers:
Today china has 25% of all household savings and in 2025 they will have 60% of the
Why should we analyze our competitive environment?
IBC: (1930 2004): costs and inn
The General Environment
Focuses on the following factors that have dramatic affect on the firms strategy:
o Demographic Genetic and observable characteristics of a population, including
the levels of growth of age, density, sex, race, ethnicity, education
Threat of New Entrants into the Market
The threat of the substitute products and services: the probability that firms product would be
replaced by other products.
Example: a Generic drug product replaced a brand name drug, steel was replaced by
Porters 5-Force Models
Porters 5-force model of the industry competition: It is used to determine the firms
competitiveness and/or our industry.
1. The treat of new entrants the possibility that the profits of established firms in the
industry may be erod