Scarborough eesbm11e ppt04 Strategic Managementand the Entrepreneur

Copyright © 2015 Pearson Education, Inc. publishing as Prentice Hall 4-1

Copyright © 2015 Pearson Education, Inc. publishing as Prentice Hall. 4-2

Chapter 4

Copyright © 2015 Pearson Education, Inc. publishing as Prentice Hall.

Developing a strategy for success! Don’t just respond to the chaos in the

environment, create the disruptions that revolutionize the industry, and, in the process, create a competitive edge Apple Computer and the iPod

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The world economy is shifting from financial to intellectual capital

Knowledge is no longer just a factor of production, it is the critical factor of production

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Knowledge management: the practice of gathering, organizing, and disseminating the collective wisdom and experience of a company’s employees for the purpose of strengthening its competitive position

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Intellectual capital: comprised of1.Human capital2.Structural capital3.Customer capital

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Strategic management: a process that involves developing a game plan to guide the company as it strives to accomplish its vision, mission, goals, and objectives and to keep it from straying off its desired course

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Competitive advantage: the aggregation of factors that sets a company apart from its competitors and gives it a unique position in the marketThe key to business success is to build a unique competitive advantage that creates value for customers, is sustainable, and is difficult to duplicate

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To define competitive advantage, entrepreneurs should consider: The products they sellThe services they provideThe pricing they offerThe way they sellThe values to which they are committed

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Core competencies: unique set of skills, knowledge, or abilities that a company develops in key areas such as superior quality, customer service, innovation, team-building, flexibility, responsiveness, and others that allow it to vault past competitors

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Building a Sustainable Competitive Advantage


Use core competencies to define a compelling value proposition: the value that the combination of goods and services that a business delivers to customers to create a sustainable competitive edge Product or service leadershipCustomer intimacyOperation excellence

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Strategic management is a continuous process1. Develop a vision and translate it into a mission

statement2. Assess strengths and weaknesses3. Scan environment for opportunities and threats4. Identify key success factors5. Analyze competition6. Create goals and objectives7. Formulate strategies8. Translate plans into actions9. Establish accurate controls

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Step 1: Develop a Clear Vision and Translate It into a Meaningful Mission StatementVision

An expression of what an entrepreneur stands for and believes in and the values on which they build their business

Answers the question: “What kind of business do we want to be”

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A clearly defined vision:Provides directionDetermines decisionsMotivates peopleAllows a company to persevere in the face of

adversity

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Mission Answers the question "What business am I in?”Makes clear to everyone “why we are here” and

“where we are going”

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Elements of a mission statementThe purpose of the companyThe business we are inThe values of the company

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statement Assess strengths and weaknesses

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Step 2: Assess the Company’s Strengths and WeaknessesStrengths: positive internal factors that

contribute to accomplishing the mission, goals, and objectives

Weaknesses: negative internal factors that inhibit the company’s ability to accomplish its mission, goals, and objectives

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Identifying Company’s Strengths and Weaknesses



statement2. Assess strengths and weaknesses Scan environment for opportunities and threats

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Step 3: Scan the Environment for Opportunities and Threats Facing the BusinessOpportunities: positive external options the company

can exploit to accomplish its mission, goals, and objectives

Threats: negative external forces that inhibit the company’s ability to accomplish its mission, goals, and objectives

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Identifying Opportunities and Threats


Identifying and Managing Major Threats



statement2. Assess strengths and weaknesses3. Scan environment for opportunities and threats Identify key success factors

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Step 4: Identify the Key Factors for Success in the BusinessKey success factors: factors that influence

a company’s ability to compete successfully in an industryDetermine a company’s ability to compete

in the marketplace

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Identifying Key Success Factors



statement2. Assess strengths and weaknesses3. Scan environment for opportunities and threats4. Identify key success factors Analyze competition

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Step 5: Analyze the CompetitionTracking competition helps companies:

Avoid surprises from existing competitors’ new strategies and tactics

Identify potential new competitorsAnticipate rivals’ next strategic movesImprove reaction time to competitors’ actionsImprove their ability to differentiate their companies’

products and services from those of competitorsRefine their companies’ competitive edge

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Small Business Success Index


Competitor AnalysisDirect competitors

Offer the same products and servicesCustomers often compare prices, features, and deals

among these competitors when they shopSignificant competitors

Offer some of the same or similar products or servicesProduct or service lines overlap but not completely

Indirect competitorsOffer same or similar products in only a small number

of areas

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Competitive profile matrix: allows entrepreneurs to evaluate their companies against major competitors on the key success factors for their market segments

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Sample Competitive Profile Matrix



statement2. Assess strengths and weaknesses3. Scan environment for opportunities and threats4. Identify key success factors5. Analyze competition Create goals and objectives

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Step 6: Create Company Goals and ObjectivesGoals: broad, long-range attributes to be accomplished;

general and abstract“BHAGS”

Objectives: are specific targets of performance SpecificMeasurableAssignableRealistic (yet challenging)TimelyWritten down

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What Makes an Effective BHAG?



statement2. Assess strengths and weaknesses3. Scan environment for opportunities and threats4. Identify key success factors5. Analyze competition6. Create goals and objectives Formulate strategies

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Step 7: Formulate Strategic Options and Select the Appropriate Strategies Strategy: a “road map” that guides a company

through a turbulent environment as it seeks to fulfill its mission, goals, and objectives

Mission, goals, and objectives = endsStrategy = means

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Three strategic options:

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Strategy?

Cost leadership

Differentiation

Focus


Cost leadership strategy: to be the low-cost producer in the industry or market segmentAdvantages:

Reaching buyers who buy on the basis of pricePower to set the industry’s price floor

Works well when:Buyers are sensitive to price changesCompeting firms sell the same commodity productsA company can benefit from economies of scale

Disadvantages: Purchase decisions are driven by price not loyalty Can underestimate costs

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Differentiation strategy: company seeks to build customer loyalty by positioning its goods or services in a unique or different fashionIdea is to be better than the competition at something

customers valueKey to success:

Build basis for differentiation on a distinctive competence, something that a small company is uniquely good at doing in comparison to its competitors

Create perceived value for the customer

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Focus strategy: company selects one or more customer segments in a market, identifies customers’ special needs, wants, or interests, and then targets them with a product or service designed specifically for themStrategy builds on differences among market

segmentsRather than try to serve the total market, the company

focuses on serving a niche (or several niches) within that market

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statement2. Assess strengths and weaknesses3. Scan environment for opportunities and threats4. Identify key success factors5. Analyze competition6. Create goals and objectives7. Formulate strategies Translate plans into actions

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Step 8: Implement the strategyCreate projects by defining:

PurposeScopeContributionResource requirementsTiming

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statement2. Assess strengths and weaknesses3. Scan environment for opportunities and threats4. Identify key success factors5. Analyze competition6. Create goals and objectives7. Formulate strategies8. Translate plans into actions Establish accurate controls

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Step 9: Establish Accurate Controls Controlling the strategy

Entrepreneur must:Identify and track key performance indicatorsTake corrective action if necessary

Balanced scorecard: a set of measurements unique to a company that includes both financial and operational measuresGives managers a quick yet comprehensive

picture of a company’s overall performance

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The Balanced Scorecard


Five Perspectives:1. Customer: How do customers see us?2. Internal Business: At what must we excel?3. Innovation and Learning: Can we continue to

improve and create value?4. Financial: How do we look to shareholders?5. Corporate Citizenship: What must we do to meet our

social responsibility to society as a whole, the environment, the community, and other stakeholders?

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Date post:	15-Apr-2017
Category:	Engineering
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Scarborough eesbm11e ppt04 Strategic Managementand the Entrepreneur

Engineering