Strategic Management

1. STRATEGIC
MANAGEMENT
Master in Business Administration
Group V
Vivian Nombrefia Hanna harriete De Rama
Dennis Maan Guian Bernardo
Michael Alonzo

2. Strategy Evaluation and Strategic
Management Analysis

3. Strategy Evaluation
is as significant as strategy formulation because it throws light on the
efficiency and effectiveness of the comprehensive plans in achieving the
desired results. The managers can also assess the appropriateness of the
current strategy in todays dynamic world with socio-economic, political and
technological innovations. Strategic Evaluation is the final phase of Strategic
Management.
The significance of strategy evaluation lies in its capacity to co-
ordinate the task performed by managers, groups, departments
etc, through control of performance.

4. Steps for Evaluating Strategies
 Fixing Benchmark of Performance
 Measurement of Performance
 Analyzing Variance
 Taking Corrective Action

5. Matrix is a four celled matrix (a 2 * 2 matrix) developed by BCG,
USA. It is the most renowned corporate portfolio analysis tool. It
provides a graphic representation for an organization to examine different
businesses in it’s portfolio on the basis of their related market share and
industry growth rates. It is a two dimensional analysis on management of
SBU’s (Strategic Business Units). In other words, it is a comparative
analysis of business potential and the evaluation of environment.
According to this matrix, business could be classified as high or low
according to their industry growth rate and relative market share.
Boston Consulting Group (BCG)

7. Stars
Stars represent business units having large market share in a fast
growing industry. They may generate cash but because of fast growing
market, stars require huge investments to maintain their lead. Net cash
flow is usually modest. SBU’s located in this cell are attractive as they
are located in a robust industry and these business units are highly
competitive in the industry. If successful, a star will become a cash cow
when the industry matures.

8. Cash Cows
Cash Cows represents business units having a large market share in a
mature, slow growing industry. Cash cows require little investment and
generate cash that can be utilized for investment in other business
units. These SBU’s are the corporation’s key source of cash, and are
specifically the core business. They are the base of an organization.
These businesses usually follow stability strategies. When cash cows
loose their appeal and move towards deterioration, then a retrenchment
policy may be pursued.

9. Question Marks
Question marks represent business units having low relative market share and
located in a high growth industry. They require huge amount of cash to
maintain or gain market share. They require attention to determine if the
venture can be viable. Question marks are generally new goods and services
which have a good commercial prospective. There is no specific strategy
which can be adopted. If the firm thinks it has dominant market share, then it
can adopt expansion strategy, else retrenchment strategy can be adopted.
Most businesses start as question marks as the company tries to enter a high
growth market in which there is already a market-share. If ignored, then
question marks may become dogs, while if huge investment is made, then they
have potential of becoming stars.

10. Dogs
Dogs represent businesses having weak market shares in low-growth
markets. They neither generate cash nor require huge amount of cash.
Due to low market share, these business units face cost disadvantages.
Generally retrenchment strategies are adopted because these firms can
gain market share only at the expense of competitor’s/rival firms. These
business firms have weak market share because of high costs, poor
quality, ineffective marketing, etc. Unless a dog has some other
strategic aim, it should be liquidated if there is fewer prospects for it to
gain market share. Number of dogs should be avoided and minimized in
an organization.

11. CHARACTERISTICS OF AN EFFECTIVE
EVALUATION SYSTEM

12.  Strategy-evaluation activities should fairly portray this type of
situation
 Strategy-evaluation activities should not dominate decisions
 Strategy-evaluation activities should be simple, not too
cumbersome, and not too restrictive
Strategy Evaluation’s basic requirements to be effective:

13. STRATEGIC FRAMEWORK
What is a Strategic Framework?
The Strategic Framework is a comprehensive picture of the
organization’s strategy. It clarifies how individual efforts and team
projects can be connected to achieve the best outcome. It includes
meaningful target measures and a sequence of activities that help
focus on the key efforts that implement the strategy.
Why Strategic Framework?
These unique tools allow you to take your strategy “off of the page”
(or in our case “off of the wall”) and implement the plan directly into
every area of your operation. And because your team helped to
customize all of the tools, you will have full understanding of not
only what the tools say, but how and why they work.

14.  We map strategy.
First, we take a look at everything you already have – from your
current objectives to your organization’s vision, mission and
values. Then, we organize this information and ask critical
questions to form the context of your strategy and effectively
define (or confirm) your strategic goals. Through interactive
sessions, we then provide you with a set of visual tools that will
help you keep your priorities clear, increase individual contribution
and identify opportunities for improvement:
 The Strategy Map is a key tool. It is a graphic (based on the Balanced
Scorecard) that translates high-level strategy into measurable action.
It communicates your vision to your organization and allows each
person to understand how he or she contributes. The Strategy Map
addresses and defines critical objectives, measures and leverages.
 The Roadmap then helps integrate your strategy into your operating
plans so that you can implement activities and monitor and reinforce
performance.

15.  Strategic Framework Will:
 Leverage the Vision, Mission, and Values of the organization
 Define internal and external drivers to success
 Structure all efforts and clarify how individuals contribute
 Prioritize goals and initiatives
 Show opportunities to leverage resources

17. PORTER’S FIVE FORCES ANALYSIS
• Porter's five forces analysis is a framework for industry analysis and
business strategy development formed by Michael E. Porter of
Harvard Business School in 1979. It draws upon Industrial
Organization (IO) Economics to derive five forces that determine the
competitive intensity and therefore attractiveness of a market.
Attractiveness in this context refers to the overall industry profitability.
An "unattractive" industry is one in which the combination of these five
forces acts to drive down overall profitability. A very unattractive
industry would be one approaching "pure competition", in which
available profits for all firms are driven to normal pro.

18. • Porter referred to these forces as the micro environment, to
contrast it with the more general term macro environment. They
consist of those forces close to a company that affect its ability
to serve its customers and make a profit. A change in any of the
forces normally, requires a business unit to re-assess the
marketplace given the overall change in industry information.
The overall industry attractiveness does not imply that every
firm in the industry will return the same profitability. Firms are
able to apply their core competencies, business model or
network to achieve a profit above the industry average. A clear
example of this is the airline industry. As an industry, profitability
is low and yet individual companies, by applying unique
business models, have been able to make a return in excess of
the industry average.

19. • Strategy consultants occasionally use Porter's five forces framework
when making a qualitative evaluation of a firm’s strategic position.
However, for most consultants, the framework is only a starting point
or "checklist." They might use " Value Chain" afterward. Like all
general frameworks, an analysis that uses it to the exclusion of
specifics about a particular situation is considered naive.
• According to Porter, the five forces model should be used at the line-
of-business industry level; it is not designed to be used at the industry
group or industry sector level. An industry is defined at a lower, more
basic level: a market in which similar or closely related products
and/or services are sold to buyers A firm that competes in a single
industry should develop, at a minimum, one five forces analysis for its
industry. Porter makes clear that for diversified companies, the first
fundamental issue in corporate strategy is the selection of industries in
which the company should compete; and each line of business should
develop its own, industry-specific, five forces analysis. The average
Global 1,000 company competes in approximately 52 industries

20. CONTINGENCY PLANS
 can be defined as alternative plans that can be put into effect if
certain key events do not occur as expected.
 Only high-priority areas require the insurance of contingency plans.
Strategists cannot and should not try to cover all bases by planning for
all possible contingencies. But in any case, contingency plans should
be as simple as possible.

21. CONTINGENCY PLANS COMMONLY ESTABLISHED BY FIRMS
INCLUDE THE FOLLOWING:
 If a major competitor withdraws from particular markets as intelligence
reports indicate, what actions should our firm take?
 If our sales objectives are not reached, what actions should our firm take
to avoid profit losses?
 If demand for our new product exceeds plans, what actions should our
firm take to meet the higher demand
 If certain disasters occur, such as loss of computer capabilities; a hostile
takeover attempt; loss of patent protection; or destruction of manufacturing
facilities because of earthquakes, tornados, or hurricanes. what actions
should our firm take?
 If a new technological advancement makes our new product obsolete
sooner than expected, what actions should our firm take?

22.  It permitted quick response to change
 It prevented panic in crisis situation
 It made managers more adaptable by encouraging them to appreciate
just how variable the future can be.
CONTINGENCY PLANNING GAVE USERS THREE MAJOR
BENEFITS:

23.  Identify both beneficial and unfavorable events that could possibly
derail the strategy or strategies
 Specify trigger points. Calculate about when contingent events are
likely to occur.
 Assess the impact of each contingent event. Estimate the potential
benefit or harm of each
contingent event.
EFFECTIVE CONTINGENCY PLANNING INVOLVES A SEVEN-
STEP PROCESS:

24.  Develop contingency plans. Be sure that contingency plans are
compatible with current strategy and are economically feasible.
 Assess the counter impact of each contingency plan. That is, estimate
how much each contingency plan will capitalize on or cancel out its
associated contingent event. Doing this will quantify the potential
value of each contingency plan.
 Determine early warning signals for key contingent events. Monitor the
early warning signals.
 For contingent events with reliable early warning signals, develop
advance action plans to take
advantage of the available lead time

25. 21ST CENTURY CHALLENGES IN
STRATEGIC MANAGEMENT

26. THE ART OR SCIENCE ISSUE
 Scientific/Objective Perspective of Strategic Management
 Firms needs to systematically assess their external and internal
environment
 Conduct research
 Carefully evaluate the pros and cons of various alternatives
 Perform analyses
 Decide upon a particular course of action

27. THE ART OR SCIENCE ISSUE (CONTINUED)
 SWOT ANALYSIS

28. THE EXTERNAL ENVIRONMENT
Customers
Competitors
Suppliers
Distributors
The
Organization
General
Environment
Specific
Environment
© Prentice Hall, 2002 3-28

29. THE ART OR SCIENCE ISSUE (CONTINUED)
 Mintzberg notion of “Crafting” Strategies (Art/Subjective Strategic Management)
 Based on:
 Holistic thinking
 Intuition
 Creativity
 Imagination
• Mintzberg refers to strategic planning as an “emergent” process whereas
strategy scientists use the term “deliberate” process.

30. THE INVISIBLE OR HIDDEN ISSUE
• Why strategy process should be visible?
1. Stakeholders can readily contribute to the process.
2. Investors and creditors have greater basis for supporting a firm
3. Visibility promotes democracy
4. Participation and openness enhance understanding, commitment, and
communication within the firm

31. THE INVISIBLE OR HIDDEN ISSUE (CONTINUED)
• Why strategy process should be a secret?
1. Rival firms could exploit the firm
2. Secrecy limits criticism
3. Participants in a visible strategy process may become more attractive to rival firms
that may lure them away
4. Secrecy limits rival firms from imitating the firm’s strategies

32. TOP DOWN OR BOTTOM-UP APPROACH
Top Down Approach
 only top management can make strategic decisions
Bottom-Up Approach
 lower and middle managers and employees must be involved in the strategy process

33. THANK YOU FOR
LISTENING