Chapter 3: Managing Strategy and Structure: Planning

Chapter 3: Formulating Strategy Current situation analysis -> goals SWOT Analysis: Strengths: i.e. High quality skills marketing Weaknesses: i.e. Rising Manufacturing costs, outdated technology Opportunities: i.e. Exploit new market segments Threats: i.e. Rise in new or substitute products. Micheal Porter’s Five Forces Model Level Rivalry: Competition – lowering prices – increasing advertising – lower profits – less profit Potential Entry: Easier = brand loyalty low – industry prices/profits low. Suppliers: Increase prices, lower profits Customers: Bargain lower prices: Substitute product: i.e. plastic substitute steel. Cannot demand high prices Hypercompetition: changing customer tastes, advancements technology Formulating Corporate Level Strategy Recourses – growth – create value – respond threats – respond change – improve performance Concentration single business Concentrate recourses – strong competitive advantage – Diversification Expanding Operations Newspaper -> online recourses Related: New -> existing industry – add value -> greater than without expansion . Synergy: Share Recourses: Manufacturing, distribution channels, advertising campaigns i.e. Mars: purchases market leader Wm, Wrigley JR Company – challenge dominance Cadbury -> worlds largest – Mars: Reduces company competition + greater market share b. Unrelated: New industry – buy poorly performing company, transfer management, turn business, increase performance, create value 3. International Expansion - 1+ national Market - Different national conditions - Global Strategy 4. Vertical Integration: -Producing own inputs (backward), distributing own outputs (forward) Reduce flexibility Add Value Lower cost value creation Changing environmental conditions outsourcing Low Cost Strategy Focus – Cost lower rivals – Manufacturing cost reduce, products cost reduce, development new products, lower costs of attracting customers Differentiation Strategy Competitive Advantage – distinguishing – competitors – product design, quality, after sales service, support, increase spending on product, charge premium price. Apple, ‘cool’. Advertising Middle: Lower levels performance, however, Campbell, Crisco- low coss & dif - > highest profits. Implementing Strategy Allocate responsibility Action plan Timetable – measureable Allocate recourses Allocate individuals, held responsible Designing Organizational Structure Communication – flexible structure, entrepreneurial cultures – decentralise authority, empower lower level employees, emphasis change & innovation – self- managed teams – highly skilled Functional Structure Functions: Finance, Administration, Merchandizing Logistics Marketing HR Perform activities necessary performance Divisional Structure Smaller, manageable units According 2 functions Separate Specific product or specific customer Product Structure According 2 product line Handled by self-contained division Each; complete set all functions Specialisation Geographic Structure Expand Regional Self-contained divisions Multi-domestic strategy Market Structure Each kind customer Self-contained division Matrix Structure Learning Work together Product Teams Develop specific product Complex network reporting relationships Flexible 2 bosses A. Functional boss – performance functional perspective B. Product Team Boss: Performance Team High Tech companies Innovative culture Product Team Structure Do away duel reporting relationships Permanently assigned cross-functional teams – report only product team manager Cross Functional Teams: Group Managers different departments – together- perform tasks Hybrid Structure Many different Large Many divisions simultaniously Coordinating Functions Linking & coordinating Different views Allocating Authority Hierarchy of Authority Chain of command – specify relative authority each manager Span of control Number subordinates report directly manager Eliminating one level & giving responsibility of managers at that level to managers above and empowering employees below – low cost foreign competitors – reduce costs. Strategic Alliance B2B Agreement managers share organization, resources, knowledge, foreign company, share rewards & risks, new venture https://www.youtube.com/watch?v=NxJvS92uCus