NAME SURNAME: ŞİMAL AYSEVER STUDENT NUMBER: 5751140
WHAT IS STRATEGIC MANAGEMENT? Strategic management may be defined as art and science of formulating, perform, and calculating crosfunctional decisions that an organization to achive its objectives. Strategic management is the process of managing the pursuit of the organization to its environment. Strategic management is concerned five stage model of objectives determination and strategy formulation. 1.Formulation of Vision, Mission Statement, and Goals: Vision isa general statement of its intended direction. Mission is its aim. Strategic goals are common statements of organizational purpose established in the firm’s key results areas. 2.Determination of Strategic Objectives: The firm should determine the strategic objectives to achieve its mission in complex internal and external process. 3.Strategy Formulation: Strategy formulation decisions commit an organization of specific product, market, resources, and technology. Strategy formulation is often called s strategic planning 4.Strategy Implementation: This often is called as ‘action stage’ of strategic management. This means mobilizing employees and managers to put formulated strategies into actions and results. 5.Evalauation and Strategic Control: This is the final stage in strategic management. Strategic control is the process of determining goals and acting to correct any problems. There are some basic questions about strategic management: *Where are we now? *Where do we want to be? *How do we get there? To answer those there questions we need to determine Strengths, Weaknesses, Opportunities, and Threats. This gives the acronym SWOT. A firm’s strategy aims at taking advantage of projected strengths and opportunities, while overcoming or reducing projected weaknesses and threats. Thus, strategies are based on these SWOT forecast.
TYPES OF STRATEGIES: Forward Integration: Gaining ownership or enhance control over distributors. For example: Southwest Airlines just began selling tickets through Galileo. DHBW 2013
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Backward Integration: Seeking ownership or increasing control of a firm’s suppliers. (For example: Hilton Hotels could acquire a large furniture manufacturer.) Horizontal Integration: Gaining ownership or enhance control over competitors. (For example: Huntington Bancshares and Sky Financial Group in Ohio merged) Market Development: Introducing present product or services into new geographic area. (For example: Burger King opened its first place in Japan.) Product Development: Seeking increased sales by improving present products or services or develop the new one. (For example: Google introduced “Google Presents” to compete with Microsoft’s Power Point.) Related Diversification: Adding new but related products or services. (For example: MGM Mirage is opening its first noncasino luxury hotel) Unrelated Diversification: Adding new, unrelated products or services. (For example: Ford Company entered the industrial bank business.) Divestiture: Selling a division or part of an organization. (For example: Whirlpool sold its struggling Hoover floor care business to Techtronic Industries.)
STRATEGIC MANAGEMENT CHALLENGES IN THE 1990s 1. Accelerating Rates of Change: Alvin Toffler in Future Shock, predicted that as we approached the 21st century, all aspects of life, would encounter accelerating rates of change. His predictions have come true. Managers must not only embrace change and learn how to manage it, but they also insure that all organization members join this effort. Strategists must change their entire organizations so that they will, as Thomas J. Peters suggests, be able to ‘thrive on chaos’. The external and internal factors affecting organizations simply won’t allow them to avoid incorporating change as part of organizational reality. Change is the order of the day. Adapt or die, proclaimed Theodore Levitt, then editor of the Harvard Business Review. 2. Increasing Competition: The 1990s will be the most competitive decade of this century. Strategists has to calculate strategies to compete in markets that offer growth and share becomes ever more critical. Modern business is a market share game. 3. Globalization of Business: European economic integration in 1992, the probability of the Pacific Rim emerging as the most significant economy of the 21st century, and increased levels of foreign competition in most domestic economies dictate that the strategist must develop and maintain a global perspective on business. Strategists must not fail to consider the global perspective when formulating strategy. 4. Technology Change: Technology changes rapidly in virtually all industries, but technological discontinuity poses the major threat to firms. DHBW 2013
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5. Resource Shortages: If is increasingly apparent that supplies of many important resources, energy, water, and human resources will be insufficient in the 1990s in many areas of the globe, especially in the United States. Strategists must cope with these resource shortages at a time when the firm ask more. 6. Transition from Industrial knowledge Society: Knowledge is a power. It can establish advantage, some say it is the only long term, sustainable competitive advantage. Knowledge about customers may also give competitive advantage. For example: electronic data interfaces, which customers and suppliers share data bases, result in closer relationships that help lock out competitors. 7. Increasing Demands of Constituents: Constituent groups are making ever more vocal demands in the areas of the environment, employee health etc. Strategists will need to formulate strategies and policies for dealing with these concerns.
THE S CURVE “The S curve is a graph of the relationship between the effort put into improving a product or process and the results one gets back for that investment.” S curves are a phenomenon show the typical path of product performance in relation to investment and R&D.
The S curve gets its name from its shape. Initially, as funds are put into a project, results come slowly. Then suddenly, bad results follow. Eventually, increases in effort produce only limited results. Typically a firm would like to have overlapping S curves so its new product introductions would slowly, conveniently replace its older products. What happens, when a competitor’s new product introduction leaves the firm’s product introductions leaves the firm’s products behind? In same cases, the firm may very well go out of business as a result of strategic discontinuity. Innovation becomes the attacker’s advantage. This happened when video rentals virtually eliminated the drive in movie, jet engines replaced propeller aircraft, and digital watches replaced pin lever watches. The S curve affect sales of some product significantly. In the future, new products emerge to replace old ones. DHBW 2013
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The company which is attacked can respond. For example: The Mac did not replace the IBM. Old products’ defenders can take several actions. IBM stresses its name, image, quality, and power to counter the Mac. A company can use superior resources, as IBM did. IBM has a mouse and software similar to Mac, now. It can counter attack at the weaknesses of the attacker’s product. Maybe, the best defense is to constantly attack yourself, changing the company. The company must be able to attack and counterattack over in any given period time.
ADVANTAGES OF THE S CURVE: 1. Allows for an evaluation of different stages of technology. 2. Create clear incentives. 3. Watch out for technological contradiction. 4. Indicates the necessity for strategic arrangement when productivity gains decline. DISADVENTAGES OF THE S CURVE: 1. This model does not give any clear hints to managers on how to react in the face of technology. 2. This model does not refer how a new technology will look like and by whom it will be introduced. 3. It cannot be inferred from the model, how big the gains will be from new technologies.
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REFERENCE 1. Alvin Toffler, Future Shock, New York: Bantam, 1970 2. Arnoldo C. Hax, Redefining the Concept of Strategy and the Strategy Formulation Process, June 1990,pp.34-41 3. Kenichi Ohmae, Getting Back to Strategy, November-December 1988, pp.149-156 4. Steingraber, Managing in the 1990s, p.50 5. Peters, Thriving on Chaos 6. Theodore Levitt, Editorial in Harvard Business Review, January-February 1988, p.4 7. Steingraber, Managing in the 1990s, p.50 8. Charles R. Day, Jr, The West: In the Single Market, Imports Might Include Personnel, February 5, 1990, pp.19-22 9. Richard Foster, Innovation: The Attacker’s advantage, New York Summit Books, 1986, p.31. 10. N. Foster, Innovation: The Attacker’s Advantage, New York Summit Books, 1986 11. Ibid, pp. 221-240. 12. Richard D. Foster, 1985 13. James m. Higgins, Julian W. Vincze, Strategic Management text and Cases, Fifth edition 14. Fred R. Davis, Strategic Management Concepts, Twelfth Edition
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