Prepard by : Hamzah Elrehail

Girne American University

Business Management Department
Presentation Include
1.Overview of Strategic
Management

2. Competitive Dynamics
Strategic Management
 Art & science of formulating, implementing, and
evaluating, cross-functional decisions that enable an
organization to achieve its objectives.
 Is the continuous process of creating, implementing
and evaluating decisions that enable an organization to
achieve its objectives.
 Strategic management consists of the analysis,
decisions, and actions within organization undertakes
in order to create and sustain competitive advantages.
Purpose of Strategic
Management
 To exploit and create new and different opportunities for
tomorrow.
 To make managers and organizational members more alert
about the opportunities and threatening development in
their corresponding field.
 To help the entrepreneur to unify its managerial and
organizational efforts.
 To provide the opportunities to managers for evaluating
the company's budget according to the situation.
3 Stages of the Strategic
Management Process
 Strategy Formulation
 Strategy formulation is the process of establishing the organization's
mission, objectives, and choosing among alternative strategies.
Sometimes strategy formulation is called "strategic planning."
 Strategy Implementation
 Strategy implementation is the action stage of strategic
management. It refers to decisions that are made to apply new
strategy or reinforce existing strategy.
 Strategy Evaluation
 In the strategy evaluation and control process managers determine
whether the chosen strategy is achieving the organization's
objectives.
Strategy Formulation

Vision & Mission

External Opportunities & Threats

Internal Strengths & Weaknesses

Long-Term Objectives

Alternative Strategies

Strategy Selection
Vision & Mission
 Vision Statement (your dream):
What do we want to become?

 Mission Statement:
What is our business?
 what the organization wants to be?
 whom we want to serve?
 Vision Statement Example
 Dell’s vision is to create a company culture where
environmental excellence is second nature.

 General Motors’ vision is to be the world leader in

transportation products and related services.
Mission Statement Example
 Dell’s mission is to be the most successful computer
company in the world at delivering the best customer
experience in markets we serve. In doing so, Dell will
meet consumer expectations of highest quality; leading
technology; competitive pricing; individual and company
accountability; best-in-class service and support; flexible
customization capability; superior corporate citizenship;
financial stability.
Mission Statement Example
 G.M. is a multinational corporation engaged in socially
responsible operations, worldwide. It is dedicated to
provide products and services of such quality that our
customers will receive superior value while our employees
and business partners will share in our success and our
stock-holders will receive a sustained superior return on
their investment.
External Opportunities and Threats

Analysis of Trends
 Economic
 Social
 Cultural
 Demographic/Environmental
 Political, Legal, Governmental
 Technological
 Competitors
External Opportunities and Threats
Internal Strengths and Weaknesses

 Controllable activities performed especially well or poorly

 Determined relative to competitors
 Typically located in functional areas of the firm

 Management
 Marketing
 Finance/Accounting
 Production/Operations
 Research & Development
 Management Information Systems
Long-Term Objectives
 Essential for ensuring the firm’s success
 Provide direction
 Aid in evaluation
 Create synergy
 Reveal priorities
 Focus coordination
 Provide basis for planning, organizing,
motivating, and controlling
Strategies
 Means by which long-term objectives are achieved.
 Examples
 Geographic expansion
 Diversification
 Acquisition
 Product development
 Market penetration
 Retrenchment
 Divestiture
 Liquidation
 Joint venture
Strategy Implementation
Implementation Process Questions:
 Who are the people to carry out the strategic
plan?
 What must be done to align operations with new
direction?
 How is work going to be coordinated?
 Purpose is to make the strategy “action-
oriented.”
 Compare proposed programs and activities with current
programs and activities.
Strategy Implementation Steps
 Developing a strategy-supportive culture
 Creating an effective organizational structure
 Redirecting marketing efforts
 Preparing budgets
 Developing and utilizing information systems
 Linking employee compensation to organizational
performance
Issues in Strategy Implementation

Action Stage of Strategic Management

 Mobilization of employees & managers

 Most difficult stage

 Interpersonal skills critical

Strategy Evaluation And Control
Purpose of Strategic Evaluation
 The purpose of strategic evaluation is to evaluate the
effectiveness of strategy in achieving organizational
objectives.
 Organizations should continually monitor internal and
external events and trends so that timely changes can
be made as needed
Porter Five Forces Model
Porters Five Forces …
 Threat of Entry
 Bargaining Power of Suppliers
 Bargaining Power of Buyers
 Development of Substitute Products or Services
 Rivalry among Competitors
Barriers to Entry …
 large capital requirements or the need to
gain economies of scale quickly.
 strong customer loyalty or strong brand
preferences.
 lack of adequate distribution channels or
access to raw materials.
Power of Suppliers …
… high when
 A small number of dominant, highly concentrated
suppliers exists.
 Few good substitute raw materials or suppliers are
available.
 The cost of switching raw materials or suppliers is
high.
Power of Buyers …
… high when
 Customers are concentrated, large or buy in
volume .
 The products being purchased are standard or
undifferentiated making it easy to switch to other
suppliers.
 Customers purchases represent a major portion of
the sellers total revenue.
Substitute Products …

… competitive strength high when

 The relative price of substitute products declines .
 Consumers’ switching costs decline.
 Competitors plan to increase market penetration
or production capacity.
Rivalry Among Competitors
… intensity increases as
 The number of competitors increases or they
become equal in size.
 Demand for the industry’s products declines or
industry growth slows.
 Fixed costs or barriers to leaving the industry are
high.
Summary For Porter Model…
 As rivalry among competing firms
intensifies, industry profits decline, in
some cases to the point where an
industry becomes inherently
unattractive.
Management and Strategic
Management
Part 2 Competitive Dynamics
What is Competitive Dynamics?
 Competitive Dynamics
 Total set of actions and responses of all firms competing
within a market.

 Competitive Dynamics
 Ongoing actions and responses taking place between all
firms competing within a market for advantageous
positions.
Model of Competitive Dynamics
Why Do Companies Launch New
Competitive Actions?
 Improve market position
 Capitalize on growing demand
 Expand production capacity
 Provide an innovative new solution
 Obtain first mover advantages
Threat Analysis
 Threat Analysis
 A firm’s awareness of its closest competitors and the kinds of
competitive actions they might be planning.
 Competitor Analysis
 Is the first step to understanding competitive rivalry and identifying who
your direct competitors are
 Involves collecting competitive intelligence
 Focuses on trying to predict competitors’behavior
 The question: ‘To what extent are firms competitors’?
 2 components to assess
 Market Commonality
 Resource Similarity
 Direct competitors have high market commonality & high resource
similarity
Market Commonality

 Market Commonality
 The number of markets with which the firm and a competitor are
jointly involved and the degree of importance of the individual
markets to each
 Each industry composed of various markets which can be
subdivided into segments
 Example: Automobile industry
 Greater market commonality results in greater rivalry
 Firms may also compete against one another in several or many
product and geographic markets
 Multimarket Competition
 Firms with greater multimarket contact are less likely to attack
but more likely to respond when attacked
Resource Similarity

 Resource Similarity
 Extent to which firm’s tangible/intangible resources are
comparable to competitor’s in type and amount.
 Can result in similar strengths and weaknesses and similar
strategies being pursued.
 The more similar the types and amounts of resources the
more direct the competition is between two firms.
3 Drivers of Competitive
Actions/Responses
 Awareness
 Extent competitors recognize degree of mutual
interdependence that results from market commonality and
resource similarity
 Greatest when firms have highly similar resources
 Affects the extent to which the firm understands the
consequences of its competitive actions and responses
 A lack of awareness
3 Drivers of Competitive
Actions/Responses
 Motivation
 Firm's incentive to take action, or to respond to a competitor's
attack, as it relates to perceived gains and losses
 A firm is more likely to attack a rival with whom it has low
market commonality
 Responses are more likely to occur when market commonality is
high
 Ability
 Firm's resources that allow competitive action and flexibility to
respond
 Without available resources a firm lacks the ability to respond
Drivers of Competitive Behavior

 Awareness
 Do managers understand the key characteristics of
competitors?

 Motivation
 Does the firm have appropriate incentives to attack or
respond?

 Capability
 Does the firm have the necessary resources to attack or
respond?
Strategic VS Tactical
 What are the strategic and tactical actions?
 Strategic actions/responses: market-based moves that
signify a significant commitment of organizational resources
to pursue a specific strategy
 Difficult to implement and reverse
 Tactical actions/responses: market-based moves that
involve fewer resources to fine-tune a strategy that is
already in place
 Easier to implement and reverse
First Mover

 Firms that take an initial competitive action.

 Generally possess the resources and capabilities that
enable them to be pioneers in new products, new
markets or new technologies.
 Can earn above average profits until competitors
respond
 Gain customer loyalty, helping to create a barrier to
entry by competitors
 Advantage depends upon difficulty of imitation
Second Mover

 Firms that respond to a First Mover’s actions

 Second Movers frequently imitate First Movers
 Speed of response often dictates success
 Should evaluate customers’ response before moving
 “Fast” Second Movers can capture some of initial
customers and develop some brand loyalty
 Avoid some of the risks associated with First Move
 Must possess necessary capabilities to imitate
Summary Of Movers
 First Mover Incentives
 Firm that takes an initial competitive action to build or to
defend its competitive advantages or to improve its market
position
 Second Movers
 Late Movers

 Quality
 Customer perception that the firm's goods or services
perform in ways that are important to customers, meeting or
exceeding expectations
 Lower quality = lower attack/response likelihood
Organizational size and
competitive actions
 Small firms
 More likely to launch competitive actions
 Are more flexible, nimble, and quicker
 Initiate a greater variety of competitive actions
 Large firms
 Initiate more competitive actions with more strategic
actions during a given period
 Tend to limit the types of competitive actions used
Actor’s Reputation

 Actor’s Reputation
 Actor: Firm taking an action or response
 Reputation: positive or negative attribute ascribed by one rival to
another based on past competitive behavior
 Firms are more likely to respond to market leaders (firms
with good reputations)
 Past behavior is also a useful predictor of future behavior
 Firms are less likely to respond to a company with a
reputation for risky, complex, and unpredictable behavior
Slow-Cycle Markets

 Markets in which the firm's competitive advantages are

shielded from imitation for long periods of time, and in
which imitation is costly
 Build a one-of-a-kind competitive advantage which creates
sustainability
 Once a proprietary advantage is developed, competitive
behavior should be oriented to protecting, maintaining, and
extending that advantage
Fast-Cycle Markets

 Markets in which the firm's capabilities that contribute to

competitive advantages are not shielded from imitation and
where imitation is often rapid and inexpensive.
 Competitive advantages are not sustainable in fast-cycle
markets.
 Focus: learning how to rapidly and continuously develop
new competitive advantages that are superior to those they
replace (creating innovation ).
 Continually try to move on to another temporary
competitive advantage before competitors can respond to
the first one.
Standard-Cycle Markets

 Markets where firm’s competitive advantages are

moderately shielded from imitation and where imitation is
moderately costly.
 Competitive advantages partially sustained as quality is
continuously upgraded.
 Seek to serve many customers and gain a large market
share.
 Gain brand loyalty through brand names.
 Careful operational control / manage a consistent experience
for the customer.
The End