Strategic Management •Course Information: https://is.slu.cz/predmet/opf/zima2024/PEMNASMA?lang=en • •Consultation: Wednesday and Thursday • (better to have an appointment in advance) • •Contact Details: shariq@opf.slu.cz •Room: B205 Important Information •Requirements on students •(Total sum of points 100) 1.Active participation in seminars and case studies solution – • 10% of points •2. Seminar paper and defence of the seminar paper • (no later than 15. 12. 2025) – • 10% of points •3. Continuous test • (in the week 27. 10. – 31. 10. 2025) – • 20% of points •4. Final written exam – • 60% of points • •Consultation: Wednesday and Thursday • (better to have an appointment in advance) •Contact Details: shariq@opf.slu.cz •Room: 205 Learning outcomes •Strategic Decision-Making Process •External Environment a)Societal Environment b)Industrial Environment •External Factor Analysis Summary (EFAS) •SWOT & TOWS (Threats & Opportunities) •Strategic Factor Analysis Summary (Threats & Opportunities) •Industrial Organization Model of Above-Average Returns Strategic Decision-Making Process Environmental Scanning External Environment A) Societal Environment B) Industrial Environment A) Societal Environment General Environment Components General Environment Components Factors involved in Pest analysis B) Industrial Environment •External Factor Evaluation Matrix •Summarize & evaluate: • Competitive Political Cultural Technological Environmental Social Governmental Demographic Economic Question 1: What are the Industry’s Dominant Economic Traits? •Market size and growth rate •Scope of competitive rivalry •Number of competitors and their relative sizes •Prevalence of backward/forward integration •Entry/exit barriers •Nature and pace of technological change •Product and customer characteristics •Scale economies and experience curve effects •Capacity utilization and resource requirements •Industry profitability Relevance of Key Economic Features of Industry Question 2: What Is Competition Like and How Strong Are the Competitive Forces? •To identify •Main sources of competitive forces •Strength of these forces •Key analytical tool •Five Forces Model of Competition Objective Five Forces Model of Competition Suppliers of Key Inputs Buyers Potential New Entrants Rivalry Among Competing Sellers Scanning the External Environment Analysis of Societal Environment Economic, Sociocultural, Technological, Political-Legal Factors Selection of Strategic Factors • Opportunities • Threats Market Analysis Competitor Analysis Supplier Analysis Governmental Analysis Interest Group Analysis Community Analysis External Factor Analysis Summary (EFAS) External Strategic Factors Weight Rating Weighted Score Comments 1 2 3 4 5 1.00 Opportunities Threats Total Weighted Score Notes: 1. List opportunities and threats (5–10 each) in column 1. 2. Weight each factor from 1.0 (Most Important) to 0.0 (Not Important) in Column 2 based on that factor’s probable impact on the company’s strategic position. The total weights must sum to 1.00. 3. Rate each factor from 5 (Outstanding) to 1 (Poor) in Column 3 based on the company’s response to that factor. 4. Multiply each factor’s weight times its rating to obtain each factor’s weighted score in Column 4. 5. Use Column 5 (comments) for rationale used for each factor. 6. Add the weighted scores to obtain the total weighted score for the company in Column 4. This tells how well the company is responding to the strategic factors in its external environment. Source: T. L. Wheelen and J. D. Hunger, “External Strategic Factors Analysis Summary (EFAS).” Copyright © 1991 by Wheelen and Hunger Associates. Reprinted by permission. .20 1 .20 Clinton Administration .20 2 .10 Bad media exposure from FDA .10 2 .05 Smokeless market SE region U.S. .15 3 .05 Production limits on tobacco .20 2 .10 Legislation against the tobacco industry Threats .30 3 .10 More social pressure to quit smoking 2.10 1.00 TOTAL .60 4 .15 Pinkerton leader in discount market .05 1 .05 Astronomical Internet growth .15 3 .05 Increased demand .15 1 .15 Global markets untapped Weighted score Rating Weight UST—Key External Factors Opportunities Prentice Hall, 2000 Chapter 5 29 SWOT Analysis •Internal Environment •Strengths •Weaknesses •External Environment •Opportunities •Threats Prentice Hall, 2000 Chapter 5 30 SO Strategies Generate strategies here that use strengths to take advantage of opportunities ST Strategies Generate strategies here that use strengths to avoid threats WO Strategies Generate strategies here that take advantage of opportunities by overcoming weaknesses WT Strategies Generate strategies here that minimize weaknesses and avoid threats INTERNAL FACTORS (IFAS) EXTERNAL FACTORS (EFAS) Strengths (S) List 5 – 10 internal strengths here Weaknesses (W) List 5 – 10 internal weaknesses here Opportunities (O) List 5 – 10 external opportunities here Threats (T) List 5 – 10 external threats here TOWS Matrix Source: Adapted from Long-Range Planning, April 1982, H. Weihrich, “The TOWS Matrix—A Tool for Situational Analysis” p. 60. Copyright 1982, with kind permission from H. Weihrich and Elsevier Science Ltd. The Boulevard, Langford Lane, Kidlington OX5 1GB, UK. Prentice Hall, 2000 Chapter 5 31 Expand Hoover’s presence in continental Europe by improving quality & reducing costs Emphasize superstore channel for all non-Maytag brands SO Strategies • Use worldwide Hoover dis- tribution channels for Hoover and Maytag • Find joint venture partners in Eastern Europe & Asia ST Strategies • Acquire Raytheon’s appliance business • Merge with major Japanese home appliance company • Sell off non-Maytag brands; defend Maytag’s US niche. • WO Strategies • Expand Hoover’s presence in continental Europe by improving quality & reducing costs • Emphasize superstore channel for non-Maytag brands WT Strategies • Sell off Dixie-Narco division to reduce debt • Emphasize cost reduction to reduce break-even point • Sell out to Raytheon or a Japanese firm. INTERNAL FACTORS (IFAS) EXTERNAL FACTORS (EFAS) Strengths (S) S1 Quality Maytag Culture S2 Experience top management S3 Vertical integration S4 Employee relations S5 Hoover’s international orientation Weaknesses (W) W1 Process-oriented W2 Distribution channels W3 Financial position W4 Global positioning W5 Manufacturing facilities Opportunities (O) O1 Economic integration of European community O2 Demographics favor quality O3 Economic development, Asia O4 Opening Eastern Europe O5 Trend toward super stores Threats (T) T1 Increasing government regulation T2 Strong US competition T3 Whirlpool & Electrolux positioned for global economy T4 New product advances T5 Japanese companies TOWS Matrix: Maytag as Example Source: Adapted from Long-Range Planning, April 1982, H. Weihrich, “The TOWS Matrix—A Tool for Situational Analysis” p. 60. Copyright 1982, with kind permission from H. Weihrich and Elsevier Science Ltd. The Boulevard, Langford Lane, Kidlington OX5 1GB, UK. Prentice Hall, 2000 Chapter 5 32 5 1 2 3 4 Strategic Factor Analysis Summary (SFAS) Key Strategic Factors (Select the most important opportunities/threats from EFAS, Table 3.4 and the most important strengths and weaknesses from IFAS, Table 4.2) Total Score Weight Rating Weighted Score Comments Notes: 1. List each of your key strategic features developed in your IFAS and EFAS tables in Column 1. 2. Weight each factor from 1.0 (Most Important) to 0.0 (Not Important) in Column 2 based on that factor’s probable impact on the company’s strategic position. The total weights must sum to 1.00. 3. Rate each factor from 5 (Outstanding) to 1 (Poor) in Column 3 based on the company’s response to that factor. 4. Multiply each factor’s weight times its rating to obtain each factor’s weighted score in Column 4. 5. For duration in Column 5, check appropriate column (short term—less than 1 year; intermediate—1 to 3 years; long term—over 3 years.) 6. Use Column 6 (comments) for rationale used for each factor. Source: T. L. Wheelen and J. D. Hunger, “Strategic Factors Analysis Summary (SFAS).” Copyright © 1997 by Wheelen and Hunger Associates. Reprinted by permission. Duration 6 Prentice Hall, 2000 Chapter 5 33 Key Strategic Factors (Select the most important opportunities/threats from EFAS, Table 3.4 and the most important strengths and weaknesses from IFAS, Table 4.2) S1 Quality Maytag culture (S) S3 Hoover’s international orientation (S) W3 Financial position (W) W4 Global positioning (W) O1 Economic integration of European Community (O) O2 Demographics favor quality (O) O5 Trend to super stores (O + T) T3 Whirlpool and Electrolux (T) T5 Japanese appliance companies (T) Total Score Weight Rating Weighted Score Comments 1.00 Notes: 1. List each of your key strategic features developed in your IFAS and EFAS tables in Column 1. 2. Weight each factor from 1.0 (Most Important) to 0.0 (Not Important) in Column 2 based on that factor’s probable impact on the company’s strategic position. The total weights must sum to 1.00. 3. Rate each factor from 5 (Outstanding) to 1 (Poor) in Column 3 based on the company’s response to that factor. 4. Multiply each factor’s weight times its rating to obtain each factor’s weighted score in Column 4. 5. For duration in Column 5, check appropriate column (short term—less than 1 year; intermediate—1 to 3 years; long term—over 3 years.) 6. Use Column 6 (comments) for rationale used for each factor. Source: T. L. Wheelen and J. D. Hunger, “Strategic Factors Analysis Summary (SFAS).” Copyright © 1997 by Wheelen and Hunger Associates. Reprinted by permission. Duration 3.05 .10 .10 .10 .15 .10 .10 .10 .15 .10 Quality key to success Name recognition High debt Only in N.A., U.K., and Australia Acquisition of Hoover Maytag quality Weak in this channel Dominate industry Asian presence 5 3 2 2 4 5 2 3 2 .50 .30 .20 .30 .40 .50 .20 .45 .20 Strategic Factor Analysis Summary (SFAS): Maytag as Example X X X X X X X X X Industrial Organization Model of Above-Average Returns Industrial Organization Model of Above-Average Returns •1. Strategy dictated by the external environments of the firm (what opportunities exist in these environments?) •2. Firm develops internal skills required by external environment (what can the firm do about the opportunities?) • Four Assumptions of the I/O Model •1. The external environment is assumed to possess pressures and constraints that determine the strategies that would result in above-average returns •2. Most firms competing within a particular or within a certain segment of it are assumed to control similar strategically relevant resources and to pursue similar strategies in light of those resources Four Assumptions of the I/O Model •3. Resources used to implement strategies are highly mobile across firms •4. Organizational decision makers are assumed to be rational and committed to acting in the firm’s best interests, as shown by their profit-maximizing behaviors • Industrial Organization Model I/O Model of Above-Average Returns 1. Study the external environment, especially the industry environment •economies of scale •barriers to market entry •diversification •product differentiation •degree of concentration of firms in the industry The External Environment I/O Model of Above-Average Returns 2. Locate an attractive industry with a high potential for above-average returns Attractive industry: one whose structural characteristics suggest above-average returns Industrial Organization Model The External Environment An Attractive Industry I/O Model of Above-Average Returns 3. Identify the strategy called for by the attractive industry to earn above-average returns Strategy formulation: selection of a strategy linked with above-average returns in a particular industry Industrial Organization Model The External Environment An Attractive Industry Strategy Formulation I/O Model of Above-Average Returns 4. Develop or acquire assets and skills needed to implement the strategy Assets and skills: those assets and skills required to implement a chosen strategy Industrial Organization Model The External Environment An Attractive Industry Strategy Formulation Assets and Skills I/O Model of Above-Average Returns 5. Use the firm’s strengths (its developed or acquired assets and skills) to implement the strategy Strategy implementation: select strategic actions linked with effective implementation of the chosen strategy Industrial Organization Model The External Environment An Attractive Industry Strategy Formulation Assets and Skills Strategy Implementation I/O Model of Above-Average Returns Industrial Organization Model The External Environment An Attractive Industry Strategy Formulation Assets and Skills Strategy Implementation Superior Returns Superior returns: earning of above-average returns Industrial Organization Model The External Environment An Attractive Industry Strategy Formulation Assets and Skills Strategy Implementation Superior Returns THANK YOU