Strategic Management lecture # 08

Editor's Notes

• #5: At the end, Unless a desperate situation confronts the firm, alternative strategies will likely repre- sent incremental steps that move the firm from its present position to a desired future position. Alternative strategies do not come out of the wild blue yonder; they are derived from the firm’s vision, mission, objectives, external audit, and internal audit; they are consistent with, or build on, past strategies that have worked well.
• #6: Attractive alternative Strategies; must be developed, examined, prioritized, and selected. __ At the end; Was the case in previous strategy-formulation activities. Involvement provides the best opportunity for managers and employees to gain an understanding of what the firm is doing and why and to become committed to helping the firm accomplish its objectives
• #11: : SO (strengths-opportunities) strategies, WO (weaknesses-opportunities) strategies, ST (strengths-threats) strategies, and WT (weaknesses- threats) strategies 3 - All managers would like their organization to be in a position in which internal strengths can be used to take advantage of external trends and events. 4 - When a firm has major weaknesses, it will strive to overcome them and make them strengths. When an organiza- tion faces major threats, it will seek to avoid them to concentrate on opportunities 4 - Sometimes key external opportunities exist, but a firm has internal weaknesses that prevent it from exploiting those opportunities. For example, there may be a high demand for electronic devices to control the amount and timing of fuel injection in automobile engines (opportunity), but a certain auto parts manufacturer may lack the technology required for producing these devices (weakness). One possible WO strategy would be to acquire this technology by forming a joint venture with a firm having competency in this area. An alternative WO strategy would be to hire and train people with the required technical capabilities. 5 - This does not mean that a strong organization should always meet threats in the external environment head-on. An example ST strategy occurred when Texas Instruments used an excellent legal department (a strength) to collect nearly $700 million in damages and royalties from nine Japanese and Korean firms that infringed on patents for semiconductor memory chips (threat). Rival firms that copy ideas, innovations, and patented products are a threat in many industries __ 6 - An organization faced with numerous external threats and internal weaknesses may indeed be in a precarious position. In fact, such a firm may have to fight for its survival, merge, retrench, declare bankruptcy, or choose liquidation.
• #12: 2 - (financial position [FP] and competitive position [CP]) and two external dimensions (stability position [SP] and industry position [IP]). 3 - Thus, SP volatility (stability) is based on the expected impact of changes in core external factors such as technology, economy, demographic, seasonality, and so on.
• #19: At the end; market penetration; market development; and product development are appropriate strategies for these divisions to consider,
• #26: The QSPM uses input from Stage 1 analyses and matching results from Stage 2 analyses to decide objectively among alternative strategies. __ 4 - Specifically, the left column of a QSPM consists of information obtained directly from the EFE Matrix and IFE Matrix. In a column adjacent to the key success factors, the respective weights received by each factor in the EFE Matrix and the IFE Matrix are recorded
• #28: 1- when there are few good substitute raw materials, or when the cost of switching raw materials is especially high. 2 - development of new services, just-in-time deliveries, and reduced inventory costs, thus 3- This strategy is especially effective when suppliers are unreliable, too costly, or not capable of meeting a firm’s needs on a consistent basis. Firms generally can negotiate more favorable terms with suppliers when backward integration is a commonly used strategy among rival firms in an industry.
• #30: 2 – Continue; stronger competitors, shifts in government priorities, changing social values,
• #31: 1 - both opportunities and threats that affect the firm and its industry. List the opportunities first and then the threats. Be as specific as possible, using percentages, ratios, and comparative numbers whenever possible ___ 2 - The weight indicates the relative importance of that factor to being successful in the firm’s industry. Opportunities often receive higher weights than threats, but threats can receive high weights if they are especially severe or threatening. Appropriate weights can be determined by comparing successful with unsuccessful competitors or by discussing the factor and reaching a group consensus. The sum of all weights assigned to the factors must equal 1.0. ___ 3 - to indicate how effectively the firm’s current strategies respond to the factor, where 4 = the response is superior, 3 = the response is above average, 2 = the response is average, and 1 = the response is poor. Ratings are based on effectiveness of the firm’s strategies. Ratings are thus company-based, whereas the weights in Step 2 are industry-based. It is important to note that both threats and opportunities can receive a 1, 2, 3, or 4.
• #32: 1 – Strength and Weaknesses ___ At the end; This comparative analysis provides important internal strategic information. Avoid assigning the same rating to firms included in your CPM analysis.