企业战略管理的理论和方法

企业战略管理的理论和方法

Theories and Methodologies in Strategic Management

Chapter 1 Introduction of Strategic Management

Outline of this chapter

1. Definition of strategic management (SM).

2. Some key trems uesed in SM

3. Model of SM.

4. Aims of SM.

5. Functions and benefits of SM

6. Reasons for not doing SM.

7. Guildlines or principles for an effective SM.

8. Methodologies of SM

9. Abilities learned and practiced in SM.

1.1 definition of SM( or SMP).

Strategic management process is the full set of commitments, decisions, and actions required for a firm to achieve strategic competitiveness and earn above average returns.

And more specifically, SM can be defined as an art and science of formulating, implementing and evaluating overall decisions that enable an business organization (BO) to achieve its long term objectives.

1.2 some key terms often used in SM

A. strategists: CEO, president（总裁）, chair of the board（董事长）, executive director（执行董事）, or entrepreneur（企业家）, who are responsible for making strategic decision and who will also take most responsibility for failure and success of a BO.

B. mission（使命）and vision（愿景）.

a. Mission : which identify the business scope for a BO.

b. Vision : which set the ultimate objectives and prospects for a BO.

C. long term objective: refers to specific results, which a BO *strives to achieve within a period longer than one year.

D. annual objective (*manage)

E. Strategy: refers to the means which is used by a BO to achieve its long term objectives. e.g focus（专业化）, acquisition（收购）, diversification（多元化）, retrenchment（收缩）.

F. policy: refers to the means which is used by a BO to guide its day to day operation, e.g compensation policy, motivation policy, business rules, cost control regulation, customer service policy, ect. The policy often reflect the business ethics and values of a BO and its top management.

1.3 model of SM

Steps 1: strategic analysis,

which can be further divided into following steps:

external analysis,

internal analysis.

Step 2: strategy formulation, which can be further divided into following steps:

strategic position i.e developing vision and mission for a business organization,

and strategy selection, which mainly focus on selecting proper strategies to achieve the long term objective of a BO.

Steps 3:strategy implementation,

which can be further divided into following steps :

establishing objectives,

managing to achieve objectives.

Steps 4: strategy evaluation, which can be further divided intio following steps:

evaluating strategy,

adjusting strategy.

1.4 aim of SM

When we conduct SM, all of SM activities should be aimed at long term benefits rather than short term interests, and theories and methods used in SM are also developed and practiced on the basis of long term objectives .

Therefore, in the long run, the aim of SM as well as the whole BO is to provide customer satisfaction and constantly compete to be the best among many other competitors. So the fundamental business ethics is the altruim.

1.5 functions and benefits of SM

The major function or benefit of SM is to provide a clear direction and paths for the future development of a BO.

1.6 why some BOs do not conduct SM.

a. firefighting management

b. waste of time

c. too expensive

d. fear of failure

e. overconfident

1.7 GUIDELINE OF SM

A. Forward thinking.

B. Fullsight thinking.

C. Trend thinking.

D. Rational thinking.

E. Path thinking.

1.8 methodology used in SM

A. the first methodology is binary analysis or dialectics, which analyse two sides of the issue and try to make comprehensive conclusion of the targeted issue. Some typical binary analysis include external and internal analysis, SW, OT, gain or loss, ect.

B. The second one is gain or loss, or benefit or harm analysis, which list and evaluate the major benefits and losses of certain actions and thereby make a final decision.

C. The third one is objective orientation.Which means in SM, we always put

objective as the top priority, and make strategic decisions in accordance with the objective. So before we take any action, it is important to make clear what is your purpose and what is your final goal of taking this action.

D. The fourth one is the result or effect orientation, which means we evaluate the effectiveness of a certain strategy according to its final results or its actual effects it has produced.

E. The fifth one is systematic plan or comprehensive management, which means in SM, we should see a BO as a whole system, each department or division has its independent functions and duties, and each department is also an indispensible part of the whole

organization, and they are all committed to the same mission of the whole organization, and this kind of relationship between different department is called strategic partner. The other meanning of systematic plan is that each separate steps of business management are related to each other, and we should make the

first step conducive and productive to the second step.

1.9 ABILITIES NEEDED TO CONDUCTING EFFECTIVE SM

Conducting effective SM, a strategist will need to have several essential abilities, which include:

A. Ability of foresightful and insightful analysis, which is needed to conduct an effctive strategic analysis.

B. Ability of making a decisive judgement, which is needed when making strategic selection.

C. Ability of comprehesive planning, which is needed when formulating a strategic plan.

D. Ability of thougthful practicing, which is needed when implementing the strategy.

E. Ability of flexibility and adaptiveness, which is needed when facing a constantly changing enviornment in which a business organization may frequently encounter.

Chapter 2 external analysis in strategic analysis

Objectives:

A.describe a framework of external analysis.

B. identify key factors in EA

C. outline a general process of analysing each of the key factor .

D. make a preliminary conclusion of EA

2.1 Introduction of EA

2.1.1 a general definition of strategic analysis

In SM, SA refers to a systematic and comprehensive analysis on the external and internal factors, which will affect business operation of a BO. So SA include two parts of analysis, one is EA, and the other is IA.

2.1.2 the aim or function of SA

Before making strategic decisions for a BO, srategist should carefully analyzing some essential factors that will affect the effectiveness of these decisions. As an old Chinese saying said: without knowing your enemy and yourself, you can never win a war.

The first strategic decision needed to be made for a BO is the mission and vision, which identify the main business scope and long term goals for a BO. Before making this decisions, strategists should know the long term profitibility of the selected business.

Basically, the long term profitibility of an business are mainly determined by two factors. One is the average profitibility of the whole industry, and the other one is the earning capacity of the individual BO. Therefore SA mainly focus on analyzing these two factors, among them, EA focus on industry analysis, and IA focus on enterprise analysis.

2.1.3 methods used in EA

Besides some basic principles in SM, we will also study some methodologies used in SM. In EA, there are some basic methods, which we will illustrate in detail in our later discussion. Here we will make a brief introduction about some of these methods.

The first method is the method of key factors. This method is used in selecting factors, which will affect the long term profitibility of a certain industry. Since there are so many factors which can affect the profitibility of an industry, that we can put all of these factors into our consideration. What we can do is to select some key factors that have significant affact on the profitibility of an industry. In Chinese philosophy, this method is called catching the major contradictions and major aspects of the major contradiction.

The other method is trend analysis. As we said before in chapter 1, prediction about future events can not be made so precisely as some economic reports. But

we still can make a basic prediction that could tell us the general trend of future events.

2.1.4 the model of EA

The model here refer to the framework used in the EA, which are different in different SM theory.

2.1.5 Five force model

A. force from competitors

B. force from new entrants

C. force from substitute products

D. froce from buyers

E. force from supplyers

2.1.6 outline of industry analysis

A. total demand

B. total supply

C. competition situation

D. supply chain situation

E. other related factors

2.2 analysis on general demand

2.2.1 the theory of market mechanism:

total supply and total demand decide market price, and market price affect total supply and total demand, and thus affect allocation of resources in the market.

2.2.2 the aim of analysis on general demand

From the basic theory of market mechanism, we can know that total demand is one of the two factors, which decide market price. In a market economy, all business activities are aimed to satisfy a certain kind of demand,

and to some extent, the profitibility of a industry are largely determind by the total demand in this industry. By analysing the current total demand and the

general trend in a relatively longer period, we can get a basic conclusion on the profitibility of an industry.

2.2.3 some major indicators used to analysize general demand

A. current total demand for a product = per captia consumption of a product * quantity of total population

B. Future demand for a product = per captia demand for a product in future * total population in future

C. the annual growth rate of total demand = (future demand – current) / growing years

2.2.4 basic conclusion on total demand: four stages in product’s life cycle

A. introduction stage

B. growth stage

C. maturity stage

D. decline stage

A. Main characteristics of introduction stage:

-----high growth rate

-----high profit margin

********stars

B. Main characteristics of growing stage

------high growth rate

------medium or low profit margin

********cash cows

C. Main characteristics of stable stage:

-----medium or low growth rate

-----medium or low profit margin

********dogs

D. Main characteristics of decling stage:

------negative growth rate

------low profit margin

********questions

2.3 Analysis on general supply

2.3.1 aims of general supply ananlysis

from theory of market mechanism we have known that, in addition to general demand, general supply is another determinant factor which will affect market price.

Actually, it is the relationship between total demand and total supply that finally determine the market price. Just because in most cases, general demand usually is the initial factor that will change the equillibrium price, we put it in the first place in our discussion. In this section,

will turn our focus on total supply analysis, and discuss how it will affact market price and thus profitibility in a certain industry.

2.3.2 indicators used in general supply analysis

A. overall capacity of general supply relative to general demand: reflect current capacity

(1) undercapacity

(2) duecapacity

(3) overcapacity

B. Barrier of entering an industry: reflect possible capacity increase in the future

(1) Investment barrier

(2) techonology barrier

(3) policy barrier

C. Barrier of leaving an industry: reflect possible capacity decrease in the future

(1) special equipment

(2) large volume of investmemt

2.3.3 basic conclusion on total supply

A. undersupply: relatively high prifit margin

B. saturate: medium profit margin

C. oversupply: low profit margin

2.4 analysis on competing situation

2.4.1 the aim of competing situation analysis

In a market economy, theoratically, there are four different kinds of competition situation, which include pure competion, monopolistic competion, oligopoly, and monopoly.

Generally, in each of these different competition situation, the profit margin of a BO is different, so the competition situation is an important external factor which has significant influence on the profitibility of a industry as a whole. The aim of competition analysis is to analyze the current competition situation in a certain industry, and thus make a preliminary assessment on the profitibility of a industry.

2.4.2 the major indicators used in competitive situation analysis

A. the number of competitors in an industry.

B. the market share of the leading competitors in this industry.

2.4.3 basic conclusion on competiting analysis

A. pure competition: many competitors compete in a homogeneous product market, and no single competitor gain a notable market share.

Conclusion: low profit margin

B. monopolistic competition: many competitors compete in a heterogeneous product market with differentiated product features, and no single competitor gain a dominant market share.

Conclusion: relatively high profit margin.

C. oligopoly: relatively fewer competitors compete in an identical product market or a differentiated product market, and each competitor has a remarkable market share.

Conclusion: high profit margin

D. monopoly: only a single player in the market, or a single competitor has a dominant market share, say 80% or 90% of the total market share.

Conclusion: controllable high profit margin.

2.5 analysis on supply chain

2.5.1 the aim of supply chain analysis

Besides the controllability in an industry that can greatly affect the profit margin of a BO, the supply chain before and after this BO will also play a role in the profit margin of this BO. These supply chain include suppliers which provide raw

materials to the BO, and distributors which provide distribution channels to the BO. If the suppliers and the distributors can provide their products or services at cheaper price to the BO, it can get a higher profit margin, otherwise it will have a lower profit margin.

2.5.2 indicators used in supply chain analysis

A. monopolistic degree of supplier or distributor

2.5.3 basic conclusion of supply chain analysis

A. high monopolistic degree: low profit margin

B. low monopolistic degree: medium or high profit margin

2.6 analysis on macroeconomy

2.6.1 aims of macroeconomy analysis

Besides those factors with the industry that will greatly affect the profitability of an industry, the factors outside the industry will also affect the profitability of the industry . Except those countercycle industry, in an expansion period,

an industry generally get a high profit margin, and in a shrinking period, an industry generally has a low profit margin.

2.6.2 indicators used in macroeconomy analysis

A. economic growth rate

B. inflation rate

2.6.3 basic conclusion on macroeconomy analysis

A. high growth rate: high or medium profit margin

B. low or nagetive growth rate:

low profit margin

Chapter 3 internal analysis

3.1 introdution of internal analysis

3.1.1 aims of internal analysis

Although the general profitability in an industry has an influence on the profitability of a BO, we still can see a big difference on the profitability of different BOs in the same industry. As a matter of fact, it is the factors within a BO that finally determind the profitability.

3.1.2 key factors used in IA

those factors which are vitally important to the competitiveness of a BO, which include:

A. resource factors

B. capability factors

C. organizational factors

3.1.3 methods applied in IA

--------scarcity rating method

high scarcity: highly competitive,

and high profitability

low scarcity: lowly competitive,

and low profitability

3.2 analysis on resourse factors

3.2.1 aims of resource analysis.

The resources refer to the physical and nonphysical assets a BO possess or has actual controls. How much and how rare resources a BO own will greatly affect the earning capacity of a BO.

3.2.2 key factors applied in resources analysis

A. physical resource

B. human resource

C. nonphysical resource

3.2.3 scarcity on resource factors and preliminary conclusion of IA on resources factors:

A. has no scarcity: low competitiveness

B. has immitable scarcity: short term competitiveness

C.has unimmitable or sustainable scarcity: long term competitiveness

3.3 analysis on capabilities factors

3.3.1 the aims of capabilities analysis

The capabilities refer to any kinds of skill or capacity which a BO possess to make fully use of its various resources. Resources are only potential wealth, if they are not properly used.

The capability to properly use the resources will greatly affact the value,

which a certain kind of resource contribute to the profit of a BO. So the capabilities is another improtant fatctor which will greatly affect the profitability of a BO, and thus is needed carefully analysing.

3.3.2 Key factors in capability analysis.

Different industry and different market may repuire quite different capabilities to achive and maintian a highly profitable performance. In CA, analysts should first identify those key capabilities which are crucial to the success in market comptetition.

In a typical manufaturing industry, thses capabilities may include:

A. R&D capability

B. manufacturing capability

C. marketing capability

D. supplying capability

E. distributing capability

F. logistic capability

3.3.3 the preliminary conclusion of CA

A. has no a certain capability: disadvantagous competitiveness;

B. has a certain capability,but with no scarcity: average competitiveness.

C. has a certain capability with immitable scarcity: short term advantageous competitiveness.

D. Has a certain capability, with unimmitable scarcity: relatively long term competitive advantages.

3.4 the analysis of organizational factors

3.4.1 the aims of organizational analysis

the organizational factors refer to the process and system by which a BO allocate and utilize its resources and capabilities. If a BO possess sufficient resources and excellent capabilities, but its does not have a efficient supporting system to

use these resources and capabilites effectively, then the overall performance will not be very good and thus the profit will not be very high. Actually, it is the organizational factors which will finally determind the efficiency of the use of

resources and capabilities, and thus the earning capacity of a BO. The aim of OA is to assess the strength and weakness a BO has in its supporting system.

3.4.2 Key factors in organizational analysis

Different enterprise may have different structure and system to make its decision on how to allocate and utilize its resources. But there are some common elements which most BOs have in their running system, which include

A. organizational structure and decision making system

B. managing and controlling system

C.operation system

D. information system

E.compensation system

F. organizational culture and morale

3.4.3 the preliminary conclusion of OA

A. excellent in an organizational factors: high competitiveness;

B. good: medium high competitiveness;

C. ordinary level: medium competitiveness;

D. unsatisfactory: low competitiveness

3.5 general conclusion of IA and core competency

3.5.1 general conculsion of IA

(1) give a proper weight to each factor according to its importance to the performance and profitability of the BO.

From 1a to 100a, and plus all a together which is equal to 100, and then get the specifie weight for each factor.

(2) Multiply rate number of each factor by it weight, and then get a general results on internal factors of a BO, from 4 to 1.

(3) Get a general conclusion on IA

A. 4: high competitiveness, and leader in the industry ;

B. 3 and above: high, and powerful follower in the industry;

C. 2 and above: average, sustainable competitor;

D. below 2: low, general participant.

3.5.2 core competency and competitivenenss

The result derived above analysis is only a calculated figure, and can only be ued as a reference when making strategic decision. But it still can provide some useful information for making a rational strategic decision.

First is the earning capacity of a BO largely depend on its competitiveness compared to other competitors. And secondly, the whole competitiveness largely depend those core competency. The core competency refer to those competitive factors which make crucial contribution to the performance and profits of a BO.

As a matter of facts, every BO has competence in terms of its earning capacity in the market competition, but only those competence which make the most contributions to its earning capacity belong to core competency, and those core competency which has unimmtable scarcity will bring long term above average profits to a BO. This tell us something about how to build core competency for a BO.

Chapter 4 Strategic positioning

4.1 introduction of SP

4.1.1 the meaning of strategic positioning

SP means setting a position and direction for a BO, so it includes two parts, one is setting a position, which means choose a industry for a BO, and the other one is setting a direction,which means setting a long term goal for the development of a BO.

4.1.2 the aim of SP

the aim of SP is to provide clear and contrete answers to the fundmental questions which every BO need to answer before it actually start it business, which include “what is our business”, that is the industry, and “what do we want to become after doing that business”, that is goal.

Without SP, a BO may be like a aimless ship which losts controll over its activites, and will not grow better and stronger in the long run.

4.1.3 the contents of SP

A. Mission statement: choose industry and business

B. vision desctription: set a long term goal.

4.1.4 the method of SP: SWOT analysis.

A. SW analysis: from IA

B. OT analysis: from EA

4.1.4 possible combination of SWOT introduced in some typical SM textbook, and it sometimes looks confusing and even ridiculous

A. combiantion of S and O

B. S and T

C. W and O

D. W and T

4.1.5 general principle of SP

A. make the best use of opportunity,and choose industry which has most favorable industry development conditions and thus make above average profits (according to Poter’s five forces analysis thoery)

B. take proper measures to aviod or reduce threats.

C. make the best use of resources and capabilities a BO has in itself, and choose the industry in which a BO has the best competitive advantage compared with other BO, and thus make above average profits (according to resource based thoery and comparative advantage thoery).

D. take proper measures to improve weakness inside the BO and gradually make full development in all aspects of its key competition elements.(IBM, GE, Toyota, P&G, Microsoft)

4.1.6 proper method of SP

A. make an internal analysis and clarify the major competitive advantage possessed by the BO and make the best use of it.

B. make an external analysis to choose the proper industry which has favorable growth trend.

eg: GE choose the industry which its has leading market position.

4.2 Vision statement

4.2.1 key points of VS

Literally, vision means visual conception of a desired or dreamed goals, it

depicts a bright pictures of one’s dreams and elucidate it in eloqent words. In a BO, vision answers question of “what is our dream in the business world?”

and “what do we want to become as a business organization?”, it set a

direction for the long term development of a BO.

Some key points of an effective

vision statememt include:

# Clarity and lack of ambiguity

# Vivid and clear picture

# Description of a bright future

# Memorable and engaging wording

# Realistic aspirations

# Alignment with organizational values and culture

4.2.2 examples of VS

There are some organization which elucidate its vision very succinct and clear, and there also some orgnization which portray its vision in very elusive and obscure words. We can see some example of both types of VS. For example, a charity organization working to help the poor may have a VS as

“ a world without poverty”. A commercial bank may have a VS as “to protect the public interest, ensure competion and fairness within the revelent financial service industries, respond innovatively to a rapidly changing word enviornment, and foster a posotive impact on the regional economy”.

4.3 Mission Statement

4.3.1 key points of MS

After portray the visual concept or its long term dreams, a BO should give answers to the question of “how to realize these dreams and “what is our businss”. MS outline its main business scope and some fundmental critiria of doing business.

Some key points of an effective MS include

#. Customers

#. Products or services

#. Techonologies

#. Concerns for survival, growth, and profitability

#. Philosophy

#. Self-concept

#. Concern for public image

#. Concern for employees

4.3.2 examples of MS（67）

Chapter 5 Selecting strategy and Types of Strategies

5.1 intruduction of selecting strategy

5.1.1 aims of selecting strategy

After identifying and clarifying the strategic or long term goal for the BO, the next question is how to reach this goal. The aim of selecting strategy is to provide a optimum or proper path, i.e strategy, to reach this goal successfully and efficiently.

5.1.2 the steps of selecting strategy

At least, there are two steps included in the process of selecting strategy. The first one is listing all the possible and viable strategies, and the second one is selecting proper or best suitable choice.

5.2 the general classfication of different types of strategies

5.2.1 classification of enterprise strategy

A. operation strategy: focusing on internal operation and management, such as brand strategy, marketing strategy, R&D strategy, ect.

B. competion strategy: focusing on external competition and development.

5.2.2 general tpyes of competion strategy

A. generic strategy

B. intergration strategy

C. intensive strategy

D. dersification strategy

E. defensive strategy

F. flex strategy

Chapter 6 Generic strategy (operational strategy)

6.1 introduction of generic strategy

6.1.1 the meaning of GS

GSs refer to those strategies which are used in the operational level in a specific selected business area to compete with other BO, so they are also called operational strategies .

6.1.2 classfication of competitive strategies

A. corporation level: corporation strategies

B. business unit level: operational strategies

C. department level: functional strategies

6.1.3 sub-types of GSs

A.cost leading strategy

B. differentiation strategy

C. focus strategy

6.2 focus strategy

6.2.1 the meaning of FS

FS refers to a strategy by which a BO focus its efforts and resources on relatively few specialized areas where it has comparative advantage.

6.2.2 the purpose of FS

A. make the best use of current advantageous abilities and resources in a BO.

B. concentrate limited resources on special area where the BO has comparative advantage.

C. focus on the core business to be a leading competitor in a certain industry.

6.2.3 circumstance of conducting FS

FS would be an effective stategy under such circumstance as following:

A. the focused area has a sufficient size, and has a good potential growth.

B. Customers in this area have consistant and enduring preferences or requirements on the products.

C. the BO pursuing FS should have abilities to provide special satisfaction for the customers

6.2.4 risks of FS

the risks of conducting FS include:

A. the possibility that numerous competitors recognize the successful area and copy the strategy.

B.the customer preference drift to a completely new area.

C. an unforeseen technology breakthrough or other unexpected events make the focued area obsolete.

6.2.5 specific method of FS

some commonly used method may include:

A. focusing on product

B. focusing on customer market segment

C. focusing on geographic areas

D. focusing on core competency

6.3 differentiation strategy

6.3.1 the meaning of DS

DS refers to strategies by which a BO diffrentiate its products from other competitors in such aspects as function, appearance, brand, package, location, working hours, or whatever that make its products different from others in certain features.

Basically, those products are similar in nature, which are provided to satisfy the same kind of customer needs. The difference is that different BOs can offer different product features which can provide special satisfaction for its customer, and thereby build customer loyalty, and make extra profits.

6.3.2 the purpose of DS

the main purpose of DS is to differentiate your products from other competitors, and thus aviod homogeneous competion which will inevitablely reduce profit margin.

6.3.3 the circumtance of adopting DS

A. when there are some niche market where other competitors are not particularly focused on for whatever reasons.

B. when customer needs have some special preference on the basically same products.

C. Those products with special features will be valued higher than the standard products.

D. the BO which adopts DS should have abilities to attract and retain talented people and develop new products.

6.3.4 the risks of DS

A. A risk of DS is that customers do not give high evaluation on the differentiated product. In this case, it will be easily defeated by the generic or so

called standard products, or by cost leading strategy.

B. Another risk of DS is that other competitors will easily imitate the special features, and thus quickly make the differientiated priduct generic.

6.3.5 The specific methods of DS

A. differentiate in location.

B. on appearance

C. on function

D. on special taste

E. on special usage

6.4 cost leading strategy(CLS)

6.4.1 the meaning of CLS

CLS refers to a strategy by which the top priority of the BO is to gain a cost leadership benefits and do its best to cut cost in the running process of its business.

6.4.2 the purposes of CLS is

A. to gain low cost advantage

B. to increase market share

C. to improve efficiency

6.4.3 the circumstance of using CLS

CLS can be especially effective under such circumstance as following:

A. the market is primarily composed of price sentitive customers.

B. there are few ways to achive product differentiation, and therefore customers tends to purchase generic products.

C.The quality of lower priced products is comparable to those brand name products, and costumers do not care much about differentiation from brand to brand.

D. or there are a large number of buyers who have significan bargining power.

E. The BO which adopts CLS has effective ways which enable the BO reduce its

running cost without lowering the quality standard of products.

6.4.4. the risks of CLS

there are several potential risks involving the process of pursuing CLS, which include:

A. other competitor may imitate the strategy very easy, and thereby driving overall industry profit level down.

B. customer’s interest may swing to other features other than price.

C. new technology breakthrough may make the original method to lower cost ineffective.

D. overconstrain on prodution cost may affect the quality of products or services provided by the BO.

E. overlimited cost may affect abilities to develop new products and new technologies.

6.4.5 the specific methods of CLS

A. make full use of economies of scale, and learning curve effects.

B. take advantage of comparative low cost resources, labor force, raw materials, distribution channels,ect.

C. strict control over running cost, overhead cost, intensive restriction on budget request, high efficiency.

Chapter 7 Intensive strategy

7.1 introduction of intensive strategy

7.1.1 the meanning of IS

the ISs refers to strategies which require intensive efforts to improve a firm’s competitive position in existing products market.

7.1.2 the general purpose of IS

As its meanning implies, the purpose of IS is to improve a firm’s competitive position in existing market, here competitive position include market share, profit margin, and leading distance with other competitors.

7.1.3 types of IS

A.market penetration

B.market development

C.products development

7.2 market penetration

7.2.1 the meanning of MP

MP refers to strategy which seeks to increase market share for present products in present market areas through greater market efforts.

It is sometimes used alone, and sometimes is used in combination with integration strategies and other ISs.

7.2.2 the purpose of MP

the main purpose of MP is to increase a firm’s market share of its present products in its present market areas.

7.2.3 the circumstance of adopting MP

MP could be an effective strategy under some circumstance, which include:

A. when current markets are not saturated with a particular products,which

means that there are still some potential needs for existing products in current market areas.

B. when the usage rate or quantities of current customers will increase significant.

C. when the market shares of major competitiors are declining, while total industry sales are increasing.

D. when historically, there is a high correlation between the costs of marketing efforts and the increase of sales revenue.

E. when increased sales may provide economies of scale and increase of profit.

7.2.4 the risks of MP

MP may provoke an intensive reaction from competitors, especially those which are losing market share, and which sometimes cause loss on both sides. So before adopting MP, a firm should carefully analyse any possible reaction of major competitors, and make adequate preparation as careful as possible.

7.2.5 the specific methods of MP

A. increasing the number of salesperson.

B. increasing advertising expenditure.

C. conducting extensive promotion activities.

D. promoting publicity and corporation image

7.3 market development (MD)

7.3.1 definition of MD

MD refers to a strategy which involves introducing present products or services into new geograghic areas.

7.3.2 the purpose of MD

The main purpose of adopting MD is to increasing current market share by developing new geographic aeras.

7.3.3 Conditions and backgrand of applying MD

In order to be effectively practiced, there are some basic conditions needed when applying MD, which included:

(1) distribution channel are available to enter into new geographic market,

which are reliable, inexpensive, and of good quality as well.

(2) The firm is very successful at what it is doing now, including products and management.

(3) The new market is unsaturated, and there are still some room for competition.

(4) The firm has excess production capacity as well as enough needed capital, HR to manage expanded operations

(5) The firm has adequate knowledge with the PEST in the new market area, especially when entering into a new international market, which means it needs to make a careful research on the new market areas and get a deep understanding about the new market envoirnment.

7.3.4 the risks of taking MD

the MD may fail to achieve originally expected results and even get a severe setback, if the firm does not make adequate research and preparation to the new market, when there is a big difference between the old market and the new market, such as oversea market.

7.3.5 methods of MD

some specific methods of MD include

(1) contracting sales agency;

(2) using local distribution channels;

(3) establishing new branches;

(4) establishing joint ventures.

7.4 product development (PD)

7.4.1 meanning of PD

PD refers to strategy which seek to increase sales by improving present products or services or develop new ones.

7.4.2 purpose of PD

A. increase sales revenue

B. uphold declining profit margin

C. maintain leading position or improve its current position

(the advantages of being a leading competitor: brand, image, low cost resources, high profit margin, costumer reliance)

7.4.3 conditions of adopting PD

PD may be very effective under following conditions:

A. a BO compete in a high growth industry;

B. customer needs to the current product has declined, or customer needs to new products grow rapidly;

C. technology change rapidly in the industry

D. a BO has very strong R&D capability

7.4.4 risks of taking PD

A. high R&D cost may not be compensate by increased sales

B. new products may fail to win market competition

C. lack of accumulation on technology and talented people

7.4.5 methods of take PD

A. self development

B. buying patent or know-how from others

C. joint development

D. follow the leading competitor

Chapter 8 integration strategy

8.1 introduction

8.1.1 meaning of IS

IS refers to strategies which seeks to get a bigger control over the whole industry

8.1.2 purpose of IS

A. increase market share

B. make better use of economic scale

C. increase profit margin by enter into supply or distribution sector

D. gain dominant position over whole industry

8.1.3 types of IS

A. horizontal integration

B. forward integration

C. backward integration

8.2 horizontal integration

8.2.1 meaning of HI

HI refers to strategy which seeks ownership or increased control over competitors

8.2.2 the conditions of adopting HI include:

A. the current industry keep growing in a relatively long period

B. the BO has sufficient finiancial and human resources to support growing

organization.

C. increased economies of scale provide a big competitive advantage

8.2.3 the risks of taking HI

A. too many investment are put into a same industry

B. capital or human resources failed to meet higher requirment of expansion

C. government restriction of unti-trust

8.3 forward integration

8.3.1 meanning of FI

FI refers to strategy which seeks to gain increased control over distributors or retailors.

8.3.2 conditions of adopting FI include:

A. the BO’s present distributors are especially expensive, or unreliable, or incapable to meet its distribution needs;

B.the availability of quality distributor is so limited that the bargin power or demanded price of distributor are very high

C.the BO compete in a growing industry and distribution sector has a high profit margin.

D. the BO has both capital and human resources needed to manage distribution sector.

8.3.3 risk of taking FI

A. the cost of building its own selling branch may be unexpectedly high, in terms of money and time, and this may offset the profits getting from selling sector.

B. because of selling its own products, it may lack of economies of scale in selling volume, and thus fall into a disadvantage position compared with specilized distributor

8.4 backward integration (BI)

8.4.1 meanning of BI

BI refers to a strategy which seeks to gain increased control over suppliers.

8.4.2 conditions of adopting BI include :

A. the BO’ s present suppliers are especially expensive, or unreliable, or incapable of meeting its needs for parts, components, or raw materials.

B.The number of suppliers is small and the number of competitors is large;

C. the BO competes in a rapid growing or stable industry, and the need for raw metarials are very high.

D. The supplying sector has a high enough profit margin to support the investment as a worthwhile venture

E. the BO has sufficient capital and human resources to manage new business to supply its own materials

F. The BO’s need for raw material is very large, and reliable, stable supply is a crucial to the BO’s normal operation.

8.4.3 risks of taking BI include

A. the of gainning its own supply section is very high, in terms capital, technology, nature resources, ect.

B. the market need at the customer end has a unexpected long term decline.

8.5 comprehensive integration

8.5.1 meanning:

seeks togain increased control over the whole industry chain.

8.5.2 condition

Have big enough scale and sustainable market demand. (food, energy, oil)

Chapter 9 diversification strategy

9.1 introduction

9.1.1 meaning of DS

strategies which intend to diversify a BO’s current business areas in order to improve its declining profit margin in original area.

9.1.2 purpose of DS

A. improve declining profit margin in old business area.

B. dilute the risk of too much investment focused on a single business.

C. the BO’s current business is not growing, or begin to declining irreversibly.

E. The BO has surplus capital, and there is a significantly growing business opportunity

9.1.3 types of DS

A. concentric diversification

B. horizontal diversification

C. conglomerate diversification

9.2 concentric diversification

9.2.1 meanning of CD

CD refers to a strategy which add new, but related products for present customers.

9.2.2 purpose

to make more effective use of current R&C .

9.2.3 conditions

A. the BO competet in a no growth or a slow growth industry

B. adding new, but related product will significantly improve its overall performance.

C. adding new, but related products will make a better use of its current R&C

D. The BO has a very strong management team and research unit to manage expanded business

9.2.4 risks

A. new products may not sell as good as expected, and thus have a side effect on its main products.

B. BO may spread its R&D on a wide range of business, and thus not focus on its original competitive advantage.

9.3 horizontal diversification

9.3.1 meanning

HD refers to a strategy which add unrelated products for present customers.

9.3.2 purpose

make more effective use of its popularity in customer, or market inflnence

9.3.3 conditions

A. the BO compete in a no growth or slow growth industry;

B. new and unrelated products will make a better use of its original R&C;

C. the BO has a strong market publicity.

D.The BO has very strong management structure to managen divercified products

9.3.4 risks

A. new products may not sell as good as expected, and thus have a side effect

on its main products.

B. BO may spread its R&D on a wide range of business, and thus not focus on its original competitive advantage.

9.4 conglomerate divesification

9.4.1meanning

add unrelated products for new customers.

9.4.2 purpose

A. make use of its surplus captical;

B. seek significant business opportunity;

C. create synergy between different business unit

9.4.3 condition

A. the BO compete in no growth or slow growth industry.

B.different business may provide support to each other.

C. BO has surplus capital and human resources to manage very divercified businesss

9.4.4 the risks

A. the resources are so decentralized used that BO can hardly manage it.

B. too many orperation risks to run different business unit may it very difficult to cordinate between different unit.

10. Defensive strategy

10.1 introduction

10.1.1 meanning

strategies which seek to reduce

losses due to declining sales and profits.

10.1.2 types

A. retrenchment

B. divestiture

C. liquidation

10.2.retrenchment

10.2.1 meanning

a strategy which intends to reverse declining sales and profit by asset regroup and cost reduction.

10.2.2 condition

the declining sales and profits is mainly due to mannagement reason and not a declining trend in the whole industry.

10.3 divestiture

10.3.1 meanning

a strategy which intends to reduce losses by seperating poorly performed business unit

with other parts of BO

10.3.2 conditions

A. the seperated unit is responsible for the BO’s overall poor performance

B. the seperated unit still has potential of regrowth.

10.4. liquidation

10.4.1 meanning

a strategy which intends to aviod further losses by sell part of its asset or all asset of a business unit for their tangible worth.

10.4.2 conditions

A. the BO has tried both rerenchmen and divestiture, but both of them failed to accomplish expected improvements.

B. liquidation represents a recognition of business defeat and consequently can be an emotionally difficult decision.

However, it may be better to cease operation of a failed business unit than to continue losing larger sum of money.

10.2 retrenchment

regroup and reduce assets and investment to reverse a declining business.

Need to have clear understanding of the market trend and make a decisive judgement.

10.3 divestitute

depart the declining business from other part of the company.

10.4 liquidation

sell the declining business for a best value.

Chapter 11 choosing strategies

11.1 introduction: two different approach of choosing strategy

11.1.1 enterprise-based approach: choose strategy according to the results from IA

11.1.2 industry-based approach:

choose strategy according to the results from EA

11.2 enterprise approach

11.1.1 meaning: choosing strategy according to initial comparative advantage

11.2.2 upgrade stages of EA

A. focus

B. cost leading

C. differentiation

D. modelization

E. standardization

F. scalization (copylize)

11.3 industry approach

11.3.1meaning

choose strategy according to life cycle of a certain industry

11.3.2 upgrade stage of IA

(1) start stage: intensive

A. product development

B. market development

C. market penetration

(2)Growing stage: integration

A. horizontal

B. forward

C. backward

(3) Stable stage: divercification

A. concentic

B. horizontal

C. conglomerate

(4) Declining stage: defence

A. retrenchment

B. divestment

C. liduidation

11.4 general principle of choosing strategy

A. planning early

B. preparing in advance

C. make a standby plan

D. adjust according to changing conditions

11.5 general assessment of choosing a specific strategy

A. whether a BO has nessesary conditions and advantageous competitiveness to practice the strategy (strength)

B. whether a BO has critical inevitable weakness to practice the strategy (weakness)

C. Whether the strategy will bring sufficient long term profit to the BO (opportunity)

D. whether the strategy has unpredictable and uncontrollable risks which may give a irrecoverable deadly impact on survival of the BO ( threat)

11.2 cash caws

intensive

integration

11.3 dogs

intensive

integration

diversification

11.4 questions

diversification

defensive

Chapter 12 implementation of strategies：management issues

12.1 introduction

12.1.1 function of management

control, lead, organize, plan

12.1.2 sequence of management

plan, organize, lead, control.

12.2 planning in the strategic backgrand

12.2.1 principle:

comprehensive planning,

separetive division,

simultenaously implementing,

timely adjustment.

12.2.2 requirement SMART

S-specific

M-measurable

A-acceptable

R-realistic

T-time table

12.2.3 method

A. Key route method:

longest and hardest route.

B. simultenaous network of other route.

12.3 organizational structure with strategic implementation

12.3.1 reverse U structure

12.3.2 centralized M

12.3.3 decentralized M

12.4 leadership in the background of SM: motivation

12.4.1 build mission oriented and objective oriented working group.

12.4.2 establish performence oriented compensation system based on variety of job positions

A. administrative position: efficiency performance

B. technical position:

effect performance

C. productive position

output performance

D.top management position

long term benefit performance

Chapter 13 strategic evaluation and control

13.1 strategic control

13.1.1goal setting : managing by objective (MOB)

A. overall objective

B. stage objective

C. annual objective

D. divisional objective

E. personal objective

13.1.2 measure actual performance

13.1.3 compare actual performance with set goals

13.1.4 make proper adjustment

13.2 strategic adjustment adjustment matrix

Aed ob/ped, EC, IC, action

Y n n Y y y Y y n Y n y N n n N n y continue

check

check

check

adjust S

corrective

N y n adjust

N y y adjust