Strategic management

STRATEGIC MANAGEMENT

Corporate strategy – what kind of business:
1. Planning school – to start business with strategic plan,
2. Positioning school – “-“ with position in an industry,
3. Skills school – “-“ with unique features,
4. Identity school – “-“ with strong (identity) differentiation.

Planning school.
Started by Alfred Chandler.
1) Assumptions (for utilization of the school):
• Here is a future (perception of the reality),
• You can predict the future,
• You can influence the future (but there are other forces that may also affect the future and sometimes you can fail).
2) Limitations:
• The future is unpredictable,
• Apathy of employees (here are feelings),
• Planning mistakes,
• Inertion – entrepreneurial instinets,
• Irrationality.
3) strategic reesponse:
• you change nothing,
• invest into additional information,
• producing cheaper,
• strategy of optimal behavior (invest in many things with little time, and if smth. Works, invest there more and drop not working out).
• Simple rules strategy.
4) Tools:
• SWOT analysis (strength , weakness, opportunities),
• PESTEL analysis (political, economical, social, technical environmental, legal things).

Positioning school.

Started by Michael Porter. 1980 “Competitive strategy analysis of industry & competitors”.
1) Assumptions:
• You change the position.
2) Limitations:
• You can’t always change the position, because you must have smth., for exmp. resources (insufficient resources),
• Your position may change without or despite your efforts (iindependently on your actions).
3) Tools:
• 5 forces model
New entrants:
• economics of scale (the more you produce, the cheaper it becomes; unit cost decline with the experience),
• switching costs (when you switching from one product to another),
• access to distribution,
• cost disadvantages beyond those of scale,
• governmental policy (in ce

ertain areas of business government puts some limits in investments of competitors.
Suppliers: (burdening power suppliers)
• dominated by a few suppliers,
• no substitutes,
• Thread of forward integration.
Buyers:
• Concentrated,
• Low switching costs,
• thread of backward integration (buyers can buy you),
• buyers have all the information.
Rivalry:
• numerous rivals (equally balanced),
• slow growth,
• high fixed costs,
• low differentiation.

Tools:
• generic strategies:
o variety based positioning,
o needs base positioning,
o access-based positioning.

Example. Generic strategies: 1. cost leadership (lower prices).
2. differentiation (distinguish yourself).
3. focus (on a particular segment).

You can achieve success

Choose of right industry to enter
Competitive advantage

5 Forces Model (5FM)
GS, skill school

Skill school.

Chris Argyris in 1978 published “Organizational learning”.

Strategy – creation of unique competence of an organization.
Key question – how to create a competence which is hard to imitate?
Key competence – smth. that company is very good at (unique products, which hard to copy).

Assumption of a school:
• an organization is a set off important and unrepeatable knowledge and capacities,
• the most valuable knowledge is tacit (tacit is smth. not describable in words, net of relationship).
• The competence can be created (it is not a product of historical circumstances).
Limitations:
• Probably there are no things that can’t be imitated. If you understand how smth. works, in principle you can imitate it.

Application:
• KSF (Key Success Factor) analysis. (For different industries the factor influencing success are different.)
• VRIO model:

Resources A B C .
Valuable
Rear
Un-imitable
Well Organized

! In business are very important:
• Connections.

Identity School: (similar to skill school)

Strategy – an identity of

f an organization its stable attributes determining what an organization is and what is it striving (stengiasi) to become.
Key question – what comprises individuality?
Assumption – reputation is a key to identity.
Reputation institute – in 2002 the companies with the best reputation: Philips, Daimler, Chrysler< Ford, VW, Peugeot, Renault, Coca-Cola, Siemens, BMW, .

Limitations:
• Reputation is easy to loose.
Tools of creation: How to create identity?
• By observing the changes in tastes, values, believes and attitudes.
Tendencies to distinguish in nowadays:
• Aging society. Segment of people above 60 is becoming lager,
• Environmental consciousness,
• Increase the number of single people.

Identity.
1) Mission and Vision.
You create identity in many aspects. Missions and Visions are similar.
“I have a dream.”-Mark Luter King. Mahatma Gandhi.

2) Values. Also related to identity. St, Augustine “If you love God do what ever you want”

MARKETING MANAGEMENT

Consumers Behavior
Falls into marketing management.
Consumer Behavior – that consumer displays in searching for, purchasing, using, evaluating and disposing of products, services and ideas.
• What consumer buys?
• Why they buy it?
• When they buy it? Values, beliefs and attitudes of consumers
• How often they buy it?
• How often they use it?

Without demand, no company is of any value

The winners are the companies, which find out the needs of customers.
How people make decisions to buy something?

External

Influence

Perception (information)
Perceive – overlook
Understand –misunderstand
Exaggerate – underestimate
Statistically information acquisition
• Ongoing process
• 200-400 commercial messages ( a person is exposed to)
 Message it

tself (stimuli)
• Exposure
• Attention
• Perception (accept or reject)
1. Interpretation
Influences in interpretation:
• General knowledge
• Interests
• Stereotypes (related to brand names)
• First impression (inclined to jump into something)
• Jumping to conclusion
• Halo effect
2. Biases in person perception
1). Primary effects
– first impression (1-2 min in an interview about job!)
2). Contrast effect
– someone in the group (compare to the others and feel superior and brilliant or interior and underperformed)
3). Halo effect
– generalization on specific dimensions
4). “Similar to me ” effect

If the person is different to you, you feel suspicious frightened and you automatically are tended to reject him because of not understanding of his behavior
– risk aversion

5). Harshness, leniency and average tendency

Harshness – negative attitude to everything

Leniency – positive attitude, optimistical one

Average tendency – there’s no one standing out, everybody are the same

6). Knowledge of predictor

When of we judge something form some attributes
3. Attributions
Internal – assigns the cause of behavior to some characteristics of the person.
External – assigns the cause of behavior to factors external to the person.

1. Fundamental attribution error (tendency to overemphasize internal things always blame person’s personality)
2. Actor observes effect (tendency to attribute behavior of others to internal causes and ones own behavior to external). You always justify yourself.
3. Self-serving attributions (is a tendency to take credit for success and avoid blame for failures)
4. Persuasion
1. Psychology of limited resources (you need something because this thing is limited). Limited in supply source
2. Urgency (“Now or ne

ever”’). “Sale ends soon”. “Time is running out”
3. Availability: (applied in consulting business). Setting some deadlines (pretend that your not available for some time, as people think, that if you don’t work at the moment, you have no clients, then your service is not so good and nobody really want your service).
• Skeptical customers: What to do with skeptical customers. They are not sure that they really need something. Then you should:
– Talking about the disadvantages first of your product then customers becomes to believe in you (you are talking about obvious things, you will build trust relationship with the clients. The most expensive tape recorder you will ever love).
– Then you talk about positive things, you should say something positive. Your products strength must become obvious.
5. Psychology and Social Persuasion:
“Best seller ” – 2002, “most preferred by . ” etc.
You made your product more interesting for customers, as somebody already have tried it and say it is best. You must be creative. For example: some popular and famous people can advertise your product. Don’t talk about advantages of your product yourself, pay for the journalists to write positive articles, pay for some specialists in this area to advertise your product.
6. Attitudes:
A learned predisposition to behave in a consistently favorable or unfavorable manner with respect to a given object. Our attitudes are changing because of our experience.

Attitudes Intentions Behavior
There no accidental things in your life, but if you are surprised that you did something the it was hidden deeply in your head.

External factors

Measuring attitudes
1. Likert scale – scale of evaluation of persuation.

Strongly agree Strongly disagree

7 6 5 4 3 2 1

6. GROUP
To which group your customer is associated with :
A symbolic group – is the one in which individual is not likely to receive membership despite acting like a member. (in Lithuania).
A membership group – is one to which a person either belongs or would quality for membership.

7. MAJOR CONSUMER REFERENCE GROUPS
Other cultures
Subculture
Social class
Friends

Break – even – point :
1. fixed cost; rent; utilities (heating, electricity, water); salaries; taxes.
2. Variable cost.
Break – even – point :
See the list
Major goals : people involment, social recognition I.
Major fears : Rejection, loss of approval I
Predictable behavior : Talkative I
Under pressure : emotional, disorganized I
Priority on : Task, goal D
Dislikes : basing over control D, complex details, being isolated I
Decision type : deliberate S, analytical C.
As a listener respond to : assurance of stability, personal attention S
Strength : interactive, persuasive, optimistic, inspirational I
Weakness : trust people over facts I.

Human resource management

We have already studied Strategic & Marketing management

Able to change Difficult to change

High priority The most critical issues
dealing with profiles (Smoking)
Low priority (Homework) Least critical issues(Repair of cycle)

DISC concept –> DISC profile

D – dominance
I – influence
S – steadiness
C – conscientiousness

Some people are obsessed with dominance other with influence.
People with expressed “S” are tended to have fear to make decisions, but rather stable. But people “C” are introverts and get very much into details
“D & C” are pessimistic and see environment as unfavorable. “I & S” are optimistic about environment they feel good in the group.
In order to be successful manager, you firstly should understand what is that guy, to which sort of people does he belong, which qualities he possesses.

D I S C
Major goals Results, control People involvement, social recognition Avoid conflict, security, stability Accuracy, order
Major fears Losing control over environment, being taken advantage of Rejection, loss of approval Sudden changes, losing security Unwarranted personal, criticism, violation of standards
Predictable behavior Direct Talkative Supportive Cautious
Under pressure Impatient Emotional, disorganized Conforming, indecisive Withdraws, stubborn
Priority on Task goal Relationship Relationship Task goal
Dislikes Being over control, lack of results Complex details, being isolated Impatience, disorder Lack of explanations
Decision type Quick Emotional, “gut feel” Deliberate Analytical
As a listener respond to Options, efficiency Testimonial, saving personal effort Assurance of stability, personal attention Evidence of quality & accuracy, logic
Strengths Decisive/direct, takes responsibility, result oriented, competitive Interactive, persuasive, optimistic, inspirational Follow through, loyal, teem oriented, good listeners Systematic, precise, analytical, well prepared
Weaknesses Impatience, may instill fear, tends to drive, could listen better May over talk, trust people, over facts, tends to be disorganized, tends to “wing it” Indirectness, avoid conflicts, slow to change, move slowly Moves continuously, tends to do it alone, concentrated on details

Organization & HRM

Birth Youth Midlife Maturity
Size small medium large very large
Burocratization Non-burocratic Pre-burocratic burocratic Very burocratic
Division of labour Overlapping tasks Some departments are created Many departments are created Extensive with small jobs & many descriptions
Centralization One person rule 2-3 persons rule Several departments heads Heavy, top management
Formalization Non written rules Few rules Policy & procedures manuals Extensive
Administrative intensity Secretary, no professional staff Increasing number of maintenance Increasing professionals staff support Large multiple departments
Internal system nonexistent Crude budget & information system Control systems in various functional areas Extensive planning
Tax forces for coordination none Top lenders only Some use of integrators Frequent
For young people it is much better to start working in maturates, where you can develop yourself, get training and get useful contracts.

Management styles

1. Management by coaching and development
2. Management by competitive edge
3. Management by consensus (quality circles)
4. Management by exception (delegating as much responsibility as possible to each employee)
5. Management by matrices (related with big organizations)
6. Management by objectives
7. Management by working around (Boss doesn’t spend much time sitting in office)
8. Management by work simplifications

Management style – the existence of a distinct set of guiding principles written or otherwise, which set parameters to and signpost for management action in the way employees are treated & particular events handled.
1. Management by coaching and development (MBCD): Managers see themselves primarily as employee trainer.
2. Management by competitive edge (MBCE): Individuals & groups within the organization compete against one another to see who can achieve the best results.
3. Management by consensus: Managers construct systems to allow for the individual input of employees.
4. Management by exception (MBE): Managers delegate as much responsibility & activity as possible to those below them, stepping in only when absolutely necessary.
5. Management by matrices (MBR): Managers study charted variables to discern their inter-relationships, probably cause & effects, & available options.
6. Management by objectives (MBO): The organization sets overall objectives, and then managers set objectives for each employee.
7. Management by working around (MBWA): Managers walk around the company, getting a ”feel” for people & operations; stopping to talk & to listen.
8. Management by work simplifications (MBWS): Managers constantly seek ways to simplifying processes & reduce expenses.
Managers vs. Leaders

In nowadays it is accepted the idea widely those good managers should be leaders:
Managers  Punishment
Leaders Reward

Managers Leaders
1. Punish 1. Reward
2. Demand ” respect ” 2. Invite speaking out
3. Limit and define (job descriptions) 3. Empower (to trust people)
4. Impose discipline 4. Value creativity
5. Here’s what we are going to do? 5. How can I serve you? (look at the employees as to a smart, creative individuals, who are successful in what they are doing)
6. Stick to a plan 6. Follow the vision (as plan is not god its just plan, and you can be wrong in planning)
7. Control 7. Instead of controlling, they encourage to change
8. Hierarchy 8. Network
9. Payment: automatic annual rises (increase every year by some %, to issue loyalty) 9. Tend to reward performance
10. Performance reviews (promotion according performance) 10. Contract for results
11. Order giving 11. Facilitating
12. Issue order 12. Act as role models (they at themselves how they want others to act)
13. Information control 13. Information availability
14. Know all the answers (that’s actually a big problem, as your opinion is not the true knowledge) 14. Admit that they do not know all answers to the questions, they ask the right questions
15. Reaction to the answers: they are not interested in the answers (they think they know everything by themselves) 15. Seek to learn & draw new ideas

Financial management

Finances in business like a blood in human body. The superior goal of your business is to “MAKE MONEY” to create positive cash flow.
1. Future value of money
Value of money that you have today is the lights of future.
Money have time value. Money has to make money (rich people do not work, they invest and live on these investments)
Money suppose to build the wealth to you.
F – future value
P – present amount
i – interest rate(as a decimal per period)
n – number of periods
For example:
If you don’t employ your capital in 3 years your opportunity cost is 33.10lt

2. Present value of future money

Money has time value
There are opportunity costs of
everything
3. Break event point

P – price per unit
Q – quantity
F – fixed costs
V – variable costs per unit

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