The Tools of Strategic Analysis

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Chapter 1

What is Strategy and the Strategic Management Process?

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall.

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The Tools of Strategic Analysis

Walt Disney Company
1984 Profits: $242 Million
Theme Park Operations: 77 percent of profits Consumer Products: 22 percent of profits Filmed Entertainment: 1 percent of profits

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

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The Tools of Strategic Analysis

Walt Disney Company
Hired Michael Eisner - 1984
1. Increased admission prices at theme parks 1984 - $186 m 1989 - $787 m 2. Focused on movie studios (character development) 1984 - $2.42 m 1994 - $845 m

3. Diversified into television (ABC), hotels, retail stores, sport team, cruise line, publishing, consumer products, licensing, etc. (Huey & McGowan, 1995)

Market Cap: 1984 = $2 billion 1994 = $28 billion
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

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The Tools of Strategic Analysis

Definition of Strategy
Strategy: A firm’s theory about how to gain competitive advantages

Eisner’s theory may have been:

People will pay a premium price for extraordinary entertainment. We have the necessary resources to create extraordinary entertainment. Therefore, let’s redeploy our resources in a different way and offer something extraordinary to people.

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

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The Tools of Strategic Analysis

The Strategic Management Process

External Analysis

Mission

Objectives

Strategic Choice

Strategy Implementation

Competitive Advantage

Internal Analysis

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

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The Tools of Strategic Analysis

The Strategic Management Process
External Analysis

Objectives

Strategic Choice

Strategy Implementation

Competitive Advantage

Internal Analysis

Mission
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

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The Tools of Strategic Analysis

The Strategic Management Process
Objectives:
• specific, measurable targets • the things a firm needs to ‘do’ to achieve its mission • should influence other elements in the strategic management process Example: Steelcon’s mission & objectives Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

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The Tools of Strategic Analysis

The Strategic Management Process
External and Internal Analysis
Systematic Examination of the Environment
External Analysis Internal Analysis • human resources (knowledge) • manufacturing abilities

• interest rates
• demographics

• social trends
• technology
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

• technology
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The Tools of Strategic Analysis

The Strategic Management Process
Strategic Choice
External Analysis Internal Analysis

Strategic Choice Business Level • positioning a business Example: Black & Decker Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

Corporate Level

• which businesses?

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The Tools of Strategic Analysis

The Strategic Management Process
Strategy Implementation
• how strategies are carried out • who will do what
• organizational structure and control • who reports to whom

• how does the firm hire, promote, pay, etc.

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

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The Tools of Strategic Analysis

The Strategic Management Process
Strategy Implementation
• every strategic choice has strategy implementation implications • strategy implementation is just as important as strategy formulation

A Strategy Is Only As Good As Its Implementation
Example: Gen. Lee at Gettysburg
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

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The Tools of Strategic Analysis

The Strategic Management Process
Competitive Advantage
Definition: the ability to create...
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