Michael Porter - Harvard Business School professor and most influential business strategist today.

Porter’s FIVE Forces:
Current Competitors
Threat of New Entrants (New Competitors)
Threat of Substitutes
Bargaining Power of Suppliers
Bargaining Power of Buyers

Strategic Positioning - According to Porter, strategic positioning attempts to achieve sustainable competitive advantage by preserving what is distinctive about a company. I.e. performing different activities from rivals, or performing similar activities in different ways.

Principles of Strategic Positioning:
Strategy is the Creation of a Unique & Valuable Position
Strategy Requires Trade-Offs in Competing
Strategy Involves Creating a “Fit” among Activities

Strategic Positioning Sources:
Few needs, many customers.
Broad needs, few customers.
Broad needs, many customers.

Companies of all sizes benefit from strategic management, however, the improvement of financial performance is smaller if the company is smaller overall.

Strategic-Management Process:
Establish the Mission and the Vision
Assess the Current Reality
Formulate the Grand Strategy
Implement the Strategy
Maintain Strategic Control: The Feedback Loop


Assess the Current Reality:
Current Reality Assessment (Organizational Assessment) - Look at where the organizations stands and see what is working and what could be different so as to maximize efficiency and effectiveness in achieving the organization’s mission. The tools used to do so include: SWOT analysis, forecasting, benchmarking, and Porter’s model for industry analysis.



Formulate the Grand Strategy:
Grand Strategy - After the assessment of the current reality, explains how the organization’s mission is to be accomplished. Three common grand strategies are: growth, stability, and defensive.

Strategy Formulation - The process of choosing among different strategies and altering them to best fit the organization’s needs.

Implementing the Strategy:
Strategy Implementation - Putting strategic plans into effect.

Maintain Strategic Control: The Feedback Loop:
Strategic Control - Consists of monitoring the execution of strategy and making adjustments.



Mission Statements: Does your company’s mission statement answer these questions?
Who are our customers?
What are our major products or services?
In what geographical areas do we compete?
What is our basic technology?
What is our commitment to economic objectives?
What are our basic beliefs, values, aspirations, and philosophical priorities?
What are our major strengths and competitive advantages?
What are our public responsibilities, and what image do we wish to project?
What is our attitude toward our employees?

Vision Statements: Does your company’s vision statement answer “yes to these questions?”
Is it appropriate for the organization and for the times?
Does it set standards of excellence and reflect high ideals?
Does it clarify purpose and direction?
Does it inspire enthusiasm and encourage commitment?
Is it well articulated and easily understood?
Does it reflect the uniqueness of the organizations, its distinctive competence, what it stands for, what it’s able to achieve?
Is it ambitious?



Competitive Intelligence - Gaining information about one’s competitors’ activities so that you can anticipate their moves and react appropriately.

Sources of Competitive Intelligence:
Public Prints and Advertising
Investor Information
Informal Sources

Environmental Scanning - Careful monitoring of an organization’s internal and external environments to detect early signs of opportunities and threats that may influence the firm’s plans.

SWOT Analysis - Also known as a situational analysis - which is a search for the Strengths, Weaknesses, Opportunities, and Threats affecting the organization.

Forecast - A vision or projection of the future.

Trend Analysis - A hypothetical extension of a past series of events into the future.

Contingency Planning - Known as scenario planning and scenario analysis - is the creation of alternative hypothetical but equally likely future conditions.

Benchmarking - A process by which a company compares its performance with that of high-performing organizations.

Porter’s Model For Industry Analysis:
Current Competitors
Threat of New Entrants (New Competitors)
Threat of Substitutes
Bargaining Power of Suppliers
Bargaining Power of Buyers

Growth Strategy - A grand strategy that involves expansion - as in sales revenues, market share, number of employees, or number of customers or (for nonprofits) clients served.

Stability Strategy - A grand strategy that involves little or no significant change.

Defensive Strategy (Retrenchment Strategy) - A grand strategy that involves reduction in the organization’s efforts.



Porter’s Four Competitive Strategies (Four Generic Strategies) - Cost-leadership, differentiation, cost-focus, focused-differentiation.

Porter’s Four Competitive Strategies

Strategy
Wide
Narrow
1. Cost Leadership
X


2. Differentiation
X


3. Cost-focus


X
4. Focused-differentiation


X

Cost Leadership Strategy - To keep costs, and hence prices, of a product or service below those of competitors and to target a wide market.

Differentiation Strategy - To offer products or services that are of unique and superior value compared with those of competitors but to target a wide market.

Cost-Focus Strategy - To keep costs, and hence prices, of a product or service below those of competitors and to target a narrow market.

Focused-Differentiation Strategy - To offer products or services that are of unique and superior value compared to those of competitors and to target a narrow market.



Single-Product Strategy - A company makes and sells only one product within its market.

Single Products Strategy

Pros
Cons
More focused on one product
Vulnerability to failure



Diversification - Operating several businesses in order to spread the risk.

Unrelated Diversification - Operating several businesses under one ownership that are not related to one another.

Related Diversification - An organization under one ownership operates separate businesses that are related to one another.

Advantages of Related Diversification:
Reduced risk - due to more than one product.
Management efficiencies - administration spread over several businesses.
Synergy - the sum is greater than the parts.

Synergy - The economic value of separate, related businesses under one ownership and management is greater together than the businesses are worth separately. E.g. Pepsi Cola applying marketing muscle to Mountain Dew and 7-UP.



BCG (Boston Consulting Group) Matrix - A means of evaluating strategic business units on the basis of (1) their business growth rates and (2) their share of the market.

BCG Matrix





Strategic Control:
Engage people.
Keep it simple.
Stay focused.
Keep moving.

Larry Bossidy - Former CEO of AlliedSignal.
Ram Charan - A business adviser to senior executives.


Execution - A central part of any company’s strategy. It consists of using questioning, analysis, and follow-through to mesh strategy with reality, align people with goals, and achieve results promised.



3 Core Processes of Business:
People
Strategy
Operations