DR. RAMON CORONA1 El Proceso de la Administración Estratégica CEIPA Colombia Agosto del 2005

DR. RAMON CORONA2 Las cinco tareas de la Administración Estratégica 1. Desarrollo de una visión estratégica y misión del negocio 2. Establecimiento de objetivos 3. Crear una estrategia 4. Poner en práctica y ejecutar la estrategia de una manera eficiente y efectiva 5. Evaluar el desempeño y hacer ajustes al proceso

DR. RAMON CORONA3 Desarrollo de visión y misión ¿Qué hacemos? ¿En qué negocio estamos? Misión: breve, realista concreta que todos la conozcan ¿Cuál es nuestra visión del futuro y dónde queremos estar en cinco años?

DR. RAMON CORONA4 MISIÓN Es lo que la empresa trata de lograr y en lo que intenta convertirse. La misión define el negocio de la empresa y provee una clara visión de lo que la empresa intenta lograr para sus clientes. Visión Estratégica: Visión de la Administración sobre el tipo de empresa que se intenta desarrollar y su posición competitiva. Comunicarla a todos los empleados

DR. RAMON CORONA5 Establecer objetivos Es convertir la misión del negocio en metas especificas de resultados. Obliga a la empresa a ser creativa Objetivos retadores pero realizables Metas a corto y mediano plazo. Se requiere de todos los gerentes. Objetivos: Financieros (Tasa de retorno, crecimiento, flujo, etc.) Estratégicos (posicionamiento de mercado, % de mercado, reducir costos, imagen, ventajas competitivas, etc.)

DR. RAMON CORONA6 Crear estrategias Los Objetivos son los “fines” y las estrategias los “medios”. Estrategia es un grupo de acciones que los gerentes utilizan para alcanzar sus objetivos financieros y estratégicos. El crear una estrategia empieza con un diagnóstico sólido de la situación externa e interna de la empresa. Es una combinación de acciones planeadas y la adaptación de reacciones de acuerdo a los cambios que se presenten, a fin de lograr los objetivos.

DR. RAMON CORONA7 LAS 3 TAREAS EN LA CREACIÓN DE LA ESTRATEGIA

DR. RAMON CORONA8 Visión estratégica de Delta LA LINEA AÉREA MUNDIAL POR EXCELENCIA Queremos que Delta se convierta en LA LINEA AÉREA MUNDIAL POR EXCELENCIA DELTA AIRLINES

DR. RAMON CORONA9 MUNDIAL, MUNDIAL, porque somos y queremos conservarnos como un competidor innovador, agresivo, ético y exitoso, que ofrece acceso al mundo a los estándares mas altos de servicio. Continuaremos buscando oportunidades de expansión hacia nuevas rutas y crear alianzas globales. Visión estratégica de Delta DELTA AIRLINES

DR. RAMON CORONA10 Visión estratégica de Delta LINEA AEREA, LINEA AEREA, porque pretendemos permanecer en el negocio que conocemos mejor – transporte aéreo y servicios relacionados. No nos desviaremos de nuestras raíces. Creemos en el potencial a largo plazo de la industria de la aviación y su crecimiento con utilidades, y continuaremos enfocando nuestro tiempo, atención, e inversiones en el mejoramiento de nuestra posición en ese ambiente de negocios. DELTA AIRLINES

DR. RAMON CORONA11 POR EXCELENCIA, POR EXCELENCIA, porque valoramos la lealtad de nuestros clientes, empleados e inversionistas. Para los pasajeros y embarcadores, continuaremos proveyendo el mejor servicio y valor agregado. Para nuestro personal, continuaremos ofreciendo un lugar de trabajo cada dia mas retador, rewarding, y orientado a resultados, reconociendo y apreciando sus contribuciones. Para nuestros accionistas, obtendremoss consistentes y superiores al mercado. Visión estratégica de Delta DELTA AIRLINES

DR. RAMON CORONA12 Los tres elementos de la Visión misión Use la misión como punto de partida visión estratégica Desarrolle una visión estratégica que incluya los fines que se pretenden comunique clara entusiasta comunique la visión de una manera clara y entusiasta

DR. RAMON CORONA13 Características de la Misión Define las actividades actuales de negocios Enfatiza los limites de los negocios actuales Nos conduce hacia: Quienes somos, Que hacemos, y Hacia donde vamos Es específica de la empresa, no genérica — a fin de darle una identidad propia La misión de una empresa no es ganar dinero ! La misión real es siempre: “Que haremos para ganar dinero””

DR. RAMON CORONA14 Definicion de Negocio Una buena definición de negocios incluye tres factores Necesidades de los clientes – Que satisfacemos? Grupos de clientes – Quien satisface sus necesidades Uso de Tecnologías y competencias – Como se entrega valor a los clientes

DR. RAMON CORONA15 Enfoque amplio y cerrado Amplio Muebles Telecomunicaciones Bebidas Entrega global de paqueteria Viajes y Turismo Cerrado Muebles de hierro fundido para exteriores Servicio de teléfono de larga distancia Bebidas gaseosas Servicio de entrega en 24 horas Cruceros al caribe

DR. RAMON CORONA16 Misiones de Departamentos Enfatizar Rol y enfoque de actividades La Dirección que se persigue La Contribución a la misión de la empresa

DR. RAMON CORONA17 Mission Statements of Functional Departments HUMAN RESOURCES To contribute to organizational success by developing effective leaders, creating high performance teams, and maximizing the potential of individuals. CORPORATE SECURITY To provide services for the protection of corporate personnel and assets through preventive measures and investigations.

DR. RAMON CORONA18 Characteristics of a Strategic Vision Charts a company’s future strategic course Defines the business makeup for 5 years (or more) Specifies future technology-product- customer focus Indicates capabilities to be developed Requires managers to exercise foresight

DR. RAMON CORONA19 Communicating the Vision An exciting, inspirational vision Challenges and motivates workforce Arouses strong sense of organizational purpose Induces employee buy-in Galvanizes people to live the business

DR. RAMON CORONA20 Managerial Value of a Well- Conceived Strategic Vision and Mission Crystallizes long-term direction Reduces risk of rudderless decision-making Conveys organizational purpose and identity Keeps direction-related actions of lower- level managers on common path Helps organization prepare for the future

DR. RAMON CORONA21 Establishing Objectives Represent commitment to achieve specific performance targets by a certain time Should be stated in quantifiable terms and contain a deadline for achievement Spell-out how much of what kind of performance by when Second Direction-Setting Task

DR. RAMON CORONA22 Purpose of Objective-Setting Substitutes results-oriented decision-making for aimlessness over what to accomplish Provides a set of benchmarks for judging organizational performance

DR. RAMON CORONA23 Two Types of Objectives Are Required Outcomes that improve a firm’s financial performance Outcomes that strengthen a firm’s competitiveness and long-term market position Financial Objectives Strategic Objectives

DR. RAMON CORONA24 Examples: Financial Objectives Achieve revenue growth of 10% per year Increase earnings by 15% annually Increase dividends per share by 5% per year Increase net profit margins from 2% to 4% Attractive EVA performance Stronger bond and credit ratings A rising stock price (outperform the S&P 500) Attractive increases in MVA Recognition as a “blue chip” company A more diversified revenue base

DR. RAMON CORONA25 Examples: Strategic Objectives A bigger market share Quicker design-to-market times than rivals Higher product quality than rivals Lower costs relative to key competitors Broader product line than rivals Better e-commerce and Internet sales capabilities than rivals Better customer service than rivals Recognition as a leader in technology Wider geographic coverage than rivals

DR. RAMON CORONA26 Example: Corporate Objectives  Self-funding revenue growth of 15% annually.  An average return on assets of 13 to 15%.  An average return on shareholders’ equity investment of 16 to 18%.  A strong balance sheet. Motorola (financial objectives)

DR. RAMON CORONA27 Crafting a Strategy An organization’s strategy deals with How to make the strategic vision a reality and achieve target objectives The game plan for Pleasing customers Conducting operations Building a sustainable competitive advantage Strategy constitutes management’s business model for producing good profitability Third Direction-Setting Task

DR. RAMON CORONA28 Strategizing Involves HOW To Achieve performance targets Out-compete rivals and achieve a sustainable competitive advantage Respond to changing market conditions and new customer requirements Make the strategic vision a reality

DR. RAMON CORONA29 Characteristics of Strategy- Making Strategy is action-oriented Strategy evolves over time Strategy-making is a never-ending, ongoing task

DR. RAMON CORONA30 Corporate Strategy Business Strategies Functional Strategies Operating Strategies Two-Way Influence Corporate-Level Managers Business-Level Managers Operating Managers Functional Managers Levels of Strategy-Making in a Diversified Company

DR. RAMON CORONA31 Levels of Strategy-Making in a Single-Business Company Business Strategy Two-Way Influence Functional Strategies Operating Strategies Executive-Level Managers Operating Managers Functional Managers

DR. RAMON CORONA32 Functional Strategies Game plan for a strategically-relevant function, activity, or business process Details how key activities will be managed Provide support for business strategy Specify how functional objectives are to be achieved

DR. RAMON CORONA33 What Do We Mean by “Corporate Social Responsibility?” Conducting company activities within bounds of what is considered ethical and in public interest Responding positively to emerging societal priorities and expectations Demonstrating willingness to take needed action ahead of regulatory confrontation Balancing stockholder interests against larger interest of society as a whole Being a “good citizen” in community

DR. RAMON CORONA34 Competitive Conditions and Industry Attractiveness A company’s strategy has to be responsive to Fresh moves of rival competitors Changes in industry’s price-cost-profit economics Shifting buyer needs and expectations New technological developments Pace of market growth

DR. RAMON CORONA35 Strategic Management Principle A company’s strategy can’t produce real market success unless it is well-matched to industry and competitive conditions!

DR. RAMON CORONA36 Company Opportunities and Threats For strategy to be successful, it has to Be well matched to capturing a company’s best opportunities And help counteract threats to the company’s well-being

DR. RAMON CORONA37 Hewlett-Packard’s Basic Values: “The HP Way” Sharing firm’s success with employees Showing trust and respect for employees Providing customers with products or services of the greatest value Being genuinely interested in providing customers with effective solutions to their problems Making profit a high stockholder priority Avoiding use of long-term debt to finance growth Individual initiative, creativity, & teamwork Being a good corporate citizen

DR. RAMON CORONA38 A Firm’s Ethical Responsibilities to Its Stakeholders Owners/shareholders – Rightfully expect some form of return on their investment Employees - Rightfully expect respect for their worth and devoting their energies to firm Customers - Rightfully expect a seller to provide them with a reliable, safe product or service Suppliers - Rightfully expect to have an equitable relationship with firms they supply Community - Rightfully expect businesses to be good citizens in their community

DR. RAMON CORONA39 Tests of a Winning Strategy GOODNESS OF FIT TEST How well is strategy matched to firm’s situation? COMPETITIVE ADVANTAGE TEST Does strategy lead to sustainable competitive advantage? PERFORMANCE TEST Does strategy boost firm performance?

DR. RAMON CORONA40 Strategic Management Principle To be a real winner, a strategy must 1. Fit the enterprise’s internal and external situation 2. Build sustainable competitive advantage 3. Improve company performance

DR. RAMON CORONA41 ANALISIS INDUSTRIAL Y COMPETITIVO

“Analysis is the critical starting point of strategic thinking.” “Things are always different-- the art is figuring out which differences matter.” Kenichi Ohmae Laszlo Birinyi

DR. RAMON CORONA43 Role of Situation Analysis in Strategy-Making Methods of Industry and Competitive Analysis Industry’s Dominant Economic Traits Industry’s Competitive Forces Drivers of Industry Change Competitive Positions of Rivals Competitive Moves of Rivals Key Success Factors Conclusions: Overall Industry Attractiveness Conducting an Industry and Competitive Analysis Chapter Outline

DR. RAMON CORONA44 What Is Situation Analysis? Two considerations Company’s external or macro-environment Industry and competitive conditions Company’s internal or micro-environment Competencies, capabilities, resource strengths and weaknesses, and competitiveness

DR. RAMON CORONA45 The Components of a Company’s Macro-Environment Legislation and Regulation Societal Values and Lifestyles Population Demographics Technology The Economy at Large COMPANY SuppliersSubstitutes Buyer s New Entrants Rival Firms  IMMEDIATE INDUSTRY AND COMPETITIVE ENVIRONMENT

DR. RAMON CORONA46 Strategic Thinking and Analysis Leads to Good Strategic Choices 1. Industry’s dominant economic traits 2. Nature of competition & strength of competitive forces 3. Drivers of industry change 4. Competitive position of rivals 5. Strategic moves of rivals 6. Key success factors 7. Conclusions about industry attractiveness Assess Industry & Competitive Conditions 1. Assessment of company’s present strategy 2. Resource strengths and weaknesses, market opportunities, and external threats 3. Company’s costs compared to rivals 4. Strength of company’s competitive position 5. Strategic issues that need to be addressed Assess Company Situation Identify Strategic Options for the Company Select the Best Strategy for the Company

DR. RAMON CORONA47 Key Considerations Regarding the Industry and Competitive Environment Industry’s dominant economic traits Competitive forces and strength of each force Drivers of change in the industry Competitor analysis Key success factors Conclusions: Industry attractiveness

DR. RAMON CORONA48 What are the Industry’s Dominant Economic Traits? Market size and growth rate Scope of competitive rivalry Number of competitors and their relative sizes Prevalence of backward/forward integration Entry/exit barriers Nature and pace of technological change Product and customer characteristics Scale economies and experience curve effects Capacity utilization and resource requirements Industry profitability

DR. RAMON CORONA49 The Experience Curve Effect An experience curve exists when a company’s unit costs decline as its cumulative production volume increases because of Accumulating production know-how Growing mastery of the technology The bigger the experience curve effect, the bigger the cost advantage of the firm with the largest cumulative production volume

DR. RAMON CORONA50 Relevance of Key Economic Features Economic Feature Market Size Market growth rate Capacity surpluses/shortages Industry profitability Entry/exit barriers Product is big-ticket item for buyers Standard products Rapid technological change Capital requirements Vertical integration Economies of scale Rapid product innovation Strategic Importance Small markets don’t tend to attract new firms; large markets attract firms looking to acquire rivals with established positions in attractive industries Fast growth breeds new entry; slow growth spawns increased rivalry & shake- out of weak rivals Surpluses push prices & profit margins down; shortages pull them up High-profit industries attract new entrants; depressed conditions lead to exit High barriers protect positions and profits of existing firms; low barriers make existing firms vulnerable to entry More buyers will shop for lowest price Buyers have more power because it’s easier to switch from seller to seller Raises risk; investments in technology facilities/equipment may become obsolete before they wear out Big requirements make investment decisions critical; timing becomes important; creates a barrier to entry and exit Raises capital requirements; often creates competitive & cost differences among fully vs. partially vs. non-integrated firms Increases volume & market share needed to be cost competitive Shortens product life cycle; increases risk because of opportunities for leapfrogging

DR. RAMON CORONA51 What is Competition Like and How Strong Are the Competitive Forces? To identify Main sources of competitive forces Strength of these forces Key analytical tool Five Forces Model of Competition Objective

DR. RAMON CORONA52 Five Forces Model of Competition Substitute Products (of firms in other industries) Suppliers of Key Inputs Buyers Potential New Entrants Rivalry Among Competing Sellers

DR. RAMON CORONA53 Rivalry Among Competing Sellers Usually the most powerful of the five forces The big factor determining the strength of rivalry is how actively and aggressively are rivals employing the various weapons of competition in jockeying for a stronger market position and seeking bigger sales Is price competition vigorous? Active efforts to improve quality? Are rivals racing to offer better performance features? Are rivals racing to offer better customer service? Lots of advertising/sales promotions? Active efforts to build a stronger dealer network?

DR. RAMON CORONA54 What Causes Rivalry to be Stronger? Active jockeying for position among rivals and frequent launches of new offensives to gain sales and market share One or more firms initiates moves to bolster their standing at expense of rivals Lots of firms that are relatively equal in size and capability Slow market growth Industry conditions tempt some firms to go on the offensive to boost volume and market share Customers have low costs in switching to rival brands A successful strategic move carries a big payoff Costs more to get out of business than to stay in

DR. RAMON CORONA55 Common Barriers to Entry Sizable economies of scale Inability to gain access to specialized technology Existence of strong learning/experience curve effects Strong brand preferences and customer loyalty Large capital requirements and/or other specialized resource requirements Cost disadvantages independent of size Difficulties in gaining access to distribution channels Regulatory policies, tariffs, trade restrictions

DR. RAMON CORONA56 Competitive Force of Substitute Products Substitutes matter when customers are attracted to the products of firms in other industries Concept 4 Eyeglasses vs. Contact Lens 4 Sugar vs. Artificial Sweeteners 4 Newspapers vs. TV vs. Internet 4 vs. Overnight Delivery Examples

DR. RAMON CORONA57 How to Tell Whether Substitute Products are a Strong Force Sales of substitutes are growing rapidly Producers of substitutes plan to add new capacity Profits of producers of substitutes are up

DR. RAMON CORONA58 Competitive Pressures From Suppliers and Supplier-Seller Collaboration Whether supplier-seller relationships represent a weak or strong competitive force depends on Whether suppliers can exercise sufficient bargaining leverage to influence terms of supply in their favor Extent and competitive importance of collaborative partnerships between one or more sellers and their suppliers

DR. RAMON CORONA59 Competitive Force of Buyers Buyers are a strong competitive force when: They are large and purchase a sizable percentage of industry’s product They buy in large quantities They can integrate backward Industry’s product is standardized Their costs in switching to substitutes or other brands are low They can purchase from several sellers Product purchased does not save buyer money

DR. RAMON CORONA60 Principle of Competitive Markets Buyers are a stronger competitive force the more they have leverage to bargain over: Price Quality Service Other terms and conditions of sale

DR. RAMON CORONA61 Strategic Implications of the Five Competitive Forces Competitive environment is unattractive from the standpoint of earning good profits when: Rivalry is strong Entry barriers are low and entry is likely Competition from substitutes is strong Suppliers and customers have considerable bargaining power

DR. RAMON CORONA62 Competitive environment is ideal from a profit-making standpoint when: Rivalry is moderate Entry barriers are high and no firm is likely to enter Good substitutes do not exist Suppliers and customers are in a weak bargaining position Strategic Implications of the Five Competitive Forces

DR. RAMON CORONA63 Common Types of Driving Forces Internet and e-commerce opportunities Increasing globalization of industry Changes in long-term industry growth rate Changes in who buys the product and how they use it Product innovation Technological change/process innovation Marketing innovation

DR. RAMON CORONA64 Entry or exit of major firms Diffusion of technical knowledge Changes in cost and efficiency Market shift from standardized to differentiated products (or vice versa) Regulatory policies / government legislation Changing societal concerns, attitudes, and lifestyles Changes in degree of uncertainty and risk Common Types of Driving Forces

DR. RAMON CORONA65 Which Companies are in Strongest / Weakest Positions? One technique for revealing the different competitive positions of industry rivals is strategic group mapping A strategic group consists of those rivals with similar competitive approaches in an industry

DR. RAMON CORONA66 Strategic Group Mapping Firms in same strategic group have two or more competitive characteristics in common Sell in same price/quality range Cover same geographic areas Be vertically integrated to same degree Have comparable product line breadth Emphasize same types of distribution channels Offer buyers similar services Use identical technological approaches

DR. RAMON CORONA67 Procedure for Constructing a Strategic Group Map STEP 1: Identify competitive characteristics that differentiate firms in an industry from one another STEP 2: Plot firms on a two-variable map using pairs of these differentiating characteristics STEP 3: Assign firms that fall in about the same strategy space to same strategic group STEP 4: Draw circles around each group, making circles proportional to size of group’s respective share of total industry sales

DR. RAMON CORONA68 Example: Strategic Group Map of the Video Game Industry Types of Video Game Suppliers/Distribution Channels Overall Cost to Players of Video Games Low (Coin-operated equipment) Medium (Video players cost $100-$300) High (Use PC) Low (Coin-operated equipment) Low (Coin-operated equipment) Low (Coin-operated equipment) Low (Coin-operated equipment) Sony, Sega, Nintendo, several others Arcade operators Publishers of games on CD-ROMs MSN Gaming Zone, Pogo.com, America Online, HEAT, Engage, Oceanline, TEN

DR. RAMON CORONA69 Guidelines: Strategic Group Maps Variables selected as axes should not be highly correlated Variables chosen as axes should expose big differences in how rivals compete Variables do not have to be either quantitative or continuous Drawing sizes of circles proportional to combined sales of firms in each strategic group allows map to reflect relative sizes of each strategic group If more than two good competitive variables can be used, several maps can be drawn

DR. RAMON CORONA70 Interpreting Strategic Group Maps Driving forces and competitive pressures often favor some strategic groups and hurt others Profit potential of different strategic groups varies due to strengths and weaknesses in each group’s market position The closer strategic groups are on map, the stronger the competitive rivalry among member firms tends to be

DR. RAMON CORONA71 What Strategic Moves Are Rivals Likely to Make Next? A firm’s own best strategic moves are affected by Current strategies of competitors Future actions of competitors Profiling key rivals involves gathering competitive intelligence about their Current strategies Most recent moves Resource strengths and weaknesses Announced plans

DR. RAMON CORONA72 Common Types of Key Success Factors Distribution- related Marketing- related Skills-related Organizational capability Other types Technology- related Manufacturing- related Scientific research expertise; Product innovation capability; Expertise in a given technology; Capability to use Internet to conduct various business activities Low-cost production efficiency; Quality of manufacture; High use of fixed assets; Low-cost plant locations; High labor productivity; Low- cost product design; Flexibility to make a range of products Strong network of wholesale distributors/dealers; Gaining ample space on retailer shelves; Having company-owned retail outlets; Low distribution costs; Fast delivery Fast, accurate technical assistance; Courteous customer service; Accurate filling of orders; Breadth of product line; Merchandising skills; Attractive styling; Customer guarantees; Clever advertising Superior workforce talent; Quality control know-how; Design expertise; Expertise in a particular technology; Ability to develop innovative products; Ability to get new products to market quickly Superior information systems; Ability to respond quickly to shifting market conditions; Superior ability to employ Internet to conduct business; More experience & managerial know-how Favorable image/reputation with buyers; Overall low-cost; Convenient locations; Pleasant, courteous employees; Access to financial capital; Patent protection