Quản trị kinh doanh - Chapter two: Implementing strategy: The value chain,the balanced scorecard, and the strategy map

Implementing Strategy: The Value Chain,the Balanced Scorecard, and the Strategy MapChapter Two2-2Explain how to implement a competitive strategy by using Strengths-Weaknesses-Opportunities-Threats (SWOT) AnalysisExplain how to implement a competitive strategy by focusing on the execution of goalsExplain how to implement a competitive strategy using value-chain analysisLearning Objectives2-3Learning Objectives (continued)Explain how to implement a competitive strategy using the Balanced Scorecard (BSC) and strategy mapExplain how to expand a conventional Balanced Scorecard (BSC) by integrating sustainability2-4There are two main competitive strategies:cost leadershipdifferentiationOnce a firm chooses which strategy to follow, there are various means of implementation:SWOT AnalysisFocus on executionValue-chain analysisBalanced scorecard (BSC) Implementing a Strategy2-5SWOT AnalysisIdentification of critical success factors (CSFs) tied to strategy—for example:Product innovation QualitySkill development Identification of quantitative measures for the specified CSFs—for example:Number of design changes or new patentsNumber of defects or number of returnsNumber of training hours or amount of skill performance improvement2-6SWOT Analysis (continued) The SWOT analysis has four areas:S – strengths/internalW – weaknesses/internalO – opportunities/externalT – threats/externalLook at product lines, management, R&D, manufacturing, marketing, and strategyLook at barriers to entry, intensity of rivalry among competitors, substitute goods, and customer/supplier bargaining power2-7The CSFs a manager executes depend on the chosen strategyCost leadership: operational performance and qualityDifferentiation: customer satisfaction and innovation Differentiated firms must pay close attention to marketing and product developmentManagement accountants assist by gathering, analyzing, and reporting on relevant informationCan be improved through benchmarking and total quality improvement (e.g., Malcolm Baldrige Quality Award) Execution2-8Value-Chain AnalysisAn analysis for better understanding the details of the organization’s competitive strategyCSFs must be implemented in each and every phase of operationsHelps a firm better understand its competitive advantage by analyzing what processes add value (processes that do not add value can be deleted or outsourced)Will include upstream (prior to manufacturing or operations) and downstream activities2-9Value-Chain AnalysisValue-chain analysis has two steps:Identify the value-chain activities at the smallest level possibleDevelop a competitive advantage by reducing cost or adding valueTo develop a competitive advantage, a firm must consider the following:What is our competitive advantage (strategy)?Where can we add value for the customer?Where can we reduce costs?Are any of our processes linked (linkages exploited)?2-10Example: Value-Chain Analysis in Computer ManufacturingComputer Intelligence Company (CIC) manufactures computers for small businessesThe company has an excellent reputation for service and reliability as well as a growing customer list: competes on differentiationIs there any way to add value for the customer while reducing costs?2-11Example: Value-Chain Analysis in Computer Manufacturing (continued)The company is considering two options:Option One is to continue functioning as isOption Two includes two separate outsourcing decisions: (a) the purchase or manufacture of parts, and (b) providing service internally or outsourcing itIt is important to consider company strategy in outsourcing decisionsValue-Chain Analysis in Computer Manufacturing (continued)Value ActivityOption One – CurrentOption Two – PotentialAcquiring raw materialsCIC is not involved at this stepCIC is not involved at this stepManufacturing computer chips and other partsCIC is not involved at this step; cost is $200CIC is not involved at this step; cost is $200Manufacturing components, some of which CIC can makeCIC purchases $300 of parts for each unitCIC manufactures these parts for $190 per unit plus $55,000 monthlyAssemblingCIC’s costs are $250CIC’s costs are $250Marketing, distributing, and servicingCIC’s costs are $175,000 per monthCIC contracts out these services for $130 per month2-12Results of Value-Chain AnalysisManufacturingMarketing, distributing, and servicingOption One600 x $300 = $180,000$175,000 per monthOption Two600 x 190 + $55,000 = $169,000$78,000 per monthSavings with Option Two$11,000$97,000 per month2-13Results of Value-Chain Analysis (continued)CIC can save $108,000 ($11,000 + $97,000) per month by manufacturing the parts and contracting out marketing, distributing, and servicingThe main factor driving the decision is company strategy, which in this case is quality and customer serviceFor a firm pursuing a differentiation strategy, the best option is not necessarily the one which provides the most savings (savings is a secondary consideration)From a strategic viewpoint, Option One is preferred over Option Two2-142-15The Five Steps of Strategic Decision Making for CIC Determine the Strategic Issues Surrounding the Problem: CIC competes on differentiationIdentify the Alternative Actions: two optionsObtain Information and Conduct Analyses of the Alternatives: calculate the relevant costsBased on Strategy and Analysis, Choose and Implement the Desired Alternative – support CIC’s strategy, this is the key to the analysisProvide an On-going Evaluation of the Effectiveness of implementation in Step 4.2-16The Balanced Scorecard (BSC)A performance report based on a broad set of financial and nonfinancial measures that is crucial to understanding and implementing a strategy This report groups a firm’s CSFs into four areas: Financial perspective (financial measures)Customer perspective (customer satisfaction)Internal process perspective (e.g., productivity and speed)Learning and growth (e.g., training and number of new patents or products)2-17The Balanced Scorecard (continued)BenefitsProvides a means for implementing strategyProvides a means to achieve a desired organizational change in strategyCan be used to determine management’s compensation and rewardsAligns managers’ efforts with strategyCoordinates efforts within the firm to achieve CSFs2-18The Balanced Scorecard (continued)A properly constructed BSC can be used to infer a company’s strategyBSC → Strategy, and Strategy → BSCThe emphasis placed on each performance perspective reflects the strategy of the firmFor a cost leader, the operations perspective might be the most important; for a differentiator, the customer perspective2-19Strategy Map A strategy map is a cause-and-effect diagram of the relationships embodied in a BSC: Shows how the achievement of CSFs in one perspective should affect the achievement of goals in another perspectiveThe financial perspective is the target in the strategy map because financial performance is the ultimate goal for most profit-seeking organizationsSuccess in the other perspectives leads directly to improved financial performance and shareholder valueAn Example Strategy Map 2-202-21SustainabilityThe fifth perspective for many organizationsThe balancing of short-term and long-term goals in all three dimensions of the company’s performance–financial, social, and environmental:Environmental reports use environmental performance indicators (EPIs) to measure sustainabilityThese indicators are in three areas:Operational measures (stresses to the environment/regulatory compliance issues)Management measures (efforts to reduce environmental effects)Environmental measures (environmental quality) 2-22Sustainability (continued)Sustainability reports also use social performance indicators (SPIs) to measure sustainabilityThese indicators are in three areas: Working conditions (worker safety and training) Community involvement (for example, employees participation in community activities such as Habitat for Humanity) Philanthropy (direct contributions) 2-23Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis provides a system and structure in which to identify a firm’s critical success factors (CSFs)Execution of goals is important in implementing a strategy Execution depends on the competitive strategy a firm is pursuingValue-chain analysis builds on the CSFs identified in SWOT analysis by breaking them into detailed activitiesChapter SummaryChapter Summary (continued) The balanced scorecard (BSC) provides the processes for evaluating a firm’s achievement of CSFsSustainability, often included as a perspective of the BSC, builds on the conventional BSC by balancing short-term and long-term goalsSustainability focuses on financial, social, and environmental issues2-24Executing Strategy: The Key to Success2-25