Principles of Management - week # 6

Chapter 7 - Strategic management

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On this chapter we have discussed Strategic management and its relationship to strategic planning, implementation and control.

We have dealt with the following issues:

- Synergy - definition and types.

-Porter's model of generic competitive strategies.

-Business ecosystem model.

-E-business and the internet revolution.

-Steps in strategic management process.

-Swot analysis.

-Forecasts - 3 types.

Strategy - is defined as an integrated and externally oriented perception of how the organization will achieve its mission.

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The Strategic management process involves four stages :

Formulation of grand strategy.

Formulation of strategic plans.

Implementation of strategic plans.

Strategic control.

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PORTER'S generic competitive strategies are :

Cost leadership

Differentiation

Cost focus

Focused differentiation

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Some personal thoughts.....

From this chapter I have learned that Strategic management is actually the bottom line of all managerial activity. It sets the basis for the whole thing. Without a strategy - a business will not be able to survive, even to exist, actually.

A person who does not have strategic thinking or cannot think strategically - will probably not make a successful manager.

Do I have what it takes to be a good manager ? I am trying to believe I do. When I was in the Israel army I served in the Israeli air-force. My commandor always told me to try to look

a head, try to look into the future and anticipate what's going to happen or what might go wrong... In the following years, after I had already left the army - I have tried to remember to always think a head... think strategically. I believe it helped me in successfully managing some big projects at work.

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Closing case # 4 – The Oracles of Oil. Summary: The oil industry is a very unstable business, affected by various factors such as world politics, environmental changes and many more. In order to maintain a stable position in this field, a company must do its outmost to just survive. The article brings Royal Dutch/ Shell as an example of an oil company that uses scenarios as its strategy. Shell’s way of coping with the unpredicted future – is to try to predict it, in other words: create scenarios, situations that may or may not occur – however – Shell will be ready for them.

Questions & Answers:

1. Which of Porter’s four generic competitive strategies would be most profitable for Royal Dutch/Shell? Why? Reply: I believe the most profitable strategy for Royal Dutch / Shell will be the Cost Leadership strategy. Since Shell is not providing a unique product but a product supplied by others as well – the only way it can stay in business is to keep costs low. As the article stated – new oil and gas demand is shifting to Asia, and competition grows bigger. The oil and gas industry is affected by many political and environmental factors – factors that no oil giant no matter how big it is - can control. Therefore the best thing and maybe the only thing to do in this case is to use Cost leadership strategy.

2. Using your imagination and making reasonable assumptions, what opportunities and threats can you envision for Shell? Reply: The Opportunities I can envision for Shell are: keeping costs low and thus maintaining a good stable position amongst oil suppliers. Signing a contract with Asian countries for cooperation and share of profits. The threats I can envision for Shell are: Asian companies lowering rates and eliminating Shell. Competitors signing contracts with new Asian oil suppliers and gaining more power thus eliminating Shell from the oil industry map. 3. Why is scenario analysis particularly useful for a global oil company such as Royal Dutch / Shell? Reply: As previously stated, the oil field is a very unstable one, effect by global trends that nobody can control. Political situation all over the world is an unpredicted one and situations may occur and have an immediate and drastic impact on the oil industry. Using Scenario analysis can assist management to be prepared for the unpredicted future. Scenarios allow you to prepare for situations that are the complete opposite than what you would normally expect, thus allowing you to be ready and on alert, and beat competitors with a faster reaction.

4. Which scenario do you think is more likely to come true: “Dynamics as usual” or Spirit of the coming age”? Why? Reply: believe the scenario of “Spirits of the coming age” is more likely to come true, because the global goal of protecting the environment is getting stronger and stronger, and oil resources become limited. Using hydrogen fuel is ecologically better. In addition – technology in the last twenty years has evolved so much comparing to 200 years a go that I think by 2050 it will develop even more and oil will be overtaken by other energy resources.