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Lecture notes, cheat sheets
Strategic management. Cheat sheet: briefly, the most important
Directory / Lecture notes, cheat sheets Table of contents
1. BACKGROUND AND CONCEPT OF STRATEGIC MANAGEMENT Term "strategic management" was introduced at the turn of the 1960s and 70s. in order to distinguish between current management at the production level and management carried out at the highest level. The need for such a distinction was caused by the transition to a new model of managing the development of an organization in a changing environment. Allocate four factors-conditions, determining the relevance of strategic management: 1. In the second half of the XX century. the number of tasks caused by internal and external changes has steadily increased. Many of them were fundamentally new and could not be solved based on the experience gained in the first half of the XNUMXth century. 2. The multiplicity of tasks, along with the expansion of the geographical scope of the activities of national economies, led to a further complication of management problems. 3. The role of the highest level of management increased, while the totality of managerial skills developed in the first half of the century. 4. The instability of the external environment increased, which increased the likelihood of strategic sudden changes. The use of flexible management has become extremely important, which would ensure the adaptation of the enterprise to a rapidly changing environment. Timely response to emerging changes was achieved through strategic management of the enterprise development. Strategic management - the process of developing, adopting and implementing strategic decisions, the central link of which is a strategic choice based on a comparison of the enterprise's own resource potential with the opportunities and threats of the external environment. rod strategic management is a system of strategies that includes a number of interrelated specific entrepreneurial, organizational and labor strategies. Strategy - this is a pre-planned reaction of the organization to a change in the external environment, the line of its behavior, chosen to achieve the desired result. Key characteristics of the strategic aspect of organization management: 1) the main purpose of the organization is survival in the long term; 2) the way to achieve goals is to search for new opportunities in competition, adapt to changes in the environment; 3) the importance of the time factor - orientation to the long term; 4) the role of the staff: the employee is the basis of the organization, the source of its well-being; 5) performance criteria - flexibility, willingness to change. Taking into account the noted features strategic management - this is the management of the organization, which relies on human potential as the basis of the organization, orients production activities to the needs of consumers, implements flexible regulation and timely changes in the organization that are adequate to the impact of the environment and allow achieving competitive advantages, which ultimately allows the organization to survive in the long term while achieving their goals. 2. THE ORIGINAL CONCEPT OF STRATEGIC MANAGEMENT Styles of organizational behavior. One of the first concepts of strategic management was based on the notion that different types of organizational behavior require significantly different organizational structures and management. The whole variety of behavioral styles is derived from two typical opposite styles - incremental and entrepreneurial. Incremental style behavior differs in the statement "from what has been achieved", is aimed at minimizing deviations from traditional behavior both within the organization and in its relationship with the environment. Organizations that adopt this style of behavior tend to avoid change, limit it, and minimize it. Proactive action is taken when the need for change has become urgent. The search for alternative solutions is carried out sequentially, and the first satisfactory solution is adopted. Entrepreneurial style behavior is characterized by a desire for change, to anticipate future dangers and new opportunities. A wide search for managerial decisions is being carried out, numerous alternatives are being developed, and the optimal one is selected from them. The relationship between behavior styles and types of management. There is a close relationship between styles of organizational behavior and types of management. Strategic management requires entrepreneurial behavior. The end result of strategic management is the systemic capacity to achieve the goals of the organization and its internal structure, providing sensitivity to changes in the external environment. Tasks of the leader dealing with strategic problems, are to: identify the need for and implement strategic changes; build capacity for strategic change; to select and educate personnel capable of carrying out strategic changes. 3. FUNCTIONS OF STRATEGIC MANAGEMENT Strategic management at the enterprise is expressed in the following five functions: 1. Strategy planning. 2. Organization of the implementation of strategic plans. 3. Coordination of actions for the implementation of strategic tasks. 4. Motivation to achieve strategic results. 5. Control over the process of implementing the strategy. Strategy planning involves the performance of such sub-functions as forecasting, strategy development and budgeting. Forecasting precedes the actual drawing up of strategic plans. It is based on the analysis of a wide range of internal and external factors, the conditions for the functioning of the enterprise in order to anticipate the possibility of development and risk assessment. A systematic forecast allows you to develop a reasonable approach to the strategy of the enterprise. Three dimensions are traditionally used in forecasting: time (how far ahead are we trying to look?), direction (what are the future trends?), magnitude (how big will the change be?). Taking into account the results of the analysis, the management of the enterprise formulates a mission (business area, global goal), determines the prospects for the development of the organization and develops a strategy. Linking the strategic goals of the enterprise with the results of the activities of individual units is carried out through the development of the necessary action program and budgeting. Budgeting includes program costing and resource allocation. Organization of the implementation of strategic plans involves the formation of the future potential of the enterprise, the coordination of the structure and management system with the chosen development strategy, the creation of a corporate culture that supports the strategy. Managerial coordination for the formation and implementation of the general strategy consists in coordinating strategic decisions at various levels and consistently consolidating the goals and strategies of structural units at higher levels of management. Motivation how the function of strategic management is associated with the development of a system of incentives that encourage the achievement of the set strategic results. Control consists in continuous monitoring of the process of implementation of strategic plans. It is designed to identify impending dangers in advance, identify errors and deviations from the adopted strategies and policies of the enterprise. 4. ESSENCE OF STRATEGIC MANAGEMENT. STRATEGIC DECISIONS The main goal of strategic management - development of potential and maintenance of the enterprise's strategic ability to survive and operate effectively in an unstable environment. The totality of the considered functions and goals determines the essence of strategic management. In this way, essence of strategic management consists in the formation and implementation of an organization's development strategy based on continuous monitoring and evaluation of ongoing changes in its activities in order to maintain the ability to survive and function effectively in an unstable environment. Features of strategic decisions. The implementation of strategic management functions is carried out through the development and adoption of strategic decisions. These include all decisions affecting the main aspects of the enterprise, oriented to the future and taken in conditions of uncertainty. Strategic decisions have a number of distinctive features. The main ones are: innovative character; focus on long-term goals and opportunities; the complexity of formation, provided that the set of strategic alternatives is not defined; subjectivity of the assessment; irreversibility and high risk. Strategic Decisions - these are decisions on the reconstruction of an enterprise, the introduction of new products and technologies, entering new sales markets, the acquisition and merger of enterprises, as well as organizational changes (transition to new forms of interaction with suppliers and consumers, transformation of the organizational structure, etc.). EXAMPLE. Entering new sales markets is a strategic decision that is aimed at long-term goals related to future opportunities; involves several alternative implementation options (work with intermediaries or independently, with which intermediaries); success in its implementation depends on the qualitative study of all interrelated issues. At the same time, it is not possible to objectively assess the feasibility of this decision until specific results are obtained. Strategic management is based on the adoption of managerial decisions focused on taking into account the specifics of the external environment, on achieving the competitiveness of the enterprise in the market, on success in the competition. 5. MAIN COMPONENTS AND STAGES OF STRATEGIC MANAGEMENT Strategic enterprise management includes five main components forming the next chain of perspective-target decisions. one. Vision is an image of the possible and desired future state of the enterprise. 2. Business area - type of activity associated with a particular economic unit, program, etc. 3. Mission, or a socially significant role, the enterprise is a qualitatively expressed set of the main goals of the business. four. Strategy - an integrated model of actions designed to achieve the goals of the enterprise. The content of the strategy is a set of decision rules used to determine the main directions of activity. 5. Programs and plans - this is a system of measures for the implementation of the strategy adopted by the enterprise, designed to solve the problems of distributing resources, powers and responsibilities among the departments (employees) involved in the implementation of the strategy; development of operational plans and programs. The main stages of strategic management: 1) environment analysis; 2) definition of the mission and goals of the organization; 3) formation and choice of strategy; 4) implementation of the strategy; 5) evaluation and control of the implementation of the strategy. 1. Analysis of the environment is the initial process in strategic management, as it creates the basis for defining the mission and goals of the organization, developing a strategy for its development. Internal environment organization is analyzed in the following areas: marketing, finance and accounting, production, personnel, management organization. When analyzing external environment economic, political, social, international factors, as well as competition factors are studied. In this case, the external environment is divided into two components: the immediate environment (direct impact environment) and the macro environment (indirect impact environment). The purpose of strategic analysis is to identify the threats and opportunities of the external environment, as well as the strengths and weaknesses of the organization (this is the so-called SH / OT analysis). 2. Process definition of mission and goals consists of three sub-processes: formulating the mission of the organization, which in a concrete form expresses the meaning of its existence; definition of long-term goals; definition of medium-term goals. 3. Formulation and choice of strategy involve the formation of alternative directions for the development of the organization, their evaluation and selection of the best strategic alternative for implementation. 4. Implementation of the strategy is a critical process, since it is he who, in case of successful implementation, leads the enterprise to achieve its goals. The implementation of the strategy is carried out through the development of programs, budgets and procedures, which can be considered as medium-term and short-term plans for the implementation of the strategy. 5. Strategy Implementation Results are evaluated and with the help of the feedback system, the organization's activities are monitored, during which the previous stages can be adjusted. 6. OBJECTS OF STRATEGIC MANAGEMENT. VENSILA CONCEPT Characteristics of objects of strategic management. Allocate three groups of objects of strategic management, corresponding to three structure-forming levels of the enterprise: 1. The enterprise as a whole (group of enterprises, concern, independent plant or factory). 2. The strategic field of management (business), i.e., the totality of product and market segments and types of enterprise activities allocated for independent production, technical, commercial and regional policies. strategic field business of large multi-product enterprises, as a rule, is broken down into strategic business units. Strategic business unit is an intra-company organizational unit responsible for developing the firm's strategy in one or more segments of the target market. The allocation of strategic business units is based on market segmentation concept. Segment - this is a certain way allocated part of the market, where the company's products can be sold. The objects included in the segment must have common features. The main task of the strategic business unit - achievement of the strategic goals set for it (introduction to a new market, cost reduction, increase in market share, development of new products, etc.). 3. Functional area of activity, or division - structural divisions of the enterprise, focused on performing certain functions and ensuring the successful operation of strategic business units and the enterprise as a whole (R & D, production, marketing, finance, etc.). The concept of strategic management of Vensil / Lagrange. The authors of this concept, based on the differentiation of the levels of strategies, were able to present the process, carriers and levels of strategic planning in a single form. The strategic planning process includes four steps: 1) structuring goals and determining the discrepancy between the intended goals and real opportunities (gap analysis); 2) identification of required resources and development of options for bridging identified gaps; 3) resource allocation (planning and budgeting); 4) monitoring and control over the implementation of plans and programs. 7. MANAGEMENT BASED ON THE SOLUTION OF STRATEGIC OBJECTIVES Strategic Governance is used when the events that may occur are fully or partially predictable, but it is impossible or impractical to change the general line of behavior of the enterprise to respond to them. Solving strategic tasks, the organization has the opportunity to prevent the occurrence of an unfavorable situation in a timely manner, to a large extent mitigate its negative consequences, or to use the opportunities that open up to the maximum benefit. Exist two sources that generate the emergence of strategic tasks: trends of changes in the external environment of the organization; internal trends characterizing the development of the organization. External trends reflect political (military actions), economic (state of market conditions), technological (emergence and spread of new types of technology) and social (strengthening requirements for maintaining the level of employment) aspects of the environment for the functioning of enterprises. Internal trends similar in nature to the outside. They can be natural (an increase in the incidence of personnel, disrupting the normal course of work), technological (obsolescence of equipment, technology), economic (diversification of production, increased capital intensity and financial instability), social (development of a mechanism for motivating labor activity). Management process by solving newly emerging strategic tasks provides for: 1) constant monitoring of all trends; 2) analysis and detection of dangers and new opportunities; 3) assessment of the importance and urgency of solving newly emerging tasks based on their classification: a) the most urgent and important tasks that require immediate solutions; b) important tasks of medium urgency that can be solved within the next planning cycle; c) important, but non-urgent tasks that require constant monitoring; d) tasks that are false alarms and do not deserve attention; 4) preparation of decisions (it is carried out by specially created operational groups); 5) decision-making taking into account possible strategic and tactical consequences (leads); 6) updating the list of problems and their priority. 8. CONTROL ON WEAK SIGNALS AND UNDER CONDITIONS OF STRATEGIC SURPRISES Weak signal control. Obvious and specific problems identified as a result of observation are called strong signals. Other problems known from early and inaccurate indications are commonly referred to as weak signals. The stronger the signal, the less time the company has for a response. On a strong signal, an enterprise can act decisively, for example, stop further increasing its capacity and reorient to use it for another purpose. The response to a weak signal can be extended over time and intensify as the signal grows. The procedure for the enterprise to respond to weak signals of problems. If there are inaccurate signs of danger (level 1) it is necessary to constantly monitor the external environment and determine the relative strength of the signal. When sources of danger or opportunity become clear (level 2), measures are taken to reduce external strategic vulnerability and increase the internal flexibility of the enterprise (for example, in the event of a threat of a decrease in demand due to the creation of a substitute product, preliminary measures are developed to enter another market, expand the range, etc.). Further signal amplification (level 3) allows you to assess the magnitude of the danger (for example, the demand for products in the short term will decrease rapidly) or the level of new opportunities. Such a signal indicates the need to start developing preparatory signals, a feasibility study of projects or programs, the implementation of which will reduce the time for the implementation of practical measures. Finally, when the essence of the problem is revealed and the ways to solve it are established (level 4), action plans are being developed and their implementation is beginning. Management in conditions of strategic surprises. The system of emergency measures for strategic surprises is used in emergency situations that arose suddenly; when new tasks are set that do not correspond to past experience, and the lack of solutions (for example) leads to major damage. This system involves the following actions: 1) use of a switching network of communications for emergency situations; 2) redistribution of top management responsibilities: control and preservation of the moral climate; regular work with a minimum level of disruption; taking emergency measures; 3) creation of groups of flexible ranging from the most experienced specialists, endowed with the necessary powers; their duties include constant monitoring, analysis and assessment of the situation, development of the necessary operational decisions, taking into account their possible consequences; such groups have a special status and operate contrary to the hierarchy existing in the organization. 9. PRINCIPLES OF STRATEGIC MANAGEMENT Strategic management is based on a number of principles which must be taken into account in the implementation process. The main ones are: 1. Science combined with elements of art. The manager in his activity uses the data and conclusions of many sciences, but at the same time he must constantly improvise, look for individual approaches to the situation. The implementation of this task requires, in addition to knowledge, mastery of the art of competitive struggle, the ability to find a way out of the most difficult situation, focus on key problems, and highlight the main advantages of your organization. 2. Purposefulness of strategic management. Strategic analysis and strategy formation should be subject to the principle of purposefulness, i.e., always be focused on the achievement of the global goal of the organization. As opposed to free improvisation and intuition, strategic management is designed to ensure the conscious directed development of the organization and the focus of the management process on solving specific problems. 3. Flexibility of strategic management. It implies the possibility of making adjustments to previously made decisions or revising them at any time in accordance with changing circumstances. The implementation of this principle involves assessing the compliance of the current strategy with the requirements of the external environment and the capabilities of the enterprise, clarifying the adopted policy and plans in the event of unforeseen developments and increased competition. 4. Unity of strategic plans and programs. To achieve success, strategic decisions at different levels must be coordinated and closely linked to each other. The unity of the strategic plans of commercial organizations is achieved by consolidating the strategies of structural divisions, mutually agreeing on the strategic plans of functional departments, linking buyers of all developed programs. 5. Creation of the necessary conditions for the implementation of the strategy. The strategic plan does not ensure its mandatory successful implementation. The process of strategic management should include the creation of organizational conditions for the implementation of strategic plans and programs, i.e. the formation of a strong organizational structure, the development of a motivation system, and the improvement of the management structure. 10. FORMING VISION. DEFINITION OF THE MISSION OF THE BUSINESS Vision of the organization - this is a figurative representation of the meaning of activity and prospects (future) of the organization. It explains and demonstrates to all employees and the public: what the organization is; what it should become; what she aspires to. Vision Shaping This is one of the tasks of top management. The vision of the future of a large company is an idea of the political, economic, social situation in the country, in the industry, as well as the desired state of the enterprise in this situation. The vision refers only to the future: it loses its "power" when the desired state of the enterprise is reached and must be formulated again. Mission - this is a business concept that reflects the purpose of the business, its main goal. In contrast to the vision, the mission characterizes only the "real" organization: the type, scope of activities, differences from competitors - leaving out the prospects for business development. The mission details the status of the enterprise and provides guidance for the development of goals and strategies at various organizational levels. The main components of the mission: 1. Products or services that the company produces, that is, the range of needs that are satisfied. 2. Categories of target groups of consumers. 3. Applied management technologies and functions, i.e., a way to meet the needs of consumers. 4. Competitive advantages. 5. Philosophy of business. Approaches to the formation of the mission. There are two approaches to understanding the mission: broad and narrow. mission broadly is the philosophy and purpose of the organization. The content of the mission is revealed through the values, beliefs, principles that underlie the activities of the organization, as well as those actions that it intends to carry out. A broad approach focuses enterprises on achieving strategic advantages by creating opportunities for the production of a wide range of products (services); simultaneous coverage of many market segments and consumer groups; flexibility in managing the organization. With a narrow approach, the mission is considered as a statement that reveals the meaning of the existence of the organization, in which the difference between this organization and similar ones is manifested. A narrowly defined mission focuses strategy on producing a limited range of products, specific market segments, customer groups, or strategic paths used to achieve business goals. This approach enhances the effectiveness of governance by increasing the certainty and organization resulting from the use of more focused, coordinated methods for implementing strategies. The meaning of the mission. 1. Forces managers to systematically engage in a comprehensive analysis of the strengths and weaknesses of the organization and its competitors, opportunities and threats. 2. Promotes staff motivation and more effective interaction between managers and subordinates at various levels. 3. Promotes the projection of a rational and positive image of the company on business partners, shareholders, investors. 11. SETTING BUSINESS GOALS Goal is the end state, the desired result that any organization seeks to achieve. Goals are set on the basis of identifying the strengths and weaknesses of the enterprise, its competitive advantages. Long term goals determine the strategic intention of the enterprise to take a certain place in the business. Allocate seven key spaces within which the enterprise defines long-term goals: 1. Market position. Market goals may be gaining leadership in a certain market segment, increasing the company's market share to a certain size. 2. Innovation. Targets in this area are associated with the definition of new ways of doing business: the development of new markets, the use of new technologies or ways of organizing production. 3. Marketing. The main results of activity in this area can be coming out on top in the sale of a certain product, creating a certain image for the product, improving customer service. 4. Production. The priority goals in this case are to achieve the highest labor productivity, improve the quality of the product, and reduce production costs compared to the main competitors. 5. Finance. The overall goal is the preservation and maintenance of all types of financial resources at the required level, their rational use. 6. Personnel management. Personnel goals may be related to the preservation of jobs, ensuring an acceptable level of remuneration, improving working conditions and motivation. 7. Management. A key goal in this area is to identify critical areas of managerial influence. The objectives of the enterprise must have a number of characteristics. Among the main characteristics of goals relate: 1. specificity and measurability. By expressing goals in clear, measurable terms, management creates the basis for decision making and evaluation of progress. 2. planning horizon. There are long-term (planning horizon more than 5 years), medium-term (planning period from 1 to 5 years) and short-term (usually within a year) goals. The narrower the planning horizon, the more specifically the goal should be expressed. 3. Reachability. Goals are set so that they do not exceed the capabilities of the enterprise. Setting unattainable goals blocks the desire of employees for success and reduces work motivation. 4. Consistency. Actions and decisions necessary to achieve one goal should not interfere with the achievement of others. The number and variety of goals can be ordered by goal tree, which is drawn up according to the following rules: the overall goal should contain a description of the end result; when deploying a common goal in a hierarchical structure, it is assumed that the implementation of the subgoals of each subsequent level is a necessary and sufficient condition for achieving the goals of the previous level; when formulating goals at different levels, the desired results are described; subgoals of each level should be independent of each other, etc. 12. CHARACTERISTICS OF THE ANALYSIS OF THE EXTERNAL ENVIRONMENT OF THE ENTERPRISE Main purpose of environmental analysis - identify and understand the opportunities and threats that may arise for the enterprise in the future in order to correctly determine the strategy and overall policy of the enterprise. External Analysis is a part SWOT-analysis, so it is aimed at identifying real opportunities and threats associated with changes in the external environment of the enterprise. SWOT is an abbreviation of four English words: S - Strengths - strengths, W - Weaknesses (weaknesses), O - Opportunities (opportunities), T - Threats (threats). Under opportunities refers to positive trends and phenomena in the external environment that can lead to an increase in sales and profits. Such opportunities for the enterprise are, for example, the growth of incomes of the population and enterprises, the weakening of the positions of competitors, etc. Threatening - these are negative trends and phenomena that are capable, in the absence of an appropriate reaction of the enterprise, to weaken its competitive status. Threats include a decrease in the purchasing power of the population, unfavorable demographic changes, and tightening of state regulation. External environment of the enterprise is a set of active subjects and forces that are outside the direct control of the organization's management and can influence its strategy. According to the degree of impact on the processes occurring within the enterprise, they distinguish two groups of external factors: 1) remote impact, representing the macrosphere; 2) the direct influence of the immediate environment, or industry factors. Microenvironment (inner environment) includes all interested groups that directly affect the core business of the enterprise or depend on its results. These are suppliers, competitors, consumers, creditors, trade and other organizations. macro environment includes general factors that do not affect the short-term activities of the enterprise, but may influence its long-term decisions. 13. PEST-ANALYSIS OF THE MICROENVIRONMENT OF THE ENTERPRISE PEST analysis consists in identifying and evaluating the influence of macroenvironment factors on the results of the current and future activities of the enterprise. Allocate four groups of factors most significant for the strategy of the enterprise: political and legal; economic; sociocultural; technological. The analysis of the noted factors is called PEST-analysis. PEST is an abbreviation of four English words: P - Political-legal - political and legal, E- Economic - economic, S - Sociocultural - sociocultural, T - Technological forces - technological factors. Purpose of PEST Analysis - Tracking (monitoring) changes in the macro environment in four key areas and identifying trends, events that are not under the control of the enterprise, but that affect the results of strategic decisions. Political factor the external environment is studied primarily in order to have a clear idea of the intentions of state authorities regarding the development of society and the means by which the state intends to implement its policies. Analysis economic aspect the external environment allows us to understand how economic resources are formed and distributed at the state level. For most enterprises, this is the most important condition for their business activity. The study social component of the external environment is aimed at understanding and evaluating the impact on business of such social phenomena as people's attitude to work and quality of life, people's mobility, consumer activity, etc. Analysis technological component makes it possible to foresee the opportunities associated with the development of science and technology, to timely adjust to the production and sale of a technologically promising product, to predict the moment of abandonment of the technology used. The procedure for conducting a PEST analysis. There are the following stages of external analysis: 1. A list of external strategic factors that have a high probability of implementation and impact on the functioning of the enterprise is being developed. 2. The significance (probability of implementation) of each event for a given enterprise is estimated by assigning it a certain weight from one (most important) to zero (insignificant). The sum of the weights must be equal to one, which is ensured by normalization. 3. An assessment is given of the degree of influence of each factor-event on the company's strategy on a 5-point scale: "five" - strong impact, serious danger; "unit" - the absence of impact, threat. 4. Weighted estimates are determined by multiplying the weight of the factor by the strength of its impact, and the total weighted estimate for the given enterprise is calculated. The total assessment indicates the degree of readiness of the enterprise to respond to current and predicted environmental factors. 14. ANALYSIS OF THE GENERAL SITUATION IN THE INDUSTRY The purpose of industry analysis is to determine the attractiveness of the industry and its individual product markets. Such an analysis allows us to understand the structure and dynamics of the industry, its characteristic opportunities and existing threats, determine the key success factors and, on this basis, develop a strategy for the enterprise's behavior in the market. When conducting an industry analysis, the main object of study is the economic industry - a set of enterprises competing in the same consumer market with similar goods or services. The economic branch covers the spheres of production, distribution and consumption of certain goods and services. There are the following industry analysis stages: 1) determination of the economic characteristics of the industry environment; 2) assessment of the degree of competition; 3) identifying the driving forces of competition; 4) identification of key success factors; 5) conclusion about the degree of attractiveness of the industry. For assessment of the general situation in the industry the following indicators: market size; the scale of competition (local, regional, national, global); the rate of market size (%) and the stage of the life cycle of the industry (rise, rapid growth, maturity, saturation, stagnation, decline); structure of competition: the number of competitors and their relative market shares; the number of consumers and their financial capabilities; the degree of vertical integration ("forward" - with consumers of products, "backward" - with suppliers of raw materials); the pace of technological change and product innovation; degree of product differentiation; the amount of economies of scale in production, transportation, etc.; the presence and magnitude of the effect of the experience curve (reduction of costs per unit of output with each doubling of its output); industry capital intensity; industry average profit. An example of assessing the general situation in the industry using the listed indicators. Economic characteristics of the sulfuric acid industry. Market size: gross volume 4 million. Market size growth rate: 2-3% per year. Industry life cycle stage: maturity. Number of competitors: about 30 companies. Market share of companies: from 3 to 21%. Consumers: about 2000, most of them are chemical enterprises. Degree of vertical integration: mixed; 5 of the 10 largest companies are integrated "backward", others are engaged only in processing. Technology and Product Innovation: Manufacturing technology changes slowly, with the biggest changes occurring in the product mix with 1-2 new chemical products being introduced each year, accounting for nearly all of the increase in production. Product characteristics: high degree of standardization; buyers do not see much difference between brands from different manufacturers. Economies of scale in production: Moderate, but there may be savings on the transportation of large quantities of products and on the purchase of large quantities of raw materials. Experience Curve: Not a key factor in this industry. Profitability: about average and highly dependent on demand. 15. COMPETITION ANALYSIS IN THE INDUSTRY: M. PORTER'S FIVE FORCES MODEL The attractiveness and profitability of the industry depend on its structure, which, according to M. Porter, is determined five forces or factors of competition: 1. Rivalry among competing enterprises. Competition among manufacturers arises due to the fact that one or more enterprises have the opportunity to better satisfy the needs of consumers or the need to improve their activities. Competition strategy is a set of offensive and defensive actions associated with achieving market success, gaining a competitive advantage over rivals, and also protecting one's competitive position. 2. Competition from products that are substitutes and competitive in terms of price. The threat of such products depends on the cost of production of substitutes and the willingness of buyers to accept such a replacement. An example of the threat of a substitute product can be the replacement of natural leather with leather substitute in the production of bags and shoes. The presence of this competitive factor leads to the appearance of a certain price ceiling in the industry, at which buyers are reoriented to substitute goods. This phenomenon must be taken into account in the pricing policy of the enterprise. 3. The threat of new competitors in the industry depends on the so-called barriers to entry into the industry. Barriers to entry into the industry - these are the obstacles that must be overcome in order to organize a business and successfully compete in the industry. Barriers to entry into the industry can be: customer loyalty to the brand; control over sales customers; economies of scale in production; transitional costs (one-time costs associated, for example, with a change in supplier); government policy aimed at protecting the industry through the requirement of licensing, restricting access to sources of raw materials. 4. Economic opportunities and trading ability of suppliers. Suppliers are a real market force if the goods they supply constitute a significant part of the costs of an industry product, are critical to the production process and (or) significantly affect the quality of an industry product. Suppliers can influence the industry by taking advantage of their ability to raise prices or reduce the quality of the goods or services they provide. 5. Economic opportunities and trading ability of buyers. The economic power of buyers is determined by their ability to impose the terms of a deal on sellers. The influence of buyers is strong in several situations: the industry that introduces the product to the market consists of a large number of relatively small sellers; the number of buyers is insignificant, the goods are purchased in large quantities; products are standardized and there are alternative purchase options, etc. The value of the five forces of competition model is that it helps to determine the structure and extent of competition in a particular industry. 16. COMPETITION ANALYSIS IN THE INDUSTRY: MODEL OF DRIVING FORCES. SUCCESS FACTORS The main economic indicators and the structure of the industry describe its current state and do not allow explaining the ongoing changes in the competitive environment of the enterprise. The concept of driving forces of competition proceeds from the fact that there are environmental factors whose actions determine the direction and intensity of sectoral changes. The analysis of sectoral driving forces consists of two stages. The first - identification of driving forces, second - study of their impact on changes in sectoral economic indicators. Most common driving forces: change in the dynamics of demand for the product in the long run; changes in the composition of buyers and ways of using the product; product and technological innovations; marketing innovations; entry and exit from the industry of large enterprises; dissemination of know-how; increased globalization of the industry; changes in unit costs and efficiency; decrease or increase in uncertainties and risk. The main driving forces of the industry are called dominant. Their number should not exceed 4. Key success factors - these are controllable variables common to all enterprises in the industry, the implementation of which makes it possible to improve the competitive position of the enterprise in the industry. The key success factors can be based on different areas of the enterprise: R&D; marketing; production; finance, etc. Key success factors for various industries. Food industry: company image, product quality, simplicity of technology, economies of scale, sales network. Oil and gas: location of sources of raw materials, communications. Pharmaceutical: financial resources, research base, innovation, sales network. The strategic analysis process identifies the key success factors for a given industry and then develops activities to master the most important competitive success factors. 17. GOALS AND PRINCIPLES OF THE STRATEGIC ANALYSIS OF THE INTERNAL ENVIRONMENT RџSЂRё enterprise strategy development managers must use not only the external environment, but also the situation within the enterprise. It is necessary to identify those internal variables that can be considered as strengths and weaknesses of the enterprise, evaluate their importance and determine which of these variables can become the basis of competitive advantages. For this, an analysis of the internal environment of the enterprise is carried out. Analysis of the internal environment of the enterprise is the process of a comprehensive analysis of the internal resources and capabilities of an enterprise, aimed at assessing the current state of the business, its strengths and weaknesses, and identifying strategic problems. In fact, the analysis of the internal environment of the enterprise is the second part of the SH / OT analysis, related to the identification of the strengths and weaknesses of the organization. Purpose of internal analysis - evaluate the strategic situation in the enterprise, taking into account the existing limitations of strengths and weaknesses. Depending on the specific situation, the strategic analysis of the internal environment of an enterprise can be unique to one degree or another, but the main condition must be observed - the completeness of the strategic analysis, its quality and ultimate efficiency. The analysis of the internal environment of the enterprise should be based on the following principles: consistency - means considering the enterprise as a complex system, including a number of functional subsystems (activities) and components (structural divisions); complexity - involves the analysis of all the constituent parts of the enterprise; comparability - requires an analysis of all internal variables in dynamics and in comparison with similar indicators of competitive firms; uniqueness, or specific goals of the enterprise. 18. ANALYSIS OF STRENGTHS AND WEAKNESSES OF THE ENTERPRISE Assessment of strengths and weaknesses. Strengths - this is the experience and resources owned by the enterprise, as well as strategically important areas of activity that allow you to win in the competition. Weak sides - these are the shortcomings and limitations that impede success. There are many sources of strengths and weaknesses of the enterprise. So, serious and obvious consumer preferences, the possibility of economies of scale can be attributed to the number of strengths. The weak side of the enterprise is a serious dependence on the domestic market for the volume of direct sales, the inability to meet the needs of new market segments, etc. Identification of strengths and weaknesses should be carried out in all areas of the enterprise: organization and general management; production; marketing; finance and accounting; personnel management, etc. An assessment of the factors of strengths and weaknesses of the enterprise is given in comparison with the market leader on an interval scale by assigning a certain weight to each factor, for example, from 1 (insignificant) to 5 (outstanding). Determination of the main advantages. The strategy of the enterprise should take into account the strengths and weaknesses of the business and rely on its main advantages. Main advantages characterize the exclusive competence (unique advantages) of the enterprise in solving the tasks. Unique advantages are based on a particularly effective combination of resources, which are divided into tangible and intangible. Tangible Resources - these are the physical and financial assets of the enterprise reflected in the balance sheet (fixed assets, stocks, cash, etc.). They determine the technical competence of the enterprise. Intangible Resources - these are, as a rule, qualitative characteristics of the business. These include: intangible assets not related to people - a trademark, a favorable location, prestige, the image of an enterprise; intangible human resources - special knowledge of the staff, experience, fame of the management team. Under competitive conditions, the unique advantages of the enterprise are "eroded", and over time they lose their strength. From the point of view of importance for business, one can single out three categories of core competencies: 1. "Spent", which have already been adopted by the main competitors and have become a kind of industry standards. They do not give the company a competitive advantage and are a prerequisite for survival in the market. 2. "Unpromising" which are currently valid but may become widely available in the near future. In the short and medium term, the enterprise must protect such advantages and use them to the maximum. They cannot serve as the basis for a long-term strategy. 3. "Sustainable" competencies that an enterprise can protect over a long period of time. 19. STRATEGIC COST ANALYSIS AND THE VALUE CHAIN Strategic cost analysis based on the "value chain" It is aimed at identifying the strengths and weaknesses of the enterprise, as well as its competitive advantages. Value chain analysis is based on the assumption that the main economic goal of an enterprise is to create value that exceeds the real costs of production. M. Porter introduced the concepts of "product value" and "value chain". Cost of goods in Porter's understanding, this is the amount that consumers are willing to pay for a product or service provided to them by the manufacturer. The traditional concept of value as socially necessary labor costs for the production of a unit of output does not apply in this case. "Value chain" gives an idea of the strategically related activities of the enterprise and allows you to trace the process of creating value. In the "value chain", the activities of the enterprise are divided into two types: the main one - related to the production of goods, its sale and after-sales service; auxiliary - providing the main processes (infrastructure of the enterprise (general management, accounting, finance, etc.), personnel management (attraction of personnel, their training and promotion), technological development (equipment, vehicles and methods of transportation, know-how in technology), logistics (all transactions with suppliers and contractors)). Each of the activities can help reduce costs and create the basis for differentiating products and services. In order to achieve competitive advantages, the "value chain" should be considered as a system of activities with its characteristic links. Links within the chain determine the ways in which individual activities interact with each other and to a large extent affect their effectiveness. Therefore, they can serve as an additional source of enterprise benefits. It is possible to increase the competitiveness of an enterprise by reducing costs, improving or excluding individual elements and connections from the "value chain". 20. ESSENCE OF STRATEGY Exist two opposite views on the understanding of strategy. In the first case, the strategy - this is a specific long-term plan to achieve some goal, and developing a strategy is the process of finding some goal and drawing up a long-term plan. This approach is based on the fact that all emerging changes are predictable, the processes occurring in the environment are deterministic and can be fully controlled and managed. In the second case, under the strategy refers to a long-term qualitatively defined direction of the development of an enterprise, relating to the scope, means and form of its activities, the system of intra-production relations, as well as the position of the enterprise in the environment. With this understanding, the strategy in general terms can be characterized as a chosen direction of activity, the functioning within which should lead the organization to achieve its goals. The main elements of the strategy. In business life, strategy refers to the overall concept of how an organization achieves its goals, solves its problems, and allocates the limited resources needed to do so. Such a concept (corresponding to the strategy of the second type) includes several elements. First of all, they are goal system, including mission, general organizational and specific goals. Another element of the strategy is politics, or a set of specific rules for organizational actions aimed at achieving the set goals. The third element of the strategy is plans, i.e., a system of specific actions to implement the adopted policy, designed to solve the problem of resource allocation. So, resources can be directed primarily to solving the most important and pressing problems for the enterprise, or allocated in proportion to needs, or provided equally to all departments if they are close in size and are engaged in similar activities. The strategy is usually developed for several years ahead, specified in various projects, programs, practical actions and implemented in the process of their implementation. Significant expenditures of labor and time of many people required to create an enterprise strategy do not allow it to be changed frequently or seriously adjusted. Therefore, it is formulated in rather general terms. It - proposed strategy. At the same time, both inside and outside the organization, new unforeseen circumstances appear that do not fit into the original concept of the strategy. They can, for example, open up new development prospects and opportunities for improving the existing state of affairs, or, conversely, force the abandonment of a proposed policy and plan of action. In the latter case, the original strategy becomes unrealizable and the enterprise proceeds to the consideration and formulation of urgent strategic tasks. 21. CLASSIFICATION OF ENTERPRISE STRATEGIES Depending on the conditions of strategic decisions, there are three types of strategies: corporate; business; functional. Corporate or portfolio strategy - this is a strategy that characterizes the general direction of the growth of the enterprise, the development of its production and marketing activities. Strategic decisions at this level are the most difficult, as they relate to the enterprise as a whole. It is at this level that the product strategy of the enterprise is determined and agreed upon. One of the goals of corporate strategy is the choice of business units of the enterprise in which investments should be directed. Corporate strategy It comprises: allocation of resources between business units based on portfolio analysis; decisions on the diversification of production in order to reduce economic risk and obtain a synergy effect; change in the structure of the enterprise; decisions on merger, acquisition, entry into certain integration structures. Business strategy (business strategy) is developed at the business unit level and aims to provide long-term competitive advantages to the business unit. This strategy is often embodied in business plans and shows how the company will compete in a particular product market, to whom exactly and at what prices it will sell products, how it will advertise, how it will achieve victory in the competition, etc. Therefore, such a strategy called the strategy of competition. For enterprises with one type of activity, the corporate strategy coincides with the business one. Functional strategies are developed by functional departments and services of the enterprise on the basis of corporate and business. This is a marketing strategy, financial, production, etc. Goal functional strategy - the allocation of department resources, the search for effective behavior of the functional unit within the framework of the overall strategy. To be successful, strategies at all levels must be aligned and interact closely with each other. 22. MAIN BUSINESS DEVELOPMENT STRATEGIES Business development strategies are called basic or reference strategies. They reflect four different approaches to enterprise growth. The whole variety of strategies that enterprises use are various modifications of several basic ones, each of which is effective under certain conditions and the state of the environment. Allocate four basic strategies: 1. Limited growth. It is chosen by most enterprises in established industries with stable technology. Development goals are set from "achieved" and adjusted as conditions change. This is the easiest, most convenient, and least risky course of action. 2. Growth. This strategy is most often applied in dynamic industries with frequently changing technology. It is characterized by the establishment annually of a significant excess of the level of development over the level of the previous year. Distinguish concentrated growth strategies in relation to the underlying market or product and integrated growth, which are associated with the expansion of the enterprise by adding new structures: 1) a strategy for strengthening the position in the market through active promotion of the product, attracting new users of the product, etc.; 2) market development strategy, which consists in finding new markets for an already produced product; 3) a product development strategy that aims to increase sales by organizing production and selling a new product in an already developed market. 3. Reduction (last resort strategy). This strategy is chosen by the enterprise least of all. It is characterized by setting goals below the level achieved in the previous period. The reduction strategy is resorted to in cases where the performance of the enterprise acquires a tendency to deteriorate and there are no effective means of changing this situation. stands out three types of targeted reduction strategies: 1) liquidation strategy - carried out if the enterprise cannot conduct further business; 2) the strategy of "harvesting" focuses on obtaining maximum income in the short term. This strategy is applied to an unpromising business that cannot be sold profitably, but can generate income during the "harvest" - the sale of existing goods while minimizing all types of costs; 3) downsizing strategy - is that the company closes or sells one of its divisions or businesses in order to make a long-term change in the boundaries of business. 4. Combined strategy. Represents any combination of considered strategic alternatives. This strategy is followed, as a rule, by large enterprises operating in several industries. 23. DETERMINING THE STRATEGY OF THE ENTERPRISE The strategy selection process includes the following main steps: clarification of the current strategy; formation of strategic alternatives; choice of enterprise strategy and its evaluation. 1. Understanding the current strategy. There are various schemes for clarifying the current strategy. One of the possible approaches was proposed by A. Thompson and A. Strickland. The authors identify the following external and internal factors that shape the current strategy. External factors: the size of the enterprise and the degree of diversity of products; the general nature and nature of the entity's recent acquisitions and sales of part of its property; the structure and direction of the enterprise's activities for the last period, etc. Internal factors: enterprise goals; resource allocation criteria; attitude to financial risk both on the part of management and in accordance with actual practice and ongoing financial policy; the level and degree of concentration of efforts in the field of R&D, etc. 2. Formation of strategic alternatives. At this stage, strategies are created to achieve the goals. G. Mintzberg identifies three main courses of action when formulating a strategy, which are determined by the personality and value system of top management: entrepreneurial (the main focus is on the growth opportunities of the enterprise, current problems go by the wayside), adaptive (characterized to a greater extent by the prompt solution of existing problems, than the search for new opportunities) and planned (both an active search for new opportunities and a prompt solution of existing problems are carried out). 3. Selection and evaluation of the enterprise strategy. It has been established that the choice of strategy is influenced by many factors. The most important of them are: type of business and features of the industry in which the enterprise operates; the nature of the goals that the enterprise sets for itself; the values that guide decision-making by top managers; financial resources and obligations of the enterprise on decisions already made; the degree of dependence on the environment; time factor. Formed strategies are evaluated according to the degree of suitability for achieving the main goals of the enterprise and their compliance with the requirements of the environment, as well as the possibilities for the development of the organization. 24. CREATING COMPETITIVE ADVANTAGES AT THE BUSINESS LEVEL The concept and types of competition. Competitive advantage - these are the characteristics and properties of a product or brand, as well as specific forms of business organization that provide the company with a certain superiority over its competitors. Competitive advantage is always relative in comparison with the company that has the best position in the market for goods or services. The relative advantage of a competitor is determined by various factors. Depending on the benefits created competitiveness factors are divided into two groups: external; internal. Competitive advantage is "external", if it is based on the distinctive qualities of the product, which form a value for the buyer in terms of quality level, design, special features, etc. The strategy resulting from external competitive advantage is a product differentiation strategy. It is based on know-how in the field of marketing, the excellence of the enterprise in identifying and meeting the expectations of customers who are not satisfied with existing products. Internal competitive advantage is based on the superiority (leadership) of the enterprise in production and management costs. The internal advantage provides greater profitability, the stability of the enterprise to reduce the price of goods and therefore is of value to the manufacturer. A strategy based on internal competitive advantage is a cost dominance strategy. It is based mainly on know-how in production and management. Basic competitive strategies. Competitive advantages, as a rule, are realized at the level of strategic business units and form the basis of the business (competitive) strategy of the enterprise. Under business strategy (business strategy) refers to the development strategy of a business unit, or the strategy of an enterprise in a particular product market. home goal of this strategy - creation and retention of competitive advantages of the enterprise. The set of business strategies is the basis portfolio (corporate) strategy organization. Exist several directions for achieving competitive advantages, or business strategies, but the most common are: cost leadership; product differentiation; focusing (concentration); early market entry (first mover strategy). M. Porter calls the first three directions basic strategies, meaning their universal applicability. At the same time, such business characteristics as innovation or globalization can also be the basis of a business strategy. The choice of a specific competition strategy is carried out taking into account a number of factors, the main of which are: key conditions (factors) of success for the goods market in question; strengths and weaknesses of the enterprise and its main competitors in relation to key success factors; the strategic potential of the enterprise and the possibility of expanding resources. 25. COST LEADERSHIP STRATEGY The cost leadership strategy aims to achievement of competitive advantages due to low costs for individual elements of goods or services and, accordingly, lower cost compared to competitors. Such a strategy requires the enterprise to have the optimal size of production, a developed sales network, capture a certain market share, use resource-saving technologies, and strictly control all types of expenses. Production plays a dominant role in this strategy. It can be said that cost leadership is an aggressive strategy aimed at achieving production efficiency. Implementation of competitive advantages based on low costs is possible with the following conditions: demand is price elastic; there is no opportunity for product differentiation; industry products are standardized, the buyer can purchase it from different sellers; the enterprise has access to sources of cheap raw materials, labor or other sources of cost reduction. However, attempts to achieve cost leadership can be associated with risk and even loss of benefits. For example, focusing on cost reduction can prevent a business from seeing diminishing sensitivity to price or a change in the way a product is used. The main risks associated with cost leadership include: the emergence of technological innovations that negate cost advantages; inability to grasp the need to change products or markets as a result of excessive focus on cost reduction; inflationary growth of costs, undermining the ability of the enterprise to reduce costs; the emergence of new, more advanced products; changing consumer preferences, their sensitivity to prices in favor of the quality of goods, services and other characteristics. Thus, the enterprise may fail if competition leads to non-price strategies. The cost leader gains effective protection against five forces of competition: the leading enterprise is able to withstand its direct competitors in the event of a price war and make a profit at a price that is minimally acceptable for competitors; large buyers cannot seek price reductions below the level acceptable for the strongest (the first two in terms of cost) producers in the industry; low production costs provide protection against strong suppliers, as they give the enterprise greater flexibility in the event of an increase in input costs; cost leadership creates an additional entry barrier for new competitors and at the same time can protect the market from substitute products. Thus, the ability of the leading enterprise to set a floor for industry prices protects its market position. In price competition, less efficient enterprises lose out. 26. STRATEGY OF DIFFERENTIATION Purpose of Differentiation - giving the product distinctive (in comparison with the product of the main competitors) properties that are important to the buyer. Through differentiation, the enterprise seeks to create a situation of monopolistic competition in which it, thanks to its special products, has significant market power. Differentiation, or, in other words, the isolation of a product in the market means the ability of an enterprise to provide a unique and higher value (compared to competitors) product for the buyer in terms of quality level, the presence of its special characteristics, marketing methods, after-sales service. Differentiation can take various forms: recognized technological excellence, the best product design (product differentiation); company image, brand (image differentiation); special service (service differentiation). Product differentiation - is the offer of products with characteristics and (or) design better than those of competitors. The basis of product differentiation is the product range of the enterprise, which is understood as a group of similar or closely related products. Image differentiation - this is the creation of an image of an organization and (or) products that distinguishes them from competitors from the best side. When using image differentiation, an enterprise can produce products under different brands for different market segments. Service differentiation - this is an offer of a diverse and higher (compared to competitors) level of services related to the goods sold (urgency and reliability of deliveries, installation of equipment, after-sales service, training and customer consulting). Allocate several necessary conditions for the successful implementation of differentiation strategies. The main ones include the following: there are many distinctive characteristics of products that are distinguished and appreciated by consumers; price competition prevails; signs of differentiation cannot be imitated without involving significant costs; demand for products is diverse in structure. At the same time, the differentiation strategy is characterized by the following specific risks: 1) the gap in prices relative to competitors may become so large that it is impossible to maintain commitment to a differentiated brand; 2) the need for differentiated products decreases as these products become more familiar; 3) the perception of differentiation is reduced in the case of imitation (copying) of the distinctive properties of the product. 27. FOCUS STRATEGY focus strategy, or narrow specialization, involves the choice of a limited-scale sphere of economic activity with a sharply defined circle of consumers. This strategy involves the concentration of the company's activities on a relatively small target group of consumers, part of the product range, any aspect of the activity. It is radically different from previous strategies because it is based on the choice of a narrow area of competition within the industry (market niche). A market niche can be defined in terms of geographic uniqueness, special requirements for the use of a product, or particular characteristics of a product that are important to niche participants. The reason for choosing such a strategy is the lack or lack of resources, the strengthening of barriers to entry into the region or the market. Therefore, the focusing strategy is inherent, as a rule, in small enterprises. The focusing strategy has the following implementation conditions and risks. Necessary market conditions: 1) the choice of a market niche on which to concentrate the activities of the enterprise; 2) the size of the market niche ensures profitability, the niche has the potential for growth; 3) competitors do not consider market niche as a key success factor; 4) the resources of the enterprise allow to serve qualitatively the consumers of the market niche. Focus strategy risks: 1) the market strategy becomes so attractive that it overflows with competitors; 2) differences between the needs of the target market segment and the market as a whole can be reduced; 3) competitors can penetrate the selected target market and reach a higher level of specialization. 28. MANUFACTURING STRATEGIES Production strategy is a long-term program of specific actions for the creation and sale of the company's products. Strategic decisions in the sphere of production are made in the following areas: focusing production capacities; use of production personnel; development of the organization of production; product quality management; development of production infrastructure; organization of relationships with suppliers and other cooperation partners; manufacturing control. Basic production strategy. The essence of this strategy is to balance the production capacity of the workforce and the volume of output. When forming the basic strategy, the following are taken into account: the technical level of the production process and the possibility of upgrading equipment; qualification potential and the level of provision of the production process with labor resources; the possibility of quick changeover of equipment and other necessary actions related to probable changes in the structure, volume and timing of production orders. Allocate three alternatives to the basic production strategy: 1. Full satisfaction of demand - the company produces as many products as it is required in the market. Product inventories are minimal, and production costs can be high due to the constant change in output. 2. Manufacture of products according to the average level of demand - with the accumulation of stocks of products with a drop in demand and satisfaction of the increased market demand due to these accumulations. 3. Production at the lowest level of demand (pessimist's strategy) - missing goods on the market are produced by competitors or partner enterprises. Production location strategy. This strategy is developed for large enterprises with developed intra-company specialization and cooperation, and is associated with the choice of a place for manufacturing components and assembling finished products. When developing a placement strategy, it is necessary to take into account economic, socio-political and geographical factors, the main of which are: the remoteness of the branch and the associated transportation costs; availability of qualified labor force; availability of sources of raw materials and markets; economic benefits offered by the regional leadership. Production organization strategy. A distinctive feature of the modern approach to the development of a strategy for the organization of production is the recognition of the need for "customer orientation". The development strategy for the organization of production with a focus on the consumer is determined as follows: the volume of output, assortment, quality and delivery time of products are set based on the forecasts of the needs of future users of these goods, deliveries are made in the required quantity and at the set time. 29. R&D STRATEGY Types of strategic decisions in R&D. R&D strategy is a long-term program of specific actions related to the creation of a new product and production technology. There are the following components of strategic activity in this direction: 1. Technological forecasting and planning. Technological forecast is part of the analysis of the external environment; it provides information about anticipated technology trends, new discoveries, and time horizons for innovative breakthroughs. The Science and Technology Development Plan focuses on the allocation of resources within research, development, and preproduction. 2. R&D structure. When drawing up a functional R&D strategy, it is advisable to single out the following areas of innovative work: a) identification of the most effective correlation between conducting one's own R&D in full and the participation of the enterprise in intercompany cooperation, the purchase of patents, licenses, know-how for the implementation of a new technical policy; b) determination of the required volume of research and development work; at) classification of R&D according to the degree of impact on the market (R&D for existing production and entry into new markets). 3. R&D management. The implementation of any strategy requires the creation of an adequate management system. The specificity of R&D implies special requirements for the innovation process management system: effective use of qualification potential; the possibility of rapid restructuring, the presence of strict control over the timing and efficiency of work. Basic R&D strategies. Offensive R&D strategy is aimed at developing new technological solutions to implement the strategy of intensive growth and diversification. An offensive strategy in advanced industries can be considered defensive, since only a quick and timely replacement of products allows you to maintain your position in the market. The protective R&D strategy is aimed at maintaining the competitive position of the enterprise. It includes technological solutions to improve the successful conduct of competition in the short and medium term. Licensing or acquisition strategy is based on acquiring the opportunity to improve one's own competitive position through the use of the best scientific and technical results obtained by other enterprises in the course of R&D. Rogue strategy is based on the core competencies of the enterprise in the field of R & D and allows you to get high profits at an early stage of implementation. In the long term, this strategy is successful if it becomes offensive. 30. ROLE AND BENEFITS The concept and benefits of diversification. Diversification (from Latin diversificatio - change, diversity) - this is the expansion of economic activity into new areas (expansion of the range of manufactured products, types of services provided, geographical scope, etc.). In a narrow sense Diversification refers to the penetration of enterprises into industries that do not have a direct industrial connection or functional dependence on their main activity. As a result of diversification, enterprises turn into complex diversified complexes. The main advantage of diversification is the opportunity for large enterprises to obtain additional benefits from diversity. Substance This effect lies in the fact that the production of many types of products within the framework of one large enterprise is more profitable than the production of the same types of goods in small specialized enterprises. The main sources of the diversity effect are: multi-purpose sharing of production facilities; concentration of the distribution network (goods and services are sold through a single network, not necessarily a joint one); the possibility of transferring information, knowledge, technical and managerial experience from one industry to another; multilateral training of workers and the variety of information they receive. At the same time, diversification requires top management to focus on many areas of activity and weakens control over the situation in a particular market, which can lead to a weakening of the company's competitive position. The cost of entering a new industry can be large enough to reduce the expected profit. Therefore, it is necessary to talk about the rational nature of diversification. The feasibility of diversification. Diversification should not become a strategic priority until the enterprise has exhausted all opportunities for growth in its field of activity. With a strong position in competition and high market growth rates, it is advisable to concentrate on a single type of business. The weakening of the position of the enterprise in the same market conditions leads to the need to revise the competitive strategy, merging with other enterprises to strengthen competitive advantages or diversify. Thus, the company can choose different approaches to expand the scope of activities. The need for differentiation arises when the possibilities for further development of an enterprise in its industry have been exhausted, but it has the necessary potential for growth. 31. DIVERSIFICATION STRATEGIES Distinguish related и unrelated (conglomerate) diversification. In turn, related diversification can be vertical or horizontal. The main criterion for determining the type of diversification - the principle of fusion. In a functional merger, enterprises that are related in the production process are combined. In an investment merger, the merger occurs without a production community of enterprises. Vertical integration - this is the process of acquiring or incorporating into the enterprise of new industries that are part of the technological chain of production of the main product at the stages before or after the production process. Types of vertical integration: full integration of production activities; partial integration, in this case, some of the necessary components are purchased from other enterprises; quasi-integration - the creation of strategic alliances of enterprises interested in integration without transfer of ownership. Depending on the direction of integration and the position of the enterprise in the production chain, two forms of related diversification: forward integration, or direct integration (consists in the acquisition or strengthening of control over the structures located between the enterprise and the end consumer, namely the system of distribution and sale of goods); integration "back", or reverse integration (the enterprise attaches functions that were previously performed by suppliers, that is, it establishes control over the sources of raw materials and the production of components). horizontal integration. Associated horizontal diversification, or horizontal integration, is the association of businesses operating and competing in the same area of activity. The main goal of horizontal integration - strengthening the position of the company in the industry by absorbing certain competitors or establishing control over them. Horizontal integration allows you to achieve economies of scale, expand the range of products and services and thus gain an additional competitive advantage. Often the main reason for horizontal diversification is the geographical expansion of markets. In this case, companies that produce the same type of products but operate in different regional markets are united. Unrelated diversification. This type of diversification covers such areas of activity that do not have a direct direct connection with the main activity of the enterprise. Diversification is justified if the opportunities for growth of the enterprise within the production chain are limited, the position of competitors is very strong, and the market for basic products is in decline. With unrelated diversification, there may be no common markets, resources, technologies, and the effect is achieved through the exchange or separation of assets / areas of activity. 32. STRATEGIC ANALYSIS OF A DIVERSIFIED COMPANY: CONCEPT AND OBJECTIVES The strategic analysis of a diversified company is called portfolio analysis. Enterprise Portfolio, or Corporate Portfolio, is a set of relatively independent business units (strategic business units) owned by one owner. portfolio analysis - this is a tool by which the management of the enterprise identifies and evaluates its economic activity in order to invest in the most profitable or promising areas and reduce / terminate investments in inefficient projects. At the same time, the relative attractiveness of the markets and the competitiveness of the enterprise in each of these markets are assessed. It is assumed that the portfolio of the company must be balanced, that is, the correct combination of products that need capital for further development must be ensured with business units that have some excess capital. Purpose of portfolio analysis - coordination of business strategies and distribution of financial resources between business units of the company. The normal analysis process includes four stages and is carried out according to the following scheme: 1. All activities of the enterprise (product range) are broken down into strategic business units. 2. The relative competitiveness of individual business units and the development prospects of the respective markets are determined. 3. A strategy is developed for each business unit, and business units with similar strategies are combined into homogeneous groups. 4. Management evaluates the strategies of all divisions in terms of their alignment with the corporate strategy, commensurate the profit and resources required by each division, using portfolio analysis matrices. At the same time, it is important to emphasize that business portfolio analysis matrices are not in themselves a decision-making tool. They only show the state of the portfolio of businesses, which should be taken into account by management when making a decision. 33. STRATEGIC ANALYSIS OF A DIVERSIFIED COMPANY: PORTFOLIO MATRIX The portfolio matrix of the Boston Consulting Group, or BCG matrix, is based on a product life cycle model, according to which A product goes through four stages in its development: market entry (product - "problem"), growth (product - "star"), maturity (product - "cash cow") and decline (product - "dog"). The BCG matrix is based on two assumptions: 1. A business with significant market share gains a competitive cost advantage as a result of the experience effect. It follows that the largest competitor has the highest profitability when selling at market prices and for him the maximum financial flows. 2. Presence in a growing market means an increased need for financial resources for its development, i.e., renewal and expansion of production, intensive advertising, etc. If the market growth rate is low, for example, a mature market, then the product does not need significant financing. In the case when both hypotheses are fulfilled, we can distinguish four groups of product markets, corresponding to different priority strategic goals and financial needs: "Problems" (fast growth/small share): products in this group can be very promising as the market expands, but require significant funds to maintain growth. With regard to this group of products, it is necessary to decide whether to increase the market share of these products or stop financing them. "Stars" (fast growth/high share) are market leaders. They generate significant profits due to their competitiveness, but also need funding to maintain a high share of a dynamic market. "Cash Cows" (slow growth/high share) - products that can generate more profit than is necessary to support their growth. They are the main source of funding for diversification and research. The priority strategic goal is "harvesting". "Dogs" (slow growth/small share) are products that are at a cost disadvantage and do not have growth opportunities. The preservation of such goods is associated with significant financial costs with little chance of improvement. The priority strategy is deinvestment and a modest existence. Ideally, a balanced nomenclature portfolio of an enterprise should include 2-3 goods - "cows", 1-2 - "stars", several "problems" as a reserve for the future and, possibly, a small number of goods - "dogs". An excess of aging goods ("dogs") indicates the danger of a downturn, even if the current performance of the enterprise is relatively good. An excess of new products can lead to financial hardship. 34. MC KINCEY MATRIX The Mc Kincey Matrix was developed by the Mc Kincey Consulting Group in conjunction with the General Electric Corporation and is called the "Business Screen". She is includes nine squares and is based on an assessment of the long-term attractiveness of the industry and the competitiveness of the strategic business unit. The factors that determine the attractiveness of an industry and the position of a business in individual markets are different. So, the main criteria of attractiveness can be the size of the market, growth rates, level of competition, market sensitivity to price. The competitiveness of a business can be assessed using criteria such as the market share controlled by the firm; the effectiveness of the marketing system, the level of costs, potential, etc. Therefore, when analyzing each market, it is necessary to single out the factors characterizing it and evaluate their level (low, medium or high). Matrix recommendations Mc Kincey are: 1) invest in order to maintain a position and follow the development of the market; 2) to invest in order to improve their position, shifting along the matrix to the right, in the direction of increasing competitiveness; 3) invest to regain lost ground. Such a strategy is difficult to implement if the attractiveness of the market is weak or medium; 4) reduce the level of investment with the intent to "harvest", for example by selling the business; 5) deinvest and leave the market (or market segment) with low attractiveness, where the company cannot achieve a significant competitive advantage. The Mc Kincey matrix has common shortcomings portfolio analysis methods. Among them: difficulties in taking into account the boundaries and scale of the market, a large number of criteria; subjectivity of assessments; the static nature of the model; overly general recommendations. At the same time, this matrix is more perfect, since it considers a significantly larger number of factors. Therefore, it does not lead to such simplistic conclusions as the Boston Matrix. 35. MAIN STAGES OF THE IMPLEMENTATION OF THE STRATEGY In the process of implementing the strategy, each level of management solves its specific tasks and performs the functions assigned to it. The decisive role belongs to the top management. Its activities at the stage of implementing the strategy can be represented in five successive steps. First stage - in-depth study of the state of the environment, goals and developed strategies. At this stage, the following main tasks are solved: 1. Understanding the essence of the goals put forward, developed by the strategy, their correctness and correspondence to each other, as well as the state of the environment. 2. Bringing the ideas of the strategic plan and the meaning of the goals to the employees of the enterprise in order to prepare the conditions for their involvement in the process of implementing the strategies. The second stage - development of a set of solutions for the efficient use of the resources available to the enterprise. At this stage, resources are assessed, allocated and aligned with the strategies being implemented. For this, special programs are being drawn up, the implementation of which should contribute to the development of resources. For example, it can be employee development programs. In the third stage top management makes decisions about changes to the current organizational structure. The fourth stage consists in carrying out those necessary changes in the enterprise, without which it is impossible to start implementing the strategy. To do this, a scenario of possible resistance to change is drawn up, measures are being developed to eliminate or reduce real resistance to a minimum and consolidate the changes made. Fifth stage - adjustment of the strategic plan in the event that it is urgently required by newly arisen circumstances. 36. STRATEGIC CHANGES: CONTENTS AND TYPES The implementation of the strategy is aimed at solving three problems. Firstly, it is the prioritization of administrative tasks so that their relative importance is consistent with the strategy that the organization will implement. Second, the this is an assessment of the compliance of the chosen strategy and internal organizational processes with the aim of orienting the activities of the enterprise towards the implementation of the adopted strategic decisions. Compliance must be achieved according to such characteristics of the organization as its structure, motivation system, norms and rules of conduct, qualifications of employees, etc. Third, it is the choice and alignment with the ongoing strategy of the leadership style and approach to managing the enterprise. Making the necessary changes contributes to the fact that the enterprise creates the conditions necessary for the implementation of the chosen strategy. Change is not an end in itself. The need and extent of change depends on how ready the enterprise is for the effective implementation of the strategy. Can be distinguished four sufficiently stable and characterized by a certain completeness type of strategic change. one. Enterprise restructuring involves fundamental changes that affect the mission and organizational culture of the enterprise. This type of change is typical for a situation where an enterprise changes its industry and, accordingly, the product and place in the market. In the case of organizational restructuring, the greatest difficulties with the implementation of the strategy arise, since they occur in both the technological and human resources areas. 2. A radical transformation of the enterprise is carried out at the stage of implementing the strategy in the event that the organization does not change the industry, but at the same time changes occur in it, caused, for example, by its merger with a similar organization. In this case, the merging of different cultures, the emergence of new products and the entry into new markets require strong intra-organizational changes regarding the organizational structure. 3. Moderate transformation occurs when an enterprise enters the market with a new product and seeks to win customers for it. In this case, the changes affect the production process and marketing. 4. The usual changes are related to the implementation of transformations in the marketing sphere in order to maintain interest in the organization's product. These changes are not significant, and their implementation has little effect on the activities of the enterprise as a whole. Strategic changes are systemic. Because of this, they affect all aspects of the enterprise. However, one can single out two slices of the organization, which are essential for strategic change. First cut is an organizational structure second - organizational culture. 37. STRATEGIC CONTROL The final stage of strategic management is monitoring the implementation of the strategic plan. Control is necessary for identifying and preventing threats associated with the implementation of the strategy. Strategic control process is a set of interrelated works carried out in the following sequence: 1. Definition of parameters to be assessed or scope of control. 2. Development of standards or precise definition of goals to be achieved in a specified period of time. The standards used to evaluate the progress of the strategy implementation are the detailing of the strategic objectives. In the control system, standards are developed to evaluate not only final, but also intermediate results. At this stage, the value of the achieved deviation from the standard is also established. 3. Evaluation of the results of functioning for the designated period. 4. Comparison of actual results of functioning with the established standards. At this stage, the question is also decided: are the identified deviations from the accepted standards acceptable. 5. Development of corrective actions in case deviations are more than permissible, i.e. identification of the causes of deviations and ways to eliminate them. Note that the control system may indicate the need to revise the plans and standards themselves (for example, the goals set may turn out to be overly optimistic). In business management, there are three types of control: strategic (results of operation for more than a year), tactical (6-12 months), operating (up to 6 months), i.e., along with the hierarchy of strategies, there is also a hierarchy of control. The corporate level is characterized mainly by strategic control, in which the main attention is focused on maintaining a balance between different types of business. At the level of departments, tactical control prevails, which focuses the attention of managers on improving the competitive position of the enterprise. In the process of tactical control, as a rule, the level of costs and market share are monitored. The functional level is characterized mainly by operational and tactical control, within the framework of which such performance indicators as the number of completed orders, the number of complaints, etc. are monitored daily or weekly.
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