chapter-02 the managerial process of crafting and executing strategy

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    Mohammed Sohail Mustafa 1

    Chapter - 02

    The Managerial Process of Craftingand Executing Strategy

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    Topics to be Covered

    What is Strategic Planning?

    Strategic planning process.

    Situational Analysis.

    Corporate Governance.

    Principles of Corporate Governance.

    Mechanisms & Controls of Corporate Governance.

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    What is Strategic Planning?

    Strategic planning is an organization's process ofdefining its strategy, or direction, and makingdecisions on allocating its resources to pursue thisstrategy, including its capital and people. In order

    to determine where it is going, the organizationneeds to know exactly where it stands, thendetermine where it wants to go and how it will getthere. All strategic planning deals with at least one

    of three key questions: "What do we do?"

    "For whom do we do it?"

    "How do we excel?"

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    Strategic Planning Process

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    Phase I: Developing a Strategic Vision

    Vision: Defines the way an organization or enterprisewill look in the future. Vision is a long-term view,sometimes describing how the organization would likethe world to be in which it operates. For example, a

    charity working with the poor might have a visionstatement which reads "A World without Poverty."

    Mission: Defines the fundamental purpose of anorganization or an enterprise, succinctly describing whyit exists and what it does to achieve its Vision.

    Values: Beliefs that are shared among the stakeholders ofan organization. Values drive an organization's cultureand priorities and provide a framework in whichdecisions are made.

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    Characteristics of an Effective Worded StrategicVision

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    Common Shortcomings in Company Vision Statement

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    Phase II Setting Objectives

    Well-constructed goals have four main characteristics:1. They are precise and measurable. Measurable goals give managers a

    yardstick or standard against which they can judge theirperformance.

    2. They address crucial issues. To maintain focus, managers shouldselect a limited number of major goals to assess the performance of

    the company. The goals that are selected should be crucial orimportant ones.

    3. They are challenging but realistic. They give all employees anincentive to look for ways of improving the operations of anorganization. If a goal is unrealistic in the challenges it poses,employees may give up; a goal that is too easy may fail to motivate

    managers and other employees.4. They specify a time period in which the goals should be achieved,when that is appropriate. Time constraints tell employees thatsuccess requires a goal to be attained by a given date, not after thatdate. Deadlines can inject a sense of urgency into goal attainmentand act as a motivator. However, not all goals require timeconstraints.

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    Phase III Crafting a Strategy to AchieveObjectives & Vision

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    Phase IV Implementing & Executing Strategy

    Building a capable organization

    Allocating resources to strategy-critical activities

    Establishing strategy-supportive policies

    Instituting best practices and programs for continuousimprovement

    Installing information, communication, and operatingsystems

    Motivating people to pursue the target objectives

    Tying rewards to achievement of results Creating a strategy-supportive corporate culture

    Exerting the leadership necessary to drive the processforward and keep improving.

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    Phase V Monitoring Developments,Evaluating Performance & Making Corrective

    Adjustments Customer needs and competitive conditions

    change

    New opportunities appear; technologyadvances; any number of other outsidedevelopments occur

    One or more aspects of executing the strategy

    may not be going well New managers with different ideas take over

    Organizational learning occurs

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    Situational Analysis

    When developing strategies, analysis of the organization and itsenvironment as it is at the moment and how it may develop inthe future, is important. The analysis has to be executed at aninternal level as well as an external level to identify allopportunities and threats of the external environment as well as

    the strengths and weaknesses of the organizations. There areseveral factors to assess in the external situation analysis:

    Markets (customers)

    Competition

    Technology

    Supplier markets Labor markets

    The economy

    The regulatory environment

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    Corporate Governance

    Corporate governance is a number of processes, customs,policies, laws, and institutions which have impact on the way acompany is controlled. An important theme of corporategovernance is the nature and extent of accountability of peoplein the business, and mechanisms that try to decrease the

    principal-agent problem. Corporate governance also includes the relationships among the

    many stakeholders involved and the goals for which thecorporation is governed. In contemporary business corporations,the main external stakeholder groups are shareholders, debt

    holders, trade creditors, suppliers, customers and communitiesaffected by the corporation's activities. Internal stakeholders arethe board of directors, executives, and other employees.

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    Principles of Corporate Governance

    1. Rights and equitable treatment ofshareholders:

    2. Interests of other stakeholders:

    3. Role and responsibilities of the board:

    4. Integrity and ethical behavior:

    5. Disclosure and transparency:

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    Mechanisms & Controls of Corporate Governance

    Internal corporate governance controls. Monitoring by the board of directors. Internal control procedures and internal auditors. Balance of power. Remuneration.

    External corporate governance controls competition debt covenants demand for and assessment of performance information

    (especially financial statements) government regulations managerial labor market media pressure takeovers

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