Strategic ManagementSM01

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Strategic Management

(The art of creating the desired Future)The greatest danger for most of us is not to aim too high and miss it, but to aim too low and reach itSM01REMEMBER

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Think through the overall mission of a business. Ask the key question: What is our Business?Peter DruckerPrime Task of Strategic Management

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Means by which long-term objectives are achievedSM01Strategies

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Strategic ThinkersNon- strategists: See abnormal things as normal.

Strategists: See normal things as abnormal.

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Strategic ThinkersGreat minds discuss ideasAverage minds discuss events.Poor minds discuss people.

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Strategic Management:Some Basic AssumptionsPlan or be planned for.No planning is planning for failure.If you think planning process is expensive, try ignorance (no planning).Sometimes planning is more important than plans.Good old days are not sufficient to secure future success (Vision and mission).If you dont know where are you going, any road will take there (strategic direction).

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Strategic Thinking Strategic thinking is done by maintaining focus, thinking long term, sorting out what important vs. what is noise and acting accordingly. An organization can continuously regenerate itself by envisioning its future, assessing what and where it is currently, and determining what goals and activities are necessary to move the organization toward its intended future.The key element that makes long-range planning strategic is the process of creating and evaluating alternatives possible outcomes (scenarios) based on data collected from the many environments that influence an organization (such as political, economic, social, and technological environments).Strategic thinking involves making some assumptions about the future environments of an organization.

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Strategic ThinkingThe gathering of environmental information and adapting to environmental change are the primary characteristics of planning that make it strategic.Strategic planning works best when the guiding members of an organization revisit what business they are in, who their customers and stakeholders are, and what these constituents need and expect.Strategic thinking states how components of the whole organization relate to each other within their internal and external environments both now and in the future. Because of this, strategic thinking provides direction for, and constraints on, long-range, intermediate, and short-range planning.

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Art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve its long term objectives.

SM01Strategic Management Defined

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Strategic Management Defined

Strategic Management is that set of managerial decisions and actions that determines the long-run performance of a corporation (Wheelen and Hunger).It includes four stages:Environmental scanning.Strategy formulation.Strategy implementation.Strategy evaluation and control.

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What kind of business should we become?Are we in the right fieldsAre there new competitorsWhat strategies should we pursue?How are our customers changing?

SM01Ch 1 -*Key Strategic Management Questions

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In essence, the strategic plan is a companys game plan.SM01Strategic Management

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SM01Ch 1 -*Strategic Management achieves a firms success through integration --ManagementMISProduction/OperationsFinance/AccountingMarketingResearch & Development

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SM01Ch 1 -*Vision & MissionStrategy FormulationExternal Opportunities & ThreatsInternal Strengths & WeaknessesLong-Term ObjectivesAlternative StrategiesStrategy Selection

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SM01Ch 1 -*Issues in Strategy FormulationNew Business opportunitiesBusinesses to abandonAllocation of resourcesExpansion or diversificationInternational marketsMergers or joint venturesAvoidance of hostile takeover

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SM01Ch 1 -*Strategy ImplementationAnnual ObjectivesPoliciesEmployee MotivationResource Allocation

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SM01Strategy ImplementationAction Stage of Strategic Management

Most difficult stageMobilization of employees & managersInterpersonal skills criticalConsensus on goal pursuit

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SM01Ch 1 -*Strategy EvaluationInternal ReviewExternal ReviewPerformance MetricsCorrective Actions

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SM01Ch 1 -*Strategy EvaluationFinal Stage of Strategic Management

Subject to future modificationTodays success no guarantee of future successNew & different problemsComplacency leads to demise

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The strategic management process attempts to organize quantitative and qualitative information under conditions of uncertainty.

SM01Integrating Intuition and Analysis

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Intuition is based on:Past experiencesJudgmentFeelings

SM01Integrating Intuition and Analysis

Intuition is Useful for decision makingConditions of great uncertaintyConditions with little precedent

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SM01Ch 1 -*Involve Management at all levelsIntuition & JudgmentInfluence all Analyses

Integrating Intuition & Analysis

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SM01Ch 1 -*Analytical ThinkingIntegrating Intuition & AnalysisIntuitive Thinking

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Organizations must monitor eventsOn-going processInternal and external eventsTimely changes

SM01Adapting to Change

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Anything that a firm does especially well compared to rival firmsSM01Strategic Management is Gaining and Maintaining Competitive Advantage

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1. Adapting to change in external trends, internal capabilities and resourcesSM01Ch 1 -*Achieving Sustained Competitive Advantage

2. Effectively formulating, implementing & evaluating strategies

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Rate & magnitude of change increasing dramaticallySM01Ch 1 -*Adapting to ChangeE-commerceDemographicsTechnology

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Effective Adaptation

SM01Ch 1 -*Adapting to Change

Requires long-term focus

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Key TermsSM01Ch 1 -*Various Job Titles:

Chief Executive Officer (CEO)Chief Strategy Officer (CSO)PresidentOwnerBoard ChairExecutive Director

Strategists Firms success/failure

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Vision Statement What do we want to become?

Mission Statement What is our business?SM01Ch 1 -*Key Terms

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Largely beyond the control of a single organizationSM01Ch 1 -*Key Terms

Opportunities and Threats (External)

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Opportunities & Threats (External) SM01Ch 1 -*Key TermsAnalysis of Trends:EconomicSocialCulturalDemographic/EnvironmentalPolitical, Legal, GovernmentalTechnologicalCompetitors

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Process of conducting research and gathering and assimilating external information

SM01Ch 1 -*Key Terms Opportunities & Threats

Environmental Scanning (Industry Analysis)

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Basic Tenet of Strategic ManagementSM01Ch 1 -*Key Terms Opportunities & ThreatsStrategy Formulation

Take advantage of External Opportunities

Avoid/minimize impact ofExternal Threats

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Controllable activities performed especially well or poorlySM01Ch 1 -*Key Terms

Strengths & Weaknesses (Internal)

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Strengths & Weaknesses (Internal) SM01Ch 1 -*Key TermsTypically located in functional areas of the firmManagementMarketingFinance/AccountingProduction/OperationsResearch & DevelopmentComputer Information Systems

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Assessing the Internal EnvironmentSM01Ch 1 -*Key Terms Strengths & WeaknessesInternal FactorsPerformance MetricsFinancial RatiosIndustry AveragesSurvey Data

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Mission-driven pursuit of specified results more than one year outSM01Key Terms

Long-term Objectives

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Long-term ObjectivesSM01Ch 1 -*Key TermsEssential for ensuring the firms successProvide directionAid in evaluationCreate synergyFocus coordinationBasis for planning, motivating, and controlling

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StrategiesSM01Ch 1 -*Key TermsSome ExamplesGeographic expansionDiversificationAcquisitionMarket penetrationRetrenchmentLiquidationJoint venture

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Short-term milestones that firms must achieve to attain long-term objectivesSM01Ch 1 -*Key Terms

Annual Objectives

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Means by which annual objectives will be achievedSM01Ch 1 -*Key Terms

Policies

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Comprehensive strategic management modelSM01Ch 1 -*

ExternalAudit

Chapter 3

InternalAudit

Chapter 4

Long-TermObjectives

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Generate,Evaluate,SelectStrategies

Chapter 6

ImplementStrategies:Mgmt Issues

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ImplementStrategies:Marketing,Fin/Acct,R&D, CISChapter 8

Measure &EvaluatePerformance

Chapter 9Vision & Mission

Chapter 2

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Dynamic & ContinuousMore formal in larger organizationsSM01Ch 1 -*Strategic Management Model

Strategic Management Process

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1. Identify Existing --SM01Ch 1 -*Strategic Management ModelVisionMissionObjectivesStrategies

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Audit external environmentAudit internal environmentEstablish long-term objectivesGenerate, evaluate & select strategiesImplement selected strategiesMeasure & evaluate performanceSM01Ch 1 -*Strategic Management Model

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SM01Ch 1 -*Benefits of Strategic Management Proactive in shaping firms future Initiate and influence firms activities Formulate better strategiesSystematic, logical, rational

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Benefits of Strategic Management Financial Benefits Improvement in sales Improvement in profitability Productivity improvement

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SM01Ch 1 -*Benefits of Strategic Management Non-Financial Benefits Improved understanding of competitors strategies Enhanced awareness of threats Reduced resistance to change Enhanced problem-prevention capabilities

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SM01Ch 1 -*Benefits of Strategic Management (Greenley) Identification of OpportunitiesObjective view of management problemsImproved coordination & controlMinimizes adverse conditions & changesDecisions that better support objectives

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SM01Ch 1 -*Benefits of Strategic Management (Greenley contd)Effective allocation of time & resourcesInternal communication among personnelIntegration of individual behaviorsClarify individual responsibilities Encourage forward thinking

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SM01Ch 1 -*Benefits of Strategic Management (Greenley contd )Encourages favorable attitude toward changeProvides discipline and formality to the management of the business

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SM01Ch 1 -*Why Some Firms Do No Strategic PlanningPoor reward structuresFire-fightingWaste of timeToo expensiveLazinessContent with success

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SM01Ch 1 -*Why Some Firms Do No Strategic PlanningFear of failureOverconfidencePrior bad experienceSelf-interestFear of the unknownSuspicion

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Principles of conduct within organizations that guide decision making and behavior.SM01Ch 1 -*Business Ethics & Strategic Management

Business Ethics defined --

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Prerequisite for good strategic managementSM01Ch 1 -*Business Ethics & Strategic Management

Good business ethics

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Provides basis on which policies can be devised to guide daily behavior and decisions in the workplaceSM01Ch 1 -*Business Ethics & Strategic Management

Code of business ethics

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Misleading advertisingMisleading labelingHarm to the environmentInsider tradingDumping flawed products on foreign marketsPoor product or service safetyPadding expense accountsSM01Ch 1 -*Business Ethics & Strategic Management

Business practices always considered unethical

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ISO 9000 focuses on quality control> 1.5 million companies incorporate ISOSM01Ch 1 -*Natural Environment Perspective

ISO used to gain strategic advantage

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Voluntary standards ISO 14001 standard for Environmental Management SystemFirms minimize harmful effects on environmentSM01Ch 1 -*Natural Environment Perspective

ISO 14000 standards

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Parent companyHost countrySM01Ch 1 -*The Nature of Global Competition

International/multinational corporations

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Cultural differencesNormsValuesWork ethic

SM01Ch 1 -*The Nature of Global Competition

Strategy implementation may be difficult

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SM01Ch 1 -*Advantages of International OperationsAbsorb excess capacityReduce unit costsSpread risk over wider marketsLow-cost production facilities

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SM01Ch 1 -*Advantages of International Operations (contd)Less intense competitionLower taxesEconomies of scale

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SM01Ch 1 -*Disadvantages of International OperationsDifficult communicationsUnderestimate foreign competitionCultural barriers to effective managementComplications arising from currency differences

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