tutorial 03. the basic strategic management process is most closely related to the traditional...

Strategic Management Process

Tutorial 03

2

SMP

Resources based view

Traditional PerspectiveStakeholder

ViewThe basic strategic

management

process is most

closely related to

the traditional

model.

However, each of the three approaches

heavily influences each one of the stages of

this process.

Chamara Bandara FCA,ACMA,MBA (USQ - AUS )

3

A combined perspective of Strategic Management

Process Firms conduct external and internal analysis (Situation analysis), both of which include analysis of stakeholders. On the basis of information obtained, they create strategic direction, strategies, and tactics for implementing strategies and control systems

Origin Traditional, Resource-based, and Stakeholder perspectives.

Adaption Vs Enactment

Influence the environment when it is economically feasible to do so. Take a proactive stance with regard to managing external stakeholders. Monitor, forecast, and adapt to environmental forces that are difficult or costly to influence

Deliberate Vs Emergent

Firms should be involved in deliberate strategy-creating processes. However, they should learn from past decisions and be willing to try new things and change strategic course.

Source of competitive advantage

Firms can obtain competitive advantage from superior resources, including knowledge based resources, superior strategies for managing those resources, and/or superior relationships with internal or external stakeholders

Creation of Strategic Alternatives

Firms develop strategies to take advantage of strengths and opportunities or overcome weaknesses or threats. They arise as organizations conduct resource analysis, analysis of organizational processes, and through analyzing and partnering with external stakeholders

4

Formulate Basic Strategies

Control

Analysis the Environment, Stakeholders, and Organizational Resources

Strategic Direction

Implement Strategies &

Establish Control Systems

Control

Strategic Management Process


5

1) Situation analysis

2) Strategic direction

3) Strategy formulation

4) Strategy implementation

5) Strategic Control

Components of Strategic Management Process

SMP


6

When performing a situation

analysis all of the stakeholders

inside and outside of the firm, as

well as the major external forces,

should be analyzed at both the

domestic and international levels.

1) Situation Analysis


7

External environment includes groups, individuals, and forces

outside of the traditional boundaries of the organization that are significantly influenced by or have a major impact on the organization.

External Environment


8

Internal Environment

The internal environment

includes all of the

stakeholders, resources,

knowledge, and processes

that exist within the

boundaries of the firm.


9

Analyzing the environment and the

company can assist the company in all of

the other tasks of strategic management.

Example

A firm's managers should formulate strategic

direction and specific strategies based on

organizational strengths and weaknesses and in

the context of the opportunities and threats

found in its environment.


10

Strengths: company resources and capabilities that can lead to a competitive

advantage.

Weaknesses :resources and capabilities that a company does not possess, to the

extent that their absence places the firm at a competitive

disadvantage.

Opportunities :conditions in the broad and operating

environments that allow a firm to take advantage of

organizational strengths, overcome organizational

weaknesses, and / or neutralize environmental threats.

Threats :conditions in the broad operating environments that may stand in the way

of organizational competitiveness or the achievement of stakeholder satisfaction.Chamara Bandara

FCA,ACMA,MBA (USQ - AUS )

11

Strategic direction pertains to the long-term goals and

objectives of the organization.

It defines the purposes for which a company exists and

operates.

This direction is often contained in mission and vision

statements.

2) Strategic Direction


12

Missions describe the areas or industries in which an organization operates.

Example: Mission of the New York Stock Exchange Support the capital-raising and asset-management processes by

providing the highest-quality and most cost-effective, self-regulated market place for the trading of financial instruments; promote confidence in and understanding of that process; and serve as a forum for discussion of relevant national and international policy issues.

Mission – Reason for Existence


13

A vision statement expresses what the organization wants to be in

the future, which may involve a fundamental change in its business.

Example:

A start-up firm may have a mission to provide software design and support

for its clients, but its long-range vision may be to become a fully integrated

Internet provider.

While the mission directs the business for now, the mission will

gradually change as the company moves over time towards

fulfillment of its vision.

Vision


14

A strategy can be thought of in

either of two ways: as a pattern that emerges in a sequence

of decisions over time or

as an organizational plan of action that is

in tended to move a company toward

the achievement of its short term goals

and, ultimately, toward the achievement

of its fundamental purposes.

3) Strategy Formulation


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In some organizations, particularly those in rapidly changing environments and

in small businesses,

strategies are not "planned" in the formal sense of the

word.

Instead, managers seize opportunities as they come

up, but within guidelines or boundaries defined by the

firm's strategic direction or mission.


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Strategies as "plans" are common in most

organizations.

Strategy formulation, the process of planning

strategies, is often divided into three levels

i.e Corporate Level

Business Level

Functional Level


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Corporate-level strategy :(“Where to Compete”)

defines a company's domain of activity through selection of business areas in which the company will

compete.

Business-level strategy :("How to compete in those areas”)

pertains to domain direction and navigation, or how businesses should compete in the areas they

have selected.

Sometimes business-level strategies are also referred to as “competitive strategies”.

Functional-level strategy : ("The functional details of how resources will be managed so

that business-level strategies will be accomplished.“)

develops the details of how functional resource areas such as marketing, operations, and finance should

be used to implement business-level strategies and achieve competitive advantage.

Basically, functional-level strategies are strategies for acquiring, developing, and managing

organizational resources Chamara Bandara FCA,ACMA,MBA (USQ - AUS )

18

Top Level

Middle Level

Lower Level

Who takes Decesions?

Corporate Strategy

Business Level

Strategy

Functional Level

Strategy


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Strategy formulation results in a plan of action for the company and it

various levels.

Strategy implementation represents a pattern of decisions and actions

that are in tended to carry out the plan.

It involves Managing stakeholder relationships

Managing organizational resources

Creating an organizational design

Creating organizational control systems

in a manner that moves the business toward the successful execution of its

strategies, consistent with its strategic direction.

4) Strategy Implementation


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Strategic control refers to the processes that lead to adjustments in strategic

direction, strategies, or the implementation plan, when necessary.

Thus, managers may collect information that leads them to believe that the

organizational mission is no longer appropriate or that its strategies are not

leading to the desired outcomes.

On the other hand, a strategic-control system may tell managers that the mission

and strategies are appropriate, but that they have not been well executed. In such

cases, adjustments should be made to the implementation process.

5) Strategic Control


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Although larger companies tend to make use of the strategic

management process, this process is also a vital part of

decision making in smaller companies. In fact, it is important

in companies of all sizes

Example- Greater Construction Inc

(See Page no:12)


SMP

Reference

Jefferey S.Harrison,

Strategic Management of Resources and

Relationships, United States of America

22Chamara Bandara

FCA, ACMA,MBA (USQ - AUS)

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