DFM 1103INTRODUCTION TO

STRATEGIC MANAGEMENT

PROF DR HASLINDA ABDULLAH

Mobile: 019-3273122

Email: drhaslinda@gmail.com

Overview

• Introduction• Welcoming to the Course Syllabus• Ground rules• Week 1 – Chapter 1

What is Strategic Management

• AK & AJ

What is Strategic Management?

• Defined as a set of decisions and actions that result in the formulation and implementation of plans designed to achieve a firm’s objectives

Strategic Management achieves a firm’s success through integration –– •

Management

MIS

Production/OperationsFinance/Accounting

Marketing

Research & Development

Purpose

• To exploit and create new and different opportunities for tomorrow: long range planning

History

• Used synonymously with the term strategic planning (SP)

• Strategic Planning originated in the 1950s & very popular between 1960s and 1970s

Stages of Strategic Management

• Stage 1 : Formulation• Stage 2 : Implementation• Stage 3: Evaluation

• Vision & Mission

Strategy Formulation

External Opportunities & Threats

Internal Strengths & Weaknesses

Long-Term Objectives

Alternative Strategies

Strategy Selection

•

Strategy Implementation

Establish Annual Objectives

Devise Policies

Motivate Employee

Allocate Resources

So that formulated strategies can be executed

Strategy Implementation

• Often called the “action stage” of strategic management

• Implementing strategy means mobilizing employees to execute strategies

• Considered as the most difficult stage• Requires personnel discipline,

commitment and sacrifice• Successful strategy hinges upon

manager's ability to motivate and influence

•

Strategy Evaluation

Internal Review

External Review

Measuring Performance

Corrective Actions

•

Strategy Evaluation

Final Stage of Strategic Management

Subject to future modification Today’s success no guarantee of

future success New & different problems Complacency leads to demise

Final Stage of Strategic Management

Subject to future modification Today’s success no guarantee of

future success New & different problems Complacency leads to demise

• Strategic Management process is based on the belief that organizations must monitor events

On-going process Internal and external events Timely changes can be made

Adapting to Change

9 Key Terms/Concepts in Strategic Management1. Competitive advantage

2. Strategists

3. Vision and mission statements

4. External Opportunities and threats

5. Internal strengths and weaknesses

6. Long term objectives

7. Strategies

8. Annual objectives

9. Policies

Concepts Defined

• Competitive advantage : anything that a firm does especially well compared to rival firms

• Strategists : Individuals responsible for the success or failure of an organisation

• Vision : What do we want to become? • Mission : What is and How?

• External opportunities and threats refer to– Economic– Social– Cultural– Demographic & environmental– Political, legal & governmental– Technological– Competition/Competitive trends and events

• These can significantly harm or benefit an organization in the future

• Basic Tenet of Strategic Management

Opportunities & Threats

Strategy Formulation

Take advantage of External Opportunities

Take advantage of External Opportunities

Avoid/minimize impact ofExternal Threats

Avoid/minimize impact ofExternal Threats

Strengths & Weaknesses (Internal)

Typically located in functional areas of the firm

• Management

• Marketing

• Finance/Accounting

• Production/Operations

• Research & Development

• Computer Information Systems

• Long term objectives: specific results that an organisation seeks to achieve in pursuing it basic mission (> 1 year)

• Strategies : means by which long term objectives will be achieved

• Annual objectives: short term milestones that organisations must achieve to reach long term objectives

• Policies : means by which annual objectives will be achieved

ExternalAudit

InternalAudit

Long-TermObjectives

Generate,Evaluate,

SelectStrategies

ImplementStrategies

Measure &Evaluate

Performance

Vision &

Mission

Comprehensive strategic management model

Strategic Management Model

• Questions:– Where are we now?– Where do we want to go?– How are we going to get there?

• Strategic management process is dynamic and continuous

• Typically more formal in larger and well established organisation

Benefits of Strategic Management

• Financial– Improvement in sales– Profitability– Productivity

• Non Financial Improved understanding of competitors strategies Enhanced awareness of threats Reduced resistance to change Enhanced problem-prevention capabilities

Benefits of Strategic Management (Greenley)1. Identification of Opportunities

2. Objective view of management problems

3. Improved coordination & control of activities

4. Minimizes adverse conditions & changes

5. Decisions that better support objectives

6. Effective allocation of time & resources

7. Internal communication among personnel

Benefits of Strategic Management (Greenley – cont’d)

8. Integration of individual behaviors

9. Clarify individual responsibilities

10. Encourage forward thinking

12. Encourages favourable attitude toward change

13. Provides discipline and formality to the management of the business

Why Some Firms Do No Strategic Planning

Poor reward structures

Fire-fighting

Waste of time

Too expensive

Laziness

Content with success

Why Some Firms Do No Strategic Planning

Fear of failure

Overconfidence

Prior bad experience

Self-interest

Fear of the unknown

Suspicion

Pitfalls in Strategic Planning

Using strategic planning to gain control over decisions and resources

Doing strategic planning only to satisfy accreditation or regulatory requirements

Too hastily moving from mission development to strategy formulation

Failing to communicate the plan to employees

Making intuitive decisions that conflict with the formal plan

Top management not actively supporting the strategic planning process

Failing to use plans as a standard for measuring performance

Delegating planning to a “planner” rather than involving all managers

Failing to involve key employees in all phases of planning

• Failing to create a collaborative climate supportive of change

• Viewing planning as unnecessary or unimportant

• Becoming so engrossed in current problems that insufficient or no planning is done

• Being so formal in planning that flexibility and credibility are stifled

Guidelines for Effective Strategic Management Should be a people process more than a paper

process Should be a learning process for all managers

and employees Should be words supported by numbers rather

than numbers supported by words Should be simple and non routine Should vary assignments, team memberships,

meeting formats and even the planning schedule

Should challenge the assumptions underlying the current corporate strategy

Should welcome bad news Should welcome open-mindedness and a

spirit of inquiry and learning Should not be a beauracratic mechanism Should not become ritualistic, stilted or

orchestrated Should not be too formal, predictable or

rigid

Should not contain jargon or arcane planning language

Should not be a formal system for control Should not disregard qualitative

information Should not be controlled by “technicians” Do no pursue too many strategies at once Continually strengthen the “good ethics is

good business” policy

Business Vs Military Strategy

The study of strategic management was formed on a strong military heritage

According to New World Dictionary, strategy is defined as the “science of planning and directing large-scale military operations, of manoeuvring forces into the most advantageous position prior to actual engagement with the enemy”

Derived from the Greek word “strategos” - refers to a military general and combines stratos (the army) and ago (to lead)

To gain competitive advantage Use strengths to exploit competitors' weaknesses If overall is wrong (ineffective) then all the efficiency in the

world may not be enough to allow success Accidental strategies are not a favoured and happy result Success is the result:

continuous attention to changing external and internal conditions and

formulation and implementation of insightful adaptations to external & internal conditions

Element of surprise provides great competitive advantages Information systems that provide data on opponents' or

competitors' strategies and resources are vitally important

Similarities

Difference

• Business:Strategy is formulated, implemented and evaluated with an assumption of competition

Military:Strategy is based on an assumption of conflict

Integration Both business and military organisations must

adapt to change and constantly improve to be successful

Napoleon won = because his opponents were committed to the strategy tactics and organization of earlier wars

He lost against Wellington, Russians & Spaniards = because he used tried and true strategies against enemies who thought afresh, who were developing the strategies not of the last war but of the next

Conclusion

All firms have strategy even if it is informal, unstructured and sporadic

All firms are heading somewhere but some do are not sure

The strategic management process is becoming more widely used by all firms, nonprofit institutions, governmental organisations and MNCs

The process of empowering managers and employees has almost limitless benefits

All organisations should take a proactive rather than a reactive approach

Should strive to influence, anticipate and initiate rather than respond to events

Strategic management process represents a logical, systematic and objective approach for determining an organisation's future direction

• People and organisation that plan ahead are more likely to achieve their objectives than those who do not plan at all.

• “By failing to prepare, you are preparing to fail.” – Benjamin Franklin

• “Always focus on the front windshield and not the review mirror” - Colin Powell