Strategic ManagementSession-2

Strategy- definition

An action plan a company designs to attain its targeted goals

Overall action plan for deploying resources to establish a favorable position in the market.

Actions plan prepared to ensure that the organization is better off than its competitors or is able to fend off competitive actions from competitors.

Tactic is a scheme for a specific maneuver.

Three levels of strategy

1. Corporate Strategy

At this level the fundamental task is to develop a balanced portfolio of businesses which will achieve the goals of the corporation and satisfy its stakeholders.

2. Business Strategy

At this level the business, or set of activities is given and the major task for strategic planner at this level is for business to succeed against competitors and also satisfy corporate success criteria.

3. Functional Strategy

At this level the major task is to provide an appropriate functional strategies ( finance and accounting, marketing, R+D, production, personnel) for SBU or corporate level strategy.

Three levels of strategy

Strategic Management

The process by which managers choose a set of strategies for the enterprise to pursue its vision.

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

Full set of commitments, decisions, and actions required for a firm to achieve strategic competitiveness

Set of decisions and actions that result to the formulation and implementation of plans designed to achieve a companys objectives

Strategic Management Process

The strategic management process is made up of three main steps: strategy formulation,

strategy implementation and

strategy evaluation.

Vision & Mission

Strategy Formulation

External Opportunities & Threats

Internal Strengths & Weaknesses

Long-Term Objectives

Alternative Strategies

Strategy Selection

It involves designing and developing strategies to achieve the firms mission and vision.

Strategy formulation entails identifying the firms external opportunities and threats, determining the firms internal strengths and weaknesses and establishing objectives to achieve the firms mission and vision.

Strategy Formulation

Strategy formulation

Identifying the companys mission and vision in the starting point for strategic management process.

The mission and vision statements set the direction for where the company is going.

In order to achieve the organizations mission, would need to operationalize the mission statement into strategic objectives.

Objectives are concrete goals the organization aims to achieve in pursuing its basic mission.

Strategy formulationBefore organization establish its objectives, it must perform external

and internal analysis, also called Situation analysis.

Situation Analysis Scanning and evaluating the organizations internal and external environment

this provides the critical information to establish the organizations objectives.

Also use to identify the organizations opportunities and threats.

An organization can develop alternative strategies once the organization had a clear picture of its environment.

Strategy formulation involves designing and developing the company strategies.

Strategy Implementation

Annual Objectives

Policies

Employee Motivation

Resource Allocation

Strategy Implementation

Strategy implementation means executing the strategies or when business strategies are translated into action.

It includes allocating resources to execute the formulated strategies, preparing budgets, and developing and utilizing information systems and employees.

Strategy Implementation Steps

Developing a strategy-supportive culture

Creating an effective organizational structure

Redirecting marketing efforts

Preparing budgets

Developing and utilizing information systems

Linking employee compensation to organizational performance

Strategy Evaluation

Internal Review

External Review

Performance Metrics

Corrective Actions

The final stage in the strategic management process

The firms managers seek to determine which strategies worked and which were not successful.

Involves: Reviewing external and internal factors that form the basis of the

current strategies

Measuring performance against objectives

Taking corrective action if the strategies formulated did not results in the objectives being met or not in line with the actual goals, the strategy should be modified or reformulated.

Strategy Evaluation

What is Formality?

The degree to which participation, responsibility, authority, and discretion in decision-making are specified in strategic management.

Formality in Strategy Formulation

Entrepreneurial Mode : The informal, intuitive, and limited approach to strategic management associated with owner-managers of smaller firms.

Adaptive Mode :The strategic formality associated with firms that emphasize the incremental modification of existing competitive approaches.

Planning Mode: The strategic formality associated with large firms that operate under a comprehensive, formal planning system

Benefits of Formal Strategic Management Process

Strategy formulation activities enhance the firms ability to prevent problems.

Group-based strategic decisions are likely to be drawn from the best available alternatives.

Involvement of employees in strategy formulation improves their understanding of the productivity-reward relationship in every strategic plan and, thus, heightens their motivation.

Gaps and overlaps in activities among individuals and groups are reduced as participation in strategy formulation clarifies differences in roles.

Risks of Formal Strategic Management

The time that managers spend on the strategic management process may have a negative impact on operational responsibilities.

If the formulators of strategy are not intimately involved in its implementation, they may shirk their individual responsibility for the decision reached.

Strategic managers must be trained to anticipate and respond to the disappointment of participating subordinates over unattained expectations.

Dimensions of Strategic Decisions

Require top-management decisions

Require large amounts of the firms resources

Often affect the firms long-term prosperity

Future oriented

Usually have multifunctional or multi-business consequences

Require considering the firms external environment

Strategy -work in progress

Changes may be necessary to react to

Shifting market conditions

Technological breakthroughs

Fresh moves of competitors

Evolving customer preferences

Emerging market opportunities

New ideas to improve strategy

Crisis situations

Vision and Mission Statements

Vision & Mission

Vision What do we want to do/ want to become

more broad and future oriented the goal on the horizon

Mission How to do

more focused how will the company get to the horizon

Current

reality

Staying the course

Vision

Vision

An attractive, ideal

future that is

credible yet not

readily available

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What Vision Does

Links the present to the future

Energizes people and gains commitment

Gives meaning to work

Establishes a standard of excellence and integrity

Components of a Vision Statement

Core ideology Core Values - timeless guiding principles Core Purpose - reason for being

Envisioned future clearly articulated goals Vivid description - a graphic description of what success and the future will be

like

Recognition of service to stakeholders Owners/creditors Employees Customers

Vision Statement

Many organizations have both a vision and a mission statement.

Vision statement should be established first and foremost.

Vision statement should be short, preferably one sentence,

Mission Statements

Mission statement answers the question:

What is our business?

Essential for effectively establishing objectives and formulating strategies

Clear mission is needed before alternative strategies can be formulated and implemented

Nine Essential Components of a Mission Statement

1. Customers: Who are the firms customers?

2. Products or services: What are the firms major products or services?

3. Markets: Geographically, where does the firm operate?

4. Technology: Is the firm technologically current?

5. Concern for survival, growth, and profitability: Is the firm committed to growth and financial soundness?

Nine Essential Components of a Mission Statement

6. Philosophy: What are the basic beliefs, values, aspirations, and ethical priorities of the firm?

7. Self-concept: What is the firms distinctive competence or major competitive advantage?

8. Concern for public image: Is the firm responsive social, community, and environmental concerns?

9. Concern for employees: Are employees a valuable asset of the firm?