SZABIST Shaheed Zulfikar Ali Bhutto Institute of Science & Technology (Larkana Campus)

Lecture # 01

THE NATURE OF STRATEGIC MANAGEMENT

A b d u l S a l a m a b d u l s a l a m @ l r k . s z a b i s t . e d u . p k

STRATEGIC MANAGEMENT (BA 5104) Fall 2014, MBA 90 (V)

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Recommended Books

Strategic Management, Fried. R. David, 13th Edition, Prentice Hall,2014.

Strategic Management: Concepts & Applications, Certo & Peter, null Edition, Random House Business Division,2014.

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Course Plan

The nature of strategic management

The business vision and mission

The External Assessment

The Internal Assessment

Case Study 1 Presentation

Strategies in Action

Strategy Analysis and Choice

Mid Term

Management and Operations Issues

Case study 2 Presentation

Marketing, Finance/Accounting, R&D and MIS issues

Assignment Presentation

Strategy Evaluation

Global/International Issues

Articles Discussions

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WHAT IS STRATEGY?

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STRATEGY RESTS ON UNIQUE ACTIVIES

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Strategy is the determination of the basic long-term goals of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals ALFRED CHANDLER

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

Strategic Management Defined

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Purpose of Strategic Management

To exploit and create new and different opportunities for tomorrow

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Strategic Management

In essence, the strategic plan is a companys game plan

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3 Stages of the Strategic Management Process

Strategy formulation

Strategy implementation

Strategy evaluation

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Vision & Mission

Strategy Formulation

External Opportunities & Threats

Internal Strengths & Weaknesses

Long-Term Objectives

Alternative Strategies

Strategy Selection

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Issues in Strategy

Formulation

Businesses to enter Businesses to abandon Allocation of resources Expansion or diversification

International markets Mergers or joint ventures

Avoidance of hostile takeover

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Strategy Implementation

Annual Objectives

Policies

Employee Motivation

Resource Allocation

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Strategy Implementation Steps

Developing a strategy-supportive culture

Creating an effective organizational structure

Preparing budgets

Developing and utilizing information systems

Linking employee compensation to organizational performance

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Issues in Strategy

Implementation

Action Stage of Strategic

Management

Mobilization of employees & managers

Most difficult stage

Interpersonal skills critical

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Strategy Evaluation

Internal Review

External Review

Performance Measurement

Corrective Action

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

Integrating Intuition & Analysis

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In God we trust. All others bring data - Dr Edward Deming

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Intuition is based on:

Past experiences

Judgment

Feelings

Integrating Intuition & Analysis

Intuition is useful for decision making in conditions of:

Great uncertainty Little precedent Highly interrelated variables Several plausible alternatives

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Involve management at all levels

Intuition & Judgment

Influence all analyses

Integrating Intuition & Analysis

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Organizations should continually monitor internal and external events and trends so that timely changes can be made as needed

Adapting to Change

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Key Terms in Strategic Management

Competitive advantage

Strategists

Vision and mission statements

External opportunities and threats

Internal strengths and weaknesses

Long-term objectives

Strategies

Annual objectives

Policies

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Anything that a firm does especially well compared to rival firms

Strategic Management is Gaining and

Maintaining Competitive Advantage

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1. Continually adapting to changes in external trends and events and internal capabilities, competencies, and resources

Achieving Sustained Competitive

Advantage

2. Effectively formulating, implementing, and evaluating strategies that capitalize on those factors

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Strategists

Gather Information

Analyze Information

Organize Information

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External Opportunities and Threats

Analysis of Trends

Economic

Social

Cultural

Demographic/Environmental

Political, Legal, Governmental

Technological

Competitors

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Basic Tenet of Strategic Management

External Opportunities and Threats

Strategy Formulation

Take advantage of

External Opportunities

Avoid/minimize impact of

External Threats

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Controllable activities performed

especially well or poorly

Determined relative to competitors

Internal Strengths and Weaknesses

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Typically located in functional areas of the firm

Management

Marketing

Finance/Accounting

Production/Operations

Research & Development

Management Information Systems

Internal Strengths and Weaknesses

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Assessing the Internal Environment

Internal Strengths and Weaknesses

Internal Factors

Performance Measures

Ratios

Industry Averages

Survey Data

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Strategies Examples

Geographic expansion

Diversification

Acquisition

Product development

Market penetration

Retrenchment

Divestiture

Liquidation

Joint venture

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Strategic Management Process

Dynamic & continuous More formal in larger organizations

Strategic Management Model

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Benefits of Strategic Management

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Benefits of Strategic Management

Nonfinancial Benefits

Enhanced awareness of threats Improved understanding of competitors

strategies Increased employee productivity Reduced resistance to change Clearer understanding of performance-reward

relationship Enhanced problem-prevention capabilities

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Why Some Firms Do No Strategic Planning

Lack of knowledge of strategic planning

Poor reward structures

Fire fighting

Waste of time

Too expensive

Laziness

Content with success

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Why Some Firms Do No Strategic Planning (continued)

Fear of failure

Overconfidence

Prior bad experience

Self-interest

Fear of the unknown

Honest difference of opinion

Suspicion

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Pitfalls in Strategic Planning

Strategic planning is an involved, intricate, and complex process that takes an organization into uncharted territory

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Effective Strategic Planning is:

A people process more than a paper process

A learning process

Words supported by numbers

Simple and non-routine

Varying assignments, team membership, meeting formats, and planning calendars

Challenging assumptions underlying corporate strategy

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Effective Strategic Planning continued

Welcomes bad news

Requires open-mindedness and a spirit of inquiry

Is not a bureaucratic mechanism

Is not ritualistic or stilted

Is not too formal, predictable, or rigid

Does not contain jargon or arcane language

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Effective Strategic Planning continued

Is not a formal system for control

Does not disregard qualitative information

Is not controlled by technicians

Does not pursue too many strategies at once

Continually strengthens the good ethics is good business policy

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Comparing Business and Military Strategy

Strategic planning started in the military

Similarity

Both business and military organizations must adapt to change and constantly improve

Difference

Business strategy assumes competition

Military strategy assumes conflict

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Questions/Queries?