Strategic Management

ProcessProf. Sajjad Ahmad Qadri

Minhaj University, Lahore

Strategic Management

The art and science of formulating, implementing and evaluating

cross functional decisions that enable an organization to achieve its

objective. (Fred R. David)

The Term “Strategic Management” is used in Business world and

“Strategic Planning” is used in Academia

What is Strategic Management?

Application of the basic planning process at the highest levels of the company

Top management sets goals for the performance of the company

Carefully formulating, implementing, and evaluating plans and strategies

What is Strategic Management?

Most important part is developing strategic plans

Plans must remain current as changes occur inside and outside the company

Involves many levels of management

Top level formally develops basic plans

Different departments may be asked to develop plans for their own areas

A solid plan guarantees that plans are coordinated and are supported by

everyone in the company

Strategic Management Approach

Three phases critical to the success of the process

Formulation

Developing the strategic plan

Implementation

Putting the formulated plan to work

Evaluation

Continuously evaluating and updating the strategic plan

Formulating Strategy

Developing the grand- and business-level strategies to be used by the

company

Company’s strengths/weaknesses and threats/opportunities shape the

strategies

First step is to understand the current position of the company

Identify mission, identify past and present strategies, diagnose the company’s

past and present performance, set objectives for the company’s operation

Formulating Strategy

Identify the mission statement

Outlines why the company exists

Describes the company’s basic products and/or services and defines markets

and sources of revenue

Designed to accomplish several goals and ensures a common purpose within

the company

Apple’s Mission Statement

Apple ignited the personal computer revolution in the 1970s with the Apple II and reinvented the personal computer in the 1980s with the Macintosh. Today, Apple continues to lead the industry in innovation with its award-winning computers, OS X operating system and iLife and professional applications. Apple is also spearheading the digital media revolution with its iPod portable music and video players and iTunes online store, and has entered the mobile phone market this year with its revolutionary iPhone.

Who’s Mission Statements?

1. "To bring inspiration and innovation to every athlete in the world."

2. "To enable people and businesses throughout the world to realize their full

potential."

3. “. . .seeks to be the world’s most customer-centric company, where

customers can find and discover anything they may want to buy online at

a great price."

Identifying Past and Present Strategies

Companies need to understand and appreciate their corporate history

Strategic managers should ask

Has past strategy been developed?

If not, can past history of the company be analyzed to identify the strategy that has evolved?

If yes, has the strategy been recorded in writing?

Diagnosing Past and Present

Performance

A corporate planner must decide if past strategies worked and if strategic

changes are needed by asking:

How is the company currently performing?

How has it performed during the past few years?

Is the performance trend moving up or down?

Setting Goals

Concise statements that provide direction employees

and set standards for achieving the company’s strategic

plan

Established in many areas (see handout)

Goals must be reevaluated as the environment and

opportunities change

Multiple goals are used to reflect the desired

performance

Policies, Procedures, and Rules

Policies are broad general guides to action that establish

boundaries within which employees must operate

“answering all written customer complaints in writing within 10

days”

Policies, Procedures, and Rules

Procedures are detailed series of related steps/tasks written to implement a

policy

Define methods through which policies are achieved

“the customer service representative must note the complaint of Form 622 and

forward the yellow copy of the form…”

Rules detail specific and definite corporate actions that employees must

follow

Leave little doubt about what is to be done

“no smoking in the conference room”

SWOT Analysis

Strengths, Weaknesses, Opportunities, Threats

Process that allows companies to evaluate overall health

Internal (SW) and external (OT)

Most important result of a SWOT analysis is the ability to draw conclusions about the attractiveness of the company’s situation and the need for strategic action

SWOT

Strengths

Convenience

Customer service

Location

Pricing

Weaknesses

Time/cost

Employee training

Limited expansion

Competition

SWOT

Opportunities

Open more locations

Re-evaluate operations

Evaluate technological advances

Threats

Competition-low barriers to entry, many other shops around

Small company- difficult to compete with large companies

Small profit margins

Implementing Strategy

Action stage of strategic management

Managers determine and implement the most appropriate company structure, motivate employees, develop short-range goals, and establish functional strategies

Strategy must fit with current company policies

Or conflicting policies must be changed

A. T. Cross Company

Strategies

Strong marketing and advertising

Hire, train and motivate employees to provide exceptional service

Willingness to be flexible

Purchase only the best products

Capture market share by gaining customer loyalty

Evaluating and Controlling the

Strategic Plan

Process of continuously monitoring the company’s progress toward its long-range goals and mission

Managers should ask:

Does the grand strategy need revising?

Where are problems likely to occur?

Basic strategy evaluation strategies:

Review external and internal factors that are the bases for current strategies

Measure performance

Take corrective action

Evaluating and Controlling the

Strategic Plan

Emphasis is making the company’s managers aware of the problems that are likely to occur and of the actions to take if they do arise

Plan ahead and avoid disaster

Strategic planning and evaluation should be done on a predetermined schedule and as frequently as necessary, determined by internal and environmental factors

Evaluation Points

Financial evaluation

Product evaluation

Employee evaluations

Customer surveys

Compare performance with similar sized pizza shops