Strategic Management : The Process

7/29/2019 Strategic Management : The Process

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FACULTY OF BUSINESS

Nurturing professionals with high moral and ethical values

Assoc. Prof. Dr. Mohd Fuad Mohd [email protected]

019-332 6629

26th.January 2013

Process of Crafting and Executing

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Without a strategy theWithout a strategy theorganization is like aorganization is like a

shi without a ruddershi without a rudder

Benefits of Strategic Thinking and aBenefits of Strategic Thinking and a

Strategic Approach toStrategic Approach to a Companya Company

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going around ingoing around incircles.circles.

HELPS A COMPANY PREPARE FOR THEFUTURE!


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5 Tasks of Strategic Management5 Tasks of Strategic Management

Formulate

Strategy

to Achieve

Goals &

Objectives

Set

Goals &

Objectives

Develop

Vision

and

Mission

Implement

and

Execute

Strategy

Task11 Task 2 Task 3 Task 4 Task 5

Monitor,

Evaluate,

and Take

Corrective

Action

3

Improve/

Change

Revise as

Needed

Revise as

Needed

Improve/

Change

Recycle

as Needed


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The Roadmap What Does the Strategy-Making, Strategy-Executing process

Entail?

Phase 1: Developing a Strategic Vision & Mission

Phase 2: Setting Goals & Objectives

Phase 3: Formulating &Crafting a Strategy

Phase 4: Implementing and Executing the Strategy

Phase 5: Evaluating Performance and Initiating CorrectiveAdjustments

Leading the Strategic Management Process

Corporate Governance: The Role of the Board of Directors inthe Strategy-Making, Strategy-Executing Process

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Developing a Strategic Vision

Involves thinking strategically about

Future direction of company

Phase 1Phase 1

ytechnology to improve

Current market position

Future prospects

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Statement about a companys long-term direction


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Key Elements of a Strategic Vision

Delineates managements aspirations for the business

Provides a panoramic view of where we are going

Charts a strategic path

Is distinctive and specific to a particular organization

Avoids use of generic language thats u an or ng an a cou

apply to most any company

Captures the emotions of employees and steers themin a common direction

Is challenging and a bit beyond a companys immediate reach

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Key Elements of a Strategic Vision

Delineates managements aspirations for the business

Provides a panoramic view of where we are going

Charts a strategic path

Is distinctive and specific to a particular organization

Avoids use of generic language that is dull and boring and thatcould apply to most any company

Captures the emotions of employees and steers themin a common direction

Is challenging and a bit beyond a companys immediatereach

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Role of a Strategic Vision

A well-conceived, well-communicated visionfunctions as a valuable managerial tool to Give the organization a sense of direction, mold

organizational identity, and create a committed

enterprise Illuminate the com an s directional ath

Provide managers with a reference point to Make strategic decisions

Translate the vision into hard-edged objectives and strategies

Prepare the company for the future

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Characteristics of an Effectively Worded Vision Statement

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Common Shortcomings in Company Vision Statements

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Microsoft Corporation(Old Vision)

Example: Vision StatementExample: Vision StatementExample: Vision StatementExample: Vision Statement

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A co m p u t er o n e v er y

desk , i n ever y hom e


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Microsoft Corporation(New Vision)

Example: Vision StatementExample: Vision StatementExample: Vision StatementExample: Vision Statement

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Crea te ex per iences th a tcom b ine t he m ag i c o f so f tw a r e

w i t h t h e p ow er o f I n t er n et

serv ices across a w or ld o fdev ices


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Strategic Vision vs. Mission

Astrategic visionconcerns a firmsfuturebusiness path - wherewe are going

Markets to be pursued

Mission statement

Focuses on itspresentbusiness purpose - whowe are and what we do

Defines a companys

uture pro uct mar etcustomer/technology focus

Kind of companymanagement is

trying to create

business

Current product and serviceofferings

Customer needs andcustomer groups beingserved

Geographiccoverage

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Characteristics of a Mission Statement

Identifies boundaries of a companys current businessand says something about

Present products and services

Types of customers served

Geographic coverage

Whowe are,

Whatwe do, and

Whywe are hereA good mission statement describes a companys business

makeup and purpose in language specific enough to give the

companyits own identity and distinguish it from

other enterprises in the same or other industries!

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Key Elements of a Mission Statement

A complete mission statement should cover three things: Customer needs being met

What is being satisfied

Customer groups or markets being served

Who is being satisfied What the or anization does in terms of business

approaches, technologies used, and activities performed)to satisfy the targeted needs of the targeted customergroups How customer needs are satisfied

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Microsoft Corporation

Example: Mission StatementExample: Mission StatementExample: Mission StatementExample: Mission Statement

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Enab l in g peop le and bu s inessest h r o u g h o u t t h e w o r l d t o r e al ize

th e ir f u l l po t en t i a l


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"."

More Mission Statements

Otis Elevator

Our missionis to provide any customer a means ofmoving people and things up, down, and sideways

over short distances with hi her reliabilit than

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any similar enterprise in the world.

Our businessis renting cars. Our missionis total

customer satisfaction.

Avis Rent-a-Car


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Mobilizing support for a new vision entails

Reiterating basis for the new direction

Addressing employee concerns head-on

Calming fears

Overcoming Resistance

Lifting spirits

Providing updates and progressreports as events unfold

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Crystallizes an organizations long-term direction

Reduces riskof rudderless decision-making

Creates a committed enterprisewhere rganizationalmembers enthusiastically pursue efforts to make thevision a realit

A Clear Strategic Vision Results..

Provides a beacon to keep strategy-related actionsof all managers on common path

Helps an organizationprepare for the future

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Setting Goals & Objectives Purpose ofsetting objectives

Converts vision into specific performance targets

Creates yardsticks to track performance

Focused on results

Phase 2Phase 2

Well-stated objectives are

Quantifiable

Measurable

Time-based

Contain a deadline for achievement

Detailing how much ofwhat kindof performance by when

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Importance of Setting Stretch Objectives

Objectives should be set at levels that stretch anorganization to

Perform at its full potential, delivering the bestpossible results

Exhibit more urgency to improve its business position

Be intentional and focused in its actions

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Types of Objectives Required

Financial Objectives Strategic Objectives

Outcomes focused

on improvingfinancial

Outcomes focused on

improving competitivestren th and market

per ormance

standing

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Winning an 20% market share within 5 years

Achieving lower overall costs than rivals

Overtaking key competitors on product performance orquality or customer service within 2 years

Derivin 60% of revenues from sale of new roducts

Examples: Strategic Objectives

introduced in past 5 years

Being the recognized industry leader in product innovationand/or technological know-how

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Achievinggood financial performance is not enough Current financial results are lagging indicatorsreflecting

results ofpast decisions and actions good profitability nowdoes not translate into stronger capability for deliveringeven better financial results later

However, setting well-chosen strategic objectives and achieving them

signals

Strategic Performance & Financial Performance

Growing strength in the marketplace

A company that is growing competitively stronger is developingthe capability for better financial performance in the yearsahead Good strategic performance is a leading indicatorof a companys

capability to deliver improvedfuture financial performance

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Short and Long-Term Objectives

Short-term objectives

Targets to be achieved soon

Milestones or steps for reaching long-range performance

targets Long-term o jectives

Targets to be achieved within 3 to 5 years

Calls for actions now that will permit reaching targetedlong-range performance later

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Concept of Strategic Intent

A company exhibits strategic intent when itrelentlessly pursues an ambitious strategicobjective, concentrating the full force of its

resources and com etitive actions onachieving that objective!

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Characteristics of Strategic Intent

Indicates firms intent to making quantum gains incompeting against key rivals and to establishing itself as awinner in the marketplace, often against long odds

Involves establishing agrandiose performance targetposition but then devoting the firms full resources andenergies to achieving the target over time

Entails sustained, aggressive actions to take marketshare away from rivals and achieve a much strongermarket position

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Objectives Are Needed at All Levels

1. First, set organization-wide objectivesand performance targets

2. Next, set business and

The objective-settingprocess is more top-downthan bottom up

product line objectives

3. Then, establishfunctionaland departmentalobjectives

4. Individualobjectives are established last

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Formulating & Crafting a Strategy Strategy-making involves astute entrepreneurship Actively searching for opportunities to do new things

or

Actively searching for opportunities to do existing things

Phase 3Phase 3

n new or e er ways

Strategizing involves Developing timely responses to happenings in the

external environmentand

Steering company activities in new directions dictated byshifting market conditions

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Crafting a Good Strategy

Developing a winning strategy involves

Diagnosing the direction and force of the market changesunderway and making timely strategic adjustments

Good strategyrequires good business entrepreneurship:

Figuring out how to outwit and outmaneuver competitors

Pursuing ways to strengthen the firms competitive capabilities

Proactively trying to out-innovate rivals

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Astute Entrepreneurship

Masterful strategies come partly (maybe mostly)by doing things differently from competitors

where it counts Innovating more creatively

Being more efficient

Adapting faster

Rather than running with the herd!

Good strategy-making is inseparable

from good entrepreneurshipone cannot exist without the other!

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Five Strategic Management TasksFive Strategic Management Tasks

Parties InvolvedParties Involved

CEO

Senior CorporateExecutives

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Subsidiaries & BusinessUnits

Functional & OperationManagers


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Crafting Strategies - Parties Involved

1. CEO (chief executive officer)

Has ultimate responsibility for leading the strategy-making process

Functions as strategic visionary and chief architect of strategy

2. Senior executives

Typically have influential roles in fashioning those strategy

3. Managers of subsidiaries, divisions, geographic regions,plants, and other important operating units (and, often, keyemployees with specialized expertise)

Some pieces of the strategy are best orchestrated by on-the-scenecompany personnel with detailed familiarity of the piece of thebusiness they are in charge of running

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CorporateStrategy

Business Strategies

Two-Way Influence

Corporate-Level Managers

Division Managers

Levels of StrategyLevels of Strategy--Making in a Diversified CompanyMaking in a Diversified Company

Functional Strategies

Operating Strategies

Two-Way Influence

Two-Way Influence

OperatingMgrs

Functional Mgrs


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Levels of StrategyLevels of Strategy--Making in aMaking in a

SingleSingle--Business CompanyBusiness Company

BusinessStrategy

Two-Way Influence

Executive-Level Managers

Two-Way Influence

Functional Strategies

Operating StrategiesOperatingManagers

Functional Managers


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Networking in Crafting ProcessNetworking in Crafting Process

Level 1

Level 2

Business-LevelMana ers

CorporateLevel

Goals/Objectives

Corporate-wideVision &Mission

CorporateLevel

Strategy

BusinessLevel

Goals/Objs

BusinessLevel

Mission

BusinessLevel

Strategies

Two-Way Influence Two-Way Influence Two-Way Influence

Corporate-Level Managers

Level 3FunctionalManagers

Level 4Plant Managers,Lower-LevelSupervisors

Functional

Objectives

Functional

Goals

Functional

Strategies

OperatingObjectives

OperatingGoals

OperatingStrategies




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Factors Shaping the Choice of Company Strategy

External FactorsSocial,political,

regulatory

and

community

factors

Competitive

conditions

and industry

attractiveness

Company

opportunities

and threats to

companys

well-being

Determine

Companys Strategic Situation

Craft

the

strategy

Internal Factors

Resource

strengths,

capabilities,

and

weaknesses

Influences of

key

executives

Shared values

and company

culture

and

evaluate

alternatives

of internal

and

external

factors


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Strategy Making - a Collaborative Process?

The job is often way too big for one person or a smallexecutive groupmany strategic issues are complex or cutacross multiple areas of expertise

The more a companys operations cut across different

products, industries and geographic areas, the more thatheadquarters executives must delegate strategy-making

authority to down-the-line managers in charge of particularfunctions and operating units

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Uniting the Companys Strategy-Making Effort

A firms strategy is a collection of initiativesundertaken by managers at all levels in theorganizational hierarchy

Pieces ofstrategy shouldfit together like the pieces of a

puzzle ey approac es use to un y a strateg c n t at ves nto

a cohesive, company-wide action plan Effectively communicate companys vision, objectives,

and major strategies to all personnel

Diligently review lower-level strategies for consistencyand support of higher-level strategiesrevise as needed

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A Strategic Plan

Its strategic visionand business mission

A

Its strategy

Its strategic andfinancial objectives

Company s

Strategic Plan

Consists of

2-4040


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Implementation and Execution

Operations-orientedactivity aimed at performing corebusiness activities in a strategy-supportive manner

Tougherand more time-consuming than crafting

Phase 4Phase 4

Key tasks include

Improving the efficiency with which the strategy is being

executed

Showing measurable progress in achieving both operatingexcellence and targeted results

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Building a capable organization

Allocating resources to strategy-critical activities

Establishing strategy-supportive policies

Instituting best practices and programs for continuous

improvement

What Does Implementing and Executing the

Strategy Involve?

nsta ng n ormat on, commun cat on, an operat ngsystems

Motivating people to pursue the target objectives

Tying rewards to achievement ofresults

Creating a strategy-supportive corporate culture

Exerting the leadership necessary to drive the process forwardand keep improving

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Crafting and implementing a strategy is not a one-timeexercise

Customer needs and competitive conditions change

New opportunities appear; technology advances; any number of other

Evaluation and Corrective Adjustments

Phase 5Phase 5

outside developments occur

One or more aspects of executing the strategy may not be going well

New managers with different ideas take over

Organizational learning occurs All these trigger a need for corrective actions and

adjustments on an as-needed basis

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Taking actions to adjust to the march of events tends toresult in one or more of the following

Altering long-term direction and/or redefining the mission/

vision

Monitoring, Evaluating, and Adjusting as Needed

Raising, lowering, or changing performance objectives

Modifying the strategy

Improving strategy execution

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Leading the Strategic Management Process

Diverse leadership challenges include Exerting take-charge leadership

Being a spark plug for change and action

Ramrodding things through

Achieving results

various styles and approaches

Being a hard-nosed authoritarian

Being a perceptive listener

Being a compromising decision maker Delegating authority to people closest to the action

Being a coach

Assuming a highly visible role in guiding the process

Making brief ceremonial appearances

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1. Stay on top of whats happening

2. Make sure company has a good strategic plan

3. Put constructive pressure on company to achieve goodresults

Leadership Capabilities

. performance

5. Lead development of stronger core competencies andcompetitive capabilities

6. Display ethical integrity and lead social responsibilityinitiatives

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Exercise strong oversight to ensure five tasks ofstrategic management are executed to benefit

Shareholders or

Corporate Governance: Strategic Role of

Board of Directors

Make sure executive actions are not onlyproperbutalso alignedwith interests of stakeholders

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Obligations of Board of Directors

Be inquiring critics and overseers Evaluate caliberofsenior executivesstrategy-

making and strategy-executing skills

Institute a compensation plan for top executives

rewarding them for results that serve interests of

Stakeholders and

Shareholders

Oversee a companysfinancial accounting and

reporting practices

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Board members have a veryimportant oversight role in

the strategy-making, strategy-executing process!


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Strategic Management : The Process

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