The Basics of Strategic Management The Basics of Strategic Management Strategic Management Ch 1 -1.

The Basics of Strategic Management

Strategic Management

Ch 1 -1

Derived from

The Greek word ‘strategtia’Means are and science of

directing military forces.

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

Ch 1 -2

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


Ch 1 -3

Strategic Management –Defined

Purpose of Strategic Management

To exploit and create new and different opportunities for tomorrow


Ch 1 -4

In essence, the strategic plan is a company’s game plan


Ch 1 -5



Ch 1 -6

Benefits of Strategic Management

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


Ch 1 -7

Ch 1 -8

Strategic Management Model

Strategy Formulation

Strategy Implementation

Evaluation and Control

Mission

Objectives

Strategies

Policies

Feedback/Learning

Environmental Scanning

Societal Environment

General Forces

Task Environment

Industry Analysis

Structure Chain of Command

Resources Assets, Skills

Competencies, Knowledge

Culture Beliefs, Expectations,

Values

Reason for existence

What results to accomplish by when Plan to

achieve the mission & objectives Broad

guidelines for decision making

Programs

Activities needed to accomplish a plan

Budgets

Cost of the programs Procedures

Sequence of steps needed to do the job

Process to monitor performanceand take corrective action

Performance

External

Internal

4 Stages of the Strategic Management Process

Strategy formulation . Strategy analysis and choice.Strategy implementation.Strategy evaluation.

Ch 1 -9


The process of developing long-range plans to deal effectively with environmental opportunities and threats in light of corporate strengths and weaknesses.

Composed of: MissionVision Objectives Strategies Policies


Ch 1 -11

Vision & Mission


External Opportunities & Threats

Internal Strengths & Weaknesses

Long-Term Objectives

Alternative Strategies

Strategy Selection


Ch 1 -12

Issues in Strategy Formulation

Businesses to enter Businesses to abandonAllocation of resourcesExpansion or

diversificationInternational marketsMergers or joint

venturesAvoidance of hostile

takeover

Businesses to enter Businesses to abandonAllocation of resourcesExpansion or

diversificationInternational marketsMergers or joint

venturesAvoidance of hostile

takeover


Ch 1 -13


Annual Objectives

Policies

Employee Motivation

Resource Allocation

Strategy Implementation Steps

Developing a strategy-supportive cultureCreating an effective organizational structureRedirecting marketing effortsPreparing budgetsDeveloping and utilizing information systemsLinking employee compensation to

organizational performance


Ch 1 -14


Ch 1 -15

Issues in Strategy Implementation

Action Stage of Strategic Management

Mobilization of employees & managers

Most difficult stage

Interpersonal skills critical

Action Stage of Strategic Management

Mobilization of employees & managers

Most difficult stage

Interpersonal skills critical


Ch 1 -16

Strategy Evaluation

Internal Review

External Review

Performance Measurement

Corrective Action

Context:Strategic Analysis

Content:Strategic

Choice

Process:Strategy

Implementation

The environment

Culture and stakeholderexpectations Resources

and strategiccapabilities

Planning and

allocating

resources

Firm structure

and design

Managing

strategic change

Identifying

strategic options

Evaluating options

Selecting strategy

Components of Strategy

Functional

Business

Corporate

Global

Levels of Strategy

Hierarchy of Strategy

Functional Strategy

Business (Division Level)

Strategy

Corporate Strategy

Manufacturing Finance MarketingResearch

and Development

Human Resources

Strategic Business

Unit

Strategic Business

Unit

Strategic Business

Unit

Corporate Headquarters

Vision Statement –What do we want to become?

Mission Statement –What is our business?


Ch 1 -20

Vision and Mission Statements

Vision

It is description of something in future

An organisational charter of core values and principles.

A puller into the future.

Ch 1 -21

Mission The purpose or reason for

the corporation’s existence. It tells who the company is? what they do? what they’d like to become?

Objectives

The end results of planned activity. They state WHAT is to be accomplished by WHEN. They should be quantified, if possible.

Should be specific, measurable and obtainable.

Strategies

A strategy is a comprehensive master plan stating HOW the corporation will achieve its mission and objectives. There are three types:

Corporate - a corporation’s overall direction and the management of its businesses.

Business - emphasizes improving the competitive position of a corporation’s products or services in a specific industry or market segment.

Functional - concerned with developing a distinctive competence to provide a company or business unit with a competitive advantage.

Policies

Broad guidelines for making decisions.

E.g. - 3M’s policy requiring researchers to spend 15% of their time working on something other than their primary project.


The process of putting strategies and policies into action through the development of:

◦ Programs - statements of activities or steps needed to accomplish a single-use plan.

◦ Budgets - statements of a corporation’s programs in dollar terms.

◦ Procedures - systems of sequential steps or techniques that describe in detail how to perform particular tasks or jobs.

Evaluation and Control

The process of monitoring corporate activities and performance results so that actual performance can be compared with desired performance.

Specific results that an organization seeks to achieve in pursuing its basic mission

Long-term means more than one year


Ch 1 -28


Essential for ensuring the firm’s success◦Provide direction◦Aid in evaluation◦Create synergy◦Reveal priorities◦Focus coordination◦Provide basis for planning, organizing, motivating, and controlling


Ch 1 -29


Means by which long-term objectives are achieved


Ch 1 -30

Strategies

Examples◦ Geographic

expansion◦ Diversification◦ Acquisition◦ Product development◦ Market penetration◦ Retrenchment◦ Divestiture◦ Liquidation◦ Joint venture


Ch 1 -31

Strategies

Short-term milestones that firms must achieve to reach long-term objectives


Ch 1 -32

Annual Objectives

Means by which annual objectives will be achieved


Ch 1 -33

Policies

Ch 1 -34


Communication is a key to successful strategic management


Ch 1 -35

Effective Strategic Planning is:

A people process more than a paper process

A learning processWords supported by numbersSimple and nonroutineVarying assignments, team

membership, meeting formats, and planning calendars

Challenging assumptions underlying corporate strategy Copyright © 2011 Pearson Education,

Inc. Publishing as Prentice Hall

Ch 1 -36

Effective Strategic Planning continued

Welcomes bad newsRequires open-mindedness and a

spirit of inquiryIs not a bureaucratic mechanismIs not ritualistic or stiltedIs not too formal, predictable, or rigidDoes not contain jargon or arcane

language


Ch 1 -37

Effective Strategic Planning continued

Is not a formal system for controlDoes not disregard qualitative

informationIs not controlled by “technicians”Does not pursue too many strategies

at onceContinually strengthens the “good

ethics is good business” policyCopyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall

Ch 1 -38

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


Ch 1 -39

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


Ch 1 -40

Adapting to Change

Key Terms in Strategic ManagementCompetitive advantageStrategistsVision and mission statementsExternal opportunities and threatsInternal strengths and weaknessesLong-term objectivesStrategiesAnnual objectivesPolicies


Ch 1 -41

Ch 1 -42

THANK YOU

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The Basics of Strategic Management The Basics of Strategic Management Strategic Management Ch 1 -1.

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