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Without a strategy the organizationis like a ship without a rudder, goingaround in circles.
Joel Ross and Michael Kami
Quote
2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Copyright
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2 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Copyright
The Strategic Management Process:
An Overview
Chapter 1
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Chapter Outline
Five Tasks of Strategic ManagementDeveloping a Strategic Vision and MissionSetting Objectives
Crafting a StrategyImplementing and Executing the StrategyEvaluating Performance and InitiatingCorrective Adjustments
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What is Strategy?
What is strategy?
What are the major elements of a Firms strategy?
Think of two firms in the same industry and identify elements of each firms strategy.
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Characteristics of a Strategic Vision
A roadmap of a companysfuture
Future technology-product-customer focus
Geographic and productmarkets to pursue
Capabilities to be
developedKind of companymanagement is trying tocreate
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6 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Copyright
Missions vs. Strategic Visions
A mission statementfocuses on current business activities --who we are and
what we do Current product andservice offeringsCustomer needsbeing servedTechnological andbusiness capabilities
A strategic visionconcerns a firms futurebusiness path --where we are going
Markets to be pursuedFuture technology-product-customer focusKind of company thatmanagement istrying to create
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Examples: Mission and Vision Statements
Empower peoplethrough great software
anytime, anyplace, andon any device.
Microsoft Corporation
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Examples: Mission and Vision Statements
Our vision : Getting to a billion connected computers
worldwide, millions of servers, and trillions of dollars of e- commerce. Intels core mission is being the building
block supplier to the Internet economy and spurringefforts to make the Internet more useful. Being
connected is now at the center of peoples computingexperience. We are helping to expand the capabilities
of the PC platform and the Internet.
Intel
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Setting Objectives
Converts strategic vision andmission into specificperformance targets
Creates yardsticks to trackperformance
Pushes firm to be inventiveand focused on resultsHelps prevent complacencyand coasting
Second Task of Strategic Management
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Types of Objectives Required
Outcomes focused onimproving financial performance
Outcomes focused onimproving long-term, competitive businessposition
Financial Objectives Strategic Objectives
$
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Examples of Financial Objectives
Grow earnings per share 15% annuallyBoost annual return on investment (or EVA)from 15% to 20% within three years
Increase annual dividends per shareto stockholders by 5% each year
Strive for stock price appreciation
equal to or above the S&P 500 averageMaintain a positive cash flow every year
Achieve and maintain a AA bond rating
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Examples of Strategic Objectives
Increase firms market shareOvertake key rivals on quality or customer service or product performance
Attain lower overall costs than rivalsBoost firms reputation with customers
Attain stronger foothold in international markets
Achieve technological superiorityBecome leader in new product introductions
Capture attractive growth opportunities
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13 2001 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Copyright
Examples: Strategic Objectives
Banc One Corporation
To be one of the top three banking companiesin terms of market share in all significant
markets we serve.
Dominos Pizza
To safely deliver a hot, qualitypizza in 30 minutes or less at a fair
price and a reasonable profit.
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Example: Financial andStrategic Objectives
Annual growth in earnings per share of 10% or
better, on average;A return on stockholders equity of 20 -25%;
A return on capital employed of 27% or better;and
Have at least 30% of sales come fromproducts introduced in the past four years.
3M Corporation
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Crafting a Strategy
Strategy involves determining whether to Concentrate on a single business or severalbusinesses (diversification)
Cater to a broad range of customers or focuson a particular nicheDevelop a wide or narrow product linePursue a competitive advantage based on
Low cost or Product superiority or Unique organizational capabilities
Third Task of Strategic Management
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Involves deciding how toRespond to changingbuyer preferences
Respond to newmarket conditionsGrow the businessover the long-term
Achieve performancetargetsOutcompete rivals
Our strategywill be . . .
Crafting a Strategy
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Figure 1- 3: Understanding a CompanysStrategy -- What to Look For
Patternof Actions
That DefineStrategy
Actions to strengthenresources &capabilities
Actions to diversify Actions to outcompete rivals
Responses tochanging externalcircumstances
Actions to alter geographiccoverage
Actions to form strategicalliances and collaborative
partnerships
How functionalactivities are
managed
Efforts to pursuenew opportunities or defend against threats
Actions to merge or acquire rival companies
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What is a Strategic Plan?
Where firm is headed --Strategic vision andbusiness mission
Action approaches to achievetargeted results -- Acomprehensive strategy
Short and long term performancetargets -- Strategic andfinancial objectives
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Figure 1-1: The Five Tasksof Strategic Management
Craft aStrategy
to Achieve
Objectives
SetObjectives
Develop aStrategic
Vision
andMission
Implementand
Execute
Strategy
Improve/Change
Revise asNeeded
Revise asNeeded
Improve/Change
Recycleas Needed
Task 1 Task 2 Task 3 Task 4 Task 5
Monitor,Evaluate,and Take
CorrectiveAction