- 1. Strategic Management and Planning in a Global Environment
Chapter 4 Part 2Planning Challenges in the 21st Century
2.
- Define strategic management and describe its purpose.
- Explain the four stages of the strategic management
process.
- Identify and explain the components of strategic analysis, as
well as explain the value of conducting this analysis.
- Explain how an organization can develop a competitive
advantage.
- Explain the purpose of strategy formulation and describe the
two levels of strategic alternatives.
LEARNING OBJECTIVES When you have finished studying this
chapter, you should be able to: 3.
- Explain the role of strategy implementation.
- Explain the importance of evaluation and control of strategy
and its implementation.
- Discuss the importance of strategic planning.
LEARNING OBJECTIVES(contd) When you have finished studying this
chapter, you should be able to: 4. Strategic Planning
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- The process by which an organization makes decisions and takes
actions that affect its long-run performance.
-
- Strategic plan:the output of the strategic planning process
that provides direction by defining its strategic approach to
business.
-
- Is a central concept of strategic planning.
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- Can only be sustained if an organization continues to out
innovate competitors.
5. Figure 4.1 The Strategic Management Process 6. Key Terms
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- Overall, long-run management.
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- The process of making plans and decisions that are focused on
long-run performance.
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- A comprehensive plan that provides overall direction for the
organization.
7. Key Terms (contd)
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- An assessment of the external and internal environments of an
organization.
-
- Establishing strategy and tactics necessary to achieve the
mission of the organization.
8. Benefits of Strategic Planning
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- Organizations that plan strategically outperform those that do
not.
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- Identification of organizational and environmental conditions
that may create problems in the long run.
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- Better decisions as a result of the group decision-making
process.
-
- Participation in the planning process increases participants
understanding of how the plan is to be implemented and their
willingness to change.
9. Strategic Analysis: Assessment in a Global Environment
- The purpose of strategic analysis is to evaluate the present
situation of the organization.
-
- Analysis requires three primary activities:
-
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- Assessing the mission of the organization
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- Internal environmental analysis
-
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- External environmental analysis
10. Figure 4. 2The Components of Strategic Analysis 11. SWOT
Analysis
- The combined internal and external strategic analysis is
referred to as aSWOTanalysis.
12. Assessing the Mission of an Organization
- The mission of an organization reflects its fundamental reasons
for existence.
- Though mission statements vary greatly, every mission statement
should describe three primary aspects of an organization:
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- The organizations primary products or services.
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- The organizations primary target markets.
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- The organizations overall strategy for ensuring long-term
success.
13. Key Terms
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- Direction of the organization toward success in the long
run.
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- The ability to predict opportunities and threats in the
future.
-
-
- A vision statement is intended to guide the organization in the
future, what the organization wants to become or where it wants to
be.
-
-
- Vision is derived from a careful analysis of the external and
internal environments
14. Table 4. 1Ford Motor Companys Mission Statement Ford Motor
Company Our Vision To become the worlds leading consumer company
for automotive products and services. Our Mission We are a global
family with a proud heritage passionately committed to providing
personal mobility for people around the world. We anticipate
consumer need and deliver outstanding products and services that
improve peoples lives. Our Values Our business is driven by our
consumer focus, creativity, resourcefulness, and entrepreneurial
spirit. We are an inspired, diverse team. We respect and value
everyones contribution. The health and safety of our people are
paramount. We are a leader in environmental responsibility. Our
integrity is never compromised and we make a positive contribution
to society. We constantly strive to improve in everything we do.
Guided by these values, we provide superior returns to our
shareholders. Source:Ford Motor Co. website (http://www.ford.com),
30 June 2005. 15. External Analysis
- Purpose of External Analysis
-
- To identify aspects of the external environment that represent
either anopportunityfor or athreatto the organization.
-
-
- Those environmental trends on which the organization can
capitalize and improve its competitive position.
-
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- Conditions that jeopardize the organizations ability to prosper
and its competitive position in the long term.
16. External Analysis Factors
-
- Includes environmental forces that are beyond the influence of
the organization and over which it has no (or little) control.
-
- Includes environmental forces that are within the organizations
operating environment and may be influenced to some degree.
-
- The economic components of the general environment.
17. Figure 4. 3Dimensions of the Global External Environment 18.
Table 4.2 Sample Issues in the General Environment Economic
Inflation rates Unemployment rates Wage rates Exchange rates Stock
market fluctuations Per capita income GDP trends Economic
development Sociocultural Norms and values Demographic trends Age
groups Regional shifts in population Household composition
Diversity Ecological awareness Life expectancy Technological
Spending on research and development Internet availability
Availability of information technology Production technology trends
Productivity improvements Telecommunications infrastructure
PoliticalLegal Tax laws Environmental protection International
trade regulation Antitrust regulation Federal Reserve policy
Intellectual property and patent laws 19. External Environment
20. Figure 4. 4Five Forces Model of Industry Analysis
Source:Adapted from Michael E. Porter, How Competitive Forces Shape
Strategy,Harvard Business Review57, no. 2 (March/April 1979):
137145. 21. Internal Analysis
- Purpose of Internal Analysis
-
- To identify the assets, resources, skills, and processes that
represent eitherstrengthsorweaknessesfor the organization.
-
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- Aspects of the organizations operations that represent
potentialcompetitive advantagesordistinctive competencies .
-
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- Areas that are in need of improvement.
22. Table 4. 3 Internal Factors for Analysis MarketingOperations
Product, serviceProductivity Brand equityQuality Market
researchFacilities Sales forceSupply chain Market shareTechnology
Size of marketPurchasing Distribution channelsSafety
PriceEcological issues Promotion Finance Profitability Revenue
Asset utilization Debt/leverage Equity Per unit costs Profit
margins Cash flow Human Resources Skills Selection Training and
development Leadership Motivation Communication Rewards Other
Factors Organization culture Overall control Information system
Information technology Organizational structure 23. Strategy
Formulation
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- Where does the organization want to be?
- Steps in strategy formulation include:
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- Casting the vision for the organization.
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- Identifying strategic alternatives.
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- Evaluating and choosing strategies that provide a competitive
advantage and optimize the performance of the organization in the
long term.
24. Casting the Vision for the Organization
- The development of a vision for the organization is central to
any strategic plan.
-
- Avision statementdescribes what the organization aspires to be
in the long run.
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- Amission statementdescribes the products, services, and target
markets for an organization.
25. Setting Strategic Goals
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- Are very broad statements of the results that an organization
wishes to achieve in the long run.
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- Relate to the mission and vision of the organization and
specify the level of performance that the organization wants to
achieve.
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- SpecificMeasurableAchievableResults-orientedTimeline
26. Identifying Strategic Alternatives
-
- Are developed in light of the organizational mission
considering its strengths, weaknesses, opportunities, and threats,
and its vision and strategic goals.
-
- Stability strategies:intended to ensure continuity in the
operations and performance of the organization.
-
- Growth strategies:designed to increase the sales and profits of
the organization.
-
- Retrenchment strategies:designed to reverse negative sales and
profitability trends.
27. Identifying Strategic Alternatives(contd)
-
- The primary ways in which an organization can compete in its
chosen market(s).
-
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- Cost leadership:competing on the basis of price.
-
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- Differentiation:offering products or services that are
differentiated from those of competitors in some way.
-
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- Focus:avoiding competing in broad markets by targeting a narrow
market segment.
-
-
- Best-Cost provider:competing on the basis of both low-cost and
differentiation.
28. Figure 4. 5Generic Strategies Matrix 29. Evaluating and
Choosing Strategy
-
- Provides a mechanism for evaluating an organizations portfolio
of business, products and services.
-
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- Boston Consulting Group (BCG) Growth-Share matrix
-
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- General Electric Industry Attractiveness Business Strength
matrix
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- A decision matrix provides a method for evaluating alternative
strategies according to the criteria that the organizations leaders
consider more important.
30. Strategy Implementation: Focusing on Results
- The best-formulated strategy is virtually worthless if it
cannot be implemented effectively.
-
- A direct, specific, clear strategy must be developed.
-
- Strategies must be established at all levels of the
organization to align each part of the organization with the
organizations overall mission and goals.
-
- The organizations system must be designed to ensure that
strategies can be institutionalized in its culture.
31. Evaluation and Control: Achieving Effectiveness and
Efficiency
-
- Involves monitoring the implementation of the strategic plan to
ensure quality and effectiveness in terms of organizational
performance.
-
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- Are designed to identify changes in the external environment or
internal operations that affect organizations ability to fulfill
its mission and meet its strategic goals.
-
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- Compare the actual performance of the organization to its
planned performance.
32. Information Technology and Strategic Planning
-
- The increasing availability of information technology has had a
tremendous impact on the ability of organizations to develop
effective strategic plans.
-
- Many organizations fail to use the information made available
by management information systems to ensure effective strategic
planning.
33. Institutionalizing Strategy
- Every member, work group, department, and division of the
organization must subscribe to and support the organizations
strategy with its plans and actions.
-
- There must be a good fit between the chosen strategy and:
-
-
- the organizational structure
-
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- the organizational culture
-
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- the organizational leadership
34. The Importance of Organizational Culture
-
- Refers to the shared, emotionally charged beliefs, values, and
norms that bind people together.
-
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- Helps people make sense of the systems within an
organization.
-
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- Guides the behavior of and gives meaning to the members of the
organization.
35. Organizational Leadership
- The Importance of Leadership
-
- If an organization is to implement its strategy effectively, it
must have the appropriate leadership.
-
- Without effective leadership, an organization is unlikely to
realize the benefits of its selected strategy.
36. Implications for Leaders
- Understand the realities of the external environment in which
you operate.
- Understand the importance of a thorough and accurate assessment
of the current situation of the organization.
- A plan will be only as good as the analysis upon which it is
based.
- Strategic vision is critical for ensuring a common strategic
direction for the organization.
- Make sure that the mission statement is a working document that
provides direction for the members of the organization.
37. Implications for Leaders (contd)
- Strategic goals serve as targets for achievement. Make sure
that they are specific, measurable, results oriented, and have a
established time for their achievement.
- Strategy should be designed to provide the organization with a
distinctive competitive advantage in the long run.
- A strategic plan is meaningless if it is not implemented
well.
- Provide for evaluation and control to be sure that operations
are on track for accomplishment of the organizations mission.