Strategic Management

by Syed Kashan Ali shah

Strategic Management Defined

The set of managerial decisions and actions that determines the long-run performance of a corporation. It includes:

1. environmental scanning (internal & external)2. strategy formulation3. strategy implementation4. evaluation and control

It focuses on integrating management, marketing, finance/accounting, production/operations, research and development, and computer information systems to achieve organizational success.

Benefits of Strategic Management

• Clearer sense of strategic vision• Sharper focus on what is strategically

important• Improved understanding of rapidly changing

environment

Three Key Strategic Questions

• Where is the organization now?• If no changes are made, where will the

organization be in one, two, five or ten years? Are the answers acceptable?

• If the answers are not acceptable, what specific actions should management undertake? What are the risks and payoffs involved?

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

Environmental Scanning

Monitoring, evaluating and disseminating information from the environment to key people within the corporation.

Scan via SWOT analysis:Look for opportunities/threats in the external environment

Look for strengths/weaknesses in the internal environment

Strategic Analysis• The process of conducting research on the

business environment within which an organization operates and on the organization itself, in order to formulate strategy.

• Why use it? To take advantage of the path of least

resistance to achieve your goal. • When to use it?

When you are planning to make a change in your organization, and you need to determine the best path to take.

TOOLS of Strategic Analysis

• A number of tools are used in the process of strategic analysis, including PEST, SWOT analysis, and Michael Porter's five forces model.

PEST Analysis

• PEST analysis stands for "Political, Economic, Social, and Technological analysis" and describes a framework of macro-environmental factors used in the environmental scanning component of strategic management.

PEST Analysis• Political factors, are how and to what

degree a government intervenes in the economy. Specifically, political factors include areas such as tax policy, labour law, environmental law, trade restrictions, tariffs, and political stability.

• Economic factors include economic growth, interest rates, exchange rates and the inflation rate. These factors have major impacts on how businesses operate and make decisions. For example Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy.

• Social factors include the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. Trends in social factors affect the demand for a company's products and how that company operates. For example, an ageing population may involve a smaller and less-willing workforce (thus increasing the cost of labor).

• Technological factors include ecological and environmental aspects, such as R&D activity, automation, technology incentives and the rate of technological change. They can determine barriers to entry, minimum efficient production level and influence outsourcing decisions.

SWOT Analysis

• SWOT Analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieving that objective.

Porter five forces analysis

• The threat of substitute products

• The threat of the entry of new competitors

• The intensity of competitive rivalry

• The bargaining power of customers

• The bargaining power of suppliers

Case Study SWOT Analysis of U-fone

Strengths Weaknesses1. Network Coverage2. International Roaming3. GPRS Roaming4. Licensed to Azad Kashmir

& Northern Areas5. Quality Coverage6. Value added services7. Lower Prices8. Second largest market

share

1. Behind on excessive demand2. Poor organizational structure3. Unfair cost deduction4. Stagnant profitability

5. Lack of franchises6. Lack of innovative services7. Network coverage8. Competition9. Internal problems

SWOT Analysis of U-fone

Opportunities Threats1. Expanding Globally2. 3,4G3. Publicity & Marketing4. Developing new value

added services5. Developing new franchise

in remote areas.

1. Government interference2. Pension payouts3. Increased heath care cost4. Tough competition5. Economic problem6. Technology viber, whats

app, hangout, skype, facebook

PEST Analysis of U-fone

Political Analysis Economical Analysis1. Pakistan

Telecommunication Corporation Act, 1991.

2. Environmental Concerns 3. Internet Regulation 4. Concerns over Radiation

from Mobile Telephones 5. Converged Regulation

1. Fluctuations in the Economy

2. Overall Economy of Pakistan

PEST Analysis of U-fone

Social Analysis Technological Analysis1. Shift towards the

Information Society 2. Mobile Society3. Increasing Need for

Communications 4. Internet at Home 5. Changing Population

Demographics

1. Wireless and Mobile Communications

2. Union 3. Residential VoIP(voice

over internet protocol)4. Real-Time and On-

Demand Communications

Conclusion

strategic analysis provides us a clear view of the company's business operations, their objectives, goals and how they achieve their targets. The SWOT, PEST, Value Chain analysis and Porter’s five forces model helps in measuring the success or failure of the strategies implemented in the company.

Strategic Planning

1. Identify mission and purpose2. Identify goals3. Identify objectives—specific, measurable4. Implement objectives to meet goals5. Evaluate process.

Strategy formulation• Strategic formulation is a combination of three main

processes which are as follows:1. Performing a situation analysis, self-evaluation and

competitor analysis: both internal and external; both micro-environmental and macro-environmental.

2. Concurrent with this assessment, objectives are set. These objectives should be parallel to a timeline; some are in the short-term and others on the long-term. This involves crafting vision statements, mission statements, overall corporate objectives, strategic business unit objectives, and tactical objectives.

3. These objectives should, suggest a strategic plan. The plan provides the details of how to achieve these objectives.

Strategy Formulation

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

Composed of:

• Mission• Objectives• Strategies• Policies

Mission

The purpose or reason for the corporation’s existence. It tells who the company is, what they do as well as 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.

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

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.

Strategy Implementation

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.

Strategy implementation• Allocation and management of sufficient resources (financial,

personnel, operational support, time, technology support)• Establishing a chain of command or some alternative structure

(such as cross functional teams) • Assigning responsibility of specific tasks or processes to specific

individuals or groups • It also involves managing the process. This includes monitoring

results, comparing to benchmarks and best practices, evaluating the effectiveness and efficiency of the process, controlling for variances, and making adjustments to the process as necessary.

• When implementing specific programs, this involves acquiring the requisite resources, developing the process, training, process testing, documentation, and integration with (and/or conversion from) legacy processes.

Evaluation and Control

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

Strategy evaluation• Measuring the effectiveness of the organizational

strategy, it's extremely important to conduct a SWOT analysis to figure out the strengths, weaknesses, opportunities and threats (both internal and external) of the entity in question.

• In corporate strategy, strategic options are evaluated against three key success criteria:

1. Suitability (would it work?) 2. Feasibility (can it be made to work?) 3. Acceptability (will they work it?)