Unit i sm

Strategic Management

UNIT-I NMBA 041DR. ZIAUL HASSAN BAKHSHI

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Strategic Management– The set of decisions and actions used to formulate and

implement specific strategies that will achieve a competitively superior fit between the organization and its environment so as to achieve organization goals

Strategy– The general plan of action that describes resource

allocation and other activities for dealing with the environment and helping the organization attain its goals

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Strategy Formulation and Implementation

Strategy Formulation– The integrating knowledge of the environment, vision, and

mission with the core competence in such a way as to achieve synergy and create customer value

Strategy Implementation– Putting strategy into action by adjusting various parts of

the organization and directing resources to accomplish strategic goals

Definition of Strategic Management

Strategic management consists of the analysis, decisions, and actions an organization undertakes in order to create and sustain competitive advantages (Dess, Lumpkin, & Eisner, Strategic Management: Creating Competitive Advantage, 3rd Ed., p. 9).

© 2006 by Nelson, a division of Thomson Canada Limited.

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Important definitions

RiskAn investor’s uncertainty about the economic gains or losses resulting from a particular investment.

Returns equal to what an investor expects from other investments with similar amount of risk.

Average returns

Strategic management processThe full set of committee's decisions and actions required for a firm to achieve strategic competitiveness and earn above average returns.


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The Strategic Management Process

The full set of commitments, decisions, and actions required for a firm to achieve strategic competitiveness and earn above-average returns.


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The Strategic Management Process


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What is Strategy?

• An integrated and coordinated set of commitments & actions designed to exploit

core competencies and gains and gain a competitive advantage.


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What is Strategy?“A unified, comprehensive, and integrated plan designed to ensure that the basic objectives of the enterprise are achieved.” (Glueck, 1980:9)

“The pattern or plan that integrates an organization’s major goals, policies, and action sequences into a cohesive whole.” (Quinn, 1980)

“A good strategy… neutralizes threats and exploits opportunities while capitalizing on strengths and avoiding or fixing weaknesses.” (Barney, 1997:17)

“A pattern of resource allocation that enables firms to maintain or improve their performance.


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Intended, Emergent and Realized Strategies

Prentice Hall, Inc. ©2009 1-11

Strategy Formulation: the development of long-range plans for the effective management of environmental opportunities and threats in light of organizational strengths and weaknesses (SWOT)

Basic Elements of Strategic Management


Mission- the purpose or reason for the organization’s existence

Vision- describes what the organization would like to become

Objectives- the end results of planned activity



Strategies- form a comprehensive master plan that states how the corporation will achieve its mission and objectives– Corporate– Business– Functional

Policies- the broad guidelines for decision making that links the formulation of a strategy with its implementation


Definition of Strategic Management

• Analysis – Strategic goals (vision, mission, strategic objectives)– Internal and external environment of the firm

• Decisions– What industries should we compete in?– How should we compete in those industries?

• Actions– Allocate necessary resources– Design the organization to bring intended strategies to

reality

Mintzberg’s Views of Strategy

• Plan - consciously intended course of action• Ploy - maneuver to outwit opponent• Pattern - consistency in behavior• Position - location in environment• Perspective - way of perceiving the world

Strategic Management Process• Analysis

– Hierarchy of goals– Analysis of external and internal environments

• Formulation– What business(es) should we be in?– For each, what is the basis for competitive advantage

(low cost, differentiation, focus)?• Implementation

– Functional tactics– Culture and organization structure

Hierarchy of Goals

Coherence in Strategic DirectionCompany vision• Massively inspiring• Overarching• Long-term• Driven by and evokes passion• Fundamental statement of the

organization’s– Values– Aspiration– Goals

Company vision

Hierarchy of Goals

Company vision

Coherence in Strategic Direction

Mission statements• Purpose of the company• Basis of competition and

competitive advantages• More specific than vision• Focused on the means by

which the firm will compete

Mission statements

Hierarchy of Goals

Company vision

Mission statements

Coherence in Strategic Direction

Strategic objectives• Operationalize the mission

statement• Measurable, specific,

appropriate, realistic, timely, challenging, resolve conflicts that arise, and yardstick for rewards and incentives

Strategic objectives

Levels of Strategy

Corporate-level

Functional-level

Business-level

Operations Marketing Finance...

Manager

Walt DIsney Pictures Touchstone Pictures...

Studio Entertainment

Disneyland...

Parks & Resorts

Disney Stores...

Consumer Products

ABC Network...

Media Networks

CEODIsney Corporation

Copyright Jeff Dyer, 2001


Strategy Profit

Strategy: goal and set of policies designed to achieve competitive advantage in a particular marketplace

Competitive Advantage: ability to transform inputs into goods andservices at a maximum profit on a sustained basis, better than competitors

Firm Competitive Advantage

ShareholderValue

Introduction to Strategic Management

Strategic Management Process

• Strategic Inputs: Internal and External Scanning• Strategic Actions: Formulation and implementation of

strategy• Strategic Outcomes: Above, at or below average

returns


From Organizational Vision to Tactical Steps• Define the Organization:

– Vision – Mission Statement

• Understand the Operating Environment– External Environment (Threats and Opportunities)– Internal Conditions (Strengths and Weaknesses)

• Determine Strategic Alternatives • Formulate Strategy (long term)• Implement Strategy through Tactics (short term)


SWOT Analysis

External Analysis – EFAS Matrix (Chapter

3)

Internal Analysis - IFAS Matrix (Chapter

4)

Strategy Implementation

Organizing (Chapter 8)

Staffing (Chapter 9)

Evaluating (Chapter 10)

Strategy FormulationAlternative

Strategies – TOWS Matrix (Chapter 5)Corporate Strategy

(Chapter 6)Functional Strategy

(Chapter 7)

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Basic Elements of the Strategic Management Process

Evaluationand

Control

StrategyImplementation

EnvironmentalScanning

StrategyFormulation

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Identify current mission and strategic goals

Conduct competitive analysis:•strengths•weakness•opportunity•threats

Develop specific strategies:•corporate•business•functional

carry out strategic plans

maintain strategic control

assess organisational factors

assess environmental factors

Strategy implementationStrategy formulation

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The Evolution of Strategic ManagementThe Evolution of Strategic Management

DOMINANTTHEME

MAINISSUES

CONCEPTS&

TECHNIQUES

IMPLEMENT-ATION

1950s 1960s Early-mid Late1970s Late 1980s Late 1990s1970s early 1980s early 1990s early 2000s

Budgetary Corporate Corporate Analysis of Quest for Strategicplanning & planning strategy industry & competitive innovationcontrol competition advantage The “New

Economy”Financial control Planning growth Diversifica- Positioning Competitive Innovation &

ion advantage knowledge

Budgeting Forecasting & Portfolio Analysis of Resource Dynamic project appraisal investment planning. industry & analysis. sources of

planning Synergy competition Case advantagemarket competences Knowledgeshare management

cooperation

Emphasis on Rise of Diversifi- Industry/market Restructuring Virtual orga-financial corporate planning cation. selectivity. BPR. nization.management departments Quest for Active asset Refocusing Alliances

& formal global management Outsourcing Quest forplanning market share critical mass

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The Levels of Strategy

R&D

HR

Finance

Production

M ktg/Sales

D ivision A

R&D

HR

Finance

Production

M ktg/Sales

D ivision B

R&D

HR

Finance

Production

M ktg/Sales

D ivision C

C orpo rateH eadquarte rsCorporate - General Electric

Business - Home Appliances

Functional - e.g., Production

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Corporate Strategy

• At the corporate level, value creation can occur if the individual parts of a firm are integrated into a coherent whole.

• Corporate strategy is the way a company creates value through the configuration and coordination of its multi-market activities.

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Eclectic Definitions of Strategy and Strategic Management

• Mintzberg’s 5 P’s of Strategy:

– Planning– Ploys (non-credible strategies)– Pattern (“emerging strategy”)– Position (firm “dynamic fit” with

environment)– Perspective (Ideology and culture)

Prentice Hall, Inc. © 2006 1-31

Strategic Management Defined

Set of managerial decisions and actions that determines the long-run performance of a firm.


Basic Concepts of Strategic Management

4 Phases of Strategic Management

1. Basic financial planning2. Forecast-based planning3. Externally-oriented planning4. Strategic management



Basic Elements of the Strategic Management Process


Strategy Formulation

Mission Statement

• Purpose/reason for organization• Promotes shared expectations• Communicates public image• Who we are; what we do; what we aspire

to



Hierarchy of Strategy


Goals & Objectives

Corporate Goals/Objectives

– Profitability (net profit)– Growth– Resource utilization (ROE, ROI)– Market leadership



3 Types of Strategy

– Corporate strategy

– Business strategy

– Functional strategy



Corporate Strategy

– Stability– Growth– Retrenchment



Business Strategy

– Competitive strategies

– Cooperative strategies



Functional Strategy

– Technological leadership

– Technological followership


Hambrick and Fredrickson – Good Strategy

5 Elements of Good Strategy

1. Arenas2. Vehicles3. Differentiators4. Staging5. Economic logic

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Mission Statements

•Enduring statement of purpose•Distinguishes one firm from another•Declares the firm’s reason for being

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The Bellevue Hospital, with respect, compassion, integrity, and courage, honors the individuality and confidentiality of our patients, employees, and community, and is progressive in anticipating and providing future health care services.

Mission Statement Examples

-- The Bellevue Hospital

Ch 2 -44

Importance of Mission

MissionResource Allocation

Unanimity of Purpose

Organizational Climate

Focal point for work structure

Benefits from a strong mission

Ch 2 -45

Social Policy & Mission

Social policy should be integrated in all strategic-management activities

Mission should convey the social responsibility of the firm

Ch 2 -46

Mission Elements

CustomersMarkets

Employees

PublicImage

Self-Concept Philosophy

SurvivalGrowthProfit

ProductsServices

Technology

Vision/Mission Statements• Statements that explain who we are

– Type of organization– Products/services– Needs we fill

• Statements that explain our direction, our purpose, our reason for being– What difference do we make?

• Statements that explain what makes us unique– Values– People– Combination of products and services

Business Vision Statement

A statement that clearly defines the firm’s “reason” for being in business– Should significantly stretch the resources and

capabilities of the farm– Should inspire people in the organization to

achieve things they never thought possible– Should unite people in the organization toward

the pursuit of one common goal

Business Vision Statement• A guiding philosophy• Consistent with organizational value• Influenced by the strengths and weaknesses

of the business

Components of a Vision Statement• Core ideology

– Core Values - timeless guiding principles– Core Purpose - reason for being

• Envisioned future– Big Hairy Audacious Goals (BHAG) -

clearly articulated goals – Vivid description - a graphic description of what

success and the future will be like• Recognition of service to stakeholders

– Owners/creditors– Employees– Customers

Mission Statements

• The mission statement of an organization is normally short, to the point, and contains the following elements:– Provides a concise statement of why the

organization exists, and what it is to achieve;– States the purpose and identity of the organization;– Defines the institution's values and philosophy; and– Describes how the organization will serve those

affected by its work.

Vision vs. Mission

• The vision is more broad and future oriented – the goal on the horizon

• The mission is more focused – how you will get to the horizon

Examples of Vision StatementsBen & Jerry’s

Product: To make, distribute, and sell the finest quality all natural ice cream and related products in a wide variety of innovative flavors made from Vermont dairy products.

Economic: To operate the Company on a sound financial basis of profitable growth, increasing value for our shareholders and creating career opportunities and financial rewards for our employees.

Social: To operate the Company in a way that actively recognizes the central role that business plays in the structure of society by initiating innovative ways to improve the quality of life of a broad community: local, national, and international.

Vision• A future view of what an organization

would like to become– Be the hospital of choice in the region– Be national recognized as a best

research center in the field– Etc…

IS 531 : Lecture 3 54

Goals and Objectives• Goal—explains how the mission will be

realized ; describes what is to be accomplished

• Objectives—specify how and when goals will be met


Strategy• Strategy is a comprehensive plan that

states how its mission, goals, and objectives will be achieved.

• Understanding the endpoint (mission, goals, and objectives) is critical to the development of the plan.


Strategic Planning• Led by upper management• Requires participation by middle managers• Lower-level managers are responsible for

supporting the planning process by providing information and insight


Strategic Planning• Chief Executive Officer( CEO)• Chief Information Officer (CIO) helps

management see the role of IT in meeting goals

• Chief Financial Officer (CFO) looks at costs/benefits

• Chief Medical Informatics Officer (CMIO)• Chief Nursing Informatics Officer (CNIO)• Chief Strategy Officer (CSO) oversees the

detailed plan




SWOT Analysis


SWOT Analysis …


Strategic Planning in Healthcare Informatics

• Strengths, Weaknesses, Opportunities, Threats (SWOT) analysis

• Determine available options• Provide directions for all IT initiatives,

establish priorities, eliminate all duplications, ensure the wise use of IT resources


Planning for HIS• Realize need for change.• Prioritize requirements.• Develop a master plan that fits into the

organization’s plan.• Review/revise plan periodically to keep

up with changing needs.• Identify project

champion/manager/teams.


Definition: • Globalization is the growing integration of the world’s

economy. It is suggested that economic decision taken in one part of the world will affect other parts of the worlds so businesses need to base their business decision-making on what is happening in the world market rather than the national market.

• There are three important features or aspects of globalization, which can be seen as follows:

1. The increasing importance o f international trade2. More and more multinational companies 3. More and more businesses thinking globally about

their strategy.

Globalization and Business

-What Is Globalization?

What Is Globalization?

• Globalization is a process of closer integration and exchange between different countries and peoples worldwide.

• Made possible by:

– Falling trade and investment barriers

– Advanced telecommunications

– Reduced transportation costs

– Importance of MNEs and FDIs

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What Is Globalization? • Multinational Enterprise (MNE)

– Deploys resources and capabilities in the procurement, production, and distribution in at least two countries• Less than 1% of firms, BUT employ 19% of U.S. workforce

– 74% of private sector R&D spending

• Foreign Direct Investment (FDI)– Investments in value chain activities abroad

• Global Strategy– To sustain a competitive advantage – Competing against foreign and domestic companies around

the world10–66

Why Global?• Gain access to a larger market

– Capitalize on market potential, such as China, India, and emerging economies

• Gain access to low-cost input factors– Labor, natural resources, technology, logistics

• Managing corporate risk

• Leverage core competencies

• Develop new competencies– Location economies– Unique locational advantages

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STRATEGY HIGHLIGHT 10.1 Stages of Globalization

• Globalization 1.0: 1900–1941

Only sales and distribution took place overseas

• Globalization 2.0: 1945–2000Duplicating business functions overseas

• Globalization 3.0: 21st centuryMNEs become global collaboration networks

(see Exhibit 10.2)

Four Global Strategies

• International strategy– Leveraging home-based core competencies – Selling the same products or services in both domestic

and foreign markets• Example: Selling Starbucks coffee internationally

• Localization (product differentiation) strategy – Maximize local responsiveness via a

multi-domestic strategy– Consumers will perceive them to be domestic companies

• Example: Nestlé’s customized product offerings in international markets

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Four Global Strategies

• Global standardization (cost leadership) strategy – Economies of scale and location economies – Pursuing a global division of labor based on best-of-

class capabilities reside at the lowest cost• Example: Lenovo’s R&D in Beijing, Shanghai, and Raleigh;

production center in Mexico, India, and China

• Transnational strategy– Combination of localization strategy (high

responsiveness) with global standardization strategy (lowest cost position attainable)

• Example: German multimedia conglomerate Bertelsmann : Caterpillar’s earth-moving equipment


Impact of Globalization:

Globalization: the integration and internationalization of markets and corporations


Impact of Environmental Sustainability:

Environmental Sustainability: the use of business practices to reduce a company’s impact on the natural, physical environment


• Regulatory risk• Supply chain risk• Product and

technology risk

• Litigation risk• Reputational risk• Physical risk

Risks of Climate Change include:

Impact of Environmental Sustainability


What Makes a Strategic Decision?

Strategic decision making focuses on the long-run future of the organization

Characteristics of strategic decision making include:• Rare• Consequential• Directive


Mintzberg’s Modes of Strategic Decision Making

• Entrepreneurial• Adaptive• Planning• Logical incrementalism (Quinn)


Strategic Decision Making Process:

1. Evaluate current performance results

2. Review corporate governance

3. Scan and assess the external environment

4. Scan and assess the internal corporate environment

5. Analyze strategic (SWOT) factors

6. Generate, evaluate and select the best alternative strategy

7. Implement selected strategies

8. Evaluate implemented strategies




Strategic audit provides a checklist of questions, by area or issue, that enables a systematic analysis to be made of various corporate functions and activities
