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Strategic Management
Strategic Planning& Competitiveness
Art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve its objectives.
Strategic Management – Defined
• What kind of business should we become?
• Are we in the right fields• Are there new competitors• What strategies should we
pursue?• How are our customers
changing?
Adapting to Change – Key Strategic Management
Questions
Mission Statement –What is our business?
Vision Statement –What do we want to become?
Key Terms
Mission Statements: Examples
To Make People Happy
To Explore the Universe and Search for Life and to Inspire the
Next Generation of Explorers
NASA
Walt Disney
Does a good job of expressing the core values of the organization. Also conveys unique
qualities about the organization.
Too vague and and unclear. Need more descriptive information about what makes the
organization special.
Matt H. Evans, [email protected]
Vision
• How the organization wants to be perceived in theHow the organization wants to be perceived in the future – what success looks like future – what success looks like
• An expression of the desired end state An expression of the desired end state • Challenges everyone to reach for somethingChallenges everyone to reach for something
significant – inspires a compelling futuresignificant – inspires a compelling future• Provides a long-term focus for the entireProvides a long-term focus for the entire
organization organization
Opportunities & Threats (External)
Key Terms
Analysis of Trends:
• Economic
• Social
• Cultural
• Demographic/Environmental
• Political, Legal, Governmental
• Technological
• Competitors
Strengths & Weaknesses (Internal)
Key Terms
Typically located in functional areas of the firm
• Management
• Marketing
• Finance/Accounting
• Production/Operations
• Research & Development
• Computer Information Systems
Means by which long-term objectives are achieved
Key Terms
Strategies
1-11
What is Strategy?
• An integrated and coordinated set of commitments & actions designed to exploit core competencies and gains and gain a
competitive advantage.
• A series of goal direceted decisions & actions
• Strategies is use of engagements for the object.
© 2006 by Nelson, a division of Thomson Canada Limited.
1-12
What is Strategy in different literature?
“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.
• All successful strategies are based on understanding of the organization’s competitive environment.
• The competitive environment is complex, and includes anything that can affect the organization’s position relative to that of its competitors.
• Competitive enviroment is related with organizations’ products, services and organizational resources.
1-13
Why Strategy is important?
• To change on organizations needs
• Burning platform
• Mission
• Vision
• Leadership
• Strategic management
• Political management
1-14
Mission & Vision
Strategy Formulation
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection
Matt H. Evans, [email protected]
Assessment Model:S W O T
Assessment
External Assessment: Marketplace, competitor’s, social trends, technology,
regulatory environment, economic cycles .
External Assessment: Marketplace, competitor’s, social trends, technology,
regulatory environment, economic cycles .
Internal Assessment: Organizational assets, resources, people, culture, systems,
partnerships, suppliers, . . .
Internal Assessment: Organizational assets, resources, people, culture, systems,
partnerships, suppliers, . . .
• Easy to Understand• Apply at any
organizational level
• Needs to be Analytical and Specific
• Be honest about your weaknesses
Good Points Possible Pitfalls
SWOT SWOT
Strategic Manegement
involves;
• Organization goals
• Goal- oriened action
• Related decision and actions
• Internal strengts
• External oppotunities and threats
© 2006 by Nelson, a division of Thomson Canada Limited.
1-17
Strategic manegement
Makes;
• Planning
• Organization
• Implementing
• Controlling
© 2006 by Nelson, a division of Thomson Canada Limited.
1-18
Why is SM important?
• Given everyone a role
• Makes a difference in performance levels
• Provides systematic approach to uncertainities
• Coordinates & focuses employess
© 2006 by Nelson, a division of Thomson Canada Limited.
1-19
Basic of Strategic ManegementThere are four aspects are too important;• Interdisciplinary• External focus competition• Internal factors• Future direction
And make: Situation analysis (analsis current situation)
Formulation of strategies (decision strategies)
Implementation of Strategies (putting strategies in action)
Evaluation of strategies( evaluating & changing)
1-20
ExternalAudit
InternalAudit
Long-TermObjectives
Generate,Evaluate,
SelectStrategies
ImplementStrategies:
Mgmt Issues
ImplementStrategies:Marketing,Fin/Acct,R&D, CIS
Measure &Evaluate
Performance
Mission&
Vision
Comprehensive strategic management model
© 2006 by Nelson, a division of Thomson Canada Limited.
1-22
The Strategic Management Process
The full set of commitments, decisions, The full set of commitments, decisions, and actions required for a firm to and actions required for a firm to
achieve strategic competitiveness and achieve strategic competitiveness and earn above-average returns.earn above-average returns.
© 2006 by Nelson, a division of Thomson Canada Limited.
1-24
Strategic Management and Strategic Competitiveness
Knowledge objectives1. Define strategic competitiveness, competitive
advantage and above average returns.
2. Describe the 21st century competitive landscape and explain how globalization and technological changes shape it.
3. Use the industrial organization (I/O) model to explain how firms can earn above average returns.
4. Use the resource-based model to explain how firms can earn above-average returns.
© 2006 by Nelson, a division of Thomson Canada Limited.
1-25
Strategic Management and Strategic Competitiveness
Knowledge objectives – continued…
5. Describe strategic intent and strategic mission and discuss their value.
6. Define stakeholders and describe their ability to influence organizations.
7. Describe strategists’ work.
8. Explain the strategic management process.
1. Adapting to change in external trends, internal capabilities and resources
Achieving Sustained Competitive Advantage
2. Effectively formulating, implementing & evaluating strategies
Strategy Implementation
Annual Objectives
Policies
Employee Motivation
Resource Allocation
Strategy Evaluation
Internal Review
External Review
Performance Metrics
Corrective Actions
© 2006 by Nelson, a division of Thomson Canada Limited.
1-29
Desired Strategic Outcomes
Strategic CompetitivenessAchieved when a firm successfully formulates and implements a value-creating strategy.
Occurs when a firm develops a strategy that competitors are not simultaneously implementing.
Sustained Competitive Advantage
Above-Average ReturnsReturns in excess of what an investor expects to earn from other investments with similar risk.
Provides benefits which current and potential competitors are unable to duplicate.
1-30
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.
© 2006 by Nelson, a division of Thomson Canada Limited.
1-31
Intended, Emergent and Realized Strategies
© 2006 by Nelson, a division of Thomson Canada Limited.
1-32
Alternative Models of Superior Returns
Industrial Organization Model
The External Environment
An Attractive Industry
Strategy Formulation
Assets and Skills
Strategy Implementation
Superior Returns
Resource-BasedModel
Resources
Capabilities
Competitive Advantage
An Attractive Industry
Strategy Implementation
Superior Returns
OIOI
© 2006 by Nelson, a division of Thomson Canada Limited.
1-33
Four Attributes of Resources and Capabilities (Competitive Advantage)
The firm is organized appropriately to The firm is organized appropriately to obtain the full benefits of the resources in obtain the full benefits of the resources in order to realize a competitive advantage. order to realize a competitive advantage.
ValuableValuable Allow the firm to exploit opportunities or Allow the firm to exploit opportunities or neutralize threats in its external neutralize threats in its external environment.environment.
RareRare Possessed by few, if any, current and Possessed by few, if any, current and potential competitors.potential competitors.
Costly to imitateCostly to imitate When other firms cannot obtain them or When other firms cannot obtain them or must obtain them at a much higher cost.must obtain them at a much higher cost.
Organized to be Organized to be exploited exploited
Res
ourc
es a
nd
Res
ourc
es a
nd
Cap
abil
itie
sC
apab
ilit
ies
© 2006 by Nelson, a division of Thomson Canada Limited.
1-34
Core CompetenciesCore Competencies
Resources and capabilities that meet these four criteria become a source
of:
ValuableValuable
RareRare
Costly to imitateCostly to imitate
Organized to be Organized to be exploitedexploited
Core CompetenciesCore Competencies
Res
ourc
es a
nd C
apab
ilit
ies
Res
ourc
es a
nd C
apab
ilit
ies
1-35
Core Competencies are the basis for a firm’s
Competitive Competitive advantageadvantage
Strategic Strategic competitivenesscompetitiveness
Ability to earn Ability to earn above-average above-average
returnsreturns
Core CompetenciesCore Competencies
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CEO’s ranking of business importance
1. A strong & well thought out strategy
2. Maximizing customer satisfaction & loyalty
3. Business leadership, quality products & services
4. Concern for consistent profits
5. Strong & consistent profits
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21st Century Values
• Flexibility
• Speed to market
• Innovation
• Integration
• Handling challenges from constantly changing conditions
• Hypercompetition
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The Global Economy
One in which goods, services, people, skills, and ideas move freely across geographic
borders
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World competitiveness ratings
1-40
Technology and Technological Change
• Increasing rate of technological change and diffusion
Perpetual innovation
• The information agePersonal computers, cellular phones, artificial
intelligence, virtual reality, massive databases, electronic networks, e-business
• Increasing knowledge intensityInformation, intelligence, expertise, strategic
flexibility.
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Internally focused, it is the leveraging of a firms resources, capabilities, and
core competencies to establish the firms goals in the competitive
environment.
Strategic Intent
Together, strategic intent and strategic mission yield the insights required to formulate and implement strategies. Externally focused, it is a statement of a
firms unique purpose and the scope of it’s operations in product and market
terms.
Strategic Mission
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Stakeholders
1-43
Organizational strategists
Top level managers, executives, top management team, or general managers
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Organizational culture
A complex set of ideologies, symbols and core values that influence how the firm conducts it’s business.
Copyright 2007 Prentice Hall Ch 1 -45
If we want to talk about Strategic Management and
strategic plan:
We can say;In essence, the strategic plan is a company’s game plan and strategic manegement is related with these game plan .
(c) Macmillan & Tampoe
2001
46
Figure 1The Four Elements of Strategic Management
Strategic
Thinking
The
Strategy
Formulation
Process
StrategicAction
TheStrategyImplementationProcess
StrategyContent
CONTEXT
(c) Macmillan & Tampoe
2001
47
Figure 2 - The Strategy Formulation Process
StrategicAssessment
StrategicIntent
StrategicChoice
(c) Macmillan & Tampoe
2001
48
Programme& Project
Management
ChangeLeadership
Culture Change
Process Change
Structure ChangeTransformed
Enterprise
Figure 3 - The Strategy Implementation Process
(c) Macmillan & Tampoe
2001
49
Figure 4 - Our complete model
StrategyContent
CONTEXT StrategicAction
Strategic
Thinking
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Predicting Outcomes of Strategic Decisions
1. Define the profit pool’s boundaries.2. Estimate the pool’s overall size.3. Estimate the size of the value chain.4. Reconcile the calculations.
The strategic management process calls for disciplined approaches to the development of competitive advantage.
Copyright 2007 Prentice Hall Ch 1 -51
Strategic Management achieves a firm’s success
through integration ––
Management
MIS
Production/OperationsFinance/Accounting
Marketing
Research & Development
Thanks…
22.02.2011
1-52