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FACULTY OF BUSINESS
Nurturing professionals with high moral and ethical values
Assoc. Prof. Dr. Mohd Fuad Mohd [email protected]
019-332 6629
26th.January 2013
Process of Crafting and Executing
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Without a strategy theWithout a strategy theorganization is like aorganization is like a
shi without a ruddershi without a rudder
Benefits of Strategic Thinking and aBenefits of Strategic Thinking and a
Strategic Approach toStrategic Approach to a Companya Company
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going around ingoing around incircles.circles.
HELPS A COMPANY PREPARE FOR THEFUTURE!
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5 Tasks of Strategic Management5 Tasks of Strategic Management
Formulate
Strategy
to Achieve
Goals &
Objectives
Set
Goals &
Objectives
Develop
Vision
and
Mission
Implement
and
Execute
Strategy
Task11 Task 2 Task 3 Task 4 Task 5
Monitor,
Evaluate,
and Take
Corrective
Action
3
Improve/
Change
Revise as
Needed
Revise as
Needed
Improve/
Change
Recycle
as Needed
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The Roadmap What Does the Strategy-Making, Strategy-Executing process
Entail?
Phase 1: Developing a Strategic Vision & Mission
Phase 2: Setting Goals & Objectives
Phase 3: Formulating &Crafting a Strategy
Phase 4: Implementing and Executing the Strategy
Phase 5: Evaluating Performance and Initiating CorrectiveAdjustments
Leading the Strategic Management Process
Corporate Governance: The Role of the Board of Directors inthe Strategy-Making, Strategy-Executing Process
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Developing a Strategic Vision
Involves thinking strategically about
Future direction of company
Phase 1Phase 1
ytechnology to improve
Current market position
Future prospects
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Statement about a companys long-term direction
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Key Elements of a Strategic Vision
Delineates managements aspirations for the business
Provides a panoramic view of where we are going
Charts a strategic path
Is distinctive and specific to a particular organization
Avoids use of generic language thats u an or ng an a cou
apply to most any company
Captures the emotions of employees and steers themin a common direction
Is challenging and a bit beyond a companys immediate reach
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Key Elements of a Strategic Vision
Delineates managements aspirations for the business
Provides a panoramic view of where we are going
Charts a strategic path
Is distinctive and specific to a particular organization
Avoids use of generic language that is dull and boring and thatcould apply to most any company
Captures the emotions of employees and steers themin a common direction
Is challenging and a bit beyond a companys immediatereach
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Role of a Strategic Vision
A well-conceived, well-communicated visionfunctions as a valuable managerial tool to Give the organization a sense of direction, mold
organizational identity, and create a committed
enterprise Illuminate the com an s directional ath
Provide managers with a reference point to Make strategic decisions
Translate the vision into hard-edged objectives and strategies
Prepare the company for the future
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Characteristics of an Effectively Worded Vision Statement
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Common Shortcomings in Company Vision Statements
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Microsoft Corporation(Old Vision)
Example: Vision StatementExample: Vision StatementExample: Vision StatementExample: Vision Statement
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A co m p u t er o n e v er y
desk , i n ever y hom e
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Microsoft Corporation(New Vision)
Example: Vision StatementExample: Vision StatementExample: Vision StatementExample: Vision Statement
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Crea te ex per iences th a tcom b ine t he m ag i c o f so f tw a r e
w i t h t h e p ow er o f I n t er n et
serv ices across a w or ld o fdev ices
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Strategic Vision vs. Mission
Astrategic visionconcerns a firmsfuturebusiness path - wherewe are going
Markets to be pursued
Mission statement
Focuses on itspresentbusiness purpose - whowe are and what we do
Defines a companys
uture pro uct mar etcustomer/technology focus
Kind of companymanagement is
trying to create
business
Current product and serviceofferings
Customer needs andcustomer groups beingserved
Geographiccoverage
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Characteristics of a Mission Statement
Identifies boundaries of a companys current businessand says something about
Present products and services
Types of customers served
Geographic coverage
Whowe are,
Whatwe do, and
Whywe are hereA good mission statement describes a companys business
makeup and purpose in language specific enough to give the
companyits own identity and distinguish it from
other enterprises in the same or other industries!
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Key Elements of a Mission Statement
A complete mission statement should cover three things: Customer needs being met
What is being satisfied
Customer groups or markets being served
Who is being satisfied What the or anization does in terms of business
approaches, technologies used, and activities performed)to satisfy the targeted needs of the targeted customergroups How customer needs are satisfied
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Microsoft Corporation
Example: Mission StatementExample: Mission StatementExample: Mission StatementExample: Mission Statement
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Enab l in g peop le and bu s inessest h r o u g h o u t t h e w o r l d t o r e al ize
th e ir f u l l po t en t i a l
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"."
More Mission Statements
Otis Elevator
Our missionis to provide any customer a means ofmoving people and things up, down, and sideways
over short distances with hi her reliabilit than
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any similar enterprise in the world.
Our businessis renting cars. Our missionis total
customer satisfaction.
Avis Rent-a-Car
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Mobilizing support for a new vision entails
Reiterating basis for the new direction
Addressing employee concerns head-on
Calming fears
Overcoming Resistance
Lifting spirits
Providing updates and progressreports as events unfold
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Crystallizes an organizations long-term direction
Reduces riskof rudderless decision-making
Creates a committed enterprisewhere rganizationalmembers enthusiastically pursue efforts to make thevision a realit
A Clear Strategic Vision Results..
Provides a beacon to keep strategy-related actionsof all managers on common path
Helps an organizationprepare for the future
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Setting Goals & Objectives Purpose ofsetting objectives
Converts vision into specific performance targets
Creates yardsticks to track performance
Focused on results
Phase 2Phase 2
Well-stated objectives are
Quantifiable
Measurable
Time-based
Contain a deadline for achievement
Detailing how much ofwhat kindof performance by when
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Importance of Setting Stretch Objectives
Objectives should be set at levels that stretch anorganization to
Perform at its full potential, delivering the bestpossible results
Exhibit more urgency to improve its business position
Be intentional and focused in its actions
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Types of Objectives Required
Financial Objectives Strategic Objectives
Outcomes focused
on improvingfinancial
Outcomes focused on
improving competitivestren th and market
per ormance
standing
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Winning an 20% market share within 5 years
Achieving lower overall costs than rivals
Overtaking key competitors on product performance orquality or customer service within 2 years
Derivin 60% of revenues from sale of new roducts
Examples: Strategic Objectives
introduced in past 5 years
Being the recognized industry leader in product innovationand/or technological know-how
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Achievinggood financial performance is not enough Current financial results are lagging indicatorsreflecting
results ofpast decisions and actions good profitability nowdoes not translate into stronger capability for deliveringeven better financial results later
However, setting well-chosen strategic objectives and achieving them
signals
Strategic Performance & Financial Performance
Growing strength in the marketplace
A company that is growing competitively stronger is developingthe capability for better financial performance in the yearsahead Good strategic performance is a leading indicatorof a companys
capability to deliver improvedfuture financial performance
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Short and Long-Term Objectives
Short-term objectives
Targets to be achieved soon
Milestones or steps for reaching long-range performance
targets Long-term o jectives
Targets to be achieved within 3 to 5 years
Calls for actions now that will permit reaching targetedlong-range performance later
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Concept of Strategic Intent
A company exhibits strategic intent when itrelentlessly pursues an ambitious strategicobjective, concentrating the full force of its
resources and com etitive actions onachieving that objective!
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Characteristics of Strategic Intent
Indicates firms intent to making quantum gains incompeting against key rivals and to establishing itself as awinner in the marketplace, often against long odds
Involves establishing agrandiose performance targetposition but then devoting the firms full resources andenergies to achieving the target over time
Entails sustained, aggressive actions to take marketshare away from rivals and achieve a much strongermarket position
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Objectives Are Needed at All Levels
1. First, set organization-wide objectivesand performance targets
2. Next, set business and
The objective-settingprocess is more top-downthan bottom up
product line objectives
3. Then, establishfunctionaland departmentalobjectives
4. Individualobjectives are established last
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Formulating & Crafting a Strategy Strategy-making involves astute entrepreneurship Actively searching for opportunities to do new things
or
Actively searching for opportunities to do existing things
Phase 3Phase 3
n new or e er ways
Strategizing involves Developing timely responses to happenings in the
external environmentand
Steering company activities in new directions dictated byshifting market conditions
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Crafting a Good Strategy
Developing a winning strategy involves
Diagnosing the direction and force of the market changesunderway and making timely strategic adjustments
Good strategyrequires good business entrepreneurship:
Figuring out how to outwit and outmaneuver competitors
Pursuing ways to strengthen the firms competitive capabilities
Proactively trying to out-innovate rivals
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Astute Entrepreneurship
Masterful strategies come partly (maybe mostly)by doing things differently from competitors
where it counts Innovating more creatively
Being more efficient
Adapting faster
Rather than running with the herd!
Good strategy-making is inseparable
from good entrepreneurshipone cannot exist without the other!
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Five Strategic Management TasksFive Strategic Management Tasks
Parties InvolvedParties Involved
CEO
Senior CorporateExecutives
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Subsidiaries & BusinessUnits
Functional & OperationManagers
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Crafting Strategies - Parties Involved
1. CEO (chief executive officer)
Has ultimate responsibility for leading the strategy-making process
Functions as strategic visionary and chief architect of strategy
2. Senior executives
Typically have influential roles in fashioning those strategy
3. Managers of subsidiaries, divisions, geographic regions,plants, and other important operating units (and, often, keyemployees with specialized expertise)
Some pieces of the strategy are best orchestrated by on-the-scenecompany personnel with detailed familiarity of the piece of thebusiness they are in charge of running
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CorporateStrategy
Business Strategies
Two-Way Influence
Corporate-Level Managers
Division Managers
Levels of StrategyLevels of Strategy--Making in a Diversified CompanyMaking in a Diversified Company
Functional Strategies
Operating Strategies
Two-Way Influence
Two-Way Influence
OperatingMgrs
Functional Mgrs
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Levels of StrategyLevels of Strategy--Making in aMaking in a
SingleSingle--Business CompanyBusiness Company
BusinessStrategy
Two-Way Influence
Executive-Level Managers
Two-Way Influence
Functional Strategies
Operating StrategiesOperatingManagers
Functional Managers
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Networking in Crafting ProcessNetworking in Crafting Process
Level 1
Level 2
Business-LevelMana ers
CorporateLevel
Goals/Objectives
Corporate-wideVision &Mission
CorporateLevel
Strategy
BusinessLevel
Goals/Objs
BusinessLevel
Mission
BusinessLevel
Strategies
Two-Way Influence Two-Way Influence Two-Way Influence
Corporate-Level Managers
Level 3FunctionalManagers
Level 4Plant Managers,Lower-LevelSupervisors
Functional
Objectives
Functional
Goals
Functional
Strategies
OperatingObjectives
OperatingGoals
OperatingStrategies
Two-Way Influence Two-Way Influence Two-Way Influence
Two-Way Influence Two-Way Influence Two-Way Influence
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Factors Shaping the Choice of Company Strategy
External FactorsSocial,political,
regulatory
and
community
factors
Competitive
conditions
and industry
attractiveness
Company
opportunities
and threats to
companys
well-being
Determine
Companys Strategic Situation
Craft
the
strategy
Internal Factors
Resource
strengths,
capabilities,
and
weaknesses
Influences of
key
executives
Shared values
and company
culture
and
evaluate
alternatives
of internal
and
external
factors
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Strategy Making - a Collaborative Process?
The job is often way too big for one person or a smallexecutive groupmany strategic issues are complex or cutacross multiple areas of expertise
The more a companys operations cut across different
products, industries and geographic areas, the more thatheadquarters executives must delegate strategy-making
authority to down-the-line managers in charge of particularfunctions and operating units
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Uniting the Companys Strategy-Making Effort
A firms strategy is a collection of initiativesundertaken by managers at all levels in theorganizational hierarchy
Pieces ofstrategy shouldfit together like the pieces of a
puzzle ey approac es use to un y a strateg c n t at ves nto
a cohesive, company-wide action plan Effectively communicate companys vision, objectives,
and major strategies to all personnel
Diligently review lower-level strategies for consistencyand support of higher-level strategiesrevise as needed
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A Strategic Plan
Its strategic visionand business mission
A
Its strategy
Its strategic andfinancial objectives
Company s
Strategic Plan
Consists of
2-4040
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Implementation and Execution
Operations-orientedactivity aimed at performing corebusiness activities in a strategy-supportive manner
Tougherand more time-consuming than crafting
Phase 4Phase 4
Key tasks include
Improving the efficiency with which the strategy is being
executed
Showing measurable progress in achieving both operatingexcellence and targeted results
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Building a capable organization
Allocating resources to strategy-critical activities
Establishing strategy-supportive policies
Instituting best practices and programs for continuous
improvement
What Does Implementing and Executing the
Strategy Involve?
nsta ng n ormat on, commun cat on, an operat ngsystems
Motivating people to pursue the target objectives
Tying rewards to achievement ofresults
Creating a strategy-supportive corporate culture
Exerting the leadership necessary to drive the process forwardand keep improving
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Crafting and implementing a strategy is not a one-timeexercise
Customer needs and competitive conditions change
New opportunities appear; technology advances; any number of other
Evaluation and Corrective Adjustments
Phase 5Phase 5
outside developments occur
One or more aspects of executing the strategy may not be going well
New managers with different ideas take over
Organizational learning occurs All these trigger a need for corrective actions and
adjustments on an as-needed basis
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Taking actions to adjust to the march of events tends toresult in one or more of the following
Altering long-term direction and/or redefining the mission/
vision
Monitoring, Evaluating, and Adjusting as Needed
Raising, lowering, or changing performance objectives
Modifying the strategy
Improving strategy execution
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Leading the Strategic Management Process
Diverse leadership challenges include Exerting take-charge leadership
Being a spark plug for change and action
Ramrodding things through
Achieving results
various styles and approaches
Being a hard-nosed authoritarian
Being a perceptive listener
Being a compromising decision maker Delegating authority to people closest to the action
Being a coach
Assuming a highly visible role in guiding the process
Making brief ceremonial appearances
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1. Stay on top of whats happening
2. Make sure company has a good strategic plan
3. Put constructive pressure on company to achieve goodresults
Leadership Capabilities
. performance
5. Lead development of stronger core competencies andcompetitive capabilities
6. Display ethical integrity and lead social responsibilityinitiatives
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Exercise strong oversight to ensure five tasks ofstrategic management are executed to benefit
Shareholders or
Corporate Governance: Strategic Role of
Board of Directors
Make sure executive actions are not onlyproperbutalso alignedwith interests of stakeholders
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Obligations of Board of Directors
Be inquiring critics and overseers Evaluate caliberofsenior executivesstrategy-
making and strategy-executing skills
Institute a compensation plan for top executives
rewarding them for results that serve interests of
Stakeholders and
Shareholders
Oversee a companysfinancial accounting and
reporting practices
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Board members have a veryimportant oversight role in
the strategy-making, strategy-executing process!
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