Basic Concepts Day 1

7/28/2019 Basic Concepts Day 1

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STRATEGIC MANAGEMENT

OVERVIEW OF THE

STRATEGIC

MANAGEMENT PROCESS


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The term strategic management refers to themanagerial process of forming a strategic vision,

setting objectives, crafting a strategy, implementingand executing the strategy,

--and then over time initiating whatever corrective

adjustments in the vision, objectives, and executionare deemed appropriate.

Thomson and Strickland


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Strategic Management is the full set ofcommitments, decisions, and actionsrequired for a firm to achieve strategiccompetitiveness and earn above averagereturns.

Hitt, Ireland, and Hoskisson


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Strategic Management is the process through whichorganizations analyze and learn from their internal

and external environments,- establish strategic direction, create strategies thatare intended to achieve established goals, and

- execute those strategies, all in an effort to satisfy

key organizational constituencies, which are calledstakeholders.

Harrison and St. John


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Art & science offormulating,implementing, andevaluating,cross-

functional decisions that enable an

organization to achieve its objectives

Fred David



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Basic Concept

A companys Strategyconsists of the combination of

competitive moves and business approaches that

managers employ to please customers, compete

successfully, and achieve organizational objectives.(Thomson and Strickland)

Strategy

Integrated and coordinated set of commitments and actions

designed to exploit core competencies and gain a

competitive advantage. (Hitt, etc.)


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Basic Concept

Excellent execution of an excellent strategy

is the best test of managerial excellenceand the most reliable recipe for

organizational success.


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BUSINESS MODEL

A companys business model deals with

whether the revenue-cost profit economics ofits strategy demonstrate the viability of the

enterprise as a Whole..

Managements plan for making money in a

particular business.


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STRATEGY AND BUSINESS MODEL

A companys business model is more narrowly

focused--

Strategyrelates to a companys competitive and

business approaches (irrespective of the financial

and competitive outcomes it produces) while

A business modeldeals with whether the

revenues and costs flowing from the strategy

demonstrate business viability.Thomson and Strickland


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An Overview of the Strategic Management Process

The Five Tasks of Strategic Management

1 2 3 4 5

Developing a

Strategic VisionAnd Business

Mission

Improve/

Change

As Needed

Revise

As Needed

SettingObjectives

Crafting a

Strategy toAchieve the

Objective

Implementing

And ExecutingThe Strategy

Evaluating Performance,

Monitoring New Develop-ments, and Initiating

Corrective Adjustments

Revise

As Needed

Recycle to

Tasks 1, 2, 3, or

4 as Needed

Improve/

Change

As Needed


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Strategic Management Process

Dynamic & continuous

More formal in larger organizations

Strategic Management Model


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STRATEGIC VISION

A strategic vision is a roadmap of a

companys futureproviding specifics about technology and customer focus,

the geographic and product markets to be

pursued,

the kind of company that management istrying to create.

the capabilities it plans to develop, and


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STRATEGIC INTENT

Strategic intentis the leveraging of a firms

resources, capabilities, core competences toaccomplish the firms goals in the competitive

environment.


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MISSION STATEMENT

A companys mission statement is typically

focused on its present business scopewho we are and what we do.

Mission statements broadly describe an

organizations present capabilities, customer focus,activities and business makeup.


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Vision Statement

What do we want to become?

Mission StatementWhat is our business?

Vision and Mission Statements


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OBJECTIVES

Objectivesare an organizations

performance targetsthe results andoutcomes it wants to achieve.

They function as yardsticks for tracking an

organizations performance and progress.


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STRATEGIC AND FINANCIAL OBJECTIVES

Strategic objectives relate to outcomes that

strengthen an organizations overall businessposition and competitive viability.

Financial objectives relate to financial

performance targets management hasestablished for the organization to achieve.


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Specific results that an organizationseeks to achieve in pursuing its basicmission

Long-term means more than one year

Long-Term Objectives


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Long-Term Objectives

Essential for ensuring the firms success

Provide direction Aid in evaluation

Create synergy

Reveal priorities

Focus coordination

Provide basis for planning, organizing,

motivating, and controlling


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Short-term milestones that firms mustachieve to reach long-term objectives

Annual Objectives


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Means by which annual objectives willbe achieved

Policies


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STRATEGIC PLAN AND IMPLEMENTATION

A strategic plan consists of an

organizations mission and future direction,near-term and long-term performance

targets, and strategy.

Strategy implementation putting a freshlychosen strategy into action.


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STRATEGY EXECUTION

Strategy executionsupervising the ongoingpursuit of strategy, making it work, improving the

competence with which it is executed, and showingthe measurable progress in achieving the targetedresults.

Strategy execution is action-oriented, a make-it-happen process. The key tasks are competencebuilding, budgeting, policy-making, motivating,culture-building, and leadership.


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Nature of Competition: Basic concepts

Strategic Competitiveness

Achieved when a firm formulate & implements a value-

creating strategy

Competitive Advantage (CA)

Implemented strategy that competitors are unable to

duplicate or find too costly to imitate

Above Average Returns Returns in excess of what investor expects in comparison to

other investments with similar risk


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Nature of Competition: Basic concepts(Contd)

Risk

Investors uncertainty about economic gains/losses resultingfrom a particular investment

Average Returns

Returns equal to what investor expects in comparison to

other investments with similar risk

Strategic Management Process (SMP)

Full set of commitments, decisions and actions required for a

firm to achieve strategic competitiveness and earn above

average returns


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TEN SCHOOLS OF STRATEGY FORMATION

1. The Design School strategy formation

as a process of conception.

2. The Planning School strategy formation

as a formal process.

3. The Positioning School strategy as an

analytical process.

Minzberg, 1998


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TEN SCHOOLS OF STRAGTEGY FORMATION

4. The Entrepreneurial School - strategy formationas a visionary process.

5. The Cognitive School strategy formation as amental process.

6. The Learning School strategy formation as anemergent process.

7. The Power School strategy formation as aprocess of negotiation.

Minzberg, 1998


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TEN SCHOOLS OF STRAGTEGY FORMATION

8. The Cultural School strategy formation as acollective process.

9. The Environmental School strategy formationas a reactive process.

10. The Configuration School strategy formation

as a process of transformation.

Minzberg, 1998


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FIVE Ps For Strategy

1. Strategy is a Plan (intended)a direction, a guide, acourse of action into the future, a patch to get from here tothere.

2. Strategy is a Pattern (realized)that is consistency inbehavior over time.

3. Strategy is a Position (looking down)locating ofparticular products in particular markets.

4. Strategy is a Perspective (looking up)an organizationsfundamental way of doing things.

5. Strategy is a Ploy (maneuver)a specific maneuverintended to outwit an opponent or a competitor.

Minzberg, 1998


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ADVANTAGES AND DISADVANTAGES OF STRATEGY

1. Strategy sets direction. Advantage: The main role of strategy is to chart the course

of an organization in order for it to sail cohesively through

its environment. Disadvantage: Strategic direction can also serve as a set of

blinders to hide potential dangers.

2. Strategy focuses effort. Advantage: Strategy promotes coordination of activity.

Disadvantage: Goupthink

Minzberg, 1998


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ADVANTAGES AND DISADVANTAGES OF STRATEGY

3. Strategy defines the organization. Advantage: Enables people to understand their

organization and to distinguish it from others.

Disadvantage: Leads to stereotyping with loss of richcomplexity of the system

4. Strategy provides consistency. Advantage: Reduces ambiguity and provide order, and

facilitate action.

Disadvantage: Loss of creativity.

Minzberg, 1998


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STRATEGY: AREAS OF AGREEMENT

1. Strategy concerns both organization andenvironment.(inseparability of organization and

environment)2. The substance of strategy is complex..)(Because change brings about novel combinationsof circumstances)

3. Strategy affects overall welfare of the

organization.4. Strategy involves issues of both content(actions taken)and process. (how decided).


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ALTERNATIVE PERSPECTIVES ON STRATEGY

DEVELOPMENT

Situation Analysis

Environmental Determinism

Principle of Enactment

Deliberate Strategy

Emergent Strategy

Stakeholder Management

Resource-Based View


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DEVELOPMENT

Situation AnalysisThe traditional process fordeveloping strategySWOT analysis. The results form the

basis for developing missions, goals, and strategies.

Environmental DeterminismDetermine which

strategy best fit environmental forces.

Principle of EnactmentThe firm can create its

environment through alliances, advertising, lobbying, etc.


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DEVELOPMENT (contd)

Deliberate StrategyStrategy is deliberate.Managers plan to pursue an intended strategy.

Emergent StrategyManagers learn as they go.Strategy emerges from a stream of decisions.


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DEVELOPMENT (contd)

Stakeholder ManagementOrganization is viewedfrom the perspective of its internal and external constituencies thathave a stake in the organization.

Resource-Based ViewThe firm is seen as a bundle ofresources. The important function is to acquire and manageresources to achieve competitive advantages leading to superior

performance.


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Basic Concepts Day 1

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