Lecture 1 managent tingement consul

8/22/2019 Lecture 1 managent tingement consul

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THE STRATEGICMANAGEMENT

PROCESS

STRATEGIC MANAGEMENT

Specific way to manage the company

aimed at adjusting the companys

activities to future changes in the

environment and taking up decisions

focused on the long term.

Mirosaw JarosiskiKatedra Zarzdzania w Gospodarce, SGH


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Managements job is not to see

the company as it is.but as it

can become.

John W. Teets

CEO, Greyhound Corporation

The McGraw-Hill Companies, Inc., 1998Irwin/McGraw-Hill

Katedra Zarz dzania w Gospodarce SGH

To think Strategically

means:

# Strive to recognize opportunities and threats many

years ahead

# Apply methods of analysis and planning facilitating

creation and implementation of the strategic plans

# Do not get used to the existing plans and be ready to

alter the way the company acts in line with the

changing vision and the changing environment


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STRATEGIC MANAGEMENT

Focus on the future Taking into account various time horizons

Adjustment of the resources to the level oforganizational goals

Comprehensive approach to the organizationintegrating its functions and areas of activity

Very strong consideration of external andinternal conditions

Taking into account various stakeholders


6 Mirosaw JarosiskiKatedra Zarzdzania w Gospodarce, SGH

Stakeholders

Individuals or groups of people having a stake in

organisations actions who can affect the organisation

(who make demands/file requests towards the

organisation and have the means to execute them)


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Stakeholders

MixedInternal External

Managers Employees Committees

Labour Unions Employees families Local environment Partners in the

network

Consumers Buyers Suppliers Banks Shareholders Regulatory

bodies Government

Ministries


Stakeholders Analysis

Identification of main stakeholders

Stakeholders distance to organisationassessment

Stakeholders power assessment

Conclusions for the organisation:

Whom to keep in touch with on everydaybasis?

Whom to invite to cooperate?

Whom to defend against?


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Stakeholders Analysis

HOSPITAL

Energytraders

Competitors

StateSanitary

Inspection LabourUnions

Chambersof differentprofessions

Foundingauthority

Localmedia

CountyCouncil

NationalHealthFund

PatientsThe Minister

of Health

Pharmaceuticalcompanies

Othersuppliers

SocialInsuranceInstitution

TaxOffice

SupremeAuditOffice

10

The McGraw-Hill Companies, Inc.Irwin/McGraw-Hill

Craft a

Strategy

to Achieve

Objectives

Set

Objectives

Develop a

Strategic

Vision

& Mission

Implement

& Execute

Strategy

Evaluate &

Make

Corrections

Improve/Change

Revise asNeeded

Revise asNeeded

Improve/Change

Recycleas Needed

Task 1 Task 2 Task 3 Task 4 Task 5

The Five Tasks

of Strategic Management


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Developing a Vision and Mission

Indicates the long-term coursemanagement has charted forthe organization

Charts a strategic path

Our futuredirectionwill be . . .

The First Task of Strategic Management

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Developing a Vision and Mission

A strategic visiondescribes the route a companyintends to take in developing and strengtheningits business.


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Developing a Strategic Vision

A strategic visionreflectsaspirations of managers

Presents a desired futurestate of the company

Provides a panoramic view of wherewe are going

Captures the emotions ofemployees and steers them

in a common direction Is challenging and a bit beyond a

companys immediate reach

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Developing a Strategic Vision

A strategic visionis aroadmap of a companysfuture --

Charts a companys future

strategic course

Defines the business

makeup in distant future

Provides a company with its

own special identity and path

to follow


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Examples: Vision Statement

McDonalds Corporation

McDonalds vision is to dominate the global

foodservice industry. Global dominance means

setting the performance standards for customer

satisfaction while increasing market share and

profitability through our Convenience,

Value, and Execution Strategies.

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Our vision: Getting to a billion connected computers

worldwide, millions of servers, and trillions of dollars

of e-commerce.

Intel


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eBayProvide a global trading platform where practically

anyone can trade practically anything.

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Examples of Strategic Visions

WyethOur vision is to lead the way to a healthier world.

By carrying out this vision at every level of ourorganization, we will be recognized by our

employees, customers, and shareholders as thebest pharmaceutical company in the world,

resulting in value for all. We will achieve this by: Leading the world in innovation by linking pharmaceutical,

biotech, and vaccines technologies

Making quality, integrity, and excellence hallmarksof the way we do business

Attracting, developing, and motivating the best people

Continually growing improving our business


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SPECIFIC QUESTIONS THAT HELPFORM STRATEGIC VISION

What business are we in now?

What business do we want to be in?

What environmental scenarios are possible?

How will technology impact our industry?

What new or different customer needs should wemove to satisfy?

What new or different buyer segments should weconcentrate on?

What new geographic or product markets should we

pursue? What kind of company should we try to become?

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Definitions: Broad - Narrow Scope

Broad Definition

Beverages

Childrens products

Furniture

Global maildelivery

Travel & tourism

Narrow Definition

Soft drinks

Toys

Wrought iron lawn

furniture

Overnight packagedelivery

Ship cruises in theCaribbean


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WHAT MAKES A GOOD VISION!

A strategic vision exists only as words and has noorganizational impact

unless and until it wins the commitmentof company personneland energizes them to act

in ways thatmove the company along the intended strategic path!

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Communicating the Vision

A strategic vision should be widelyshared among all employees

When all employees are committed tofirms long-term direction

Daily execution of strategy is improved

Better choices are maid


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DEVELOPING MISSION

An organizations MISSION

Reflects managements vision ofwhat firm seeks to do & become

Provides clear view of what firm istrying to accomplish for itscustomers

Indicates intent to stake out aparticular business position

COMPANY'S MISSION IS ADDRESSED

INTERNALLY EXTERNALLY

Managers

Directors

Employees

Local Society

Competitors

Suppliers

Clients

Investors

COMPANY'S MISSION

Katedra Zarzdzania w Gospodarce, SGH


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Missions vs. Strategic Visions

A missionstatement focuses

on currentbusiness

activities

Business(es)

company is in

now

Customer needs

currently beingserved

A strategic visionconcerns a firms

futurebusiness path

The kind of

company it is

trying to become

Customer needs to

be satisfied in

the future

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Examples: Mission Statements

Otis Elevator

Our missionis to provide any customer a meansof moving people and things up, down, andsideways over short distances with higher

reliability than any similar enterprise in the world.

Our businessis renting cars. Our missionis

total customer satisfaction.

Avis Rent-a-Car


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Examples: Mission Statements

The missionof the American Red Cross

is to improve the quality of human life;

to enhance self-reliance and concern for

others; and to help people avoid,

prepare for, and cope with emergencies.

American Red Cross

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Intels Strategic Inflection Points

Prior to mid-1980s

Focus on memory chips

Starting in mid-1980s

Abandon memory chip business and

Become supplier ofmicroprocessors to PC industry

Make PC central appliance inworkplace and home

Be undisputed leader in driving

PC technology forward 1998

Shift focus from PC technology tobecoming the preeminent buildingblock supplier to the Internet Economy


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Examples: Mission andVision Statements

Intel

To be the preeminent building blocksupplier to the new computing

industry worldwide.

1980

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Examples: Mission Statement

Intels core missionis being the building block

supplier to the Internet economy and spurring

efforts to make the Internet more useful.

Being connected is now at the center of

peoples computing experience. We are

helping to expand the capabilities of the PC

platform and the Internet.

Intel1998


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Strategic Inflection Point

Business declines

Business goes on to new heights

Inflection point

Old vision

New vision

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Business Mission:

McDonalds

Serving a limited menu of hot, tasty food quicklyin a clean, friendly restaurant for a good value toa broad base of fast-food customers worldwide.

McDonalds serves approximately 30 million customers dailyat 20,000-plus restaurants in over 90 countries.


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Good mission statement

A good mission statement describes a companys

business makeup and purposein language

specific enoughto give the company its own

identityand distinguish it from

other enterprisesin the same or other industries!

Mission Statement of the Warsaw School of

Economics Warsaw School of Economics is the oldest economic school in Poland.

Striving for European approach of its academic activity, it combinesmore than a 100-year-old tradition with todays activity and futurechallenges.

Teaching and bringing up the School aims at transferring up-to-dateknowledge, solid working skills, and social responsibility. Its scientificresearch is guided by the respect for truth and the benefit of the society.

The School educates and makes research in the field of economy andmanagement on the basis of the achievements in social science.

Our graduates, equipped with up-to-date general and specialistknowledge, contribute substantially to economic, social and political lifeat home and abroad. Together with professors, administrative staff,students and the representatives of societies affiliated with the Schoolthey create its image, promoting its outputs and realising its mission.



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Capturing the Vision in a Slogan

FedEx

Satisfying worldwide demand for fast,

time-definite, reliable distribution.

Home Depot

Helping people improve the

places where they live and work.

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Craft a

Strategy

to Achieve

Objectives

Set

Objectives

Develop a

Strategic

Vision

& Mission

Implement

& Execute

Strategy

Evaluate &

Make

Corrections

Improve/Change

Revise asNeeded

Revise asNeeded

Improve/Change

Recycleas Needed


The Five Tasks



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Setting Objectives

Establishing OBJECTIVES

Converts vision into specific

performance targets

Creates yardsticks to track performance

Pushes firm to be inventiveand focused

The Second Task of Strategic Management

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Types of Objectives Required

Outcomes focused onimproving a firms

financialperformance

Outcomes focused onimproving a firmscompetitivenessandits long-term businessposition

Financial Objectives Strategic Objectives

$


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Example: Financial Objectives

To achieve a 20% return on equity.

To achieve a net sales growth rate of 10% per year.

To maintain an average earnings per share growth rateof 15% per year.

To maintain total debt-to-total capital at 40% or less.

To pay out 25% to 35% of net income in dividends.

To make selective acquisitions which complement our

current businesses and can enhance our overall returns. To dispose of those parts of our businesses which do

not or cannot generate adequate returns or do not fitwith our business strategy.

McCormick & Company

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Increase sales to 4.2 million cars and trucksby 2008 (up from 3 million in 2003)

Cut purchasing costs 20% and halve thenumber of suppliers

Have zero net debt

Maintain a return on invested capital of 20%

Maintain a 10% or better operating margin

Example: Financial Objectives


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Example: Nikes Strategic Objectives

Protect and improve Nikes position as thenumber one athletic brand in America.

Build a strong momentum in growing fitness market.

Intensify the companys effort to develop products thatwomen need and want.

Explore the market for products specifically designedfor the requirements of maturing Americans.

Direct and manage the companys internationalbusiness as it continues to develop.

Continue the drive for increased margins throughproper inventory management and fewer,better products.

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Strategic or Financial Objectives --

Which Take Precedence? Pressures for better short-term financial

performancebecome pronounced when

Firm is struggling financially

Resource commitments for new strategicinitiatives may hurt bottom-line for several years

Proposed strategic moves are risky

A firm that consistently passes up opportunities to

strengthen its long-term competitive position Risks diluting its competitiveness

Risks losing momentum in its markets

Can hurt its ability to fend off rivals challenges


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The Concept of Strategic Intent

A company exhibits STRATEGIC INTENT

when it relentlesslypursues an ambitious

strategic objective and concentrates its

competitive actions and energies on

achieving that objective!

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The Concept of Strategic Intent

Indicates firms intent to stakeouta particular position overthe long-term

Serves as a rallying cry foremployees to do their very best

Signals deep-seatedcommitmentto winning

Entails sustained, aggressiveactionsto take market shareaway from rivalsand achieveamuch stronger market position


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Short-Term andLong-Term Objectives

Short-Termobjectives Targets to be achieved soon (1 - 2 years)

Serve as stair stepsfor reaching long-range performance

Indicate speedof progress & level ofperformance being aimed for

Long-Termobjectives Targets to be achieved within longer

period (3 to 5 years)

Calls for actions nowthat will permit

reaching targeted long-rangeperformance later

Pushmanagers to weigh impact oftodays decisions on future performance

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3 Rules for Establishing Objectives

Objectives should representcommitment to achievespecific performancetargetsstated in quantifiableterms

They must contain a deadlinefor

achievement Objectives should be challenging

but attainable


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The Home Depots Objectives

Be the number one destination for professionalcontractors, whose business accounted forroughly 30 percent of 2006 sales

Improve in-stock positions so customers can findand buy exactly what they need

Deliver differentiated customer service and theknow-how that our customers have come toexpect from The Home Depot

Repurchase $22.5 billion of outstanding shares

during 2008 Open 55 new store locations with 5 store

relocations in 2008

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The Objectives at Yum! Brands

(KFC, Pizza Hut, Taco Bell)

Open 100 KFC restaurants in Vietnam by 2010

Expand Taco Bell restaurant concept to Dubai, India,Spain and Japan during 2008 and 2009

Increase number of international restaurant locationsfrom 12,000 in 2007 to 15,000 in 2012

Increase operating profit from international operationsfrom $480 million in 2007 to $770 million in 2012

Expand Pizza Huts menu to include pasta and chickendishes

Decrease the number of company owned restaurantunits in U.S. from 20% of units in 2007 to less than 10%of units by 2010

Increase the number of Taco Bell units in the U.S. by2%3% annually between 2008 and 2010


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S.M.A.R.T.

S.M.A.R.T. - Simple, Measurable, Achievable,Relevant, Timely defined.

S.M.A.R.T. - Simple, Measurable, Ambitious,Realistic, Timely defined.

S.M.A.R.T. - Specific, Measurable, Ambitious,Realistic, Tangible.


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S.M.A.R.T.E.R.

S.M.A.R.T.E.R. - Simple, Measurable, Achievable,Relevant, Timely defined, Exciting, Recorded.


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Craft a

Strategy

to Achieve

Objectives

Set

Objectives

Develop a

Strategic

Vision

& Mission

Implement

& Execute

Strategy

Evaluate &

Make

Corrections

Improve/Change

Revise asNeeded

Revise asNeeded

Improve/Change

Recycleas Needed


The Five Tasksof Strategic Management

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Crafting a Strategy

A companys strategyconsists ofcombined actions management hastaken & intends to take that deal with

How to makemanagements

strategic vision a reality

Achieving strategic & financial objectives

The Third Task of Strategic Management


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Katedra Zarzdzania w Gospodarce SGH

Definitions of Strategy

1947 Von Neuman & MorgensternStrategy is a series of actions by a firm that are dedicated on

according to the particular situation.

1969 AndrewsStrategy is the pattern of objectives, purposes or goals and

major policies and plans for achieving these goals, stated in

such a way as to define what business the company is in or is

to be in and the kind of company it is or is to be.

1976 McCarthyStrategy is an unified, comprehensive and integrated plan

designed to assure that the basic objectives of the enterprise

are achieved.

1979 MinzbergStrategy is a mediating force between the organization and its

environment: consistent patterns in streams of organizational

decisions to deal with the environment.

STRATEGIC PERSPECTIVE OF VISION

Exp

ec

ta

tions

Time

Vision - Year t

Long-range objectives - Year t-5

Short-range objectives - Year t-8

Strategies in execution - Year t-10

Momentof planning



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Strategizing Is HOW To . . .

Make the strategic vision a reality

Achieve performance targets

Please customers

Out-compete rivals

Achieve sustainable competitiveadvantage

Strengthen firms long-termcompetitive position

Respond to changingmarket conditions

Our game planfor running thecompany willbe . . .

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A Companys Strategy IsPartly Proactive and Partly Reactive


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Why Do Strategies Evolve?

There is alwaysan ongoing needto react to

Shifting market conditions

Fresh moves of competitors

New technologies

Evolving customer preferences

Political and regulatory changes

New windows of opportunity The crisis of the moment

Levels of Strategy-Making

Businessstrategies

Operational strategies

Functional strategies

Corporate strategy

SBU SBU SBU SBU

Plant/Unit

Plant/Unit

Plant/Unit

Plant/Unit

Plant/Unit

Corp. HQ



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Corporate Strategy fora Diversified Company

CorporateStrategy

How MuchDiversification

Kind of Diversification

Responses toChanging Conditions

Efforts to BuildCompetitiveAdvantage ViaDiversification

Moves to Strengthen

Positions and Profitsin Present Businesses

Moves to capturesynergy amongbusiness units

Approach toCapital Allocation(investment priorities)

Moves to Divest

Weak Units andAdd New Businesses

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Strategy Components of

a Single-Business Company

BusinessStrategy

Strategic Alliancesand CollaborativePartnerships

Responses to Changing Conditions

Basic CompetitiveApproach

Moves toSecureCompetitiveAdvantage

Geographic coverage;approach to verticalintegration

ManufacturingStrategy

MarketingStrategy

R & DStrategy

Human ResourcesStrategy Finance Strategy


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Networking of Missions,Objectives, and Strategies

Level 1

Level 2

Level 3

Level 4

CorporateLevel

Objectives

Overall Scopeand Strategic

Vision

CorporateLevel

Strategy

BusinessLevel

Objectives

BusinessLevel

Strategic Vision

BusinessLevel

Strategies

FunctionalObjectives

FunctionalStrategies

OperatingObjectives

OperatingStrategies

Two-Way Influence Two-Way Influence Two-Way Influence

Two-Way Influence Two-Way Influence

Corporate-LevelManagers

Business-LevelManagers

FunctionalManagers

Plant Managers,Lower-Level Supervisors

Two-Way Influence Two-Way Influence

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What Is a Strategic Plan?

Its strategic visionand business mission

Its strategy

Its strategicandfinancial objectives

A

Companys

Strategic PlanConsists of


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What is a Business Model?

A companys business model addresses How do we makemoney in this business?

Is the strategy that management is pursuing capable ofdelivering good bottom-line results?

Do the revenue-cost-profit economics of the companysstrategy make good business sense?

Look at the revenue streams thestrategy is expected to produce

Look at the associated cost structureand potential profit margins

Do the resulting earnings streams andROI indicate the strategy makes sense and that thecompany has a viable business model?

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Microsofts Business Model

Employ a cadre of highly skilled programmers to develop proprietarycode; keep source code hidden from users

Sell resulting OS and software packages to PC makers and users atrelatively attractive prices to achieve a 90% or more market share

Most costs in developing software are fixed; variable costs aresmall; once break-even volume is reached, revenues from additionalsales are almost pure profit

Provide technical support to users at no cost

Rejuvenate revenues by periodically introducing next-generationsoftware with features inducing PC users to upgrade their operatingsystems


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Redhat LinuxsBusiness Model

Rely on collaborative efforts of volunteer programmers to create thesoftware

Collect and test enhancements and new applications submitted byvolunteer programmers for evaluation and inclusion in new releases ofLinux

Market upgraded and tested family of Red Hat products to largecompanies, charging a subscription fee that includes 24/7 support within1 hour in 7 languages

Make source code open and available to all users

Make money by providing fee-based training, consulting, softwarecustomization, and client-directed engineering to Linux users

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Craft a

Strategy

to Achieve

Objectives

Set

Objectives

Develop a

Strategic

Vision

& Mission

Implement

& Execute

Strategy

Evaluate &

Make

Corrections

Improve/Change

Revise asNeeded

Revise asNeeded

Improve/Change

Recycleas Needed


The Five Tasks



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Implementing and Executing Strategy

Creating fitsbetween way

things are done and what it

takes for effective strategy

execution

Producing excellent

resultsin a timely

manner

The Fourth Task of Strategic Management

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Strategy implementationis an

internal, operations-driven activity

involving organizing, budgeting,

motivating, culture-building,

supervising, and leading tomake the strategy work

as intended!

Strategy Implementation


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Building a capable organization Allocating resourcesto strategy-critical activities

Establishing strategy-supportive policies

Instituting best practicesand programs forcontinuous improvement

Installing information, communication, andoperating systems

Motivatingpeople to pursue the target objectives

Tying rewardsto achievement of results

Creating a strategy-supportive corporate culture

Exerting the leadershipnecessary to drive the processforward and keep improving

What Does Strategy ImplementationInvolve?

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Craft a

Strategy

to Achieve

Objectives

Set

Objectives

Develop a

Strategic

Vision

& Mission

Implement

& Execute

Strategy

Evaluate &

Make

Corrections

Improve/Change

Revise asNeeded

Revise asNeeded

Improve/Change

Recycleas Needed


The Five Tasks



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Evaluating Performance

Constant checking of strategic plansand their implementation to see ifthey are up-to-date in order to foreseethe need for

change of strategic direction

rdo: H. Steinmann, G. Schreygg, Zarzdzanie, podstawy kierowania przedsibiorstwem, Oficyna wydawnicza PolitechnikiWrocawskiej, Wrocaw 1995.


The Fifth Task of Strategic Management

StrategyObjectivesVision& Mission

StrategyExecution

Strategic Control

Analysis

Improve/change

Reviseas needed

Improve/change

Reviseas needed

Strategic Management Process



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Strategic Management

To reduce risks

companies should perform strategic analysis

and

prepare strategies for growth and competitivestrategies


Strategic Management

Even a deficient strategic plan

or

a strategic plan which has not been executedproperly

is better than

being unaware of the direction the company shouldtake

Prof. Maria Romanowska


Lecture 1 managent tingement consul

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