Lewis AISE Chap04

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PowerPoint Presentation by Charlie CookThe University of West Alabama

2007 Thomson/South-Western. All rights reserved.

StrategicManagementand Planningin a GlobalEnvironment

Chapter

4

Part 2 Planning Challenges in the 21st Century


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2007 Thomson/South-Western. All rights reserved. 4 2

1. Define strategic management and describe itspurpose.

2. Explain the four stages of the strategic management

process.3. Identify and explain the components of strategic

analysis, as well as explain the value of conductingthis analysis.

4. Explain how an organization can develop acompetitive advantage.

5. Explain the purpose of strategy formulation anddescribe the two levels of strategic alternatives.

LEARNING OBJECTIVES

When you have finished studying this chapter, you should be able to:


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6. Explain the role of strategy implementation.

7. Explain the importance of evaluation and control of strategy and its implementation.

8. Discuss the importance of strategic planning.

LEARNING OBJECTIVES(contd)

When you have finished studying this chapter, you should be able to:


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Strategic Planning

Strategic PlanningThe process by which an organization makesdecisions and takes actions that affect its long-run

performance.

Strategic plan: the output of the strategic planning process that provides direction by defining itsstrategic approach to business.


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Figure 4.1 The Strategic Management Process


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Key Terms

Strategic ManagementOverall, long-run management.

Strategic PlanningThe process of making plans and decisions that arefocused on long-run performance.

Strategic Plan A comprehensive plan that provides overall directionfor the organization.


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Key Terms (contd)

Strategic Analysis An assessment of the external and internal environments of an organization.

Strategy FormulationEstablishing strategy and tactics necessary toachieve the mission of the organization.


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Strategic Analysis: Assessment in aGlobal Environment

The purpose of strategic analysis is to evaluatethe present situation of the organization.

Analysis requires three primary activities: Assessing the mission of the organization

Internal environmental analysis

External environmental analysis


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Figure 4.2 The Components of Strategic Analysis


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SWOT Analysis

The combined internal and external strategicanalysis is referred to as a SWOT analysis.S trengthsW eaknessesO pportunitiesT hreats


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Assessing the Mission of an Organization

The mission of an organization reflects itsfundamental reasons for existence.

Though mission statements vary greatly, everymission statement should describe three primaryaspects of an organization:

1. The organizations primary products or services.

2. The organizations primary target markets.

3. The organizations overall strategy for ensuring long -term success.


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Key Terms

Strategic DirectionDirection of the organization toward success in thelong run.

VisionThe ability to predict opportunities and threats in thefuture.

A vision statement is intended to guide the organization in thefuture, what the organization wants to become or where itwants to be.Vision is derived from a careful analysis of the external andinternal environments


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Table 4.1 Ford Motor Companys Mission Statement

Ford Motor Company

Our VisionTo become the worlds leading consumer company for automotive products andservices.

Our MissionWe are a global family with a proud heritage passionately committed to providingpersonal mobility for people around the world.

We anticipate consumer need and deliver outstanding products and services thatimprove peoples lives.

Our Values Our business is driven by our consumer focus, creativity, resourcefulness, andentrepreneurial spirit.

We are an inspired, diverse team. We respect and value everyones contribution.

The health and safety of our people are paramount.We are a leader in environmental responsibility. Our integrity is never compromised and we make a positive contribution to society.

We constantly strive to improve in everything we do. Guided by these values, weprovide superior returns to our shareholders.

Source: Ford Motor Co. website (http://www.ford.com), 30 June 2005.


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External Analysis

Purpose of External AnalysisTo identify aspects of the external environment that represent either an opportunity for or a threat to theorganization.

Opportunities:Those environmental trends on which the organization cancapitalize and improve its competitive position.

ThreatsConditions that jeopardize the organizations ability to prosper and its competitive position in the long term.


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External Analysis Factors

General EnvironmentIncludes environmental forces that are beyond theinfluence of the organization and over which it has no(or little) control.

Task EnvironmentIncludes environmental forces that are within theorganizations operating environment and may beinfluenced to some degree.

Economic EnvironmentThe economic components of the general environment.


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External Environment

General EnvironmentEconomic factors

Technological factors

Socio-cultural factorsPolitical-legal factors

Task EnvironmentCustomer Profiles

Competitive Structure

Resource Availability


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Figure 4.4 Five Forces Model of Industry Analysis

Source: Adapted from Michael E. Porter, How Competitive Forces Shape Strategy, Harvard Business Review 57, no. 2 (March/April 1979): 137 145.


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Internal Analysis

Purpose of Internal AnalysisTo identify the assets, resources, skills, and processes that represent either strengths or weaknesses for the organization.

Strengths Aspects of the organizations operations that representpotential competitive advantages or distinctive competencies .

Weaknesses Areas that are in need of improvement.


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Table 4.3 Internal Factors for Analysis

Marketing OperationsProduct, service ProductivityBrand equity QualityMarket research FacilitiesSales force Supply chainMarket share TechnologySize of market PurchasingDistribution channels Safety

Price Ecological issuesPromotion

FinanceProfitabilityRevenueAsset utilizationDebt/leverageEquityPer unit costsProfit margins

Cash flow

Human ResourcesSkillsSelection

Training and developmentLeadershipMotivationCommunicationRewards

Other FactorsOrganization cultureOverall control

Information systemInformation technologyOrganizational structure


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Strategy Formulation

Answers the question:Where does the organization want to be?

Steps in strategy formulation include:

Casting the vision for the organization.Setting strategic goals.

Identifying strategic alternatives.

Evaluating and choosing strategies that provide acompetitive advantage and optimize the performanceof the organization in the long term.


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Casting the Vision for the Organization

The development of a vision for the organizationis central to any strategic plan.

Vision versus Mission

A vision statement describes what the organizationaspires to be in the long run.

A mission statement describes the products, services,and target markets for an organization.


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Setting Strategic Goals

Goals Are very broad statements of the results that anorganization wishes to achieve in the long run.

Relate to the mission and vision of the organizationand specify the level of performance that theorganization wants to achieve.

SMART goals are:

SpecificMeasurableAchievableResults -orientedTimeline


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Identifying Strategic Alternatives

Strategic Alternatives Are developed in light of the organizational missionconsidering its strengths, weaknesses, opportunities,and threats, and its vision and strategic goals.

Grand StrategiesStability strategies: intended to ensure continuity inthe operations and performance of the organization.Growth strategies: designed to increase the sales and

profits of the organization.Retrenchment strategies: designed to reversenegative sales and profitability trends.


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Identifying Strategic Alternatives (contd)

Generic StrategiesThe primary ways in which an organization cancompete in its chosen market(s).

Cost leadership: competing on the basis of price.

Differentiation: offering products or services that aredifferentiated from those of competitors in some way.

Focus: avoiding competing in broad markets by targeting anarrow market segment.

Best-Cost provider: competing on the basis of both low-costand differentiation.


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Evaluating and Choosing Strategy

Portfolio AssessmentProvides a mechanism for evaluating anorganizations portfolio of business, products and services.

Boston Consulting Group (BCG) Growth-Share matrixGeneral Electric Industry Attractiveness Business Strengthmatrix

Decision Matrices A decision matrix provides a method for evaluating alternative strategies according to the criteria that theorganizations leaders consider more important.


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Evaluation and Control: AchievingEffectiveness and Efficiency

Strategic ControlInvolves monitoring the implementation of thestrategic plan to ensure quality and effectiveness in

terms of organizational performance.Feedforward controls

Are designed to identify changes in the external environmentor internal operations that affect organizations ability to fulfillits mission and meet its strategic goals.

Feedback ControlsCompare the actual performance of the organization to itsplanned performance.


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Organizational Leadership

The Importance of LeadershipIf an organization is to implement its strategy effectively, it must have the appropriate leadership.

Without effective leadership, an organization isunlikely to realize the benefits of its selected strategy.


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Implications for Leaders (contd)

Strategic goals serve as targets for achievement. Makesure that they are specific, measurable, results oriented,and have a established time for their achievement.

Strategy should be designed to provide the organization

with a distinctive competitive advantage in the long run. A strategic plan is meaningless if it is not implemented

well.

Provide for evaluation and control to be sure thatoperations are on track for accomplishment of theorganizations mission.

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