The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn. Alvin Toffler,

daily Dawn 3 Feb 12

Welcome and introduction to

Strategic Management

(StM)

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COURSE PROFILE

SEMESTER FALL-2013

 MBA - 4D+Y

STRATEGIC MANAGEMENT

MGT - 625

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COURSE DESCRIPTION• Today’s Business World is extremely competitive. It relies

heavily on the decisions made by its (Strategic) Managers / Strategic Management. The strategic managers must develop panoramic view of business environment, i.e., both internal and external. The managers of modern businesses should be adequately skilled to pre-empt the situation rather than resorting to reactive mode. Recent economic slowdown and currency war raging between the USA, Europe (Euro Zone) and China are cases in example. Therefore, the strategic management course has been designed to enable you to learn not only the fundamentals, but also the intricacies of higher levels of management. A careful look at the schedule would let you know the progression of the course.

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COURSE OBJECTIVES

• Develop an understanding of “Strategy” and “Strategic Management” and its application to complex relationships that exist in today’s environment.

• Develop an awareness of the various environmental contexts under which strategic formulation and implementation occur.

• Develop an ability to thoroughly analyze business problems.

• Develop an ability to function effectively as a member or a chairperson of a strategic team and,

• Develop an ability to effectively communicate strategic thinking, both orally and in writing.

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Recommended Books

• Dess, Gregory G; Lumpkin, G.T.; Eisner, Alan B. Strategic Management – Text and Cases. 2006. The McGraw-Hill Companies, Inc., NewYork. • Cases in Strategic Management by

Amita Mital • Strategic Management: Concepts and Cases By Fred R. David

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Lecture Delivery Plan

As per Course Profile

 

Shahid Nawaz Assist. Professor

0345-5139748

Email: csn724@gmail.com OR

Qaisera5210@yahoo.com 

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LP-1 dt 2 Sep 13

• Ch-1 Strat. Mgmt – Creating Competitive Advantages

• Learning Objectives– Definition and 4 key attributes of Strat. Mgmt – The Strat. Mgmt Process and its 3 related

principal activities – Corporate Governance – Environmental Forces – Vision, Mission and Objectives – Awareness

of

STRATEGIC MANAGEMENT MODEL

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1.Establish vision,Purpose, values, and

3-5 yrs scorecard

2. determine annual

Obj & Goals

3. Address implementation

Barriers

7. Identify drivers with Targets for annual

Objectives 6. Develop project action plans

For drivers

5. Charter improvement teams

And Create infrastructure

4. Design and execute communication

plan

8. Execute Project Action Plans

9. Review Project planIn a database

And systematic process

10. Sustain the Improvements

(Trg & Doc) Impr

ove

stra

tegi

c m

anag

emen

t pro

cess

Planning Development Implementation

Do Proj

Mgmt

Study Performance Evaluat

ion

ActInstitutionalize

Annual strategic planning

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STRAT MGMT & CEO

• All Org are run by the CEO’s• Explain role of CEO vis-vis Strat Mgmt and challenges they face

– CEOs are synonymous with the success and failure of the org– Strat Mgmt is based on participatory decision making techniques

with the CEO taking full responsibility for the outcome • Leadership roles:

– Romantic ---- Leader is the key to success or failure – External Factor ---- Focus is on the external factors for success

or failure of the Org • Explain recent examples:

– BP Oil Rig disaster and its fallout – OGDC– Downfall of BCCI– Recent economic downturn in USA / Euro Zone / DPW etc

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STRAT MGMT

• The Essence of STRAT MGMT is to focus on 2 fundamental

questions:

– How should we compete in order to create competitive advantages (CA) in the market place

– How can we create competitive advantage in the market place that are not only unique, sustainable and valuable but also difficult for competitors to copy or substitute.

• Important to note is:

– Sustainable CA cannot be achieved without operational effectiveness which means performing similar activities better than rivals.

• Operational Effectiveness includes concepts of TQM, just-in-time, benchmarking, business process reengineering, and outsourcing etc

• Strategy is all about being different from everyone else.

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SUCCESSFUL STRAT MGMT

• An industry is composed of a set of firms that produce similar products or services, sell to similar customers, and use the similar methods of production.

• Gathering industry information and understanding competitive dynamics among the different companies in an industry is key to successful strategic management.

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STRAT MGMT DEFINITION

• What is Strat Mgmt?• Step further than incremental management – Taking minor

decisions in a stable, simple and unchanging industry. • Does it happen always? No, therefore, need for Strat

Mgmt which is defined as:• “Analyzing, taking decisions, and initiating actions in order

to create and sustain competitive advantage.”• Biggest Question

– How (and when) and why do some firms outperform others?

• Critical Answer– The challenge to managers is to decide on strategies that provide

advantages that can be sustained over time

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STRAT MGMT AND 4 KEY ATTRIBUTES

• Directed at overall organizational goals – Looking at the strategic issues rather than functional

areas – What to produce and at what cost • Involving multiple stakeholders

– Involve owners, employees, customers, suppliers, and the community at large

• Incorporating short term and long term perspectives – Keep an eye on the current production needs as well

as vision for the future ---- Creative Tension• Recognizing need for trade-offs between

efficiency and effectiveness– Using organizational resources wisely and optimally

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THE STRAT. MGMT PROCESS

• It involves 3 related principal activities:– Analysis

• Of strategic goals (V + M + Strat Obj)

• Internal and External Environment of the Org

– Decisions (Strategic)• Based on Org’s domestic and international operations, the Org

should address 2 basic questions, i.e., 1. What industries should we compete in?

2. How should we compete in those industries?

– Actions• In order to achieve success as a result of decisions, the

necessary resources must be made available for a desirable outcome.

• It is a continuing process and seeks intimate involvement of CEO

• Be able to differentiate between Intended Strategy and Realized Strategy

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Environmental Forces

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CORPORATE GOVERNANCE AND STAKEHOLDERS MANAGEMENT

• Management (CEO)– To run the Org to satisfy the interests and

needs of the shareholders under the guidelines prepared by BOD

• Shareholders (Owners)

• BOD (Elected by the shareholders to represent their interests)– To align the interests and motives of the

management with those of the owners

ROLE OF CEO--- Electronic Data System since 1962

• In 1998 --- EDS earned $22Bn (Total market $140Bn) as Revenue with shares trading at $35.

• In March 2003 --- Shares shrunk to $16. Additionally, EDS’s reputation was tarnished due investigations by S&EC resulting in loss of competitive position.

• EDS CA -- technical competence, steady growth, old CEO’s conservative culture --- crisp white shirt and military cut hair style v/s new CEO’s culture --- gung-ho style to get rid of bureaucratic life style

• To spur growth the new CEO pushed for “megadeals” requiring outsourcing companies to make large investments. Resultantly, stocks were pushed up to $77. By 2001, CEO (Mr. Brown) received $52M in compensation.

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EDS- WHAT WENT WRONG • CEO’s Attitude --- Over ruling the managers• By 2002, Navy contract suffered loss of $1.9Bn due poor

calculation of margins – Megadeals / megarisks• In the same time frame, a contract with Worldcom signed in

1998 incurred a loss of $118M due bankruptcy of Worldcom as a result of Internet Bubble Burst

• 2002 estimates were fudged and investors were assured of 13-14% growth despite recession

• Stocks plunged to $11.68• By 2003, EDS BOD lost patience and replaced CEO• Closing statement: Pay for performance, differentiate

performance- not organizational level….make difficult choices. Do as I say, not as I do.

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• Creating Symbiosis or Zero Sum • Two views

1. Zero Sum --- All the stakeholders are to be satisfied:• Employees want higher wages • Shareholders want higher profits • Zero sum concept gives rise to Unionism

2. Stakeholder symbiosis ---- Managers acknowledge

interdependence between employees, suppliers,

customers, shareholders and the community at

large

CORPORATE GOVERNANCE AND STAKEHOLDERS MANAGEMENT --CONTD

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Corporate Governance and Social Responsibility

• Social Responsibility is the expectation that businesses or

individuals will strive to improve the overal welfare of the society.

• Companies have determined Triple Bottom Line which is:

– Financial Measures / Capital

– Ecological and material capital

• Renewable resources generated by living systems, such as

wood or animal by-products

– Human and Social capital

• Human deals with peoples’ knowledge, skills, health,

nutrition, safety, security, and fossil fuels

• Social includes assets of civil society, social cohesion, trust,

reciprocity, equity and other values that provide mutual

benefits

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THE STRAT. MGMT Perspective --- An imperative

• It requires managers to take an integrative view of the Org and assess how all of the functions and activities fit together to help an Org achieve its goals and objectives.

• Some Key Driving Forces are: 1. Globalization

– Global economy is NOT the flow of goods only but it is flow of capital, people, and information worldwide.

2. Technology– Innovative technology is having impact on our lives, trade,

services and products

3. Intellectual Capital – Creating and applying knowledge to deliver differentiated

products and services of superior value for customers require the acquisition of superior talent, as well as ability to develop and retain that talent

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• Role of Leaders

• Thinking and Working groups can not be different and separated

• Ideas must be encouraged, analyzed and implemented

• Trg and Dev must move hand in glove

EMPLOYEES AND STRAT MGMT

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VISION, MISSION AND OBJECTIVES

• Vision tend to be quite broad, and can be inspiring, overarching and emotionally driven

• Org express priorities best through stated goals and objectives that form a hierarchy of goals

• Hierarchy of goals is the Company’s Vision • A vision may or may not succeed• Give examples of vision:

– GOP– BU– ICI AkzoNobel– Unilever– Telenor– PTCL

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MISSION

• It encompasses both the purpose of the company as well as the

basis of competition and competitive advantage

• More specific and depict rationale for existence of org

• Effective mission statements incorporates the concept of

stakeholder management, suggesting that org must respond to

multiple constituencies if they are to survive and prosper.

• They also have the greatest impact when they reflect an org’s

enduring, overarching strategic priorities and competitive

positioning.

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STRATEGIC OBJECTIVES

• Operationalization of Mission statement

• Outlining Strategy how to achieve higher goals

• Cover well defined time frame

• Resources are identified and allocated

• To be meaningful, Objectives must be:

– Measurable

– Specific - clear and concise

– Appropriate - Consistent with vision and mission

– Timely – Have a time frame

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Thank you