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STRATEGIC MANAGEMENT AND BUSINESS POLICY

---PART I: FOUNDATIONS

THEME 1:STRATEGIC MANAGEMENT AS A STRATEGIC MANAGEMENT AS A

MANAGEMENT SYSTEMMANAGEMENT SYSTEM

© Alfonso VARGAS SÁNCHEZ

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EXECUTIVES: ACTIVE MANAGEMENT PLAYERS

MAIN FUNCTIONSMAIN FUNCTIONS

INNOVATION STRATEGYSTRATEGYLEADERSHIP

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TA HUOY MUNN CHEONG

YAU CHEK MUNN

FAI TIT LO PA SIN LAY

POOK CHO HOY!!

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CIRQUE DU SOLEIL - STARBUCKS

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EXPO 2008-ZARAGOZA, SPAIN

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BLUE OCEAN STRATEGY

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EXECUTIVES: ACTIVE MANAGEMENT PLAYERS

MAIN APTITUDESMAIN APTITUDES

AS A LEADER(EXPERTISE IN BUSINESS MATTERS)

STRONG MARKET-CUSTOMER ORIENTATION

AS A STRATEGIST (ORGANIZATIONAL CAPABILITIES)

SKILLS IN MANAGING PEOPLE (COMMUNICATION SKILLS)

FLEXIBILITY AND ABILITY FORMANAGING CHANGE

CAPACITY FOR NEGOTIATING AND SOLVING CONFLICTS

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ORGANIZATION CULTURE

BEHAVIORS & ATTITUDES

HUMANCOMPONENT

METHODS & TECHNIQUES

SYSTEMS & PROCESSES

TECHNICAL

COMPONENT

MANAGEMENT

based on resulting in

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THE MANAGEMENT PROCESS

SEQUENTIAL FUNCTIONS

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CONTINUOUS FUNCTIONSCONTINUOUS FUNCTIONS

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D E C I S I O N M A K I N G

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TASKS

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HUMAN RESOURCES

LEADERSHIP

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THE ROLE OF STRATEGY IN SUCCESS

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Simple, consistent and

long-term objectives

Profound understanding of the competitive

environment

Objective appraisal

of resources

EFFECTIVE IMPLEMENTATION

Successful Strategy

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WHAT ARE THE PURPOSES OF STRATEGY IN AN ORGANIZATION?

PROVIDES ORIENTATION

A SOURCE OF ORGANIZA-

TIONAL COHERENCE

DEFINES THE ORGANIZATION

CONCENTRATES THE EFFORTS OF

ALL MEMBERS

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DANGER

“The strategy is to the organization like the blinders to the horse, an element which forces it to go straight and doesn’t allow it to turn aside the glance” (Mintzberg, Lampel and Ahlstrand, 1998).

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STRATEGY: CHARACTERISTICS

INTERACTIVE PROCESS BETWEEN COMPANY &

ENVIRONMENT

SHORT TERM OBJECTIVES & POLICIES

(adjustment of means )

LONG TERMOBJECTIVES

IMPROVEMENT OFCOMPETITIVENESS (questioning the nature

and structure of the firm)

MANY CONCEPTS MANY CONCEPTS BUT COMMON BUT COMMON

CHARACTERISTICSCHARACTERISTICS

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DISTINCTIVE FEATURES OF THE FIRM’S STRATEGY

• It is decided at the upper echelon of the organization.

• Making it is a management skill that is both a science and an art.

• It must take into account not only the company’s environment but also its resources and capabilities.

• It is devised to achieve certain basic objectives, and to determine the necessary lines of actionand the corresponding allocation of resources.

• (…).

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INTENDED STRATEGY

IMPLEMENTED STRATEGY

DELIBERATE STRATEGY

UNIMPLEMENTEDSTRATEGY

EMERGENT STRATEGY

Strategy is conceived as an organizational intention, defined and formulated in advance (deliberate strategy), but the implemented strategy also has an emergent component.

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Henry Mintzberg

-Plan.-Ploy.-Pattern.-Position.-Perspective.

The 5 "P's" of Strategy

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THE FIRMTHE FIRM’’S STRATEGY S STRATEGY specifies the general objectives of the company and the main courses of action, in agreement with the organization’s present and potential resources, in order to secure its optimal insertion in the socioeconomic environment (Menguzzato and Renau, 1991).

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THE FIRMTHE FIRM’’S STRATEGYS STRATEGY: A certain pattern of behavior over a period of time. This behavior implies a way of using thecompany’s resources according to specific capabilities, taking into consideration the determining factors of the competitive environment, to reach a set of objectives and goals. This behavior will be more or less planned and emergent (AECA, 1999).

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STRATEGY: ELEMENTS OR COMPONENTS

SCOPE OF THE BUSINESS (product-market combinations)

COMPETITIVE ADVANTAGES(defensible position)

CAPABILITIES(resources, skills)

SYNERGIES(multiplying effect)

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SEQUENTIAL FUNCTIONS

Control

Manage

Integrate

Organize

Plan

CONTINUOUS FUNCTIONS

Decision Making

Communication

Analysis of Problems

M A N A G E M E N T A S A P R O C E S S

S T R A T S T R A T EE G I C M A N A G E M E N TG I C M A N A G E M E N T

Formulation

Control

I m p l e m e n t a t i o n

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PRESENT SITUATION

DESIRED SITUATION

STRATEGY

•Limited and uncertain information.

•Limited resources, present and future.

•Coordination in time and space.

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AATTTIITTUUDD

PPRROOBBLLEEMM

T H I N K I N GT H I N K I N GP O S I T I O NP O S I T I O N

THE CARDINAL POINTS OF STRATEGIC MANAGEMENT

EE

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“The expression FIRM’S STRATEGY sounds so familiar that people suppose that devising it is an activity undertaken very often. The familiarity of the word contradicts the difficulty of the task. Most of the directors do not think strategically, in the sense that they do not usually question the question the main premises of the businessmain premises of the business in which they are operating. They fight for their market share in, say, the steel sector, instead of asking themselves if steel will continue being used in the same form or if the same amounts will be needed. They accept the knowledge of how steel is made, without asking themselves if it is out of date” (Bower, 1988).

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STRATEGIC MANAGEMENT:

Process Organization

Vision & Mission

(Strategic Business Units)

External Analysis

Internal Analysis

Attractiveness:

Opportunities & Threats

Competitive Position:

Strengths & Weaknesses

Challenges & Impacts

Scenarios Generation

Objectives

Strategic Alternatives:

Formulation & Evaluation

Strategy Selection

Planning:

Strategic Plan & Contingent Plans

Organization

HH. RR. Management

Control

Strategic Problem

Organizational Culture

Corporate Social Responsibility

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IMPLEMENTATION

CONTROL

STRATEGIC ANALYSIS

STRATEGIC PLANNING

STRATEGIC CONTROL

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Board of Directors

Analysis:

-Environment

-Competitors

-Clients

-Internal situation

General Guidelines

-Opportunities

-Threats

-Strengths

-Weaknesses

Scenarios generation:

Basic Assumptions

Scenarios:

General Objectives

& Strategic Options

Evaluation &

Decision

Strategic Surprises

Contingent Plans

Strategic Plan

-Functional Plans

-Division Plans

-Plan of Activities and Financial Investments

-Annual Operative Plan

Control – Dynamic Update

General Scheme of Planning in IBERIA

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DYNAMIC MODEL OF THE STRATEGY FORMATION PROCESS (AECA, 1999)

STRATEGIC

ANALYSIS

STRATEGIC FORMULATION

STRATEGIC IMPLEMENTATION

& CONTROL

STRATEGIC

PROGRAMMING

STRATEGIC THINKING

STRATEGYSTRATEGYEMERGENT PLANNED

STRATEGIC STRATEGIC

MANAGEMENTMANAGEMENT

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A DECISION IS STRATEGIC IF ...

• Adopting it changes some essential aspect of the nature of the company , like its product, its market and/or its technology.

• It gives rise to a different company in the future.

• It is based on the aims and missions of the company.

(and more...)

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INFORMATION:

Not very specific and of informal origin

(intuition, experience, personal contacts,

specialist media, etc.).

ACTION:

Risky - it may jeopardize the present and future resources

of the company.

STRATEGIC DECISIONS

CONTROL:

Results are difficult to evaluate, because enough time must be allowed for results to

become evident.

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PROXIMITY TO CLIENT

EMPHASIS ON ACTION

FOSTERING CREATIVITYSIMPLE STRUCTURESGOLD RULES

FOR EXCELLENCE

SPECIALIZATION

CLEAR AND SHARED VALUES

EFFECTIVE PARTICIPATION OF EMPLOYEES

SIMILTANEOUS CENTRALIZATION & DECENTRALIZATION 1

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37(Peters and Waterman)

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COMPETITIVENESS EVOLUTION

LEARN

DO WELL

DO BETTER

DO DIFFERENT

ENJOY WHAT YOU DOEmotional Intelligence

KNOW

DO

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KEYS FOR BUSINESS EXCELLENCE

• Preferential attention to human resources.

• Creativity, innovation and quality.

• Shared values, strongly implanted organizational culture.

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"The best way to predict the future is to invent it"

(Alan C. Kay, 1971)