STRATEGIC MANAGEMENT OB/09. THE STRATEGIC MANAGEMENT PROCESS Chapter 1.
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Transcript of STRATEGIC MANAGEMENT OB/09. THE STRATEGIC MANAGEMENT PROCESS Chapter 1.
STRATEGIC MANAGEMENT
OB/09
THE STRATEGIC MANAGEMENT THE STRATEGIC MANAGEMENT PROCESSPROCESS
Chapter 1
3
An Introduction to Strategy
What Is Strategic Management?
Why Is Strategic Management Important?
Who Is Involved in Strategic Management?
4
Five Tasks of Strategic Management
Developing a Strategic Vision and Mission Setting Objectives Crafting a Strategy Implementing and Executing the Strategy Evaluating Performance and Initiating Corrective
Adjustments
Why Strategic Management Is a Process?
Chapter Outline
5
Definition
An organisation’s strategy consists of the moves and approaches devised by management to produce successful
organisation performance. (Thompson & Strickland)
Strategy is management’s “action plan” to
Attract and satisfy its customers
Run its operations
Compete successfully against rival firms
Achieve organizational objectives and targets
What is Strategy?
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1. Where are we now?( the company’s present situation)
2. Where do we want to go?( business or markets, buyers and groups to target)
3. How do we get there?(the co.’s answer to how to get there is its strategy)
The 3 Big Strategic Management Questions
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- To proactively shape how a company’s business will be conducted.
- To mold the independent actions and decisions of managers and employees into a coordinated, company-wide plan.
- Charts the company’s direction.
Why is Strategy Important?
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Competent execution of a well-conceived strategy is the best test of managerial excellence and a proven recipe for organizational success!
Good Strategy + Good Strategy Execution Good Strategy + Good Strategy Execution
= = Good ManagementGood Management
Strategic Management Concept
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Crafting and executing strategy are core management functions.
Who is Involved in Strategic Management?
Senior Corporate Executives
Managers of Subsidiary Business Units
Functional Area Managers
Operating Managers
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Craft aStrategy
to AchieveObjectives
SetObjectives
Develop aStrategic
Visionand
Mission
Implementand
ExecuteStrategy
Improve/Change
Revise asNeeded
Revise asNeeded
Improve/Change
Recycleas Needed
Task 1 Task 2 Task 3 Task 4 Task 5
Monitor,Evaluate,and Take
CorrectiveAction
The 5 Tasks of Strategic Management
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Developing a Vision & Mission
The first task of strategic management
The first direction setting task
Offers a big picture perspective of “WHO we are, WHAT we do and WHERE we are headed”
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Strategic Vision
Effective strategy making begins
with a vision of where the organisation needs to head.
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Tasks include: Creates a roadmap for the future Provide long term direction Give firm a strong identity
Concerns a firm’s future business path -“where we are going” Markets to be pursued Future technology-product-customer focus Kind of company that management is
trying to create
Forming a vision of the firm’s future in 5-10 years.
Strategic Vision (cont)
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Example of a Strategic Vision
Our vision: Getting to a billion connected computers worldwide,millions of servers, and
trillions of dollars of e-commerce.
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A mission statement focuses on current business activities.
Concerns “who we are and what we do”
Current product and service offerings Customer needs being served Technological and business capabilities
Mission Statement
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Intel’s core mission is 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 people’s computing experience. We are helping to expand
the capabilities of the PC platform and the Internet.
Example of a Mission Statement
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The 2nd Task of Strategic Management
The 2nd Direction Setting Task
Represent managerial commitment to achieve specific & measurable performance targets by a certain time.
Spell-out how much of what kind of performance by when
Direct attention & energy to what needs to be accomplished
Setting Objectives
Establishing objectives converts firm’s mission into concrete performance outcomes
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Provides benchmarks for judging organisational performance
The firm is more focused over what needs to be accomplished
Objectives need to be set for every key result area
Objectives are required both for the long term term and short term
Types of Objectives required: Financial Objectives Strategic Objectives
Setting Objectives (cont)
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Relates to the firm’s financial performance – usually improving the financial performance
Financial performance is critical to firm’s survival
Examples of Financial Objectives:
Grow earnings per share 15% annually Boost annual return on investment from 15% to 20%
within three years Increase annual dividends per share
to stockholders by 5% each year Maintain a positive cash flow every year
Financial Objectives
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Focused on improving long-term, competitive business position
Increase firm’s market share Overtake key rivals on quality or customer service or
product performance Attain lower overall costs than rivals Boost firm’s reputation with customers Attain stronger foothold in international markets Achieve technological superiority Become leader in new product introductions Capture attractive growth opportunities
Strategic Objectives
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Example of Strategic Objective
Domino’s Pizza
To safely deliver a hot, quality pizza in 30 minutes or less at a fair price and a
reasonable profit.
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3rd Task of Strategic Management
3rd Direct Setting Task
A firm’s strategy consists of combined actions that management has taken and intends to take in Achieving strategic and financial objectives Pursuing organisation’s mission
Strategy-making is all about HOW to Reach performance targets Out-compete rivals Achieve sustainable competitive advantage Capture market opportunities Strengthen firm’s long term competitive position Make the strategic vision a reality
Crafting a Strategy
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Strategy involves determining whether to Concentrate on a single business or several businesses
(diversification) Cater to a broad range of customers or focus on a
particular niche Develop a wide or narrow product line Pursue a competitive advantage based on
Low cost or Product superiority or Unique organizational capabilities
Crafting a Strategy (cont)
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Understanding a Firm’s Strategy
Patternof Actions
That DefineStrategy
Actions to strengthen resources & capabilities
Actions to diversify Actions to outcompete rivals
Responses tochanging externalcircumstances
Actions to alter geographic coverage
Actions to form strategic alliances and collaborative
partnerships
How functional activities are
managed
Efforts to pursue new opportunities or defend against threats
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There is always an ongoing need to react to
Shifting market conditions Fresh moves of competitors New technologies Evolving customer preferences Political and regulatory changes New windows of opportunity Crisis situation
Why do Strategies Evolve?
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The 4th Task of Strategy Management
Executing and Implementing Strategy
Taking actions to put a freshly-chosen strategy into place
Supervising the ongoing pursuit of strategy
Improving the competence and efficiency with which the strategy is being executed
Showing measurable progress in achieving the targeted results and objectives
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Building a capable organization Allocating resources to strategy-critical activities Establishing strategy-supportive policies Motivating people to pursue the target objectives Tying rewards to achievement of results Creating a strategy-supportive corporate culture Installing needed information, communication, and
operating systems Instituting best practices and programs for
continuous improvement Exerting the leadership necessary to drive the
process forward and keep improving
What does Strategy Implementation and Execution Include?
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Monitoring, Evaluating and Taking Corrective Actions as Required
The 5th Task of Strategic Management
The tasks of crafting, implementing, and executing a strategy are not a one-time exercise
Customer needs and competitive conditions change New opportunities appear; technology advances; any number
of other outside developments occur
One or more aspects of executing the strategy may not be going well
New managers with different ideas take over Organizational learning occurs
All these trigger the need for corrective actions and adjustments
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Need to do the five tasks never goes away
Strategizing is not isolated from other managerial activities
The big challenge: To get the best strategy-supportive performance from employees, perfect current strategy, and improve strategy execution
Characteristics of the Strategic Management Process
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Guides entire firm regarding “what it is we are trying to do and to achieve”
Makes managers more alert to “winds of change, new opportunities,and threatening developments
Unifies numerous strategy-related decisions and organizational efforts
Creates a proactive atmosphere Promotes development of an evolving business model
focused on bottom-line success Provides basis for evaluating competing budget
requests
HELPS A COMPANY PREPARE FOR THE FUTURE!
Benefits of Strategic Thinking and a Strategic Approach to Managing