Strategic Management Engineering Management ELE 2EMT


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  • Page 166
  • While strategy formulation is important to strategic management, strategies will not have the intended impact unless implementation is effective. Strategy implementation involves management activities to put the strategy in place, set up strategic controls to monitor progress, and ultimately achieve organisational goals (see Figure 5.10 on page 166). Further discussion can be found on page 166-7.
  • Strategic Management Engineering Management ELE 2EMT

    1. 1. Strategic Management Engineering Management ELE 2EMT George Alexander [email_address] Lecture 7 14 September 2007
    2. 2. Last Lecture <ul><li>The planning process </li></ul><ul><ul><li>Major comp onents </li></ul></ul><ul><ul><li>Organisational mission </li></ul></ul><ul><li>Nature of organisational goals </li></ul><ul><ul><li>Benefits of goals, levels of goals </li></ul></ul><ul><li>Goals and performance </li></ul><ul><ul><li>Goal content, goal commitment, work behaviour, other process components </li></ul></ul><ul><ul><li>Possible problems with goals </li></ul></ul><ul><li>Linking goals and plans </li></ul><ul><ul><li>Levels of plans, extent of recurring use, time spans of goals and plans, plans and promoting innovation, possible obstacles to planning </li></ul></ul><ul><li>Management by Objectives </li></ul><ul><ul><li>Steps in the MBO process </li></ul></ul><ul><ul><li>Strengths and weaknesses of MBO </li></ul></ul><ul><ul><li>Assessing MBO </li></ul></ul>
    3. 3. This week <ul><li>The concept of strategic management </li></ul><ul><li>Competitive analysis in strategy formulation </li></ul><ul><li>Formulating corporate level strategy </li></ul><ul><li>Formulating business level strategy </li></ul><ul><li>Strategy implementation </li></ul>
    4. 4. Business Planning Framework <ul><li>Where are we now? </li></ul><ul><li>What business are we in? </li></ul><ul><li>Where do we want to go? </li></ul><ul><li>What is necessary to close the gap? </li></ul><ul><li>How do we make it all happen? </li></ul>
    5. 5. The Concept of Strategic Management <ul><li>Most well-run organisations try to develop and follow strategies, which are large-scale action plans for interacting with the environment to achieve long-term goals ( Jauch & Glueck 1988; Pearce & Robinson 1988 ). </li></ul><ul><li>It is important to recognise that strategic management is oriented towards: </li></ul><ul><ul><li>Achieving long-term goals, </li></ul></ul><ul><ul><li>Weighs important environmental elements, </li></ul></ul><ul><ul><li>Considers major internal organisational characteristics, and </li></ul></ul><ul><ul><li>Involves specific strategy development. </li></ul></ul>
    6. 6. The Strategic Management Process <ul><li>Strategy Formulation: </li></ul><ul><ul><li>Identify organisational mission and strategic goals </li></ul></ul><ul><ul><li>Perform competitive situation analysis, considering both external environment and internal organisational factors. </li></ul></ul><ul><ul><li>Develop the strategies to reach the strategic goals </li></ul></ul><ul><li>Strategy Implementation: </li></ul><ul><ul><li>Effective implementation of the strategic plan </li></ul></ul><ul><ul><li>Brilliantly formulated strategies will not succeed if they are implemented ineffectively </li></ul></ul>
    7. 7. The Importance of Strategic Management <ul><li>The process helps organisations to identify and develop a competitive advantage. </li></ul><ul><li>It provides direction such that the organisation knows where to expend its efforts. </li></ul><ul><li>It demonstrates the need for innovation in the organisation – new ways of thinking and doing things. </li></ul><ul><li>It can involve managers at various levels in the planning process. This makes it more likely that the plans will be understood and committed to. </li></ul>
    8. 8. Identify current mission and strategic goals <ul><li>Conduct competitive analysis: </li></ul><ul><li>strengths </li></ul><ul><li>weakness </li></ul><ul><li>opportunity </li></ul><ul><li>threats </li></ul><ul><li>Develop specific strategies: </li></ul><ul><li>corporate </li></ul><ul><li>business </li></ul><ul><li>functional </li></ul>carry out strategic plans maintain strategic control assess organisational factors assess environmental factors Strategy implementation Strategy formulation
    9. 9. Conducting Competitive Analysis <ul><li>Strengths on which to capitalise, </li></ul><ul><li>Weaknesses you need to address, </li></ul><ul><li>Opportunities available to you, and </li></ul><ul><li>Threats that could adversely affect you. </li></ul>SWOT Analysis
    10. 10. SWOT Analysis Key Strengths Key Weaknesses Key Opportunities Key Threats Most Likely Possible Possible Unlikely Internal Factors External Factors
    11. 11. Organisational Assessment Organisational culture Information systems (up-to-date)? Liquidity (and other financial dimensions) Skills levels (competency profiles ) Organisational structure (flexibility ) Tangible assets (buildings and equipment) Sales and distribution channels The organisation’s strengths and weaknesses:
    12. 12. Environmental Assessment The organisation Social Analysis Political & Regulatory Analysis Human Resources Analysis Industry and Market Analysis Competitor Analysis Economic Analysis Technological Analysis
    13. 13. Levels of Strategy <ul><li>Corporate-Level Strategy </li></ul><ul><ul><li>the businesses an organisation will operate </li></ul></ul><ul><ul><li>co-ordination of strategies </li></ul></ul><ul><ul><li>allocation of resources </li></ul></ul><ul><li>Business-Level Strategy </li></ul><ul><ul><li>strategic business units </li></ul></ul><ul><ul><li>focusing on a particular business </li></ul></ul><ul><li>Functional-Level Strategy </li></ul><ul><ul><li>managing functional area to support business-level strategy </li></ul></ul><ul><ul><li>the day-to-day management of business </li></ul></ul>
    14. 14. Formulating functional-level strategy <ul><li>Functional level strategies spell out </li></ul><ul><li>how functional areas can bolster </li></ul><ul><li>business-level strategy. </li></ul><ul><li>Example: An R&D department might accelerate innovation to provide new products before competitors. </li></ul>
    15. 15. CORPORATE STRATEGY Operations Management Strategy R & D Strategy Financial/ Accounting Strategy Marketing Strategy Human Resources Strategy Business 1 Strategy Business 2 Strategy Business 3 Strategy Corporate Level Functional Level Business Level
    16. 16. Co-ordinating Levels of Strategy <ul><li>Co-ordinating strategies across the levels is critical to maximising strategic impact </li></ul><ul><li>Business-level strategy is enhanced when functional-level strategies support it. </li></ul><ul><li>Corporate-level strategy will have more impact when supported by business-level strategies complementing each other. </li></ul><ul><li>Thus, the three levels must be co-ordinated as part of the Strategic Management. </li></ul><ul><li>Top-Down or Bottom-Up approach ? </li></ul>
    17. 17. Strategy implementation <ul><li>Carrying out strategic plans </li></ul><ul><li>Technology </li></ul><ul><li>Human resources </li></ul><ul><li>Reward systems </li></ul><ul><li>Decision processes </li></ul><ul><li>Structure </li></ul><ul><li>Maintaining strategic control </li></ul><ul><li>Monitoring environment </li></ul><ul><li>Assessing effects of actions </li></ul><ul><li>Monitoring results </li></ul>
    18. 18. liquidation bankruptcy Diversification Vertical integration concentration divestiture turnaround harvest Defensive Stability Growth GRAND STRATEGIES
    19. 19. Growth Strategy <ul><li>Concentration </li></ul><ul><ul><li>Market development </li></ul></ul><ul><ul><li>Product development </li></ul></ul><ul><ul><li>Horizontal integration </li></ul></ul><ul><li>Vertical Integration </li></ul><ul><ul><li>Backward integration, business grows by becoming its own supplier </li></ul></ul><ul><ul><li>Forward integration, business growth encompasses a role previously fulfilled by a customer </li></ul></ul>
    20. 20. Growth Strategy - Cont. <ul><li>Diversification </li></ul><ul><ul><li>Conglomerate diversification when an organisation diversifies into areas unrelated to its current business </li></ul></ul><ul><ul><li>Concentric diversification when an organisation diversifies into related, but distinct, business </li></ul></ul><ul><li>Growth strategies can be implemented by: </li></ul><ul><ul><li>Internal growth </li></ul></ul><ul><ul><li>An acquisition </li></ul></ul><ul><ul><li>A merger </li></ul></ul>
    21. 21. Stability Strategy <ul><li>Maintaining the status quo or growing in a methodical, but slow, manner. </li></ul><ul><li>Adopted by small privately owned businesses </li></ul><ul><li>Reasons for adopting this strategy: </li></ul><ul><ul><li>Avoid risk </li></ul></ul><ul><ul><li>Provide an opportunity to recover after a period of an accelerated growth </li></ul></ul><ul><ul><li>Lets company hold on to current market share </li></ul></ul><ul><ul><li>May occur through default </li></ul></ul>
    22. 22. Defensive Strategy <ul><li>Harvest entails minimising investments while attempting to maximise short-run profits and cash flow, with the long-run intention of exiting the market. </li></ul><ul><li>A turnaround is designed to reverse a negative trend and restore the organisation to appropriate levels of profitability. </li></ul><ul><li>A divestiture involves an organisation's selling or divesting of a business or part of a business. </li></ul><ul><li>Liquidation entails selling or dissolving an entire organisation </li></ul>
    23. 23. Strategy implementation – some obstacles in real life Overwhelmed by day to day events Absence of budget/resources to implement <ul><ul><li>Perceived lack of management commitment </li></ul></ul>Leads to lack of real commitment Credibility of the plan
    24. 24. References <ul><li>Bartol, K.M., Martin, D.C., Tein, M., & Matthews, G., “Management A Pacific Rim Focus”, McGraw-Hill, 2002. </li></ul>Thanks for your attention