What is Strategic Management?• Application of the basic planning process at the highest levels of the company• Top management sets goals for the performance of the company – Carefully formulating, implementing, and evaluating plans and strategies
What is Strategic Management?• Most important part is developing strategic plans – Plans must remain current as changes occur inside and outside the company• Involves many levels of management – Top level formally develops basic plans – Different departments may be asked to develop plans for their own areas – A solid plan guarantees that plans are coordinated and are supported by everyone in the company
Strategic Management Approach• Three phases critical to the success of the process – Formulation • Developing the strategic plan – Implementation • Putting the formulated plan to work – Evaluation • Continuously evaluating and updating the strategic plan
Formulating StrategyDeveloping the grand- and business-level strategies to be used by the company• Company’s strengths/weaknesses and threats/opportunities shape the strategies• First step is to understand the current position of the company – Identify mission, identify past and present strategies, diagnose the company’s past and present performance, set objectives for the company’s operation
Formulating Strategy• Identify the mission statement – Outlines why the company exists – Describes the company’s basic products and/or services and defines markets and sources of revenue – Designed to accomplish several goals and ensures a common purpose within the company
Apple’s Mission Statement• Apple ignited the personal computer revolution in the 1970s with the Apple II and reinvented the personal computer in the 1980s with the Macintosh. Today, Apple continues to lead the industry in innovation with its award-winning computers, OS X operating system and iLife and professional applications. Apple is also spearheading the digital media revolution with its iPod portable music and video players and iTunes online store, and has entered the mobile phone market this year with its revolutionary iPhone.
Who’s Mission Statements?1. "To bring inspiration and innovation to every athlete in the world."2. "To enable people and businesses throughout the world to realize their full potential."3. “. . .seeks to be the world’s most customer- centric company, where customers can find and discover anything they may want to buy online at a great price."
Identifying Past and Present Strategies• Companies need to understand and appreciate their corporate history• Strategic managers should ask – Has past strategy been developed? • If not, can past history of the company be analyzed to identify the strategy that has evolved? • If yes, has the strategy been recorded in writing?
Diagnosing Past and Present Performance• A corporate planner must decide if past strategies worked and if strategic changes are needed by asking: – How is the company currently performing? – How has it performed during the past few years? – Is the performance trend moving up or down?
Setting Goals• Concise statements that provide direction employees and set standards for achieving the company’s strategic plan• Established in many areas (see handout)• Goals must be reevaluated as the environment and opportunities change• Multiple goals are used to reflect the desired performance
Policies, Procedures, and Rules• Policies are broad general guides to action that establish boundaries within which employees must operate – “answering all written customer complaints in writing within 10 days”
Policies, Procedures, and Rules• Procedures are detailed series of related steps/tasks written to implement a policy – Define methods through which policies are achieved – “the customer service representative must note the complaint of Form 622 and forward the yellow copy of the form…”• Rules detail specific and definite corporate actions that employees must follow – Leave little doubt about what is to be done – “no smoking in the conference room”
SWOT Analysis• Strengths, Weaknesses, Opportunities, Threats• Process that allows companies to evaluate overall health – Internal (SW) and external (OT)• Most important result of a SWOT analysis is the ability to draw conclusions about the attractiveness of the company’s situation and the need for strategic action
Implementing Strategy• Action stage of strategic management• Managers determine and implement the most appropriate company structure, motivate employees, develop short-range goals, and establish functional strategies• Strategy must fit with current company policies – Or conflicting policies must be changed• A. T. Cross Company
Evaluating and Controlling the Strategic Plan• Process of continuously monitoring the company’s progress toward its long-range goals and mission• Managers should ask: – Does the grand strategy need revising? – Where are problems likely to occur?• Basic strategy evaluation strategies: – Review external and internal factors that are the bases for current strategies – Measure performance – Take corrective action
Evaluating and Controlling the Strategic Plan• Emphasis is making the company’s managers aware of the problems that are likely to occur and of the actions to take if they do arise• Plan ahead and avoid disaster• Strategic planning and evaluation should be done on a predetermined schedule and as frequently as necessary, determined by internal and environmental factors