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strategic tools

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strategic tools

  1. 1. The Strategic Tool Kit
  2. 2. Strategy – Part one Introduction to strategic concepts.
  3. 3. Strategy Defined “Strategic management can be defined as the art and science of formulating, implementing and evaluating cross-functional decisions that enable an organization to achieve its objectives.”
  4. 4. Strategy Defined “An integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage.”
  5. 5. Strategy Defined “Strategic management includes understanding the strategic position of an organisation, making strategic choices for the future and managing strategy in action.”
  6. 6. Strategy Defined “Strategic management is defined as the process by which managers of the firm analyse the internal and external environments for the purpose of formulating strategies and allocating resources to develop a competitive advantage in an industry that allows for the successful achievement of organisational goals.”
  7. 7. What is strategic management? Various definitions are used to describe the subject, but few give a full and easy to understand answer. The combination of all four definitions used previously gives us a clearer view of what the subject is:
  8. 8. Combined Strategic Definition Strategic management is a continuous process of strategic analysis, formulation, implementation and monitoring, used by organisations with the purpose to achieve and maintain a competitive advantage. It is a reflection action tool!
  9. 9. Strategic Management Planning is more important than the Plan!
  10. 10. Strategic Management 10 6 Word Strategy The actions that achieve the vision.
  11. 11. Strategic Purpose The general purpose of doing it is to combine the energy of an organisation’s functional areas into one focused effort to achieve superior performance. It is usually done through the many steps of a process and should ultimately be closely alligned with the culture of the organisation.
  12. 12. The 3 Key Questions! In essence, it answers the following 3 questions: Where is the organisation is at the moment? Where does it want to go? How it will get there?
  13. 13. Predicting The Future Strategic management is not about predicting the future, but about preparing for it and knowing what exact steps the company will have to take to implement its strategic plan and achieve a competitive advantage.
  14. 14. Strategic Plan or Management? Both strategic management and strategic planning terms mean the same! The difference is that the latter one is more used in the business world while the former is used in the academic environment.
  15. 15. Business v Academic Both strategic management and strategic planning terms mean the same! The difference is that the latter one is more used in the business world while the former is used in the academic environment.
  16. 16. Concepts and Cases According to David, strategic planning is sometimes confused with strategy formulation, because strategic plan is constructed in this stage.
  17. 17. Importance of Strategic PLanning Requirement for sustained competitive advantage. Competitive advantage is what keeps great organisations ahead of their competitors. Rothaermel pointed out that the company, which has a competitive advantage, performs financially much better than other companies in the industry or better than the industry average.
  18. 18. Strategic Committment Some companies may achieve competitive advantage without thorough strategic planning, but for the most players it is vital to plan strategically, i.e. analyse, create, implement and monitor, and do this continuously.
  19. 19. Sustainable Advantage It is not guaranteed that companies will ever achieve competitive advantage conducting strategic planning, but it is an essential process if the company wants sustain it.
  20. 20. Strategy – Broad Cohesive Perspective A reason why organisations don’t simply rely on their finances, marketing or operations functional areas to create competitive advantage is that managers of each area often view things only from their own specific angle, , which is too narrow view for the whole organisation to rely upon.
  21. 21. Custodians of Strategy It is the function of the managers (e.g. CEOs or strategic planners) who see the whole picture of the company and its surrounding environments to make the decisions that bring the competitive advantage.
  22. 22. Trickle Down and Across Virus
  23. 23. Managing the Middle Most companies involve middle managers of functional areas into the process of formulating strategic plan. Middle managers are the people who implement the strategies set out in a plan and if they aren’t involved in making the plan, then they aren’t so committed to support it. Manage the Culture.
  24. 24. Strategic Communications Strategic planning is used to achieve competitive advantage and to integrate all the functional areas of the company by facilitating the communication between the employees at all levels.
  25. 25. Strategy - Part Two - Benefits
  26. 26. Benefits of Strategic Management 1. Defines a company’s vision, mission and future goals.
  27. 27. Benefits of Strategic Management 2. Identifies the suitable strategies to achieve the goals. It may be a marketing, lean, internal comunication, R&D, etc strategy.
  28. 28. Benefits of Strategic Management 3. Improves awareness of the external and internal environments, and clearly identifies the competitive advantage.
  29. 29. Benefits of Strategic Management 4. Increases managers’ commitment to achieving the company’s objectives.
  30. 30. Benefits of Strategic Management 5. Improves coordination of the activities and more efficient allocation of company’s resources.
  31. 31. Benefits of Strategic Management 6. Better communication between managers of the different levels and functional areas.
  32. 32. Benefits of Strategic Management 7. Reduces resistance to change by informing the employees of the changes and the consequences of them.
  33. 33. Benefits of Strategic Management 8. Strengthens the firm’s performance. Strong performance may not immediately mean more profits. “If you manage in the good times, you do not have to manage so hard in the bad times”
  34. 34. Benefits of Strategic Management 9. On average, companies using strategic management are more successful than the companies that don’t.
  35. 35. Benefits of Strategic Management 10. Strategic planning allows the organisation to become more proactive than reactive.
  36. 36. Strategic Limitations - SME 1. The costs of engaging in it can be expensive.
  37. 37. Strategic Limitations - SME 2. The process is complex.
  38. 38. Strategic Limitations - SME 3. Success is not guaranteed.
  39. 39. Sources 1. David, F.R. (2009). Strat.Mgmt.: Concepts and Cases. 12th ed. FT Prentice Hall, p. 36-37, 40, 48 2. Rothaermel, F. T. (2012). Strat.Mgmt.: Concepts and Cases. McGraw-Hill/Irwin, p. 5 3. Johnson, G, Scholes, K. Whittington, R. (2008). Exploring Corporate Strategy. 8th ed. FT Prentice Hall, p. 11-12 4. Cox, M. Z., Daspit, J., McLaughlin, E. and Jones III, R.J. (2012). Strat.Mgmt.: Is It an Academic Discipline? Journal of Business Strategies, Vol. 29 Issue 1, pp. 27-28 5. Blatstein, I.M. (2012). Strategic Planning: Predicting or Shaping the Future? Organization Development Journal, Vol. 30 Issues 2, pp. 32 6. Wikipedia (2013). Strategic Management. Available at: http://en.wikipedia.org/wiki/Strategic_management 7. Business Gateway (2012). Strategic planning: the basics. Available at:http://www.bgateway.com/grow-improve/growing-a-business/strategic-planning-the- basics/#page-1576
  40. 40. The Strategic Management Process ● “Strategic management process is a method by which managers conceive of and implement a strategy that can lead to a sustainable competitive advantage.”[1] ● “It is a process by which an organization establishes its objectives, formulates actions (strategies) designed to meet these objectives in the desired timescale, implements the actions, and assesses progress and results.”[2] ● “Strategic planning process is a systematic or emerged way of performing strategic planning in the organization through initial assessment, thorough analysis, strategy formulation, its implementation and evaluation.”
  41. 41. Strategy - Part Three Strategic Topics
  42. 42. Strategic Integration Definition Horizontal Integration is the process of acquiring or merging with competitors, leading to industry consolidation. Horizontal integration is a strategy where a company acquires, mergers or takes over another company in the same industry value chain.”
  43. 43. What is horizontal integration? It is a type of integration strategies pursued by a company in order to strengthen its position in the industry. A corporate that implements this type of strategy usually mergers or acquires another company that is in the same production stage. For example, Disney merging with Pixar (movie production), Exxon with Mobile (oil production, refining and distribution) or the infamous Daimler Benz and Chrysler merger (car developing, manufacturing and retailing).
  44. 44. Horizontal Integration Purpose The purpose of horizontal integration (HI) is to grow the company in size, increase product differentiation, achieve economies of scale, reduce competition or access new markets. When many firms pursue this strategy in the same industry, it leads to industry consolidation (oligopoly or even monopoly)
  45. 45. HI Versions HI can occur in a form of mergers, acquisitions or hostile takeovers. Merger is the joining of two similar sizes, independent companies to make one joint entity. Acquisition is the purchase of another company. Hostile takeover is the acquisition of the company, which does not want to be acquired.
  46. 46. Horizontal Effectiveness ● Organisation competes in a growing industry. ● Competitors lack of some capabilities, competencies, skills or resources that the company already possesses. ● HI would lead to a monopoly that is allowed by a government. ● Economies of scale would have significant effect. ● The organisation has sufficient resources to manage M&A.
  47. 47. HI Manufacturing Industry
  48. 48. Horizontal v Vertical HI is different from vertical integration, where a firm usually expands into another production stage rather than merging or acquiring the company in the same production stage. For example, a company is vertically integrating if it expands from manufacturing industry to retailing industry, while HI would mean buying other firms in the same manufacturing industry.
  49. 49. Horizontal Integration Examples ACQUIRING COMPANY ACQUIRED COMPANY Porsche Volkswagen Daimler Benz Chrysler Kraft Foods Cadbury Pepsico Quaker Oats HP Compaq Microsoft Yahoo BP Amoco United Airlines Continental Delta Northwest Airlines Oracle Peoplesoft AT&T T-Mobile Glaxo Welcome SmithKline Beecham
  50. 50. Advantages of horizontal integration ● Lower costs. The result of HI is one larger company, which produces more services and products. The higher output leads to greater economies of scale and higher efficiency. ● Increased differentiation. The combined company can offer more product or service features. ● Increased market power. The larger company has more power over its suppliers and distributors/customers. ● Reduced competition. The result of industry consolidation is fewer companies operating in the industry and less intense competition. ● Access to new markets. New markets and distribution channels can be accessed by integrating with a company that produces the same goods but operates in a different region or serves different market segment
  51. 51. Disadvantages of the strategy ● Destroyed value. M&A rarely add value to the companies. More often M&A fail and destroy the value of the companies involved in it because expected synergies never materialize. ● Legal repercussions. HI can lead to a monopoly, which is highly discouraged by many governments due to lack of competition. Therefore, governments usually have to approve any larger M&A before they can happen. ● Reduced flexibility. Large organisations are harder to manage and they are less flexible in introducing innovations to the market.
  52. 52. Strategic Vertical Integration Definition “Vertical integration is a strategy used by a company to gain control over its suppliers or distributors in order to increase the firm’s power in the marketplace, reduce transaction costs and secure supplies or distribution channels.”
  53. 53. Strategic Integration Definition “Forward integration is a strategy where a firm gains ownership or increased control over its previous customers (distributors or retailers).”
  54. 54. Strategic Integration Definition “Backward integration is a strategy where a firm gains ownership or increased control over its previous suppliers.”
  55. 55. Vertical Integration Consideration Costs. An organisation should vertically integrate when costs of making the product inside the company are lower than the costs of buying that product in the market. Scope of the firm. A firm should consider whether moving into new industries would not dilute its current competencies. New activities in a company are also harder to manage and control. The answers to previous questions determine if a company will pursue none, partial or full VI.
  56. 56. What is vertical integration? Vertical integration (VI) is a strategy that many companies use to gain control over their industry’s value chain. This strategy is one of the major considerations when developing corporate level strategy. The important question in corporate strategy is, whether the company should participate in one activity (one industry) or many activities (many industries) along the industry value chain. For example, the company has to decide if it only manufactures its products or would engage in retailing and after-sales services as well. Two issues have to be considered before integration:
  57. 57. General Industry Value Chain VI
  58. 58. Horizontal v Vertical Difference VI is different from horizontal integration, where a corporate usually acquires or mergers with a competitor in a same industry. An example of horizontal integration would be a company competing in raw materials industry and buying another company in the same industry rather than trying to expand to intermediate goods industry. Horizontal integration examples: Kraft Foods taking over Cadbury, HP acquiring Compaq or Lenovo buying personal computer division from IBM.
  59. 59. Types of Vertical Integration
  60. 60. Forward Integration If the manufacturing company engages in sales or after-sales industries it pursues forward integration strategy. This strategy is implemented when the company wants to achieve higher economies of scale and larger market share. Forward integration strategy became very popular with increasing internet appearance. Many manufacturing companies have built their online stores and started selling their products directly to consumers, bypassing retailers.
  61. 61. Forward Integration Reason ● Few quality distributors are available in the industry. ● Distributors or retailers have high profit margins. ● Distributors are very expensive, unreliable or unable to meet firm’s distribution needs. ● The industry is expected to grow significantly. ● There are benefits of stable production and distribution. ● The company has enough resources and capabilities to manage the new business.
  62. 62. Backward Integration When the same manufacturing company starts making intermediate goods for itself or takes over its previous suppliers, it pursues backward integration strategy. Firms implement backward integration strategy in order to secure stable input of resources and become more efficient.
  63. 63. Backward Integration Reason ● Firm’s current suppliers are unreliable, expensive or cannot supply the required inputs. ● There are only few small suppliers but many competitors in the industry. ● The industry is expanding rapidly. ● The prices of inputs are unstable. ● Suppliers earn high profit margins. ● A company has necessary resources and capabilities to manage the new business.
  64. 64. Balanced Integration Balanced integration strategy is simply a combination of forward and backward integrations
  65. 65. Smart Phone Industry VI
  66. 66. Auto Industry VI
  67. 67. Oil Industry
  68. 68. Media Industry
  69. 69. Advantages of Vertical Integration ● Advantages of the strategy: Lower costs due to eliminated market transaction costs ● Improved quality of supplies ● Critical resources can be acquired through VI ● Improved coordination in supply chain ● Greater market share ● Secured distribution channels ● Facilitates investment in specialized assets (site, physical-assets and human- assets) ● New competencies
  70. 70. Disadvantages of Vertical Integration ● Disadvantages of VI: ● Higher costs if the company is incapable to manage new activities efficiently ● The ownership of supply and distribution channels may lead to lower quality products and reduced efficiency because of the lack of competition ● Increased bureaucracy and higher investments leads to reduced flexibility ● Higher potential for legal repercussion due to size (An organization may become a monopoly) ● New competencies may clash with old ones and lead to competitive disadvantage
  71. 71. Alternatives to Vertical Integration ● Alternatives to VI ● This strategy may not always be the best choice for an organization due to a lack of sufficient resources that are needed to venture into a new industry. Sometimes the alternatives to VI offer more benefits. The available choices differ in the amount of investments required and the integration level. For example, short-term contracts require little integration and much less investments than joint ventures.
  72. 72. Alternatives to Vertical Integration ● Does Vodafone actually exist?
  73. 73. American Apparel – The Vertically Integrated Company
  74. 74. Part Four – Strategic Tools ● This section covers the essential and the most popular business strategy tools used by companies to implement their strategic plans and achieve a sustained competitive advantage. These tools are from a range of tools available within our time frame today! 319,000 Google Results.
  75. 75. Strategic Vision Defined ● “Vision is a statement that expresses organization’s ultimate objectives.”
  76. 76. The Vision Statment ● A vision statement asks ‘What does our business want to become?’ and usually is a one sentence, inspirational, clear and memorable statement that expresses company’s desired long-term position. It motivates employees to make extra effort and usually results in higher performance. Because money rewards only partly motivates employees, it is important to use other tools such as vision statement to increase their motivation
  77. 77. Strategic Intent ● Vision is closely related with a term ‘strategic intent’ – a desired leadership position that is currently unachievable due to the lack of resources and capabilities. It is also defined as the combination of vision and mission.
  78. 78. Vision Benefits ● Not all the visions are equally good. Some of them are very generic or focus on financial objectives and as a result, poorly motivates employees. But if a company puts enough efforts in creating vision statement, it results into following benefits: ● Motivates and inspires employees ● Provides one purpose to work for ● Sets the stretch goals (goals that are impossible to achieve with current resources and capabilities) ● Guides managers in effectively allocating resources
  79. 79. Writing The Statement ● Step 1. Gather a team of managers, employees and shareholders. Vision is the statement that must be understood by employees of all levels. As many people as possible should be involved in the process because involvement leads to stronger commitment to company’s vision. After choosing the people that will be involved you should also distribute several articles to them about what is organisation’s vision and ask everyone to read them as a background.
  80. 80. Writing the Statement ● Step 2. Ask everyone to write their own version of vision. The next step is to ask everyone to write his or her own version of the statement and submit it to the responsible team. After receiving the statements, the team should try to combine draft vision out of all the submissions. This is also a great opportunity to resolve any conflicting views about firm’s ultimate objective.
  81. 81. Writing The Statement ● Step 3. Revise the statement and present the final version. The draft statement should be distributed to the members again for their last revision. Upon receiving the feedback, the final version of the vision should be created and presented to every employee.
  82. 82. A Memorable Vision Statement ● A vision statement should be a one clear sentence, inspirational and memorable.
  83. 83. Wow! ● Chevron: To be the global energy company most admired for its people, partnership and performance. ● Feeding America: A hunger-free America ● Habitat for Humanity: A world where everyone has a decent place to live. ● Microsoft: A computer on every desk and in every home ● Save the Children: Our vision is a world in which every child attains the right to survival, protection, development and participation.
  84. 84. Ooops! ● General Motors: To design, build and sell the world’s best vehicles. ( GM should have specified their objective) ● Ikea: At Ikea our vision is to create a better everyday life for the many people. (This is impossible to achieve, they sell furniture! ) ● Samsung: Inspire the World, Create the Future. (The statement is too vague and doesn’t set any objectives) ● Toyota: Toyota will lead the way to the future of mobility, enriching lives around the world with the safest and most responsible ways of moving people. Through our commitment to quality, constant innovation and respect for the planet, we aim to exceed expectations and be rewarded with a smile. We will meet our challenging goals by engaging the talent and passion of people, who believe there is always a better way. (It is too long and sounds more like a mission than a true vision)
  85. 85. Part Five – The Strategic Management Processes!
  86. 86. What is Strategic Management ● “Strategic management process is a method by which managers conceive of and implement a strategy that can lead to a sustainable competitive advantage.”
  87. 87. The Strategic Management Process ● “It is a process by which an organisation establishes its objectives, formulates actions (strategies) designed to meet these objectives in the desired timescale, implements the actions, and assesses progress and results.”
  88. 88. Strategic Planning ● “Strategic planning process is a systematic or emerged way of performing strategic planning in the organisation through initial assessment, thorough analysis, strategy formulation, its implementation and evaluation.”
  89. 89. The Process (doing) of Strategic Management ● The process of strategic management lists what steps the managers should take to create a complete strategy and how to implement that strategy successfully in the company. It might comprise from 7 to nearly 30 steps and tends to be more formal in well-established organisations.
  90. 90. Salami Slicing ● The salami slicing process is how a project is sliced into component parts, often of various thickness.Various schools slice the “ salami” differently and use different component names for each slice!
  91. 91. Strategy Creation ● The ways that strategies are created and realised differ. There are many different models of the process. The models vary between companies typically depending upon: ● Organisation’s culture. ● Leadership style. ● The experience the firm has in creating successful strategies.
  92. 92. Design School Strategy ● All the examples of the process in this the following slides represent top-down approach and belong to the ‘design school’. This is the accepted global academic norm. It is based on a hierarchical company structure.
  93. 93. Strategic Components ● There are many components of the process which are spread throughout strategic planning stages. Most often, the strategic planning process has 4 common phases: strategic analysis, strategy formulation, implementation and monitoring. For clearer understanding, this programme represents 5 stages of the strategic planning process. ● Evaluation!
  94. 94. 5 Stage Strategy ● Initial Assessment ● Situation Analysis ● Strategy Formulation ● Strategy Implementation ● Strategy Monitoring
  95. 95. Initial Assessment ● Components: Vision & Mission ● Tools used: Creating Vision and Mission statements
  96. 96. Vision and Mission ● Vision answers the question: What does an organisation want to become? Without visualising the company’s future, managers wouldn’t know where they want to go and what they have to achieve. Vision is the ultimate goal for the firm and the direction for its employees. ● Mission describes a company’s business. It informs the organisation’s stakeholders about the products, customers, markets, values, concern for public image and employees of the organisation . A thorough mission statement acts as guidance for managers in making appropriate short term decisions.
  97. 97. Situational Assessment ● Components: Internal environment analysis, External environment analysis and Competitor analysis ● Tools used: PEST, SWOT, Core Competencies, Critical Success Factors, Unique Selling Proposition, Porter's 5 Forces, Competitor Profile Matrix, External Factor Evaluation Matrix, Internal Factor Evaluation Matrix, Benchmarking, Financial Ratios, Scenarios Forecasting, Market Segmentation, Value Chain Analysis, VRIO Framework.
  98. 98. Shining a Light ● When the company identifies its vision and mission it must assess its current situation in the market. This includes evaluating an organisation’s external and internal environments and analysing its competitors.
  99. 99. External Analysis ● During external environment analysis managers look into the key external forces: macro & micro environments and competition. PEST or PESTLE frameworks represent all the macro environment factors that influence the organization in the global environment. Micro environment affects the company in its industry. It is analyzed using Porter’s 5 Forces Framework.
  100. 100. Internal Analysis ● Internal analysis includes the assessment of the company’s resources, core competencies and activities. An organisation holds both tangible resources: capital, land, equipment, and intangible resources: culture, brand equity, knowledge, patents, copyrights and trademarks. A firm’s core competencies may be superior skills in customer relationship or efficient supply chain management. When analysing the company’s activities managers look into the value chain and the whole production process.
  101. 101. SWOT ● As a result, situation analysis identifies strengths, weaknesses, opportunities and threats for the organization and reveals a clear picture of company’s situation in the market.
  102. 102. Strategy Formulation ● Components: Objectives, Business level, Corporate level and Global Strategy Selection ● Tools used: Scenario Planning, SPACE Matrix, Boston Consulting Group Matrix, GE- McKinsey Matrix, Porter’s Generic Strategies, Bowman’s Strategy Clock, Porter’s Diamond, Game Theory, QSP Matrix.
  103. 103. Business Level Strategy ● Business level strategy. This type of strategy is used when strategic business units (SBU), divisions or small and medium enterprises select strategies for only one product that is sold in only one market. The example of business level strategy is well illustrated by Royal Enfield firms. They sell their Bullet motorcycle (one product) in United Kingdom and India (different markets) but focus on different market segments and sell at very different prices (different strategies). Firms may select between Porter’s 3 generic strategies: cost leadership, differentiation and focus strategies.
  104. 104. Corporate Level Strategy ● Corporate level strategy. At this level, executives at top parent companies choose which products to sell, which market to enter and whether to acquire a competitor or merge with it. They select between integration, intensive, diversification and defensive strategies.
  105. 105. Global/International strategy ● Global/International strategy. The main questions to answer: Which new markets to develop and how to enter them? How far to diversify?
  106. 106. Strategy Implementation ● Components: Annual Objectives, Policies, Resource Allocation, Change Management, Organizational chart, Linking Performance and Reward ● Tools used: Policies, Motivation, Resistance management, Leadership, Stakeholder Impact Analysis, Changing organizational structure, Performance management
  107. 107. Strategy Implementation (David) ● At this stage, managerial skills are more important than using analysis. Communication in strategy implementation is essential as new strategies must get support all over organisation for effective implementation. ● Setting annual objectives; ● Revising policies to meet the objectives; ● Allocating resources to strategically important areas; ● Changing organizational structure to meet new strategy; ● Managing resistance to change; ● Introducing new reward system for performance results if needed.
  108. 108. Strategy Implementation ● The first point in strategy implementation is setting annual objectives for the company’s functional areas. These smaller objectives are specifically designed to achieve financial, marketing, operations, human resources and other functional goals. To meet these goals managers revise existing policies and introduce new ones which act as the directions for successful objectives implementation.
  109. 109. Strategy Implementation ● The other very important part of strategy implementation is changing an organisational chart. For example, a product diversification strategy may require new SBU to be incorporated into the existing organisational chart. Or market development strategy may require an additional division to be added to the company. Every new strategy changes the organisational structure and requires reallocation of resources. It also redistributes responsibilities and powers between managers. Managers may be moved from one functional area to another or asked to manage a new team. This creates resistance to change, which has to be managed in an appropriate way or it could ruin excellent strategy implementation.
  110. 110. Strategy Monitoring ● Components: Internal and External Factors Review, Measuring Company’s Performance ● Tools used: Strategy Evaluation Framework, Balanced Scorecard, Benchmarking
  111. 111. Strategy Monitoring ● Implementation must be monitored to be successful. Due to constantly changing external and internal conditions managers must continuously review both environments as new strengths, weaknesses, opportunities and threats may arise. If new circumstances affect the company, managers must take corrective actions as soon as possible. ● Usually, tactics rather than strategies are changed to meet the new conditions, unless firms are faced with such severe external changes as the 2008 credit crunch.
  112. 112. Strategy Monitoring ● Measuring performance is another important activity in strategy monitoring. Performance has to be measurable and comparable. Managers have to compare their actual results with estimated results and see if they are successful in achieving their objectives. If objectives are not met managers should: ● Change the reward system. ● Introduce new or revise existing policies. ● The key element in strategy monitoring is to get the relevant and timely information on changing environment and the company’s performance and if necessary take corrective actions.
  113. 113. Different models of the process ● There is no universal model of the strategic management process. The one, we have described in this presentation, is just one more version of so many models that are established by other authors. In this section we will illustrate and comment on 3 more well- known frameworks presented by recognised scholars in the strategic management field. More about these models can be found in the author's books.
  114. 114. David’s Model of the Strategic Management’s Process
  115. 115. David’s Model of the Strategic Management’s Process ● Stages ● Strategy Formulation ● Strategy Implementation ● Strategy Evaluation
  116. 116. David’s Model of the Strategic Management’s Process ● Steps ● Develop vision and mission ● External environment analysis ● Internal environment analysis ● Establish long-term objectives ● Generate, evaluate and choose strategies ● Implement strategies ● Measure and evaluate performance
  117. 117. David’s Model of the Strategic Management’s Process ● Benefits ● Indicates all the major steps that have to be met during the process. ● Illustrates that the process is a continuous activity. ● Arrows show the two way process. This means that companies may sometimes go a step or two back in the process rather than having to complete the process and start it all over from the beginning. For example, if in the implementation stage the company finds out that the strategy it chose is not viable, it can simply go back to the strategy selection point instead of continuing to the monitoring stage and starting the process from the beginning.
  118. 118. David’s Model of the Strategic Management’s Process ● Drawbacks ● Represents only strategy formulation stage and does separate situation analysis from strategy selection stages. ● Confuses strategy evaluation with strategy monitoring stage.
  119. 119. Rothaermel’s The Analysis-Formulation-Implementation (AFI) Strategy Framework
  120. 120. Rothaermel’s The Analysis-Formulation-Implementation (AFI) Strategy Framework ● Stages ● Where are we? ● Where are we going? ● How are we getting there? ● How are we doing?
  121. 121. Rothaermel’s The Analysis-Formulation-Implementation (AFI) Strategy Framework ● Stages ● Analysis ● Formulation ● Implementation
  122. 122. Rothaermel’s The Analysis-Formulation-Implementation (AFI) Strategy Framework ● Steps ● Initial analysis ● External and internal analysis ● Business or corporate strategy formulation ● Implementation
  123. 123. Rothaermel’s The Analysis-Formulation-Implementation (AFI) Strategy Framework ● Benefits ● Shows that the process is a continuous activity. ● Separates initial analysis from internal/external analysis. ● Emphasizes the main focus of strategic management: “Gain and sustain competitive advantage”
  124. 124. Rothaermel’s The Analysis-Formulation-Implementation (AFI) Strategy Framework ● Drawbacks ● Does not include strategy monitoring stage. ● Arrows indicate only one way process. For example, after the strategy formulation the process continues to the implementation stage while this is not always the truth. Companies may go back and reassess their environments if some conditions had changed.
  125. 125. Thompson’s and Martin’s Strategic Management Framework
  126. 126. Thompson’s and Martin’s Strategic Management Framework ● Stages ● Where are we? ● Where are we going? ● How are we getting there? ● How are we doing?
  127. 127. Thompson’s and Martin’s Strategic Management Framework ● Steps ● Situation appraisal: review of corporate objectives ● Situation assessment ● Clarification of objectives ● Corporate and competitive strategies ● Strategic decisions ● Implementation ● Monitor progress
  128. 128. Thompson’s and Martin’s Strategic Management Framework ● Benefits ● Indicates all the major steps that have to be met during the process. ● Shows that the process is a continuous activity. ● The model is supplemented by 4 fundamental strategic management questions. ● Drawbacks ● Arrows indicate only one way process. Simplest Strategy!
  129. 129. Note ● It is rare that the company will be able to follow the process from the first to the last step. Producing a quality strategic plan requires time, during which many external and even internal conditions may change. This results in the flawed strategic plan which has to be revised, hence requiring even more time to finish. ● On the other hand, when implementing the strategic plan, the actual results do not meet the requirements of the strategic plan so the plan has to be altered or better methods for the implementation have to be discovered. This means that some parts of strategic management process have to be done simultaneously, which makes the whole process more complex.
  130. 130. Sources ● Rothaermel, F. T. (2012). Strategic Management: Concepts and Cases. McGraw-Hill/Irwin, p. 20, 32-45, 90 ● Thompson, J. and Martin, F. (2010). Strategic Management: Awareness & Change. 6th ed. Cengage Learning EMEA, p. 34, 557, 790 ● Clark, D. N. (1997). Strategic management tool usage: a comparative study. Strategic Change Vol. 6, pp. 417-427 ● David, F.R. (2009). Strategic Management: Concepts and Cases. 12th ed. FT Prentice Hall, p. 36-37, 45-47, 93 ● Johnson, G, Scholes, K. Whittington, R. (2008). Exploring Corporate Strategy. 8th ed. FT Prentice Hall, p. 11-13, 224, 294

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