Strategic managment

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introduction to strategic management

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Strategic managment

  1. 1. Lecture 1: Introduction to Strategic Management (Chapter 1) Instructor: Moses Acquaah, Ph.D. 377 Bryan Building Phone: (336) 334-5305 Email: acquaah@uncg.edu
  2. 2. Lecture Objectives <ul><li>By the end of this lecture, students should be able to: </li></ul><ul><ul><li>Explain the functions of management </li></ul></ul><ul><ul><li>Define and explain strategy and strategic management </li></ul></ul><ul><ul><li>Explain why strategic management is important </li></ul></ul><ul><ul><li>Explain the strategic management process </li></ul></ul><ul><ul><li>Describe the levels of organizational strategies </li></ul></ul><ul><ul><li>Discuss the misconceptions about strategy and strategic management </li></ul></ul>
  3. 3. OBJECTIVE #1 Functions of Management <ul><li>Planning, Organizing, Leading; & Controlling (PLOC) </li></ul><ul><li>Planning </li></ul><ul><ul><li>defining goals and objectives </li></ul></ul><ul><ul><li>deciding what type of activities the company will engage in </li></ul></ul><ul><ul><li>determining the resources needed to achieve the organization’s goals & objectives. </li></ul></ul>
  4. 4. Functions of Management <ul><li>Leading </li></ul><ul><ul><li>Attracting people to the organization. </li></ul></ul><ul><ul><li>Specifying job responsibilities </li></ul></ul><ul><ul><li>Grouping jobs into work units </li></ul></ul><ul><ul><li>Marshalling and allocation of resources </li></ul></ul><ul><ul><li>Creating good working conditions </li></ul></ul>
  5. 5. Functions of Management <ul><li>Organizing </li></ul><ul><ul><li>Directing, motivating, and communication with employees, individually & in groups. </li></ul></ul><ul><ul><li>Conflict resolution. </li></ul></ul><ul><li>Controlling </li></ul><ul><ul><li>Monitoring performance of people & units. </li></ul></ul><ul><ul><li>Provision of feedback or information about progress. </li></ul></ul><ul><ul><li>Identification of performance problems & actions to correct problems. </li></ul></ul>
  6. 6. Disciplinary Focus <ul><li>Various disciplines in “management” emerge from the functions of management: </li></ul><ul><ul><li>Business Policy (formally called Strategic Planning ) from the planning function. </li></ul></ul><ul><ul><li>Organizational Behavior primarily from the leading function. </li></ul></ul><ul><ul><li>Human Resources Management primarily from the organizing function. </li></ul></ul><ul><ul><li>Strategic Management , originated from Business Policy, but focuses on overall management – PLOC – and beyond . </li></ul></ul>
  7. 7. OBJECTIVE #2 What’s Strategy? <ul><li>Strategy is management’s overall plan and actions for deploying resources and skills taking into consideration opportunities and threats in the environment </li></ul><ul><ul><li>to achieve it’s mission, vision and objectives </li></ul></ul><ul><ul><li>to establish a favorable competitive position . </li></ul></ul><ul><li>Strategy involves: </li></ul><ul><ul><li>An organization’s goals </li></ul></ul><ul><ul><li>A series of related decisions & actions </li></ul></ul><ul><ul><li>Takes into account key internal strengths & weaknesses and external opportunities threats </li></ul></ul><ul><ul><li>Analysis, communication, coordination, & action </li></ul></ul>
  8. 8. What is Strategic Management? <ul><li>Focuses on how managers formulate and implement, and evaluate strategies aimed at developing and maintaining competitive advantage : </li></ul><ul><ul><li>the reason some firms enjoy higher levels of performance than their rivals or competitors . </li></ul></ul><ul><li>Strategic management is therefore concerned with overall PLOC </li></ul><ul><li>Four aspects that set strategic management apart: </li></ul><ul><ul><li>Interdisciplinary </li></ul></ul><ul><ul><li>External focus </li></ul></ul><ul><ul><li>Internal focus </li></ul></ul><ul><ul><li>Future directions </li></ul></ul>“ Big picture” view of an organization influenced by its external environment
  9. 9. Strategic Management’s Uniqueness <ul><li>Field of Study </li></ul><ul><ul><li>Macroeconomics </li></ul></ul><ul><ul><li>Microeconomics </li></ul></ul><ul><ul><li>Strategic Management </li></ul></ul><ul><ul><li>Finance </li></ul></ul><ul><ul><li>Marketing </li></ul></ul><ul><ul><li>Org. Behavior </li></ul></ul><ul><ul><li>Human Resource Mgmt. </li></ul></ul><ul><ul><li>Operations Mgmt. </li></ul></ul><ul><li>Level of Analysis </li></ul><ul><ul><li>The economy </li></ul></ul><ul><ul><li>Industries & markets </li></ul></ul><ul><ul><li>Firms & businesses </li></ul></ul><ul><ul><li>Investment Projects </li></ul></ul><ul><ul><li>Products & services </li></ul></ul><ul><ul><li>Individuals & Groups </li></ul></ul><ul><ul><li>Tasks & Structure </li></ul></ul><ul><ul><li>Plants </li></ul></ul>
  10. 10. OBJECTIVE #3 Importance of Strategic Management <ul><li>Gives every employee a role to play in making the firm successful </li></ul><ul><ul><li>Applies to all professional employees, not just those in management </li></ul></ul><ul><ul><li>Allows decision-making, allocation of resources and management of people to be based on a firm’s strategic plan </li></ul></ul><ul><ul><li>Success as a manager (as measured by your promotion, job security, and pay increases) is often determined by your efforts & departments contribution to overall organization’s success </li></ul></ul><ul><li>Makes a difference in performance levels </li></ul><ul><ul><li>Research suggest that successful companies use strategic management concepts & techniques </li></ul></ul><ul><ul><li>Success evolves from “knowing what you’re doing” and often implies having a strategic plan </li></ul></ul>
  11. 11. Importance of Strategic Management <ul><li>Provides systematic approach to uncertainties that organizations face </li></ul><ul><ul><li>Competitive & global environment are dynamic (changing) </li></ul></ul><ul><ul><li>Change, whether significant of minor, must be recognized and analyzed, & dealt with </li></ul></ul><ul><ul><li>Strategic management allows for the analysis of the situation (identifying the sources of change in environment) </li></ul></ul><ul><li>Coordinates and focuses employees to achieve organization’s goals </li></ul><ul><ul><li>Allows for team effort which is coordinated for firm success </li></ul></ul><ul><ul><li>Allows for development of a plan, communication, coordination, & cooperation among diverse depts & functions </li></ul></ul>
  12. 12. OBJECTIVE #4 Strategic Management Process <ul><li>Establishing a mission, vision and objectives </li></ul><ul><li>Environmental Analysis </li></ul><ul><li>Internal Analysis </li></ul><ul><li>Strategy Formulation </li></ul><ul><li>Strategy Implementation </li></ul><ul><li>Strategic Control and Performance Evaluation </li></ul>
  13. 13. The Strategic Management Process Mission, Vision & Objectives Internal Analysis Environ. Analysis Strategy Formul- ation Strategy Implem- entation Strategic Eval. & Control
  14. 14. Mission, Vision & Objectives <ul><li>A company’s mission is a statement of </li></ul><ul><ul><li>the basic purpose or reason for its existence </li></ul></ul><ul><ul><li>its values (role to stakeholders - customers, employees, society, etc.). </li></ul></ul><ul><li>The vision goes beyond the mission statement </li></ul><ul><ul><li>clarifies the long-term direction of the company (where the company is going) </li></ul></ul><ul><ul><li>reflects management’s aspirations for the company </li></ul></ul>
  15. 15. Mission, Vision & Objectives <ul><li>Objectives are yardsticks for tracking a company’s performance or end result. </li></ul><ul><ul><li>Financial performance objectives (e.g., ROA, ROI, ROE, Dividend growth, Stock price, etc.). </li></ul></ul><ul><ul><li>Strategic performance objectives (e.g., market share, growth, innovation leader, customer service, community & environmental responsibility, etc.) </li></ul></ul>
  16. 16. Examples of Mission & Vision <ul><li>Southwest Airlines: </li></ul><ul><ul><li>Mission : To provide high quality service at a lower price in the airline industry. </li></ul></ul><ul><ul><li>Vision : Opening air travel to a wider group of leisure travelers while infusing the organization with a sense of fun. </li></ul></ul><ul><li>Apple Computer: </li></ul><ul><ul><li>Mission : To bring the best personal computing products and support to consumers around the world. </li></ul></ul><ul><ul><li>Vision : One person, one computer. </li></ul></ul>
  17. 17. Financial & Strategic Objectives <ul><li>Alcan Aluminum </li></ul><ul><ul><li>Financial : To outperform the average return on equity of the S&P’s industrial stock index. </li></ul></ul><ul><ul><li>Strategic : To be lowest-cost producer of aluminum. </li></ul></ul><ul><li>GE </li></ul><ul><ul><li>Financial : To achieve an average of 10 inventory turns and a corporate operation profits margin of 16% by 1998. </li></ul></ul><ul><ul><li>Strategic : To become most competitive enterprise in the world by being #1 or #2 in market share in every business the company is in. </li></ul></ul>
  18. 18. Environmental Analysis <ul><li>Involves the evaluation of the business environment of the organization. </li></ul><ul><ul><li>All external influences that impact a company’s decision and performance. </li></ul></ul><ul><li>Environment of firm classified by proximity into </li></ul><ul><ul><li>(1) Macro-environment; and </li></ul></ul><ul><ul><li>(2) Micro-environment or task environment. </li></ul></ul>
  19. 19. Environmental Analysis <ul><li>The macro-environment consists of </li></ul><ul><ul><li>The international/national economy; changes in demographic structures; social and political trends; technology; and the natural environment. </li></ul></ul><ul><li>The micro-environment consists of </li></ul><ul><ul><li>The industry environment such as competitors, suppliers, customers; unions and employees; owners and shareholders, etc. </li></ul></ul>
  20. 20. Internal Analysis <ul><li>Involves the evaluation of the inventory of the firm’s resources and capabilities. </li></ul><ul><li>Resources/Capabilities can be classified as: </li></ul><ul><ul><li>Tangible resources: Financial or physical assets </li></ul></ul><ul><ul><li>Intangible resources: brand name, reputation (product & firm), organizational culture, etc. </li></ul></ul><ul><ul><li>Capabilities or competencies: managerial ability, specialized skill & knowledge base of employees, etc. </li></ul></ul>
  21. 21. Strategy Formulation <ul><li>The strategy formulation process </li></ul><ul><ul><li>involves designing a course of action for addressing strategic issues facing the firm after going through the external and internal evaluation processes. </li></ul></ul><ul><li>Actual strategy of a company involves: </li></ul><ul><ul><li>Planned or Intended Actions (Deliberate & purposeful actions). </li></ul></ul><ul><ul><li>Reactive or Emergent Actions (As-need reactions to unanticipated events in firm’s micro and macro environments). </li></ul></ul>
  22. 22. Strategy Formulation <ul><li>Strategy formulation is concerned with the following parts of a company: </li></ul><ul><ul><li>Corporate (whole company) -- Corporate strategies: Deals with businesses company wants to be in & how to manage those businesses </li></ul></ul><ul><ul><li>Businesses -- Competitive strategies: How to compete in specific business or industry </li></ul></ul><ul><ul><li>Functional areas -- Functional strategies: short goal-directed decisions & actions of an organization’s various functional departments. </li></ul></ul>
  23. 23. Strategy Implementation <ul><li>Strategy implementation is the process of putting a company’s various strategies into action </li></ul><ul><ul><li>development of programs, policies, budgets & procedures. </li></ul></ul><ul><li>It can take several months to years to complete. </li></ul><ul><li>Most difficult part of the strategy process. </li></ul><ul><li>The job of implementing strategy involves managers at all levels </li></ul>
  24. 24. Strategic Control & Evaluation <ul><li>Process by which desired outcomes (mission, vision, & objectives) are compared with realized outcomes to determine if there are gaps. </li></ul><ul><li>Initiate corrective actions by monitoring changes in environment - competitor actions, new market opportunities, customer needs & expectations. </li></ul>
  25. 25. Strategic Management Process <ul><li>On-going and continuous cycle of </li></ul><ul><ul><li>Situation Analysis : Internal evaluation & Environmental scanning </li></ul></ul><ul><ul><li>Strategy formulation </li></ul></ul><ul><ul><li>Strategy implementation </li></ul></ul><ul><ul><li>Strategy evaluation </li></ul></ul>
  26. 26. Misconceptions about Strategy & Strategic Management <ul><li>Strategy & strategic planning are dead </li></ul><ul><ul><li>Every organization needs the focus and direction provided by its strategies and the strategic management process </li></ul></ul><ul><li>Strategy is strictly for top management </li></ul><ul><ul><li>Top management play a crucial role, but everyone in the organization has a part to play. </li></ul></ul><ul><li>Strategy is about planning </li></ul><ul><ul><li>Strategic management process shows that strategy is not only about planning, but also about doing. </li></ul></ul>
  27. 27. Misconceptions about Strategy & Strategic Management <ul><li>Strategy is stable and constant </li></ul><ul><ul><li>Organizations compete in dynamic environments. Flexibility and change needed to respond to environmental opportunities & threats, & strength and weaknesses </li></ul></ul><ul><li>Strategic management outlines ultimate destination & route </li></ul><ul><ul><li>It establishes a systematic approach to analyzing relevant information & using it to design, implement, & evaluate appropriate strategies. </li></ul></ul>

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