An overview of strategic management


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Highly useful in understanding the basic concepts related to the field of strategic management

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An overview of strategic management

  2. 2. 15 August 2011 2Business/Service StrategyO The means an organization uses to achieve itsobjectivesO Serves as a tool for the implementation ofmanagement’s concept of business scope, mission,purpose, and objectivesO Guiding framework in running overall institutionaloperationsO A direction for the organization both in shorter as wellas long run
  3. 3. Components of Corporate/Institutional Strategy1. Scope, mission, and intent2. Objectives3. Development strategy4. Resources allocation5. Source of synergy
  4. 4. 15 August 2011 41. Scope, mission, and intent What business/service should the firm be in?, What customer needs, market segments,and/or technologies should the firm focus on?,and What should be the end purpose or the intentof the firm?
  5. 5. MarketOrientedFit MarketEnvironmentMotivating RealisticDistinctiveCompetenciesSpecificCharacteristicsof Good MissionStatementsMission Statements
  6. 6. 15 August 2011 62. Objectives* What performance dimensions should thefirm’s service/business units and employeesfocus on?,* What is the target level of performance to beachieved on each dimension?, and* What is the timeframe in which each targetshould be attained?
  7. 7. 15 August 2011 7The Characteristics of ObjectivesEvery business/service objective should be:S = SpecificM = MeasurableA = AchievableR = RealisticT = Time-bounded
  8. 8. 15 August 2011 83. Development Strategy How can the firm achieve the desired level ofgrowth over time?, Can the desired growth be attained byexpanding the firm’s current business orservice?, and Will the institution have to diversify into newbusinesses or product or service markets toachieve its future growth objectives?
  9. 9. 15 August 2011 94. Resources Allocation* How should the firm’s limited financialresources be allocated across its business andservices to produce the highest returns? and* Of the alternative strategies that each businessor service might pursue, which will producethe greatest returns for the money invested?
  10. 10. 15 August 2011 105. Sources of Synergy* What competencies, knowledge, and customer basedintangibles (e.g., brand recognition, reputation,loyalty, etc.) might be developed and shared acrossthe firm’s operations?, and* What operational resources, facilities, or functions(e.g., plants, R&D, salesforce, etc.) might the firm’soperations share to increase their efficiency?
  11. 11. 15 August 2011 11A Business/Service Strategy SpecificationIncludes the determination of:1. The product market in which the business is to compete2. The level of investment3. The functional area strategies needed to compete in theselected product market4. The strategic assets or competencies that underline thestrategy and provide sustainable competitive advantage (SCA)Multiple Businesses/Services5. The allocation of resources over the business/service units6. The development of synergistic effects across thebusiness/service centers -the creation of value by havingbusiness units that support and complement each other.SMART
  12. 12. 15 August 2011 12A Model of Business/Service StrategyBusiness/Service StrategyProduct-MarketInvestment Decision* Product market scope* Investment intensity* Resources allocationover business unitsFunctional AreaStrategies* Product* Price* Distribution* Promotion, etc.Basis of SCAs* Assets/competencies* SynergiesSMART
  13. 13. 15 August 2011 13The Search for SCAsSources ofAdvantage* Superior skills* Superior resources* Superior controlsPositionalAdvantages* Superiorcustomer value* Lower relativecostsPerformanceOutcomes* Satisfaction* Loyalty* Market share* ProfitabilityInvestment of profits to sustain advantage
  14. 14. 15 August 2011 14Strategic Business Unit (SBU)¤ SBU is an organizational unit that has distinctlydefined business strategy and a manager withsales and profit responsibility.¤ The concept of SBU makes business units moreautonomous and strategy development lesscentralized.¤ An SBU should be formed either at the brandlevel (e.g., KU MBA), or at the category level(e.g., KU management study center)
  15. 15. 15 August 2011 15What are the bases of setting up SBUs?The appropriate level of aggregation for an SBUfully relies on judgments. The judgment may bedone on TWO bases. They are:1.Commonality of the products/service to bekept within one SBU, and2.Necessary size of the organization to supportSBUIn many cases, an SBU may have a variety of product/servicelines.
  16. 16. 15 August 2011 16Strategic Management° Integral part of strategic management process.° Planning process to deal with the rapid change in theenvironment.° Has close associations with budgeting (early 1990s),long-range planning (1950s), and strategic planning(1960s), and is developed since mid 1980s.° A proactive and future oriented management processin marketing.° Emphasizes the strategy development needs to bedriven by the market and its environment rather thanan internal orientation.
  17. 17. 15 August 2011 17Strategic Management Aims at:° How to influence the external factors andmake them supportive to the organizationaloperations, and how to most efficiently andeffectively use the internal forces whereby theresources (strengths) are best utilized toachieve the highest possible rate ofproductivity for the organization.
  18. 18. 15 August 2011 18Some Strategic Challenges to Managers:° Management has a distinctive and farsighted view,rather than a conventional and reactive view, aboutthe future.° Senior management focuses regenerating corestrategies rather than reengineering core processes.° Competitors view the institution as a rule makerrather than a rule follower.° The institution’s strength is on innovation andgrowth rather than on operational efficiency.° The institution is mostly out in front rather thancatching up.
  19. 19. 15 August 2011 19Development of Strategic Management° Developed along with the evolution of variousmanagement systems.° Follows the evolution of Budgeting, Long-Range Planning, and Strategic Planning.° Sometimes all these terms are usedinterchangeably.
  20. 20. 15 August 2011 20Characteristics and Trends of Strategic ManagementThe following are some of the major thrusts or trendsemerged in the field of strategic management:1. External, Market Orientation2. Proactive Strategies3. Emphasis on Information System4. On-Line Analysis and Decision Making5. Entrepreneurial Thrust6. Strategic Fitness in Implementation7. Matching with the Global Realitiescontd…
  21. 21. 15 August 2011 21Characteristics and Trends contd…8. Longer Time Horizon9. Empirical Research Based10. Interdisciplinary DevelopmentsMarketingOrganizational BehaviorFinance and AccountingEconomicsStrategy
  22. 22. 15 August 2011 22Needs/Importance of Strategic ManagementDespite the involvement of high cost, strategicmanagement has the potential to:• Precipitate the concept of strategic choices,• Force a long-range view,• Make visible the resources allocation decision,• Aid strategic analysis and decision making,• Provide a strategic management and control system,• Provide both horizontal and vertical communicationand coordination systems, and• Help a business/institution cope with changes.
  23. 23. 15 August 2011 23Needs/Importance …George Yip studied strategy development in 13 firmsand concluded that strategic market managementapproaches have particular value for businesses that -* Need multifunctional strategies; one marketingoriented firm used them to provide a strategic rolefor functions other than marketing,* need to achieve synergy among multiple markets,* need to coordinate the strategies of multiplebrands, and* are involved in complex markets wheremultiple or layered channels, regional variations, ormultiple elements of marketing mix are involved.
  24. 24. External Analysis1. Customer analysis2. Competitor analysis3. Market analysis4. Environmental analysisStrengths, weaknesses, stg. problems,constraints, and uncertaintiesOpportunities, threats, trends,and strategic uncertaintiesInternal Analysis1. Performance analysis2. Determinants of strategic optionsStrategy Identification and SelectionDetermination of Functional StrategiesPlanning, Implementation and ControlReview of Strategic ThrustsSituation AnalysisStrategicManagementProcess