STRATEGIC MANAGEMENT: INCLUDING APPLICATION OF MAQASID AL-SHARIAH AS STRATEGIC OPTION

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A complete Lecture on Strategic Management [At MBA Level], including the various option of strategies including the latest option of application of Maqasid Al-Shariah in Strategic Management.

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STRATEGIC MANAGEMENT: INCLUDING APPLICATION OF MAQASID AL-SHARIAH AS STRATEGIC OPTION

  1. 1. Lecture STRATEGIC MANAGEMENT [Including Application of Maqasid Al Shariah in Strategic Management] This lecture was given to MBA Students. University of Keele ,Staffordshire,(UK); INSANIAH & KUIS (MALAYSIA) and Senior Managers of Caprice Gold Group, Turkey MISSION To Score Distinction For MBA OBJECTIVE Understand & Apply By Prof. SHAYA’A OTHMAN sottoman@gmail.com 1429H [1st Lecture] -1435H [Revised] / 2008M [1st Lecture] -2014M [Revised]
  2. 2. Proposed Time For The Lecture [1000 - 1800] [13th March 1999] Strategic Management • • • • • • • • • 1000-1100 1100-1200 1200-1300 1300-1400 1400-1500 1500-1600 1600-1615 1600-1700 1700-1800 - LECTURE LECTURE DISCUSSION LUNCH LECTURE LECTURE TEA BREAK DISCUSION DISCUSSION
  3. 3. STRUCTURE OF LECTURE Part 1. SITUATION ANALYSIS : 1000 - 1300 [3hrs] • STRATEGIC MANAGEMENT • Definition and Process • FORMULATION OF STRATEGY • Situation Analysis • Strategic Option • SITUATION ANALYSIS • General Environment • Competitive Environment • Organization • Internal Environment • SWOT Analysis Part 2. STRATEGIC OPTION : 1400-1800 [4 hrs] • COMPETITIVE STRETEGY • Three Generic Strategies • DEVELOPMENT STRATEGY • Alternative Directions For Strategic Development • PORTPOLIO STRATEGY • Boston Consulting Group [BCG] Growth Share Matrix • McKinsey/Attractiveness Strength Matrix • BLUE OCEAN STRATEGY • MAQASID AL-SHARIAH STRATEGY
  4. 4. STRATEGIC MANAGEMENT STRATEGIC S MANAGEMENT SUM M Slide 2
  5. 5. Definition of STRATEGY • As Plan = deals with how leaders try to establish direction for the company, to set them on predetermine courses of action • As Pattern = focuses on action, reminding us that the concept is an empty one if it does not take behavior into account • As Position = encourages us to look at organizations in their competitive environments • As Perspective = raises intriguing questions about intention and behavior in a collective context • A Strategy is a pattern or plan that integrate an organization’s major goals, policies, and action sequences into a cohesive whole. James Brian Quinn,[1988], The Strategy Process, Prentice Hall
  6. 6. Definition of Management • “Knowing exactly what you want [people] to do, and then seeing that they do it in the best and cheapest way”. - Frederick Taylor • “Application of knowledge to realities in order to attain desired results” • K. O’Donnell, Weitrich 1986, Essential of Management, McGraw Hill • “A set of activities [including planning and decision making, organizing, leading, and controlling] directed at an organization’s resources, [human, finical, physical and information] within the aim of achieving organizational goals in an efficient and effective manner” • efficient = using resources wisely and in a cost-effective way. • effective = making the right decisions and successfully implementing them. Ricky W Griffin [1996] Management, Houghton Mifflin
  7. 7. Definition of STRATEGIC MANAGEMENT • ALL THAT IS NECESSARY TO POSITION THE COMPANY A WAY THAT WILL ASSURE ITS LONGTERM SURVIVAL IN A COMPETATIVE ENVIRONMENT
  8. 8. FORMULATION OF STRATEGY MATCHING CAPABILITIES ENVIRONMENT • In essence, the FORMULATION OF STRATEGY is concerned with MATCHING the CAPABILITIES of the organization with its ENVIRONMENT MATCHING = SITUATION ANALYSIS [The Firm and its Environment]
  9. 9. STRATEGY FORMULATION 5 3 SITUATION ANALYSIS • GENERAL ENVIRONMENT • • Firm’s Position - Lifecycle Model, Strategic Group analysis, Market Share Analysis • Recourses and Capabilities: The Value Chain COMPETITIVE STRETEGY • • • Three Generic Strategies DEVELOPMENT STRATEGY • Alternative Directions For Strategic Development PORTPOLIO STRATEGY • Boston Consulting Group [BCG] Growth Share Matrix • INTERNAL ENVIRONMENT • • Product, Supplier, Buyer, Rivalry, Labor ORGANIZATION • • Economics, Technological, Legal, Political, Social & Cultural COMPETITIVE ENVIRONMENT • • STRATEGIC OPTIONS McKinsey/Attractiveness Strength Matrix • BLUE OCEAN STRATEGY • MAQASID AL SHARIAH STRATEGY SWOT ANALYSIS • Determine Firm Strategic position, Capability of Present Strategy to changes
  10. 10. SITUATION ANALYSIS • GENERAL ENVIRONMENT • Economics, Technological, Legal, Political, Social & Cultural • COMPETITIVE ENVIRONMENT • Product, Supplier,Buyer,Rivalry,Labor • ORGANIZATION • Firm’s Position - Lifecycle Model, Strategic Group analysis, Market Share Analysis • INTERNAL ENVIRONMENT • Recourses and Capabilities: The Value Chain • SWOT ANALYSIS • Determine Firm Strategic position, Capability of Present Strategy to changes
  11. 11. 1. General Environment [SITUATION ANALYSIA] • Economics factors : • Technological factors : • Legal factors : • Political factors : • Social & Cultural factors :
  12. 12. 2. Competitive Environment [SITUATION ANALYSIA] • Product, Supplier,Buyer,Rivalry,Labor [ PROS BURILA] Potential Entrants Treats of new entrants Suppliers Bargaining Power Industry Competitors Bargaining Power Buyers Rivalry Among Existing Firms Porter 1980 The Five Forces of Industry Competition Treats of substitute products or services Substitutes
  13. 13. 3. Organization [SITUATION ANALYSIS] • Firm’s Position : • Lifecycle Model: • Strategic Group Analysis: • Market Share Analysis
  14. 14. 3.1 Firm’s Position [SITUATION ANALYSIS: Organization] • Comparing environmental influences have on the firm and its competitors. Assessment of the overall impact the changes are likely to have on companies Company Overall Healthy living PROTONGood Fair Prices Design Fair Thriftiness Excellent Good KIA Excellent Excellent Good Good Excellent MZADA Excellent Excellent Excellent Good Excellent LADA Fair Fair Good Fair Fair
  15. 15. 3.2 Life-Cycle Model [SITUATION ANALYSIS: Organization] Industry Sales • INTRODUCTION GROWTH Proton Perdana V6 Proton Satria GTi • • • • • • • MATURITY Proton Wira DECLINE Proton Iswara Growth Rate Slow Accelerating Leveling Declining Sales Low Rising Peak Declining Unit Cost High Declining Product Line Profits Competitors Pricing Short Negative Few Cost Plus Low Low Growing Diversified Shrinking Increasing High Declining increasing more but stable Declining Penetration Competitive Cut
  16. 16. 3.3 Strategic Group Analysis FORD ROVER VW MAZDA NISSAN HONDA TOYOTA SUZUKI DAIHATSU SKODA LADA Local • CRYSLER FIAT RENAULT PEUGEOT SEAT Narrow Product Range Covered Broad [SITUATION ANALYSIS : Organization ] VOLVO PROTON MERCEDES BMW AUDI SAAB Multinational Extend of Geographic coverage [in terms of sales
  17. 17. 3.4 Market Share Analysis [SITUATION ANALYSIS : Organization ] 100 % Proton Market Shares in Malaysia 1998 Mercedes BMW 0% MARKET SHARES Proton Perodua Audi Volvo Perodua Micro Mini Medium Big Luxury • MARKET SEGMENTS 4x4 Proton-Lotus Sports
  18. 18. 4. Internal Environment • Recourses and Capabilities: The Value Chain, Porter Firm Structure 1985 Human Resource Management Technology Development Procurement PRIMARY ACTIVITIES Marketing and sales Services in Outbound Logistics M a rg Operation n Inbound Logistics i arg M SUPPORT ACTIVITIES [SITUATION ANALYSIS]
  19. 19. 5. SWOT Analysis [SITUATION ANALYSIS] • STRENGTH & WEAKNESSES OF THE ORGANIZATION AGAINST THE OPPORTUNITIES AND TREATS THROWN OUT BY THE ANALYSIS OF EXTERNAL ENVIRONMENT
  20. 20. STRATEGIC OPTION 1. COMPETATIVE STRATEGIES 2. DEVELOPMENT STRATEGIES 3. PORTPOLIO STRATEGIES 4. BLUE OCEAN STRATEGY 5. MAQASID AL SHARIAH STARTEGY
  21. 21. Criteria for evaluating the Strategic Option • SUITABILITY • relation to the state of the internal and external environment[based on Situational Analysis • FEASIBILITY • assessment of how it might work in practice • ACCEPTABILITY • consequences in terms of the risk and return to interested parties [shareholders, management, etc]
  22. 22. 1. Competitive Advantage [STRATEGIC OPTION] • Three Generic Strategies. [Porter 1985] Broad Target Narrow Target Competitive Scope Low Cost Competitive Advantage Differential 1. Cost Leadership 2. Differentiation 3A. Cost Focus 3B. Differential Focus
  23. 23. 1.1 Cost-Leadership Strategies [Examples of Successful Implementation ] • BiC in ballpoint pens and disposable razors • Black&Decker in tools • Amstrad in consumer electronics • Aldi and KwikSave in the retail grocery trade • The Superdrug chemist chain
  24. 24. 1.1.1 Cost-Leadership Strategies [Striving for an overall low-cost position ] • • • • Leader in constructing the most efficient plants Implementing cost-reducing technological advances Keeping overhead and administrative costs to a minimum Containing costs in R&D, advertising, service and distribution, • WHILE MAINTAINING PRODUCT QUALITY • THE FIRM HAS SUPERIOR COORDINATION ACROSS LINKAGES IN THE VALUE CHAIN, WHILE KEEPING COSTS TO A MINIMUM IN EACH ACTIVITY
  25. 25. 1.1.2 Cost-Leadership Strategies [Backfiring ] • Ford Motor Company 1900, the low cost leader, successful strategy for decade • But fail to take into account the changing nature of consumer preferences • Inflexibility, notably in production, and spread right across the value chain into other activity, thus Ford could not respond to market change • Example of Ford Model T 1900s for mass production at low costs, 55% market share in 1921 drop to 45% in 1925 and to 35% in 1926. Consumer shift to Chevrolet, little expansive but better specification.
  26. 26. 1.1.3 Cost-Leadership Strategies [Possible Risks ] • Technological Changes can result in cost or process breakthrough which efficiency gains nullify past investments and • May be short-lived if rivals easily imitate the leader’s lowcost methods • Shift in market with consumers being less price sensitive • requires firms to be the overall cost leader - this would result in fierce competition and squeeze the profit until leader was established and recognized.
  27. 27. 1.2 Differentiation Strategies [Examples of Successful Implementation ] • Coca-Cola - A different taste • Rolex - Unusual quality and distinctiveness • Mercedes Benz - Engineering design & performance • Rolls Royce -Top-of-the-line image and reputation • Sony - Technological leadership in consumer electronics
  28. 28. 1.2.1 Differentiation Strategies [Sustained Competitive Advantage is to come from four areas ] • Technical Superiority • Quality • Giving Customers More Support Services • More Value [The Same Money
  29. 29. 1.2.2 Differentiation Strategies [Be warned - there are risks ] • May result in a selling price so high that buyers opt for lower-priced brand • Buyers may decide, over a period of time, decide that they do not need extra features. • Rival may imitate the product or service attributes buyers cannot distinguish • Broad-based differentiators may be out-maneuvered by specialist firms focusing on particular segment
  30. 30. 1.3 Focus Strategies [Examples of Successful Implementation ] • • • • • • Cray Computer - Large Main Frame Rolls Royce - Luxury cars Land Rover - Off Road Vehicles Porsche - Unique Sports Cars Lotus - Sports Cars Excellent Handling Virgin Airline - Low-cost transatlantic flight
  31. 31. 1.3.1 Focus Strategies [Risks Involved ] • Possibility that broad-range competitors will find effective ways to match the focused firm in serving market segment • Unfavorable shifts in buyer preferences may leave the focuser without viable market • Competitors may find sub- segments within the target segment and out focuses the focuser
  32. 32. 2. DEVELOPMENT STRATEGIES [Alternative Directions For Strategic Development] Market Product Line PL0 Mo M1 Market Penetration M2 ……………………. .Mn Market Development PL2 ‘ . . PLn Product Development PL1 Diversification Paul Dobson & Ken Starkey [1993], The Strategic Management , Blackwell
  33. 33. 2. DEVELOPMENT STRATEGIES [Alternative Directions For Strategic Development] • 1. MARKET PENETRATION • Continue with the same market with the same product • Increases its market share through improved quality or productivity • Market share is maintained through consolidation • 2. PRODUCT DEVELOPMENT • • • • Develops new products while maintaining its present markets Firms continually introducing product lines Typically in consumer-oriented industries-tastes are changing Products with short-life-cycle : computer, electronics products
  34. 34. 2. DEVELOPMENT STRATEGIES [Alternative Directions For Strategic Development] • 3. MARKET DEVELOPMENT • Maintaining present product lines but extends its market operation • Opening new market segments, devising new uses for the products • Extending new geographical areas for its present products Globalization
  35. 35. 2. DEVELOPMENT STRATEGIES [Alternative Directions For Strategic Development] • 4. RELATED DIVERSIFICATION • Increasing the range of activities in the value chain • ‘Vertically integrate backwards’ towards its inputs [e.g producing raw materials, machinery - for better quality and price • ‘Vertically integrated forwards’ towards outputs[ e.g. moving to transportation, distribution, retailing, or services and maintenance, to have control over final product market. • ‘Horizontally integrated’ towards substitute or complementary activities[ e.g. marketing-by-products]
  36. 36. 2. DEVELOPMENT STRATEGIES [Alternative Directions For Strategic Development • 5. UNRELATED DIVERSIFICATION • Covers beyond the boundaries of the industry presently operates • Appropriate when current markets are saturated and/or declining • New activities sought should be complementary to current activities, either in terms of resources or finances [combined effect should be 3+3=8 [e.g join production, common use of facilities etc] • Divisionalized or internally restructured the firm’ management bureaucracy
  37. 37. 2. DEVELOPMENT STRATEGIES [Categories of Methods] • Internal Development • Appropriate when activities requires a build-up knowledge and skills - highly technical in design or methods of manufacturing • Acquisition • To enter new product or market areas [e.g. R&D, knowledge of markets and products, production system, all these may take years to develop internally] • Joint Development and Agency Relations • Entering into partnership or Joint venture • Franchising and agency
  38. 38. 3. PORTFOLIO STRATEGIES HIGH [Higher than LOW [Slower than the economy as a whole] the economy as a whole] Industry Growth Rate [Boston Consulting Group [BCG] Growth-share matrix] Relative Market Share Position STARS CASH COWS PROBLEM CHILDREN DOGS Note: The sizes of the circles indicate the sizes of revenues generated
  39. 39. 3. PORTFOLIO STRATEGIES • STARS • High Growth and High Share • Strongly placed in the growth phase of the product life cycle • Cash generation is strong but not sufficient to finance rapid growth • CASH COWS • Dominant products in a mature market • Produce excess cash that can be invested in STARS and PROBLEM CHILD
  40. 40. 3. PORTFOLIO STRATEGIES • DOGS • Low-share products in low-share markets • Cash flow is usually low and can be negative due to weak competitive position • Divest and re-allocate to STARS or PROBLEM CHILDREN • PROBLEM CHILDREN • Low-share of a growing market • Considerable cash is required to maintain share • Investment to create a star is risky
  41. 41. 3. PORTFOLIO STRATEGIES STAR PROBLEM CHILD DOG CASH COW
  42. 42. 3. PORTFOLIO STRATEGIES [Drawbacks of BCG Growth Share Matrix] • Is mainly concerned with the uses of cash flows • Its relies too heavily on the notion of product lifecycles and cost efficiency for generating profits • It neglects that small market share can still result in high profits if product quality is high and unique. • It limits the measurement to business strength [market share] and market attractiveness [growth rates] only.
  43. 43. 3. PORTFOLIO STRATEGIES [McKinsey/ General Electric Attractiveness-Strengths Matrix] Medium High Business Strength Low Industry Attractiveness High Medium Low Note: The sizes of circles indicate the sizes of revenues generated and the shaded areas in each circle indicate product’s market share
  44. 44. 3. PORTFOLIO STRATEGIES [McKinsey/ General Electric Attractiveness-Strengths Matrix] • BUSINESS STRENGTH • is measured in terms of organization’s ability and relative competitive position and to take into consideration: • relative market shares • profit margins relative to competitors • able to compete on price and quality • knowledge of customer and market • competitive strength and weakness • technological capability • employee relations and goodwill • the caliber of management
  45. 45. 3. PORTFOLIO STRATEGIES [McKinsey/ General Electric Attractiveness-Strengths Matrix] • INDUSTRY ATTRACTIVENESS • is measured with reference to the operating and general environment and addresses: • market size and its growth rates • industry profit margins [both historic and projected] • competitive intensity • economies of scale • the nature of demand [seasonality , cyclicality] • technology and capital requirements • barriers to entry and exist • social, environmental and legal impacts • emerging opportunities and threats
  46. 46. 4. BLUE OCEAN STRATEGY By W. Chan Kim –The Boston Consulting Group , Chair Professor of Strategy and International Management at INSEAD, and Renee Mauborgne, -The INSEAD Fellow and Professor of Strategy and Management
  47. 47. BLUE OCEAN STRATEGY The Essence: “Creating Uncontested Market Space and Make Competition Irrelevant”
  48. 48. RED OCEAN STRATEGY vs BLUE OCEAN STRATEGY RED OCEAN STRATEGY BLUE OCEAN STRATEGY Compete in existing market space Create uncontested market space Beat the Competition Make the competition irrelevant Exploit existing demand Create and capture new demand Make the value-cost trade-off Break the value-cost trade-off Align the whole systems of a firm’s activities with its strategic choice of differentiation or low cost. Align the whole system of a firm’s activities in pursuit of differentiation and low costs
  49. 49. BLUE OCEAN STRATEGY Align the whole system of a firm’s activities in pursuit of differentiation and low costs
  50. 50. From Head to Head Competition to Blue Ocean Creation Head to Head Competition Blue Ocean Creation INDUSTRY Focuses on rivals within its industry Looks across alternative industries STRATEGIC GROUP Focuses on competitive position within strategic group Looks across strategic groups within industries BUYER GROUP Focuses on better serving the buyer groups Redefines the industry buyer group SCOPE OF PRODUCT OR SERVICE OFFERING Focuses on maximizing the value product and service offering within the bounds of its industry Looks across to complementary product and service offering FUNCTIONAL -EMOTIONAL ORIENTATION Focuses on improving price Rethinks the functional-emotional performance within the functional- orientation of its industry emotional orientation of its industry TIMEX, BODYSHOP, TIME Focuses on adapting to external trends as they occur Participates in sharing external trends over time iTUNE, MP3
  51. 51. SIX PRINCIPLES OF BLUE OCEAN STRATEGY Formulation Principles 1. Reconstruct market boundaries. 2. Focus on the big picture, not the numbers 3. Reach beyond existing demand 4. Get the strategic sequence right Execution Principles 5. Overcome key organizational hurdles. 6. Build execution into strategy
  52. 52. Cirque du Soeil as an example of putting BLUE OCEAN STRATEGY back since 1984 Cirque du Soeil [CDS], Canada’s largest cultural exports, created in 1984 by group of street performers. CDS productions - 40 million people in 90 countries in less than 20 years. It revenues took champion of circus industries more than 100 years to attain. CDS Success: 1.Did not win by taking customers from shrinking circus industry 2.Did not compete with Circus Players or Industry. 3.It created uncontested new market space that made the competition irrelevant. 4.It appealed to a whole new group of customers. 5.CDS succeeded because it realized that to win in the future, companies must stop competing with each other.
  53. 53. MALAYSIAN Experience – From Blue Ocean to Red Ocean The first to introduce to the world the usage of e-Identification Cards.
  54. 54. MALAYSIAN Experience – From Blue Ocean to Red Ocean The first to introduce to the world the usage of e-Passport. Now it going to become a world standard.
  55. 55. My-Kad to I-Kad From Blue Ocean to Red Ocean than to Blue Ocean
  56. 56. World’s First Variable Density Tunnel Boring Machine Examples of Blue Ocean Strategy
  57. 57. Examples of Blue Ocean Strategy
  58. 58. The Malaysian Police force kickstarted its 2014 Hybrid Revolo engine, first-of-its-kind plug-in technology for car and light commercial vehicles The prime minister witnessed a memorandum of understanding signing between the Police and Malaysian Green Technology Corporation as well as DFRAN Technologies Research Sdn Bhd responsible in introducing the Revolo engine, first-of-its-kind plug-in technology for car and light commercial vehicles. The hybrid engine capable 1.Improving acceleration up to 40 %, % 2.Fuel efficiency by 35%, 3.Reduce emission by 30% 4.Lower travel cost by 25 %.
  59. 59. 5. MAQASID AL-SHARIAH STRATEGY MAQASID = ULTIMATE OBJECTIVES AL-SHARIAH = THE COMAMMADMENT OF ALLAH FOR ALL ASPECT OF HUMAN ACTIVITIES IN THIS WORLD MANAGEMENT = ACTIVITIES OF THINKING, PLANNING, ORGINIZING, LEADING & CONTROLING MAQASID AL- SHARIAH = ULTIMATE OBJECTIVES OF THE COMAMMADMENT OF ALLAH FOR ALL ASPECT OF HUMAN ACTIVITIES INCLUDING MANAGEMENT, IN THIS WORLD: 1. PARENTS, COMMUNITY LEADERS, COMPANY MANAGERS & NATION LEADERS SHOULD UNDERSTAND AND APPLY THIS MAQASID ALSHARIAH IN MANAGING FAMILIES, COMMUNITIES, COMPANIES, NATIONS, RESPECTIVELY. SHAYA’A OTHMAN PROTECTION OF RELIGION 2. 3. PROTECTION OF LIFE 4. PROTECTION OF INTELLECT 5. PROTECTION OF WEALTH PROTECTION OF OFFSPRING
  60. 60. MAQASID AL SHARIAH AS A CORPORATE STARTEGY 1. 2. 3. 4. 5. PROTECTION OF RELIGION PROTECTION OF LIFE PROTECTION OF OFFSPRING FUNCTIONAL STRTAEGIES PROTECTION OF INTELLECT PROTECTION OF WEALTH 1. COMPETATIVE STRATEGIES 2. DEVELOPMENT STRATEGIES FULFILLING THE ABOVE OBJECTIVES OF SHARIAH 3. PORTPOLIO STRATEGIES 4. BLUE OCEAN STRATEGY
  61. 61. MBA Strategic Management Distinction EVALUATION • MISSION • To Score Distinction Result of The Exam A • OBJECTIVE • To Understand [ %] [ %] • To Applied Above 80% Distinction
  62. 62. ASSIGMENT [ To get Distinction you must score 80% and above. Below 50% is definitely failed ] Explain in details how you can apply Maqasid AlShariah in Strategic Management of your Organization or your Company. [ To be submitted by 14 Rabi Al-Awal 1435 / 15. 01.2014 in Soft Copy to my e-Mail AND Hard Copy to of Office ] e-Mail to sottoman@gmail.com

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