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NAME-479 Engineering Management
Cdre M Muzibur Rahman, (E), psc, PhD, BN (Retd)
Part-5: Strategic Management
“Without a strategy the organization is like a ship without a
rudder, going around in circles.”
• Strategic management is a stream of decision and actions, which
leads to the development of an effective strategy or strategies to
help corporate/company objectives.
• The strategic management process is the way in which strategists
determine objectives and make strategic decisions. Strategic
decisions are the means to achieve the end.
- Joel Ross and Michael Kami

Cdre Muzib, psc, PhD
Thinking Strategically:
Three Big Strategic Questions
1. Where are we now?
2. Where do we want to go?
– Business(es) to be in and market positions to stake out
– Buyer needs and groups to serve
– Outcomes to achieve
3. How will we get there?
Good Strategy + Good Strategy Execution =
Good Management

Company’s Strategy: Partly Proactive and Partly Reactive

Characteristics of strategic decision
Strategic decisions are:
i. likely to be concern with the long term direction of an org;
ii. normally about trying to achieve some advantages for the org;
iii. likely to be concern with the scope of organization activities;
iv. seen as the matching of activities of an organization to the
environment in which it is operated.
However, strategy can also be seen as building on or stretching on
organization resources and competences to create opportunity or to
capitalize on them.
Strategies may require major resources changes for an organization.
Strategic decisions are therefore likely to affect operational decisions.
The strategy of an organization is affected not only by environmental
forces and resources availability but also by the values and
expectation of those who have power in and around the
organization.

Strategic management process
The strategic management process consists of five interrelated
managerial tasks.
These are:
1. Forming a vision and a mission
2. Setting up objectives/goals
3. Crafting a strategy to achieve the desired outcomes.
4. Implementing and executing the chosen strategy efficiently
and effectively.
5. Evaluating performance and initiating corrective adjustments
in vision

The five tasks flow chart
Developing
a vision and
mission
Setting
objectives
/goals
Crafting a
strategy to
achieve the
objectives
Implementing
and executing
the strategy
Evaluating
performance,
monitoring new
developments,
and initiative
corrective
adjustments
Revise as
needed
Revise as
needed
Improve/
change as
needed
Improve/
change as
needed
Recycle to
tasks 1,2,3 or
4 as needed
Task one Task Two Task Three Task Four Task Five

Strategic Planning
• Top-down rational planning
– Define mission, vision, and goal (strategic intent)
– External analysis of opportunities and threats
– Internal analysis of strengths and weaknesses
– Create strategic fit through analysis of SWOT, PEST etc
– Formulate appropriate strategy
– Implement chosen strategy
– Monitor performance and modify if necessary

Identify
current
mission
and
strategic
goals
Conduct
competitive
analysis:
•strengths
•weakness
•opportunity
•threats
Develop
specific
strategies:
•corporate
•business
•functional
carry out
strategic
plans
maintain
strategic
control
assess
organisational
factors
assess
environmental
factors
Strategy implementation
Strategy formulation

Vision
A vision describes aspiration for the future. The vision of an
organization states desired future ambition. It articulates in bold
terms that what the organization would like to achieve. Vision
means what will be happened in future.
For example - what I will do in future, I don’t know? I may want
to establish the largest hotel in my country or I want to build
the largest shopping mall in my country. If I choose the largest
hotel, my vision is to successfully establish the grand largest
hotel.
Vision of NAME Dept: To be national and international centre of
excellence offering academic programme of high quality,
innovation and creativity in the field of Naval Architecture and
Marine Engineering.

• Well-stated vision statements
– Are distinctive and specific to a particular organization
– Avoid generic language
– Excite strong emotions
– Are challenging, uncomfortable, nail biting
Write down the vision your life.
Vision without Action is a Daydream
Action without Vision is a Nightmare

Mission
The mission may be defined as the unique purpose that sets it
apart from other firms of its type. Every organization needs a
mission statement as to:
– What is our purpose?
– Describes current state
– Give timeline of 3-5 Years
– Build on the own distinctive competencies
– Tend focusing on Core Business
– Limit in length of 30-35 Words
Mission of NAME Dept: To produce engineers and researchers
with sound knowledge on fundamentals, modern and emerging
areas of Naval Architecture and Marine Engineering together
with innovative design abilities and managerial skills to achieve
sustainable national development.

Four Elements in the Mission Statement
1) Purpose
– Why the firm exists and what it exists to do.
• What would happen if the firm did not exist?
2) Strategy
– How the firm will achieve its aspirations.
• What is it offering?
• To whom?
• Why should people buy it?
• What are its competitive advantages?
3) Values
– What the firm believes in
• Why the world will be better if the firm succeeds?
4) Behaviour standards
– The routines, procedures and policies the firm adopt to fulfil its values
• What is the firm willing to do/not to do in order to succeed?
• How low will it go? Cdre Muzib, psc, PhD

Mission of Business Org
• Customer-Oriented Missions
• Define the firm in terms of solutions for customers
– Disney: "Make People Happy"
– Enhanced strategic flexibility
– NOT the same as listening to customers
• Product-Oriented Missions
• Define the firm in terms of products or services
– U.S. Railroads: "Safest… North American railroad”
• Missed the opportunity to move into delivery before
UPS & Federal Express

Mission vs Vision
• A mission statement
focuses on current
business activities --
“who we are and what
we do”
– Current product and
service offerings
– Customer needs being
served
– Technological and
business capabilities
• A strategic vision concerns
a firm’s future business
path -- “where we are
going”
– Markets to be pursued
– Future technology-product-
customer focus
– Kind of company that the
management is trying to
create

Values
• The values of a company states how managers
and employees should conduct themselves,
how they should do business, and what kind
of organization they should build to help a
company achieve its mission.
• For example two values of a company (Nucor):
• Employees should be able to feel confident that if they
do their jobs properly, they will have job tomorrow.
• Employees have the right to be treated fairly and must
believe that they will remain.

Goal
• A goal is a precise and measurable desired future state
that a company attempts to realize. The purpose of goal
is to specify with precision what must be done if the
company is to attain its mission and vision. Some
features of a goal are:
» Precise and measurable
» Address crucial issues
» Challenging but realistic
» Specify a time period
That means GOAL has to be SMART (Specific, Measurable ,
Attainable, Rewarding/Result-oriented and Timely/Time-bound)

Fundamental Question for the Choice of Goals
• Profitability (net profits)
• Efficiency (low costs)
• Market Share
• Growth (e.g., increase in total assets, sales, etc)
• Shareholder Wealth (dividends plus stock price)
• Utilization of Resources (e.g., ROE, ROI)
• Reputation
• Contribution to Stakeholders (e.g., employees, society)
• Survival (avoid bankruptcy)

Core competencies and distinctive
competencies
• A core competence is something that a company
does well relative to other internal activities.
– For example: the operation style of the machine is too
much better than other section of the organization.
• Distinctive competence is something that company
does well relative to the competitors.
– For example: our organization is competing with the
relevant competitor organizations successfully.

Crafting the Strategy
• Primarily a market-driven
activity
• Successful strategy making
depends on
– Business vision
– Perceptive analysis of
market conditions and
company capabilities
– Attracting and pleasing
customers
– Outcompeting rivals
– Using company capabilities
to forge a competitive
advantage
Executing the Strategy
• Primarily an operations-driven
activity
• Successful strategy execution
depends on
– Doing a good job of working
through others
– Good organization-building
– Building competitive
capabilities
– Creating a strategy-
supportive culture
– Getting things done and
delivering good results
Crafting vs. Executing Strategy

• An action-oriented, make-things happen task
involving management’s ability to:
– Direct organizational change
– Achieve continuous improvement in operations
and business processes
• Move toward operating excellence
– Create and nurture a strategy-supportive culture
– Consistently meet or beat performance targets
• Tougher and more time-consuming than
crafting strategy
Executing the Strategy

Implementing a New Strategy
Requires Adept (Expert) Leadership
• Implementing a new strategy takes adept /skillful
leadership to:
– Convincingly communicate reasons for the new strategy
– Overcome pockets of doubt
– Secure commitment of concerned parties
– Build consensus and enthusiasm
– Get all implementation pieces in place and coordinated

Goals of the Strategy
Implementing-Executing Process
• Unite total organization behind the strategy
• See that activities are done in a manner that is
conducive to first-rate strategy execution
• Generate commitment so an enthusiastic crusade
emerges to carry out the strategy
• Fit how organization conducts its operations to strategy
requirements

The Eight Components of the Strategy Execution Process

• Communicate the case for change
• Build consensus on how to proceed
• Arouse enthusiasm for the strategy to turn implementation
process into a companywide crusade
• Empower subordinates to keep process moving
• Establish measures of progress and deadlines
• Reward those who achieve implementation milestones
• Direct resources to the right places
• Personally lead strategic change process and the drive for
operating excellence
What Top Executives Have to Do in
Leading the Implementation Process

The Three Components of Building an
Organization Capable of Proficient Strategy Execution

• Assembling a capable management team is a
cornerstone of the organization-building task
• Find the right people to fill each slot
– Existing management team may be suitable
– Core executive group may need strengthening
• Promote from within
• Bring in skilled outsiders
Putting Together a Strong
Management Team

Building Core Competencies
and Competitive Capabilities
• Crafting the strategy involves
– Identifying the desired competencies and capabilities to build
into the strategy to help achieve a competitive advantage
• Good strategy execution requires
– Putting desired competencies and capabilities in place,
– Upgrading them as needed, and
– Modifying them as market conditions evolve
In management every word has own connotation, thus:
Competency + Capacity = Capability

1. Develop ability to do something
2. As experience builds, ability can translate into a
competence or capability
3. If ability continues to be polished and refined, it can
become a distinctive competence, providing a path
to competitive advantage!
Three-Stage Process of Developing
Competencies and Capabilities

Structuring the Work Effort
to Promote Successful Strategy Execution

Step 1: Decide Which Value Chain Activities to
Perform Internally and Which to Outsource
• Involves deciding which activities are
essential to strategic success
– Most strategies entail certain crucial business processes
or activities that must be performed exceedingly well or
in closely coordinated fashion if the strategy is to be
executed with real proficiency
• These processes/activities usually need to be performed internally
– Other activities, such as routine administrative
housekeeping and some support functions, may be
candidates for outsourcing

• Assign managers of strategy-critical activities a visible,
influential position
• Avoid fragmenting responsibility for strategy-critical
activities across many departments
• Provide coordinating linkages between related work
groups
– Meld into a valuable
competitive capability
Step 2: Make Strategy-Critical Activities the
Main Building Blocks

• In a centralized structure
– Top managers retain authority for most decisions
• In a decentralized structure
– Managers and employees are empowered to make decisions
• Trend in most companies
– Shift from authoritarian to decentralized structures stressing
empowerment
Step 3: Determine How Much Authority to
Delegate to Whom

• Classic method of coordinating activities – Have related
units report to single manager
– Upper-level managers have clout to coordinate efforts of their
units
• Support activities should be woven into structure to
– Maximize performance of primary activities
– Contain costs of support activities
• Formal reporting relationships often need to be
supplemented to facilitate coordination
Step 4: Provide for Internal Cross-Unit
Coordination

Step 5: Provide for Collaboration With Outsiders
• Need multiple ties at multiple levels to ensure
– Communication
– Coordination and control
• Find ways to produce collaborative efforts to enhance
firm’s capabilities and resource strengths
• While collaborative relationships present opportunities,
nothing valuable is realized until the relationship
develops into an engine for better organizational
performance

Management by objectives (MBO)
• Management by objectives (MBO), also known as management
by results (MBR), is a process of defining objectives within an
organization so that management and employees agree to the
objectives and understand what they need to do in the
organization in order to achieve them. The term "management by
objectives" was first popularized by Peter Drucker in his 1954
book The Practice of Management
• The essence of MBO is participative goal setting, choosing course
of actions and decision making. An important part of the MBO is
the measurement and the comparison of the employee’s
actual performance with the standards set. Ideally, when
employees themselves have been involved with the goal setting
and choosing the course of action to be followed by them, they
are more likely to fulfill their responsibilities.

MBO: Plan View
Vision

Strategic plan provides direction for an organization's vision, mission, objectives, and
strategies. It defines the action steps by which a company intends to attain strategic
goals and includes decisions that can greatly change the direction of the organization.
Tactical plan deals support of strategic plans and implementation a specific part of the
company's strategy. Tactical plans usually are developed for organizations in the areas
of finance, production, plant facilities, production, and marketing.
Operational plans provide the details of how the strategic plans will be accomplished.
They are developed to specify actions steps toward achieving operational goals and to
support tactical plans. The difference between strategic and operational plans relates
to their time frame, scope, and whether or not they include a known set of objectives.
Operational plans offer ways for attaining these objectives. There are two categories of
operational plans: single-uses plans and standing plans.
Single-Use Plans are detailed courses of action that probably will not be repeated in
the same time in the future. Single-use plans typically include organizational programs,
projects, budgets. A program is a single-use plan designed to attain an important, one-
time organizational goals. Projects are the smaller and separate portions of programs.
Budgets are statements of financial resources set aside for specific activities in a
given period of time.
Standing Plans are ongoing plans because they focus on organizational situations
that occur repeatedly. Examples of standing plans include policies, standard
procedures, and rules. Policy is a general guide to action. Standard procedures are
plans that outlines a series of steps for the accomplishment of some specific
objectives. A rule is a detailed guide to action. It describes how a specific action is to
be performed.

MBO: Cross Sectional View
Vision
Mission
Tactical
Plans
Management
by
Objectives
Operational
Plans
Standing
Plans
Single-Use
Plans
Top
Managers
Middle
Managers
First-Level
Managers

Short-Term vs Long-Term Objectives
• Short-term objectives
– Targets to be achieved soon
– Milestones or stair steps for reaching long-range performance
• Long-term objectives
– Targets to be achieved within 5 years or so
– Prompt actions now that will permit reaching targeted
long-range performance later

CASCADING OF OBJECTIVES
Objectives are needed at all levels.
Objective-setting process is mostly top-down, not bottom-up.

Responsibility Accountability
The duty to complete tasks; not doing
so is a failure of responsibility
The duty to give an account of tasks
after they are completed
Ongoing while final goal is being
worked towards
Happens after a situation occurs ( or
in the form of status update)
Can be shared among a team; many
people can have the same task, or
different tasks that work towards the
same goal
Should be assigned to just one person
to avoid thinking someone else will be
doing the job
Specifically task-focused Specifically results-focused
Cannot be assigned to someone. Each
person must take responsibility on
their own (more behavioral)
Is assigned (ideally to one person) –
they are held accountable for results
and potential consequences of not
reaching desired results
Responsibility vs Accountability

BCG MATRIX
Why BCG matrix? It is to assess :
 Profiles of products/businesses
 The cash demands of products
 The development cycles of products
 Resource allocation and divestment decisions
BCG matrix (or growth-share matrix) is a corporate planning tool, which
is used to portray firm’s brand portfolio or SBUs on a quadrant along
relative market share axis (horizontal axis) and speed of market growth
(vertical axis) axis.

MAIN STEPS OF BCG MATRIX
• Identifying and dividing a company into SBU.
• Assessing and comparing the prospects of each SBU
according to two criteria :
1. SBU’S relative market share.
2. Growth rate of SBU’S industry.
• Classifying the SBU’S on the basis of BCG matrix.
• Developing strategic objectives for each SBU.

BCG Growth-Share Matrix
Relative market share
Market
growth
rate
Low
High
Low
High
Star Question mark
Cash cow Dog

STARS
High growth, High market share
• Stars are leaders in business.
• They also require heavy investment, to maintain
its large market share.
• It leads to large amount of cash consumption and
cash generation.
• Attempts should be made to hold the market
share otherwise the star will become a CASH COW.

CASH COWS
Low growth , High market share
• They are foundation of the company and often the
stars of yesterday.
• They generate more cash than required.
• They extract the profits by investing as little cash
as possible
• They are located in an industry that is mature, not
growing or declining.

DOGS
Low growth, Low market share
• Dogs are the cash traps.
• Dogs do not have potential to bring in much cash.
• Number of dogs in the company should be
minimized.
• Business is situated at a declining stage.

QUESTION MARKS
High growth , Low market share
• Most businesses start of as question marks.
• They will absorb great amounts of cash if the market
share remains unchanged, (low).
• Why question marks?
• Question marks have potential to become star and
eventually cash cow but can also become a dog.
• Investments should be high for question marks.

BCG MATRIX WITH CASH FLOW

Limitations of BCG Matrix
• BCG MATRIX uses only two dimensions,
Relative market share and market growth rate.
• Problems of getting data on market share and
market growth.
• High market share does not mean profits all
the time.
• Business with low market share can be
profitable too.

Developing Growth Strategies

SWOT analysis (alternatively SWOT matrix) is a structured planning method
used to evaluate the strengths, weaknesses, opportunities and
threats involved in a project or in a business venture. A SWOT analysis can be
carried out for a product, place, industry or person. It involves specifying the
objective of the business venture or project and identifying the internal and
external factors that are favorable and unfavorable to achieve that objective.
The degree to which the internal environment of the firm matches with the
external environment is expressed by the concept of strategic fit.
Strengths: characteristics of the business or project that give it an advantage
over others.
Weaknesses: characteristics that place the business or project at a
disadvantage relative to others.
Opportunities: elements that the project could exploit to its advantage.
Threats: elements in the environment that could cause trouble for the business
or project.
SWOT analysis

Internal
environment
External
environment

PEST Analysis
PEST analysis ("Political, Economic, Social and Technological") describes a
framework of macro-environmental factors used in the environmental
scanning component of strategic management. It is a part of the external
analysis when conducting a strategic analysis or doing market research, and
gives an overview of the different macro-environmental factors that the
company has to take into consideration. It is a useful strategic tool for
understanding market growth or decline, business position, potential and
direction for operations.
Other variants of the mnemonic include "Legal" to make SLEPT;
inserting Environmental factors expands it to PESTEL or PESTLE, which is
popular in the United Kingdom.
The model has recently been further extended to STEEPLE and STEEPLED,
adding "Ethics" and "Demographic" factors.

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