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Strategic Management Process.pptx
- 1. 2 TRUTHS & 1 LIE
- 2. Strategic Management Benefits of Strategic Management
- 5. “strategos” army leader “stratego” strategy Destroying one’s enemies through the effective use of resources.
- 6. moses
- 7. SUN TZU
- 8. VIRGIL
- 9. KING ARTHUR
- 13. NAPOLEON’S DEFEAT AT WATERLOO
- 16. STRATEGIC MANAGEMENT AS A FIELD OF STUDY MODERN HISTORY
- 17. FREDERICK W. TAYLOR • published The Principles of Scientific Management • “ONE ACCEPTABLE APPROACH TO ATTACK A STRATEGIC GOAL”
- 18. HENRY FORD • organized assembly lines for creating automobiles
- 19. ALFRED CHANDLER • published Strategy and Structure: Chapters in the History of the Industrial Enterprise • structure follows strategy
- 21. PETER DRUCKER • Management by Objectives (MBO)
- 22. PHILIP SELZNICK • Internal and external factors
- 24. ALFRED CHANDLER • Structure follows strategy
- 25. IGOR ANSOFF
- 26. IGOR ANSOFF • his book, “Corporate Strategy” • 3 parts pf strategic management: • strategic planning; • convert plans into reality; and • managing internal resistance to change. • Father of Strategic Management
- 27. MICHAEL PORTER 3 Key Principles in Strategic Positioning: • Create unique and valuable positions • Requires tradeoffs when competing • Creating fit across company’s activities
- 30. Operational effectiveness - performing similar activities better than rivals perform them. Strategic positioning - performing different activities from rivals.
- 32. strategy - is creating a unique and valuable position, involving different set of activities - requires making trade-offs when competing - creating fit across linked activities within the company
- 34. Hey, you can’t outrun that bear. Maybe I can’t outrun that bear, but I surely can outrun you.
- 35. STRATEGIC MANAGEMENT The art and science of FORMULATING, IMPLEMENTING, and EVALUATING cross-sectional decisions that enable a company to achieve its objectives. -Fred R. David
- 37. FORMULATION Y
- 38. Strategy - means by which long-term objectives will be achieved TYPES: - Integration: forward, backward, horizontal - Intensive: market penetration, market development, product development - Diversification: related & unrelated - Defensive: retrenchment, divestiture, liquidation TYPES OF STRATEGIES
- 40. VISION & MISSION • Vision Statement –What do we want to become? • Mission Statement –What is our business?
- 41. 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
- 42. INTERNAL • Strengths and Weaknesses – Controllable activities performed especially well or poorly. – Arise in functional areas of the business: • Management • Marketing • Finance/accounting • Production/operations • Research & development • Computer Information Systems
- 43. INTERNAL • Determining Internal Factors: –Financial ratios –Measuring performance – Industry averages –Survey data
- 44. EXTERNAL • External Opportunities and Threats – Significantly benefit or harm the organization in the future. – Include the following trends: • Economic • Social • Cultural • Demographic Environmental • Political, legal, governmental • Technological • Competitive trends
- 45. EXTERNAL • External Opportunities and Threats – Largely beyond the control of a single organization. –Basic tenet of strategic management • Strategy formulation to: – Take advantage of external opportunities – Avoid or reduce impact of external threats
- 46. EXTERNAL Environmental Scanning – Industry Analysis • Process of conducting research and gathering and assimilating external information
- 47. ESTABLISH LONG TERM OBJECTIVES OBJECTIVE - the end results of planned activity. - also referred to as the outcomes that a company wish to achieve from the activities planned. WHAT and WHEN An objective should state on the activities that are needed to be completed and the timeline on when it should be accomplished.
- 48. Objectives cont’d. FOCUS AREAS include: profitability, efficiency, growth, shareholder wealth, utilization of company resources, reputation, market share, etc. An organization is considered to be successful in achieving its corporate objectives when the company manage to fulfill its missions.
- 49. Establish Long-term Objectives TOYOTA US objectives: to improve the quality of its products, enhance efficiency, minimize the cost of production, and increase its productivity to cater to the different customer needs in its market. Toyota US - invested on research and development activities to produce high quality cars. - puts emphasis on the importance of human resource as the company believes that satisfied employees will produce high quality products.
- 50. Purpose of Strategic Management - To exploit and create new and different opportunities for tomorrow In essence, the strategic plan is a company’s game plan.
- 51. Issues in Formulation -What new businesses to enter? –What businesses to abandon? –How to allocate resources? –Expand operations or diversify? –Enter international markets? –Merge or form joint venture? –Avoidance of hostile takeover?
- 54. Strategy Implementation • the process by which strategies and policies are put into action through the development of programs, budgets, and procedures. • In other words, it means it is process of carrying out the strategy which has been formulated.
- 55. Annual objectives Short-term milestones that organizations must achieve to reach long-term objectives.
- 56. Policies Means by which annual objectives will be achieved.
- 61. • Evaluation and control - the process in which corporate activities and performance results are monitored so that actual performance can be compared with desired performance. • All strategies subject to future modification • Success today is no guarantee of success tomorrow • Success creates new and different problems • Complacency leads to demise Measure and Evaluate performance
- 63. STRATEGIC MANAGEMENT PROCESS - attempts to organize quantitative and qualitative information under conditions of uncertainty. - dynamic and continuous - more formal in larger organizations
- 64. REVIEW: STRATEGIC MANAGEMENT PROCESS 1.Identify Organization’s existing: • Vision • Mission • Objectives • Strategies
- 65. REVIEW: STRATEGIC MANAGEMENT PROCESS 2.Perform External Audit 3.Perform Internal Audit 4.Establish long-term objectives 5.Generate, evaluate, select strategies 6.Implement strategies 7.Measure and evaluate performance
- 66. • Give a specific example on how your respective company conducts the 3 stages of the Strategic Management process, namely, FORMULATING, IMPLEMENTING, and EVALUATING? • Identify one (1) issue your company has faced in each stage.
- 67. Integrating Intuition and Analyses • Intuition based on: –Past experiences – Judgment –Feelings • Useful for decision making –Conditions of great uncertainty –Conditions with little precedent
- 68. Integrating Intuition and Analyses • Intuition and judgment –Management at all levels –Analyses are influenced • Analytical thinking and intuitive thinking –Complement each other
- 69. Adaptation to Change • Organizations must monitor events –On-going process – Internal and external events –Timely changes
- 70. Adaptation to Change • Rate and magnitude of changes – Increasing dramatically • E-commerce • Demographics • Technology • Merger-mania –Effective Adaptation • Long-run focus
- 71. What are the Benefits of Strategic Management?
- 72. Benefits of Strategic Management • Financial benefits – Improvement in sales – Improvement in profitability – Improvement in productivity
- 73. Benefits of Strategic Management • Non-Financial benefits – Enhanced awareness of external threats – Improved understanding of competitors’ strategies – Increased employee productivity – Reduced resistance to change – Understanding of performance-reward relationships – Enhances problem-prevention capabilities
- 74. Benefits of Strategic Management cont’d. • Identification of opportunities • Objective view of management problems • Improved coordination and control • Minimizes adverse conditions and changes • Decisions to better support objectives • Effective allocation of time and resources • Internal communication among personnel
- 75. Benefits of Strategic Management cont’d. • Integration of individual behaviors • Clarifies individual responsibilities • Encourages forward thinking • Encourages favorable attitude toward change • Discipline and formality to the management of the business
- 76. Why some firms do no Strategic Planning?
- 77. Why some firms do no Strategic Planning? • Poor reward structures • Fire-fighting • Waste of time • Too expensive • Laziness • Content with success
- 78. Key strategic-management questions – What kind of business should we become? – Are we in the right fields? – Should we reshape our business? –What new competitors are entering our industry? – What strategies should we pursue? – How are our customers changing?
- 79. References Ansoff Matrix https://corporatefinanceinstitute.com/resources/knowledge/strategy/ansoff-matrix/ History of Strategic Management https://open.lib.umn.edu/strategicmanagement/chapter/1-4-the-history-of-strategic-management/ What is Strategic Positioning? https://strategyforexecs.com/strategic-positioning/ Strategic Positioning https://www.isc.hbs.edu/strategy/business-strategy/Pages/strategic-positioning.aspx Origins of Strategic Management https://cio-wiki.org/wiki/Strategic_Management What is Strategy by Michael Porter https://www.linkedin.com/pulse/porter-m-e-1996-what-strategy-harvard-business-review-salman- siddiqui/
Editor's Notes
- STRATEGY IN ANCIENT TIMES Strategic management borrows many ideas from ancient uses of strategy over time. The following anecdotes provide a few notable examples of historical actions that remain relevant for the study of modern strategy.
- STRATEGY IN ANCIENT TIMES Indeed, the Greek verb strategos means “army leader” and the idea of stratego (from which we get the word “strategy”) refers to the idea of destroying one’s enemies through the effective use of resources.
- STRATEGY IN ANCIENT TIMES 1491 BC: Moses uses hierarchical delegation of authority during the exodus from Egypt. Dividing a large set of people into smaller groups creates a command structure that enables strategies to be implemented.
- STRATEGY IN ANCIENT TIMES 500 BC: Sun Tzu’s The Art of War provides a classic handbook on military strategy with numerous business applications, such as the idea to “win without fighting is best.” This type of approach was used by businesses, suh as Gap Inc. when they decided to create their own stores rather than competing for shelf space for their clothing within traditional department stores.
- STRATEGY IN ANCIENT TIMES 70 BC: Roman poet Virgil tells the story of the Trojan horse, a classic strategic ploy where the Greek forces hid a select number of soldiers in a large wooden horse that the Trojan army took into their heavily guarded city gates. Once inside the city, Greek soldiers were able to open the gates and allow in reinforcements, which eventually led to the end of the war.
- STRATEGY IN ANCIENT TIMES 530 CE: King Arthur rules Britain. Legend says he make his famed round table so that no one, including him, would be seen as above the others. His mission to find the Holy Grail serves as an exemplar for the importance of the central mission to guide organizational objectives.
- CLASSIC MILITARY STRATEGY Strategic management often borrows lessons as well as metaphors from classic military strategy. For example, major business decisions are often categorized as “strategic” while more minor decisions (such as small changes in price or the opening of a new location) are referred to as “tactical” decisions. Here are a few select examples of classic military strategies that hold insights for strategic decisions today.
- CLASSIC MILITARY STRATEGY 1532: Machiavelli’s book The Prince offers clever recipes for success to government leaders. Some of the book’s suggestions are quite devious, and the word Machiavellian comes to refer to acts of deceit and manipulation.
- CLASSIC MILITARY STRATEGY 1775: The American Revolutionary War between the United State and Great Britain begins. Weaker American forces win the war in part by relying on nontraditional tactics such as guerilla warfare and the strategic targeting of British officers. They also depend on hep from the French navy, illustrating the potential value of strategic alliances.
- CLASSIC MILITARY STRATEGY 1815: Napoleon’s defeat at Waterloo demonstrates how spreading resources too thin can result in defeat of even one of the most famed militaries of all time.
- CLASSIC MILITARY STRATEGY 1865: The American Civil War ends. Historians consider the Confederacy to have had better generals, but the Union possessed greater resources. Sometimes good strategies simply cannot overcome a stronger adversary.
- CLASSIC MILITARY STRATEGY 1944: Following a series of deceptions designed to confuse and fool German forces, the Allies launch the D-Day invasion in an effort to liberate Europe from Nazi control.
- The Modern History of Strategic Management Although strategy has been important throughout history, strategic management as a field of study has largely developed over the past century. Below are a few key business and academic events that have help the field evolve.
- The Modern History of Strategic Management The ancient Chinese strategist Sun Tzu made it clear that strategic management is part art. But it is also part science. Major steps toward developing the scientific aspect of strategic management were taken in the early twentieth century by Frederick W. Taylor. In 1911, he published The Principles of Scientific Management. The book was a response to Taylor’s observation that most tasks within organizations were organized haphazardly. Taylor believed that businesses would be much more efficient if management principles were derived through scientific investigation. In The Principles of Scientific Management, Taylor stressed how organizations could become more efficient through identifying the “one best way” of performing important tasks.
- The Modern History of Strategic Management Also in the early twentieth century, automobile maker Henry Ford emerged as one of the pioneers of strategic management among industrial leaders. At the time, cars seemed to be a luxury item for wealthy people. Ford adopted a unique strategic perspective, however, and boldly offered the vision that he would make cars the average family could afford. Building on ideas about efficiency from Taylor and others, Ford organized assembly lines for creating automobiles that lowered costs dramatically.
- The Modern History of Strategic Management In 1962, Harvard professor Alfred Chandler published Strategy and Structure: Chapters in the History of the Industrial Enterprise. This book describes how strategy and organizational structure need to be consistent with each other to ensure strong firm performance, a lesson that Moses seems to have mastered during the Hebrews’ exodus from Egypt. To answer my question earlier – which comes first? According to Chandler, the choice f organizational structure depends on the business strategy being pursued.
- The strategic management discipline originated in the 1950s and 1960s. Among the numerous early contributors, the most influential were…
- Peter Drucker was a prolific management theorist and author of dozens of management books, with a career spanning five decades. He addressed fundamental strategic questions in a 1954 book The Practice of Management writing: "... the first responsibility of top management is to ask the question 'what is our business?' and to make sure it is carefully studied and correctly answered.“ He wrote that the answer was determined by the customer. He recommended eight areas where objectives should be set, such as market standing, innovation, productivity, physical and financial resources, worker performance and attitude, profitability, manager performance and development, and public responsibility.
- In 1957, Philip Selznick initially used the term "distinctive competence" in referring to how the Navy was attempting to differentiate itself from the other services. He also formalized the idea of matching the organization's internal factors with external environmental circumstances.
- This core idea was developed further by Kenneth R. Andrews in 1963 into what we now call SWOT analysis, in which the strengths and weaknesses of the firm are assessed in light of the opportunities and threats in the business environment.
- Alfred Chandler recognized the importance of coordinating management activity under an all-encompassing strategy. Interactions between functions were typically handled by managers who relayed information back and forth between departments. He says it concisely, "structure follows strategy." Chandler wrote that: "Strategy is the determination of the basic long-term goals of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals."
- Igor Ansoff built on Chandler's work by adding concepts and inventing a vocabulary. He developed a grid that compared strategies for market penetration, product development, market development and horizontal and vertical integration and diversification. He felt that management could use the grid to systematically prepare for the future. The four strategies of the Ansoff Matrix are: Market Penetration: This focuses on increasing sales of existing products to an existing market. Product Development: Focuses on introducing new products to an existing market. Market Development: This strategy focuses on entering a new market using existing products. Diversification: Focuses on entering a new market with the introduction of new products.
- In his 1965 classic Corporate Strategy, he developed gap analysis to clarify the gap between the current reality and the goals and to develop what he called "gap reducing actions". Ansoff wrote that strategic management had three parts: strategic planning; the skill of a firm in converting its plans into reality; (action stage/implementation) and the skill of a firm in managing its own internal resistance to change. (evaluation) Known as the Father of Strategic Management.
- Last but definitely not the least, Michael Porter. He defined strategy as…
- Now, “what is strategy?”
- According to Michael Porter The root of the problem is the failure to distinguish between operational effectiveness and strategy. The quest for productivity, quality, and speed has spawned a remarkable number of management tools and techniques: total quality management benchmarking, time-based competition, outsourcing, partnering, reengineering, change management. Although the resulting operational improvements have often been dramatic, many companies have been frustrated by their inability to translate those gains into sustainable profitability. And bit by bit, almost imperceptibly (gradual/subtle), management tools have taken the place of strategy. As managers push to improve on all fronts, they move farther away from viable competitive positions. Operational effectiveness and strategy are both essential to superior performance. But they work in very different ways. A company can outperform rivals only if it can establish a difference that it can preserve. It must deliver greater value to customers or create comparable value at a lower cost, or do both. The arithmetic of superior profitability then follows: delivering greater value allows a company to charge higher average unit prices; greater efficiency results in lower average unit costs.
- Operational effectiveness means performing similar activities better than rivals perform them. It refers to any number of practices that allow a company to better utilize its inputs by, for example, reducing defects in products or developing better products faster. In contrast, Strategic positioning means performing different activities from rivals, or performing similar activities in different ways. Strategic positionings are often not obvious unlike with operational effectiveness, and finding them requires creativity and insight. Why? What is strategic positioning? A company's relative position within its industry matters for performance. Strategic positioning reflects choices a company makes about the kind of value it will create and how that value will be created differently than rivals.
- When your business occupies a market position that is both profitable and that you can protect, we say that it has been strategically positioned within that market, And there are only two ways to create such a position: through differentiated products, or through lower relative unit costs. Differentiation means that your products and services are both unique and valuable to your target consumers, while lower relative costs on the other hand mean that those products and services are produced at a lower cost per unit than competing solutions. Now in order for you to effectively protect your business, that is, to ensure that it has a market position that is both profitable and defendable, is through the strategic positioning of its products and services. You can choose your strategy – Differentiation, Price Leader Strategy, or both. You perform similar activities in different ways. Constant improvement in operational effectiveness is necessary to achieve superior profitability. However, it is not usually sufficient.
- Strategy according to Michael Porter is.. the creation of a unique and valuable position - Strategy Rests on Unique Activities "Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value“. Moreover, the essence of strategy, according to Porter, is choosing to perform activities differently than rivals. Strategy is the creation of a unique and valuable position, involving a different set of activities. requires trade-offs in competing - According to Porter, a sustainable advantage cannot be guaranteed by simply choosing a unique position, as competitors will imitate a valuable position. Thus, in order for a strategic position to be sustainable there must be trade-offs with other positions. "A trade-off means that more of one thing necessitates less of another“. The essence of strategy is choosing what not to do. involves creating a fit among activities - Positioning choices determine not only which activities a company will perform and how it will configure individual activities but also how activities relate to one another. "Fit locks out imitators by creating a chain that is as strong as its strongest link" (p. 70). Fit, as per Porter, is the central component of competitive advantage because discrete activities often affect one another.
- Now that we have clearly designed what strategy is, let us now answer this question…
- Once there were two company presidents who competed in the same industry. These two presidents decided to go on a camping trip to discuss a possible merger. They hiked deep into the woods. (Next) Suddenly, they came upon a grizzly bear that rose up on its hind legs and snarled. Instantly, the first president took off his knapsack and got out a pair of jogging shoes. (next) The second president said, “Hey, you can’t outrun that bear.” (next) The first president responded, “Maybe I can’t outrun that bear, but I surely can outrun you!” This story captures the notion of strategic management, which is to achieve and maintain competitive advantage.
- Now that we have clearly designed what strategy is, let us now answer this question 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. As this definition implies, strategic management focuses on integrating management, marketing, finance/accounting, production/operations, research and development, and information systems to achieve organizational success. The term strategic management in this text is used synonymously with the term strategic planning. The latter term is more often used in the business world, whereas the former is often used in academia