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  1. 1. LO1Examine the framework of strategic management process and identifythe context within which strategies are formulated. Examine theimportance of mission statements.
  2. 2. Why do some organizations succeed while others fail?Define Strategy: Strategy is a set of related actions that managers take to increase their company’s performance. • Strategic Leadership – Task of most effectively managing a company’s strategy- making process • Strategy Formulation – Task of determining and selecting strategies • Strategy Implementation – Task of putting strategies into action to improve a company’s efficiency and effectiveness Competitive Advantage results when a company’s strategies lead to superior performance compared to competitors Copyright © Houghton Mifflin 1|2 Company. All rights reserved.
  3. 3. Superior Performance and Sustainable Competitive• Advantage Superior Performance – One company’s profitability relative to that of other companies in the same or similar business or industry – Maximizing shareholder value is the ultimate goal of profit making companies – When a company’s profitability is greater than the average of all other companies in the same industry & competing for the same customers Sustained Competitive Advantage When a company’s strategies enable it to maintain above average profitability for a number of years Copyright © Houghton Mifflin 1|3 Company. All rights reserved.
  4. 4. Strategic Managers• Corporate-Level Managers – Oversee the development of strategies for the whole organization. The CEO is the principle general manager who consults with other senior executives – Allocating resources among businesses, deciding which businesses if any it needs to get rid of and which new businesses if any it should acquire• Business-Level Managers – Transfer corporate strategy into concrete strategies for individual businesses.• Functional-Managers – Responsible for supervising a particular task or operation (e.g. marketing, operations, accounting, human resources) Copyright © Houghton Mifflin 1|4 Company. All rights reserved.
  5. 5. Levels of Strategic Management Figure 1.4Copyright © Houghton Mifflin 1|5Company. All rights reserved.
  6. 6. Strategic Leadership Good leaders of the strategy-making process have a number of key attributes: • Vision, eloquence, and consistency • Articulation of the business model • Commitment • Being well informed • Willingness to delegate and empower • The astute use of power • Emotional intelligence: self-awareness, self- regulation, motivation, empathy, social skillsCopyright © Houghton Mifflin 1|6Company. All rights reserved.
  7. 7. The Five Steps of the Strategy Making Process Select the corporate mission and the major corporate goals. Analyze the external competitive environment to identify opportunities and threats. Analyze the organization’s internal environment to identify its strengths and weaknesses. Select strategies that: – Build on the organization’s strengths and correct its weaknesses – in order to take advantage of external opportunities and counter external threats – Are consistent with organization’s mission and major goals – Are congruent and constitute a viable business model Implement the strategies. strat Copyright © Houghton Mifflin 1|7 Company. All rights reserved.
  8. 8.  Crafting the Organization’s Mission StatementProvides a framework or context withinwhich strategies are formulated, including: Mission – The reason for existence – what an organization does Vision – A statement of some desired future state Values – A statement of key values that an organization is committed to Major Goals – The measurable desired future state that an organization attempts to realizeCopyright © Houghton Mifflin 1|8Company. All rights reserved.
  9. 9. The Mission The mission is a statement of a company’s reason for existence today.• What is it that the company does? – Who is being satisfied (what customer groups)? – What is being satisfied (what customer needs)? – How customer needs are being satisfied (by what skills, knowledge, or distinctive competencies)? A company’s mission is best approached from a customer-oriented business definition. Copyright © Houghton Mifflin 1|9 Company. All rights reserved.
  10. 10. Abell’s Framework for Defining the Business Figure 1.6 Source: D. F. Abell, Defining the Business: The Starting Point of Strategic Planning (Englewood Cliffs, Prentice Hall, 1980), p. 7.Copyright © Houghton Mifflin 1 | 10Company. All rights reserved.
  11. 11. The VisionWhat would the company like to achieve? A good vision is meant to stretch a company byarticulating an ambitious but attainable future state. The vision of Ford is “to become the world’s leading consumer company for automotive products and services.” Nokia is the world’s largest manufacturer of mobile phones and operates with a simple but powerful vision: “If it can go mobile, it will!”Copyright © Houghton Mifflin 1 | 11Company. All rights reserved.
  12. 12. ValuesThe values of a company should state: How managers and employees should conduct themselves How they should do business What kind of organization they need to build to help achieve the company’s mission Organizational culture • The set of values, norms, and standards that control how employees work to achieve an organization’s mission and goals • Often seen as an important source of competitive advantage In high-performance organizations, values respect the interests of key stakeholders.Copyright © Houghton Mifflin 1 | 12Company. All rights reserved.
  13. 13. Values at Nucor  “Management is obligated to manage Nucor in such a way that employees will have the opportunity to earn according to their productivity.”  “Employees should be able to feel confident that if they do their jobs properly, they will have a job tomorrow.”  “Employees have the right to be treated fairly and must believe that they will be.”  “Employees must have an avenue of appeal when they believe they are being treated unfairly.” At Nucor, values emphasizing pay for performance, job security, and fair treatment for employees help to create an atmosphere that leads to high employee productivity.Copyright © Houghton Mifflin 1 | 13Company. All rights reserved.
  14. 14. Major Goals A goal is a precise and measurable desiredfuture state that a company must realize if it is to attain its vision or mission. Key characteristics of well-constructed goals: 1. Precise and measurable – to provide a yardstick or standard to judge performance 2. Address crucial issues – with a limited number of key goals that help to maintain focus 3. Challenging but realistic – to provide employees with incentive for improving 4. Specify a time period – to motivate and inject a sense of urgency into goal attainment Focus on long-run performance and competitiveness.Copyright © Houghton Mifflin 1 | 14Company. All rights reserved.
  15. 15.  External AnalysisPurpose is to identify the strategic opportunities andthreats in the organization’s operating environment that will affect how it pursues its mission. External Analysis requires an assessment of:  Industry environment in which company operates • Competitive structure of industry • Competitive position of the company • Competitiveness and position of major rivals  The country or national environments in which company competes  The wider socioeconomic or macroenvironment that may affect the company and its industry • Social • Legal • Technological • Governmental • International • MacroeconomicCopyright © Houghton Mifflin Company. All rights reserved. 1 | 15
  16. 16.  Internal AnalysisPurpose is to pinpoint the strengths and weaknesses of the organization. Strengths lead to superiorperformance and weaknesses to inferior performance. Internal analysis includes an assessment of:  Quantity and quality of a company’s resources and capabilities  Ways of building unique skills and company-specific or distinctive competencies Building & sustaining a competitive advantage requires a company to achieve superior: • Efficiency • Innovations • Quality • Responsiveness to customersCopyright © Houghton Mifflin Company. All rights reserved. 1 | 16
  17. 17.  Selecting Strategies: SWOT Analysis and Business Model SWOT analyses help to identify strategies that align a company’s resources and capabilities to its environment – in order to create and sustain a competitive advantage. Functional strategies should be consistent with and support the company’s business level and global strategies. • Functional-level strategy – directed at operational effectiveness • Business-level strategy – businesses’ overall competitive themes • Global strategy – expand, grow and prosper at a global level • Corporate-level strategy – to maximize profitability and profit growth When taken together, the various strategies pursued by a company must lead to a viable business model. Copyright © Houghton Mifflin Company. All rights reserved. 1 | 17
  18. 18.  Strategy Implementation After choosing a set of congruent strategies to achieve competitive advantage, managers must put those strategies into action: • Implementation and execution of the strategic plans • Design of the best organization structure • Consistency of strategy with company culture • Control systems to measure and monitor progress • Governance systems for legal and ethical compliance • Consistency with maximizing profit and profit growthCopyright © Houghton Mifflin Company. All rights reserved. 1 | 18
  19. 19. ⑥ The Feedback Loop Managers must monitor strategy execution: • To determine if strategic goals and objectives are being achieved • To evaluate to what extent competitive advantage is being created and sustained Managers must monitor and reevaluate for the next round of strategy formulation and implementation Strategic planning is ongoing.Copyright © Houghton Mifflin Company. All rights reserved. 1 | 19
  20. 20. Group Assignment 1• Craft a mission statement for a company your group agrees on (assume you are the executives) (i.e. could be the company you work in), which includes: – The reason for existence – what an organization does – A statement of some desired future state (vision) – A statement of key values that an organization is committed to (values) – The measurable desired future goals (goals)