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Strategic management

Strategic management

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Strategic management

  1. 1. STRATEGIC MANAGEMENTSTRATEGIC MANAGEMENT AND PLANNING IN AAND PLANNING IN A GLOBALGLOBAL ENVIRONMENTENVIRONMENT PLANNING CHALLENGES INPLANNING CHALLENGES IN THE 21ST CENTURYTHE 21ST CENTURY
  2. 2. LEARNING OBJECTIVESLEARNING OBJECTIVES 1.1. Define strategic management and describe itsDefine strategic management and describe its purpose.purpose. 2.2. Explain the four stages of the strategic managementExplain the four stages of the strategic management process.process. 3.3. Identify and explain the components of strategicIdentify and explain the components of strategic analysis, as well as explain the value of conductinganalysis, as well as explain the value of conducting this analysis.this analysis. 4.4. Explain how an organization can develop aExplain how an organization can develop a competitive advantage.competitive advantage. 5.5. Explain the purpose of strategy formulation andExplain the purpose of strategy formulation and describe the two levels of strategic alternatives.describe the two levels of strategic alternatives. When you have finished studying, you should be ableWhen you have finished studying, you should be able to:to:
  3. 3. LEARNING OBJECTIVESLEARNING OBJECTIVES (cont’d)(cont’d) 6.6. Explain the role of strategy implementation.Explain the role of strategy implementation. 7.7. Explain the importance of evaluation and control ofExplain the importance of evaluation and control of strategy and its implementation.strategy and its implementation. 8.8. Discuss the importance of strategic planning.Discuss the importance of strategic planning. When you have finished studying, you should be ableWhen you have finished studying, you should be able to:to:
  4. 4. Strategic PlanningStrategic Planning • Strategic PlanningStrategic Planning The process by which an organization makesThe process by which an organization makes decisions and takes actions that affect its long-decisions and takes actions that affect its long- run performance.run performance. Strategic plan:Strategic plan: the output of the strategicthe output of the strategic planning process that provides direction byplanning process that provides direction by defining its strategic approach to business.defining its strategic approach to business. • Competitive AdvantageCompetitive Advantage Is a central concept of strategic planning.Is a central concept of strategic planning. Can only be sustained if an organizationCan only be sustained if an organization continues to out innovate competitors.continues to out innovate competitors.
  5. 5. The Strategic Management Process
  6. 6. Key TermsKey Terms • Strategic ManagementStrategic Management Overall, long-run management.Overall, long-run management. • Strategic PlanningStrategic Planning The process of making plans andThe process of making plans and decisions that are focused on long-rundecisions that are focused on long-run performance.performance. • Strategic PlanStrategic Plan A comprehensive plan that providesA comprehensive plan that provides overall direction for the organizationoverall direction for the organization..
  7. 7. Key Terms (cont’d)Key Terms (cont’d) • Strategic AnalysisStrategic Analysis An assessment of the external andAn assessment of the external and internal environments of aninternal environments of an organization.organization. • Strategy FormulationStrategy Formulation Establishing strategy and tacticsEstablishing strategy and tactics necessary to achieve the mission ofnecessary to achieve the mission of the organizationthe organization..
  8. 8. Benefits of Strategic PlanningBenefits of Strategic Planning • EconomicEconomic Organizations that plan strategically outperformOrganizations that plan strategically outperform those that do not.those that do not. • BehavioralBehavioral Identification of organizational and environmentalIdentification of organizational and environmental conditions that may create problems in the longconditions that may create problems in the long run.run. Better decisions as a result of the group decision-Better decisions as a result of the group decision- making process.making process. Participation in the planning process increasesParticipation in the planning process increases participants understanding of how the plan is to beparticipants understanding of how the plan is to be implemented and their willingness to change.implemented and their willingness to change.
  9. 9. Strategic Analysis: Assessment in aStrategic Analysis: Assessment in a Global EnvironmentGlobal Environment • The purpose of strategic analysis is toThe purpose of strategic analysis is to evaluate the present situation of theevaluate the present situation of the organization.organization. Analysis requires three primary activities:Analysis requires three primary activities: Assessing the mission of the organizationAssessing the mission of the organization Internal environmental analysisInternal environmental analysis External environmental analysisExternal environmental analysis
  10. 10. The Components of Strategic Analysis
  11. 11. SWOT AnalysisSWOT Analysis • The combined internal and externalThe combined internal and external strategic analysis is referred to as astrategic analysis is referred to as a SWOTSWOT analysis.analysis. SStrengthstrengths WWeaknesseseaknesses OOpportunitiespportunities TThreatshreats
  12. 12. Assessing the Mission of anAssessing the Mission of an OrganizationOrganization • The mission of an organization reflects itsThe mission of an organization reflects its fundamental reasons for existence.fundamental reasons for existence. • Though mission statements vary greatly, everyThough mission statements vary greatly, every mission statement should describe three primarymission statement should describe three primary aspects of an organization:aspects of an organization: 1.1. The organization’s primary products orThe organization’s primary products or services.services. 2.2. The organization’s primary target markets.The organization’s primary target markets. 3.3. The organization’s overall strategy forThe organization’s overall strategy for ensuring long-term success.ensuring long-term success.
  13. 13. Key TermsKey Terms • Strategic DirectionStrategic Direction Direction of the organization toward success inDirection of the organization toward success in the long run.the long run. • VisionVision The ability to predict opportunities and threats inThe ability to predict opportunities and threats in the future.the future. A vision statement is intended to guide theA vision statement is intended to guide the organization in the future, what the organizationorganization in the future, what the organization wants to become or where it wants to be.wants to become or where it wants to be. Vision is derived from a careful analysis of theVision is derived from a careful analysis of the external and internal environmentsexternal and internal environments
  14. 14. Company’s/Organization’s Mission StatementCompany’s/Organization’s Mission Statement Our Vision To become the world’s leading client’s research/knowledge company for innovative products and services. Our Mission We are a global family with a proud heritage passionately committed to providing personal mobility for people around the world. We anticipate client’s need and deliver outstanding products and services that improve people’s knowledge and lives. Our Values Our business is driven by our client’s focus, creativity, resourcefulness, and entrepreneurial spirit. We are an inspired, diverse team. We respect and value everyone’s contribution. The health and safety of our people are paramount. We are a leader in environmental responsibility. Our integrity is never compromised and we make a positive contribution to society. We constantly strive to improve in everything we do. Guided by these values, we provide superior returns to our shareholders..
  15. 15. External AnalysisExternal Analysis • Purpose of External AnalysisPurpose of External Analysis To identify aspects of the external environmentTo identify aspects of the external environment that represent either anthat represent either an opportunityopportunity for or afor or a threatthreat to the organization.to the organization. Opportunities:Opportunities: Those environmental trends on which theThose environmental trends on which the organization can capitalize and improve itsorganization can capitalize and improve its competitive position.competitive position. ThreatsThreats Conditions that jeopardize the organization’sConditions that jeopardize the organization’s ability to prosper and its competitive position inability to prosper and its competitive position in the long term.the long term.
  16. 16. External Analysis FactorsExternal Analysis Factors • General EnvironmentGeneral Environment Includes environmental forces that are beyondIncludes environmental forces that are beyond the influence of the organization and over which itthe influence of the organization and over which it has no (or little) control.has no (or little) control. • Task EnvironmentTask Environment Includes environmental forces that are within theIncludes environmental forces that are within the organization’s operating environment and may beorganization’s operating environment and may be influenced to some degree.influenced to some degree. • Economic EnvironmentEconomic Environment The economic components of the generalThe economic components of the general environment.environment.
  17. 17. Dimensions of the Global External EnvironmentDimensions of the Global External Environment
  18. 18. Sample Issues in the General EnvironmentSample Issues in the General Environment Economic • Inflation rates • Unemployment rates • Wage rates • Exchange rates • Stock market fluctuations • Per capita income • GDP trends • Economic development Socio cultural • Norms and values • Demographic trends • Age groups • Regional shifts in population • Household composition • Diversity • Ecological awareness • Life expectancy Technological • Spending on research and development • Internet availability • Availability of information technology • Production technology trends • Productivity improvements • Telecommunications infrastructure Political–Legal • Tax laws • Environmental protection • International trade regulation • Antitrust regulation • Federal Reserve policy • Intellectual property and patent laws
  19. 19. External EnvironmentExternal Environment • General EnvironmentGeneral Environment Economic factorsEconomic factors TechnologicalTechnological factorsfactors Socio-culturalSocio-cultural factorsfactors Political-legalPolitical-legal factorsfactors • Task EnvironmentTask Environment CustomerCustomer ProfilesProfiles CompetitiveCompetitive StructureStructure ResourceResource AvailabilityAvailability
  20. 20. Five Forces Model of Industry AnalysisFive Forces Model of Industry Analysis Source: Adapted from Michael E. Porter, “How Competitive Forces Shape Strategy,” Harvard Business Review 97, no. 2 (March/April 1999): 137–145.
  21. 21. Internal AnalysisInternal Analysis • Purpose of Internal AnalysisPurpose of Internal Analysis To identify the assets, resources, skills, andTo identify the assets, resources, skills, and processes that represent eitherprocesses that represent either strengthsstrengths oror weaknessesweaknesses for the organization.for the organization. StrengthsStrengths Aspects of the organization’s operations thatAspects of the organization’s operations that represent potentialrepresent potential competitive advantagescompetitive advantages oror distinctive competenciesdistinctive competencies.. WeaknessesWeaknesses Areas that are in need of improvementAreas that are in need of improvement..
  22. 22. Internal Factors for AnalysisInternal Factors for Analysis Marketing Operations Product, service Productivity Brand equity Quality Market research Facilities Sales force Supply chain Market share Technology Size of market Purchasing Distribution channels Safety Price Ecological issues Promotion Finance Profitability Revenue Asset utilization Debt/leverage Equity Per unit costs Profit margins Cash flow Human Resources Skills Selection Training and development Leadership Motivation Communication Rewards Other Factors Organization culture Overall control Information system Information technology Organizational structure
  23. 23. Strategy FormulationStrategy Formulation • Answers the question:Answers the question: ““Where does the organization want to be?”Where does the organization want to be?” • Steps in strategy formulation include:Steps in strategy formulation include: Casting the vision for the organization.Casting the vision for the organization. Setting strategic goals.Setting strategic goals. Identifying strategic alternatives.Identifying strategic alternatives. Evaluating and choosing strategies that provide aEvaluating and choosing strategies that provide a competitive advantage and optimize thecompetitive advantage and optimize the performance of the organization in the long term.performance of the organization in the long term.
  24. 24. Casting the Vision for the OrganizationCasting the Vision for the Organization • The development of a vision for theThe development of a vision for the organization is central to any strategic plan.organization is central to any strategic plan. • Vision versus MissionVision versus Mission AA vision statementvision statement describes what thedescribes what the organization aspires to be in the long run.organization aspires to be in the long run. AA mission statementmission statement describes thedescribes the products, services, and target markets forproducts, services, and target markets for an organization.an organization.
  25. 25. Setting Strategic GoalsSetting Strategic Goals • GoalsGoals Are very broad statements of the results that anAre very broad statements of the results that an organization wishes to achieve in the long run.organization wishes to achieve in the long run. Relate to the mission and vision of theRelate to the mission and vision of the organization and specify the level of performanceorganization and specify the level of performance that the organization wants to achieve.that the organization wants to achieve. • SMART goals are:SMART goals are: Specific…Measurable…Achievable…Results-Specific…Measurable…Achievable…Results- oriented…Timelineoriented…Timeline
  26. 26. Identifying Strategic AlternativesIdentifying Strategic Alternatives • Strategic AlternativesStrategic Alternatives  Are developed in light of the organizational missionAre developed in light of the organizational mission considering its strengths, weaknesses, opportunities,considering its strengths, weaknesses, opportunities, and threats, and its vision and strategic goals.and threats, and its vision and strategic goals. • Grand StrategiesGrand Strategies  Stability strategies:Stability strategies: intended to ensure continuity inintended to ensure continuity in the operations and performance of the organization.the operations and performance of the organization.  Growth strategies:Growth strategies: designed to increase the sales anddesigned to increase the sales and profits of the organization.profits of the organization.  Retrenchment strategies:Retrenchment strategies: designed to reversedesigned to reverse negative sales and profitability trends.negative sales and profitability trends.
  27. 27. Identifying Strategic AlternativesIdentifying Strategic Alternatives (cont’d)(cont’d) • Generic StrategiesGeneric Strategies  The primary ways in which an organization canThe primary ways in which an organization can compete in its chosen market(s).compete in its chosen market(s).  Cost leadership:Cost leadership: competing on the basis of price.competing on the basis of price.  Differentiation:Differentiation: offering products or services thatoffering products or services that are differentiated from those of competitors inare differentiated from those of competitors in some way.some way.  Focus:Focus: avoiding competing in broad markets byavoiding competing in broad markets by targeting a narrow market segment.targeting a narrow market segment.  Best-Cost provider:Best-Cost provider: competing on the basis of bothcompeting on the basis of both low-cost and differentiation.low-cost and differentiation.
  28. 28. Generic Strategies MatrixGeneric Strategies Matrix
  29. 29. Evaluating and Choosing StrategyEvaluating and Choosing Strategy • Portfolio AssessmentPortfolio Assessment  Provides a mechanism for evaluating anProvides a mechanism for evaluating an organization’s portfolio of business, products andorganization’s portfolio of business, products and services.services.  Academy of Corporate Learning and Innovation (ACLI)Academy of Corporate Learning and Innovation (ACLI) Growth-Share matrixGrowth-Share matrix  ––Business Strength matrixBusiness Strength matrix • Decision MatricesDecision Matrices  A decision matrix provides a method for evaluatingA decision matrix provides a method for evaluating alternative strategies according to the criteria that thealternative strategies according to the criteria that the organization’s leaders consider more important.organization’s leaders consider more important.
  30. 30. Strategy Implementation: Focusing on ResultsStrategy Implementation: Focusing on Results • The best-formulated strategy is virtuallyThe best-formulated strategy is virtually worthless if it cannot be implemented effectively.worthless if it cannot be implemented effectively.  A direct, specific, clear strategy must be developed.A direct, specific, clear strategy must be developed.  Strategies must be established at all levels of theStrategies must be established at all levels of the organization to align each part of the organizationorganization to align each part of the organization with the organization’s overall mission and goals.with the organization’s overall mission and goals.  The organization’s system must be designed toThe organization’s system must be designed to ensure that strategies can be institutionalized in itsensure that strategies can be institutionalized in its culture.culture.
  31. 31. Evaluation and Control: AchievingEvaluation and Control: Achieving Effectiveness and EfficiencyEffectiveness and Efficiency • Strategic ControlStrategic Control  Involves monitoring the implementation of theInvolves monitoring the implementation of the strategic plan to ensure quality and effectiveness instrategic plan to ensure quality and effectiveness in terms of organizational performance.terms of organizational performance.  Feed forward controlsFeed forward controls  Are designed to identify changes in the external environmentAre designed to identify changes in the external environment or internal operations that affect organization’s ability to fulfillor internal operations that affect organization’s ability to fulfill its mission and meet its strategic goals.its mission and meet its strategic goals.  Feedback ControlsFeedback Controls  Compare the actual performance of the organization to itsCompare the actual performance of the organization to its planned performance.planned performance.
  32. 32. Information Technology and StrategicInformation Technology and Strategic PlanningPlanning • PositivePositive  The increasing availability of information technologyThe increasing availability of information technology has had a tremendous impact on the ability ofhas had a tremendous impact on the ability of organizations to develop effective strategic plans.organizations to develop effective strategic plans. • NegativeNegative  Many organizations fail to use the information madeMany organizations fail to use the information made available by management information systems toavailable by management information systems to ensure effective strategic planning.ensure effective strategic planning.
  33. 33. Institutionalizing StrategyInstitutionalizing Strategy • Every member, work group, department, andEvery member, work group, department, and division of the organization must subscribe todivision of the organization must subscribe to and support the organization’s strategy with itsand support the organization’s strategy with its plans and actions.plans and actions.  There must be a good fit between the chosen strategyThere must be a good fit between the chosen strategy and:and:  the organizational structurethe organizational structure  the organizational culturethe organizational culture  the organizational leadershipthe organizational leadership
  34. 34. The Importance of OrganizationalThe Importance of Organizational CultureCulture • Organizational CultureOrganizational Culture Refers to the shared, emotionally chargedRefers to the shared, emotionally charged beliefs, values, and norms that bind peoplebeliefs, values, and norms that bind people together.together. Helps people make sense of the systemsHelps people make sense of the systems within an organization.within an organization. Guides the behavior of and gives meaningGuides the behavior of and gives meaning to the members of the organization.to the members of the organization.
  35. 35. Organizational LeadershipOrganizational Leadership • The Importance of LeadershipThe Importance of Leadership  If an organization is to implement its strategyIf an organization is to implement its strategy effectively, it must have the appropriate leadership.effectively, it must have the appropriate leadership.  Without effective leadership, an organization isWithout effective leadership, an organization is unlikely to realize the benefits of its selected strategy.unlikely to realize the benefits of its selected strategy.
  36. 36. Implications for LeadersImplications for Leaders • Understand the realities of the external environment inUnderstand the realities of the external environment in which you operate.which you operate. • Understand the importance of a thorough and accurateUnderstand the importance of a thorough and accurate assessment of the current situation of the organization.assessment of the current situation of the organization. • A plan will be only as good as the analysis upon which itA plan will be only as good as the analysis upon which it is based.is based. • Strategic vision is critical for ensuring a commonStrategic vision is critical for ensuring a common strategic direction for the organization.strategic direction for the organization. • Make sure that the mission statement is a workingMake sure that the mission statement is a working document that provides direction for the members of thedocument that provides direction for the members of the organization.organization.
  37. 37. Implications for Leaders (cont’d)Implications for Leaders (cont’d) • Strategic goals serve as targets for achievement. MakeStrategic goals serve as targets for achievement. Make sure that they are specific, measurable, results oriented,sure that they are specific, measurable, results oriented, and have a established time for their achievement.and have a established time for their achievement. • Strategy should be designed to provide the organizationStrategy should be designed to provide the organization with a distinctive competitive advantage in the long run.with a distinctive competitive advantage in the long run. • A strategic plan is meaningless if it is not implementedA strategic plan is meaningless if it is not implemented well.well. • Provide for evaluation and control to be sure thatProvide for evaluation and control to be sure that operations are on track for accomplishment of theoperations are on track for accomplishment of the organization’s mission.organization’s mission.

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