The Strategic Management Process

Strategic management refers to the managerial process which forms a strategic

vision, mission, set objectives, craft and execute the strategy and then take any
corrective adjustments to the process.

THE VISION:
Definition
The vision provides long-term direction. It is a commitment to a dream. It
involves asking “what do we want to be like in a few years?” It reflects
management’s aspirations for the organization and its business.

Importance of a Vision:

Without a vision, companies are prone to drift aimlessly and lose any claim to
being an industry leader. Managers need to think strategically about the impact
of new technologies, how customer needs and expectations are changing, and
what will it take to overtake competitors. Thus, the vision serves as a beacon to
guide resource allocation and also as a basis for crafting a strategy to get the
company where it needs to go.

Characteristics of the Vision:

THE MISSION

SETTING OBJECTIVES

The purpose of setting objectives is to convert managerial statements of strategic

vision and business mission into specific performance targets the organization
wants to achieve.

Importance

These are important because they push an organization to be more inventive;

more focused in its actions.

Types:

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Financial – signals commitment to growth earnings, return on investments,
dividend growth

Strategic – is concerned with competitiveness, exercising technology, leadership,

improve business position.

CRAFTING A STRATEGY

How to achieve the objectives. Strategy is proactive and reactive. To achieve

objectives involves collective learning of the organization overtime.

Crafting involves actively searching for opportunities to do new things or to do

existing things in new ways. The faster a company’s business environment is
changing, the more critical it becomes for its managers to be good entrepreneurs
in making both predictions and timely strategic adjustments.

It entails studying market trends, listening to customers and anticipating their

changing needs and expectations, scrutinizing the business possibilities that
spring from technological developments, building the firms market position via
acquisitions.

Strategy and Entrepreneurship

This involves actively searching for opportunities to do new things or do existing

things in new ways. The faster a company’s business environment is changing,
the more critical it becomes for its managers to be good entrepreneurs in making
both predictions and timely strategic adjustments

Implementing and Executing the Strategy

The focus is what will it take to develop the needed organizational capabilities
and to reach the targeted objectives on schedule. It includes thefollowing
principal aspects
Motivating people in ways that induce them to purse the target objectives
energetilly
Tying the reward structure to the achievement of targeted results, creating a
company culture and work climate conducive to successful strategy
implementation and executive; exerting internal leadership

Good strategy execution involves creating a strong “fit” between the way things
are done internally and what it will take for the strategy to succeed.

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Evaluating Performance, Monitoring New Developments, and Initiating Corrective
Adjustments

This invlolves revising budgets, changing policies, reorganizing, making

personnel changes.

How Strategies Get Crafted:

Chief Architect Approach – this is characteristic of companies that have been

founded by the company’s present CEO.
Dis: caliber (degree of worth) of the strategy depends heavily on one person’s
entrepreneurial acumen (keen judgement/insight); it also breaks down in
enterprises with diverse product lines since one person cannot orchestrate the
strategy-making process.

Delegation Approach – a team of consultants brought in specifically to help

develop new strategic initiatives. This allows for broad participation from many
managers and personnel with specialized expertise and on the scene knowledge.
However, with this approach, subordinates may deal more with how to address
today’s problems than with positioning the enterprise to capture tomorrow’s
opportunities.
Dis: lack of sufficient top-down direction on part of senior executives; runs the
rise that the outcome will be shaped by influential subordinates that have a
common interest in promoting their particular version of what the strategy ought
to be.

Collaborative/Team Approach – enlists the assistance and advice of key peers

and subordinates in hammering out a consensus strategy. This is well satiated
wehre strategic issues cut across departments, product lines etc.
Dis: conducive to political strategic choices; there is slower reaction and
response times as group members meet to debate the merits of what to do.

Corporate Intrapreneur Approach – top management encourages individuals and

teams to develop and champion proposals for new product lines and new
business ventures. This approach works well in enterprises where technological
advances are coming at a fast and furious pace.
Dis: may not result in achieving clear strategic direction for the company

Benefits of a Strategic Approach to Managing

Provides better guidance to the organization on what they are trying to do

Management more alert to new opportunities and threats
Unifes the organization
Creates proactive management posture

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Promote development of a constantly evolving business model

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Today’s managers have to think strategically about their company’s
position and about the impact of changing conditions. They have to
monitor the company’s external environment and internal
capabilities closely enough to know when to institute strategy
changes. They have to know the business well enough to
determine what kinds of strategic changes to initiate. Simply said,
the fundamentals of strategic management need to drive the whole
approach to managing organizations. The chief executive officer of
one successful company put it well when he said:

In the main, our competitors are acquainted with the same

fundamental concepts and techniques and approaches that we
follow, and they are as free to pursue them as we are. More often
than not, the difference between their level of success and ours
lies in the relative thoroughness and self-discipline with which we
and they develop and execute our strategies for the future.

The advantages of first-rate strategic thinking and conscious

strategy management (as opposed to freewheeling improvisation,
gut feel, and hoping for good luck) include

(1) providing better guidance to the entire organization on the

crucial point of “what it is we are trying to do,”

(2) making managers and organizational members more alert to

new opportunities and threatening developments,

(3) helping to unify the organization,

(4) creating a more proactive management posture,

(5) promoting the development of a constantly evolving business

model that will produce sustained bottom-line success for the
enterprise, and

(6) providing managers with a rationale for evaluating competing

budget requests—a rationale that argues strongly for steering
resources into strategy-supportive, results-producing areas.

Trailblazing strategies can be the key to better long-term

performance. Business history shows that high-performing
enterprises often initiate and lead, not just react and defend. They
launch strategic offensives to out-innovate and out-maneuver
rivals and secure sustainable competitive advantage, then use their
market edge to achieve superior financial performance. Aggressive
pursuit of a creative, opportunistic strategy can propel a firm into a
leadership position, paving the way for its products and services to
become the industry standard. High-achieving enterprises are
nearly always the product of astute, proactive management, rather
than the result of lucky breaks or a long run of good fortune.

Two factors separate the best-managed organizations from the 6

rest:
Management's direction-setting tasks involve (1) charting a company's
future strategic path, (2) setting objectives, and (3) crafting a
strategy.

STRATEGIC VISION

Early on in the direction-setting process, managers need to address

the question "What is our business and what will it be?" Management's
views and conclusions about the organization's future course, the
market position it should try to occupy, and the business activities to
be pursued constitute a strategic vision for the company.

A strategic vision indicates management's aspirations for the

organization, providing a panoramic view of "what businesses we want
to be in, where we are headed, and the kind of company we are trying
to create."

It spells out a direction and describes the destination. Effective visions

are clear, challenging, and inspiring; they prepare a firm for the
future, and they make sense in the marketplace.

A well-conceived, well-worded mission/vision statement helps

managers manage-serving as a beacon of the enterprise's long-term
direction, helping channel organizational efforts and strategic
initiatives along the path management has committed to following,
building a strong sense of organizational identity and purpose, and
creating employee buy-in.

Missions should be clear, both in terms of intentions and words used. Effective
mission statements, generally, identify the subject of the service or products, which the
enterprise is set up to provide. The mission statements for non-profits are usually spelt
out in the form of a cause such as “Fight homelessness”. The mission should reflect a
commitment to those who provide the resources.
SOS KINDERJDORF
Original Mission: to provide orphaned, abandoned, and destitute children with a new and
permanent home, and lay a sound foundation for a useful and productive life”

Vision: more personalized children village; not traditional orphanage

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Program: each village had 10 – 15 homes; each home housed 6 – 8 children; each family
cared for by a single woman, woman received training.

Non-profit range of activities were broaden:

Change program based on educational need; open schools, training centers; and extended
schools to neighborhood children, some paid tuition; added medical centers
60% spend on core services; 40% on schools, medical services etc

Kinderdorf could have continued to broaden its range of activities until the
organization became too stretched to be effective in addressing the core dimensions
of its broad mission. Thus one fundamental characteristic of a mission of non-
profit organizations is that it should not be stretched too far that it pushes the
organization beyond its limit. The mission should neither be too narrow that it
restricts the organization’s activites, nor too broad to make itself meaningless.

Problems with Missions of Non-profit Organizations

Another characteristic of a mission statement is that it should be motivating for

members of the organization and of society, and they should feel it worthwhile
working for such an organization.

As the mission inspires founders to create the organization, nonprofits have strong
reasons to stay loyal to their missions. The founders often deliberately ensure that their
original vision is embraced in the next generation of leaders, sometimes by using
products of the very system who reflect the core values and culture. Thus, the core
mission becomes cemented into the consciousness of the entire organization.

At Kinderdorf, Kutin who was also an orphan was groomed to become the successor.
Kutin groomed Pichler, who was from the village, as Secretary General.

However, this “mission stickiness” could result in the organization become rigid and
falling behind in changing times. Stickiness is the packaging that makes an idea
memorable and irresistible.

One prime example of mission stickiness is Planned Parent Hood in which they were
called to adjust their programs due to the changes in the market environment. They
refused the recommendations of the task force as they felt that the changes were
causing the organization’s mission to become diluted.

The combination of stickiness to the mission and stretchiness to market demands

can undermine a nonprofit’s effectiveness. Before it can move forward it must
unstuck the inertia at its center and tehn creep forward one step at a time.

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CHAPTER 2

Usually, the next step in the strategic making process is the

establishment of objectives. However, the case takes us to the
development of an operational mission.

The second direction-setting task is to establish strategic and financial

objectives for the organization to achieve.

This may be likened to the operational mission referred to in the case.

The operational mission

Objectives convert the mission statement and strategic vision into

specific performance targets. The agreed-on objectives need to spell
out precisely how much by when, and they need to require a
significant amount of organizational stretch. Objectives are needed at
all organizational levels.

The third direction-setting step entails crafting a strategy to achieve

the objectives set in each area of the organization. A corporate
strategy is needed to achieve corporate-level objectives; business
strategies are needed to achieve business-unit performance
objectives; functional strategies are needed to achieve the
performance targets set for each functional department; and
operating-level strategies are needed to achieve the objectives set in
each operating and geographic unit. In effect, an organization's
strategic plan is a collection of unified and interlocking strategies.
Typically, the strategy-making task is more top-down than bottom-up.
Lower-level strategies should contribute to the achievement of higher-
level, companywide objectives.

Strategy is shaped by both external and internal considerations. The

major external considerations are societal, political, regulatory, and
community factors; competitive conditions and overall industry
attractiveness; and the company's market opportunities and threats.

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The primary internal considerations are company strengths,
weaknesses, and competitive capabilities; managers' personal
ambitions, philosophies, and ethics; and the company's culture and
shared values. A good strategy must be well matched to all these
situational considerations. In addition, a good strategy must lead to
sustainable competitive advantage and improved company
performance.

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Application of the Five Forces Model

According to Porter, the strength of competition is a composite of five forces: the

rivalry among competing sellers, the presence of attractive substitutes, the potential for
new entry, the competitive pressures stemming from supplier-seller collaboration and
bargaining, and the competitive pressures stemming from seller-buyer collaboration and
bargaining.

The Porter model could be said to be characteristic of a profit and product oriented
market. The nonprofit sector may possess distinct features that, together, make
competition in this sector different from that faced by a non-profit business. However, as
pointed out in the case, nonprofits too are faced by market forces, and hence the Porter
Model is still seen as applicable as shows below:

Threat of New Entrants: Although some capital may be required to secure a location and
facilities as the organization matures, the nonprofit organization may be seen as a sector
which is relatively easy to enter.

Bargaining Power of Suppliers, in the case of the nonprofit organization could be

renamed as “Bargaining power of donors”. This may be akin to the market pull identified
in the case. In the Porter’s model, suppliers-seller relationships represent a weak or
strong competitive force when suppliers can exercise sufficient bargaining power to
influence the terms of conditions of supply in their favour. In the same way, non-profits,
in an effort to attract new donors, may take on programmes that do not fit their existing
capabilities and expertise well. For example, the grant that STRIVE received from Ford
was significant for them. However, it forced them to broadened their focus which proved
very challenging. According to the case, small nonprofits are more susceptible to this
type of market pull which causes them to loose their focus, than large non-profits who are
able to shoulder the demands of donors and trustees.

In addition, there could be rivalry among competing sellers – While in for-profit

organization, competition may be centred on price. In the nonprofit organization
competiton may exist wehre agencies may be fighting for the same grants from the same
donor agencies. In addition, they may also be fighting for the same clients to target. The
greater the benefits of going after a new cause the more likely that one or more rivals will
initiate moves to capture it. As identified in the, when HIV/AIDS prevention became an
important issue, many agencies, new and old, staked claims for available funding.

Threat of substitute products or services. In the five forces model, competitive pressures
from substitute products depends on three factors (1) whether attractively priced
substitutes are available; (2) whether buyers view the substitutes as being satisfactory in
terms of quality , performance, and other relevant attributes; and (3) whether buyers can
switch to substitutes easily. However, nonprofits provide services rather than products.
As a result, substitution may occur where organizations provide the same service to the
same client or have the same mission.

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The task of competition analysis is to understand the competitive pressures associated
with each force; determine whether these pressures add up to a strong or weak
competitive force in the marketplace, and then think strategically about what sort of
competitive strategy, given the rules of competition in the industry, the company will
need to employ to (a) insulate the firm as much as possible from the five competitive
forces, (b) influence the industry's competitive rules in the company's favor, and (c) gain
a competitive edge.

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