Business Business Policy Policy

Lecture Lecture Plan Plan

What What is is a a strategy? strategy? The The strategic strategic management management process process Why Why strategic strategic management management is isan an ongoing ongoing process process Who Who performs performs the the tasks tasks of of SM? SM? Benefits of a strategic approach Benefits of a strategic approach

Strategy Strategy Formulation Formulation Topic Topic 1: 1: The The Concept Concept of of Strategy Strategyand andthe the Strategic Management Process Strategic Management Process

What What is is a a strategy? strategy?

determination determination of of the the basic basic long-term long-term goals goals and and objectives of an enterprise, and the adoption objectives of an enterprise, and the adoption of of courses courses of of action action and and the the allocation allocation of of resources resources necessary necessaryfor forcarrying carrying out out these these goals goals
Chandler Chandler

What What is is a a Strategy? Strategy? (2) (2)

...the ...the game game plan plan management management has has for for positioning the company... entails choice positioning the company... entails choice among among alternatives alternatives and andsignals signals organisational organisational commitment commitment to to specific specific markets, competitive approaches, markets, competitive approaches, and andways ways of of operating. operating.
Thomson Thomsonand andStrickland Strickland

a a commitment commitment to to undertake undertake one one set set of ofactions actions rather than another rather than another
Oster Oster

Different Different Levels Levels of of Strategy Strategy

Corporate Corporate -- what what business? business? Business how to Business - how to compete compete in in each eachbusiness business Functional Functional -- in in support support of of business business level level

The The Strategic Strategic Management Management Process Process

Analyze Analyze Environment Environment Identify Identify opps opps/ /threats threats

Strategy Strategy Making Making -- Process Process or or Event? Event?

Identify Identify current current mission, mission, objectives objectives & &strategies strategies

SWOT SWOTANALYSIS ANALYSIS

Identify Identify strengths strengths& & weaknesses weaknesses

Formulate Formulate Strategies Strategies Implement Implement Strategies Strategies

Analyze Analyze Resources Resources

Strategy Strategy making making is is an an ongoing ongoing process process Boundaries Boundaries between between tasks:conceptual tasks:conceptualnot not real real Managers Managers have have many many other other responsibilities responsibilities Crafting/ Crafting/ implementing implementing happens happens erratically erratically

Evaluate Evaluate Results Results

Management, Robbins, S. & Coultar, M. 1996p. 259 M anagement, Robbins, S. & Coultar, M. 1996p. 259

Intended Intended and and Adaptive Adaptive Strategy Strategy

strategy strategy is is a a combination combination of of planned planned actions actions and on-the-spot adaptive reactions to and on-the-spot adaptive reactions to freshly freshly developing developing industry industry and andcompetitive competitive events. events.
Respond Respond to to external/internal external/internalenvironment environment Emergent EmergentStrategy Strategy

Who Who Performs Performs the the five five tasks? tasks?
CEO CEOand and other othermanagers managers Strategic Strategic planners planners Board Board of of directors directors

The The Three Three Strategy Strategy Making Making Tasks Tasks
Develop Develop a a strategic strategic vision/ vision/ business business mission mission Set objectives Set objectives Craft Craft a a strategy strategy

Chesire ChesirePuss Pussshe she(Alice) (Alice) began began... ... Would Wouldyou youplease pleasetell tellme mewhich whichway wayII ought oughtto togo gofrom fromhere here That Thatdepends dependson onwhere whereyou youwant wantto toget get to, said the cat. to, said the cat.

Lewis LewisCarroll Carroll

If Ifyou you dont dontknow knowwhere whereyoure youre going, going, any anyold oldroad roadwill willtake takeyou youthere. there. Anonymous Anonymous

Mission Mission

Defines Defines the the current currentboundaries boundaries Defines Definesthe the business business position position -Who are we? Who are we? -- What What do do we we do? do?

What What Business Business are are you you in: in: Coca Coca Cola Cola
soft softdrinks? drinks? Competition Competition is isPepsi, Pepsi, Finches Finches beverages? beverages? Competition Competition is is tea, tea, coffee, coffee, softdrinks softdrinks thirst thirst -quenching? -quenching? Competition Competition is is water water & &all all liquids! liquids!

Present Present

Broad Broad // Narrow Narrow Business Business Definition Definition

Broad Broad Beverages Beverages Childrens Childrens entertainment entertainment Furniture Furniture Travel Travel Narrow Narrow Fizzy Fizzy drinks drinks Toys Toys for for toddlers toddlers Waterbeds Waterbeds River River cruises cruises in in Egypt Egypt

Prepares Preparescompany companyfor for the thefuture future

Defines Definesthe thebusiness businessposition position
Who Whoare arewe? we? What do What dowe wedo? do?

Vision Vision

Defines Definestarget targetmarket market Establishes Establisheslong-term long-termdirection direction

Where Whereare arewe wegoing? going?

Not making Not simply simply making a a profit profit

Future Future
Importance Importance of of COMMUNICATING COMMUNICATINGthe the vision vision

Objectives Objectives
Strategic Strategic vs. vs. Financial? Financial? Long Long range range vs. vs. short short range? range? Challenging Challenging but but achievable achievable

Strategic Strategic vs. vs. financial financial objectives? objectives?

Strategic Strategic
focus focusis ison oncompetitors competitors
eg. eg.becoming beco ming the thetop to pcompany companyin inthe theindustry industry

Financial Financial
focus focusis ison onfinancial financialperformance performance
eg. eg.acceptable acceptableprofit profit margin/ margin/ROI ROI

Both Both are are neccessary neccessary

company companymust mustsurvive survive in inboth bothshort shortand and long longterm term

Measurable Measurable

Long Long vs. vs. Short Short term? term?

Long Long term term forces forces
early earlyaction action long longterm termimplications implications considered considered

Challenging Challenging but but Achievable Achievable

objectives objectives must must be be realistic realistic but but should should stretch stretch funds/ funds/ resources resources must must be be available available to to execute execute the the strategy strategy

Short Short term term encourages encourages

speedy speedyprogress progress

Measurable Measurable
Objectives Objectivesmust must be be measureable measureable
eg. eg.growth growth in inmarket marketshare share of 5% of 5%

Objectives Objectives needed needed at at all all levels levels

Parts Partssupporting supporting the thewhole whole Top-down Top-down objective-setting objective-setting -- cohesion cohesion -- leadership leadership

Deadlines Deadlines must must be be set set

eg. eg.by byDecember December next next You You cannot cannotmanage manage what what you you cannot cannot measure measure

Corporate Corporate Strategy Strategy

Builds Builds portfolio portfolio of of businesses businesses Harnesses Harnesses synergies synergies between betweenbusinesses businesses
Eg Eg pepsi: pepsi: cola cola sold sold via viarestaurant restaurant chain chain

Business Business Strategy Strategy

Aims Aims to to strengthen strengthen long-term long-term competitive competitive position & build sustainable competitive position & build sustainable competitive advantage advantage Build Build competencies competencies and and capabilities capabilities Respond Respond to to changing changing circumstances circumstances Unify Unify functional functional strategies strategies

Makes Makes resourcing/ resourcing/ investment investment decisions decisions Reviews/ Reviews/ unifies unifies business business unit unit strategies strategies

Operational Operational strategy strategy

Lower Lower level level units units of of the the organisation organisation Specific Specificmeans means and andapproaches approaches for forthese these units units
Eg. Eg. Software Software development development group group trains trains people people in use of GUI/ client-server development in use of GUI/ client-server development

Approaches Approaches to to performing performing the the strategy strategy making making tasks tasks
Master Master strategist: strategist: manager manager is is chief chief architect architect Delegate Delegate to toothers others Collaborative Collaborative approach approach Champion approach Champion approach

Societal, Societal, Political, Political, Regulatory Regulatory Conditions Conditions

Limit Limit the the strategic strategic actions actions that that a a company company can canor or should should take take May May cause cause company company to to change change strategy strategy
anti-smoking anti-smoking lobby lobby (direct (direct mkg/advertising) mkg/advertising) lead-free petrol (eg Pura) lead-free petrol (eg Pura) recycling recycling

Industry Industry Attractiveness Attractiveness

Strategy Strategy must must be be matched matched to to industry industryand and competitive conditions eg. competitive conditions eg.
technology technology shift shift change in cost change in cost structure structure of of industry industry

Market Market Opportunities Opportunities and and Threats Threats

Be Be open open to to opportunities opportunities Aim Aim at at capturing capturing best best growth growth opportunities opportunities Defend against threats to well-being Defend against threats to well-being and and future performance future performance

Organisational Organisational Strengths Strengths and and Weaknesses Weaknesses

Strategy Strategy must must be be well-matched well-matched to to the the companys strengths companys strengths
strategy strategy should should be be grounded grounded in inwhat whatcompany company is good at doing is good at doing perilous perilous to to depend dependon on what what its itsnot notgood good at at

Managers Managers Values, Values, Beliefs Beliefs and and Ambitions Ambitions
Management Management play play a a pivotal pivotal role role Strong Strong leadership leadershipbuilds builds commitment commitment Management --in Management communication communication -- buy buy in

Strategy Strategy formulation: formulation: deciding deciding what what to to do do

what what you you might mightdo: do: what what you you can can do: do: opportunity opportunity resources resources

Tests Tests for for a a good good strategy strategy

Goodness Goodness of of fit fit test test
matches matches well well the the companys companys situation situation
internal internal external external

Competitive Competitive advantage advantage test test

leads leads to tosustainable sustainable competitive competitive advantage advantage

what what youd youd like liketo to do: do:

what what you you ought oughtto to do: do:

values/ values/ ambitions ambitions

ethics ethics

Performance Performance test test

leads leads to tosuperior superior performance performance
profitability profitability long longterm termbusiness/ business/market marketposition positionstrength strength

Benefits Benefits of of a a Strategic Strategic Approach Approach

Direction Direction Adaptable Adaptable // in-tune in-tune with with environment environment Basis Basis for for budget/resource budget/resource allocation allocation Unifies decisions across organisation Unifies decisions across organisation Encourages Encourages pro-active pro-active management management Requires Requires strategic strategic thinking thinking rather rather than than gutgutfeel/drift feel/drift