STRATEGIC MANAGEMENT

OVERVIEW OF THE STRATEGIC MANAGEMENT PROCESS

STRATEGIC MANAGEMENT

The term strategic management refers to the managerial process of forming a strategic vision, setting objectives, crafting a strategy, implementing and executing the strategy, --and then over time initiating whatever corrective adjustments in the vision, objectives, and execution are deemed appropriate.

Thomson and Strickland

STRATEGIC MANAGEMENT

Strategic Management is the full set of commitments, decisions, and actions required for a firm to achieve strategic competitiveness and earn above average returns.

Hitt, Ireland, and Hoskisson

STRATEGIC MANAGEMENT

Strategic Management is the process through which organizations analyze and learn from their internal and external environments, - establish strategic direction, create strategies that are intended to achieve established goals, and - execute those strategies, all in an effort to satisfy key organizational constituencies, which are called stakeholders.

Harrison and St. John

STRATEGIC MANAGEMENT

Art & science of formulating, implementing, and evaluating, crossfunctional decisions that enable an organization to achieve its objectives
Fred David

Basic Concept

A companys Strategy consists of the combination of competitive moves and business approaches that managers employ to please customers, compete successfully, and achieve organizational objectives.
(Thomson and Strickland)

Strategy

Integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage. (Hitt, etc.)

Basic Concept

Excellent execution of an excellent strategy is the best test of managerial excellence and the most reliable recipe for organizational success.

BUSINESS MODEL

A companys business model deals with whether the revenue-cost profit economics of its strategy demonstrate the viability of the enterprise as a Whole..

Managements plan for making money in a particular business.

STRATEGY AND BUSINESS MODEL

A companys business model is more narrowly focused- Strategy relates to a companys competitive and business approaches (irrespective of the financial and competitive outcomes it produces) while A business model deals with whether the revenues and costs flowing from the strategy demonstrate business viability.
Thomson and Strickland

An Overview of the Strategic Management Process

The Five Tasks of Strategic Management

Developing a Strategic Vision And Business Mission

Setting Objectives

Crafting a Strategy to Achieve the Objective

Implementing And Executing The Strategy

Evaluating Performance, Monitoring New Developments, and Initiating Corrective Adjustments

Revise As Needed

Revise As Needed

Improve/ Change As Needed

Improve/ Change As Needed

Recycle to Tasks 1, 2, 3, or 4 as Needed

Strategic Management Model

Strategic Management Process Dynamic & continuous More formal in larger organizations

STRATEGIC VISION

A strategic vision is a roadmap of a companys futureproviding specifics about

technology and customer focus, the geographic and product markets to be pursued, the kind of company that management is trying to create. the capabilities it plans to develop, and

STRATEGIC INTENT

Strategic intent is the leveraging of a firms resources, capabilities, core competences to accomplish the firms goals in the competitive environment.

MISSION STATEMENT

A companys mission statement is typically focused on its present business scope who we are and what we do.
Mission statements broadly describe an organizations present capabilities, customer focus, activities and business makeup.

Vision and Mission Statements

Vision Statement What do we want to become? Mission Statement What is our business?

OBJECTIVES

Objectives are an organizations performance targetsthe results and outcomes it wants to achieve. They function as yardsticks for tracking an organizations performance and progress.

STRATEGIC AND FINANCIAL OBJECTIVES

Strategic objectives relate to outcomes that strengthen an organizations overall business position and competitive viability. Financial objectives relate to financial performance targets management has established for the organization to achieve.

Long-Term Objectives

Specific results that an organization seeks to achieve in pursuing its basic mission Long-term means more than one year

Long-Term Objectives

Essential for ensuring the firms success Provide direction Aid in evaluation Create synergy Reveal priorities Focus coordination Provide basis for planning, organizing, motivating, and controlling

Annual Objectives

Short-term milestones that firms must achieve to reach long-term objectives

Policies

Means by which annual objectives will be achieved

STRATEGIC PLAN AND IMPLEMENTATION

A strategic plan consists of an organizations mission and future direction, near-term and long-term performance targets, and strategy. Strategy implementation putting a freshly chosen strategy into action.

STRATEGY EXECUTION

Strategy execution supervising the ongoing pursuit of strategy, making it work, improving the competence with which it is executed, and showing the measurable progress in achieving the targeted results. Strategy execution is action-oriented, a make-ithappen process. The key tasks are competence building, budgeting, policy-making, motivating, culture-building, and leadership.

Nature of Competition: Basic concepts

Strategic Competitiveness

Achieved when a firm formulate & implements a valuecreating strategy Implemented strategy that competitors are unable to duplicate or find too costly to imitate Returns in excess of what investor expects in comparison to other investments with similar risk

Competitive Advantage (CA)

Above Average Returns

Nature of Competition: Basic concepts (Contd)

Risk

Investors uncertainty about economic gains/losses resulting from a particular investment Returns equal to what investor expects in comparison to other investments with similar risk Full set of commitments, decisions and actions required for a firm to achieve strategic competitiveness and earn above average returns

Average Returns

Strategic Management Process (SMP)

TEN SCHOOLS OF STRATEGY FORMATION

1.

2.

3.

The Design School strategy formation as a process of conception. The Planning School strategy formation as a formal process. The Positioning School strategy as an analytical process.

Minzberg, 1998

TEN SCHOOLS OF STRAGTEGY FORMATION

4. 5. 6. 7.

The Entrepreneurial School - strategy formation as a visionary process. The Cognitive School strategy formation as a mental process. The Learning School strategy formation as an emergent process. The Power School strategy formation as a process of negotiation.

Minzberg, 1998

TEN SCHOOLS OF STRAGTEGY FORMATION

8. 9.

The Cultural School strategy formation as a collective process. The Environmental School strategy formation as a reactive process. The Configuration School strategy formation as a process of transformation.

10.

Minzberg, 1998

FIVE Ps For Strategy

1.

2. 3. 4. 5.

Strategy is a Plan (intended) a direction, a guide, a course of action into the future, a patch to get from here to there. Strategy is a Pattern (realized) that is consistency in behavior over time. Strategy is a Position (looking down) locating of particular products in particular markets. Strategy is a Perspective (looking up) an organizations fundamental way of doing things. Strategy is a Ploy (maneuver) a specific maneuver intended to outwit an opponent or a competitor.

Minzberg, 1998

ADVANTAGES AND DISADVANTAGES OF STRATEGY

1.

Strategy sets direction.

Advantage: The main role of strategy is to chart the course of an organization in order for it to sail cohesively through its environment. Disadvantage: Strategic direction can also serve as a set of blinders to hide potential dangers.

2.

Strategy focuses effort.

Advantage: Strategy promotes coordination of activity. Disadvantage: Goupthink

Minzberg, 1998

ADVANTAGES AND DISADVANTAGES OF STRATEGY

3.

Strategy defines the organization.

Advantage: Enables people to understand their organization and to distinguish it from others. Disadvantage: Leads to stereotyping with loss of rich complexity of the system

4. Strategy provides consistency.

Advantage: Reduces ambiguity and provide order, and facilitate action. Disadvantage: Loss of creativity.

Minzberg, 1998

STRATEGY: AREAS OF AGREEMENT

1.

2.

3.

4.

Strategy concerns both organization and environment.(inseparability of organization and environment) The substance of strategy is complex..) (Because change brings about novel combinations of circumstances) Strategy affects overall welfare of the organization. Strategy involves issues of both content (actions taken) and process. (how decided).

ALTERNATIVE PERSPECTIVES ON STRATEGY DEVELOPMENT

Situation Analysis Environmental Determinism Principle of Enactment Deliberate Strategy Emergent Strategy Stakeholder Management Resource-Based View

ALTERNATIVE PERSPECTIVES ON STRATEGY DEVELOPMENT

Situation Analysis The traditional process for

developing strategySWOT analysis. The results form the basis for developing missions, goals, and strategies.

Environmental Determinism Determine which strategy best fit environmental forces. Principle of Enactment The firm can create its
environment through alliances, advertising, lobbying, etc.

ALTERNATIVE PERSPECTIVES ON STRATEGY DEVELOPMENT (contd)

Deliberate Strategy Strategy is deliberate.

Managers plan to pursue an intended strategy.

Emergent Strategy Managers learn as they go.

Strategy emerges from a stream of decisions.

ALTERNATIVE PERSPECTIVES ON STRATEGY DEVELOPMENT (contd)

Stakeholder Management Organization is viewed

from the perspective of its internal and external constituencies that have a stake in the organization.

Resource-Based View The firm is seen as a bundle of

resources. The important function is to acquire and manage resources to achieve competitive advantages leading to superior performance.