Basic Concepts of Strategic Management

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revIEW OF STRATEGIC MANAGEMENT MODEL

BA 545 --2011/2012 BA 545 2011/2012

Strategic Management
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Strategic Management: a set of managerial decisions and actions that determines the long-run performance of a corporation. Purpose: To exploit and create new and different opportunities for tomorrow. Includes:
Internal and external environment scanning Strategy formulation Strategy implementation Evaluation and control
BA 545 - 2011/2012 In essence, the strategic plan is a companys game plan.

Q?U?E?S?T?I?O?N
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Why has strategic management become so important

to todays corporations? What are the benefits of strategic management?

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Benefits of Strategic Management

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Clearer sense of strategic vision for the firm Better focus on what is strategically important Improved understanding of a rapidly changing environment Achieves a match between the organizations environment

and its strategy, structure, and processes

Improved organizational performance Important in unstable environments Strategic thinking Organizational learning
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Basic Model of Strategic Management

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Basic Model of Strategic Management

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External Environment: Opportunities and Threats

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Opportunities - Threats
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In a global economic recession, a few opportunities

and threats face many firms:

Availability of capital can no longer be taken for granted. Consumers expect green operations and products. Marketing is moving rapidly to the Internet. Consumers must see value in all that they consume. Global markets offer the highest growth in revenues.

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Internal Environment: Strengths and Weaknesses 99

Typically located in functional areas of the firm:

Management

Marketing Finance/Accounting Production/Operations Research

& Development Information Systems

Management

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Basic Model of Strategic Management

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Basic Elements of Strategy Formulation

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Mission- the purpose or reason for the organizations existence Vision- describes what the organization would like to become Vision Statement
What do we want to become? Mission Statement What is our business? (values/philosophy about how it does business and treats its employees)

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Vision/Mission Statement Example (I)

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Mission
To become the

preferred leading
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Vision/Mission Statement Example (II)

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Vision To become the most admired company, with the best people, constantly delivering outstanding results. Mission To provide the best banking experience in Turkey, offering outstanding value for its stakeholders. Strategic objectives Achieving a long-term sustainable ROE of at least 20%, Increase total assets market share from 12% to 18%, Take the first place in the Best Place to Work rankings, Become the company with the most valuable brand name in Turkey. BA 545 - 2011/2012

Objectives
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Objectives are the end results of planned activity.

stated as action verbs and tell what is to be accomplished by when and quantified as possible.

their achievement should result in the fulfillment of a corporations mission.

Goal / Objective? Same or different?

Goal an open-ended statement of what one wants to accomplish, with no quantification of what is to be accomplished and no time criteria for completation. BA 545 - 2011/2012

Objectives?
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Basic Elements of Strategy Formulation

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Strategies: form a comprehensive master plan that states how

the corporation will achieve its mission and objectives.

Corporate
* typically fit within three main categories of stability, growth, and retrenchment.

Business

* occurs at the business unit or product level and fit within the two overall categories, competitive and cooperative strategies.

Functional

Ex: marketing strategy, R&D strategy, finance strategy BA 545 - 2011/2012

Hierarchy of Strategy
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Basic Elements of Strategy Formulation

Policies: the broad guidelines for decision making that links the formulation of a strategy with its implementation.
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Pegasus offers no meals on airplanes. (This supports Pegasuss competitive strategy of having the lowest costs in the industry)

3M says researchers should spend 15% of their time working on something other than

their primary project. (This supports 3Ms strong product development strategy)

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Basic Model of Strategic Management

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Strategy Implementation
Strategy implementation: the process by which strategies and
policies are put into action through the development of:

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Programs : statements of activities or steps needed to accomplish a single-use plan.

Ex: BMWs objective increasing production efficiency by 5% each year. Programs a) shorten new model development time from 60 to 30 months. b) reduce preproduction time from a year to five months.

Budgets: cost of the program Procedures: system of sequential steps or techniques that describe in
BA 545 2011/2012 detail how a particular- task or job is to be done.

Q?U?E?S?T?I?O?N: Policy, Procedure, Program?

month McDonalds: Employee of theHiring/Selection .
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at Google

Hiring at Google.doc

Against Animal Testing

AgainstAnimalTesting.pdf

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Basic Model of Strategic Management

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Evaluation and Control

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Evaluation and control: the process in which corporate

activities and performance results are monitored so that actual performance can be compared to desired performance.

What is the next step???

FEEDBACK!

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Initiation of Strategy: Trigerring Effects

Henry Mintzberg stated:
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strategy formulation is typically not a regular, continuous process: It is most often an irregular, discontinuous process
After a long period of fine-tuning an existing strategy, some sort

of shock to the system is needed to motivate management to reassess the corporations situation.

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Initiation of Strategy: Triggering Events

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Triggering event: something that acts as a stimulus for a change in strategy and can include:

New CEO External intervention Threat of change of ownership Performance gap Strategic inflection point (it is what happens to a business
when a major change takes place due to introduction of new technologies, a different regulatory environment, a change in customers values, etc.)

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Q?U?E?S?T?I?O?N
Consider distinct groups of decisions..
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Q?U?E?S?T?I?O?N
What makes a strategic decision? In which aspects strategic decision making is
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different from other kinds of decision making?

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Strategic Decision Making

What Makes a Strategic Decision?
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Strategic decision making focuses on the long-run future of the organization. Characteristics of strategic decision making include:

Rare (strategic decisions commit

Consequential/Significant

substantial resources and demand a great deal of commitment from people at all levels)
Directive

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Strategic Decision Making Process

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Strategic Decision Making Process

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