strat. mgmt. 2
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The Nature of StrategicManagement
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1-2
OverviewWhy do some firms succeed while others
fail?
A central objective of strategic management is
to learn why this happens.
What is strategy? An action a company takes to attain superior
performance.
What is the strategic management process? The process by which managers choose a set
of strategies for the enterprise to pursue its
vision.
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Art & science offormulating,
implementing, andevaluating,
cross-functional decisions that
enable an organization to achieve
its objectives.
Strategic Management
Defined
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Vision & Mission
Strategy Formulation
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection
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Strategy Implementation
Annual Objectives
Policies
Employee Motivation
Resource Allocation
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Strategy Evaluation
Internal Review
External Review
Performance Metrics
Corrective Actions
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Strategic Planning
Strategic planning
A set of procedures for
making decisions
about theorganizations long-
term goals and
strategies
Strategic goals
major targets or end
results that relate to
the long-term survival,value, and growth of
the organization.
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Strategic PlanningWhat is Strategy?
A pattern of actions and resource allocations designed toachieve the organizations goals
Strategy: Strategy, narrowly defined, means "the art of
the general" (from the Greek word stratigos). A
combination of the ends (goals) for which the firm isstriving and the means (policies) by which it is seeking to
get there. A strategy is sometimes called a roadmap which
is the path chosen to plow towards the end vision. The
most important part of implementing the strategy is
ensuring the company is going in the right direction whichis towards the end vision.
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Strategic planning Strategic planning is an organization's process of defining its strategy,
or direction, and making decisions on allocating its resources to pursue
this strategy, including its capital and people.
In order to determine where it is going, the organization needs to know
exactly where it stands, then determine where it wants to go and how it
will get there. The resulting document is called the "strategic plan."
While strategic planning may be used to effectively plot a company's
longer-term direction, one cannot use it to reliably forecast how themarket will evolve and what issues will surface in the immediate future.
Therefore, strategic innovation and tinkering with the "strategic plan"
have to be a cornerstone strategy for an organization to survive the
turbulent business climate.
Strategic planning is the formal consideration of an organization's futurecourse. All strategic planning deals with at least one of three key
questions:
"What do we do?"
"For whom do we do it?"
"How do we excel?"
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Strategic Planning1. Where will we be active?
2. How will we get there?
3. How will we win in the marketplace?
4. How fast will we move and in what sequence will we make changes?
5. How will we obtain financial returns?
Various business analysis techniques can be used in strategic planning,including SWOT analysis (Strengths, Weaknesses, Opportunities,
and Threats ), GE/McKinsey portfolio analysis, BCG Matrix,PEST
analysis (Political, Economic, Social, and Technological), STEER
analysis (Socio-cultural, Technological, Economic, Ecological, and
Regulatory factors), and EPISTEL (Environment, Political, Informatic,
Social, Technological, Economic and Legal).
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Hierarchy of Goals and Plans
4-11Figure 4.2
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Tactical and Operational
Planning Tactical planning
A set of procedures for translating broad
strategic goals and plans into specific goals
and plans that are relevant to a distinct
portion of the organization, such as a
functional area like marketing.
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Tactical and Operational
Planning Operational planning
The process of identifying the specific
procedures and processes required at lower
levels of the organization.
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Strategic Planning
Strategic management
A process that involves managers from all
parts of the organization in the formulation
and implementation of strategic goals and
strategies.
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The Strategic Management
Process
4-15Figure 4.4
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Establishment of Mission, Vision,
and Goals Mission
An organizations
basic purpose and
scope of operations.
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EnvironmentalAnalysis
4-17 Table 4.1
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Opportunities & Threats (External)
Key Terms
Analysis of Trends:
Economic
Social
Cultural
Demographic/Environmental
Political, Legal, Governmental
Technological
Competitors
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Opportunities & Threats (External)
Key Terms
Analysis of Trends:
Economic
Social
Cultural
Demographic/Environmental
Political, Legal, Governmental
Technological
Competitors
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Analysis of External Opportunities
and Threats
Stakeholders
Groups and individuals
who affect and are
affected by theachievement of the
organizations mission,
goals, and strategies
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Analysis of Internal Strengths and
Weaknesses
Resources
Inputs to a system that can enhance
performance
Tangible, intangible assets
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Internal Resource Analysis
4-22Table 4.2
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Resources and Core
Competencies
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Figure 4.5
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Analysis of Internal Strengths and
Weaknesses
Benchmarking
process of assessing how well one companys
basic functions and skills compare with those
of another company or set of companies.
goal of benchmarking is to thoroughly
understand the best practices of other firms
and to undertake actions to achieve bothbetter performance and lower costs
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SWOT Analysis and Strategy
Formulation
SWOT analysis
A comparison of strengths, weaknesses,
opportunities, and threats that helps
executives formulate strategy.
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1. Adapting to change in external trends,internal capabilities and resources
Achieving Sustained
Competitive Advantage
2. Effectively formulating, implementing &evaluating strategies
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What kind of businessshould we become?
Are we in the right fields
Are there new competitors
What strategies should wepursue?
How are our customerschanging?
Adapting to Change Key
Strategic ManagementQuestions
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Vision and MissionVision Statements and Mission Statements are the inspiring words
chosen by successful leaders to clearly and concisely convey the
direction of the organization. By crafting a clear mission statement andvision statement, you can powerfully communicate your intentions and
motivate your team or organization to realize an attractive and
inspiring common vision of the future.
These statements create a sense of direction and opportunity. They
both are an essential part of the strategy-making process. "Mission Statements" and "Vision Statements" do two distinctly
different jobs.
A ission statementtells you the fundamental purpose of the
organization. It defines the customer and the critical processes. It
informs you of the desired level of performance.
A Vision statementoutlines what the organization wants to be, or
how it wants the world in which it operates to be. It concentrates on
the future. It is a source of inspiration. It provides clear decision-
making criteria.
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Your organization's vision is all about what is possible, all about that
potential.
The mission is what it takes to make that vision come true.
The mission statement can galvanize the people to achieve defined
objectives, even if they are stretch objectives, provided it can beelucidated in SMART (Specific, Measurable, Achievable, Relevant and
Time-bound) terms. A mission statement provides a path to realize the
vision in line with its values. These statements have a direct bearing on
the bottom line and succ
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Mission Statement What is our business?
Sets out why the organization exists and what it should be doing i.e.
the fundamental purpose of the organization. A Mission Statement
defines the organization's purpose and primary objectives. Its primefunction is internal to define the key measures of the organization's
success i.e. what the organization hopes to fulfill in the medium to long
term.
A mission statement defines the customer and the critical processes. It
informs the Cos leadership team & stakeholders(mgrs,employees,customers,etc) of the desired level of performance.
It is sometimes used to set out a "picture" of the organization in the future. A
mission statement provides details of what is done and answers the
question: "What do we do?" For example, the charity might provide "job
training for the homeless and unemployed.
The mission statement thus describes the Cos specific defined objectives
that can be elucidated in SMART (Specific, Measurable, Achievable,
Relevant and Time-bound) terms. A mission statement provides a path to
realize the vision in line with its values.
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Vision Statements also define the organizations purpose, but the
broader goal in terms of the organization's values rather than bottom line
measures (values are guiding beliefs about how things should be done.)
The vision statement communicates the overall purpose for being in
existence or in the business and can remain the same for decades ifcrafted well. For employees, it gives direction about how they are
expected to behave and inspires them to give their best. Shared with
customers, it shapes customers' understanding of why they should work
with the organization.
Vision Statement
What do we want to become?
Vision defines the way an organization or enterprise will look in the
future. Vision is a long-term view, sometimes describing how the
organization would like the world to be in which it operates.
For example, a charity working with the poor might have a vision statement
which reads "A World without Poverty.
Vision should describe why it is important to achieve the Mission. A Vision
should describe what will be achieved in the wider sphere if the
organization and others are successful in achieving their individual
missions.
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Features of an effective vision statement include:
Clarity and lack of ambiguity
Vivid and clear picture
Description of a bright future
Memorable and engaging wording
Realistic aspirations
Alignment with organizational values and culture
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JIMS 5
Vision
Agreement on the basic vision for whichthe firm strives to achieve in the long run is
critically important to the firms success.
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JIMS -34
What do we want tobecome?
Vision
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JIMS 35
Comprehensive
Mission Statement
Vision
Clear Business
Vision
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JIMS 36
Shared Vision advantages--
Creates commonality of interests & ashared sense of purpose which is inspiring
for managers
Reduce daily monotony
Provides opportunity & challenge It fosters long term thinking
Vision & Mission
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Ch 2 -37
Reveal what an organization wants to be
and whom it wants to serve
Mission Statements
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Ch 2 -38
Essential for effectively establishing
objectives and formulating strategies
Mission Statements
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Ch 2 -39
Vision & Mission
Many organizations develop both vision &mission statements
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Ch 2 -40
Vision & Mission
Profit & vision are necessary to effectively
motivate a workforce
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Ch 2 -41
Vision & Mission
Shared vision creates a community of
interests
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Ch 2 -42
Developing Vision & Mission
Clear mission is needed before alternative
strategies can be formulated and
implemented
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Ch 2 -43
Developing Vision & Mission
Participation from diverse managers is
important in developing the mission
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Ch 2 -44
It is the California Energy Commissionsmission to assess, advocate, and act throughpublic/private partnerships to improve energysystems that promote a strong economy andhealthy environment.
Mission Statement Examples
-- California Energy Commission
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Ch 2 -45
The Bellevue Hospital, with respect,compassion, integrity, and courage, honors the
individuality and confidentiality of our patients,employees, and community, and is progressivein anticipating and providing future health careservices.
Mission Statement Examples
-- The Bellevue Hospital
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Ch 2 -46
A national organization which represents
its members in all aspects of poultry and
eggs on both a national and international
level
Vision Statement Examples
-- U.S. Poultry & Egg Association
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Ch 2 -47
The Vision of Manley Baptist Church is to
be the people of God, on mission withGod, motivated by a love for God, and alove for others
Vision Statement Examples
-- Manley Baptist Church
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Ch 2 -48
The Vision of USGS is to be a world
leader in the natural sciences through ourscientific excellence and responsivenessto societys needs
Vision Statement Examples
-- U.S. Geological Survey (USGS)
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Ch 2 -49
To be the first choice in the printed
communications business. The firstchoice is the best choice, and being thebestis what Atlanta Webpledges to workhard at beingevery day!
Vision Statement Examples
-- Atlanta Web Printers, Inc.
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Ch 2 -50
-- 90% of all companies have used amission statement in the previous five
years
Mission Statements
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Ch 2 -51
What is our business?
Mission Statements
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Ch 2 -52
Mission Statements
Enduring statement of purpose
Distinguishes one firm from another
Declares the firms reason for being
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Ch 2 -53
Mission Statements
Creed statement
Statement of purpose
Statement of philosophy
Statement of business principles
Also referred to as:
Examples of vision & mission statements
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Examples of vision & mission statements
Advanced Auto Parts, Inc. is a company that provides customers with
automotive products and services, which include diagnosing vehicle problems
and doing repair work
Mission StatementIt is the Mission of Advance Auto Parts to provide personal vehicle owners
and enthusiasts with the vehicle related products and knowledge that fulfill
their wants and needs at the right price. Our friendly, knowledgeable and
professional staff will help inspire, educate and problem-solve for our
customers.
A supermarket and drugstore, Albertsons is a food and drug retailer located
in Boise, Idaho. With a team of more than 200,000 in 2,300 stores all over
America, Albertsons has over 2,500 locations in 37 states of the US.
Mission Statement
Guided by relentless focus on our five imperatives, we will constantly strive to
implement the critical initiatives required to achieve our vision. In doing this,
we will deliver operational excellence in every corner of the Company and
meet or exceed our commitments to the many constituencies we serve. All of
our long-term strategies and short-term actions will be molded by a set of core
values that are shared by each and every associate.
K T
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Key Terms
Strategies: Means by which long-termobjectives are achieved. There are 3 levels atwhich strategy operates:
1. Business-Level Strategies
2. Functional-Level Strategies
3. Corporate-Level Strategies
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1-56
Business-Level Strategies
Cost leadership
Attaining, then using the lowest total cost
basis as a competitive advantage.
Differentiation
Using product features or services to
distinguish the firms offerings from its
competitors.Market niche focus
Concentrating competitively on
a specific market segment.
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JIMS 1-57
Functional-Level Strategies
Focus is on improving the effectiveness of
operations within a company.
Manufacturing
Marketing
Materials management
Research and development
Human resources
Corporate Level Strategies
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1-58
Corporate-Level Strategies
Vertical integration(When a company expands its business into areas
that are at different points of the same supply chain & are controlled by a
single company in order to increase that companys or entitys power inthe marketplace.)Eg: A car company that expands into tire manufacturing,
the producer of the cold drink expands into making bottles aswell, a
mobile company opening its own Mobile retail chain.
Diversification(a company enters additional lines of business that aredifferent from the current products, services and markets.Eg: Reliance
Industries diversifying into retail)
Strategic alliances(Strategic alliances are partnerships in which two or
more companies work together to achieve objectives that are mutually
beneficial to share resources, information, capabilities and risks to
achieve this. Eg: Aviva Life Insurance entered into a nation-wide strategic
alliance with India Post, which help the Co. to gather its premium of
policies through post offices)
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Acquisitions(to increase your market share by taking over a similar
company.Eg: You Tube, which was taken over my Google primarily
because it had a strong and loyal user base)
Joint ventures(Eg:Walmart established a joint venture with Bharti
Enterprises called Bharti Walmart Pvt Ltd, for wholesale cash-and-carry
and back-end supply chain management operations in India).
Business portfolio restructuring(involves modifying the business
portfolio through divestitures like sale of a division or plant or unit of one
form to another with d motive to raise capital or to cut losses. From the
sellers perspective, it is a form of contraction from the buyers point ofview, it represents expansion).
Eg: When Coromandal Fertilizers Ltdsold its cement division to India
Cements Ltdthe size of Coromandal Fertilizers Ltd contracted whereas
the size of India Cements Ltd expanded. Hence, a divestiture is the
obverse of a purchase.
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1-60
Strategic Managers for All Levels
FIGURE 1.2
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Defining the Mission and Setting TopDefining the Mission and Setting Top--Level GoalsLevel Goals
External Analysis of Opportunities and ThreatsExternal Analysis of Opportunities and Threats
Internal Analysis of Strengths and WeaknessesInternal Analysis of Strengths and Weaknesses
Selection of Appropriate StrategiesSelection of Appropriate Strategies
Implementation of Chosen StrategiesImplementation of Chosen Strategies
Strategic Planning
Rational planning by top management
Basic Strategic Planning ModelBasic Strategic Planning Model
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Strategic Managers
Strategic managers are General managers
as opposed to Operations managers
Responsible for the overall (strategic)
performance and health of the total
organization.
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Benefits of Strategic
Management
Financial Benefits
Improvement in sales
Improvement in profitability
Productivity improvement
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Benefits of Strategic
Management
Non-Financial Benefits
Improved understanding of competitors strategies
Enhanced awareness of threats
Reduced resistance to change
Enhanced problem-prevention capabilities
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