class 5 chap 2 create implement strategy
TRANSCRIPT
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Class 5 Chap 2: Crafting and Executing Strategy
Learning Objectives
1. Understand the hierarchy of the Firms strategies
2. Understand why the initiatives at various
organizational levels must be coordinated to
achieve company strategic targets.
3. Be aware of that crafting a strategy is a task for acompanys entire management team.
4. See that a strategy is a collection of strategic
initiatives and actions taken at many
organizational levels.5. Understand the role and responsibility of the
board of directors in the strategic management
process.
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22Copyright 2012 by Glo-Bus Software, Inc.
If you dont know where you are
going, any road will take youthere.
Cheshire Cat to Alice
Lewis Carroll, Alice in Wonderland
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The Strategic Plan is the Roadmap
Its strategic vision, business
mission, and core values
Its strategic and financial
objectives
Its chosen strategy
Elements of a Firms
Strategic Plan
23Copyright 2012 by Glo-Bus Software, Inc.
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2.1 The Strategy-Making, Strategy-Executing ProcessFigure
Copyright 2012 by Glo-Bus Software, Inc.
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Task 3: Crafting a Strategy
Crafting a strategy entails stitching together
managements answers to a series of hows:
Howto attract and please customers
How to compete against rivals
Howto position the company in the marketplace and
capitalize on attractive opportunities to grow the business
Howbest to respond to changing economic and market
conditions
Howto manage each functional piece of the businessHowto achieve the companys performance targets.
And this stitching together must result in a coherent andcoordinated game plan for running the firm successfully.
25 Copyright 2012 by Glo-Bus Software, Inc.
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A Firms Strategy-Making Hierarchy
Crafting strategy is a collaborative effort
that:
Involves managers from various
levels of the organization
Is not something only high-level executives engage in
Requires jointly choosing among
the various strategic alternatives
A firms strategy is crafted into a collection
of initiatives undertaken by managers at all
levels in the organizational hierarchy
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The Strategy-Making Hierarchy
Corporate
strategy
Is orchestrated by the CEO and other senior executives and
establishes an overall game plan for managing a set of businesses
in a diversified, multibusiness company.
Addresses the questions of how to capture cross-business
synergies, what businesses to hold or divest, which new markets to
enter, and how to best enter new marketsby acquisition, creation
of a strategic alliance, or through internal development.
Business
strategy
Is primarily concerned with building competitive advantage in a
single business unit of a diversified company or strengthening the
market position of a nondiversified single business company.
Functional-area
strategies
Are concerned with the strategies specifically related to particular
functions or processes within a business (marketing strategy,
production strategy, finance strategy, customer service strategy,product development strategy, and human resources strategy).
Operating
strategies
Are relatively narrow strategic initiatives and approaches of limited
scope for managing key operating units (plants, distribution centers,
geographic units) and specific operating activities such as materials
purchasing or Internet sales.
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Figure 2.2
Strategy-MakingHierarchy
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A Unified Overall Strategy
Uniting the Strategy-Making Effort
Entails creating a cohesive collection of mutually
reinforcing initiatives that fit and work together
Conflicting or inconsistent strategic elements impair a firmsperformance.
Requires that lower-level strategies be modified to fit
with higher-level strategies.
Requires that higher-level strategies be adapted toaccommodate more appealing lower-level strategy
ideas and initiatives as they arise.
29 Copyright 2012 by Glo-Bus Software, Inc.
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Task 4: Implementing and
Executing the Strategy
Implementation and execution of strategy Is an operations-oriented, make-things-happen task aimed at
performing core business strategy-supportive initiatives .
Is the most demanding and time-consuming part of the strategy
management process.
Converting plans into actions tests a managers
ability to:
Direct organizational change to build and strengthen company
competencies and competitive capabilities
Create and nurture a strategy-supportive work climate thatmotivates people to meet or beat performance targets.
To put the strategy in place and execute it proficiently on many
organizational fronts.
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The Strategy Execution Process Involves
Many Initiatives, For Example:
Staffing needed skills and expertise to build and strengthen
strategy-supportive competencies and competitive capabilities.
Allocating ample resources to activities critical to strategic
success.
Ensuring policies and procedures facilitate rather than impede
execution. Using best practices to perform core business activities and
push for continuous improvement.
Installing information and operating systems that enable
personnel to better carry out their strategic roles.
Tying rewards and incentives directly to the achievement of
performance objectives and good strategy execution.
Creating a culture and work climate conducive to the strategy.
Exerting the leadership needed to keep improving on how the
strategy is being executed.211 Copyright 2012 by Glo-Bus Software, Inc.
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Task 5: Evaluating Performance and
Initiating Corrective Adjustments
This task involves:
Examining one or more aspects of the firms strategy
implementation and execution to determine if all is
going as well as intended.
Evaluating organizational learning about strategy
execution and making adjustments that will move the
firm closer to operating excellence.
Deciding whether or not to continue or change the
firms current vision, objectives, strategy, and/or
strategy execution methods.
212 Copyright 2012 by Glo-Bus Software, Inc.
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Stage 5: Evaluating Performance and
Initiating Corrective Adjustments
Triggering change as needed:
Monitoring new external developments
Evaluating the firms progress
Making corrective adjustments
Managing strategy is an ongoing process,
not an every-now-and-then task
A firms vision, objectives, strategy, and approach
to strategy execution are never final
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Successful Strategy Execution
Strategy execution Is a job for the entire management team and requires diligent
pursuit of operating excellence.
Hinges upon the skills and cooperation of operating managers
who can push needed changes in their units and consistentlydeliver good results.
Handling of the strategy implementation/execution
process is considered successful if the firm:
Achieves or exceeds strategic and financial performance targets. Shows good progress in achieving its strategic vision.
214 Copyright 2012 by Glo-Bus Software, Inc.
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Corporate Governance:Role of the Board of Directors in Strategy-Making & Strategy-Executing
The Board of directors duty is to:Exercise strong oversight of how the firms business is
being conducted and managed including strategy-
crafting & strategy-execution tasks.
Effective corporate governance is undermined:when boards of directors fail in their responsibility to
maintain ultimate control over
the firms strategic direction,
the major elements of its strategy, How management is implementing and executing the strategy,
executive compensation, and
the financial reporting process.
215 Copyright 2012 by Glo-Bus Software, Inc.
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Strong Boards Lead to Good
Corporate Governance
A Strong, Independent Board of Directors:
Is well informed about the companys performance
Guides and judges the CEO and other top executives
Has the courage to curb management actions itbelieves are inappropriate or unduly risky
Certifies to shareholders that the CEO is doing what
the board expects
Provides insight and advice to management
Is intensely involved in debating the pros and cons of
key decisions and actions
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Why Does It MeanThat a Firm
Exhibits Strategic Intent?
A firm with an unshakableoften obsessive
commitment to achieving its strategic intent typically:
Goes all out to marshal resources and capabilities to close in on its
strategic target.
Crafts potent offensive strategies to throw rivals off-balance, put
them on the defensive, and force them into a game of catch-up.
Tries to alter the market contest and tilt the rules for competing in
its favor.
Rallies its personnel in efforts to make its strategic intent a reality.
Firms with strategic intent are thus a force to be reckonedwith and often are more formidable competitors than rivalshaving modest strategic objectives and market ambitions.
217 Copyright 2012 by Glo-Bus Software, Inc.
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Final Thought for the Glo-bus Simulation:
Lead the Development of Better Competitive
Capabilities
Lead efforts to strengthen existingcompetitive capabilities
Anticipate changes in industry environment
Proactively build competencies andcapabilities that hold promise for building
a stronger competitive edge
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Team Exercise
Convert your strategic vision into a set ofinitiatives required to implement the vision.
Transform the initiatives into specific
actions/decisions you will make in the
practice round.
2013 by The McGraw-Hill Companies, Inc. All rights reserved. 219