strategic management

Company’s Mission, Social responsibility and Ethics (chap. 2-3

External Environment (Global and Domestic)

Chap 4-5

Internal Analysis (Chap 6

Strategic Management

The Nature and Value of strategic Management

• Corporate executives or execution of ones personal affairs include:

• Internal activities• Challenges posted by the external

environment ( immediate and remote)


• The Immediate external environment includes:

• Suppliers, Competitors, Increasingly scarce resources, Government agencies and their regulations and customers whose preferences often shift inexplicably.


• The Remote external environment includes:• Economic and social conditions, political

priorities and technological developments, all of which must be anticipated, monitored, assessed and incorporated on the executives decision making.


• The analysis of the external and internal environment must corroborate and not be subordinated nor be superceded by “requirements of it’s stakeholders” which are often inconsistent. ( Since Human behavior is dynamic)

• Stakeholders are: owners, top managers, employees, communities, customers and country.


• Hence, Managers “consciously use” management processes that they feel will position the firm optimally in its competitive environment by: “ Maximizing the anticipation of environmental changes and of unexpected internal and competitive demands”


• Earn Profits…• Perfect processes that respond to increases in

the size and number of competing firms (MKTG, HR)

• To the expanded role of the government as a buyer, seller, regulation and competitor in the free enterprise system (Economics, Finance)


• The greater business involvement in the international trade ( H.R, HBO, Financial management, Economics)


• Long-range planning, planning, programming, budgeting and business policy were blended with increased emphasis on environmental forecasting and external considerations in formulating and implementing please.

• This all encompassing approach is known as “Strategic Management”


• Defined as the set of decisions and actions that result in the formulation and implementation of plans designed to achieve a company’s objectives. It comprises nine critical tasks:

Nine Critical Strategic Management tasks

1. Formulate the company's mission, including broad statements about its purpose, philosophy, and goals.

2. Conduct an analysis that reflects the company’s internal conditions and capabilities

3. Assess the company's external environment. Including both the competitive and the general contextual factors

4. Analyze the company’s options by matching its resources with the external environment


5. Identify the most desirable options by evaluating each option in light of the company’s mission

6. Select the long-term objectives and grand strategies that will achieve the most desirable options

7. Develop annual objectives and short-term strategies that are compatible with the selected set of long term objectives and grand strategies


8. Implement the strategic choices by means of budgeted resource allocations in which the matching of task, people. Structures and technologies, and reward systems is emphasized

9. Evaluate the success of the strategic process as an input for future decision making

Strategy

• Large scale future oriented plans for interacting with the competitive environment to achieve company objectives

Point is…

• Strategist Manage ( plan, Organize, Lead and control) the company's strategy. This strategy is a company’s game plan… although the plan does not precisely detail all future deployments (of people, finances and materials) IT DOES PROVDE A FRAMEWORK FOR MANAGERIAL DECISIONS.

Point is…

• A Strategy reflects a company’s AWARENESS of HOW, WHEN, and WHERE it should compete. Against WHOM it should compete: and for what purpose it should perform

Point is…

• In reality, College life in a particular perspective is a competition and requires strategy… ask your self…

Are you aware HOW, WHEN, and WHERE you should compete. Against WHOM you should

compete: and for what purpose you should perform?

Three levels of Strategy

• Corporate Level • Business level• Functional ( POM/R&d, Financial/Acct’g

Marketing and Human Relations strategies))

Three levels of Strategy Strategic Decision makers

Ends ( What is to be achieved)

Means (How is it to be achieved?)

Board of Directors

CORPmanagers

Business Managers

FunctionalManagers

Mission, Including Goals and Philosophy XX XX X

Long term Objectives

Grand Strategy X XX XX

Annual Objectives

Short term strategies and policies X XX XX


• Corporate-level decisions are often characterized by greater risk, cost and profit potential: greater need for flexibility and longer time horizons

• This include, but are not limited to choice of businesses, dividend policies, sources of long term financing and priorities for growth


• Functional Level decision “implement” the overall strategy formulated at the corporate and business levels.

• They involve operational issues and are relatively short range and low risk.

• Incur modest cost, because they depend on available resources

• Include branding, basic versus applied R&D, Ratio analysis, close versus loose supervision.


• Business-level decisions help bridge decisions at the corporate and functional levels.

• These decisions are less costly, less risky and potentially profitable than the corporate-level decisions, but more costly, risky and potentially profitable than functional level decisions.


• Business level decision include plant location, market segmentation and geographic coverage, and distribution channels

The Strategic Management Process

1. The Company Mission• Identifies the scope of its operations• It describes the company’s product, market

and technological areas of emphasis in a way that reflects the values and priorities of the strategic decision makers


• It must express how the company intends to contribute to the societies that sustain it. A firms needs to set social and responsibility aspirations for it self, just as it does in other areas of corporate performance ( Social responsibility and Ethics)


E.G• Downscaling as a corporate act as practiced by

Ayala corp. (sale of pure foods and BK) and Samsung reflected a revised management philosophy that favored Specialization thereby changing the scope and direction of the organization ( Management and Org Behavior management)


2. Internal Analysis• The company analyzes the quantity and the

quality of the company’s financial, human and physical resources. It also assesses the strengths and weaknesses of the company’s management and organizational structure. ( Management, HR, HBO, Accounting, Finance)


• Finally, it contrasts the company’s past success and traditional concerns with the company’s current capabilities in an attempt to identify the company’s future capabilities


3. External Environment• A firms external environment consists of all

the conditions and forces that affect its strategic options and define its competitive situation. The strategic management model shows the external environment as three interactive segments: Remote, industry, and operating environments.


4. Strategic Analysis and Choice• The simultaneous assessment of the external

environment and the company profile enables a firm to identify a range of possible attractive interactive opportunities.


• These opportunities include possible avenues for investment, however, hey must be screened through the criterion of the company mission to generate a set of possible and desired opportunities.


• This screening process results in the selection of options from which strategic choice is made. The process is meant to provide the combination of long term objectives and generic and grand strategies to optimally position the firm in its external environment to achieve the company mission


• Strategic analysis and choice in single or dominant product or service business center around identifying strategies that are most effective in building sustainable competitive advantages based on key value chain activities and competencies or the firms core competencies.


• Multi business analysis on the other hand focus on the question of which combination of businesses maximizes shareholder value as a guiding theme during their strategic analysis and choice


5. Long-Term Objectives• The results the Organization seeks over a

multi year period.• This includes profitability, return investment.

Competitive position, technological leadership, productivity, employee relations, public responsibility, and employee development


6. Generic and Grand Strategies• Generic strategies are fundamental

philosophical options for the design of strategies

• Grand strategies is the means by which objectives are achieved.


• Many businesses explicitly adopt one or more generic strategies characterizing their competitive orientation in the marketplace.

• Low cost, differentiation or focus strategies define three fundamental options.


• Enlightened manages seek to create ways their firm possess both low cost and differentiation competitive advantages as part of their overall generic strategy.

• They usually combine this capabilities with a comprehensive plan by which they intend to achieve their objectives in a dynamic environment, this is called the Grand strategy.


The 15 basic Approaches in grand strategizing• Concentration• Market development, product development,

innovation, horizontal or vertical integration, joint venture, strategic alliances, consortia, concentric diversification, conglomerate diversification, turnaround, divestiture, bankruptcy and liquidation.


7. Short-term objectives• This are desired results that provide specific

guidance for action during a period of one year or less.

• They must be logically consistent with the firms long term objectives.

• Includes short term marketing activity, raw material usage, employee turnover, and sales objectives among others


8. Functional tactics• These are short term, narrow scoped plans

that detail the “means” or activities that a company

• Tactics are specific actions that needs to be undertaken to achieve short term objectives, usually by functional areas.


• These tactical activities are purposed to help achieve sustainable competitive advantage at the functional level.

• These includes but are not limited to an ad campaign, an inventory reduction, and introductory laon rate.


• Managers “in each business function” develop tactics that delineate the functional activities undertaken in their part of the business and usually include them as a core part of their action plan.


9. Policies that empower action• Speed is a critical necessity for today’s

competitive, global marketplace.• One way to enhance speed and

responsiveness is to force/allow decisions to be made whenever possible at the lowest level of the organization. ( HBO, H.R, Management)


• Policies are broad, precedent setting decisions that guide or substitute for repetitive or time sensitive managerial decision making.


• Creating the policies that guide or “pre-authorize” the thinking, decisions and actions of operating managers and their subordinates in implementing the business strategy is essential for the establishing and controlling the on going operating process of the firm in a manner consistent with the firms strategic objectives.


• Policies increase managerial effectiveness by standardizing routine decisions, and empowering or expanding the discretion of managers and subordinates in implementing business strategies.


• Examples of the nature and diversity of company policies

• A requirement that managers have purchase requests for items costing more than $5,000 cosigned by the controller

• The minimum equity position for all new McDonald's franchises


• The standard formula used to calculate return on investment for 43 strategic business units at G.E

• Sears Employees having the right to waive repair charges to appliance customers they feel have been poorly served by their Sears appliance


POINT SIR

• At this point managers have maintained a decidedly market oriented focus as they formulate strategies and begin implementation through action plans and functional tactics.


POINT SIR• NOW, the process takes an internal focus-

Getting the work done effectively and efficiently so as to make the strategy successful. Hence, the need to implement

10. Restructuring, Reengineering and refocusing the Organization


• Restructuring, Reengineering, and refocusing the Organization solves questions like

• What is the best way to organize ourselves to accomplish our ? ( Management Organizing Function, HBO, Job analysis and Job Design)


• Where Should leadership come from? ( Social influence Power and Politics, leadership vs. Management)

• What values should guide our daily activities, What should the organization and its people be like? ( Values, personality and Individual behavior Organizational Culture, HBO, H.R)


• How can we shape rewards to shape appropriate action? ( motivation, reinforcement etc)


• What is the point?

• The intense competition in the global marketplace has made this traditionally “internally Focused” set of questions-How the activities within their business are conducted- recast themselves with unprecedented attentiveness to the market place


• Downsizing, Restructuring and Reengineering ( Organizing function of management) are terms that reflect critical stages in strategy implementation wherein managers attempt to recast their organization.

• The Company’s Structure, leadership, Culture, Reward system may all be change to ensure cost competitiveness and quality demanded by unique requirements.


E.G of the elements of the strategic management process at GM

• Strategy was lower cost, increase efficiency, improve designs and increase brand appeal.

• Purpose, improve cash flow to cover for rising pension cost

• It had to… improve operations, hire new executives that brought product development and financial controls. Employee committees broke down bureaucracies and developed ways to reduce the time needed to develop new-concept vehicles


11. Strategic Control and Continuous improvement

• Strategic control is concerned with tracking a strategy as it is being implemented (even if the end result is years away), detecting problems or changes in its underlying premises and making necessary adjustments


• Continuous improvement is a form of strategic control in which managers are encouraged to be proactive in improving all operations of the firm.


A Process

Strategic Management as a Process

• A process is the flow of information through inter-related stages of analysis toward the achievement of an aim. And the strategic management process involves the flow of historical, current and forecasted data on operations and environment of a business.


• Managers evaluate this data in light of the values and priorities of influential individuals and groups called “stakeholders.” this interrelated stages are the eleven components discussed in the previous slides.

• Finally, the aim of the process is the formulation and implementation of strategies that work, achieving the company’s long term mission and near term objectives.


• The importance of viewing Strategic management as a process.

1. A change in one component affects several or all the other components, The flow of information is reciprocal. As a company can change its mission statement because of changes in the external environment


2. Strategy formulation and implementation are sequential. The process begins with the development or reevaluation of the company’s mission. Followed by the assessment of the company profile and assessment of the external environment. Then strategic choice, definition of long term objectives, design of the grand strategy, definition of short term objectives, design of operating strategies, institutionalization of the strategy, and review and evaluation


• How do you Qualify the rigidity (inflexibility or firmness) of the process?

1. A firms strategic posture may be re-evaluated in response to changes in an y of the principal factors that determine or affect its performance.

• E.g. entry by a Major new competitor, death of a prominent board member, replacement of the CEO, and a downturn in market responsiveness among others. BUT, what ever the cause of the reevaluation might have been the Strategic management process begins with the mission statement


2. Not every component of the process requires equal attention each time planning activities take place. (Stable vs unstable environments)

• Objectives and strategies are updated each year but rigorous reassessment of the initial stages of strategic planning rarely is undertaken at this times.


3. Necessity of feedback from the institutionalization, review and evaluation to the early stages of the process.

• Feedback is the analysis of post implementation results that can be used to enhance future decision making.


4. The strategic management process must be regarded as a dynamic system

• Dynamic means being characterized by constantly changing conditions that affect interrelated and interdependent strategic activities

• Thus, the need for continuous monitoring, and critical anticipation and contingency planning.

strategic management

Documents

management processes

financial management

strategic process

strategic choices

internal environment

companys external environment

company s objectives

competitive environment