1st Lecture- Overview of St.mgt.

8/6/2019 1st Lecture- Overview of St.mgt.

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Strategic ManagementStrategic

Management

ProcessProcess

An OverviewAn Overview


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SEQUENCESEQUENCE

1.1. Thinking StrategicallyThinking Strategically

2.2. Five Tasks of Strategic ManagementFive Tasks of Strategic Management

2.1.2.1. Developing Mission and Strategic VisionDeveloping Mission and Strategic Vision

2.2.2.2. Setting ObjectivesSetting Objectives

2.3.2.3. Crafting a StrategyCrafting a Strategy

2.42.4 Implementing & Executing StrategyImplementing & Executing Strategy

2.52.5 Evaluating Performance and InitiatingEvaluating Performance and Initiating

Corrective AdjustmentsCorrective Adjustments

1.1. Characteristics of Strategic Management ProcessCharacteristics of Strategic Management Process


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1-1- Thinking StrategicallyThinking Strategically


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Thinking StrategicallyThinking

Strategically

First-rate strategic thinking is conscious strategyFirst-rate strategic thinking is conscious strategymanagement as opposed to freewheelingmanagement as opposed to freewheeling

improvisation, gut feel, and hoping for good luck.improvisation, gut feel, and hoping for good luck.

Doing a good job of managing inherently requiresDoing a good job of managing inherently requires

good strategic thinking.good strategic thinking.

Todays managers have to think strategically aboutTodays managers have to think strategically about

their organizations position and about the impact oftheir organizations position and about the impact of

changing conditions.changing conditions.

(Continued)(Continued)


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They have to monitor the organizations externalThey have to monitor the organizations external

environment and internal capabilities closelyenvironment and internal capabilities closelyenough to know when to institute strategy changes.enough to know when to institute strategy changes.

They have to know the business well enough toThey have to know the business well enough todetermine what kinds of strategic changes todetermine what kinds of strategic changes to

initiate.initiate.

Simply said, the fundamentals of strategicSimply said, the fundamentals of strategic

management need to drive the whole approach tomanagement need to drive the whole approach to

managing organizations.managing organizations.


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Three Big Strategic QuestionsThree Big

Strategic Questions

1.1. Where are we now?Where are we now?2.2. Where do we want to go?Where do we want to go?

Business(es) to be in and marketBusiness(es) to be in and marketpositions to stake out?positions to stake out?

Buyer needs and groups to serve?Buyer needs and groups to serve?

Outcomes to achieve?Outcomes to achieve?

3.3. How do we get there?How do we get there?


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AdvantagesAdvantages1.1. Providing better guidance to the entire organization on theProviding better guidance to the entire organization on the

crucial point of what it is we are trying to do,;crucial point of what it is we are trying to do,;

2.2. Making employees more alert to new opportunities andMaking employees more alert to new opportunities andthreatening developments;threatening developments;

3.3. Helping to unify the organization;Helping to unify the organization;

4.4. Creating a more proactive management posture;Creating a more proactive management posture;

5.5. Promoting development of a constantly evolving businessPromoting development of a constantly evolving business

model that will produce sustained bottom-line success for themodel that will produce sustained bottom-line success for theenterprise; andenterprise; and

6.6. Providing managers with a rationale for evaluating competingProviding managers with a rationale for evaluating competingbudget requests a rationale that argues strongly forbudget requests a rationale that argues strongly for

steering resources into strategy-supportive, results-producingsteering resources into strategy-supportive, results-producingareas.areas.


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Chief Executive Officer of a successfulChief Executive Officer of a successful

company put it well when he said:company put it well when he said:

In the main, our competitors are acquaintedIn the main, our competitors are acquainted

with the same fundamental concepts andwith the same fundamental concepts and

techniques and approaches that we follow,techniques and approaches that we follow,

and they are as free to pursue them as weand they are as free to pursue them as we

are. More often than not, the differenceare. More often than not, the difference

between their level of success and ours liesbetween their level of success and ours lies

in the relative thoroughness and self-in the relative thoroughness and self-discipline with which we and they developdiscipline with which we and they develop

and execute our strategies for the future.and execute our strategies for the future.


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2- Five Tasks2- Five Tasks

ofof

Strategic ManagementStrategic Management


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Strategic management is not a box ofStrategic management is not a box of

tricks or a bundle of techniques. It istricks or a bundle of techniques. It is

analytical thinking and commitment ofanalytical thinking and commitment of

resources to action.resources to action.

Peter DruckerPeter Drucker


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Strategic ManagementStrategic Management

The termThe term strategic managementstrategic managementrefers torefers to

the managerial process of forming athe managerial process of forming a

strategic vision, setting objectives, craftingstrategic vision, setting objectives, crafting

a strategy, implementing and executinga strategy, implementing and executing

the strategy, and then over time initiatingthe strategy, and then over time initiating

whatever corrective adjustments in thewhatever corrective adjustments in the

vision, objectives, strategy, and executionvision, objectives, strategy, and executionare deemed appropriate.are deemed appropriate.


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The Five TasksThe Five Tasks

Developing a Strategic Vision and MissionDeveloping a Strategic Vision and Mission

Setting ObjectivesSetting Objectives

Crafting a StrategyCrafting a Strategy

Implementing and Executing the StrategyImplementing and Executing the Strategy

Evaluating Performance and InitiatingEvaluating Performance and InitiatingCorrective AdjustmentsCorrective Adjustments


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The Five TasksThe Five Tasks

Craft a

Strategy

to Achieve

Objectives

Set

Objectives

Develop a

Strategic

Vision

andMission

Implement

and

Execute

Strategy

Improve/

Change

Revise as

Needed

Revise as

Needed

Improve/

Change

Recycle

as Needed

Task 1 Task 2 Task 3 Task 4 Task 5

Monitor,

Evaluate,

and Take

CorrectiveAction


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2.1.2.1. Developing Mission and Strategic VisionDeveloping Mission and Strategic Vision


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Strategic VisionStrategic Vision

AA strategic visionstrategic vision is a roadmap of ais a roadmap of a

companys futureproviding specificscompanys futureproviding specifics

about technology and customer focus, theabout technology and customer focus, the

geographic and product markets to begeographic and product markets to be

pursued, the capabilities it plans topursued, the capabilities it plans to

develop, and the kind of company thatdevelop, and the kind of company that

management is trying to create.management is trying to create.


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Strategic VisionStrategic Vision

A roadmap of a companys futureA roadmap of a companys future

Future technology-product-customerFuture technology-product-customer

focusfocus

Geographic and product markets toGeographic and product markets to

pursuepursue

Capabilities to be developedCapabilities to be developed

Kind of company that management isKind of company that management is

trying to createtrying to create


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Mission StatementMission Statement

A companysA companys mission statementmission statementis typicallyis typically

focused on its present business scopefocused on its present business scope

"who we are and what we do"; mission"who we are and what we do"; mission

statements broadly describe anstatements broadly describe an

organizations present capabilities,organizations present capabilities,

customer focus, activities, and businesscustomer focus, activities, and business

makeup.makeup.


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Missions vs. Strategic VisionsMissions vs. Strategic Visions

AA missionmission statementstatement

focuses onfocuses on currentcurrent

business activities --business activities --

who we are andwho we are and

what we dowhat we do Current product andCurrent product and

service offeringsservice offerings

Customer needs beingCustomer needs being

servedserved

Technological andTechnological and

business capabilitiesbusiness capabilities

AA

strategic visionstrategic vision

concerns a firmsconcerns a firms

futurefuture business pathbusiness path

---- where we arewhere we are

goinggoing Markets to be pursuedMarkets to be pursued

Future technology-Future technology-

product-customerproduct-customerfocusfocus

Kind of company thatKind of company that

management ismanagement is

trying to createtrying to create


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2.2.2.2. Setting ObjectivesSetting Objectives


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ObjectivesObjectives

ObjectivesObjectives are an organizationsare an organizations

performance targetsthe results andperformance targetsthe results and

outcomes it wants to achieve. Theyoutcomes it wants to achieve. They

function as yardsticks for tracking anfunction as yardsticks for tracking anorganizations performance and progress.organizations performance and progress.


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Strategic ObjectivesStrategic Objectives

Strategic objectivesStrategic objectives relate to outcomesrelate to outcomes

that strengthen an organizations overallthat strengthen an organizations overall

business position and competitive vitality;business position and competitive vitality;

Financial objectivesFinancial objectives relate to the financialrelate to the financial

performance targets management hasperformance targets management has

established for the organization toestablished for the organization to

achieve.achieve.


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Setting of ObjectivesSetting of Objectives

Outcomes focusedOutcomes focusedon improvingon improving

financialfinancial

performanceperformance

Outcomes focusedOutcomes focusedon improvingon improving long-long-

term,term, competitivecompetitive

business positionbusiness position

Financial Objectives Strategic Objectives


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2.3.2.3.



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Without a strategy the organization isWithout a strategy the organization is

like a ship without a rudder.like a ship without a rudder.

Joel Ross and Michael KamiJoel Ross and Michael Kami


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What Is StrategyWhat Is Strategy??

AA strategystrategyconsists of the competitive effortsconsists of the competitive efforts

and business approaches that managersand business approaches that managersemploy to please customers, competeemploy to please customers, competesuccessfully, and achieve organizationalsuccessfully, and achieve organizationalobjectives.objectives.

Strategy is both proactive (intended andStrategy is both proactive (intended and

deliberate) and reactive (adaptive).deliberate) and reactive (adaptive).

Strategies are partly visible and partly hidden toStrategies are partly visible and partly hidden to

outside view.outside view.


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What Is a Business Model?What Is a Business Model?

A companysA companys business modelbusiness modeldeals withdeals withwhether the revenue-cost-profit economicswhether the revenue-cost-profit economicsof its strategy demonstrate the viability of theof its strategy demonstrate the viability of theenterprise as a whole.enterprise as a whole.

Look at the revenue streams the strategy is expected toLook at the revenue streams the strategy is expected toproduceproduce

Look at the associated cost structure and potentialLook at the associated cost structure and potentialprofit marginsprofit margins

Do the resulting earnings streams and ROI indicate theDo the resulting earnings streams and ROI indicate thestrategy makes sense and that the company has astrategy makes sense and that the company has aviable business model?viable business model?


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Why Are Strategies Needed?Why Are Strategies Needed?

ToToproactivelyproactively

shape how ashape how a

companyscompanysbusiness willbusiness will

bebe

conductedconducted

To mold theTo mold the

independentindependent

actions andactions anddecisions ofdecisions of

managers andmanagers and

employees into aemployees into acoordinated,coordinated,

company-widecompany-wide

game plangame plan


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Involves decidingInvolves deciding howhowtoto Respond to changing buyer preferencesRespond to changing buyer preferences

Respond to new market conditionsRespond to new market conditions

Grow the business over the long-termGrow the business over the long-term

Achieve performance targetsAchieve performance targets

Outcompete rivalsOutcompete rivals


Strategy is PartlyStrategy

is Partly PlannedPlanned


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Strategy is PartlyStrategy is Partly PlannedPlannedandand Partly ReactivePartly Reactive

Newinitiativesplusongoingstrategyfeaturescontinuedfrompriorperiods

Adaptivereactionsto

changingcirc

umstances

Abandonedstrate

gy

features

Actual

Company

Strategy

Company

Experiences,

Know-how,Resource

Strengths and

Weaknesses,

andCompetitive

Capabilities

PlannedStrategy

ReactiveStrate

gy

Understanding StrategyUnderstanding

Strategy


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Understanding Strategy Understanding Strategy

What to Look ForWhat to Look For

Pattern

of ActionsThat Define

Strategy

Actions to strengthen

resources &

capabilities

Actions to diversify Actions to outcompete rivals

Responses to

changing external

circumstances

Actions to alter

geographic

coverage

Actions to form strategic

alliances and collaborative

partnerships

How functional

activities are

managed

Efforts to pursue

new opportunities ordefend against threats

Actions to merge oracquire rival companies

Strategic Approaches toStrateg

ic Approaches to


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Strategic Approaches toStrategic Approaches to

Future Market ConditionsFuture Market Conditions

Keep from being

swamped by thewaves of change

Source: Adapted from Derek F. Abell, Competing Today While Preparing for Tomorrow, Sloan Management Review 40, No. 3 (Spring 1999), p. 75.

Company ApproachesReactive/Follower Proactive/Leader

Futur

eMa

rket

Con d

itions

Rapid

Revolutionary

Change

Gradual

Evolutionary

Change

Aggressively

altering strategy tomake waves and

drive change

Revising strategy(hopefully in time)to catch the waves

of change

Anticipatingchange andinitiating strategicactions to ride the

crest of change


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Strategy SelectionStrategy Selection

Each of the four basic strategy-makingEach of the four basic strategy-making

approaches has strengths and weaknesses,approaches has strengths and weaknesses,

and each is workable in the "right" situation.and each is workable in the "right" situation.


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An Ongoing ProcessAn Ongoing Process

Strategy making is fundamentally a market-driven andStrategy making is fundamentally a market-driven and

customer-driven entrepreneurial activitythe essentialcustomer-driven entrepreneurial activitythe essential

qualities are a talent for capitalizing on emerging marketqualities are a talent for capitalizing on emerging market

opportunities and evolving customer needs, a bias foropportunities and evolving customer needs, a bias for

innovation and creativity, an appetite for prudent risk taking,innovation and creativity, an appetite for prudent risk taking,and a strong sense of what needs to be done to grow andand a strong sense of what needs to be done to grow and

strengthen the business.strengthen the business.

The march of external and internal developments dictate thatThe march of external and internal developments dictate thata companys strategy change and evolve over timeaa companys strategy change and evolve over timea

condition that makes strategy making an ongoing process,condition that makes strategy making an ongoing process,

not a one-time event.not a one-time event.


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Strategies and Long-TermStrategies and Long-Term

PerformancePerformanceTrailblazing strategies can be the key to better long-termTrailblazing strategies can be the key to better long-termperformance. Business history shows that high-performingperformance. Business history shows that high-performingenterprises often initiate and lead, not just react and defend.enterprises often initiate and lead, not just react and defend.

They launch strategic offensives to out-innovate and out-They launch strategic offensives to out-innovate and out-maneuver rivals and secure sustainable competitivemaneuver rivals and secure sustainable competitiveadvantage, then use their market edge to achieve superioradvantage, then use their market edge to achieve superiorperformance.performance.

Aggressive pursuit of a creative strategy can propel a firmAggressive pursuit of a creative strategy can propel a firminto a leadership position, paving the way for its products andinto a leadership position, paving the way for its products andservices to become the industry standard.services to become the industry standard.

High-achieving enterprises are nearly always the product ofHigh-achieving enterprises are nearly always the product of

proactive management, rather than the result of lucky breaksproactive management, rather than the result of lucky breaksor a long run of good fortune.or a long run of good fortune.


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What is a Strategic PlanWhat is a Strategic Plan??

Where firm is headed --Strategic vision and

business mission

Action approaches to achievetargeted results -- Acomprehensive strategy

Short and long term performancetargets -- Strategic and

financial objectives


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Strategic PlansStrategic Plans

AA strategic planstrategic plan consists of an organizationsconsists of an organizations

mission and future direction, near-term and long-mission and future direction, near-term and long-

term performance targets, and strategy.term performance targets, and strategy.

The faster a companys external and internalThe faster a companys external and internal

environment changes, the more frequently thatenvironment changes, the more frequently that

its short-run and long-run strategic plans have toits short-run and long-run strategic plans have to

be revised and updatedannual changes maybe revised and updatedannual changes may

not be adequate. In todays world strategy lifenot be adequate. In todays world strategy life

cycles are growing shorter, not longer.cycles are growing shorter, not longer.


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2.42.4 Implementing & ExecutingImplementing & ExecutingStrategyStrategy


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Strategy implementation and execution is an

action-oriented, make-it-happen process

involving people management, developing

competencies and capabilities, budgeting,policy-making, motivating, culture-building,

and leadership.

Excellent execution of an excellent strategy is

the best test of managerial excellenceand

the most reliable recipe for organizational

success.

Strategy implementation and execution is an

action-oriented, make-it-happen process

involving people management, developing

competencies and capabilities, budgeting,policy-making, motivating, culture-building,

and leadership.

Excellent execution of an excellent strategy is

the best test of managerial excellenceand

the most reliable recipe for organizational

success.

Strategy ImplementationStrategy Implementation


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Strategy ExecutionStrategy Execution

Strategy implementationStrategy implementation concerns the managerial exerciseconcerns the managerial exerciseof putting a freshly chosen strategy into place.of putting a freshly chosen strategy into place.

Strategy executionStrategy execution deals with the managerial exercise ofdeals with the managerial exercise of

supervising the ongoing pursuit of strategy, making it work,supervising the ongoing pursuit of strategy, making it work,improving the competence with which it is executed, andimproving the competence with which it is executed, andshowing measurable progress in achieving the targetedshowing measurable progress in achieving the targetedresults.results.

Strategy execution is fundamentally an action-oriented,Strategy execution is fundamentally an action-oriented,make-it-happen processthe key tasks are developingmake-it-happen processthe key tasks are developingcompetencies and capabilities, budgeting, policy making,competencies and capabilities, budgeting, policy making,motivating, culture-building, and leadership.motivating, culture-building, and leadership.


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2.52.5 Evaluating Performance and InitiatingEvaluating Performance and Initiating

Corrective AdjustmentsCorrective Adjustments


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Evaluating PerformanceEvaluating Performance

A companys vision, objectives, strategy,A companys vision, objectives, strategy,

and approach to implementation are neverand approach to implementation are never

final;final;

Evaluating performance, reviewingEvaluating performance, reviewing

changes in the surrounding environment,changes in the surrounding environment,

and making adjustments are normal andand making adjustments are normal and

necessary parts of the strategicnecessary parts of the strategic

management process.management process.


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Best-Managed OrganizationsBest-Managed OrganizationsTwo factors separate the best-managed organizations from the rest:Two factors separate the best-managed organizations from the rest:

1.1. Superior strategy making and entrepreneurship, andSuperior strategy making and entrepreneurship, and

2.2. Competent implementation and execution of the chosen strategy.Competent implementation and execution of the chosen strategy.

Quality of managerial strategy making and strategy implementing has aQuality of managerial strategy making and strategy implementing has a

significant impact on organization performance.significant impact on organization performance.

An organization that lacks clear-cut direction, has vague orAn organization that lacks clear-cut direction, has vague orundemanding objectives, has a muddled or flawed strategy, or cantundemanding objectives, has a muddled or flawed strategy, or cantseem to execute its strategy competently is a company whoseseem to execute its strategy competently is a company whoseperformance is probably suffering, whose business is at long-term risk,performance is probably suffering, whose business is at long-term risk,

and whose management is lacking.and whose management is lacking.

The better conceived an organizations strategy and the more proficientThe better conceived an organizations strategy and the more proficientits execution, the greater the chances the company will be a leadingits execution, the greater the chances the company will be a leadingperformer in its markets and truly deserve a reputation for talentedperformer in its markets and truly deserve a reputation for talentedmanagement.management.


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Tightly-Knit ProcessTightly-Knit Process

Strategic management is a tightly-knitStrategic management is a tightly-knit

process.process.

The boundaries between the five tasks areThe boundaries between the five tasks are

conceptual, not fences that prevent someconceptual, not fences that prevent some

or all of them being done together.or all of them being done together.


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Broad ParticipationBroad Participation

Every company manager has a strategy-making/Every company manager has a strategy-making/strategy-implementing roleit is flawed thinking tostrategy-implementing roleit is flawed thinking toview strategic management as solely the provinceview strategic management as solely the provinceof senior executives.of senior executives.

Broad participation in a companys strategy-Broad participation in a companys strategy-creating exercises is usually a strong plus.creating exercises is usually a strong plus.

Corporate Enterpreneuring relies upon middle andCorporate Enterpreneuring relies upon middle andlower-level managers and teams to spot newlower-level managers and teams to spot newbusiness opportunities, develop strategic plans tobusiness opportunities, develop strategic plans to

pursue them, and create new businesses.pursue them, and create new businesses.


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CharacteristicsCharacteristics

ofof

Strategic Management ProcessStrategic Management Process


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CharacteristicsCharacteristics

Need to do the five tasksNeed to do the five tasks nevernevergoes away.goes away.

Boundaries among the five tasks are blurry.Boundaries among the five tasks are blurry.

Strategizing is not isolated from otherStrategizing is not isolated from othermanagerial activities.managerial activities.

Time required comes in lumps and spurts.Time required comes in lumps and spurts.

The Big Challenge is tThe Big Challenge is to get the best strategyo get the best strategy Supportive performance from employees,Supportive performance from employees,

Perfect current strategy, andPerfect current strategy, and

Improved strategy executionImproved strategy execution

St t i M t P i i lSt t

i M t P i i l


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Strategic Management PrincipleStrategic Management Principle

The role of Board of Directors in theThe role of Board of Directors in thestrategic management process is tostrategic management process is to

critically appraise and ultimatelycritically appraise and ultimatelyapprove strategic action plans andapprove strategic action plans and

to evaluate the strategic leadershipto evaluate the strategic leadership

skills of the CEO and others in lineskills of the CEO and others in line

to succeed the incumbent CEO.to succeed the incumbent CEO.


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THANK YOUTHANK YOU

1st Lecture- Overview of St.mgt.

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