Lecture 1: Introduction to Strategic Management (Chapter 1)

Instructor: Moses Acquaah, Ph.D. 377 Bryan Building Phone: (336) 334-5305 Email: acquaah@uncg.edu

Lecture Objectives

By the end of this lecture, students should be able to:

1. Explain the functions of management

2. Define and explain strategy and strategic management

3. Explain why strategic management is important 4. Explain the strategic management process 5. Describe the levels of organizational strategies 6. Discuss the misconceptions about strategy and strategic

management

OBJECTIVE #1 Functions of Management

Planning, Organizing, Leading; & Controlling (PLOC) Planning

defining goals and objectives deciding what type of activities the

company will engage in determining the resources needed to achieve the organizations goals & objectives.

Functions of Management

Leading
Attracting people to the organization. Specifying job responsibilities

Grouping jobs into work units

Marshalling and allocation of resources Creating good working conditions

Functions of Management

Organizing
Directing, motivating, and communication with

employees, individually & in groups. Conflict resolution.

Controlling
Monitoring performance of people & units. Provision of feedback or information about

progress. Identification of performance problems & actions to correct problems.

Disciplinary Focus

Various disciplines in management emerge from the functions of management:

Business Policy (formally called Strategic

Planning) from the planning function. Organizational Behavior primarily from the leading function. Human Resources Management primarily from the organizing function. Strategic Management, originated from Business Policy, but focuses on overall management PLOC and beyond.

OBJECTIVE #2 Whats Strategy?

Strategy is managements overall plan and actions for deploying resources and skills taking into consideration opportunities and threats in the environment
to achieve its mission, vision and objectives

to establish a favorable competitive position.

Strategy involves:
An organizations goals A series of related decisions & actions Takes into account key internal strengths & weaknesses and

external opportunities threats Analysis, communication, coordination, & action

What is Strategic Management?

Focuses on how managers formulate and implement, and evaluate strategies aimed at developing and maintaining competitive advantage:
the reason some firms enjoy higher levels of performance

than their rivals or competitors.

Strategic management is therefore concerned with overall PLOC Four aspects that set strategic management apart:

Interdisciplinary External focus Internal focus Future directions

Big picture view of an organization influenced by its external environment

Strategic Managements Uniqueness

Field of Study
Macroeconomics Microeconomics

Level of Analysis
The economy Industries & markets

Strategic Management
Finance Marketing Org. Behavior Human Resource Mgmt. Operations Mgmt.

Firms & businesses

Investment Projects Products & services Individuals & Groups Tasks & Structure Plants

OBJECTIVE #3 Importance of Strategic Management

Gives every employee a role to play in making the firm successful

Applies to all professional employees, not just those in

management Allows decision-making, allocation of resources and management of people to be based on a firms strategic plan Success as a manager (as measured by your promotion, job security, and pay increases) is often determined by your efforts & departments contribution to overall organizations success

Makes a difference in performance levels

Research suggest that successful companies use strategic

management concepts & techniques Success evolves from knowing what youre doing and often implies having a strategic plan

Importance of Strategic Management

Provides systematic approach to uncertainties that organizations face

Competitive & global environment are dynamic (changing) Change, whether significant of minor, must be recognized and

analyzed, & dealt with Strategic management allows for the analysis of the situation (identifying the sources of change in environment)

Coordinates and focuses employees to achieve organizations goals

Allows for team effort which is coordinated for firm success Allows for development of a plan, communication,

coordination, & cooperation among diverse depts & functions

OBJECTIVE #4 Strategic Management Process

Establishing a mission, vision and objectives Environmental Analysis Internal Analysis Strategy Formulation Strategy Implementation Strategic Control and Performance Evaluation

The Strategic Management Process

Internal Analysis

Mission, Vision & Objectives

Strategy Formulation

Strategy Implementation

Strategic Eval. & Control

Environ. Analysis

Mission, Vision & Objectives

A companys mission is a statement of

the basic purpose or reason for its existence its values (role to stakeholders - customers,

employees, society, etc.).

The vision goes beyond the mission statement

clarifies the long-term direction of the company

(where the company is going) reflects managements aspirations for the company

Mission, Vision & Objectives

Objectives are yardsticks for tracking a companys performance or end result.

Financial performance objectives (e.g., ROA,

ROI, ROE, Dividend growth, Stock price, etc.).

Strategic performance objectives (e.g., market

share, growth, innovation leader, customer service, community & environmental responsibility, etc.)

Examples of Mission & Vision

Southwest Airlines:
Mission: To provide high quality service at a

lower price in the airline industry. Vision: Opening air travel to a wider group of leisure travelers while infusing the organization with a sense of fun.

Apple Computer:
Mission: To bring the best personal computing

products and support to consumers around the world. Vision: One person, one computer.

Financial & Strategic Objectives

Alcan Aluminum
Financial: To outperform the average return on

equity of the S&Ps industrial stock index. Strategic: To be lowest-cost producer of aluminum.

GE
Financial: To achieve an average of 10 inventory

turns and a corporate operation profits margin of 16% by 1998. Strategic: To become most competitive enterprise in the world by being #1 or #2 in market share in every business the company is in.

Environmental Analysis

Involves the evaluation of the business environment of the organization.

All external influences that impact a companys

decision and performance.

Environment of firm classified by proximity into

(1) Macro-environment; and (2) Micro-environment or task environment.

Environmental Analysis

The macro-environment consists of

The international/national economy; changes in

demographic structures; social and political trends; technology; and the natural environment.

The micro-environment consists of

The industry environment such as competitors,

suppliers, customers; unions and employees; owners and shareholders, etc.

Internal Analysis

Involves the evaluation of the inventory of the firms resources and capabilities. Resources/Capabilities can be classified as:
Tangible resources: Financial or physical assets Intangible resources: brand name, reputation

(product & firm), organizational culture, etc. Capabilities or competencies: managerial ability, specialized skill & knowledge base of employees, etc.

Strategy Formulation

The strategy formulation process

involves designing a course of action for

addressing strategic issues facing the firm after going through the external and internal evaluation processes.

Actual strategy of a company involves:

Planned or Intended Actions (Deliberate &

purposeful actions). Reactive or Emergent Actions (As-need reactions to unanticipated events in firms micro and macro environments).

Strategy Formulation

Strategy formulation is concerned with the following parts of a company:

Corporate (whole company) -- Corporate

strategies: Deals with businesses company wants to be in & how to manage those businesses Businesses -- Competitive strategies: How to compete in specific business or industry Functional areas -- Functional strategies: short goal-directed decisions & actions of an organizations various functional departments.

Strategy Implementation

Strategy implementation is the process of putting a companys various strategies into action
development of programs, policies, budgets &

procedures.

It can take several months to years to complete. Most difficult part of the strategy process. The job of implementing strategy involves managers at all levels

Strategic Control & Evaluation

Process by which desired outcomes (mission, vision, & objectives) are compared with realized outcomes to determine if there are gaps. Initiate corrective actions by monitoring changes in environment - competitor actions, new market opportunities, customer needs & expectations.

Strategic Management Process

On-going and continuous cycle of

Situation Analysis : Internal evaluation &

Environmental scanning Strategy formulation Strategy implementation Strategy evaluation

Misconceptions about Strategy & Strategic Management

Strategy & strategic planning are dead

Every organization needs the focus and direction

provided by its strategies and the strategic management process

Strategy is strictly for top management

Top management play a crucial role, but everyone

in the organization has a part to play.

Strategy is about planning

Strategic management process shows that strategy

is not only about planning, but also about doing.

Misconceptions about Strategy & Strategic Management

Strategy is stable and constant

Organizations compete in dynamic environments.

Flexibility and change needed to respond to environmental opportunities & threats, & strength and weaknesses

Strategic management outlines ultimate destination & route

It establishes a systematic approach to analyzing

relevant information & using it to design, implement, & evaluate appropriate strategies.