You are on page 1of 7

Strategic management process

:
i. Strategy formulation
ii. Strategy implementation
iii. Strategy evaluation
What managers do in:
Strategy formulation
• Designing, developing
company strategies
• Identify external
opportunity/threats
• Determining internal
strength/weaknesses
• Establishing obectives to
achieve missions and
visions
• !enerating strategies to
achieve the obectives
Strategy implementation
• "ondensing, prioriti#ing,
formulated strategies
• Executing strategies
• $ranslated strategies into
action
• %llocating resources,
preparing budget
Strategy Evaluation
• Determine which strategies
worked and which did not work
• &eviewing external/internal
factors
• $o modify/reformulate if
strategies did not work
• 'easuring performances
• $aking corrective action
Vision statement
• % statement about what
an organi#ation wants to
become.
Importance of VS
• % vision should stretch
the organi#ation
capabilities and image of
itself to guide, shape,
give direction purpose
and serve as a powerful
motivator for those
around us and ourselves.
• (aving a vision of the
future might contribute to
formulating a good
strategy and motivating
the )rm*s employees to
achieve it.
• $he bridge from the
present to the future of
the organi#ation
(ow can it be e+ective,
 -nderstandable and
clear
Mission statement
 $he purpose or reason
for the organi#ation*s
existence
Importance of MS
o $o work of
organi#ation can
be extremely
counterproductive
o It*s essential for
creating, applying
and analy#ing the
business of an
organi#ation
o $o communicate
the )rm*s obective
and key resources
and capabilities
Analyze Mission statement using
9 essential components (David
!"#"$
%omponents &uestions
"ustomer .ho are the )rm*s
customers,
/roducts/services .hat are the
)rm*s maor
products/services,
'arket0geographic
ally1
.here does the
)rm compete,
$echnology Is the )rm using
the latest
technology,
"oncern for
survival, growth 2
pro)tability
Is the )rm
committed to
growth and
)nancial
soundness,
/hilosophy .hat are the basic
belief, value,
aspirations a2
ethical priories of
the )rm,
Self3concept .hat is the )rm*s
distinctive
competence or
maor competitive
advantage,
"oncern for public
image
Is the )rm
responsive to
social community
and environment
concern,
"oncern for
employees
%re employee*s
valuable assets of
the )rm,
Strength and Wea'nesses
(Internal (nvironment$
o Strength is anything internal to
the company that may lead to
an advantage relative to
competitors and bene)ts
relative to customers.
o .eaknesses are anything
internal that may lead to
disadvantages relative to
competitors and customers.
)pportunities and *hreats
((+ternal (nvironment$
o 4pportunities may include a
new international market,
breakthrough in technology,
which creates a new product,
increase in population and
decrease in trade barrier
o $hreats are the external
environment forces that can
impact a )rm*s e+orts to
achieve its obectives.
What are the resources in a
company,
o E5uipment, (r processes,
patents or )nances used by a
)rm to create its
products/services.
*ypes of resources in a company
i. $angible 6assets that can
be seen and 5uanti)ed
ii. Intangible 6 assets that
can*t be seen and touch
iii. (uman resource 6 skills,
knowledge, abilities,
intelligence, experience 2
competencies of the
organi#ation employees
(+ample of the resources:
i. $angible 6 /roperties,
machineries, furniture
ii. Intangible3 /atent, licenses,
copyright, information system
iii. (& 6 employees, competencies
Why -e need to conduct an
e+ternal environmental analysis,
o $o identify opportunity and
threats
o $ake advantage as opportunities
o %void/reduce the impact of
threats
o .e can )nd the information of
external environment from
printed materials
 7ournal
 &eport
 8ook
 9ewspaper
 Interview
 "onference
Main factor in .eneral
(nvironment (/(S* A0A12SIS$
/olitical
3 the various law 2 regulations of
country such as employment law,
environmental regulations 2
competitive regulations, government
leadership, tax policies, 5uotas on
goods produced, consumer protection,
political trends and government
structure
3 It*s important for )rms to develop a
corporate political strategy that will
represent how the organi#ation will
interact with the political/legal factors
Economic
3can determine how resources are
allocated and used in an organi#ation
3 Include economic growth trends of
various countries, taxation levels,
government spending level,
disposable income, ob growth,
unemployment levels, tari+s, in:ation
rates, consumer con)dence index,
import/export rations and production
level.
3it*s important for ability to predict
with accuracy in the in:uences of the
economic factors on the )rms
operations is vital in making strategic
decisions.
Social
3population shifts, education level of
population, diversity,
immigration/emigration, health, living
standard, housing trends, fashion,
attitudes towards work, leisure
activities, occupation 2 earning
capacity.
3 It*s important because strategist
should keep a close watch on the
social factor that can change the
preferences, needs, and interest of
their customer and general
population.
$echnological
3create new industries which will pose
a threat to existing organi#ations when
such a breakthrough can create a new
products/services which might render
existing products/services redundant.
3involve a rate of technology transfer,
energy use cost, new product/services
of competitors, change in internet, and
change in mobile technology.
3it*s important to strategist to examine
the changes in technology that can
a+ect the )rm*s operation and pursue
strategies that will take advantages of
the technological opportunities.
*hree .eneric 3usiness 1evel
Strategies (Michael /orter$
i. "ost leadership strategy 0;ow
cost1
3 8ased on organi#ation*s
ability to produce
product/services at a cost
below what competitors can
achieve.
3 E.g.< Dell, %ir %sia, 'ydin
ii. Di+erentiation Strategy
0-ni5ue1
3 "reating di+erences in the
)rm*s product/services by
o+ering something that is
perceived industry wide as
uni5ue and valued by
customers.
3 E.g. (arley Davidson, %pple,
;=, &olex, >edEx, =olvo
iii. >ocus strategy 0narrow to one1
3 >irm competing in a narrow
scope within an industry
3 It can be selected a
segment/group/segment and
tailor its strategy to serve
them
3 E.g. 8ugaboo, =ictoria
Secret,
3 >ocus strategy consist of ?
variants <
 "ost focus3)rm create
cost advantage it its
target segment
 Di+erentiation focus3
)rm seeks to
di+erentiate it its
target market
S/A%( M)D(1 (Strategic
positioning action evaluation$
 External >actors
 Industrial %ttractiveness 0I%1
 Environmental Stability 0ES1
 Internal >actors
 >inancial Strength 0>S1
 "ompetitive advantages
0"%1
S/A%( M)D(1 4 &uadrants
@. %ggressive 5uadrant 6 treat
growth and expansion of high
priority. &e5uire the drive to
get more market share and
new market
?. Defensive 5uadrant3 a
company that is generally
weak in all A dimensions.
&etrenchment/cost cutting
actions needed to be done
immediately and whatever
strength/advantage that is
still available need to be
evaluated seriously, do a
turnaround it has potential to
do so.
B. "ompetitive 5uadrant 6 a
situation where )nancial
strength and environmental
stability are weak but the
competitive advantage and
industry attractiveness score
are 5uite high.
A. "onservative 5uadrant3
indicate a weak industry with
a low competitive advantage
although the )nancial and
environmental factors are
encouraging.
Di5erences 6et-een S/A%( 7
SW)*
S/%"E S.4$
$he factors that
should be
considered is >S
and "% should
obectively come
from the same I>E
data and for ES
and I% form E>E
data.
%n E>E 2 I>E
analysis would
deal with about
?Cfactors each
from which the
Dopprtunities and
threats and
another D
strengths and
weaknesses can be
derived
Similarities of S/A%( 7 SW)*
 -sing the list of external 2
internal variables are similar
8oles9:o6s 7 responsi6ilities of
S*8A*(.IS*,
o Skillful person in designing and
planning action and policy to
achieve a maor/overall aim.
o &esponsible for success/failure
of an organi#ation
o 7ob title< "E4, /resident, 4wner
of the )rm, "hairman, Executive
Director, "hancellor, Dean,
Entrepreneur.
o (elp organi#ation to gather,
analy#e, and organi#e
information.
o 9eed to track industry,
competitive trends, develop
forecasting model 2 scenario
analyses, evaluate corporate 2
divisional performance, spot
emerging market opportunities,
and identify business threats.
o 7ob< $o develop competitive
response to a rapidly changing
complex environment.
Sustained %ompetitive Advantage
• 'aintaining higher pro)ts than
competitors over long period of
time
• &efer to a competitive advantage
that )rm can maintain for a long
period of time.
Di5erences among %ost
leadership strategy
di5erentiation strategy and focus
strategy,
"ost
leadership
strategy
Di+erentiati
on strategy
>ocus
strategy
>ocus on
driving cost
lower
relative to
competitors
cost
"reate
customer
loyalty to a
)rm*s
product
because
consumer
perceives
these
products to
be uni5ue
and they
willing to
pay more
for it.
%bility to
identify
segments
that are not
properly
served to
)nd market
segments
that have
uni5ue needs
or
speciali#ed
that broad
based
competitors
choose not to
serve them .
Importance of /1%
3 Enable top management to
predict pro)ts and sales of a
company*s product
3 Identify the product*s
strength
;o- can a <rm practice 6ased on
= generic 6usiness level
strategies
i1 "ost leadership strategy 6 providing
a basic and standardi#ed
product/service that can be produced
at a relatively low cost and made
available to a broad target market
ii1 Di+erentiation strategy3 allow the
di+erentiation strategy, constantly
upgrade the di+erentiated features
that consumer value without
signi)cant cost increase by generate
higher pro)ts than cost leadership
strategy
iii1 >ocus strategy3 %bility to identify
segments that are not properly served
or to )nd market segments that have
uni5ue needs or that are so
speciali#ed that broad based
competitors choose not to serve them.
/roduct 1ife %ycle (/1%$
It does consist of A stages<
i1 Stage @ 6 Introductory stage
3 % product newly enter into
the market
ii1 Stage ? 6 !rowth stage
3 % little competition, fre5uent
product modi)cation and
limited distribution and sales
increase to maximum
iii1 Stage B 6 'aturity stage
3 Sales beginning to decline,
shapes of curve changes,
many competitors
3 $he longest stage of /;"
iv1 Stage A 6 Decline stage
3 % long run drop in sales,
preferences change is being
replaced by substitute
product.
%urrent issues in strategic
management
• !lobali#ation
3 Involve integration and
exchange between di+erent
countries 2 people.
3 E.g. >alling barrier, advances
in communication, reduction
in transportation costs.
3 Si#e market is not only at
one point in national
boundaries.
3 (uman migration, capital
movement, international
trade and ease of traveling
across countries.
• "ustomer*s world
3"ulture to focus on
customer*s satisfaction
3 /rovide product/service at
high level of expectation than
the customer needs.
3 E.4.F level of customer*s
satisfaction
3"ultivate customer*s loyalty
• 'ass "ustomi#ation
3get economy of scale
through mass production yet
incorporate some :exibility
for customi#ation to suit
customer*s re5uirement need
3 Speed is vital
3 /rovide strategic
advantages and economic
value.
• 8alance scorecard 08S"1
3ensure a balanced allocation
of resources