You are on page 1of 30

Strategic Management

Session-2

Strategy- definition
An action plan a company designs to attain its targeted goals
Overall action plan for deploying resources to establish a favorable
position in the market.

Actions plan prepared to ensure that the organization is


better off than its competitors or is able to fend off
competitive actions from competitors.

Tactic is a scheme for a specific maneuver.

Three levels of strategy


1. Corporate Strategy
At this level the fundamental task is to develop a balanced
portfolio of businesses which will achieve the goals of the
corporation and satisfy its stakeholders.
2. Business Strategy
At this level the business, or set of activities is given and the
major task for strategic planner at this level is for business
to succeed against competitors and also satisfy corporate
success criteria.
3. Functional Strategy
At this level the major task is to provide an appropriate
functional strategies ( finance and accounting, marketing,
R+D, production, personnel) for SBU or corporate level
strategy.

Three levels of strategy

Strategic Management
The process by which managers choose a set of strategies
for the enterprise to pursue its vision.
Art & science of formulating, implementing, and evaluating, crossfunctional decisions that enable an organization to achieve its
objectives
Full set of commitments, decisions, and actions required for a firm to
achieve strategic competitiveness
Set of decisions and actions that result to the formulation and
implementation of plans designed to achieve a companys objectives

Strategic Management Process


The strategic management process is made up of three main steps:
strategy formulation,
strategy implementation and
strategy evaluation.

Strategy Formulation
Vision & Mission
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term Objectives

Alternative Strategies
Strategy Selection

Strategy Formulation
It involves designing and developing strategies to achieve the firms mission and
vision.
Strategy formulation entails identifying the firms external opportunities and
threats, determining the firms internal strengths and weaknesses and
establishing objectives to achieve the firms mission and vision.

Strategy formulation
Identifying the companys mission and vision in the starting point for
strategic management process.
The mission and vision statements set the direction for where the
company is going.
In order to achieve the organizations mission, would need to
operationalize the mission statement into strategic objectives.
Objectives are concrete goals the organization aims to achieve in
pursuing its basic mission.

Strategy formulation
Before organization establish its objectives, it must perform external
and internal analysis, also called Situation analysis.
Situation Analysis
Scanning and evaluating the organizations internal and external environment
this provides the critical information to establish the organizations
objectives.
Also use to identify the organizations opportunities and threats.

An organization can develop alternative strategies once the


organization had a clear picture of its environment.
Strategy formulation involves designing and developing the company
strategies.

Strategy Implementation

Annual Objectives
Policies
Employee Motivation
Resource Allocation

Strategy Implementation
Strategy implementation means executing the strategies or when
business strategies are translated into action.
It includes allocating resources to execute the formulated strategies,
preparing budgets, and developing and utilizing information systems
and employees.

Strategy Implementation Steps


Developing a strategy-supportive culture
Creating an effective organizational structure
Redirecting marketing efforts
Preparing budgets
Developing and utilizing information systems
Linking employee compensation to organizational
performance

Strategy Evaluation

Internal Review
External Review
Performance Metrics
Corrective Actions

Strategy Evaluation
The final stage in the strategic management process
The firms managers seek to determine which strategies worked
and which were not successful.
Involves:
Reviewing external and internal factors that form the basis of the
current strategies
Measuring performance against objectives
Taking corrective action if the strategies formulated did not
results in the objectives being met or not in line with the actual
goals, the strategy should be modified or reformulated.

What is Formality?
The degree to which participation, responsibility,
authority, and discretion in decision-making are
specified in strategic management.

Formality in Strategy Formulation


Entrepreneurial Mode : The informal, intuitive, and
limited approach to strategic management associated
with owner-managers of smaller firms.
Adaptive Mode :The strategic formality associated with
firms that emphasize the incremental modification of
existing competitive approaches.
Planning Mode: The strategic formality associated with
large firms that operate under a comprehensive,
formal planning system

Benefits of Formal Strategic Management Process


Strategy formulation activities enhance the firms ability to prevent
problems.
Group-based strategic decisions are likely to be drawn from the best
available alternatives.
Involvement of employees in strategy formulation improves their
understanding of the productivity-reward relationship in every
strategic plan and, thus, heightens their motivation.
Gaps and overlaps in activities among individuals and groups are
reduced as participation in strategy formulation clarifies differences in
roles.

Risks of Formal Strategic Management


The time that managers spend on the strategic
management process may have a negative impact on
operational responsibilities.
If the formulators of strategy are not intimately involved in
its implementation, they may shirk their individual
responsibility for the decision reached.
Strategic managers must be trained to anticipate and
respond to the disappointment of participating
subordinates over unattained expectations.

Dimensions of Strategic Decisions


Require top-management decisions
Require large amounts of the firms resources
Often affect the firms long-term prosperity
Future oriented
Usually have multifunctional or multi-business consequences
Require considering the firms external environment

Strategy -work in progress


Changes may be necessary to react to
Shifting market conditions
Technological breakthroughs
Fresh moves of competitors
Evolving customer preferences
Emerging market opportunities
New ideas to improve strategy
Crisis situations

Vision and Mission


Statements

Vision & Mission


Vision What do we want to do/ want to become
more broad and future oriented the goal on the horizon

Mission How to do
more focused how will the company get to the horizon

Vision
Vision

An attractive, ideal
future that is
credible yet not
readily available

Current
reality

Staying the course

What Vision Does


Links the present to the future
Energizes people and gains commitment
Gives meaning to work
Establishes a standard of excellence and integrity

25

Components of a Vision Statement


Core ideology
Core Values - timeless guiding principles
Core Purpose - reason for being

Envisioned future
clearly articulated goals
Vivid description - a graphic description of what success and the future will be
like

Recognition of service to stakeholders


Owners/creditors
Employees
Customers

Vision Statement

Many organizations have both a vision and a mission statement.


Vision statement should be established first and foremost.
Vision statement should be short, preferably one sentence,

Mission Statements
Mission statement answers the question:
What is our business?
Essential for effectively establishing objectives and formulating
strategies
Clear mission is needed before alternative strategies can be formulated
and implemented

Nine Essential Components of a Mission Statement


1. Customers: Who are the firms customers?
2. Products or services: What are the firms major products or services?
3. Markets: Geographically, where does the firm operate?
4. Technology: Is the firm technologically current?
5. Concern for survival, growth, and profitability: Is the firm committed
to growth and financial soundness?

Nine Essential Components of a Mission


Statement
6. Philosophy: What are the basic beliefs, values, aspirations, and ethical
priorities of the firm?
7. Self-concept: What is the firms distinctive competence or major
competitive advantage?
8. Concern for public image: Is the firm responsive social, community,
and environmental concerns?
9. Concern for employees: Are employees a valuable asset of the firm?