Professional Documents
Culture Documents
STRATEGIC MANAGEMENT
PROCESS
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Oldest Companies
1812 Citicorp
1911 Bombay Bakery
1837 Procter & Gamble
1947 English Boot House
1847 Philip Morris
1948 Kohinoor Textiles
1850 American Express
1948 Millat Fans
1886 Johnson & Johnson
1948 Hamdard
1891 Merck
1949 Snowhite Dry Cleaners
1892 General Electric
1950 Pakola
1902 3 M
1953 Pakistan Cables
1903 Ford
1953 Gul Ahmed Textiles
1911 IBM
1955 PIA
1938 HP
1957 Engro Corp
1945 Sony
1966 EBM
1945 Wal-Mart 5
Intriguing Questions
How did P & G continue to thrive over 150 years after its founding
while most companies are lucky to strive even 15 years?
How has Apple remained healthy and vibrant even after Steve Jobs
left, while Texas Instruments, scoring high at Wall Street, almost self
destructed after Pat Haggarty stepped aside?
Why PIA (1955), which was amongst world’s 10 top most airlines has
gone into bankruptcy? (almost sure now)
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How did Apple progress from Apple-1, in April 1976 to I-7 in 2016 ?
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Where does Dentonic (1963) stand today as the product in the eyes of
customers? Why?
Where has Abdul Khaliq Sweets, a 500 years old sweetmeat company
gone?
Why has Bundu Khan (1948) stagnated while Barbecue Tonight and
Kolaachi have become the industry leaders?
How has Unilever’s Fair & Lovely beaten Tibet Snow (1956)
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WHAT IS STRATEGY & WHY CHANGE ?
Failure to adapt to change demise of numerous
organizations over the past 15 years
Survivors which withstood test of time adapted their
business and strategy to fit the external forces shaping their
markets
Organizations must understand their environments
stimulating new ideas, which ultimately produce economic value
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Create unique and differentiated propositions made up of different activities
Strategy is about doing things differently or doing different things from the
competition
Unstable Business environment strategy has become less about
detailed plans and more about direction
Strategy is:
planning the capabilities needed
new potential markets in order to create room to maneuver
creating strategic options that can be utilized when the time is right
Constant focus:
to ensure consistency between internal strategy
external environment in order to stay relevant and respond to customers’ needs and
wants
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Flawed Concepts of Strategy
Strategy as action
– “Our strategy is to merge…”
– “… internationalize…”
– “… consolidate the industry…”
– “… outsource…”
– “…double our R&D budget…”
• Strategy as aspiration
– “Our strategy is to be #1 or #2…”
– “Our strategy is to grow…”
– “Our strategy is to be the world leader…”
– “Our strategy is to provide superior returns to our
shareholders…” 12
What is Strategy ?
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Setting the right goals……
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Economic Performance Vs Share Holder Value
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Economic Foundations of Competition
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Determinants of Relative Performance
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Achieving Superior Performance
Operational effectiveness is not a strategy
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Five Tests of a Good Strategy
1. A unique value proposition compared to other organizations
2. A different, tailored value chain
3. Clear tradeoffs, and choosing what not to do
4. Activities that fit together and reinforce each other
5. Strategic continuity with continual improvement in realizing the
strategy
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Defining the Value Proposition
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Strategic Positioning
IKEA, Sweden
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Strategic Tradeoffs
Tradeoffs occur when strategic positions are incompatible – need for a
choice
Sources of Tradeoffs
Incompatible product / service features or attributes
Differences in the best configuration of activities in the value chain to deliver the
chosen value proposition
Inconsistencies in image or reputation across positions
Limits on internal coordination, measurement, motivation, and control
Tradeoffs make a strategy sustainable against imitation by established
rivals
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Strategic Trade Offs
IKEA, Sweden
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Mutually Reinforcing Activities …….IKEA
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Thinking Strategically: 3 Big Strategic Questions
Strategy.mp4
Indian Rail
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Strategy involves:
Competitive moves and business approaches used by managers to
run the company
Management’s “action plan” to:
o Grow the business
o Attract and please customers
o Compete successfully
o Conduct operations
o Achieve the targeted levels of
organizational performance
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Defining Strategy
Systematic analysis of the factors
associated with customers and competitors (the external
environment)
and the organization itself (the internal environment)
to provide the basis for re-thinking
the current management practices.
Its objective is to achieve better alignment
of corporate policies and strategic priorities
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The Concept
Managerial process of forming:
a strategic vision,
setting objectives,
crafting, implementing and executing the strategy,
and then over time initiating whatever corrective adjustments in
the vision, objectives, strategy, and execution are deemed
appropriate.
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FIVE TASKS: Strategy Making, Strategy Executing
Process
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Who performs the 5 tasks?
CEO: most visible and important strategy manager
chief direction setter,
chief objective setter,
chief strategy maker and
implementer for the whole organization
Ultimate responsibility rests with the CEO:
hammers out a consensus strategy
coordinates various aspects of executing the strategy
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Role of Leaders in Strategy
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Decide which industry changes, technologies, and customer
needs to respond to, and how the response can be tailored to the
company’s strategy
Measure progress using tailored metrics that capture the
implications of the strategy for serving customers and performing
particular activities
Sell the company’s strategy and how to evaluate progress against
the strategy to the financial markets
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MISSION & VISION
MISSION STATEMENT ---- A STARTING POINT FOR FORMING
A STRATEGIC VISION:
Mission Statement answers the question “WHAT IS OUR
BUSINESS”. Conveys the essence of “WHO WE ARE, WHAT WE
DO, and WHERE WE ARE NOW”
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COMPONENTS OF A MISSION STATEMENT:
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6. Philosophy----what are the basic beliefs, values, aspirations and
ethical priorities of the firm?
7. Self-concept-----what is the firm’s distinctive competence or
major competitive advantage?
8. Concern for public image----is the firm responsive to social,
community and environmental concerns?
9. Concern for employees----are employees a valuable asset of
the firm?
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Good Vision Statement
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Common Shortcomings : Vision Statement
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Process of developing Mission & Vision
Involve as many managers as possible; commitment
Opportunity for strategists enlist support
A facilitator or committee of top managers to short list one single
draft
Hire out-side consultants, experts ?
Communicate the final mission statement, down the line
Process should create an “emotional bond” and “sense of
mission”.
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Importance: Mission & Vision
To ensure unanimity of purpose within the organization
To provide a basis or standard for allocating resources
To establish organizational climate
To serve as a focal point to identify with organization’s purpose and direction
To facilitate the translation of objectives into a work structure
To specify organizational purpose and then translate it into objectives in
such a way that cost, time and performance controlledparameters can be
assessed and
Firms with a formalized mission statement have twice the average return on
shareholder’s equity ----Rarick & Vitton
Firms using mission statements have a 30 % higher return on financial
measures than those without such statements ----Business Week40
6 paths leading to Mission & Vision
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INFLECTION POINTS
Many successful organizations need to change direction not only
to survive but to maintain success-----STRATEGIC INFLECTION
POINTS
When a company reaches a strategic inflection point some tough
decisions are required:
about changing a company’s course,
to sustain company’s success, not just to avoid possible disaster
May radically change a company’s prospects and require a radical
revision of its strategic course; E.g.
Engro Corp
PIA’s Route strategy
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Communicating Mission & Vision
Down the line to lower level managers so that it grabs attention
and provokes excitement
Should convey a larger sense of purpose so that employees see
themselves as “building” rather than “laying stones”
Should be inspirational for people, to “live” in the business instead
of just coming to work. E.g. Starbucks’ mission statement :
“To inspire and nurture the human spirit--- one person, one cup,
one neighborhood at a time”
BREAKING DOWN RESISTANCE :
Must provide a rationale for a new strategic vision
REINFORCEMENT on every occasion
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Corporate Social Responsibility
Critical consideration: Mission Statement must express how the company
intends to contribute to the societies that sustain it
Business exists to serve, depends upon its environment, and therefore, has a
responsibility to ensure its well being
Environment is represented by stake holders
Pollution, disposal of solid and liquid waste, and the conservation of natural
resources should be principal considerations in strategic decision making
Adoption of 4Es:
Make it Easy for consumer to be green
Empower consumer with solutions
Enlist the support of consumer
Establish credibility with public to avoid backlash
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Conduct & publish annual social audits from the perspective of social
responsibility e.g. Abbot, Dow Chemicals, Exxon & Bank of America
FOUR TYPES OF SOCIAL COMMITMENTS / RESPONSIBILITIES:
1. ECONOMIC
2. LEGAL
3. ETHICAL
4. DISCRETIONARY
CSR COSTS ARE MORE THAN OFFSET IN THE LONG RUN BY AN
IMPROVED COMPANY IMAGE AND INCREASED COMMUNITY
GOODWILL
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Crafting a Strategy
Chief Architect Approach: Single owner or the CEO, assumes the
role of chief strategist and chief entrepreneur, single handedly
shaping strategy, e.g.
Michael Dell at Dell Computers, Bill Gates at Microsoft, Howard
Shultz at Starbucks, Zeelaf Munir at EBM, Hussain Dawood or
Samad Dawood at Engro Corp., Khalid Awan at TCS, Babar Ali or
Haider Ali at Packages
Delegation Approach: E.g. Most Pakistani Banks
Team Approach: E.g. Shaukat Khanum
Corporate Intrapreneur Approach:
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Strategy-Making Hierarchy
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Understanding a Company’s Strategy
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From Thinking Strategically to Choosing a Strategy
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BCG Growth-Share Matrix
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