2011/07/20

STRATEGIC
BUSINESS
MANAGEMENT

STRATEGIC MANAGEMENT IS
THE PROCESS OF INTEGRATING:

– management
– human resources
– marketing
– finance/accounting
– production/operations
– research and development
– information systems

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THREE STAGES OF STRATEGIC MANAGEMENT

Strategy Formulation

Strategy Implementation

Strategy Evaluation

COMPREHENSIVE STRATEGIC MANAGEMENT MODEL

External
Audit

Identify Generate,
existing Set Evaluate, Measure &
Implement
Strategies Long-Term Select Evaluate
Strategies
Vision Objectives Strategies Performance
&
Mission

Internal
Audit

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THREE STAGES OF STRATEGIC MANAGEMENT

Strategy Formulation

Strategy Implementation

Strategy Evaluation

STEPS IN STRATEGY FORMULATION

Vision & Mission

Opportunities & Threats

Strengths & Weaknesses

Long-Term Objectives

Alternative Strategies

Strategy Selection

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VISION
A vision statement answers the question:
“What do we want to become?”

Clear vision provides foundation for

comprehensive mission statement and
strategic planning

The Eastend Hospital is the LEADER in

providing resources necessary to realize
the community’s highest level of HEALTH
throughout life.

MISSION
Mission statement answers the question:

“What is our business?”

Mission Statements are:

– Enduring statement of purpose
– Distinguishes one organization from another in
similar enterprises
– Declaration of an organization’s “reason for being”
– Reveal what an organization wants to be and
whom it wants to serve
– Essential for effectively establishing objectives and
formulating strategies

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LONG-TERM OBJECTIVES
The results expected from pursuing
certain strategies
Strategists should avoid
– Managing by Extrapolation
– Managing by Crisis
– Managing Subjectively
– Managing by Hope

Long-term objectives are necessary –

– Corporate
– Divisional
– Functional levels

Objectives must be
Quantifiable, Measurable, Realistic, Understandable, Challenging,
Hierarchical, Obtainable, Congruent, Time-lined

PORTER’S GENERIC STRATEGIES

Cost Leadership Strategies

Differentiation Strategies

Focus Strategies

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PORTER’S GENERIC STRATEGIES

Cost Leadership Strategies
 Pursued in conjunction with differentiation
 Economies or diseconomies of scale
 Capacity utilization achieved
 Linkages with suppliers and distributors

Low Cost Producer Advantages

 Market of many price-sensitive buyers
 Few ways of achieving product differentiation
 Buyers not sensitive to brand differences
 Large number of buyers with bargaining power

PORTER’S GENERIC STRATEGIES

Differentiation Strategies

 Greater product flexibility

 Greater compatibility
 Lower costs
 Improved service
 Greater convenience
 More features
 Allow firm to charge higher price
 Gain customer loyalty

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PORTER’S GENERIC STRATEGIES

Focus Strategies

 Industry segment of sufficient size

 Good growth potential
 Not crucial to success of major competitors
 Consumers have distinctive preferences
 Rival firms not attempting to specialize in the
same target segment

ENVIRONMENTAL ANALYSIS
Basis for objectives & strategies:
– Clear statement of mission
– External opportunities/threats
– Internal strengths/weaknesses
Five (5) broad categories:
1. Economic forces
2. Social, cultural, demographic, &
environmental forces
3. Political, governmental, and legal forces
4. Technological factors
5. Competitive forces

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KEY EXTERNAL FORCES

Competitors
Suppliers
Distributors
Creditors
Key Customers Opportunities
External Employees &
Forces Communities Threats
Managers
Stockholders
Labour Unions
Special Interest Groups
Products
Services

KEY INTERNAL FORCES

Culture

Management
Key Human resources Strengths
Internal &
Marketing
Forces Weaknesses
Finance/Accounting

Production/Operations

Research & Development

Management info systems

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THREE STAGES OF STRATEGIC MANAGEMENT

Strategy Formulation

Strategy Implementation

Strategy Evaluation

ACTIONS RELATED TO STRATEGY

IMPLEMENTATION

– Altering sales territories

– Adding new departments
– Closing facilities
– Hiring new employees
– Cost-control procedures
– Changing advertising strategies
– Building new facilities

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IMPLEMENTING STRATEGIES
Strategy implementation varies among different types
and sizes of organizations

There is a shift in responsibility from strategists to

division and functional managers
For Successful Strategy Implementation --
– Firms must be managed efficiently
– The right organisational culture must exist
– Firms must market goods and services well
– Firms must raise needed working capital
– Firms produce technologically-sound goods
– Firms must have sound information systems

MANAGEMENT ISSUES

Resistance to Change Annual Objectives

Managers & strategy Policies

Supportive culture Resources

Management
Production/operations Issues Organizational structure

Human resources Restructuring

Downsizing Rewards/Incentives

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THREE STAGES OF STRATEGIC MANAGEMENT

Strategy Formulation

Strategy Implementation

Strategy Evaluation

I. Review Underlying Bases

Differences? Yes

NO
III. Take
II. Measure Firm Performance Corrective
Actions
Differences? Yes

NO

Continue present course

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MEASURING ORGANIZATIONAL PERFORMANCE

Quantitative criteria for strategy evaluation

Performance Ratios:
• Compare performance over different periods
• Compare performance to competitors
• Compare performance to industry averages

Financial Ratios
– Return on investment
– Return on equity
– Profit margin
– Market share
– Debt to equity
– Earnings per share
– Sales growth
– Asset growth

MEASURING ORGANIZATIONAL PERFORMANCE

Qualitative evaluation of strategy -

– Internal consistency of strategy

– Consistency of strategy with environment
– Strategy appropriate in view of resources
– Acceptable degree of risk
– Appropriate time frame
– Workability of the strategy

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THANK
YOU

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