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Strategic

Management
An Introduction to Strategy

By : Dr. Hadi Supratikta, MM


Learning Outline

What is strategic management?


Why is strategic management
important?
Who is involved with strategic
management?
Strategic management today

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A definition of strategy

Goal-directed decisions and actions in


which capabilities and resources are
matched with the opportunities and
threats in the environment.

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Military influences in strategy

Strategos referred to a general in


command of an army
The art of the general
By 450 B.C. it came to mean managerial skill
By 330 B.C. it referred to the skill of employing forces
to overcome positions to create a system of global
governance
Carl von Clausewitz tactics(involve) the
use of armed forces in the engagement,
strategy (is) the use of engagements for the
object of war 1838 On War

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Academic influences in strategy

1911 Scientific management (Taylor) Still in place today


(UPS), some consider it micromanaging
HBS requires a class in Business Policy in 1912
Adam Smiths invisible hand (the market) gives way to
Alfred Sloan (GM CEO from 1923-1946) concept of the
visible handmiddle manager
Chester Bernard influential book The Executive argues
that managers should pay attention to strategic factors
Ronald Coases 1937 article why firms exist (Nobel
Prize in economics) and Joseph Schumpters concept of
disruptive technologies written in 1942 bring in
organizational economics
Max Weber warns against bureaucratic organizations but
sees a shift toward this way of organizing

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Recent influences in strategy

1960s (Strategy and structure; Corporate


Strategy)
1963 Harvard business conference leads to
SWOT analysis
BCG founded in 1963 strategy boutique
Created the portfolio analysis
Stars, dogs, cash cows, question marks
1980s (Porters 5 forces)
1990s (Resource based view of the firm)

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Why is strategic management
important?

Gives everyone a role


Makes a difference in performance levels
Provides systematic approach to
uncertainties
Coordinates and focuses employees

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Why Strategy?

To change, an organization needs


Burning Platform
Vision
Leadership
Strategic Management
Political Management

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Strategy vs. Strategic
Management
Strategy Strategic
A series of goal- management
directed decisions Analyze current
and actions situation
matching an Develop
organizations appropriate
skills and strategies
Put strategies into
resources with the
opportunities and action
Evaluate, modify,
threats in its
environment or change
strategy

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Strategy vs. Strategic
Management
Strategy involves Strategic
Organizations management
goals Planning
Goal-oriented
Organizing
action
Related decisions Implementing

and actions Controlling


Internal strengths
External
opportunities and
threats

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Basics of Strategic
Management
Four aspects that set strategic
management apart
Interdisciplinary
Capstone of the Business degree
External focus
Competition
Internalfocus
Future direction

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Strategic Management
Process
Analyzing Deciding Putting Evaluating and
Current on Strategies Changing
Situation Strategies in Action Strategies
Situation Strategy Strategy Strategy
Analysis Formulation Implementation Evaluation
External
Analysis
Chapter 2 Chapter 3 Functional Competitive
Chapter 5 Chapter 6

Internal
Analysis Corporate
Chapter 4 Chapter 7

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Strategic Management
Process
Situation Analysis
Scanning & evaluating context
Internal and External environments

Strategy formulation
Functional
Competitive
Corporate strategies

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Levels of strategy
Corporate
What direction are we going and
what business(es) are we in or do we
want to be in?

Competitive:
How are we going to compete in
our chosen business(es)?

Functional
What resources and capabilities do
we have to support the corporate and
competitive strategies?

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Strategic Management
Process
Strategy implementation
Process of putting strategies into
action
Consider implementation at each level

Strategy evaluation
Was the strategy effective?
Close the loop

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Who does strategy?

The Role of the Board of Directors


Elected representatives of the companys stockholders
Legally obligated to represent and protect stockholders
The Role of Top Management
Responsible for decisions and action of every employee
Providing effective leadership
Other Organizational Employees
Implement put the strategies into action and monitor
performance
Evaluatedo the actual evaluations and take necessary
actions

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The Role of the Board of
Directors
Review and approve strategic goals and plans
Review and approve organization's financial
standards and policies
Approve an organizational philosophy
Monitor organizational performance and
regularly review performance results
Select, evaluate, and compensate top-level
managers
Develop management succession plans
Monitor relations with shareholders and other
key stakeholders
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Who is on the board of
directors?
Chairman of the board
Chief Executive officer (CEO)
President
Chief Operating officer (COO)
Other Cs
Chief Financial officer
Chief Information officer
Inside board members
Outside board members

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The Role of Top
Management
Determining
Organizational
Purpose or Vision

Establishing Exploiting and


Appropriately Maintaining
Balanced Controls Core Competencies

Effective
Strategic
Leadership
Developing
Emphasizing Human Capital
Ethical Decisions
and Practices Creating and
Sustaining Strong
Organizational Culture
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Strategic Management
Principle

Effective strategy-making
begins with a vision of where
the organization needs to
head!

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Elements of a Strategic Vision

Use the mission statement as a


starting point

Develop a strategic vision that


spells out a course to pursue

Communicate the vision in a


clear and exciting manner
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Characteristics of a
Mission Statement

Defines current business activities


Highlights boundaries of current
business
Conveys
Who we are,
What we do, and
Where we are now

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Characteristics of a
Mission Statement
Company specific, not generic so
as to give a company its own identity
A companys mission is not to
make a profit !
The real mission is alwaysWhat
will we do to make a profit?

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Examples of Missions

Microsoft
Corporation

Empower people through great


software anytime, anyplace,
and on any device.
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Examples of Missions

Otis Elevator

Our mission is to provide any


customer a means of moving people
and things up, down, and sideways
over short distances with higher
reliability than any similar enterprise in
the world.
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Examples of Mission

American Red Cross

The mission of the American Red Cross is


to improve the quality of human life; to
enhance self-reliance and concern for
others; and to help people avoid, prepare
for, and cope with emergencies.
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Ritz-Carlton Hotels

The Ritz-Carlton Hotel is a place where the


genuine care and comfort of our guests is our
highest mission.
We pledge to provide the finest personal
service and facilities for our guests who will
always enjoy a warm, relaxed yet refined
ambiance. The Ritz-Carlton experience enlivens
the senses, instills well-being, and fulfills even
the unexpressed wishes and needs of our
guests (vision)
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Characteristics of a
Strategic Vision
Charts a companys future strategic
course
Defines the business makeup for 5
years (or more)
Specifies future technology-
product-customer focus

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Communicating the Vision

An exciting, inspirational vision


Challenges and motivates workforce
Arouses strong sense of organizational
purpose
Induces employee buy-in
Galvanizes people to live the business

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Value of a Well-Conceived
Strategic Vision and Mission

Crystallizes long-term direction


Reduces risk of rudderless
decision-making
Conveys organizational
purpose and identity
Keeps direction-related actions of lower-
level managers on common path
Helps organization prepare for the future

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Concept of Strategic Intent

A company exhibits strategic


intent when it relentlessly
pursues an ambitious strategic
objective and concentrates its
competitive actions and energies
on achieving that objective!

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Lessons about change: Built
to last
Understand why superior companies
are better than peer companies which
are better than most companies
$1 invested in stock market in 1926
yields
$420 in all other companies
$960 in peer companies
$6360 in superior (visionary) companies

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Who are these companies
Visionary Peer companies
3M Norton
Boeing McDonnell Douglass
GE
Westinghouse
IBM
Burroughs
Zenith
Motorola
Melville
Nordstrom
Colgate
P&G Kenwood
Sony Ames
Wal-mart

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So what did they find?
Great companies had BHAG
Big Hairy Audacious Goals
What ever your values are stick with
it
Deal with the AND, not the OR

Seek Alignment (internally)

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Characteristics of Strategic
Intent

Indicates firms intent to stake out a


particular position over the long-term
Involves establishing a BHAG - big, hairy,
audacious goal
Signals relentless commitment to winning

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Example of BHAG

General Electric
All businesses are held to a standard of
being #1 or #2 in their industries as well
as achieving good business results
John F. Kennedy
Put a man on the moon and return safely
by the end of the decade

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Crafting a Strategy
An organizations strategy deals with
How to make the strategic vision a reality
and achieve target objectives
The game plan for
Pleasing customers
Conducting operations
Building a sustainable competitive advantage

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Take Aways
Strategy has become more important
Information, technology, globalization
Key ideas in the strategy making process
Mission (who are we)
Vision (where do we want to go)
Strategic intent / BHAG (major goal)
Strategy (specific plan at different levels)
Ethics (code of conduct or values)

Linkage & communication are important


Avoid mission creep!
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Take Aways

Where strategy came from


Strategic Management Process

Who does strategy

Next week
Read Airline Simulation Book (1-35)
Bring Laptop

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