Strategic Management

Course In charge
Dr. Mustaghis-ur-Rahman
Organizational Management
vs
Strategic Management
Definition

“Management is the process of designing and

maintaining an environment in which
individuals, working together in groups,
efficiently accomplish selected aims”.

Harold Koontz 1976

Definition

To manage is to forecast, to plan,to

Organize, to coordinate and to control.
Henri Fayol
 Strategy

What is Strategy?
 What is Strategy?

1) Strategy is a competitive moves and

business approaches to produce successful
performance

2) Strategy is Management’s game plan for

running the business, strengthening firm’s
competitive positions, satisfying customers
and achieving performance targets
Strategic Questions
What are the strategic questions?
Strategic questions are:

1) Where are we now?

2) Is the status acceptable? If no
3) Where do we want to go?
4) What specific actions are required and
what are the risks and pay offs
Strategic Management
 Strategic Management

By combining the two terms ‘Strategy’

and ‘Management’. A new discipline
emerges “Strategic Management”
Strategic Management
 Strategic Management

Strategic Management is the set of

managerial decisions and actions that
determines the long run performance of a
corporation
Composition
 Composition of
Strategic Management

Strategic Management is Composed

Of:
Environmental scanning
Strategy formulation
Strategy implementation
Evaluation and control
Tasks/Functions
 Five Tasks/functions of SM
1) Forming a strategic vision
2) Setting objectives
3) Crafting a strategy to achieve the
desired outcomes
4) Implementation of the chosen strategy
5) Evaluating performance and initiating
corrective adjustments
Five Tasks/functions of SM
 Strategy

What is Strategy?
 Strategic Management

benefits:
 The units
 The departments
 The enterprise as a whole
moves the business into a favorable
position
is long term in scope
finds multiple solutions
Supported by strategic business partners
 Difference between ‘Organizational
Management’ and ‘Strategic Management’?
 Difference between OM and SM

OM SM
Definition Definition
To manage is to forecast, to Strategic Management is the set
plan, to organize, to of managerial decisions and
coordinate and to control. actions that determines the long
Composition: run performance of a corporation
To forecast, To Plan Composition:
To Organize Environmental scanning
To Coordinate Strategy formulation
To Control Strategy implementation
Evaluation and control
Nature Nature
Administrative Competitive
Output Output
Efficiency Effectiveness
 Difference between OM and SM

Efficiency
Productivity
Effectiveness
What is Vision and Mission?
 Vision

Vision is a “description of a desirable

situation for the organization or individual”.
e.g
Where should the company be headed and
what kind of company do we want to
become in future
 Mission

It answers the question, ‘What does the

organization exist for’
Or
What an organization is doing to realize the
vision
Definition of Objectives
 Definition of Objectives

Objectives are the end results of

planned activity. They state WHAT is to
be accomplished by WHEN.
 Why SM is an ongoing process?

whether to continue or change the company’s

vision, objectives, Strategy and implementation
approaches need change and improvement.
This is why this is an ongoing process
Who performs the tasks of SM?
Who performs the tasks of SM?

CEOs and other senior managers

Managers who have profit and loss

responsibilities

Functional Areas Mangers

Managers of major operating units

 Approaches of SM

The Chief Architect Approach

The delegation approach
The collaborative approach
The corporate intrapreneur approach
Establishing Company’s Direction
 Establishing Company’s Direction

How to Set Company’s Direction?

Company’s direction is guided by its strategic

vision and mission, setting objectives, and
crafting strategy for its operations
 Establishing Company’s Direction:
Developing Strategic Vision
Managers have three discernible tasks in forming a
strategic vision and making a useful direction.

1. Coming up with a mission statement that defines

what business the company is presently in and
conveys the essence of who we are, what we do,
and where we are now

2. Using the mission statement as a basis for deciding

on a long term course, making choices about “
where we are going” and charting a strategic path
for the company to pursue

3. Communicating the strategic vision in clear, exciting

terms that arouse organization wide commitment
Strategic Mission Statement
 Strategic Mission Statement

A strategically revealing mission statement

incorporate three elements:

1. Customer needs, or what is being satisfied

2. Customer groups, or who is being satisfied
3. The company’s activities, technologies, and
competencies, or how the enterprise goes
about creating and delivering value to
customers and satisfying their needs
A broad or narrow business definition
and mission
 A broad or narrow business definition and mission
Broad/Narrow Definitions

Furniture /Wrought-iron Furniture Business

Telecommunications/Long Distance Telephone
Service Beverage/Soft Drink Business
Global Mail Delivery/Over-night Package Delivery
Business
Travel and Tourism/Caribbean Cruise Ship Business
Sample Mission Statements: example to
Critique

PFIZER INC
RITZ-CARLTON HOTELS
APPLE COMPUTER
THE GILLET COMPANY
Critically evaluate the caliber of the four
mission statements in of the above
companies given on page 37/Handouts
From Mission to Strategic Vision:
From Mission to Strategic Vision

A mission statement highlighting the

boundaries of the company’s current business
is a logical vantage point from which to look
down the road, decide what the enterprise's
business makeup and customers focus need
to be and chart a strategic path for the
company to take
 Developing Strategic Vision

Developing strategic vision is to think creatively

about how to prepare a company for the future
 Developing Strategic Vision

Strategic Vision

Strategic Vision is an exercise in thinking

carefully about where a company needs to
head to be successful. It involves selecting
the market arenas in which to participate,
putting the company on strategic path, and
making a commitment to follow that path.
 From Mission to Strategic Vision
While defining a vision or choosing company’s future
path requires reasoned answers to the following
questions:
1. What Changes are occurring in the market arenas
where we operate and what implications do these
changes have for the direction in which we need to
move?
2. What new or different customer needs should we be
moving to satisfy?
3. What new or different buyer segments should we be
concentrating on?
4. What new geographic or product markets should we be
pursuing?
5. What should the company’s business makeup look like
in five years?
6. What kind of company should we be trying to become?
Communicating the Strategic Vision
Communicating the Strategic Vision

Communicating the strategic vision down the

line to lower-level managers and employees
is almost as important as setting the
organization’s long term direction. People
need to believe that the company’s
management knows where it is trying to take
the company and what changes lie ahead
both externally and internally. It also
breakdown resistance to a new strategic
vision
Advantages of Communicating the
Strategic Vision :

The real pay offs of a well-conceived, well worded vision:

1. It crystallizes senior executive’s own views

about the firm’s long term vision

2. It reduces the risk of rudderless decision

making

3. It conveys organizational purpose in ways

that motivate organization members to go
all out
The real pay offs of a well-conceived, well
worded vision:

4. It provides a beacon that lower-level managers

can use to form departmental strategies that are
in sync with the company’s overall strategy

5. It helps an organization prepare for the future

When these five benefits have been realized, the

first step in organizational direction setting is
successfully complete
Establishing Objectives: The second
direction setting task
 Establishing Objectives

Setting objectives converts the strategic

vision into specific performance targets and also
objectives represent a Managerial commitment
to achieving specific outcomes and results
 Establishing Objectives

Objective setting needs to be more of a top-

down than a bottom-up process in order to
guide lower-level managers and
organizational units towards outcomes that
support the achievement of overall business
and company objectives.

This is also needed at all org levels

 Establishing Objectives

See some strategic objectives on Page 44

Discuss, how it is different from Vision and

Mission statement?
 Kinds of Objectives to Set
There are two types of key result areas stand
out:

Financial performance
Strategic Performance

Please see the examples of both types of

Objectives on page 43. Also go through some of
the strategic objectives of some corporate
organizations
 Strategic Objective vs Financial
Objectives

Discussion:

Which do you think to give priority?

 Long and Short Range Objectives

What is long and short range objectives?

And how stretchable an strategic objectives

should be?
Crafting A Strategy: The third
direction-setting task
 Crafting A Strategy: The third
direction-setting task

An organization’s strategy deals with how to

make management’s strategic vision for the
company or a reality – it represents the game
plan for moving the company into an
attractive business position and building a
sustainable competitive advantage
 Crafting A Strategy
Strategy making is all about ‘How’ and What
How to achieve performance targets
How to out compete rivals
How to achieve sustainable competitive
Advantage
How to strengthen the enterprise’s long term
business positions
How to make management’s strategic vision
for the company a reality
It is also action oriented; it concerns what
to do, when to do and how to do
Pattern of strategy development?
Pattern of strategy development?

An organizational strategy evolves over time,

emerging from the patterns of actions already
initiated, the plans managers have fresh
moves and the ongoing need to react to new
or to unforeseen developments
 Pattern of strategy development?

The strategy making pyramid

In a diversified enterprise, strategies are

initiated at four distinct organizational
levels:
As a whole; Corporate Strategy
Business Strategy
Functional Strategy
Operating Strategy
Pattern of strategy development?

Corporate Strategy
It is the over all managerial game plan for a
diversified company; it is to establish business
positions in different industries
Pattern of strategy development?

Business Strategy
It refers to the managerial game plan for a
single business; it is to produce successful
performance in one specific line of business
Pattern of strategy development?
Pattern of strategy development?
Functional Strategy
It refers to the managerial game plan for a particular
functional activity, business process. Or key
department within a business – Marketing, product
development, etc. It supports the business strategy

Operating Strategy
It is concerned with narrower strategic initiatives and
approaches for managing key operating units :
Plants, sales districts, distribution centres and for
handling daily operating tasks with strategic
significance: advertising campaigns, material
purchasing, inventory control, maintenance etc
Pyramid of Strategy development
The factor that shape a company’s
strategy
?
 External Environment………..

All organizations operate within external

Environment prevailing in that society. So
these environments dictate what an
organization can do and can not do or
some time how to do. Therefore, there is
a need to the external environment needs
to be considered while making strategy at all
org. level
Linking Strategy with Ethics and
Social responsibilities

What is ethic?
Ethics concern human duty and the principles
on which this duty rests.
Ethical and moral standards go beyond the
law and the language “Thou shalt not”
 Linking Strategy with Ethics and
Social responsibilities

Ethical Duty of Business

Every business has an ethical duty to
each of five constituencies:
1) Owners/Shareholders
2) Employees
3) Customers
4) Suppliers and the
5) Community at large
 Test of a winning strategy

Three tests can be used to evaluate the

merits of one strategy over the others:

The goodness of fit test

The competitive advantage test
The performance test