Strategic Management

An overview of the Subject –

Conceptualize the Managerial Policy

Welcome to all of you!

Expectations for the Course:
You Will…
Struggle with figuring out what to do
Be prepared to participate in planning for your
own firms
Study real business situation
 An Overview of the Subject
• Introduction to Strategic Management - Conceptualize the
Managerial Policy
• Business Vision and Mission
• The External Assessment
• The Internal Assessment
• Strategies in Action
• Strategy Analysis and Choice
• Implementing Strategies: Management Issues
• Implementing Strategies: Marketing Issues
• Strategy Review, Evaluation and Control
• Business Ethics/Social Responsibility Sustainability
• Global/International Issues
• Implementing Strategy Through Action Plans
 Topics to be discussed
Introduction to Strategic Management
Why Strategic Management is important?
Strategic Management: Key Concepts
Design a business plan for you/organization
 Learning Objectives
Understand the types of strategic decisions for which
different managers are responsible
Describe a comprehensive model of strategic
decision making
Appreciate the importance of strategic management
as a process
Give examples of strategic decisions that companies
have recently made
Explain the differences between strategic and non-
strategic decisions, and between functional, business-
level, and corporate-level strategy
Distinguish between different modes of strategy-making
and identify which modes are prevalent in a particular
organization
Explain the concepts of fit, distinctiveness, and
sustainability and their importance in assessing the
viability of a strategy
Discuss the role that risk, uncertainty, and trade-offs
play in strategic decisions
Contrast the objectives of different stakeholder groups
and explain the manner in which they influence strategy,
and how this might vary between different cultures
Discuss the role of corporate social responsibility (CSR)
and business ethics in corporate strategy
Explain how strategies can go wrong.
What is Strategic Management?

The set of decisions and actions

that result in the formulation and
implementation of plans designed to
achieve a company’s objectives.
 Definitions & Concepts –
Strategic Management
Strategic Management is concerned with:
making decisions about an organization’s future
direction for growth, renewal and transformation
and implementing those policies. The set of
managerial decisions and actions that determines the
long-run performance of an organization.
The strategic management process can be broken into
two phases – strategic planning and strategy
implementation
Critical Tasks of Strategic Management
1 Formulate the company’s mission
2 Develop company profile, reflecting its internal conditions

3 Assess company’s external environment

4 Analyze company’s options
5 Identify most desirable options
6 Select long-term objectives and grand strategies
7 Develop annual objectives and short-term strategies
8 Implement the strategic choices
9 Evaluate success of the strategic process
Strategic Management achieves a firm’s
success through integration ––

Management Marketing

Finance/Accounting Production/Operations

Research & Development MIS

Strategy Formulation
Vision & Mission

External Opportunities & Threats

Internal Strengths & Weaknesses

Long-Term Objectives

Alternative Strategies

Strategy Selection
Issues in Strategy Formulation

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New
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
International
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
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ventures

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Strategy Implementation

Annual Objectives

Policies

Employee Motivation

Resource Allocation
Strategy Implementation

Action
ActionStage
Stageof
ofStrategic
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
Most
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
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
Consensus
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Strategy Evaluation

Internal Review

External Review

Performance Metrics

Corrective Actions
 Strategy Evaluation

Final
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New
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 Prime Task of
Strategic Management
Peter Drucker: -- Think through the overall
mission of a business. Ask the key question:
“What is our Business?”
Integrating Intuition and Analysis
The strategic management process attempts to
organize quantitative and qualitative
information under conditions of uncertainty
Integrating Intuition and Analysis
Intuition is based on:
– Past experiences
– Judgment
– Feelings

Intuition is useful for decision making in:

 Conditions of great uncertainty

 Conditions with little precedent

Integrating Intuition & Analysis

Intuition & Judgment

Involve Management at all levels

Influence all Analyses

Integrating Intuition & Analysis

Analytical Thinking

Intuitive Thinking
 Adapting to Change
Organizations must monitor events
• On-going process
• Internal and external events
• Timely changes
Strategic Management is Gaining and
Maintaining Competitive Advantage
“Anything that a firm does especially
well compared to rival firms”
 Achieving Sustained Competitive
Advantage

1. Adapting to change in external trends,

internal capabilities and resources

2. Effectively formulating, implementing &

evaluating strategies
 Adapting to Change – Key Strategic
Management Questions
• What kind of business should we become?

• Are we in the right fields

• Are there new competitors?

• What strategies should we pursue?

• How are our customers changing?

 Key Terms
Strategists – Firm’s success/failure
Various Job Titles:

Chief Executive Officer (CEO)

Chief Strategy Officer (CSO)
President
Owner
Board Chair
Executive Director
 Key Terms
Vision Statement –
What do we want to become?
Mission Statement –
What is our business?
 Definitions & Concepts –
Mission/Vision
• Mission is the reason for which the organization
exists & what it will do. It describes the
products/services to be supplied, the markets to be
served and the technology to be applied, if critical.

• Vision Statement answers the question, What do we

want to become? It is futuristic and long term.
Strategic Management Model
Identify Existing --
Vision
Mission
Objectives
Strategies
 Key Terms
Strategies
Some Examples
Geographic expansion
Diversification
Acquisition
Market penetration
Retrenchment
Liquidation
Joint venture
 Key Terms
Annual Objectives

Short-term milestones that firms must

achieve to attain long-term objectives
 Key Terms
Policies
Means by which annual objectives will be
achieved
 Strategy: Levels and Dynamics
1. Corporate: general perspective towards growth and
management of various business units, product lines,
functional areas
2. Business: Strategic Business Units (SBUs), focus on
improvement of competitive position of products and
services
3. Functional: focus on marketing, R & D, etc. to
achieve SBU and overall corporate objectives.
 Three Levels of Strategy
Corporate level: board of directors, CEO &
administration [Highest]
Business level: business and corporate managers
[Middle]
Functional level: Product, geographic, and functional
area managers [Lowest]
Why is strategic management
important?
Gives everyone a role
Makes a difference in performance levels
Provides systematic approach to uncertainties
Coordinates and focuses employees
Basics of Strategic Management
Four aspects that set strategic management apart
– Interdisciplinary
• Capstone of the Business degree
– External focus
• Competition
– Internal focus
– Future direction
Strategic Management Process
 Strategic Management Process
Step 1: Identifying the organization's current
mission, objectives, and strategies
◦ Mission: the firm’s reason for being
 Who we are,
 What we do, and
 Where we are now
◦ Goals: the foundation for further planning
 Measurable performance targets
Step 2: Conducting an external analysis
◦ The environmental scanning of specific and general
environments
◦ Focuses on identifying opportunities and threats
Strategic Management Process (cont’d)
Step 3: Conducting an internal analysis
◦ Assessing organisational resources, capabilities,
activities and culture:
 Strengths (core competencies) create value for the customer
and strengthen the competitive position of the firm.
 Weaknesses (things done poorly or not at all) can place the
firm at a competitive disadvantage.
Steps 2 and 3 combined are called a SWOT analysis
(Strengths, Weaknesses, Opportunities, and Threats)
Strategic Management Process (cont’d)
• Step 4: Formulating strategies
– Develop and evaluate strategic alternatives
– Select appropriate strategies for all levels in the
organisation that provide relative advantage over
competitors
– Match organisational strengths to environmental
opportunities
– Correct weaknesses and guard against threats
Strategic Management Process (cont’d)
Step 5: Implementing strategies
◦ Implementation: effectively fitting organizational
structure and activities to the environment
◦ Effective strategy implementation requires an
organisational structure matched to its requirements.

Step 6: Evaluating results

◦ How effective have strategies been?
◦ What adjustments, if any, are necessary?
Levels of strategy
Alternative Strategic Management Structures
 Strategic Management Process
• The basic components of the models used to
analyze strategic management are similar
• Strategic management is a process—a flow of
information through interrelated stages of
analysis toward the achievement of some goal
Phases of Strategic Management
Process
Formulation

Implementation

Control
Strategic Management Model
Strategic Management Components
• Company Mission • Internal Analysis
• External Analysis • Strategic Analysis &
• Long-Term Objectives Choice
• Short-Term Objectives • Generic & Grand
• Policies Empowering Action Strategies
• • Functional Tactics
Strategic Control &
Continuous Improvement • Restructuring,
Reengineering &
Refocusing
 Key Terms
Opportunities and Threats (External)
• Largely beyond the control of a single
organization
 Key Terms
Opportunities & Threats (External)
Analysis of Trends:
Economic
Social
Cultural
Demographic/Environmental
Political, Legal, Governmental
Technological
Competitors
 Key Terms
Opportunities & Threats
Environmental Scanning (Industry Analysis)
– Process of conducting research and gathering and
assimilating external information
 Key Terms
Opportunities & Threats
Basic Tenet of Strategic Management
Take
Takeadvantage
advantageof
of
External
ExternalOpportunities
Opportunities

Strategy Formulation

Avoid/minimize
Avoid/minimizeimpact
impactof
of
External
ExternalThreats
Threats
 Key Terms
Strengths & Weaknesses (Internal)
Controllable activities performed
especially well or poorly
 Key Terms
Strengths & Weaknesses (Internal)
Typically located in functional areas of the firm
Management
Marketing
Finance/Accounting
Production/Operations
Research & Development
Computer Information Systems
 Key Terms
Strengths & Weaknesses
Assessing the Internal Environment
Financial Ratios

Performance Metrics
Internal Factors
Industry Averages

Survey Data
 Key Terms
Long-term Objectives

 Mission-driven pursuit of specified results more

than one year out
 Key Terms
Long-term Objectives
Essential for ensuring the firm’s success
Provide direction
Aid in evaluation
Create synergy
Focus coordination
Basis for planning, motivating, and
controlling
Comprehensive strategic management model
External
Audit

Chapter 3

Long-Term Generate, Implement Implement Measure &

Vision
Objectives Evaluate, Strategies: Strategies: Evaluate
&
Select Mgmt Issues Marketing, Performance
Mission
Strategies Fin/Acct,
R&D, CIS
Chapter 2 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9

Internal
Audit

Chapter 4
Strategic Management Model
Strategic Management Process
Dynamic & Continuous
More formal in larger organizations
Strategic Management Model
Audit external environment

Audit internal environment

Establish long-term objectives

Generate, evaluate & select strategies

Implement selected strategies

Measure & evaluate performance

Benefits of Strategic Management
• Proactive in shaping firm’s future

• Initiate and influence firm’s activities

• Formulate better strategies
•Systematic, logical, rational
Benefits of Strategic Management
Financial Benefits
• Improvement in sales

• Improvement in profitability
• Productivity improvement
Benefits of Strategic Management
Non-Financial Benefits
• Improved understanding of competitors strategies
• Enhanced awareness of threats
• Reduced resistance to change
• Enhanced problem-prevention capabilities
 Benefits of Strategic Management
1. Identification of Opportunities
2. Objective view of management problems
3. Improved coordination & control
4. Minimizes adverse conditions & changes
5. Decisions that better support objectives
6. Effective allocation of time & resources
7. Internal communication among personnel
8. Integration of individual behaviors
9. Clarify individual responsibilities
10. Encourage forward thinking
11. Encourages favorable attitude toward change
12. Provides discipline and formality to the management of the business
Why Some Firms Do No Strategic
Planning
Poor reward structures
Fire-fighting
Waste of time
Too expensive
Laziness
Content with success
Why Some Firms Do No Strategic
Planning
Fear of failure
Overconfidence
Prior bad experience
Self-interest
Fear of the unknown
Suspicion
 Business Ethics & Strategic
Management
Business Ethics defined –
 Principles of conduct within organizations
that guide decision making and behavior
Business Ethics & Strategic
Management

Good business ethics –

 Prerequisite for good strategic management
Business Ethics & Strategic
Management
Code of business ethics –
 Provides basis on which policies can be devised
to guide daily behavior and decisions in the
workplace
The Nature of Global Competition

Strategy implementation may be difficult

 Cultural differences
– Norms
– Values
– Work ethic
 What is a BP ?
 A written document that
(1)outlines an organization's overall direction,
philosophy, and purpose
(2)examines its current status in terms of its
strengths, weakness, opportunities, and threats
(3)sets long-term objectives, and
(4)formulates short-term tactics to reach them.
 The Strategic Mind behind BP
Focus the strategic parts of your plan related to:
Time and Energy to attain goals (predefine what is to
be achieved)
Resource allocation (Count chickens before they
hatch don’t take in too much. Promise what can be
delivered)
Your Business and Competition (Analyze your
strengths and weakness)
Employee communication (nice trick, don’t take the
blame over you)
 Extended Tricks
Divide the work. Take The Correspondence.
Editable BP – make BP in revisions as you go in
depth, make it finalized when you are sure about
zero loopholes
Make another BP as a Plan 2, so that anytime
you can seek in more resource (handy but a
tough trick)
 How to Draft a Simple BP
Work on These lines:
Vision of organization
Goal of future
Clients, Users, Target market
Edge of you / your team / company
Barriers to achieve the target
Better serve clients..how ??
Ad more to target..possible ??
Adding new customers / users / target market share
Accountings
Starting of the plan dates
In theory, there is no difference between
theory and practice. But, in
practice, there is."

- Jan L.A. van de Snepscheut

 Simply Stated...
Make your points clearly and crisply.
 Market Analysis
• It should be as useful for you as it is for the
investor.
– Situation Analysis
– Market Opportunity
– Competitive Factors
– Technical Feasibility
– Risk/Reward Assessment
 The Product
• Know when “less is more”
• Readability geared for layman
• Deep technical points can be reserved for an
appendix

“Market Driven Engineering”