Strategic Management: An Overview

Dr A Jagan Mohan Reddy Institute of Public Enterprise

Strategic Management
Why do we exist? (Mission/Vision) Where are we? (Situational Analysis) Where do we want to be? (Goals/Objectives) How are we going to get there? (Who, Resources, When, Success/Failure)

Mission/Vision
Top Management Establishes the Mission/Vision Involves thinking strategically about Future of company Where are we going? Tasks include Creating a roadmap of the future Deciding future business position to stake out Providing long-term direction Giving company a strong identity

Strategy: Two-Way Process

Entity - Level Managers Business - Level Managers
Top Down Bottom Up Entity Strategy
Two-Way Influence

Business Strategies
Two-Way Influence

Functional Managers Operating Managers

Functional Strategies
Two-Way Influence

Operating Strategies

Situational Analysis
Current and Future Analysis of factors that can affect the future
Three Considerations External environment Internal environment How well are we doing now?

External Environment
. Economic conditions . Legislative and regulatory conditions . Political conditions . Legal environment . Technology . Competition . Markets . Suppliers . Other
1. Identify those forces likely to exert greatest influence over next 1 - 3 years - Usually no more than 3 - 4 factors quality as real drivers of change 2. Assess impact

Internal Environment
. Skills, expertise, human capital . Facilities and equipment . Financial resources . Customers . Products/services . Technology . Quality . Alliances . Internal politics

S O

W T

S W O T represents the first letter in S trengths W eaknesses O pportunities T hreats A core competence is a well-performed internal activity that is central to a companys competitiveness and viability A distinctive competence is a competitively valuable activity that a company performs better than its rivals

How Well Are We Doing Now?

Two Key Steps
Qualitative Assessment -What is the Strategy? Company Scope Recent Accomplishments Alignment with functional strategies, goals and objectives Quantitative Assessment -What are the Results? Measurement against financial and strategic objectives?

Strategy to Tactics

Vision Entity Goals Business Goals Strategic Initiatives Programs Projects Deliverables

Multiple Initiatives

Multiple Projects

Organizational Vision

Strategic Initiative 1

Strategic Initiative N

Program

Program

Program

Program

Project 1

Project 3

Project 1

Project 3

Project 1

Project 2

Project 1

Project 3

Project 2

Project 2

Prioritize Dont over commit resources

Project 2

Goals/Objectives
without the last minute nothing would ever get done

Setting Goals/Objectives
Converts strategic mission/vision, and situational assessment into specific performance targets Creates yardsticks to track and measure performance Pushes company to focus on results Helps prevent complacency and coasting

Goals/Objectives

Objective-setting process is mostly top-down, not bottom-up!

1. First, establish organization-wide objectives and performance targets 2. Next, set business objectives 3. Then, establish functional and departmental objectives 4. Individual objectives are established last

Top Down
Entity Objectives Business Objectives

Functional Objectives

Operating Objectives

Goals/Objectives
Characteristics of Goals/Objectives
Represent commitment to achieve specific performance targets Well-stated objectives are Quantifiable Measurable Contain a deadline for achievement Communicated in writing and spell-out how much of what kind of performance by when and by who Measure performance

Short or Long Range

Short range objectives lay the foundation for long range objectives
Short-Range objectives Targets to be achieved soon Serve as stair steps for reaching long-range performance Long-Range objectives Targets to be achieved within 3 to 5 years Prompt actions now that will permit reaching targeted long-range performance later

Planning vs. Executing

Crafting the Strategy
Primarily a market-driven activity Successful strategy development depends on Business vision Perceptive analysis of the external and internal situation Attracting and pleasing customers and stakeholders Outcompeting rivals Forging a competitive advantage Prioritizing

Executing the Strategy

Primarily an operations-driven activity Successful strategy execution depends on managements ability Direct organizational change Manage multiple initiatives Good organization-building and people management Creating and nurturing a strategy-supportive culture Continuous improvement Getting things done and consistently deliver good results Is tougher than crafting strategy

Executing
Executing Strategic Initiatives takes adept leadership to
Convincingly communicate reasons for the new strategy Overcome pockets of doubt and resistance to change Build consensus and enthusiasm Resolve priority conflicts Launch and manage a variety of strategic initiatives at the same time Secure commitment of concerned parties Get all implementation pieces in place and coordinated Integrate many different departments to smoothly function as a whole

A Team Effort
Implementing and executing strategy involves a companys whole management team and all of its employees Just as every part of a watch plays a role in making the watch function properly, it takes all pieces of an organization working cohesively for a strategy to be well-executed Top-level managers must lead the process and orchestrate major initiatives But they must rely on the cooperation of middle and lower-level managers to see that things go well in the various parts of the organization and on employees to perform their roles competently on a daily basis

How are we going to get there?

Don t confuse a plan with execution. execution. A plan is good intentions. You don t win with good intentions!

Management Cycle
Set Goals Report Shared Info Analyze
Variances Effectiveness Modifications Resources Constraints Viability

Model

Plan Monitor
Performance Efficiency Benchmarking Budgeting Resource Allocation Time Frame

Who?

Ultimately, someone has to be responsible

Who?
Objectives (projects) may be departmental or company wide. In either case, selection of the project participants is extremely important. . Team members .. Departmental .. From many departments within the company . Matrix organization management support project member may be assigned to the project effort on a part time basis he/she may wind up with multiple supervisors conflicts will have to be resolved. . Project manager/leader

Project Manager
The project manager is key to the objective/project success. Many hard decisions will have to be made and it will test their leadership abilities.

Work Human Resources Communications

Quality Time Financial Resources

Project Manager Traits

Create vision Execute vision Motivator Communicator Empathetic, yet results oriented Ethical Focused Tenacious Creates infrastructure for success Manages expectations Understands business risk Knows when to cut losses Asks the hard questions Answers the hard questions

Project Plan
Work Breakdown
Project
Sub-components are identified Resources and responsibilities are allocated and assigned Timelines are established for completion Monitoring schedule is established Reporting requirements are defined Project and sub-component success are established

Communications/Monitoring
Effective communications and monitoring of plans is critical to the successful implementation of strategic initiatives.

Gantt Chart
Work Breakdown Tasks

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

Plan

Actual

Unsuccessful Projects
Enthusiasm Disillusionment Panic

Punishment of the Innocent Search for the Guilty

Praise and Honors for the Nonparticipants

Successful Projects

A management system should provide a framework for picturing the major factors in the situation as an integrated whole. It should be realistic. It should simplify the complex rather than complicate the simple. George Odiorne

MBO
Management by Objectives
Peter Drucker, 1954, The Practice of Management Is a systematic and organized approach that allows management to focus on achievable goals and attain the best possible results from available resources Aims to increase individual and organizational effectiveness by aligning organizational goals and subordinate objectives Clarifies and quantifies objectives to allow for monitoring, evaluation, and feedback throughout the hierarchy of objectives

Hierarchy of Objectives
1. Socio-economic purpose 2. Mission 3. Overall organization objectives 4. More specific overall objectives 5. Division objectives 6. Department and unit objectives 7. Individual objectives a. Performance b. Personal development

Setting Objectives
Objectives
are set jointly throughout the organization by the superior and subordinate written and clearly stated with emphasis on verifiable results rather than activities and personality should outline results in quantifiable terms for both performance and personal development (e.g. Quantity, Quality, Time. Cost, Skills, etc.) should be challenging yet reasonable should not neglect other important aspects of a job that can not be quantified

Control & Appraisal

Control
refers to the measurement of organizational performance

involves the measurement and, if necessary the correction of performance

Appraisal
refers to the evaluation of individual performance

Appraisal
is not a fault finding session that both the superior and subordinate dislike is a positive, constructive, and oriented toward the future.
focuses on performance, not personality supervisor self control rather than control responsibility for evaluation and development rests primarily with subordinate not supervisor an opportunity to learn from the past, but to focus on the future amount of time should be spent on new objectives a great

shared, rational analysis of performance by the supervisor and subordinate

Benefits of Strategic Management

Good strategic thinking and good management of the strategy-crafting, strategy-executing process
guides entire firm regarding what it is trying to do and to achieve helps unify numerous strategy-related decisions across the company creates a proactive atmosphere promotes development of an evolving business model focused on bottom-line (financial viability) success provides basis for determining how best to allocate company resources

Strategic Planning Measurement & Control Goals & Objectives

General and verbally communicated Written & measurable with target dates Written & measurable with target dates & used to evaluate personnel performance

36% 33%

28%

Not clearly established 3%

Key Findings (Goals)

Companies who perceive they have more sophistication in their planning process tend to have more clearly defined measurable, performance objectives.

Performance Goals

Perceived Sophistication

Companies with more strategic planning knowledge tend to have more clearly defined measurable, performance objectives.

Performance Goals Strategic Planning Knowledge

Key Findings (Performance)

Performance Clearly Defined, Measureable Performance Goals

Companies with more clearly defined measurable, performance objectives tend to meet or exceed their expectations

Key Findings (Improved Knowledge)

Regardless of current performance all companies felt that better performance results would be obtained with increased knowledge of the strategic planning discipline

Performance

Increased Knowledge of Strategic Planning

Knowledge Impact
59%

Needs Improvement
30%

11% 0% 0% Improve Significantly Improve Moderately Improve Slightly No Impact Make it worse

Knowledge Impact Met Expectations

40% 29% 26%

6% 0%

Improve Significantly Improve Moderately Improve Slightly No Impact Make it worse

Knowledge Impact Exceeded Expectations

41%

38%

19% 3% 0% Improve Significantly Improve Moderately Improve Slightly No Impact Make it worse

Knowledge Impact
57%

Superior
43%

0% 0% 0%

Improve Significantly Improve Moderately Improve Slightly No Impact Make it worse

Knowledge Impact Did Not Do

45%

27% 27% 0% 0% Improve Significantly Improve Moderately Improve Slightly No Impact Make it worse

Overall Knowledge Impact

Improve Significantly Improve Moderately Improve Slightly No Impact Make it worse