Stratgie Management Process

Strategic Management Concepts

Definition: Strategic management consists of the analysis, decisions, and actions an organization undertakes in order to create and sustain competitive advantages. Art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve its objectives

Key Attributes of Strategic Management

:Directs the organization toward overall goals
and objectives. Involves the inclusion of multiple stakeholders in decision making. Needs to incorporate short-term and longterm perspectives.

Recognizes tradeoffs between efficiency and effectiveness.

Strategic Management achieves a firms success through integration

Management

Marketing

Finance/Accounting

Production/Operations

Research & Development

MIS

Ch 1 -4

Strategy Formulation
Vision & Mission

External Opportunities & Threats Internal Strengths & Weaknesses Long-Term Objectives Strategy Selection

Issues in Strategy Formulation

New business opportunities Allocation of resources Expansion or diversification International markets Mergers or joint ventures Avoidance of hostile takeover

Strategy Implementation

Annual Objectives

Policies
Employee Motivation Resource Allocation

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Ch 1 -7

Strategy Evaluation
Final Stage of Strategic Management
Subject to future modification Todays success no guarantee of future success New & different problems Complacency leads to demise

Prime Task of Strategic Management

Peter Drucker: -- Think through the overall mission of a business. Ask the key question: What is our Business?

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Ch 1 -9

Integrating Intuition and Analysis

The strategic management process attempts to organize quantitative and qualitative information under conditions of uncertainty

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Ch 1 -10

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
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Adapting to Change Organizations must monitor events

On-going process Internal and external events Timely changes
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Strategic Management is Gaining and Maintaining Competitive Advantage

Anything that a firm does especially well compared to rival firms

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Ch 1 -13

Adapting to Change Rate & magnitude of change increasing dramatically

E-commerce Demographics Technology

Ch 1 -14

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?
Hall Ch 1 -15

Strategists Firms success/failure

Various Job Titles:
Chief Executive Officer (CEO) Chief Strategy Officer (CSO) President Owner Board Chair Executive Director
Ch 1 -16

Key Terms
Strengths & Weaknesses (Internal)
Typically located in functional areas of the firm Management Marketing Finance/Accounting Production/Operations Research & Development

Computer Information Systems

Ch 1 -17

Key Terms Strengths & Weaknesses Assessing the Internal Environment

Financial Ratios

Performance Metrics
Internal Factors

Industry Averages

Survey Data
Ch 1 -18

Key Terms

Long-term Objectives

Mission-driven pursuit of specified results more than one year out

Ch 1 -19

Key Terms
Long-term Objectives
Essential for ensuring the firms success Provide direction

Aid in evaluation
Create synergy Focus coordination Basis for planning, motivating, and controlling

Ch 1 -20

Key Terms Strategies

Means by which long-term objectives are achieved

Ch 1 -21

Key Terms
Strategies
Some Examples Geographic expansion

Diversification
Acquisition Market penetration Retrenchment Liquidation
Ch 1 -22

Example Strategies in Action

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Ch 1 -23

Example Strategies in Action

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Ch 1 -24

Strategic Management Model

1. Identify Existing - Vision Mission

Objectives
Strategies

Ch 1 -25

Strategic Management Model 2. Audit external environment 3. Audit internal environment 4. Establish long-term objectives 5. Generate, evaluate & select strategies 6. Implement selected strategies 7. Measure & evaluate performance

Ch 1 -26

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

Ch 1 -27

Benefits of Strategic Management

6. Effective allocation of time & resources 7. Internal communication among personnel 8. Integration of individual behaviors 9. Clarify individual responsibilities 10. Encourage forward thinking

Copyright 2007 Prentice Hall

Ch 1 -28

Why Some Firms Do No Strategic Planning

Waste of time
Too expensive Laziness Content with success Overconfidence

Prior bad experience

Fear of the unknown
Ch 1 -29

Vision
A vision statement is a vivid idealized description of a desired outcome that inspires, energizes and helps you create a mental picture of your target. It could be a vision of a part of your life, or the outcome of a project or goal. Vision statements are often confused with mission statements, but they serve complementary purposes.
What do we want to become?

Key to strategic planning

Clear Business Vision Comprehensive Mission Statement

Ch 2 -31

Vision & Mission

Vision - Creates commonality of interests Reduce daily monotony Provides opportunity & challenge

Vision Statement Examples

"McDonald's vision is to be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile. The vision statement of Tata Motors Limited, India's largest automobile company, is to be "best in the manner in which we operate, best -- U.S. Poultry & Egg Association in the products we deliver, and best in our value system and ethics."
Ch 2 -33

Mission Statements
Mission: Defines the fundamental purpose of an organization or an enterprise, succinctly describing why it exists and what it does to achieve its Vision. What is our business?

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Ch 2 -34

Mission Statements Example

Mcdonald -Being the best by providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile. Tata Motors-To become a world class automotive engineering and product development centre, and enable Tata Motors to become a world class automotive company.
Ch 2 -35

Mission Statements

Enduring statement of purpose

Distinguishes one firm from another Declares the firms reason for being
Reveal what an organization wants to be and whom it wants to serve

Essential for effectively establishing objectives and Ch 2 -36 formulating strategies

Importance of Mission
Benefits from a strong mission
Unanimity of Purpose

Resource Allocation

Mission
Organizational Climate Focal point for work structure

Ch 2 -37

Effective Missions

Broad in scope Generate strategic alternatives

Not overly specific

Reconciles interests among diverse stakeholders Finely balanced between specificity & generality

Ch 2 -38

Effective Missions Arouse positive feelings & emotions

Motivate readers to action Generate favorable impression of the
firm

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Ch 2 -39

Effective Missions

Reflect future growth Provide criteria for strategy selection Basis for generating & evaluating strategic options Are dynamic in nature

Ch 2 -40

Mission & Customer Orientation

Define what the organization is Define what it aspires to be

Broad enough to allow for growth Distinguishes firm from all others Stated clearly understood by all

Ch 2 -41

Mission & Customer Orientation

An Effective Mission Statement --

Anticipates customer needs Identifies customer needs Provides product/service to satisfy needs
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Vision & Mission

Research results are mixed, however, firms with formal mission statements generally see a: 2x average return on shareholders equity Positive relationship to company performance 30% higher return on certain financial measures

Ch 2 -43

Customers

Products Services

Markets

Technology Employees

Mission Elements
Survival Growth Profit Self-Concept Philosophy

Public Image

Ch 2 -44

PepsiCo Mission
PepsiCos mission is to increase the value of our shareholders investment. We do this through sales growth, cost controls, and wise investment resources. We believe our commercial success depends upon offering quality and value to our consumers and customers; providing products that are safe, wholesome, economically efficient and environmentally sound; and providing a fair return to our investors while adhering to the highest standards of integrity.

Ch 2 -45

Ben & Jerrys Mission

Ben & Jerrys mission is to make, distribute and sell the finest quality all-natural ice cream and related products in a wide variety of innovative flavors made from Vermont dairy products. To operate the Company on a sound financial basis of profitable growth, increasing value for our shareholders, and creating career opportunities and financial rewards for our employees. To operate the Company in a way that actively recognizes the central role that business plays in the structure of society by initiating innovative ways to improve the quality of life of a broad communitylocal, national and international.

Copyright 2007 Prentice Hall

Ch 2 -46

Mission Statement Evaluation Matrix

COMPONENTS Concern for Survival, Growth, Profitability

Organization

Customers

Products Services

Markets

Technology

PepsiCo Ben & Jerry's

Yes No

No Yes

No Yes

Yes Yes

No No

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Ch 2 -47

Mission Statement Evaluation Matrix

COMPONENTS

Organization

Philosophy

SelfConcept

Concern for Public Image

Concern for Employees

PepsiCo Ben & Jerry's

Yes No

No Yes

No Yes

No Yes

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Ch 2 -48

Growth Accelarator