Strategic Management Formulation Implementation and Evaluation Course Objectives

Strategic Management Formulation, Implementation and Evaluation

Course Objectives 1. Understand the Strategic management concepts. 2. How to be a strategic thinker. 3. How to create a competitive advantages to your business. 4. Develop students’ skills in strategy design, implementation and evaluation. 5. How culture differences affect management. 6. Develop the knowledge on the influence of social responsibility on business strategy. Prentice Hall, 2008 2

Teaching Techniques 1. Lecturing and discussions. 2. Using cases in teaching : Real cases and problem solving. 3. Presentations from students. 4. Group work, teamwork and assignments. Prentice Hall, 2008 3

Course Contents l Concepts and definitions: Strategy, Strategic management, strategic planning, Importance of strategic management, Internal and external environment analysis, competitive advantages, stakeholders, social responsibility and so on. l Tools will be used in analysis, e. g. , SWOT. Prentice Hall, 2008 4

Course Contents continue l Types of Strategies: Corporate-Level Strategies, Business Unit Strategies, Functional/operational Strategies. l Strategy Formulation: Business Mission, strategy analysis and choice, corporate objectives and strategies. l Strategy Implementation: Organizational Structure, assessment of Organizational Structure, restructuring and reengineering, short-term objectives and programs and activities. Prentice Hall, 2008 5

Course Contents continue l Strategy Evaluation and control: processes of evaluation, measuring performance and corrective action. l Global Issues in strategic management: global competition, managing crosscultures. Prentice Hall, 2008 6

Strategic Management Defined Art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives. Strategy “Top Management’s plan to attain outcomes consistent with the organization’s mission and goals” (Wright, Kroll and Parnell, 1998) Prentice Hall, 2008 7

Strategic management A continuous process of change and modification: intended strategy, realized strategy. Prentice Hall, 2008 8

Three-Stage Process Strategy Formulation Strategy Implementation Strategy Evaluation Prentice Hall, 2008 9

Strategy Formulation Vision & Mission Opportunities & Threats Strengths & Weaknesses Long-Term Objectives Alternative Strategies Strategy Selection Prentice Hall, 2008 10

Strategy Formulation Issues include: n What new businesses to enter n What businesses to abandon n How to allocate resources n Expand operations or diversify n Enter international markets n Merge or form joint venture n Avoidance of hostile takeover Prentice Hall, 2008 11

Strategy Implementation Annual Objectives Policies Employee Motivation Resource Allocation Prentice Hall, 2008 12

Strategy Implementation Action Stage of strategic management: n Most difficult stage n Mobilizing employees and managers n Interpersonal skills are critical n Consensus on pursuing goals Prentice Hall, 2008 13

Strategy Evaluation Internal Review External Review Performance Measurement Corrective Action Prentice Hall, 2008 14

Strategy Evaluation Final stage of strategic management: All strategies subject to future modification n Success today is no guarantee of success tomorrow n Success creates new and different problems n Complacencysatisfaction leads to demise end. n Prentice Hall, 2008 15

Prime Task of Strategic Management According to Peter Drucker… The prime task is to think through the overall mission of a business Ask the question: What is our Business? Prentice Hall, 2008 16

Integrating Intuition and Analysis The strategic management process attempts to organize quantitative and qualitative information under conditions of uncertainty. Prentice Hall, 2008 17

Integrating Intuition and Analysis Intuition based on: n Past experiences n Judgment n Feelings Useful for decision making n Conditions of great uncertainty n Conditions with little precedent Prentice Hall, 2008 18

Integrating Intuition and Analysis Intuition and judgment n Management at all levels n Analyses are influenced Analytical thinking and intuitive thinking n Complement each other Prentice Hall, 2008 19

Adaptation to Change Organizations must monitor events n On-going process n Internal and external events n Timely changes Prentice Hall, 2008 20

Adaptation to Change Rate and magnitude of changes n Increasing dramatically n E-commerce n Demographics n Technology n Merger-mania n Effective Adaptation n Long-run focus Prentice Hall, 2008 21

Adaptation to Change Key strategic-management questions: What kind of business should we become? n Are we in the right fields? n Should we reshape our business? n What new competitors are entering our industry? n What strategies should we pursue? n How are our customers changing? n Prentice Hall, 2008 22

Key Terms Strategists Most responsible for success or failure of an organization n Various job titles: n Chief executive officer n President n Owner n Chair of the Board n Executive Director n Entrepreneur n Prentice Hall, 2008 23

Key Terms Vision Statement n What do we want to become? Mission Statement n What is our business? Prentice Hall, 2008 24

Key Terms External Opportunities and Threats n n Significantly benefit or harm the organization in the future. Include the following trends: n n n n Economic Social Cultural Demographic Environmental Political, legal, governmental Technological Competitive trends Prentice Hall, 2008 25

Key Terms External Opportunities and Threats n Largely beyond the control of a single organization. n Basic tenetprinciple of strategic management n Strategy formulation to: Take advantage of external opportunities n Avoid or reduce impact of external threats n Prentice Hall, 2008 26

Key Terms Environmental Scanning n Industry Analysis n Process of conducting research and gathering and assimilating/integrate external information Prentice Hall, 2008 27

Key Terms Internal Strengths and Weaknesses n Controllable activities performed especially well or poorly. n Arise in functional areas of the business: Management n Marketing n Finance/accounting n Production/operations n Research & development n Computer Information Systems n Prentice Hall, 2008 28

Key Terms Determining Internal Factors: n Financial ratios n Measuring performance n Industry averages n Survey data Prentice Hall, 2008 29

Key Terms Long-term objectives: Mission-driven pursuit of specific results more than one-year out. n Essential for organizational success n State direction n Aid in evaluation n Create synergy n Focus coordination n Basis for planning, motivating and controlling n Prentice Hall, 2008 30

Key Terms Strategies: n Means by which long-term objectives will be achieved. n May include: Geographic expansion, diversification n Acquisition n Product development, market penetration n Retrenchment, divestiture n Liquidation, joint venture n Prentice Hall, 2008 31

Key Terms Annual Objectives: Short-term milestones that organizations must achieve to reach long-term objectives. n They should be SMART when writing them. n Prentice Hall, 2008 32

Key Terms Policies: n Means by which annual objectives will be achieved. Prentice Hall, 2008 33

Strategic-Management Model Strategic-Management Process – n n Dynamic and Continuous More formal in larger organizations Prentice Hall, 2008 34

Strategic-Management Model 1. Identify Organization’s existing: • • Vision Mission Objectives Strategies Prentice Hall, 2008 35

Strategic-Management Model 2. 3. 4. 5. 6. 7. Perform External Audit Perform Internal Audit Establish long-term objectives Generate, evaluate, select strategies Implement strategies Measure and evaluate performance Prentice Hall, 2008 36

Benefits of Strategic Management n n n Proactive in shaping organization’s future Initiate and influence activities Formulate better strategies n Systematic, logical, rational approach Prentice Hall, 2008 37

Benefits of Strategic Management n Financial benefits n n n Improvement in sales Improvement in profitability Improvement in productivity Prentice Hall, 2008 38

Benefits of Strategic Management n Non-Financial benefits n n n Enhanced awareness of external threats Improved understanding of competitors’ strategies Increased employee productivity Reduced resistance to change Understanding of performance-reward relationships Enhances problem-prevention capabilities Prentice Hall, 2008 39

Benefits of Strategic Management 1. 2. 3. 4. 5. 6. 7. Identification of opportunities Objective view of management problems Improved coordination and control Minimizes adverse conditions and changes Decisions to better support objectives Effective allocation of time and resources Internal communication among personnel Prentice Hall, 2008 40

Benefits of Strategic Management Integration of individual behaviors 9. Clarifies individual responsibilities 10. Encourages forward thinking 11. Encourages favorable attitude toward change 12. Discipline and formality to the management of the business 8. Prentice Hall, 2008 41

Why Some Firms Do No Strategic Planning n n n Poor reward structures Fire-fighting Waste of time Too expensive Laziness Content with success Prentice Hall, 2008 42

Why Some Firms Do No Strategic Planning (Cont’d) n n n Fear of failure Overconfidence Prior bad experience Self-interest Fear of the unknown Suspicion Prentice Hall, 2008 43

Business Ethics and Strategic Management Business ethics defined: n Principles of conduct within organizations that guide decision making and behavior. Prentice Hall, 2008 44

Business Ethics and Strategic Management Good business ethics: n prerequisite for good strategic management Prentice Hall, 2008 45

Business Ethics and Strategic Management Code of business ethics: n Provides basis on which policies can be devised to guide daily behavior and decisions at the workplace Prentice Hall, 2008 46

Business Ethics and Strategic Management Internet privacy n Emerging ethical issue of immense proportion Prentice Hall, 2008 47

Business Ethics and Strategic Management Internet and business ethics -n 38% of companies store and review employees email messages n Up from 15% in 1997 n 54% of companies monitor employees’ Internet connections Prentice Hall, 2008 48

Business Ethics & Strategic Planning Business actions always unethical include: • • Misleading advertising Misleading labeling Environmental harm Poor product or service safety Padding expense accounts Insider trading Dumping flawed products on foreign markets Prentice Hall, 2008 49

Nature of Global Competition Companies conduct business across borders Ø International or multinational corporations § § n Parent company Host country Strategy implementation more difficult Ø Cultural differences § Norms, values, work ethics Prentice Hall, 2008 50

Advantages of International Operations n n n n Absorb excess capacity Reduce unit costs Spread economic risks over wider markets Low-cost production facilities Competition may be less intense Reduced tariffs, lower taxes Economies of scale Prentice Hall, 2008 51

Disadvantages of International Operations n n Different social, cultural demographic, legal forces may create difficult communication Weaknesses of foreign competition may be underestimated Barriers to communication and effective management of personnel Complications from different monetary systems Prentice Hall, 2008 52