Introduction to Strategic Management
Lecture Objectives
By the end of this lecture, students should be able to:1. Explain the functions of management
2. Define and explain strategy and strategic management
3. Explain why strategic management is important
4. Explain the strategic management process
5. Describe the levels of organizational strategies
6. Discuss the misconceptions about strategy and strategic management
OBJECTIVE #1Functions of Management
Planning, Organizing, Leading; & Controlling (PLOC)
Planning defining goals and objectives deciding what type of activities the company will
engage in determining the resources needed to achieve the
organization’s goals & objectives.
Functions of Management
Leading Attracting people to the organization. Specifying job responsibilities Grouping jobs into work units Marshalling and allocation of resources Creating good working conditions
Functions of Management
Organizing Directing, motivating, and communication with
employees, individually & in groups. Conflict resolution.
Controlling Monitoring performance of people & units. Provision of feedback or information about
progress. Identification of performance problems & actions
to correct problems.
Disciplinary Focus
Various disciplines in “management” emerge from the functions of management: Business Policy (formally called Strategic
Planning) from the planning function. Organizational Behavior primarily from the
leading function. Human Resources Management primarily from
the organizing function. Strategic Management, originated from Business
Policy, but focuses on overall management – PLOC – and beyond.
OBJECTIVE #2What’s Strategy?
Strategy is management’s overall plan and actions for deploying resources and skills taking into consideration opportunities and threats in the environment to achieve it’s mission, vision and objectives to establish a favorable competitive position.
Strategy involves: An organization’s goals A series of related decisions & actions Takes into account key internal strengths & weaknesses and
external opportunities threats Analysis, communication, coordination, & action
What is Strategic Management?
Focuses on how managers formulate and implement, and evaluate strategies aimed at developing and maintaining competitive advantage: the reason some firms enjoy higher levels of performance
than their rivals or competitors. Strategic management is therefore concerned with
overall PLOC Four aspects that set strategic management apart:
Interdisciplinary External focus Internal focus Future directions
“Big picture” view of anorganization influenced byits external environment
Strategic Management’s Uniqueness
Field of Study Macroeconomics Microeconomics Strategic Management Finance Marketing Org. Behavior Human Resource Mgmt. Operations Mgmt.
Level of Analysis The economy Industries & markets Firms & businesses Investment Projects Products & services Individuals & Groups Tasks & Structure Plants
OBJECTIVE #3Importance of Strategic Management
Gives every employee a role to play in making the firm successful Applies to all professional employees, not just those in
management Allows decision-making, allocation of resources and
management of people to be based on a firm’s strategic plan Success as a manager (as measured by your promotion, job
security, and pay increases) is often determined by your efforts & departments contribution to overall organization’s success
Makes a difference in performance levels Research suggest that successful companies use strategic
management concepts & techniques Success evolves from “knowing what you’re doing” and often
implies having a strategic plan
Importance of Strategic Management
Provides systematic approach to uncertainties that organizations face Competitive & global environment are dynamic (changing) Change, whether significant of minor, must be recognized
and analyzed, & dealt with Strategic management allows for the analysis of the situation
(identifying the sources of change in environment) Coordinates and focuses employees to achieve
organization’s goals Allows for team effort which is coordinated for firm success Allows for development of a plan, communication,
coordination, & cooperation among diverse depts & functions
OBJECTIVE #4Strategic Management Process
Establishing a mission, vision and objectives Environmental Analysis Internal Analysis Strategy Formulation Strategy Implementation Strategic Control and Performance Evaluation
The Strategic Management Process
Mission, Vision &
Objectives
InternalAnalysis
Environ.Analysis
StrategyFormul-
ation
StrategyImplem-entation
StrategicEval. &Control
Mission, Vision & Objectives
A company’s mission is a statement of the basic purpose or reason for its existence its values (role to stakeholders - customers,
employees, society, etc.).
The vision goes beyond the mission statement clarifies the long-term direction of the company
(where the company is going) reflects management’s aspirations for the company
Mission, Vision & Objectives
Objectives are yardsticks for tracking a company’s performance or end result. Financial performance objectives (e.g., ROA,
ROI, ROE, Dividend growth, Stock price, etc.).
Strategic performance objectives (e.g., market share, growth, innovation leader, customer service, community & environmental responsibility, etc.)
Examples of Mission & Vision
Southwest Airlines: Mission: To provide high quality service at a lower
price in the airline industry. Vision: Opening air travel to a wider group of
leisure travelers while infusing the organization with a sense of fun.
Apple Computer: Mission: To bring the best personal computing
products and support to consumers around the world.
Vision: One person, one computer.
Financial & Strategic Objectives
Alcan Aluminum Financial: To outperform the average return on equity
of the S&P’s industrial stock index. Strategic: To be lowest-cost producer of aluminum.
GE Financial: To achieve an average of 10 inventory
turns and a corporate operation profits margin of 16% by 1998.
Strategic: To become most competitive enterprise in the world by being #1 or #2 in market share in every business the company is in.
Environmental Analysis
Involves the evaluation of the business environment of the organization. All external influences that impact a company’s
decision and performance.
Environment of firm classified by proximity into(1) Macro-environment; and
(2) Micro-environment or task environment.
Environmental Analysis
The macro-environment consists of The international/national economy; changes in
demographic structures; social and political trends; technology; and the natural environment.
The micro-environment consists of The industry environment such as competitors,
suppliers, customers; unions and employees; owners and shareholders, etc.
Internal Analysis
Involves the evaluation of the inventory of the firm’s resources and capabilities.
Resources/Capabilities can be classified as: Tangible resources: Financial or physical assets Intangible resources: brand name, reputation
(product & firm), organizational culture, etc. Capabilities or competencies: managerial
ability, specialized skill & knowledge base of employees, etc.
Strategy Formulation
The strategy formulation process involves designing a course of action for addressing
strategic issues facing the firm after going through the external and internal evaluation processes.
Actual strategy of a company involves: Planned or Intended Actions (Deliberate &
purposeful actions). Reactive or Emergent Actions (As-need reactions to
unanticipated events in firm’s micro and macro environments).
Strategy Formulation
Strategy formulation is concerned with the following parts of a company: Corporate (whole company) -- Corporate
strategies: Deals with businesses company wants to be in & how to manage those businesses
Businesses -- Competitive strategies: How to compete in specific business or industry
Functional areas -- Functional strategies: short goal-directed decisions & actions of an organization’s various functional departments.
Strategy Implementation
Strategy implementation is the process of putting a company’s various strategies into action development of programs, policies, budgets &
procedures. It can take several months to years to complete. Most difficult part of the strategy process. The job of implementing strategy involves
managers at all levels
Strategic Control & Evaluation
Process by which desired outcomes (mission, vision, & objectives) are compared with realized outcomes to determine if there are gaps.
Initiate corrective actions by monitoring changes in environment - competitor actions, new market opportunities, customer needs & expectations.
Strategic Management Process
On-going and continuous cycle of Situation Analysis : Internal evaluation &
Environmental scanning Strategy formulation Strategy implementation Strategy evaluation
Misconceptions about Strategy & Strategic Management
Strategy & strategic planning are dead Every organization needs the focus and direction
provided by its strategies and the strategic management process
Strategy is strictly for top management Top management play a crucial role, but everyone
in the organization has a part to play. Strategy is about planning
Strategic management process shows that strategy is not only about planning, but also about doing.
Misconceptions about Strategy & Strategic Management
Strategy is stable and constant Organizations compete in dynamic environments.
Flexibility and change needed to respond to environmental opportunities & threats, & strength and weaknesses
Strategic management outlines ultimate destination & route It establishes a systematic approach to analyzing
relevant information & using it to design, implement, & evaluate appropriate strategies.
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