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Strategic Management

Course In charge

Dr. Mustaghis-ur-Rahman

Organizational Management
vs
Strategic Management

Definition
Management is the process of designing
and maintaining an environment in which
individuals, working together in groups,
efficiently accomplish selected aims.
Harold Koontz
1976

Definition

To manage is to forecast, to plan,to


Organize, to coordinate and to
control.
Henri Fayol

Strategic Management

Strategy
What is Strategy?

What is Strategy?
1)

Strategy is a competitive moves and


business approaches to produce
successful performance

2) Strategy is Managements game plan for


running the business, strengthening
firms competitive positions, satisfying
customers and achieving performance
targets

Strategic Questions

What are the strategic


questions?
Strategic questions are:

1)
2)
3)
4)

Where are we now?


Is the status acceptable? If no
Where do we want to go?
What specific actions are required
and what are the risks and pay offs

Strategic Management

Strategic Management
By combining the two terms
Strategy and Management. A
new discipline emerges Strategic
Management

Strategic Management

Strategic Management
Strategic Management is the set of
managerial decisions and actions that
determines the long run performance of
a corporation

Composition

Composition of
Strategic Management
Strategic Management is Composed
Of:
Environmental scanning
Strategy formulation
Strategy implementation
Evaluation and control

Tasks/Functions

Five Tasks/functions of SM
1) Forming a strategic vision
2) Setting objectives
3) Crafting a strategy to achieve the
desired outcomes
4) Implementation of the chosen
strategy
5) Evaluating performance and
initiating corrective adjustments

Five Tasks/functions of SM

Strategy
What is Strategy?

Strategic Management
benefits:

The units
The departments
The enterprise as a whole

moves the business into a favorable


position
is long term in scope
finds multiple solutions
Supported by strategic business partners

Difference between Organizational


Management and Strategic
Management?

Difference between OM and SM


OM
Definition
To manage is to forecast, to
plan, to organize, to
coordinate and to control.
Composition:
To forecast, To Plan
To Organize
To Coordinate
To Control
Nature
Administrative
Output
Efficiency

SM
Definition
Strategic Management is the
set
of managerial decisions and
actions that determines the
long
run performance of a
corporation
Composition:
Environmental scanning
Strategy formulation
Strategy implementation
Evaluation and control
Nature
Competitive
Output
Effectiveness

Difference between OM and SM


Efficiency
Productivity
Effectiveness

What is Vision and Mission?

Vision
Vision is a description of a desirable
situation for the organization or individual.
e.g
Where should the company be headed and
what kind of company do we want to
become in future

Mission
It answers the question, What does the
organization exist for
Or
What an organization is doing to realize
the vision

Definition of Objectives

Definition of Objectives
Objectives are the end results of
planned activity. They state WHAT is
to
be accomplished by WHEN.

Why SM is an ongoing process?


whether to continue or change the
companys vision, objectives, Strategy
and implementation approaches need
change and improvement. This is why this
is an ongoing process

Who performs the tasks of SM?

Who performs the tasks of SM?

CEOs and other senior managers


Managers who have profit and loss
responsibilities
Functional Areas Mangers
Managers of major operating units

Approaches of SM
The
The
The
The

Chief Architect Approach


delegation approach
collaborative approach
corporate intrapreneur approach

Establishing Companys
Direction

Establishing Companys
Direction
How to Set Companys Direction?
Companys direction is guided by its
strategic
vision and mission, setting objectives, and
crafting strategy for its operations

Establishing Companys
Direction: Developing Strategic
Vision
Managers have three discernible tasks in forming a
strategic vision and making a useful direction.
1. Coming up with a mission statement that defines
what business the company is presently in and
conveys the essence of who we are, what we do,
and where we are now
2. Using the mission statement as a basis for
deciding on a long term course, making choices
about where we are going and charting a
strategic path for the company to pursue
3. Communicating the strategic vision in clear,
exciting terms that arouse organization wide
commitment

Strategic Mission Statement

Strategic Mission Statement


A strategically revealing mission statement
incorporate three elements:

1. Customer needs, or what is being satisfied


2. Customer groups, or who is being satisfied
3. The companys activities, technologies, and
competencies, or how the enterprise goes
about creating and delivering value to
customers and satisfying their needs

A broad or narrow business


definition and mission

A broad or narrow business definition and mission


Broad/Narrow Definitions

Furniture /Wrought-iron Furniture Business


Telecommunications/Long Distance Telephone
Service Beverage/Soft Drink Business
Global Mail Delivery/Over-night Package
Delivery Business
Travel and Tourism/Caribbean Cruise Ship
Business

Sample Mission Statements:


example to Critique
PFIZER INC
RITZ-CARLTON HOTELS
APPLE COMPUTER
THE GILLET COMPANY
Critically evaluate the caliber of the
four mission statements in of the
above companies given on page 37

From Mission to Strategic Vision:

From Mission to Strategic Vision


A mission statement highlighting the
boundaries of the companys current
business is a logical vantage point from
which to look down the road, decide
what the enterprise's business makeup
and customers focus need to be and
chart a strategic path for the company
to take

Developing Strategic Vision


Developing strategic vision is to think
creatively about how to prepare a
company for the future

Developing Strategic Vision


Strategic Vision
Strategic Vision is an exercise in thinking
carefully about where a company needs
to head to be successful. It involves
selecting the market arenas in which to
participate, putting the company on
strategic path, and making a
commitment to follow that path.

From Mission to Strategic Vision


While defining a vision or choosing companys future
path requires reasoned answers to the following
questions:
1. What Changes are occurring in the market arenas
where we operate and what implications do these
changes have for the direction in which we need
to move?
2. What new or different customer needs should we
be moving to satisfy?
3. What new or different buyer segments should we
be concentrating on?
4. What new geographic or product markets should
we be pursuing?
5. What should the companys business makeup
look like in five years?
6. What kind of company should we be trying to
become?

Communicating the Strategic


Vision

Communicating the Strategic


Vision
Communicating the strategic vision down
the line to lower-level managers and
employees is almost as important as
setting the organizations long term
direction. People need to believe that the
companys management knows where it
is trying to take the company and what
changes lie ahead both externally and
internally. It also breakdown resistance to
a new strategic vision

Advantages of Communicating
the Strategic Vision :
The real pay offs of a well-conceived, well worded
vision:
1. It crystallizes senior executives own views
about the firms long term vision
2. It reduces the risk of rudderless decision
making
3. It conveys organizational purpose in ways
that motivate organization members to go
all out

The real pay offs of a well-conceived, well


worded vision:
4. It provides a beacon that lower-level
managers can use to form departmental
strategies that are in sync with the
companys overall strategy
5. It helps an organization prepare for the
future
When these five benefits have been realized,
the first step in organizational direction
setting is successfully complete

Establishing Objectives: The


second direction setting task

Establishing Objectives
Setting objectives converts the strategic
vision into specific performance targets
and also
objectives represent a Managerial
commitment
to achieving specific outcomes and results

Establishing Objectives
Objective setting needs to be more of a
top-down than a bottom-up process in
order to guide lower-level managers and
organizational units towards outcomes
that support the achievement of overall
business and company objectives.
This is also needed at all org levels

Establishing Objectives
See some strategic objectives on Page 44
Discuss, how it is different from Vision and
Mission statement?

Kinds of Objectives to Set


There are two types of key result areas stand
out:
Financial performance
Strategic Performance
Please see the examples of both types of
Objectives on page 43. Also go through some of
the strategic objectives of some corporate
organizations

Strategic Objective vs Financial


Objectives
Discussion:
Which do you think to give priority?

Long and Short Range


Objectives
What is long and short range objectives?
And how stretchable an strategic
objectives
should be?

Crafting A Strategy: The third


direction-setting task

Crafting A Strategy: The third


direction-setting task
An organizations strategy deals with
how to make managements strategic
vision for the company or a reality it
represents the game plan for moving
the company into an attractive business
position and building a sustainable
competitive advantage

Crafting A Strategy
Strategy making is all about How and What
How to achieve performance targets
How to out compete rivals
How to achieve sustainable competitive
Advantage
How to strengthen the enterprises long term
business positions
How to make managements strategic vision
for the company a reality
It is also action oriented; it concerns what
to do, when to do and how to do

Pattern of strategy
development?

Pattern of strategy
development?

An organizational strategy evolves over


time, emerging from the patterns of
actions already initiated, the plans
managers have fresh moves and the
ongoing need to react to new or to
unforeseen developments

Pattern of strategy
development?
The strategy making pyramid
In a diversified enterprise, strategies are
initiated at four distinct organizational
levels:
As a whole; Corporate Strategy
Business Strategy
Functional Strategy
Operating Strategy

Pattern of strategy
development?
Corporate Strategy
It is the over all managerial game plan
for a diversified company; it is to
establish business positions in different
industries

Pattern of strategy
development?
Business Strategy
It refers to the managerial game plan
for a single business; it is to produce
successful performance in one specific
line of business

Pattern of strategy development?

Pattern of strategy
development?
Functional Strategy
It refers to the managerial game plan for a
particular functional activity, business process. Or
key department within a business Marketing,
product development, etc. It supports the
business strategy
Operating Strategy
It is concerned with narrower strategic initiatives
and approaches for managing key operating units
: Plants, sales districts, distribution centres and
for handling daily operating tasks with strategic
significance: advertising campaigns, material
purchasing, inventory control, maintenance etc

Pyramid of Strategy
development

The factor that shape a


companys strategy

External Environment..
All organizations operate within external
Environment prevailing in that society. So
these environments dictate what an
organization can do and can not do or
some time how to do. Therefore, there is
a need to the external environment needs
to be considered while making strategy at all
org. level

Linking Strategy with Ethics and


Social responsibilities
What is ethic?
Ethics concern human duty and the
principles on which this duty rests.
Ethical and moral standards go beyond
the law and the language Thou shalt
not

Linking Strategy with Ethics and


Social responsibilities
Ethical Duty of Business
Every business has an ethical duty to
each of five constituencies:
1) Owners/Shareholders
2) Employees
3) Customers
4) Suppliers and the
5) Community at large

Test of a winning strategy


Three tests can be used to evaluate the
merits of one strategy over the others:
The goodness of fit test
The competitive advantage test
The performance test