2. 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
3. OBJECTIVE #1
Functions 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.
4. 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
5. 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.
6. 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.
7. OBJECTIVE #2
What’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
8. 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 an
organization influenced by
its external environment
9. Strategic Management’s
Uniqueness
Field
of Study
Level
of Analysis
– Macroeconomics
– The economy
– Microeconomics
– Strategic Management
– Industries & markets
– Firms & businesses
– Finance
– Marketing
– Investment Projects
– Products & services
– Org. Behavior
– Human Resource Mgmt.
– Individuals & Groups
– Tasks & Structure
– Operations Mgmt.
– Plants
10. OBJECTIVE #3
Importance 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
11. 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
12. OBJECTIVE #4
Strategic Management Process
Establishing
a mission, vision and
objectives
Environmental Analysis
Internal Analysis
Strategy Formulation
Strategy Implementation
Strategic Control and Performance
Evaluation
14. 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
15. 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.)
16. 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.
17. 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.
18. 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.
19. 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.
20. 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.
21. 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).
22. 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.
23. 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
24. 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.
25. Strategic Management
Process
On-going
and continuous cycle of
– Situation Analysis : Internal evaluation &
Environmental scanning
– Strategy formulation
– Strategy implementation
– Strategy evaluation
26. 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.
27. 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.
