Strategic management

1. STRATEGIC MANAGEMENTSTRATEGIC MANAGEMENT
AND PLANNING IN AAND PLANNING IN A
GLOBALGLOBAL
ENVIRONMENTENVIRONMENT
PLANNING CHALLENGES INPLANNING CHALLENGES IN
THE 21ST CENTURYTHE 21ST CENTURY

2. LEARNING OBJECTIVESLEARNING OBJECTIVES
1.1. Define strategic management and describe itsDefine strategic management and describe its
purpose.purpose.
2.2. Explain the four stages of the strategic managementExplain the four stages of the strategic management
process.process.
3.3. Identify and explain the components of strategicIdentify and explain the components of strategic
analysis, as well as explain the value of conductinganalysis, as well as explain the value of conducting
this analysis.this analysis.
4.4. Explain how an organization can develop aExplain how an organization can develop a
competitive advantage.competitive advantage.
5.5. Explain the purpose of strategy formulation andExplain the purpose of strategy formulation and
describe the two levels of strategic alternatives.describe the two levels of strategic alternatives.
When you have finished studying, you should be ableWhen you have finished studying, you should be able
to:to:

3. LEARNING OBJECTIVESLEARNING OBJECTIVES (cont’d)(cont’d)
6.6. Explain the role of strategy implementation.Explain the role of strategy implementation.
7.7. Explain the importance of evaluation and control ofExplain the importance of evaluation and control of
strategy and its implementation.strategy and its implementation.
8.8. Discuss the importance of strategic planning.Discuss the importance of strategic planning.
When you have finished studying, you should be ableWhen you have finished studying, you should be able
to:to:

4. Strategic PlanningStrategic Planning
• Strategic PlanningStrategic Planning
The process by which an organization makesThe process by which an organization makes
decisions and takes actions that affect its long-decisions and takes actions that affect its long-
run performance.run performance.
Strategic plan:Strategic plan: the output of the strategicthe output of the strategic
planning process that provides direction byplanning process that provides direction by
defining its strategic approach to business.defining its strategic approach to business.
• Competitive AdvantageCompetitive Advantage
Is a central concept of strategic planning.Is a central concept of strategic planning.
Can only be sustained if an organizationCan only be sustained if an organization
continues to out innovate competitors.continues to out innovate competitors.

5. The Strategic Management Process

6. Key TermsKey Terms
• Strategic ManagementStrategic Management
Overall, long-run management.Overall, long-run management.
• Strategic PlanningStrategic Planning
The process of making plans andThe process of making plans and
decisions that are focused on long-rundecisions that are focused on long-run
performance.performance.
• Strategic PlanStrategic Plan
A comprehensive plan that providesA comprehensive plan that provides
overall direction for the organizationoverall direction for the organization..

7. Key Terms (cont’d)Key Terms (cont’d)
• Strategic AnalysisStrategic Analysis
An assessment of the external andAn assessment of the external and
internal environments of aninternal environments of an
organization.organization.
• Strategy FormulationStrategy Formulation
Establishing strategy and tacticsEstablishing strategy and tactics
necessary to achieve the mission ofnecessary to achieve the mission of
the organizationthe organization..

8. Benefits of Strategic PlanningBenefits of Strategic Planning
• EconomicEconomic
Organizations that plan strategically outperformOrganizations that plan strategically outperform
those that do not.those that do not.
• BehavioralBehavioral
Identification of organizational and environmentalIdentification of organizational and environmental
conditions that may create problems in the longconditions that may create problems in the long
run.run.
Better decisions as a result of the group decision-Better decisions as a result of the group decision-
making process.making process.
Participation in the planning process increasesParticipation in the planning process increases
participants understanding of how the plan is to beparticipants understanding of how the plan is to be
implemented and their willingness to change.implemented and their willingness to change.

9. Strategic Analysis: Assessment in aStrategic Analysis: Assessment in a
Global EnvironmentGlobal Environment
• The purpose of strategic analysis is toThe purpose of strategic analysis is to
evaluate the present situation of theevaluate the present situation of the
organization.organization.
Analysis requires three primary activities:Analysis requires three primary activities:
Assessing the mission of the organizationAssessing the mission of the organization
Internal environmental analysisInternal environmental analysis
External environmental analysisExternal environmental analysis

10. The Components of Strategic Analysis

11. SWOT AnalysisSWOT Analysis
• The combined internal and externalThe combined internal and external
strategic analysis is referred to as astrategic analysis is referred to as a
SWOTSWOT analysis.analysis.
SStrengthstrengths
WWeaknesseseaknesses
OOpportunitiespportunities
TThreatshreats

12. Assessing the Mission of anAssessing the Mission of an
OrganizationOrganization
• The mission of an organization reflects itsThe mission of an organization reflects its
fundamental reasons for existence.fundamental reasons for existence.
• Though mission statements vary greatly, everyThough mission statements vary greatly, every
mission statement should describe three primarymission statement should describe three primary
aspects of an organization:aspects of an organization:
1.1. The organization’s primary products orThe organization’s primary products or
services.services.
2.2. The organization’s primary target markets.The organization’s primary target markets.
3.3. The organization’s overall strategy forThe organization’s overall strategy for
ensuring long-term success.ensuring long-term success.

13. Key TermsKey Terms
• Strategic DirectionStrategic Direction
Direction of the organization toward success inDirection of the organization toward success in
the long run.the long run.
• VisionVision
The ability to predict opportunities and threats inThe ability to predict opportunities and threats in
the future.the future.
A vision statement is intended to guide theA vision statement is intended to guide the
organization in the future, what the organizationorganization in the future, what the organization
wants to become or where it wants to be.wants to become or where it wants to be.
Vision is derived from a careful analysis of theVision is derived from a careful analysis of the
external and internal environmentsexternal and internal environments

14. Company’s/Organization’s Mission StatementCompany’s/Organization’s Mission Statement
Our Vision
To become the world’s leading client’s research/knowledge company for
innovative products and services.
Our Mission
We are a global family with a proud heritage passionately committed to
providing personal mobility for people around the world.
We anticipate client’s need and deliver outstanding products and
services that improve people’s knowledge and lives.
Our Values
Our business is driven by our client’s focus, creativity, resourcefulness,
and entrepreneurial spirit.
We are an inspired, diverse team. We respect and value everyone’s
contribution. The health and safety of our people are paramount.
We are a leader in environmental responsibility. Our integrity is never
compromised and we make a positive contribution to society.
We constantly strive to improve in everything we do. Guided by these
values, we provide superior returns to our shareholders..

15. External AnalysisExternal Analysis
• Purpose of External AnalysisPurpose of External Analysis
To identify aspects of the external environmentTo identify aspects of the external environment
that represent either anthat represent either an opportunityopportunity for or afor or a threatthreat
to the organization.to the organization.
Opportunities:Opportunities:
Those environmental trends on which theThose environmental trends on which the
organization can capitalize and improve itsorganization can capitalize and improve its
competitive position.competitive position.
ThreatsThreats
Conditions that jeopardize the organization’sConditions that jeopardize the organization’s
ability to prosper and its competitive position inability to prosper and its competitive position in
the long term.the long term.

16. External Analysis FactorsExternal Analysis Factors
• General EnvironmentGeneral Environment
Includes environmental forces that are beyondIncludes environmental forces that are beyond
the influence of the organization and over which itthe influence of the organization and over which it
has no (or little) control.has no (or little) control.
• Task EnvironmentTask Environment
Includes environmental forces that are within theIncludes environmental forces that are within the
organization’s operating environment and may beorganization’s operating environment and may be
influenced to some degree.influenced to some degree.
• Economic EnvironmentEconomic Environment
The economic components of the generalThe economic components of the general
environment.environment.

17. Dimensions of the Global External EnvironmentDimensions of the Global External Environment

18. Sample Issues in the General EnvironmentSample Issues in the General Environment
Economic
• Inflation rates
• Unemployment rates
• Wage rates
• Exchange rates
• Stock market fluctuations
• Per capita income
• GDP trends
• Economic development
Socio cultural
• Norms and values
• Demographic trends
• Age groups
• Regional shifts in population
• Household composition
• Diversity
• Ecological awareness
• Life expectancy
Technological
• Spending on research and development
• Internet availability
• Availability of information technology
• Production technology trends
• Productivity improvements
• Telecommunications infrastructure
Political–Legal
• Tax laws
• Environmental protection
• International trade regulation
• Antitrust regulation
• Federal Reserve policy
• Intellectual property and patent laws

19. External EnvironmentExternal Environment
• General EnvironmentGeneral Environment
Economic factorsEconomic factors
TechnologicalTechnological
factorsfactors
Socio-culturalSocio-cultural
factorsfactors
Political-legalPolitical-legal
factorsfactors
• Task EnvironmentTask Environment
CustomerCustomer
ProfilesProfiles
CompetitiveCompetitive
StructureStructure
ResourceResource
AvailabilityAvailability

20. Five Forces Model of Industry AnalysisFive Forces Model of Industry Analysis
Source: Adapted from Michael E. Porter, “How Competitive Forces Shape Strategy,” Harvard Business Review 97, no. 2 (March/April 1999): 137–145.

21. Internal AnalysisInternal Analysis
• Purpose of Internal AnalysisPurpose of Internal Analysis
To identify the assets, resources, skills, andTo identify the assets, resources, skills, and
processes that represent eitherprocesses that represent either strengthsstrengths oror
weaknessesweaknesses for the organization.for the organization.
StrengthsStrengths
Aspects of the organization’s operations thatAspects of the organization’s operations that
represent potentialrepresent potential competitive advantagescompetitive advantages
oror distinctive competenciesdistinctive competencies..
WeaknessesWeaknesses
Areas that are in need of improvementAreas that are in need of improvement..

22. Internal Factors for AnalysisInternal Factors for Analysis
Marketing Operations
Product, service Productivity
Brand equity Quality
Market research Facilities
Sales force Supply chain
Market share Technology
Size of market Purchasing
Distribution channels Safety
Price Ecological issues
Promotion
Finance
Profitability
Revenue
Asset utilization
Debt/leverage
Equity
Per unit costs
Profit margins
Cash flow
Human Resources
Skills
Selection
Training and development
Leadership
Motivation
Communication
Rewards
Other Factors
Organization culture
Overall control
Information system
Information technology
Organizational structure

23. Strategy FormulationStrategy Formulation
• Answers the question:Answers the question:
““Where does the organization want to be?”Where does the organization want to be?”
• Steps in strategy formulation include:Steps in strategy formulation include:
Casting the vision for the organization.Casting the vision for the organization.
Setting strategic goals.Setting strategic goals.
Identifying strategic alternatives.Identifying strategic alternatives.
Evaluating and choosing strategies that provide aEvaluating and choosing strategies that provide a
competitive advantage and optimize thecompetitive advantage and optimize the
performance of the organization in the long term.performance of the organization in the long term.

24. Casting the Vision for the OrganizationCasting the Vision for the Organization
• The development of a vision for theThe development of a vision for the
organization is central to any strategic plan.organization is central to any strategic plan.
• Vision versus MissionVision versus Mission
AA vision statementvision statement describes what thedescribes what the
organization aspires to be in the long run.organization aspires to be in the long run.
AA mission statementmission statement describes thedescribes the
products, services, and target markets forproducts, services, and target markets for
an organization.an organization.

25. Setting Strategic GoalsSetting Strategic Goals
• GoalsGoals
Are very broad statements of the results that anAre very broad statements of the results that an
organization wishes to achieve in the long run.organization wishes to achieve in the long run.
Relate to the mission and vision of theRelate to the mission and vision of the
organization and specify the level of performanceorganization and specify the level of performance
that the organization wants to achieve.that the organization wants to achieve.
• SMART goals are:SMART goals are:
Specific…Measurable…Achievable…Results-Specific…Measurable…Achievable…Results-
oriented…Timelineoriented…Timeline

26. Identifying Strategic AlternativesIdentifying Strategic Alternatives
• Strategic AlternativesStrategic Alternatives
 Are developed in light of the organizational missionAre developed in light of the organizational mission
considering its strengths, weaknesses, opportunities,considering its strengths, weaknesses, opportunities,
and threats, and its vision and strategic goals.and threats, and its vision and strategic goals.
• Grand StrategiesGrand Strategies
 Stability strategies:Stability strategies: intended to ensure continuity inintended to ensure continuity in
the operations and performance of the organization.the operations and performance of the organization.
 Growth strategies:Growth strategies: designed to increase the sales anddesigned to increase the sales and
profits of the organization.profits of the organization.
 Retrenchment strategies:Retrenchment strategies: designed to reversedesigned to reverse
negative sales and profitability trends.negative sales and profitability trends.

27. Identifying Strategic AlternativesIdentifying Strategic Alternatives
(cont’d)(cont’d)
• Generic StrategiesGeneric Strategies
 The primary ways in which an organization canThe primary ways in which an organization can
compete in its chosen market(s).compete in its chosen market(s).
 Cost leadership:Cost leadership: competing on the basis of price.competing on the basis of price.
 Differentiation:Differentiation: offering products or services thatoffering products or services that
are differentiated from those of competitors inare differentiated from those of competitors in
some way.some way.
 Focus:Focus: avoiding competing in broad markets byavoiding competing in broad markets by
targeting a narrow market segment.targeting a narrow market segment.
 Best-Cost provider:Best-Cost provider: competing on the basis of bothcompeting on the basis of both
low-cost and differentiation.low-cost and differentiation.

28. Generic Strategies MatrixGeneric Strategies Matrix

29. Evaluating and Choosing StrategyEvaluating and Choosing Strategy
• Portfolio AssessmentPortfolio Assessment
 Provides a mechanism for evaluating anProvides a mechanism for evaluating an
organization’s portfolio of business, products andorganization’s portfolio of business, products and
services.services.
 Academy of Corporate Learning and Innovation (ACLI)Academy of Corporate Learning and Innovation (ACLI)
Growth-Share matrixGrowth-Share matrix
 ––Business Strength matrixBusiness Strength matrix
• Decision MatricesDecision Matrices
 A decision matrix provides a method for evaluatingA decision matrix provides a method for evaluating
alternative strategies according to the criteria that thealternative strategies according to the criteria that the
organization’s leaders consider more important.organization’s leaders consider more important.

30. Strategy Implementation: Focusing on ResultsStrategy Implementation: Focusing on Results
• The best-formulated strategy is virtuallyThe best-formulated strategy is virtually
worthless if it cannot be implemented effectively.worthless if it cannot be implemented effectively.
 A direct, specific, clear strategy must be developed.A direct, specific, clear strategy must be developed.
 Strategies must be established at all levels of theStrategies must be established at all levels of the
organization to align each part of the organizationorganization to align each part of the organization
with the organization’s overall mission and goals.with the organization’s overall mission and goals.
 The organization’s system must be designed toThe organization’s system must be designed to
ensure that strategies can be institutionalized in itsensure that strategies can be institutionalized in its
culture.culture.

31. Evaluation and Control: AchievingEvaluation and Control: Achieving
Effectiveness and EfficiencyEffectiveness and Efficiency
• Strategic ControlStrategic Control
 Involves monitoring the implementation of theInvolves monitoring the implementation of the
strategic plan to ensure quality and effectiveness instrategic plan to ensure quality and effectiveness in
terms of organizational performance.terms of organizational performance.
 Feed forward controlsFeed forward controls
 Are designed to identify changes in the external environmentAre designed to identify changes in the external environment
or internal operations that affect organization’s ability to fulfillor internal operations that affect organization’s ability to fulfill
its mission and meet its strategic goals.its mission and meet its strategic goals.
 Feedback ControlsFeedback Controls
 Compare the actual performance of the organization to itsCompare the actual performance of the organization to its
planned performance.planned performance.

32. Information Technology and StrategicInformation Technology and Strategic
PlanningPlanning
• PositivePositive
 The increasing availability of information technologyThe increasing availability of information technology
has had a tremendous impact on the ability ofhas had a tremendous impact on the ability of
organizations to develop effective strategic plans.organizations to develop effective strategic plans.
• NegativeNegative
 Many organizations fail to use the information madeMany organizations fail to use the information made
available by management information systems toavailable by management information systems to
ensure effective strategic planning.ensure effective strategic planning.

33. Institutionalizing StrategyInstitutionalizing Strategy
• Every member, work group, department, andEvery member, work group, department, and
division of the organization must subscribe todivision of the organization must subscribe to
and support the organization’s strategy with itsand support the organization’s strategy with its
plans and actions.plans and actions.
 There must be a good fit between the chosen strategyThere must be a good fit between the chosen strategy
and:and:
 the organizational structurethe organizational structure
 the organizational culturethe organizational culture
 the organizational leadershipthe organizational leadership

34. The Importance of OrganizationalThe Importance of Organizational
CultureCulture
• Organizational CultureOrganizational Culture
Refers to the shared, emotionally chargedRefers to the shared, emotionally charged
beliefs, values, and norms that bind peoplebeliefs, values, and norms that bind people
together.together.
Helps people make sense of the systemsHelps people make sense of the systems
within an organization.within an organization.
Guides the behavior of and gives meaningGuides the behavior of and gives meaning
to the members of the organization.to the members of the organization.

35. Organizational LeadershipOrganizational Leadership
• The Importance of LeadershipThe Importance of Leadership
 If an organization is to implement its strategyIf an organization is to implement its strategy
effectively, it must have the appropriate leadership.effectively, it must have the appropriate leadership.
 Without effective leadership, an organization isWithout effective leadership, an organization is
unlikely to realize the benefits of its selected strategy.unlikely to realize the benefits of its selected strategy.

36. Implications for LeadersImplications for Leaders
• Understand the realities of the external environment inUnderstand the realities of the external environment in
which you operate.which you operate.
• Understand the importance of a thorough and accurateUnderstand the importance of a thorough and accurate
assessment of the current situation of the organization.assessment of the current situation of the organization.
• A plan will be only as good as the analysis upon which itA plan will be only as good as the analysis upon which it
is based.is based.
• Strategic vision is critical for ensuring a commonStrategic vision is critical for ensuring a common
strategic direction for the organization.strategic direction for the organization.
• Make sure that the mission statement is a workingMake sure that the mission statement is a working
document that provides direction for the members of thedocument that provides direction for the members of the
organization.organization.

37. Implications for Leaders (cont’d)Implications for Leaders (cont’d)
• Strategic goals serve as targets for achievement. MakeStrategic goals serve as targets for achievement. Make
sure that they are specific, measurable, results oriented,sure that they are specific, measurable, results oriented,
and have a established time for their achievement.and have a established time for their achievement.
• Strategy should be designed to provide the organizationStrategy should be designed to provide the organization
with a distinctive competitive advantage in the long run.with a distinctive competitive advantage in the long run.
• A strategic plan is meaningless if it is not implementedA strategic plan is meaningless if it is not implemented
well.well.
• Provide for evaluation and control to be sure thatProvide for evaluation and control to be sure that
operations are on track for accomplishment of theoperations are on track for accomplishment of the
organization’s mission.organization’s mission.