103404 Strategic Management (Chapter 1)

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103404 Strategic Management(Chapter 1)

• Dr. Mubarak Ali
• Oman College of Mgt. Tech.
• Sultanate of Oman

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Lecture Objectives

• By the end of this lecture, students should be
  able to
• Explain the functions of management
• Define and explain strategy and strategic
  management
• Explain why strategic management is important
• Explain the strategic management process
• Describe the levels of organizational strategies
• Discuss the misconceptions about strategy and
  strategic management

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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
  organizations goals objectives.

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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

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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.

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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.

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OBJECTIVE 2Whats Strategy?

• Strategy is managements overall plan and actions
  for deploying resources and skills taking into
  consideration opportunities and threats in the
  environment
• to achieve its mission, vision and objectives
• to establish a favorable competitive position.
• Strategy involves
• An organizations goals
• A series of related decisions actions
• Takes into account key internal strengths
  weaknesses and external opportunities threats
• Analysis, communication, coordination, action

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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
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Strategic Managements 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

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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 firms
  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 organizations success
• Makes a difference in performance levels
• Research suggest that successful companies use
  strategic management concepts techniques
• Success evolves from knowing what youre doing
  and often implies having a strategic plan

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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
  organizations goals
• Allows for team effort which is coordinated for
  firm success
• Allows for development of a plan, communication,
  coordination, cooperation among diverse depts
  functions

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OBJECTIVE 4Strategic Management Process

• Establishing a mission, vision and objectives
• Environmental Analysis
• Internal Analysis
• Strategy Formulation
• Strategy Implementation
• Strategic Control and Performance Evaluation

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The Strategic Management Process
Internal Analysis
Strategy Formul- ation
Strategy Implem- entation
Strategic Eval. Control
Mission, Vision Objectives
Environ. Analysis
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Mission, Vision Objectives

• A companys mission is a statement of
• the basic purpose or reason for its existence
• its values (role to stakeholders - customers,
  employees, society, etc.).
• A companys vision is what do we want to
  become.
•  
•  

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Mission, Vision Objectives

• Objectives are yardsticks for tracking a
  companys 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.)

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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.

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Financial Strategic Objectives

• Alcan Aluminum
• Financial To outperform the average return on
  equity of the SPs 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.

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Environmental Analysis

• Involves the evaluation of the business
  environment of the organization.
• All external influences that impact a companys
  decision and performance.
• Environment of firm classified by proximity into
• (1) Macro-environment and
• (2) Micro-environment or task environment.

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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.

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Internal Analysis

• Involves the evaluation of the inventory of the
  firms 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.

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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 firms micro and macro
  environments).

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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
  organizations various functional departments.

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Strategy Implementation

• Strategy implementation is the process of putting
  a companys 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

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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.

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Strategic Management Process

• On-going and continuous cycle of
• Situation Analysis Internal evaluation
  Environmental scanning
• Strategy formulation
• Strategy implementation
• Strategy evaluation

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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.

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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.