By Shahbaz Islam

Perform External Audit

Chapter 3

The Nature of Strategic Management

Develop Vision & Mission Statement

Establish Long-Term Objectives

Generate, Evaluate & Select Strategies

Chapter 1

Chapter 2

Chapter 5

Chapter 6

Implement Strategies Management Issues

Implement Strategies Mktg, Fin, Actg, R&D & MIS Issues

Measure & Evaluate Performance Chapter 9

Chapter 7

Chapter 8

Perform Internal Audit

Chapter 4

Strategic Management Overview

Strategy Formulation

Strategy Implementation

Strategy Evaluation

Which of the following is not an example of an organization?

1. A Church 2. A Hospital

3. Pakistan Cricket Board

4. An NGO 5. IBM 6. Iqra university 7. A Political Party

Organizations are
1.

social entities that

2. are goal directed

3. are designed as deliberately

structured & coordinated system,

4. are linked to the external environment

The key element in an organization is not a building or a set of policies & procedures. Organizations are made of and their relationship with one another. An organization exists when people with one another to perform essential functions that help attain goals.

people

interact

1. 2. 3. 4.

Bring together resources to activate desired goals & outcomes Produce goods/services efficiently Facilitate innovation Use technology

5.
6. 7.

Adapt to and influence a changing environment

Create values for stakeholders Accommodate ongoing challenges of diversity, ethics, motivation & coordination of employees

The word strategy, deriving from the Greek noun strategus, meaning commander in chief, was first used in the English language in 1656. The development and usage of the word suggests that it is composed of stratos (army) and agein (to lead). In a management context, the word strategy has now replaced the more traditional term long-term planning to denote a specific pattern of decisions and actions A strategy is a course of action.

1. Strategic or institutional management is the conduct of drafting, implementing and evaluating cross-functional decision making that will enable an organization to achieve its long-term objectives.

2. It is the process of specifying the organization's mission, vision and objectives, developing policies and plans, often in terms of projects and programs, which are designed to achieve these objectives, and then allocating resources to implement the policies and plans, projects and programs.

3. Art and science of formulating, implementing, and evaluating crossfunctional decisions that enable an organization to achieve its objectives.

Strategic management is an ongoing process that evaluates and controls the business and the industries in which the company is involved; assesses its competitors and sets goals and strategies to meet all existing and potential competitors; and then reassesses each strategy annually or quarterly [i.e. regularly] to determine how it has been implemented and whether it has succeeded or needs replacement by a new strategy to meet changed circumstances, new technology, new competitors, a new economic environment., or a new social, financial, or political environment.

Brief History of Strategic Management

1950s - Term strategic planning originates
1960s 1970s - Strategic planning very popular
- Widely viewed as answer to all problems

1980s - Strategic planning cast aside

- Planning models did not yield higher returns

1990s2000 - Revival of strategic planning

- Widely practiced in business world

Strategic Management
Vision Why are we in business ? Values Climate Culture Where are we now ? SWOT OCA How do we do business ? Driving Force Mission

Gap Analysis

Where do we want to be ?

Goals/Obj .
Tactics Strategies Resources

How can we get there ?

How will we know weve arrived ?

Coordination

Budgets

Controls

Reports

Milestones

Vision & Mission Opportunities & Threats Strengths& Weaknesses Goals & Objectives Alternate Strategy & Selection

Formulation

External & Internal Review Measure Performance Corrective Action

Implementation

Evaluation
Annual Objectives Performance Measures Policies & Procedures Employee Motivation Resource Allocation

Step 1: Define the Business and Its Mission Step 2: Perform External and Internal Audits

Step 3: Translate the Mission into Strategic Goals

Step 4: Formulate a Strategy to Achieve the Strategic Goals Step 5: Implement the Strategy Step 6: Evaluate Performance

External Environment
Opportunities Threats Uncertainty Resource Availability

Organization Design
Structural Form learning vs. efficiency Information and control systems Production technology Human resource policies, incentives Organizational culture Interorganizational linkages

Strategic Direction CEO, Top Management Team

Define mission, official goals Select operational goals, competitive strategies

Effectiveness Outcomes
Resources Efficiency Goal attainment Competing values

Internal Situation
Strengths Weaknesses Distinctive Competence Leadership Style Past Performance

Feedback

Internal Audit

CPM IFE

TOWS SPACE EFE QSPM Procedures Internal & External Scans

Vision

Mission

Goals

Objectives

Input Stage

Matching Stage
BCG IE

Decision Stage

Performance Annual Measures Objectives

Establish Policies
SOPs

Allocate Resource

Evaluate Performance

External Audit

Grand Strategy

Planning Improvements

Feedback

(Balanced Score Card)

Vision & Mission

Opportunities & Threats

Strengths & Weaknesses

Long-Term Objectives

Alternative Strategies

Strategy Selection

Annual Objectives

Policies

Motivate Employees

Resource Allocation

Review External & Internal

Measure Performance

Corrective Action

1. 2. 3. 4. 5. 6. 7. 8. 9.

Strategists Vision statements Mission statements External opportunities and threats Internal strengths and weaknesses Long-term objectives Strategies Annual objectives Policies

Answers the question: What do we want to become?

1. First step in strategic planning 2. Often times a single sentence

Our vision is to take care of your vision.

(Stokes Eye Clinic, Florence, South Carolina)

VISION

What?
Company Vision Strategies

How?

Guiding Principles
Core Values

Divisional Objectives Department Objectives Individual Objectives Individual

Competencies/Skills
Functional Management Strategic

 SWOT analysis is a basic, straightforward model that provides direction and serves as a basis for the development of strategic plans. It accomplishes this by assessing an organizations

Strengths (what an organization can do) and Weaknesses (what an organization cannot do) in addition to

Opportunities (potential favorable conditions for an organization)

Threats (potential unfavorable conditions for an organization).

&

PESTLE is an acronym for

Political Economic Social Technological Legal and Environmental factors

Cultural Demographic Governmental Competitive trends & events

Controllable activities that are performed well or poorly relative to competitors - Based on functional analysis of activities in the firms:
Management Marketing Finance/accounting Production/operations Research and development Computer information systems

Organizations strive to pursue strategies that capitalize on strengths and improve weaknesses

1. Goals are broad objectives are narrow. 2. Goals are general intentions; objectives are precise. 3. Goals are intangible; objectives are tangible. 4. Goals are abstract; objectives are concrete.

5. Goals can't be validated as is; objectives can be validated

SMARTS Way to Write Objectives

Specific

Measurable
Achievable Realistic Time Bound Stretched.

Results to be achieved in pursuing the organizations mission. Time frame is beyond one year.
State direction Aid in evaluation Create synergy Reveal priorities Focus coordination Provide basis for effective management

Potential actions that require top management decisions and large amounts of firms resources

Mechanisms by which long-term objectives are realized

Geographic expansion Diversification Acquisition Product development

Market penetration
Retrenchment Divestiture Liquidation Joint venture

Corporate-level strategy
Identifies the portfolio of businesses that, in total, comprise the company and the ways in which these businesses relate to each other.
Diversification strategy implies that the firm will expand by adding new product lines. Vertical integration strategy means the firm expands by, perhaps, producing its own raw materials, or selling its products direct.

Consolidation strategy reduces the companys size

Geographic expansion strategy takes the company abroad.

Business-level/competitive strategy
Identifies how to build and strengthen the businesss long-term competitive position in the marketplace.
Cost leadership: the enterprise aims to become the low-cost leader in an industry. Differentiation: a firm seeks to be unique in its industry along dimensions that are widely valued by buyers. Focus: a firm seeks to carve out a market niche, and compete by providing a product or service customers can get in no other way.

Company
Dell
General Electric Southwest Airlines Wal-Mart

Strategic Principle
Be direct
Be number one or number two in every industry in which we compete, or get out Meet customers short-haul travel needs at fares competitive with the cost of automobile travel Low prices, every day

S T R A T E G I E S

I N

B R I E F

Short-term milestones necessary to achieve long-term objectives.

Represent the basis for allocating resources Established at corporate, divisional, and functional levels

Important in strategy implementation as the means by which annual objectives will be achieved
Guide to decision making and address repetitive situations Established at corporate, divisional, or functional levels Allow consistency & coordination within and between organizational departments

Vision

Skills Skills

Incentives Incentives Incentives

Resources Resources Resources Resources

Action Plan Action Plan Action Plan Action Plan Action Plan

Vision Vision Vision Vision Skills Skills Skills

Incentives Incentives Resources

Proactive vs. Reactive

Principal Benefit
- Formulate better strategies (Systematic, logical, and rational approach)

Communication (Key to successful strategic management) Financial Benefits

- More profitable and successful - Improvements in sales, profitability, and productivity

Nonfinancial Benefits
Enhanced awareness of external threats Understanding of competitors strategies Increased employee productivity Reduced resistance to change Clear performance-reward relationships Order and discipline to the firm View change as opportunity

Poor reward structures Fire-fighting Waste of time Too expensive Laziness Content with success Fear of failure Overconfidence Prior bad experience Self-interest Fear of the unknown Suspicion