Chapter - 02

The Managerial Process of Crafting and Executing Strategy

Mohammed Sohail Mustafa

Topics to be Covered

What is Strategic Planning? Strategic planning process. Situational Analysis. Corporate Governance. Principles of Corporate Governance. Mechanisms & Controls of Corporate Governance.

Mohammed Sohail Mustafa

What is Strategic Planning?

Strategic planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy, including its capital and people. In order to determine where it is going, the organization needs to know exactly where it stands, then determine where it wants to go and how it will get there. All strategic planning deals with at least one of three key questions:

"What do we do?" "For whom do we do it?" "How do we excel?"

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Strategic Planning Process

Mohammed Sohail Mustafa

Phase I: Developing a Strategic Vision

Vision: Defines the way an organization or enterprise will look in the future. Vision is a long-term view, sometimes describing how the organization would like the world to be in which it operates. For example, a charity working with the poor might have a vision statement which reads "A World without Poverty." Mission: Defines the fundamental purpose of an organization or an enterprise, succinctly describing why it exists and what it does to achieve its Vision. Values: Beliefs that are shared among the stakeholders of an organization. Values drive an organization's culture and priorities and provide a framework in which decisions are made.
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Characteristics of an Effective Worded Strategic Vision

Mohammed Sohail Mustafa

Common Shortcomings in Company Vision Statement

Mohammed Sohail Mustafa

Phase II Setting Objectives

Well-constructed goals have four main characteristics: 1. They are precise and measurable. Measurable goals give managers a yardstick or standard against which they can judge their performance. 2. They address crucial issues. To maintain focus, managers should select a limited number of major goals to assess the performance of the company. The goals that are selected should be crucial or important ones. 3. They are challenging but realistic. They give all employees an incentive to look for ways of improving the operations of an organization. If a goal is unrealistic in the challenges it poses, employees may give up; a goal that is too easy may fail to motivate managers and other employees. 4. They specify a time period in which the goals should be achieved, when that is appropriate. Time constraints tell employees that success requires a goal to be attained by a given date, not after that date. Deadlines can inject a sense of urgency into goal attainment and act as a motivator. However, not all goals require time constraints.
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Phase III Crafting a Strategy to Achieve Objectives & Vision

Mohammed Sohail Mustafa

Phase IV Implementing & Executing Strategy

Building a capable organization Allocating resources to strategy-critical activities Establishing strategy-supportive policies Instituting best practices and programs for continuous improvement Installing information, communication, and operating systems Motivating people to pursue the target objectives Tying rewards to achievement of results Creating a strategy-supportive corporate culture Exerting the leadership necessary to drive the process forward and keep improving.
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Phase V Monitoring Developments, Evaluating Performance & Making Corrective Adjustments

Customer needs and competitive conditions change New opportunities appear; technology advances; any number of other outside developments occur One or more aspects of executing the strategy may not be going well New managers with different ideas take over Organizational learning occurs
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Situational Analysis

When developing strategies, analysis of the organization and its environment as it is at the moment and how it may develop in the future, is important. The analysis has to be executed at an internal level as well as an external level to identify all opportunities and threats of the external environment as well as the strengths and weaknesses of the organizations. There are several factors to assess in the external situation analysis:

Markets (customers) Competition Technology Supplier markets Labor markets The economy The regulatory environment

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Corporate Governance

Corporate governance is a number of processes, customs, policies, laws, and institutions which have impact on the way a company is controlled. An important theme of corporate governance is the nature and extent of accountability of people in the business, and mechanisms that try to decrease the principal-agent problem. Corporate governance also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed. In contemporary business corporations, the main external stakeholder groups are shareholders, debt holders, trade creditors, suppliers, customers and communities affected by the corporation's activities. Internal stakeholders are the board of directors, executives, and other employees.

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Principles of Corporate Governance

1.

2. 3. 4. 5.

Rights and equitable treatment shareholders: Interests of other stakeholders: Role and responsibilities of the board: Integrity and ethical behavior: Disclosure and transparency:

of

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Mechanisms & Controls of Corporate Governance

Internal corporate governance controls.

Monitoring by the board of directors. Internal control procedures and internal auditors. Balance of power. Remuneration. competition debt covenants demand for and assessment of performance information (especially financial statements) government regulations managerial labor market media pressure takeovers
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External corporate governance controls