Chapter 1 The Nature Of Strategic Management

1. Chapter 1The Nature Of Strategic Management

2. All heading somewhere, but unfortunately some Organizations do not know where they are going “ If you don’t know where you are going, then any road will lead you there”

3. Notable Quotes • Plans are less important than planning • Where there is no vision, the people perish • A strategist’s job is to see the company not as it is….. But as it can become • A good strategist plans & controls his/her plans, while a bad strategist plans & then tries to control people

4. What is Strategic Management? Story

5. Thinking Strategically • Strategic thinking means to take the long term view and to see the big picture, including the Organization and the competitive environment and how they fit together

6. Strategic Management – Defined Art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve its objectives The set of decisions and actions used to formulate and implement strategies that will provide a competitively superior fit between the organization and its environment so as to achieve organizational goals

7. Defining Strategic Management Strategic Management focuses on Integrating Management, Marketing, Finance/Accounting, Production/Operations, R&D, Computer info system to achieve Organization Success

8. Defining Strategic Management • The term Strategic Management used synonymously with the term Strategic Planning • Term Strategic planning is used in Business world, whereas the Strategic Management is often used in academia

9. Strategic Management Strategic Planning Refers to Strategy Formulation only Purpose is to optimize for tomorrow the trends of today • Refers to Strategy Formulation, Implementation & evaluation • Purpose is to exploit & create new and different opportunities for tomorrow, long-range planning

10. Strategic Planning • Originated in the 1950’s • Very popular between mid-1960’s & mid 70’s • During these years “SP” believed to be the answer for all problems • Following the ‘boom’ – in 1980’s various planning did not yield higher returns • 1990’s revival of ‘SP’ the process is widely practiced today in the business world

11. Comprehensive strategic management model Perform External Audit Chapter 3 Develop Vision & Mission Chapter 2 Establish Long-Term Objectives Chapter 5 Generate, Evaluate, Select Strategies Chapter 6 Implement Strategies: Mgmt Issues Chapter 7 Implement Strategies: Marketing, Fin/Acct, R&D, CIS Chapter 8 Measure & Evaluate Performance Chapter 9 Perform Internal Audit Chapter 4

12. Strategic Management • Evaluate current • Mission • Goals • Strategies ________ ________ ________________ • Implement Strategy via Changes in : • __________ • __________ • __________ • __________ Define New _________ _________

13. Stages of Strategic Management Strategy Formulation Vision & Mission External Opportunities & Threats Internal Strengths & Weaknesses Long-Term Objectives Alternative Strategies Strategy Selection

14. Strategy Implementation Annual Objectives Policies Employee Motivation Resource Allocation

15. Strategy Evaluation Internal Review External Review Performance Metrics Corrective Actions

16. Fundamentals of Human Resource Management 8e, DeCenzo and Robbins Key Terms in Strategic Management Internal strengths & Weaknesses Competitive Advantage Strategists Policies Long Term Objectives Vision & Mission Strategies External Opportunities & Threats Annual Objectives

17. Competitive Advantage I/O & RBV theories of organization present different perspectives on how best to capture and keep competitive advantage “ Anything that a firm does especially well compared to rival firms.” • Firm sustain Competitive advantage for only a certain period due to rival firms imitating & understanding the advantage • A firm must strive to achieve sustained CA • Continually adapting to changes in external trends and events & internal capabilities, competencies & resources • Effectively formulating, implementing & evaluating strategies that capitalize upon those factors

18. Strategists • Individuals responsible for the success or failure of an Org • Job titles “All strategists have to be chief learning officers. We are in an extended period of change. If our leaders aren’t highly adaptive & great role models during this period, then our companies wont adapt either, because ultimately leadership is about being a role model” CEO, President, Owner, Chancellor, Dean, Entrepreneur

19. Vision & Mission Statements Vision Statement – What do we want to become? Mission Statement – What is our business?

20. Environmental scanning or industry analysis • Analysis of Trends: • Economic • Social • Cultural • Demographic/Environmental • Political, Legal, Governmental • Technological • Competitors Opportunities & Threats (External) National catastrophe, declining value of dollar, intro of new product/service by competitor, unrest in the middle East , War against terrorism Wireless revolution, population shifts, high gas prices, changing work values & attitudes, illegal immigration, competition for foreign companies Changes creating different types of consumer & need for diff types of products/services & strategies

21. Typically located in functional areas of the firm • Management • Marketing • Finance/Accounting • Production/Operations • Research & Development Strengths & Weaknesses (Internal) Organizations strive to pursue strategies that capitalize on internal strengths & eliminate internal weakness • Surveys developed and administered to examine factors:, Profit Margin, Return on investment, Credit Rating , market share, customer satisfaction, distribution channels, degree of centralization . Info & control system

22. Strategy • Means by which long-term objectives are achieved • Comprehensive plan for accomplishing an Organizational goals • Plan of action that prescribes resource allocation & the activities for dealing with environment & helping the Org attain its goal

23. Long Term Objectives • Specific results that an organization seeks to achieve in pursuing its basic mission • Long – term means more than one year • State direction- aid in evaluation; create synergy; reveal priorities; provide basis for effective Planning, organizing, motivating and controlling activities • Should be Challenging, Measurable, Consistent, Reasonable & Clear • Established for overall company & for each division

24. Annual Objectives • Short term milestones that Org’s must achieve to reach long-term objectives • Should be Measurable, quantitative, challenging, realistic, consistent and prioritized • Should be established at the Corporate, divisional & functional levels • Set of annual objectives is needed for each long-term objective • AO important in strategy implementation, whereas Long term objectives in strategy formulation

25. Policies • Means by which Annual objectives will be achieved • Includes Guidelines, rules & Procedures • Policies are guides to decision making and address repetitive or recurring situations • Established at corporate level & apply to an entire organization—divisional level-operational level No smoking policies are usually derived from annual objectives Reduce medical costs- associated with absenteeism & provide a healthy work place- healthier WF can more effectively & efficiently implement strategies

26. Allows an ORG to be more proactive than reactive in shaping its future- exert control over its own destiny Benefits of Strategic Management • Communication is a key to successful strategic management • Dialogue & participation are essential ingredients • Managers & employees become creative innovative when they understand & support the firm’s Mission-Objectives & Strategies • Empowerment is the act of strengthening employees sense of effectiveness –encourage them-participate in decision making – reward them for initiation & imagination • Notion of centralized staff planning is being replaced in ORG by decentralized line manager planning Ownership of strategies by the people who have to execute them is a key to success

27. 100,000 businesses in US fails annually- bankruptcies, liquidations, foreclosures Benefits of Strategic Management Financial Benefits • Improvement in sales • Improvement in profitability • Productivity improvement

28. Benefits of Strategic Management Non-Financial Benefits • Improved understanding of competitors strategies • Enhanced awareness of threats • Reduced resistance to change • Enhanced problem-prevention capabilities

29. Business Ethics & Strategic Management • Provides basis on which policies can be devised to guide daily behavior and decisions in the workplace Code of business ethics – Good ethics is just good business! Discussion “Ethical Behavior” – “how far is too far”

30. Importance of integrity & characterTrees die from the top” no one should ever become a strategist unless he or she is willing to have his or her character serve as the model for subordinates”

31. Mission Statement Our mission is to operate a chain of restaurants that will prepare & serve high quality food on timely basis & at reasonable prices Strategic Goals(President & CEO) • Start or purchase new restaurant • Chain within few years • Provide 14% return to investors for at least 10 years VP-Operations VP-Marketing VP- Finance • Open 150 new restaurants during next five years • Decrease average customer wait by 30 seconds this year • Increase per store sales 5% per year for 10 years • Target & attract two new market segments during next 5 years • Develop new promotional strategy for next year • Keep corporate debt to no more than 20% of liquid assets for next ten years • Revise computerized accounting system with in five years Restaurant Manager Advertising Director Accounting Manager • Hire & train new assistant manager • Decrease waste by 5% this year • Implement incentive system within 1 year • Implement this year’s promotional strategy • Develop regional advertising campaigns with in 1 year • Negotiate 5 % lower advertising rates next yr • Competitive payroll system for each restaurant this year • Pay all invoices within thirty days

32. Assignments • Integrating Intuition & Analysis Albert Einstein “ I believe in intuition & inspiration. At times I feel certain that I am right while not knowing the reason. Imagination is more important than knowledge, because knowledge is limited, where as imagination embraces the entire world” SM is not a pure science that lends itself to a nice, neat, one-two-three approach

33. Integrating Intuition & Analysis • Analytical thinking and intuitive thinking complement each other • I’ve –already-made-up-mind-don’t-bother-me-with-the –facts mode is not management by intuition; its management by ignorance.

34. Adapting to Change – Key Strategic Management Questions (Assignment No.2) • What kind of business should we become? • Are we in the right fields • Are there new competitors • What strategies should we pursue? • How are our customers changing?

35. Standing Plan : Ethical behavior by employeesPolicy : Employees expected to behave ethically in their dealings with suppliers & customers Rule : Requires any employee who receives from customer a gift larger than $10 report the gift SOP: recipient of the gift to make disclosure in writing with in 30 days