1. Concept of Strategy

8/8/2019 1. Concept of Strategy

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The Concept of Strategy:

Strategic Management involves creating organizations that generate

value in a turbulent world over a sustained period of time.

Leadership

Creativity Passion

Analysis

Build an organization that generates and respond

to change

Task involves:



Hierarchy of Strategic Intent:

Refers to the purposes the organization strives to

achieve

Can be broad:

* Vision

* Mission

Can be more focused:

* Goals

* Objectives



Vision:

Refers to the category of intentions that are broad, all -

inclusive and forward thinking

Describes the aspirations of for the future, without

specifying the means that will be used to achieve the

desired ends

Are personal things and often unwritten

Example: Statement such as ³Quality comes First´

But no company can afford to stop production if

quality is bad since quality improvement is a

continuous and gradually process



Mission:

Refers to a statement that makes vision more tangible

Verbalizes the beliefs and directions towards which a

manager wants to lead the organization

Addresses issues that are explicit and serve to identify

what is unique about the character of the organization

No well established rules regarding what they must

include



Attempts to answer the following

questions:

a. What is our reason for being? What is our basic

purpose?

b. What is unique or distinctive about our organization?

c. What is likely to be different about our business three

or five years in the future?

d. Who are, or who should be, our principal customers,

clients or key market segments?

e. What are our principal goods and services, present

and future?

f. What are our principal concerns?

g. What are the firm¶s basic beliefs, values, aspirations

and philosophical priorities?



Examples of Mission Statements:

FORD MOTOR COMPANY

Ford Motor Company

is a worldwide leader in automotive

and automotive-related products and servicesas well as newer industries such as aerospace, communications and

financial products.

Our mission is toimprove continually our products and services

to meet our customers¶ needs, allowing us to prosper

as a business and to provide a reasonable return for our stockholders,

the owners of our business.

Source: Strategic Management ² Miller and Dess, Second International Edition, McGraw Hill Companies



Examples«

AMERICAN AIRLINES

We will be the global market leader in air transportation and

related information services.

That leadership will be attained by:

Setting the industry standard for safety and security

Providing world-class customer service

Creating an open and participative work

environment which seeks positive changes, rewardsinnovation and provides growth, security and

opportunity to all employees

Provide consistently superior financial returns for

shareholders

Source: Strategic Management ² Miller and Dess, Second International Edition, McGraw Hill Companies



Goals:

Refers to attempts made to make mission statements

more concrete

Goals are needed as mission statements hardly project

concrete directions for action Address both financial and non ± financial issues

Financial:

BOEING: Profitability as measured

against our ability to achieve andthen maintain a 20 % average annualreturn on Stockholder·s return.

REYNOLDS: To be an industryleader in profitability and growthand achieve an average ROE of 20 %.

Non - Financial:

BOEING: Integrity must pervade

our actions in all relationships,including those with our customers,suppliers and each other. This is acommitment to uncompromisingvalues and conduct.

GE: We will run only businesses

that are number one or numbertwo in their global markets.



Facilitate reasoned trade-offs

Example:

a. Having simultaneous goals like low cost leadership and good

employee

b. During Recession may face a dilemma such asretaining employees or laying ± off employees;

one results in a loss and the other affects employee

relations

Goals:



Can be reached with a stretch

In the words of Edwin Land, founder of Polaroid:

Goals that draw the greatest strengths out of people are

those they feel are manifestly important and nearly

impossible. Byconstantly setting goals that demand

more effort, an organization

is more likely to reach its

fullest potential.

Goals:



Cut across functional areas: integrating force

Goals:

Based on following areas:

* Market Share and Brand Equity

* Productivity

* Profit Projection

* HRD

* Innovation

* Resource Planning

* Good Corporate Citizenship



Objectives:

Are operational definition of goals

Define what will be accomplished in order to reach

the goals

Characteristics include:

* Can be measured

* Incorporate the dimension of time

* Reduce Conflict



Forms of Strategy:

1. Intended Strategies

Represent the plans that managers develop

Provide guidelines for the means by which the

organization will work toward the ends it pursues

ExampleAT & T¶s Intended Strategy:

We are dedicated to being the world¶s best at bringing people

together ± giving them access to each other and to the information

and services they want and need ± anytime, anywhere.

We look at Customer satisfaction, employee satisfaction, Stock

Price and EVA.

We treat every one with respect and dignity, valuing individual

and cultural differences



Categories of Guidelines:

Help in linking the organization to the intentions/goals

that are supposed to be reached.

Example:

AT & T¶s plans state that in order to reach its objective of 10 %

growth in earnings annually, its business units will focus on

high-margin products.

(A) Plans:

(ii) Other Examples: To maintain our desired rate of growth, we will open four new

stores in the next two years

To increase demand for our products, we will spend heavily

on advertising to establish brand recognition.

Timing is a critical element of plans



Categories of Guidelines:

Guidelines explicitly stated or implicitly understood to

be part of the intended strategy

Example:

We will not depend on outside suppliers for the most critical

components for the assembly of our products.

(A) Policies :

We will not take on long-term debt

Usually stated in negative terms

We will fund future growth through retained earnings



R ealized Strategies:

Entails reference to the past and to what has actually

developed

Realized Strategy different from Intended Strategy as

the latter seldom survives implementation in its

original form

Plans that do not materialize are Unrealized Elements

Example:

* A firm plans to develop a new product and diversify into

new markets. THIS IS INTENDED STAR TEGY

* The product is developed and successfully sold. THIS IS

R EALIZED STR ATEGY.

* Else the product is developed but fails to sell. THIS IS

UNR EALIZED STAR TEGY.



Views of the Strategic Management Process:

Description Attempts to move an organization to a new strategic

position and maintain that position as efficiently and

directly as possible

Assumption Organizational Strategy lends itself to intellectual analysis

and formulation, the environment is predictable and

organizations are controllable

Benefits Has led to the development of many useful planning tools

and techniques

R ATIONAL PLANNING:

Limitations Plans must be quickly outdated by unexpected

developments; formal planning often breaks down in

implementation stage

Mnemonic Icon

Devise the shortest path



Views of the StrategicManagement

Process:

Description Typically move to new strategic positions and maintain those

positions by making continuous adjustments

Assumption While there will be many mistakes, organizations can benefit

from them by discovering new ways of moving towards the

goals.

Benefits Emphasizes broad ± based involvement in management of the

firm and encourages risk taking by legitimizing mistakes

OR GANIZATIONAL LEAR NING:

Limitations May be stressful for individuals not used to unlearning the status

quo and learning new ways of managing.

Mnemonic Icon

Search for what works



Views of the Strategic Management Process:

Description Organizational drift, from one strategy to the next, depending

on the unfolding of events beyond managers control

Assumption Managers lack the ability to forecast or enforce the

developments essential to developing a pre-ordained strategy

and therefore must continually adjust.

Benefits Encourages flexibility and concern of strategy

implementation

INCR EMENTALISM:

Limitations Does not encourage proactive efforts to control the

organization¶s future or destiny.

Mnemonic Icon

Wander about



Views of the Strategic Management

Process:

Description Organizational drift, from one strategy to the next, depending

on the unfolding of events beyond managers control

Assumption Managers lack the ability to forecast or enforce the

developments essential to developing a pre-ordained strategy

and therefore must continually adjust.

Benefits Encourages flexibility and concern of strategy

implementation

INCR EMENTALISM:

Limitations Does not encourage proactive efforts to control the

organization¶s future or destiny.

Mnemonic Icon

Search for what works



Strategic Planning Process:

LEVELStrategic Context Understanding

andAd justing to

Gaps

Identifying

R esources needed

to closeGap

Distributing

R esources

Monitoring

Progress

Corporate

Strategic Goals

Vision

Mission

Objectives

Business

Competitive

EnvironmentOpportunities

and Threats

Function

Internal

Situation

Strengths and

Weaknesses

1

2

3

4

5

6

7

8

9

10

11

12



Steps in Strategic Management Process:

Evaluate performance in light off goals and identify gaps

Relate gaps to environmental conditions

Relate gaps to organizational capabilities

Identify future goals given understanding of gaps

Describe broad action plans aimed at meeting goals

Identify resources required by each function to implement plans

Aggregate needs by function into overall needs of business

Allocate resources across multiple business units

Reallocate resources across multiple functions

Deploy resources within functions

Monitor use of resources within functions

Monitor use of resources across businesses



StrategicManagement vs. General

Management

Integrates various management functions

Oriented toward achieving organizational

goals

Considers broad range of stakeholders

Entails multiple time horizons

Concerned with both efficiency and

effectiveness

Documents

1. Concept of Strategy