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11
INTRODUCING STRATEGIC INTRODUCING STRATEGIC MANAGEMENTMANAGEMENT
22
““Cheshire Puss” she (Alice) began…Cheshire Puss” she (Alice) began… ““Would you tell me, please, which way I Would you tell me, please, which way I
ought to go from here?”ought to go from here?”
““That depends a good deal on where That depends a good deal on where you want to get to “ said the Cat.you want to get to “ said the Cat.
Lewis CarrollLewis Carroll
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““Without a strategy the organization Without a strategy the organization is like a ship without a rudder, going is like a ship without a rudder, going around in circles”.around in circles”.
Joel Ross and Michael KamiJoel Ross and Michael Kami
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“ “ All men can see the tactics All men can see the tactics whereby I conquer, but what none whereby I conquer, but what none can see is the strategy out of which can see is the strategy out of which great victory is evolved”great victory is evolved”
Sun-Tzu (Chinese military strategist, Sun-Tzu (Chinese military strategist, 3000 years ago)3000 years ago)
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Definition of Definition of Strategic ManagementStrategic Management
Strategic ManagementStrategic Management
That set of managerial decisions and That set of managerial decisions and actions that determines the long-run actions that determines the long-run performance of a corporationperformance of a corporation
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Strategic management is the art and Strategic management is the art and science of formulating, science of formulating, implementing, and evaluating cross-implementing, and evaluating cross-functional decisions that enable an functional decisions that enable an organization to achieve its objectivesorganization to achieve its objectives
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What is Strategic What is Strategic Management?Management?
Strategic management is undertaken by Strategic management is undertaken by the top management of the organization.the top management of the organization.
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What is Strategic What is Strategic Management?Management?
It calls for managers to move It calls for managers to move away from the narrow, specialized away from the narrow, specialized technically oriented perspective to technically oriented perspective to a more comprehensive view of the a more comprehensive view of the firm.firm.
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Definition of StrategyDefinition of Strategy
STRATEGY STRATEGY is the is the direction direction of an of an organization over the organization over the long term, long term, which which achieves achieves advantage advantage of the organization of the organization through its configuration of through its configuration of resources resources within a within a changing environment changing environment and to and to fulfill fulfill stakeholder stakeholder expectationsexpectations
STRATEGY STRATEGY is the is the long term direction of long term direction of an organizationan organization
1010
Benefits of Strategic Benefits of Strategic ManagementManagement
Financial BenefitsFinancial Benefits Non Financial BenefitsNon Financial Benefits
1111
Financial BenefitsFinancial Benefits
More profit and successMore profit and success More informed decisions with good More informed decisions with good
anticipation of both short term and anticipation of both short term and long term consequenceslong term consequences
Less business failuresLess business failures
1212
Non Financial BenefitsNon Financial Benefits
1.1. Allows identification, prioritization Allows identification, prioritization and exploitation of opportunitiesand exploitation of opportunities
2.2. Provides an objective view of Provides an objective view of management problemsmanagement problems
3.3. Represents a framework for Represents a framework for improved coordination and control of improved coordination and control of activitiesactivities
4.4. Minimizes the effects of adverse Minimizes the effects of adverse conditions and changesconditions and changes
1313
5.5. Allows major decisions to better support Allows major decisions to better support established objectivesestablished objectives
6.6. Less ad-hoc decisionsLess ad-hoc decisions7.7. Creates a framework for internal Creates a framework for internal
communicationcommunication8.8. Helps integrate the behavior of Helps integrate the behavior of
individuals into a total effortindividuals into a total effort9.9. Provides a basis for clarifying individual Provides a basis for clarifying individual
responsibilities responsibilities
1414
11.11. Encourages forward thinkingEncourages forward thinking12.12. Provides a cooperative, integrated, Provides a cooperative, integrated,
and enthusiastic approach to and enthusiastic approach to tackling problems and opportunitiestackling problems and opportunities
13.13. Encourages a favorable attitude Encourages a favorable attitude towards changetowards change
14.14. Discipline and formality in Discipline and formality in managing businessmanaging business
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Why some firms do no Why some firms do no strategic planningstrategic planning
Poor reward structuresPoor reward structures Fire-fightingFire-fighting Too expensiveToo expensive LazinessLaziness Content with successContent with success fear of failurefear of failure OverconfidenceOverconfidence Prior bad experiencePrior bad experience Self interestSelf interest Fear of the unknownFear of the unknown Honest difference of opinionHonest difference of opinion SuspicionSuspicion
1616
Pitfalls in Strategic PlanningPitfalls in Strategic Planning
Using SP to gain control over decisions and Using SP to gain control over decisions and resourcesresources
Doing SP only to satisfy accreditation or Doing SP only to satisfy accreditation or requirementsrequirements
Quick move from mission development to Quick move from mission development to strategy formulationstrategy formulation
Failing to communicate the plan to Failing to communicate the plan to employeesemployees
Making intuitive decisions conflicting with Making intuitive decisions conflicting with the formal planthe formal plan
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Top management not supporting the Top management not supporting the strategic planning processstrategic planning process
Failing to use plans as a standard for Failing to use plans as a standard for measuring performancemeasuring performance
Delegating planning to a ”planner” Delegating planning to a ”planner” rather than involving all managersrather than involving all managers
Failing to involve key employees in Failing to involve key employees in all phases of planningall phases of planning
1818
Failure to create a collaborative Failure to create a collaborative climate supportive of changeclimate supportive of change
Viewing planning to be unnecessary Viewing planning to be unnecessary or unimportantor unimportant
Becoming so involved with current Becoming so involved with current problems that no planning is done problems that no planning is done
Being so formal in planning that Being so formal in planning that flexibility and creativity are stifledflexibility and creativity are stifled
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www.entarga.com/stratplan/index.htwww.entarga.com/stratplan/index.htmm
www.mindtools.com/plfailpl.htm/www.mindtools.com/plfailpl.htm/ www.des.calstate.edu/limitations.htmwww.des.calstate.edu/limitations.htm
// www.ethicsweb.ca/codeswww.ethicsweb.ca/codes www.stetson.edu/-rhansen/strategywww.stetson.edu/-rhansen/strategy
2020
Three Key Strategic Three Key Strategic QuestionsQuestions
Where is the organization now?Where is the organization now? If no changes are made, where will the If no changes are made, where will the
organization be in one, two, five or ten organization be in one, two, five or ten years? Are the answers acceptable?years? Are the answers acceptable?
If the answers are not acceptable, If the answers are not acceptable, what specific actions should what specific actions should management undertake? What are the management undertake? What are the risks and payoffs involved?risks and payoffs involved?
2121
Strategic Planning Process -Strategic Planning Process -Three Basic QuestionsThree Basic Questions
Long-TermView
SituationAnalysis
Strategy
1: Where Do We Want To Go?
2: Where Are We Now?
3: What Must We Do To Close The Gap?
2222
Challenges to Strategic Challenges to Strategic ManagementManagement
Globalization Globalization Electronic CommerceElectronic Commerce
2323
GlobalizationGlobalization
Globalization (the internationalization of Globalization (the internationalization of markets and corporations) has changed markets and corporations) has changed the way modern corporations do businessthe way modern corporations do business
A global (worldwide) market instead of a A global (worldwide) market instead of a national marketnational market
SM is a way to keep track of international SM is a way to keep track of international developments and position the company developments and position the company for long-term competitive advantagefor long-term competitive advantage
2424
Regional Trade AssociationsRegional Trade Associations
RTA are changing the way to RTA are changing the way to conduct international businessconduct international business
Force corporations to establish a Force corporations to establish a manufacturing presence wherever manufacturing presence wherever they wishthey wish
Harmonized standards so that Harmonized standards so that products can be sold and moved products can be sold and moved across national boundariesacross national boundaries
2525
Regional Trade Regional Trade Associations/AgreementsAssociations/Agreements
European Union (EU)European Union (EU) North American Free Trade Agreement North American Free Trade Agreement
(NAFTA)(NAFTA) Mercosur (Argentina, Brazil, Urugway and Mercosur (Argentina, Brazil, Urugway and
Paragway)Paragway) Association of South East Asian Nations Association of South East Asian Nations
(ASEAN) (Brunei, Indonesia, Malaysia, the (ASEAN) (Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Philippines, Singapore, Thailand and Vietnam)Vietnam)
FTA (Australia, New Zealand)FTA (Australia, New Zealand)
2626
EUROPEAN UNIONEUROPEAN UNION
EuropeEurope European Union (EU)European Union (EU)
Grouping of 25 European Grouping of 25 European countries that agreed to countries that agreed to support mutual economic support mutual economic growthgrowth
2727
NAFTANAFTA
The AmericasThe Americas North American Free North American Free
Trade Agreement (NAFTA)Trade Agreement (NAFTA) Agreement for free flow of Agreement for free flow of
goods and services between goods and services between the U.S., Canada, and Mexicothe U.S., Canada, and Mexico
Free Trade of the Free Trade of the Americas (FTAA)—Alaska Americas (FTAA)—Alaska to Chile—is a possibilityto Chile—is a possibility
2828
Asian and the Pacific Asian and the Pacific RimRim Rivals EU in size and is Rivals EU in size and is
growinggrowing Economic power of Japan Economic power of Japan
and Chinaand China Asia-Pacific Economic Asia-Pacific Economic
Cooperation (APEC) is a Cooperation (APEC) is a growing regional economic growing regional economic alliancealliance
Human rights and Human rights and intellectual property intellectual property issuesissues
2929
AfricaAfrica Beckons international Beckons international
businessbusiness Increased attention to Increased attention to
stable countriesstable countries South African South African
Development Development Community (SADC) Community (SADC) links 14 countries in links 14 countries in trade and economic trade and economic developmentdevelopment
3030
Electronic CommerceElectronic Commerce
refers to the use of the internet to conduct refers to the use of the internet to conduct business transactionsbusiness transactions
internet is breaking down traditional distribution internet is breaking down traditional distribution channelschannels
The balance of power is shifting to the consumerThe balance of power is shifting to the consumer companies exploit the internet to become more companies exploit the internet to become more
innovative and efficientinnovative and efficient The pace of business is increasing The pace of business is increasing The internet is pushing corporations out of their The internet is pushing corporations out of their
traditional boundariestraditional boundaries Knowledge is becoming the key asset and a Knowledge is becoming the key asset and a
source of competitive advantagesource of competitive advantage
3131
Theories of Organizational Theories of Organizational AdaptationAdaptation
1.1. Population EcologyPopulation Ecology: organizations do not : organizations do not change and are replaced by others more change and are replaced by others more suited to the environmentsuited to the environment
2.2. Institution TheoryInstitution Theory: organizations can : organizations can imitate other successful organizationsimitate other successful organizations
3.3. Strategic Choice perspectiveStrategic Choice perspective organizations can reshape the environmentorganizations can reshape the environment
4.4. Organizational Learning TheoryOrganizational Learning Theory: using : using knowledge to improve the fit with the knowledge to improve the fit with the environmentenvironment
3232
Creating a Learning Creating a Learning OrganizationOrganization
Strategic flexibility demands a long term Strategic flexibility demands a long term commitment to the development and commitment to the development and nurturing of critical resourcesnurturing of critical resources
It demands that the company becomes a It demands that the company becomes a learning organizationlearning organization
Strategic management is essential to Strategic management is essential to learning organizations to avoid stagnation learning organizations to avoid stagnation through a continuous self-examination through a continuous self-examination and experimentationand experimentation
3333
Learning OrganizationLearning Organization
An organization skilled at creating, An organization skilled at creating, acquiring, transferring knowledge, and acquiring, transferring knowledge, and at modifying its behavior to reflect new at modifying its behavior to reflect new knowledge and insightsknowledge and insights
3434
Learning organizations are skilled at 4 Learning organizations are skilled at 4 main activities :main activities :
1.1. Solving problems systematicallySolving problems systematically2.2. Experimenting with new approachesExperimenting with new approaches3.3. Learning from their own experiences as Learning from their own experiences as
well as from the experiences of otherswell as from the experiences of others4.4. Transferring knowledge quickly and Transferring knowledge quickly and
efficiently throughout the organizationefficiently throughout the organization
3535
Triggering Events for Triggering Events for Strategic ChangeStrategic Change
New CEONew CEO External interventionExternal intervention Threat of a change in ownershipThreat of a change in ownership Performance gapPerformance gap Strategic Inflection PointStrategic Inflection Point
3636
Characteristics of Characteristics of Strategic DecisionsStrategic Decisions
RareRare ConsequentialConsequential DirectiveDirective
3737
Characteristics of Strategic Characteristics of Strategic DecisionsDecisions
Concerned with the Concerned with the long term directionlong term direction of of an organizationan organization
Trying to achieve some Trying to achieve some advantage advantage to the to the organization over the competitionorganization over the competition
Concerned with the Concerned with the scope of the scope of the organization’s activitiesorganization’s activities
Concerned with Concerned with matching of the resources matching of the resources and activities of an organization to the and activities of an organization to the environment (Strategic Fit)environment (Strategic Fit)
3838
Characteristics of Strategic Characteristics of Strategic DecisionsDecisions
Strategic Fit Strategic Fit is developing strategy by identifying is developing strategy by identifying opportunities in the business environment and opportunities in the business environment and adapting resources and competences so as to take adapting resources and competences so as to take advantage of theseadvantage of these
Concerned with building on or Concerned with building on or “stretching an “stretching an organization’s resources and competences organization’s resources and competences to to create opportunities or to capitalize on themcreate opportunities or to capitalize on them
Stretch Stretch is the leverage of the resources and is the leverage of the resources and competences of an organization to provide competences of an organization to provide competitive advantage and/or yield new competitive advantage and/or yield new opportunitiesopportunities
3939
Characteristics of Strategic Characteristics of Strategic DecisionsDecisions
May require May require major resource major resource changes changes for an organizationfor an organization
Are likely to affect Are likely to affect operational operational decisionsdecisions
Is affected by the Is affected by the values and values and expectations expectations of those who have of those who have power power in and around the organizationin and around the organization
4040
Basic Elements of the Basic Elements of the Strategic Management Strategic Management
ProcessProcess
Evaluation and
Control
Strategy Implementation
Environmental Scanning
Strategy Formulation
4141
Basic Model ofBasic Model ofStrategic ManagementStrategic Management
Strategic Management consistsStrategic Management consists of four of four basic elementsbasic elements
1.1. Environmental scanningEnvironmental scanning
2.2. Strategy formulationStrategy formulation
3.3. Strategy implementationStrategy implementation
4.4. Evaluation and controlEvaluation and control
4242
Evaluation and Control
and Control
Strategic Management Strategic Management ModelModelStrategy
FormulationStrategy
Implementation
Mission
Objectives
Strategies
Policies
Feedback/Learning
Environmental Scanning
Societal Environment
General Forces
Task Environment
Industry Analysis
Structure Chain of Command
Resources Assets, Skills
Competencies, Knowledge
Culture Beliefs, Expectations,
Values
Reason for existence
What results to accomplish by when Plan to
achieve the mission & objectives Broad
guidelines for decision making
Programs
Activities needed to accomplish a plan
Budgets
Cost of the programs Procedures
Sequence of steps needed to do the job
Process to monitor performanceand take corrective action
Performance
External
Internal
Evaluationand Control
4343
Societal EnvironmentSocietal Environment
Composed of general forces in Composed of general forces in environmentenvironment
4444
Environmental VariablesEnvironmental Variables
Societal Environment
Economic
Forces
Technological
Forces
Political-Legal Forces
Sociocultural Forces
Internal Environment
Structure Culture
Resources
Shareholders
Governments
Customers
Creditors
Communities
Competitors
Employees/
Labor Unions
Suppliers
Special
Interest
Groups
Trade Associations
TaskEnvironment
(Industry)
4545
Task EnvironmentTask Environment
Composed ofComposed of Groups in environment that directly Groups in environment that directly
affect or are affected by the affect or are affected by the organization’s operationsorganization’s operations
(Often called industry)(Often called industry)
4646
StructureStructure
The way a corporation is organized in The way a corporation is organized in terms of communication, authority, terms of communication, authority, and workflowand workflow
4747
Corporate CultureCorporate Culture
Collection of beliefs, expectations, Collection of beliefs, expectations, and values and values learnedlearned and and sharedshared by by members and members and transmittedtransmitted from one from one generation of employees to anothergeneration of employees to another
4848
ResourceResource
An asset, competency, process, skill, An asset, competency, process, skill, or knowledge controlled by the or knowledge controlled by the corporationcorporation
4949
Definition of Strategy Definition of Strategy FormulationFormulation
Strategy FormulationStrategy Formulation
The process of developing long-The process of developing long-range plans to deal effectively with range plans to deal effectively with environmental opportunities and environmental opportunities and threats in light of corporate threats in light of corporate strengths and weaknessesstrengths and weaknesses
5050
Composed ofComposed of MissionMission ObjectivesObjectives StrategiesStrategies PoliciesPolicies
5151
Definition of MissionDefinition of Mission
MissionMission
The purpose or reason for the The purpose or reason for the corporation’s existence. It may be corporation’s existence. It may be narrow or broad in scope.narrow or broad in scope.
5252
Mission Elements
CustomersMarkets
Employees
PublicImage
Self-Concept Philosophy
SurvivalGrowthProfit
ProductsServices
Technology
5353
Definition of VisionDefinition of Vision
Vision or Strategic Intent is the Vision or Strategic Intent is the desired future state of the desired future state of the organizationorganization
5454
The Elements of a Strategic The Elements of a Strategic VisionVision
Defining what business the company Defining what business the company is is presentlypresently in in
Deciding on a Deciding on a long termlong term strategic strategic courses for the company to pursuecourses for the company to pursue
Communicating the vision in ways Communicating the vision in ways that are clear, exciting, and inspiringthat are clear, exciting, and inspiring
5555
Vision vs. MissionVision vs. Mission
Amoco mission statement :Amoco mission statement : “ “ Amoco is a worldwide integrated Amoco is a worldwide integrated
petroleum and chemical company. We find petroleum and chemical company. We find and develop petroleum resources and and develop petroleum resources and provide quality products and services for provide quality products and services for our customers. We conduct our business our customers. We conduct our business responsibly to achieve a superior financial responsibly to achieve a superior financial return balanced with our long-term growth, return balanced with our long-term growth, benefiting shareholders and fulfilling our benefiting shareholders and fulfilling our commitment to the community and the commitment to the community and the environment”environment”
5656
Amoco Vision Statement :Amoco Vision Statement : ““Amoco will be a global business enterprise, Amoco will be a global business enterprise,
recognized throughout the world as recognized throughout the world as preeminent by employees, customers, preeminent by employees, customers, competitors, investors, and the public. We will competitors, investors, and the public. We will be the standards by which other businesses be the standards by which other businesses measure their performance. Our hallmarks will measure their performance. Our hallmarks will be the innovation, initiative and teamwork of be the innovation, initiative and teamwork of our people and our ability to anticipate and our people and our ability to anticipate and effectively respond to change and to create effectively respond to change and to create opportunities”opportunities”
5757
Pepsi Co Mission StatementPepsi Co Mission Statement
PepsiCo’s mission is to increase the value of PepsiCo’s mission is to increase the value of our shareholders’ investment. We do this our shareholders’ investment. We do this through sales growth, cost controls, and wise through sales growth, cost controls, and wise investment resources. We believe our investment resources. We believe our commercial success depends upon offering commercial success depends upon offering quality and value to our consumers and quality and value to our consumers and customers providing products that are safe, customers providing products that are safe, wholesome, economically sound, and wholesome, economically sound, and providing a fair return to our investors while providing a fair return to our investors while adhering to the highest standards of integrityadhering to the highest standards of integrity
5858
Ben & Jerry’s MissionBen & Jerry’s Mission Ben & Jerry’s mission is to make, distribute and Ben & Jerry’s mission is to make, distribute and
sell the finest quality all-natural ice cream and sell the finest quality all-natural ice cream and related products in a wide variety of innovative related products in a wide variety of innovative flavors made from Vermont dairy products. To flavors made from Vermont dairy products. To operate the Company on a sound financial basis operate the Company on a sound financial basis of profitable growth, increasing value for our of profitable growth, increasing value for our shareholders, and creating career opportunities shareholders, and creating career opportunities and financial rewards for our employees. To and financial rewards for our employees. To operate the Company in a way that actively operate the Company in a way that actively recognizes the central role that business plays in recognizes the central role that business plays in the structure of society by initiating innovative the structure of society by initiating innovative ways to improve the quality of life of a broad ways to improve the quality of life of a broad community—local, national and international.community—local, national and international.
5959
Mission Statement Evaluation Mission Statement Evaluation MatrixMatrix
COMPONENTS
Organization CustomersProducts Services Markets
Concern for Survival, Growth,
Profitability Technology
PepsiCo Yes No No Yes No
Ben & Jerry's No Yes Yes Yes No
6060
Mission Statement Evaluation Mission Statement Evaluation MatrixMatrix
COMPONENTS
Organization PhilosophySelf-
ConceptConcern for Public Image
Concern for Employees
PepsiCo Yes No No No
Ben & Jerry's No Yes Yes Yes
6161
Definition of ObjectivesDefinition of Objectives
ObjectivesObjectives
The end results of planned activity. The end results of planned activity. They state WHAT is to be accomplished They state WHAT is to be accomplished by WHEN. They should be quantified, if by WHEN. They should be quantified, if possible.possible.
6262
Strategy Formulation Strategy Formulation Establishing Long Term Establishing Long Term
ObjectivesObjectives
– SpecificSpecific– MeasurableMeasurable– Achievable/AttainableAchievable/Attainable– RationalRational– Time BoundTime Bound
SMARTSMART
6363
Areas for Setting ObjectivesAreas for Setting Objectives
Profitability (Net Profits)Profitability (Net Profits) Efficiency (low costs)Efficiency (low costs) Growth (increase in total assets)Growth (increase in total assets) Shareholder wealth (dividends plus Shareholder wealth (dividends plus
stock price appreciation)stock price appreciation) Utilization of resources (return on Utilization of resources (return on
investment or equity)investment or equity) Reputation (being considered a top Reputation (being considered a top
firm)firm)
6464
Contribution to employeesContribution to employees Contribution to societyContribution to society Market leadershipMarket leadership Technological leadershipTechnological leadership SurvivalSurvival Personal needs of top managementPersonal needs of top management
6565
Definition of StrategyDefinition of Strategy
StrategyStrategy
A comprehensive master plan stating A comprehensive master plan stating HOW the corporation will achieve its HOW the corporation will achieve its mission and objectivesmission and objectives
6666
Definition of Definition of Corporate StrategyCorporate Strategy
Corporation’s overall direction and Corporation’s overall direction and the management of its businessesthe management of its businesses
6767
Definition of Definition of Business StrategyBusiness Strategy
Emphasizes improving the Emphasizes improving the competitive position of a competitive position of a corporation’s products or unitscorporation’s products or units
6868
Definition of Definition of Functional (operational) Functional (operational)
StrategyStrategyMaximizes resource productivityMaximizes resource productivity
6969
Hierarchy of StrategyHierarchy of Strategy CorporateCorporate StrategyStrategy
Business (Division Level)
Strategy
Functional Strategy
7070
Definition of PoliciesDefinition of Policies
PoliciesPolicies
Broad guidelines for making Broad guidelines for making decisionsdecisions
7171
Definition of Strategy Definition of Strategy ImplementationImplementation
Strategy ImplementationStrategy Implementation
The process of putting strategies and The process of putting strategies and policies into action through the policies into action through the development of development of ProgramsPrograms BudgetsBudgets ProceduresProcedures
7272
Definition of ProgramDefinition of Program
ProgramProgram
A statement of activities or steps A statement of activities or steps needed to accomplish a single-use needed to accomplish a single-use planplan
7373
Definition of BudgetDefinition of Budget
BudgetBudget
A statement of a corporation’s A statement of a corporation’s program in dollar termsprogram in dollar terms
7474
Definition of ProceduresDefinition of Procedures
ProceduresProcedures
A system of sequential steps or A system of sequential steps or techniques that describe in detail techniques that describe in detail how to perform a particular task or how to perform a particular task or jobjob
7575
Definition of Evaluation Definition of Evaluation and Controland Control
Evaluation and ControlEvaluation and Control
The process of monitoring corporate The process of monitoring corporate activities and performance results so activities and performance results so that actual performance can be that actual performance can be compared with desired performancecompared with desired performance
7676
Modes of Strategy FormulationModes of Strategy Formulation(Mintzberg)(Mintzberg)
Entrepreneurial Mode (made by a powerful Entrepreneurial Mode (made by a powerful individual, focus on opportunity)individual, focus on opportunity)
Adaptive Mode ( reactive solutions to existing Adaptive Mode ( reactive solutions to existing problems)problems)
Planning Mode (situation analysis and rational Planning Mode (situation analysis and rational selection of alternatives)selection of alternatives)
Logical incrementalism (strategy emerges Logical incrementalism (strategy emerges from debates, discussions, experimentation, from debates, discussions, experimentation, useful when the environment is changing useful when the environment is changing rapidly)rapidly)
7777
Strategic Decision-Making Strategic Decision-Making ProcessProcess
Review and Revise as Necessary: Mission Objectives
Generate and Evaluate Strategic Alterna- tives
Select and Recommend Best Alternative
Implement Strategies: Programs Budgets Procedures
Evaluate and Control
StrategyImplementation
Step 7
5(b) 6(a) 6(b) 7 8
Analyze External Factors: Opportun- ities Threats
Scan and Assess Internal Environment: Structure Culture Resources
Analyze Internal Factors: Strengths Weak- nesses
Select Strategic Factors (SWOT) in Light of Current Situation
Scan and Assess External Environment: Societal Task
Evaluate Current Performance Results
Examine and Evaluate the Current: Mission Objectives Strategies Policies
Review Corporate Governance: Board of Directors Top Man- agement
Strategy
Formulation:
Steps 1 – 6
3(a)
1(a) 1(b) 2 5(a)
4(a)
3(b)
4(b)
Evaluationand
Control:Step 8
7878
Characteristics of a good Characteristics of a good strategystrategy Provides answers for the following questions:Provides answers for the following questions:
1.1. Arenas : where will we be active?Arenas : where will we be active?
2.2. Vehicles: how will we get there?Vehicles: how will we get there?
3.3. Differentiators: how will we win in the market Differentiators: how will we win in the market place?place?
4.4. Staging : what will be our speed and Staging : what will be our speed and sequence of movessequence of moves
5.5. Economic logic: how will we obtain our Economic logic: how will we obtain our returns?returns?
7979
Strategic Management Process Strategic Management Process at Maytag Corporation (1993): at Maytag Corporation (1993):
Mission & ObjectivesMission & ObjectivesStrategy FormulationStrategy Formulation
Mission Mission BroadBroad: To serve the best interests of shareowners, : To serve the best interests of shareowners,
customers, and employeescustomers, and employees NarrowNarrow: To become a full-line globally-oriented major : To become a full-line globally-oriented major
home appliance manufacturer and marketerhome appliance manufacturer and marketer
ObjectivesObjectives Increased profitabilityIncreased profitability Number one in customer satisfactionNumber one in customer satisfaction Number three in North American unit salesNumber three in North American unit sales
8080
Strategic Management Process Strategic Management Process at Maytag Corporation (1993): at Maytag Corporation (1993):
Strategies & PoliciesStrategies & PoliciesStrategiesStrategies To grow horizontally where the corporation is not yet well represented To grow horizontally where the corporation is not yet well represented
through external acquisition or joint venturesthrough external acquisition or joint ventures To grow horizontally internally by improving efficiency and quality of acquired To grow horizontally internally by improving efficiency and quality of acquired
companies and by using one business unit’s expertise in one acquired are to companies and by using one business unit’s expertise in one acquired are to introduce quality products from a business unit in another areaintroduce quality products from a business unit in another area
PoliciesPolicies No cost reduction proposal will be approved if it reduces product quality in No cost reduction proposal will be approved if it reduces product quality in
any wayany way Every product, from the least expensive to the highest priced, should be Every product, from the least expensive to the highest priced, should be
superior to the competition in overall quality and performancesuperior to the competition in overall quality and performance The corporation must not emphasize market share at the expense of The corporation must not emphasize market share at the expense of
profitabilityprofitability Business units must be managed for synergies, while simultaneously the Business units must be managed for synergies, while simultaneously the
specialized expertise among those units must be allowed to flourishspecialized expertise among those units must be allowed to flourish
8181
Strategic Management Process Strategic Management Process at Maytag Corporation (1993): at Maytag Corporation (1993):
Programs & BudgetsPrograms & BudgetsProgramsPrograms Work with Bosch-Siemens to develop joint marketing Work with Bosch-Siemens to develop joint marketing
and supplier agreements for Hoover appliancesand supplier agreements for Hoover appliances Analyze and develop Asian markets through current Analyze and develop Asian markets through current
distributors and licensees and through joint venturesdistributors and licensees and through joint ventures Develop new appliances for continental EuropeDevelop new appliances for continental Europe Develop TV advertising for Jenn-Air and Magic ChefDevelop TV advertising for Jenn-Air and Magic Chef Consolidate production of washers and dryers in Consolidate production of washers and dryers in
dedicated plantsdedicated plants
BudgetsBudgets Prepare budgets for each planned programPrepare budgets for each planned program
8282
Strategic Management Process Strategic Management Process at Maytag Corporation (1993): at Maytag Corporation (1993):
ProceduresProceduresProceduresProcedures Develop procedures for joint purchasing and Develop procedures for joint purchasing and
joint marketing of Bosch-Siemens with Hooverjoint marketing of Bosch-Siemens with Hoover Coordinate marketing, manufacturing, and Coordinate marketing, manufacturing, and
purchasing activities of business units through purchasing activities of business units through committeescommittees
Research and development takes place in unit Research and development takes place in unit housing each product linehousing each product line
Consolidate all advertising under one agency, Consolidate all advertising under one agency, but establish internal advertising for each but establish internal advertising for each brand categorybrand category
8383
Strategic Management Process Strategic Management Process at Maytag Corporation (1993): at Maytag Corporation (1993):
Evaluation & ControlEvaluation & ControlEvaluation & ControlEvaluation & Control Require all business units to provide Require all business units to provide monthlymonthly status reports status reports
on sales and costs by product line plus any trends in expenseson sales and costs by product line plus any trends in expenses Require all business units to provide Require all business units to provide annualannual reports giving reports giving
operating revenues, costs, and expenses as well as operating revenues, costs, and expenses as well as identifiable assets in dollars, plus property additions and identifiable assets in dollars, plus property additions and deletionsdeletions
Require all business units to provide Require all business units to provide quarterlyquarterly assessments of assessments of competitive activity and overall trends affecting each of their competitive activity and overall trends affecting each of their product linesproduct lines
Require all business units to inform corporate headquarters Require all business units to inform corporate headquarters before proceeding on any financially risky planbefore proceeding on any financially risky plan