Lecture 1 SM 2012

8/3/2019 Lecture 1 SM 2012

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Strategic Management

Mahmud A. Shareef Associate Professor

Post Doctoral (McMaster University), PhD(Business Administration, Carleton University, Ottawa,

Canada), M. Engg. (Structural Engg., Carleton

University, Canada), MBA (IBA, Dhaka University),

B.Sc. Engg. (Civil Engg., BUET)

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Management Concept

This course integrates

Theoretical Concept of Management and

Applied Concept of Strategy

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Management Concept

In this course, we will

Explore the meaning of organisational strategyand Investigate the processes by which strategy isformulated within the organisation.

Summarise the strength, weakness, opportunity,and threat related issues and relate this to theissue of strategy through a self-assessmentactivity.

Generic Strategies and Strategy for Diversification

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Management Concept

Analyse various concepts of strategy andcritically consider which is more appropriateto your organisation.

Organizational Capability and PromoteStrategy

Corporate Culture and Leadership

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What is Business Strategy?

Organization has a limited set of resources (e.g.time, people, money, physical resources) and theymust decide how to use those resources.

Example: You have the following resources: ± $500,000

± A building

± 10 employees

± A patent on a new product A

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What is Business Strategy?

Strategy is deciding

what the organization is going to do

how it will use its resources to capitalize onmaximum benefits

gain competitive advantage and

fulfill objectives

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Examples of Strategies Strategy 1: buy equipment and other required assets with

the money and use resources including human resources tomanufacture product A.

Strategy 2: Outsource the production of product A and usethe resources including human resources to market and

distribute the product.

Strategy 3: Sell patent to a larger firm, sell resources, fireemployees, and do other business

Example: once the organization decides that it wants to be amanufacturer of product A, there are many decisions thatmust be made about how to profitably manufacture product A and gain competitive advantage.

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Strategy

Strategy is the process by which individualsand organisations make choices aboutscarce resources so as to satisfy wants over time in an environment of uncertainty. They

are aided in this process by market and non-market forces.

A strategy is defined as a pattern of purposes, policies, programmes, actions,

decisions, or resource allocations thatfocuses essentially on deciding on what theorganization is trying to do, what it is tryingto become within its business environment.

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Strategy

Strategy is the direction and scope of an organisation over the long term:which achieves advantage for the

organisation through its configuration of resources within a changingenvironment, to meet the needs of

markets and to fulfil stakeholder expectations

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Strategic Decisions

Strategic decisions address questions suchas:

± What products or services will be provided?

± Will we focus on providing low costgoods/services?

± Will we focus on providing uniquegoods/services?

± Where will we sell our goods/services? ± To whom?

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Competitive Advantage

What makes strategy difficult is that mostbusiness environments are competitive.Need to try to "second guess" thecompetition.

Competitive advantage: what sets the firmsuperior from the rest of its competitors.

Basis for competition: cost (Walton), quality(Sony), variety (Chadni Chalk for clothes),level of service (Singapore Airlines),...

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Strategic Management

± Strategic management is a means of understandingstrategic position of organisation; formulating courses of action, evaluating them and choosing between them; aswell as planning how choice of strategy can be put intoeffect and managing resultant changes

± It is art and science of formulating, implementing, andevaluating cross-functional decisions that enable anorganization to achieve desired goals

Strategic management process

± The process by which managers choose a set of strategies that will allow a company to achieve superior performance

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Implications: Strategic Management Processes

You need to understand how strategiesdevelop in your organisation:

± To account for strategic direction ± To manage formulation processes

± To manage strategic change

Managing strategic change means managingchanges to the realised strategy - not just theintended strategy.

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Steps of Strategic managementTask 1: Select the corporate vision and mission

Task 2: Setting ObjectivesTask 3: Select strategies that build on the organization¶sstrengths and correct its weaknesses in order to takeadvantage of external opportunities and counter externalthreats

Analyze the external competitive environment to identifyopportunities and threats

Analyze the organization¶s internal environment to identify itsstrengths and weaknesses

Task 4: Implement the strategyTask 5: Evaluating performance, monitoring new development,

and initiating corrective actions

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Task 1: Vision and Mission

Vision: Develop a vision statement is the first stepin strategic planning.

It answers:What do we want to become in

future?

The Boeing Company in 2016:

± ³People working together as a global enterprise for aerospace leadership´

Microsoft:

± ³To empower people through great software, any time,any place, on any device´

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µanimating the dream¶. These statementsoffer aspirations about the future strategicdirection of the organisation and are oftenincorporated in Mission statements.

In this stage the organisation is developinga view of what it should look like once its

strategies are achieved and developed totheir full potential.

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Mission

: defined in the mission statementwhich is a broad declaration of the overridingpurpose. ± Mission statement identifies product, customers

and how firm differs from competitors.

It answers: What is our business?

A description or declaration of why acompany is in operation

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Provides the framework or context withinwhich strategies are formulated

What company is trying to achieve over medium to long term

A. Defining the business: seeks to identify our customers and the needs we can and shouldsatisfy.

This also pinpoints competitors.

B. E stablishing major goals: states who willcompete in the business. Should stretch the organization to new heights.

Goals must also be realistic and have a time period inwhich they are achieved.

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Guiding principles for Mission

It takes years not months

True consensus is necessary within the topteam

Action is a better communicator than words

Top team visibility is essential Top team continuity helps

Strategy and Values should be formulatedtogether

Management should focus on the link betweenbehaviour and values.

Make the mission inspirational but not

unrealistic

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Mission StatementsMission Statements

Company

CompaqCompaq

AT&TAT&T

Mission Statement

Compaq, along with our partners, willCompaq, along with our partners, will

deliver compelling products and services of deliver compelling products and services of

the highest quality that will transformthe highest quality that will transformcomputing into an intuitive experience thatcomputing into an intuitive experience that

extends human capability on all planesextends human capability on all planes ----

communication, education, work, and play.communication, education, work, and play.

We are dedicated to being the world¶s best atWe are dedicated to being the world¶s best at

bringing people togetherbringing people together ---- giving them easygiving them easy

access to each other and to the informationaccess to each other and to the information

and services they want and needand services they want and need ---- anytime,anytime,

anywhere.anywhere.

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Abell¶s Framework for Defining the Business

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Task 2:Setting ObjectivesWhat the specific targets and results you

want to achieve

Characteristics of setting objectives

T i me hor izon: refers to how far in the future

the objective applies. ± Long-term plans are usually 5 years or more.

± Intermediate-term plans are 1 to 5 years. Corporate and business level plans specify long and

intermediate term. ± Short-term plans are less than 1 year.

Functional plans focus on short to intermediate term.

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Task 3: Strategy Formulation

F ormulat ing strategy: managers analyze currentsituation and develop strategies needed to achievethe mission.

Objective is the end result and strategy is the

means to achieve that Strategy formulation answers

± concentrate a single business or build diversification

± target broad range of customers or specific segment

± Product superiority or low cost ± Respond to changing buyer preference

± React to emerging market

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Planning & Strategy FormulationPlanning & Strategy Formulation

Corporate-level strategy

develop a plan of action

maximizing long-run value

Bu siness-level strategy

a plan of action to take

advantage of opportunities

and minimize threats

F unctional-level strategy

a plan of action improving

department¶s ability to

create value

SWOT analysis

identifies strengths &

weaknesses inside the

firm and opportunities

& threats in the

environment.

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Task 4:Strategy Implementation I mplement ing strategy : managers must

decide how to allocate resources betweengroups to ensure the strategy is achieved.

± Building an organization capable to carry out

the strategy ± Allocate resources

± Establish strategy supported policy

± Motivating people ± Leading

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Developing an Effective Implementation Process

Developing a document is not enough. For strategy

to be realised there are some considerations: ± Individuals, teams etc. must know their roles and

responsibilities

± action plans have to be developed

± timescale has to be considered (a planning cycle mightdevelop).

± resources have to be committed, particularly to training

± communication processes have to be developed (and

these have to be effective) ± Review and monitoring procedures have to be considered

(This may involve, performance indicators, benchmarking)

± Accountability procedures must be put in place

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Task 5:EvaluatingTask 5:Evaluating

The process ison going. Butremember,

new strategiesemerge andsome old onesare discarded

whilst othersremain.

Establish standards of performance, goals, orEstablish standards of performance, goals, or

targets against which performance is evaluated.targets against which performance is evaluated.

Measure actual performanceMeasure actual performance

Compare actual performanceCompare actual performance

against chosen standardsagainst chosen standards

Evaluate results and take corrective actionEvaluate results and take corrective action

when the standard is not being achieved.when the standard is not being achieved.

1.

2.

3.

4.

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Steps of Strategic management

Suppose you wantto start a new

pharmaceutical

business

Vision: Develop a

disease free

Bangladesh

Mission: Drugs

with better quality

and reasonable price

must be available for all people at anytime

anywhere

Objective: We

want to capture 10%

market share in

Bangladesh for all

drugs on an average

Documents

Lecture 1 SM 2012