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The Nature of StrategicManagement

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1-2

OverviewWhy do some firms succeed while others

fail?

A central objective of strategic management is

to learn why this happens.

What is strategy? An action a company takes to attain superior

performance.

What is the strategic management process? The process by which managers choose a set

of strategies for the enterprise to pursue its

vision.

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Art & science offormulating,

implementing, andevaluating,

cross-functional decisions that

enable an organization to achieve

its objectives.

Strategic Management

Defined

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Vision & Mission

Strategy Formulation

External Opportunities & Threats

Internal Strengths & Weaknesses

Long-Term Objectives

Alternative Strategies

Strategy Selection

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Strategy Implementation

Annual Objectives

Policies

Employee Motivation

Resource Allocation

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Strategy Evaluation

Internal Review

External Review

Performance Metrics

Corrective Actions

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Strategic Planning

Strategic planning

A set of procedures for

making decisions

about theorganizations long-

term goals and

strategies

Strategic goals

major targets or end

results that relate to

the long-term survival,value, and growth of

the organization.

4-7

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Strategic PlanningWhat is Strategy?

A pattern of actions and resource allocations designed toachieve the organizations goals

Strategy: Strategy, narrowly defined, means "the art of

the general" (from the Greek word stratigos). A

combination of the ends (goals) for which the firm isstriving and the means (policies) by which it is seeking to

get there. A strategy is sometimes called a roadmap which

is the path chosen to plow towards the end vision. The

most important part of implementing the strategy is

ensuring the company is going in the right direction whichis towards the end vision.

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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. The resulting document is called the "strategic plan."

While strategic planning may be used to effectively plot a company's

longer-term direction, one cannot use it to reliably forecast how themarket will evolve and what issues will surface in the immediate future.

Therefore, strategic innovation and tinkering with the "strategic plan"

have to be a cornerstone strategy for an organization to survive the

turbulent business climate.

Strategic planning is the formal consideration of an organization's futurecourse. 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 Planning1. Where will we be active?

2. How will we get there?

3. How will we win in the marketplace?

4. How fast will we move and in what sequence will we make changes?

5. How will we obtain financial returns?

Various business analysis techniques can be used in strategic planning,including SWOT analysis (Strengths, Weaknesses, Opportunities,

and Threats ), GE/McKinsey portfolio analysis, BCG Matrix,PEST

analysis (Political, Economic, Social, and Technological), STEER

analysis (Socio-cultural, Technological, Economic, Ecological, and

Regulatory factors), and EPISTEL (Environment, Political, Informatic,

Social, Technological, Economic and Legal).

4-10

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Hierarchy of Goals and Plans

4-11Figure 4.2

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Tactical and Operational

Planning Tactical planning

A set of procedures for translating broad

strategic goals and plans into specific goals

and plans that are relevant to a distinct

portion of the organization, such as a

functional area like marketing.

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Tactical and Operational

Planning Operational planning

The process of identifying the specific

procedures and processes required at lower

levels of the organization.

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Strategic Planning

Strategic management

A process that involves managers from all

parts of the organization in the formulation

and implementation of strategic goals and

strategies.

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The Strategic Management

Process

4-15Figure 4.4

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Establishment of Mission, Vision,

and Goals Mission

An organizations

basic purpose and

scope of operations.

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EnvironmentalAnalysis

4-17 Table 4.1

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Opportunities & Threats (External)

Key Terms

Analysis of Trends:

Economic

Social

Cultural

Demographic/Environmental

Political, Legal, Governmental

Technological

Competitors

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Opportunities & Threats (External)

Key Terms

Analysis of Trends:

Economic

Social

Cultural

Demographic/Environmental

Political, Legal, Governmental

Technological

Competitors

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Analysis of External Opportunities

and Threats

Stakeholders

Groups and individuals

who affect and are

affected by theachievement of the

organizations mission,

goals, and strategies

4-20

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Analysis of Internal Strengths and

Weaknesses

Resources

Inputs to a system that can enhance

performance

Tangible, intangible assets

4-21

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Internal Resource Analysis

4-22Table 4.2

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Resources and Core

Competencies

4-23

Figure 4.5

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Analysis of Internal Strengths and

Weaknesses

Benchmarking

process of assessing how well one companys

basic functions and skills compare with those

of another company or set of companies.

goal of benchmarking is to thoroughly

understand the best practices of other firms

and to undertake actions to achieve bothbetter performance and lower costs

4-24

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SWOT Analysis and Strategy

Formulation

SWOT analysis

A comparison of strengths, weaknesses,

opportunities, and threats that helps

executives formulate strategy.

4-25

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1. Adapting to change in external trends,internal capabilities and resources

Achieving Sustained

Competitive Advantage

2. Effectively formulating, implementing &evaluating strategies

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What kind of businessshould we become?

Are we in the right fields

Are there new competitors

What strategies should wepursue?

How are our customerschanging?

Adapting to Change Key

Strategic ManagementQuestions

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Vision and MissionVision Statements and Mission Statements are the inspiring words

chosen by successful leaders to clearly and concisely convey the

direction of the organization. By crafting a clear mission statement andvision statement, you can powerfully communicate your intentions and

motivate your team or organization to realize an attractive and

inspiring common vision of the future.

These statements create a sense of direction and opportunity. They

both are an essential part of the strategy-making process. "Mission Statements" and "Vision Statements" do two distinctly

different jobs.

A ission statementtells you the fundamental purpose of the

organization. It defines the customer and the critical processes. It

informs you of the desired level of performance.

A Vision statementoutlines what the organization wants to be, or

how it wants the world in which it operates to be. It concentrates on

the future. It is a source of inspiration. It provides clear decision-

making criteria.

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Your organization's vision is all about what is possible, all about that

potential.

The mission is what it takes to make that vision come true.

The mission statement can galvanize the people to achieve defined

objectives, even if they are stretch objectives, provided it can beelucidated in SMART (Specific, Measurable, Achievable, Relevant and

Time-bound) terms. A mission statement provides a path to realize the

vision in line with its values. These statements have a direct bearing on

the bottom line and succ

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Mission Statement What is our business?

Sets out why the organization exists and what it should be doing i.e.

the fundamental purpose of the organization. A Mission Statement

defines the organization's purpose and primary objectives. Its primefunction is internal to define the key measures of the organization's

success i.e. what the organization hopes to fulfill in the medium to long

term.

A mission statement defines the customer and the critical processes. It

informs the Cos leadership team & stakeholders(mgrs,employees,customers,etc) of the desired level of performance.

It is sometimes used to set out a "picture" of the organization in the future. A

mission statement provides details of what is done and answers the

question: "What do we do?" For example, the charity might provide "job

training for the homeless and unemployed.

The mission statement thus describes the Cos specific defined objectives

that can be elucidated in SMART (Specific, Measurable, Achievable,

Relevant and Time-bound) terms. A mission statement provides a path to

realize the vision in line with its values.

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Vision Statements also define the organizations purpose, but the

broader goal in terms of the organization's values rather than bottom line

measures (values are guiding beliefs about how things should be done.)

The vision statement communicates the overall purpose for being in

existence or in the business and can remain the same for decades ifcrafted well. For employees, it gives direction about how they are

expected to behave and inspires them to give their best. Shared with

customers, it shapes customers' understanding of why they should work

with the organization.

Vision Statement

What do we want to become?

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.

Vision should describe why it is important to achieve the Mission. A Vision

should describe what will be achieved in the wider sphere if the

organization and others are successful in achieving their individual

missions.

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Features of an effective vision statement include:

Clarity and lack of ambiguity

Vivid and clear picture

Description of a bright future

Memorable and engaging wording

Realistic aspirations

Alignment with organizational values and culture

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JIMS 5

Vision

Agreement on the basic vision for whichthe firm strives to achieve in the long run is

critically important to the firms success.

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JIMS -34

What do we want tobecome?

Vision

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JIMS 35

Comprehensive

Mission Statement

Vision

Clear Business

Vision

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JIMS 36

Shared Vision advantages--

Creates commonality of interests & ashared sense of purpose which is inspiring

for managers

Reduce daily monotony

Provides opportunity & challenge It fosters long term thinking

Vision & Mission

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Ch 2 -37

Reveal what an organization wants to be

and whom it wants to serve

Mission Statements

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Ch 2 -38

Essential for effectively establishing

objectives and formulating strategies

Mission Statements

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Ch 2 -39

Vision & Mission

Many organizations develop both vision &mission statements

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Ch 2 -40

Vision & Mission

Profit & vision are necessary to effectively

motivate a workforce

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Ch 2 -41

Vision & Mission

Shared vision creates a community of

interests

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Ch 2 -42

Developing Vision & Mission

Clear mission is needed before alternative

strategies can be formulated and

implemented

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Ch 2 -43

Developing Vision & Mission

Participation from diverse managers is

important in developing the mission

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Ch 2 -44

It is the California Energy Commissionsmission to assess, advocate, and act throughpublic/private partnerships to improve energysystems that promote a strong economy andhealthy environment.

Mission Statement Examples

-- California Energy Commission

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Ch 2 -45

The Bellevue Hospital, with respect,compassion, integrity, and courage, honors the

individuality and confidentiality of our patients,employees, and community, and is progressivein anticipating and providing future health careservices.

Mission Statement Examples

-- The Bellevue Hospital

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Ch 2 -46

A national organization which represents

its members in all aspects of poultry and

eggs on both a national and international

level

Vision Statement Examples

-- U.S. Poultry & Egg Association

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Ch 2 -47

The Vision of Manley Baptist Church is to

be the people of God, on mission withGod, motivated by a love for God, and alove for others


-- Manley Baptist Church

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Ch 2 -48

The Vision of USGS is to be a world

leader in the natural sciences through ourscientific excellence and responsivenessto societys needs


-- U.S. Geological Survey (USGS)

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Ch 2 -49

To be the first choice in the printed

communications business. The firstchoice is the best choice, and being thebestis what Atlanta Webpledges to workhard at beingevery day!


-- Atlanta Web Printers, Inc.

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Ch 2 -50

-- 90% of all companies have used amission statement in the previous five

years

Mission Statements

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Ch 2 -51

What is our business?

Mission Statements

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Ch 2 -52

Mission Statements

Enduring statement of purpose

Distinguishes one firm from another

Declares the firms reason for being

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Ch 2 -53

Mission Statements

Creed statement

Statement of purpose

Statement of philosophy

Statement of business principles

Also referred to as:

Examples of vision & mission statements

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Examples of vision & mission statements

Advanced Auto Parts, Inc. is a company that provides customers with

automotive products and services, which include diagnosing vehicle problems

and doing repair work

Mission StatementIt is the Mission of Advance Auto Parts to provide personal vehicle owners

and enthusiasts with the vehicle related products and knowledge that fulfill

their wants and needs at the right price. Our friendly, knowledgeable and

professional staff will help inspire, educate and problem-solve for our

customers.

A supermarket and drugstore, Albertsons is a food and drug retailer located

in Boise, Idaho. With a team of more than 200,000 in 2,300 stores all over

America, Albertsons has over 2,500 locations in 37 states of the US.

Mission Statement

Guided by relentless focus on our five imperatives, we will constantly strive to

implement the critical initiatives required to achieve our vision. In doing this,

we will deliver operational excellence in every corner of the Company and

meet or exceed our commitments to the many constituencies we serve. All of

our long-term strategies and short-term actions will be molded by a set of core

values that are shared by each and every associate.

K T

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Key Terms

Strategies: Means by which long-termobjectives are achieved. There are 3 levels atwhich strategy operates:

1. Business-Level Strategies

2. Functional-Level Strategies

3. Corporate-Level Strategies

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1-56

Business-Level Strategies

Cost leadership

Attaining, then using the lowest total cost

basis as a competitive advantage.

Differentiation

Using product features or services to

distinguish the firms offerings from its

competitors.Market niche focus

Concentrating competitively on

a specific market segment.

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JIMS 1-57

Functional-Level Strategies

Focus is on improving the effectiveness of

operations within a company.

Manufacturing

Marketing

Materials management

Research and development

Human resources

Corporate Level Strategies

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1-58

Corporate-Level Strategies

Vertical integration(When a company expands its business into areas

that are at different points of the same supply chain & are controlled by a

single company in order to increase that companys or entitys power inthe marketplace.)Eg: A car company that expands into tire manufacturing,

the producer of the cold drink expands into making bottles aswell, a

mobile company opening its own Mobile retail chain.

Diversification(a company enters additional lines of business that aredifferent from the current products, services and markets.Eg: Reliance

Industries diversifying into retail)

Strategic alliances(Strategic alliances are partnerships in which two or

more companies work together to achieve objectives that are mutually

beneficial to share resources, information, capabilities and risks to

achieve this. Eg: Aviva Life Insurance entered into a nation-wide strategic

alliance with India Post, which help the Co. to gather its premium of

policies through post offices)

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Acquisitions(to increase your market share by taking over a similar

company.Eg: You Tube, which was taken over my Google primarily

because it had a strong and loyal user base)

Joint ventures(Eg:Walmart established a joint venture with Bharti

Enterprises called Bharti Walmart Pvt Ltd, for wholesale cash-and-carry

and back-end supply chain management operations in India).

Business portfolio restructuring(involves modifying the business

portfolio through divestitures like sale of a division or plant or unit of one

form to another with d motive to raise capital or to cut losses. From the

sellers perspective, it is a form of contraction from the buyers point ofview, it represents expansion).

Eg: When Coromandal Fertilizers Ltdsold its cement division to India

Cements Ltdthe size of Coromandal Fertilizers Ltd contracted whereas

the size of India Cements Ltd expanded. Hence, a divestiture is the

obverse of a purchase.

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1-60

Strategic Managers for All Levels

FIGURE 1.2

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1-61

Defining the Mission and Setting TopDefining the Mission and Setting Top--Level GoalsLevel Goals

External Analysis of Opportunities and ThreatsExternal Analysis of Opportunities and Threats

Internal Analysis of Strengths and WeaknessesInternal Analysis of Strengths and Weaknesses

Selection of Appropriate StrategiesSelection of Appropriate Strategies

Implementation of Chosen StrategiesImplementation of Chosen Strategies

Strategic Planning

Rational planning by top management

Basic Strategic Planning ModelBasic Strategic Planning Model

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1-62

Strategic Managers

Strategic managers are General managers

as opposed to Operations managers

Responsible for the overall (strategic)

performance and health of the total

organization.

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Benefits of Strategic

Management

Financial Benefits

Improvement in sales

Improvement in profitability

Productivity improvement

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Benefits of Strategic

Management

Non-Financial Benefits

Improved understanding of competitors strategies

Enhanced awareness of threats

Reduced resistance to change

Enhanced problem-prevention capabilities

Documents

Strat. Mgmt. 2