Strategic Management Concept

Learning Objectives
1. Explain why strategic Management is important
2. List the six steps in strategic management
process
3. Be able to describe each of the process
 Strategic management

What is strategic management ?

• The set of managerial decisions and actions

that determines the long run performance of an
organizations
The 3 Big Strategic Questions
1. Where are we now -- what is our situation?
2. Where do we want to go?
✔Business(es) we want to be in and market
positions we want to stake out
✔Buyer needs and groups we want to serve
✔Outcomes we want to achieve
3. How will we get there?
 What Is Strategy?

• Competitive moves and business approaches

management employs in running a company
• Management’s “game plan” to
✔Please customers
✔Position a company in its chosen market
✔Compete successfully
✔Achieve good business performance
 What is the purposes of
strategic management
• Its important to
– Achieve higher organizational performance
– Require managers to examines and adapt the
business environmental changes
– Coordinate diverse organizational units and help
them focus on organizational goals
 Strategic management process
External analysis
•Opportunities
•Threats

Identify
organization’s Formulate Implement Evaluate
SWOT analysis strategies result
situation, goals strategies
and strategies

Internal analysis
•Strength
•Weaknesses
 STRATEGIC MANAGEMENT
CONCEPT
(The Five Tasks of Strategic
Management)

1. DEVELOPING A VISION AND

MISSION
• Begins with thinking strategically about
✔The firm’s future business makeup
✔Where to take the firm
• The task is to
✔Create a roadmap of a company’s
future
✔Decide what future business position
to stake out
✔Provide long-term direction
✔Give the firm a strong identity
• Strategic Vision vs Mission

• A strategic vision concerns with a firm’s future

business path
✔The kind of company it is trying to become
✔Customer needs to be satisfied in the future
• A strategic vision is a roadmap of a company’s future
--
✔Direction it is headed
✔Business position it intends to stake out
✔Capabilities it plans to develop
✔Customer needs it intends to serve
• A mission statement focuses on current
business activities
✔Business(es) company is in now
✔Customer needs currently being
served
• It is a statement that clearly state the organization’s
purpose and what it wants to accomplish in the
larger environment.
• It should be market-oriented, based on distinctive
competencies, motivating and realistic.
Market-Oriented Mission Statement

• Companies usually define their business in

product / technology term:
– “We manufacture furniture”
– “We are a chemical processing firms”
• Product & technology will be outdated
somehow and are not market-oriented
where it will last forever.
Market-Oriented Mission Statement
• Defines the business in term of satisfying basic
customer needs
• Telekom is not in the telephone business (product
term) but is in the communication business
(customer needs term)
• Visa is not a credit cards business, but as allowing
customers to exchange value for anything,
anywhere, anytime.
• Parkson Grand mission is not to run a department
store, but is to provide a wide range of products
that deliver value to customer.
 Mission Statement-realistic &
specific
• A pencil manufacturer mission statement is stated
that they are in the ‘communication’ equipment
business. (too broad, not specific)
• “We want to become the leading company in this
industry by producing the highest quality
products, the best service at the lowest prices”
(sounds too good to be true, but is it realistic?)
 Some examples…
• “To provide core banking and selected
financial services professionally, efficiently
and competitively”
• “To provide a safe and reliable supply of
electrical power at reasonable cost to the
people of New South Wales and to
industrial and commercial undertakings
throughout the state”
 Examples of Mission & Vision Statement

Mc Donald’s Corporation
Mc Donald’s vision is to dominate the global
foodservice industry. Global dominance
means setting the performance standard for
customer satisfaction while increasing
market share and profitability through our
convenience, value and execution strategies
Examples of Mission & Vision Statement

Otis Elevator
Our Mission is to provide any customer a
means of moving people and things up,
down and sideways over short distances
with higher reliability than any similar
enterprise in the world
 Examples of Mission & Vision Statement

Avis Rent-a-Car
Our mission is total customer satisfaction

The Body Shop

We aim to achieve commercial success by meeting
our customers’ needs through the provision of
high quality, good value products with exceptional
service and relevant information which enables
customers to make informed and responsible
choices
Examples of Mission & Vision Statement

Ritz-Carlton Hotels
The Ritz-Carlton Hotel is a place where the
genuine care and comfort of our guests is
our highest mission.
We pledge to provide the finest personal
service and facilities for our guests who will
always enjoy a warm, relaxed yet refined
ambiance.
Examples of Mission & Vision Statement

Intel
Intel supplies the computing industry with
chips, boards, systems and software. Intel’s
products are used as “building blocks” to
create advanced computing systems for PC
users. We aim to be the preeminent
building block supplier to the new
computing industry worldwide
 Examples of Mission & Vision Statement

Long John Silver’s Restaurant Chain

To be America’s best quick service restaurant
chain. We will provide each guest great
tasting, healthful, reasonably priced fish,
seafood and chicken in a fast, friendly
manner on every visit.
 2. What Are the Firm’s SWOT ?
• S W O T represents the first letter in
– S trengths
S W
– W eaknesses
– O pportunities
– T hreats O T
• Strategy-making must be well-matched to both
– A firm’s resource strengths and weaknesses
– A firm’s best market opportunities and external
threats to its well-being
 Role of SWOT Analysis in
Crafting a Better Strategy
• Developing a clear understanding of a company’s
– Resource strengths
– Resource weaknesses
– Best opportunities
– External threats
• Drawing conclusions
about how best to deploy
resources in light of the company’s internal
and external situation
• Thinking strategically about how to strengthen the
company’s resource base for the future
• A strength is something a firm does well or a
characteristic that enhances its competitiveness
– Valuable competencies or know-how
– Valuable physical assets
– Valuable human assets
– Valuable organizational assets
– Valuable intangible assets
– Important competitive capabilities
– An attribute that places a company in
a position of market advantage
– Alliances or cooperative ventures
• A weakness is something a firm lacks,
does poorly, or a condition placing it
at a disadvantage
• Resource weaknesses relate to
– Deficiencies in know-how or
expertise or competencies
– Lack of important physical,
organizational, or intangible assets
– Missing capabilities in key areas
 Identifying a Company’s
Market Opportunities

• The market opportunities most relevant to

a company are those offering
– The best prospects for profitable long-
term growth
– Competitive advantage
– Good match with its financial and
organizational resource capabilities
 Identifying External Threats
• Emergence of cheaper/better technologies
• Introduction of better products by rivals
• Intensifying competitive pressures
• Unfavorable regulations
• A rise in interest rates
• Potential of a hostile takeover
• Unfavorable demographic shifts
• Adverse shifts in foreign exchange rates
• Political upheaval in a country
 SWOT Analysis -- What to Look For
Potential Resource Potential Resource Potential Company Potential External
Strengths Weaknesses Opportunities Threats

• Powerful strategy • No clear strategic • Serving additional • Entry of potent new

• Strong financial direction customer groups competitors
condition • Obsolete facilities • Expanding to new • Loss of sales to
• Strong brand name • Weak balance sheet; geographic areas substitutes
image/reputation excess debt • Expanding product • Slowing market
• Widely recognized • Higher overall costs line growth
market leader than rivals • Transferring skills to • Adverse shifts in
• Proprietary • Missing some key new products exchange rates & trade
technology skills/competencies • Vertical integration policies
• Cost advantages • Subpar profits . . . • Openings to take MS • Costly new
from rivals regulations
• Strong advertising • Internal operating
problems . . . • Acquisition of rivals • Vulnerability to
• Product innovation business cycle
skills • Falling behind in • Alliances or JVs to
R&D expand coverage • Growing leverage of
• Good customer customers or suppliers
service • Too narrow product • Openings to exploit
line new technologies • Shift in buyer needs
• Better product for product
quality • Weak marketing • Openings to extend
skills brand name/image • Demographic
•Alliances or JVs changes
3. SETTING OBJECTIVES
• Establishing OBJECTIVES
✔Converts vision into specific performance
targets
✔Creates yardsticks to track performance
✔Pushes firm to be inventive and focused
• Types of objectives required outcomes focused
on improving firm’s:
✔financial performance
✔competitiveness and its
✔long-term business position
• Objectives of firm is commonly known as
Corporate objectives
• There are two types of corporate objectives:
– Financial objectives (focus on firms’ financial
performance)
– Strategic objectives (focus on firms’
competitiveness and long term position)
• Examples of Financial Objectives:
✔Grow earnings per share 15% annually
✔Boost annual return on investment from 15% to
20%
✔Increase annual dividends per share to
stockholders by 5% each year
✔Strive for stock price appreciation equal to or
above the S&P 500 average
✔Maintain a positive cash flow
• Examples: Strategic Objectives:
✔Increase firm’s market share
✔Overtake key rivals on quality or customer
service or product performance
✔Attain lower overall costs than rivals
✔Boost firm’s reputation with customers
✔Attain stronger foothold in international
markets
✔Achieve technological superiority
✔Become leader in new product introductions
✔Capture attractive growth opportunities
 Some Examples of Corporate Objectives

Nike
• Protect and improve Nike’s position as the no. 1 athletic
brand in America
• Build a strong momentum in growing fitness market
• Intensify the company’s effort to develop products that
women need and want
• Explore the market for products specifically designed for
the requirements of maturing Americans
• Direct and manage the company’s international business as
it continues to develop
• Continue the drive for increased margins through proper
inventory management and fewer better products
 Some Examples of Corporate Objectives

Ford Motor Company

• To satisfy our customers by providing:
– Quality cars and trucks
– New products
– Reducing the time it takes to bring new vehicles to
market
– Improving the efficiency of all our plants & processes
– Building on our teamwork with employees, unions,
dealers and suppliers
 Some Examples of Corporate Objectives

3M Corporation
• Annual growth in earnings per share of 10%
or better, on average
• A return on stockholders’ equity of 20-25%
• A return on capital employed of 27% or
better
• Have at least 30% of sales come from
products introduced in the past four years
 Some Examples of Corporate Objectives

Exxon
• To provide shareholders a secure investment with a
superior return
General Electric
• To become the most competitive enterprise in the world by
being no.1 or no.2 in market share in every business the
company is in. To achieve an average of 10 inventory turn
over and a corporate operating profit margin of 16% by
1998
Bristol-Myers Squibb
• To focus globally on those businesses in health and
personal care where we can be no. 1 or no. 2 through
delivering superior value to the customer
4. CRAFTING / MAKING A STRATEGY
• Involves deciding how to

✔Achieve performance targets (How to achieve

strategic and financial objectives)
Respond to changing buyer preferences (How to
please customers)
Out compete rivals
Respond to new market conditions / changing
market conditions
Grow the business over the long-term
✔How to manage each functional piece of the
business and develop needed organizational
capabilities
The Objectives
Continued growth
Providing customer care
Remaining as an efficient and quality
producer
High value & good tasting products
McDonald’s as global brand
The How ?
•Add 2500 restaurant annually
•Promote frequent customer visits via
attractive menu items, low-price
specials, extra value meals
•Locate on sites offering convenience
to customers
•Be highly selective in granting
franchises
•Focus on limited menu and
consistent quality
•Hire courteous personnel; pay a
competitive wage; provide training
•More than 5 min. food
Extensive advertising and franchising
• Strategy-making / crafting is a market-driven
and customer-driven activity that involves:
✔Risk-taking and venture
✔Innovation and business creativity
✔Keen eye for spotting market opportunities
✔Keen observation of customer needs
✔Choosing among alternatives of strategies
• Strategy alternatives involves determining whether
to
✔Concentrate on a single business or several
businesses (diversification strategy)
✔Cater to a broad range of customers or focus
on a particular niche (broad or niche market
strategy)
✔Develop a wide or narrow product line
✔Pursue a competitive advantage based on
• Low cost or
• Product superiority or Unique
organizational capabilities
• Details will be discussed further...
• Why Do Strategies Evolve?
• Strategy is both planned and reactive to
changing circumstances
– There is always an ongoing need to react to
✔Shifting market conditions
✔Fresh moves of competitors
✔New technologies
✔Evolving customer preferences
✔Political and regulatory changes
✔New windows of opportunity
✔Internal and external crisis
5. IMPLEMENTING STRATEGY
• Getting the organization to execute strategy
proficiently and efficiently
• Producing excellent results in a timely manner
• Implementation Includes:
• Identifying organization capabilities
• Allocating resources to strategy-critical activities
• Establishing strategy-supportive policies & cultures
• Motivating people to pursue objectives
• Tying rewards achievement for good results
• Installing needed information, communication, and
operating systems
• Instituting best practices for continuous improvement
• Exerting strategic leadership
6. EVALUATING PERFORMANCE
• The tasks of strategy are not a one-time only exercise
✔Times and conditions change
✔Events unfold
✔Better ways to do things emerge
✔New managers with different ideas take over
• Corrective adjustments are sometimes needed. It includes:
✔Alter long-term direction
✔Redefine the business
✔Raise or lower performance objectives
✔Modify the strategy
✔Improve strategy execution
 Who Performs the Five Strategic
Management Tasks?
• Strategizing: An Individual or Group Responsibility?
• Teams are increasingly used because
✔Strategic issues cut across departmental lines
✔Ideas of people with different backgrounds can be
tapped into
✔More people will have an ownership stake in the
strategy
• Senior Corporate Level Managers
• Subsidiary Business Unit Managers
• Functional Area Managers
• Operating Managers