Strategic Management

Topics
 Strategic Management Process
 Situational Analysis
 Strategy Formulation
 Strategy Implementation
 Cases and Strategy Exercise
Process of Planning
 A lack of fit between expected
performance and existing performance
 A lack of fit between the changing needs
and the existing management practices.
What should
be done

Rather than….

How do we
manage our
constraints
Strategy…….

Design of a desired
future
and effective ways of
bringing it about
Strategy…...
Fundamental pattern of
present and past resource
deployments and environmental
interactions that indicates how
the organisation will achieve
its objectives.
 Shifting Focus
Internal External
focus Focus
Past
performance

current
operating
performance

Expected
performance
in a forecast
environment
 Setting Directions

 defining the business

 establishing strategic
objectives

 formulating strategy
Primary
determinants External factors
of strategy

Pressures to
review the Situation analysis
present
strategy…..

Internal factors
 Conclusions
concerning
implications
for strategy Identification
from &
int & ext evaluation
analysis of
Choice of
strategy
strategy
alternatives
that best
fits the
overall
situation
Environment
CHANGING POLICIES

CHANGING CUSTOMERS

CHANGING COMPETITORS
 External Factors

 market opportunities &

industry attractiveness

 external threats

 societal, political, regulatory,

ethical and economy-related
constraints
 Internal Factors
 organisational skills, resources,
and capabilities

 organisational culture,
core beliefs, and business
philosophy

 values, aspirations and vision

of key executives
 A basic strategic planning model
Swot Strategy Performance
Goal setting Analysis Formulation Evaluation

External
Environment

Ways & Realized

Desired Means Performance
Performance

Internal
Environment
 Evolution of
Planning Systems
Budgeting:

Operational control
Value System:

Meet Budget
 Evolution of
Planning Systems
LRP
Effective Planning
for growth

Value System:
Predict future
 Evolution of
Planning Systems
Strategic Planning
Increasing response
to emerging needs

Value System:
Think strategically
 Evolution of
Planning Systems
Strategic Management
Orchestration of all
resources to create
competitive advantage

Value System:
Create future
PEST Analysis
Ansoff Model
Profit Optimization Model
BCG Growth share matrix of
Portfolio Analysis
GE/McKinsey Matrix of
Industry Attractiveness –
Business Strength Matrix
PIMS
Porter’s Industry Attractiveness
& Competitive Advantage Analysis
Porter’s Value Chain
Kenichi Ohmae’s Strategic 3 C’s
Framework (Corporation, customers,
Competitors)
Value based strategic management
SPA & Marakon Associates – using
Discounted cash flow analysis to focus
On the spread between a company’s rate
Return and its cost of capital (connecting
Competitive positioning concepts to
Shareholder value analysis)
TQM, Benchmarking,
Business Process
Reengineering
Core Competence
Balanced Scorecard
Framework –
Financial measures of
actions already taken
 Stakeholders
Employees
Patients/Attendants
Doctors/Technicians
Suppliers
Politicians
Bureaucrats
Community
Funding Agencies
Unions
Competitors
S W O T

OR

T W S O?
Define capabilities:

Strengths
Weaknesses
Analyze Environment

Opportunities
Identify an Threats
opportunity
that requires
your distinctive
capabilities to exploit
 The 7S model
 super-ordinate goals
 strategies
 structure
 systems
 staff
 skills
 shared values
 Business Mission

What business are we in?

What do we want to be?

 Key components of
mission statements

 target customers and

markets
 principal products and services
 geographic domain
 core technologies
 Key components of
mission statements

 commitment to survival, growth

and profitability
 key elements in the company
philosophy
 the company self-concept
 the firm’s desired public image
 An effective mission
statement
Involves identification of:

•distinctive competencies of the firm

•important external factors and
constituencies expected to impact
the firm
• organisational goals and aspirations
 Identify scope of operations

Shape strategic direction More

Impact & organisational focus effective
strategic
of effective
decisions
mission Communicate organisational
statement philosophy & goals

Set tone for organisational

Superior
culture
organisational
performance
Motivate employees to achieve
organisational goals
Mission statement must be
understandable by all

Long term objectives:

efficiency oriented
effectiveness oriented
equity oriented
response oriented
 Mission statements

 achieve excellence & maintain

leadership through customer
satisfaction in cardiac care focussing
on technology and professionalism
 Objectives
 should relate to a single,
specific topic
 should relate to a result
not to an activity to be
performed
 should be measurable
 should contain a time
deadline
 should be challenging
but achievable
 Standard performance
objectives
• to preserve shareholders’ capital
• to increase earnings on an average
of 10% a year
• to earn a return of 13-15% each year
on shareholders’ equity(net worth)
• to pay out 35-45%of earnings in the
form of dividends to shareholders
 Standard performance
objectives

• to maintain a prudent financial

structure, retaining the company’s
triple A rating for the purpose of
borrowing large sums of money
• to compare favourably with
competitors
 Sizing up the
situation
• Where are we now?

• How did we get here?

• Where are we going?

• How do we get there?

Vision, mission and objectives
require strong communication
within an organisation
 Strategy formulation
 strategy must be consistent with
environment
 strategies of parts must be
consistent with each other and
the whole
 Strategy formulation
 effective strategies focus
resources rather than scatter
them
 resources are critical
 risks should not be taken
casually
 Strategy formulation
 a good strategy is controlled
 strategy should be built on
its successes
 support at all levels
 Long term accent in strategy
formulation
• Competitive positioning and
performance benchmarking
• Investment Decisions in a
Global context
• Formation of Strategic
Alliances
 Strategy Identification
and Selection
Specify Mission
Identify Strategic Alternatives
Investment strategies
Strategies for sustainable
competitive advantage
Strategy selection
Implementation
Review
 Strategic
Alternatives
What might we do?

What do we do best?

What must we do?

 Operational Task
Requirements
What should we focus on?

What should we do?

What have we done?

 Reformulation &
Recovery
What if?

What then?
scenarios & consequences
 Strategy Selection
Criteria
• Is it responsive to the
environment?
• Does it conform to your
mission and goals?
• Is it feasible given the
resources available?
 Types of strategies
Integrative

Forward
Backward
Horizontal
 Types of strategies
Intensive

Market penetration
Market Development
Product Development
 Types of strategies

Diversification

Concentric
Conglomerate
Horizontal
 Types of strategies
Others
Joint Venture
Retrenchment
Divestment
Liquidation
Combination
No Strategy
Tests to Evaluate
A Future Strategy
 I. Internally Focussed:
Resources & Internal
1. Resources Stakeholders
Resource Adequacy/Feasibility
--Does the company have
resources to expand?
--Can it afford the risks of
strategy?
 I. Internally Focussed:
Resources & Internal
1. Resources Stakeholders
Flexibility
--Will the commitment preserve
the company’s flexibility?
--Are the risks taken warranted
by the rewards expected?
--Can the decision be reversed
and at what cost?
 I. Internally Focussed:
Resources & Internal
1. Resources Stakeholders

Controllability
--Can the company afford to
succeed?
--Does management know how to
gauge whether the strategy is
working?
 I. Internally Focussed:
Resources & Internal
Stakeholders
1. Resources

Controllability
--What problems will be
resolved? What will be
created?
 I. Internally Focussed:
Resources & Internal
Stakeholders

2. Internal Stakeholders

Stakeholder Adequacy
--Will it satisfy internal
stakeholder objectives?
 I. Internally Focussed:
Resources & Internal
Stakeholders

2. Internal Stakeholders

Value Compatibility
--Will the organisation’s
critical stakeholders
go along with it?
 I. Internally Focussed:
Resources & Internal
Stakeholders
2. Internal Stakeholders

Impact on Management Harmony

--Who opposes strategy
commitment?
--What is the organisational
and personal cost of
commitment?
 II. Externally Focussed:
Environment & External
Stakeholders
1. Environment
Competitive Advantage
--Does the strategy enhance
the company’s competitive
strengths?
--Is the company competitively
early, late, or ‘on time’?
 II. Externally Focussed:
Environment & External
1. Environment Stakeholders
Competitive Advantage
--Is it far-sighted or merely
expedient?
--Does the strategy create and
exploit a situation of imbalance,
ie. does it focus maximum
resources against maximum
opposition?
 II. Externally Focussed:
Environment & External
Stakeholders
1. Environment

Competitive Advantage
--does it preserve the firm’s
distinctive competence?
--Is it robust?
 II. Externally Focussed:
Environment & External
Stakeholders
1. Environment

Conventional Wisdom
--Does the strategy violate
conventional wisdom?
--How do you know it will work?
 II. Externally Focussed:
Environment & External
Stakeholders
1. Environment

Contingency Tests
--What assumptions are implicit
in the strategy? Are they
viable--does the success of the
strategy depend upon an
economic upswing/
 II. Externally Focussed:
Environment & External
Stakeholders
2. External Stakeholders
Reactions
--Does the strategy assume that
the competitors are smart?
--Does it allow for intelligent
reactions by the competitors?
Does it allow for irrational or
emotional reaction by them?
 II. Externally Focussed:
Environment & External
Stakeholders
2. External Stakeholders

Vulnerability
--What are the strategy’s
vulnerabilities?
--Could it be caught in
cross-impact?
 III. The Ultimate Test

--Does the strategy provide

value to the ultimate
customer?
--Is the strategy consistent
with the reality of the
industry/sector?
 III. The Ultimate Test

--Does it acknowledge the real

power of competitors, suppliers,
distributors, customers and
regulators?
Strategy Implementation
Strategy can be recognised
as the broader and more
general policy statement or
approach encompassing a
group of action programmes.
Action programmes are
tactical moves that are
specific and detailed in
nature
 Business Mission

What business are we in?

What do we want to be?

Mission statement must be
understandable by all

Long term objectives:

efficiency oriented
effectiveness oriented
equity oriented
response oriented
Corporate Culture

Sets of values instilled in

employees and institutional/
departmental practices that
govern their internal and
external behaviour
…..strategies must be
compatible with
institutional
cultures
IMPLEMENTATION PROBLEMS
• INCOMPATIBILITY BETWEEN
MINDSET &STRATEGY

• LACK OF CONSENSUS/COMMITMENT TO
STRATEGY

• EXIT/ABSENCE OF LEADER

• RESOURCE MISMATCH

• LACK OF A CLEAR ROAD MAP

• LACK OF MIND MAPPING OF ISSUES

• ORGANIZATIONAL BUREAUCRACY
problem classification
• organisation wide problem
• departmental problem
• physical, technological,
quantitative problem
• human, organisation related
problem
• problem amenable to solution
• problem not amenable to
solution
Prioritise
implementation
strategies
in order of
importance
What if? Scenarios

Do what? Options

So what? Consequences
What do we want?

Consequences

What can we do?

Options

What do we know?

Scenarios
Major problem in
implementation
is that the intent of
the growth strategy
is not communicated
properly
to the units.
Resource allocation
Structure fitting
Systems design, etc.
Performance
appraisal
Goal setting
Critical
success factors
Action
plans
 Check
list

• identify strategic intent by

matching strategy benefits
to organisation’s needs

• interpret strategic intent into

specific managerial actions
at all levels
 Check
list

• collate and translate all

actions into comprehensive
action plans

• produce a framework of key

activities and identify the
critical success factors
 Check
list
• use goal setting to translate
the CSF into targets for
individual managers --
these may be inputs, rather
than outputs

• link reward and appraisal

systems to individual
manager goals
 Check
list

• use an interventionistic
approach to communicate
an environment of
participant involvement
aimed at problem
avoidance
 Check
list

• finally, monitor the

implementation process
to ensure adherence to plans
and/or modify plans as
situations change