Overview of Strategic Management

What Is Strategic Management? Key terms in strategic management Benefits of Strategic Management Business ethics and Strategic Management Comparing business and Millitary Strategy The business mission What is business mission? Vision and mission Importance of clear mission statement Process of developing a clear mission Nature of business mission / components of a good mission statement
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A Comprehensive Strategic Management Model

Perform external audit Generate, Evaluate, and Select Strategies Establish Policies and Annual Objectives

Develop Mission Stement

Esatablish Long-term Objective

Allocate Resources

Measure and Evaluate Performance

Perform Internal Audit

Strategy Formulation Stage

Strategy Implementation Stage

Strategic Evaluation

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WHAT IS STRATEGIC MANAGEMENT

Defining Strategic Management Strategic management is the art or science of formulating, implementing and evaluating cross-functional decisions that enable an organization to achieve its objective. The definition implies Strategic management focuses on integrating management, marketing, finance/accounting, production/operations, R&D and computer information system to achieve the success of the organization.

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Benefit of Strategic Management

Allows organization be more proactive than reactive in achieving to the future. Allows organization to initiates and influence activities in the organization. Allows organization to exert control of its own destiny. Helps organization make better strategies through more systematic, logical and rational approach to strategic choices.

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Financial Benefits of Strategic Management

Research shows that firms adopting strategic management concepts are more successful and profitable. Able to make more informed decision with good anticipation of short and long term consequences Improvement in sales Improvement in profitability Productivity improvement

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Benefits of Strategic Management (Greenley) 1. Identification of opportunities 2. Objective view of management problems 3. Improved coordination & control 4. Minimizes adverse conditions & changes 5. Decisions that better support objectives

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6. Effective allocation of time & resources 7. Internal communication among personnel 8. Integration of individual behaviors 9. Clarify individual responsibilities 10. Encourage forward thinking 11. Encourages favorable attitude toward change 12. Provides discipline and formality to the management of the business

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Stages of strategic management

The strategic management process:
The objective of strategic management process is to make logical and systematic approach for making major decision in organization. Strategic management process consist of 3 stages: 1. 2. 3. Strategy formulation Strategy implementation. Strategy evaluation.

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Strategic Analysis
Referred as the "home work" required to develop appropriate strategy. Strategic analysis includes TAKES PLACE IN STRATEGY FORMULATION STAGE: Developing business mission 1. Consideration of an organization's strategic goal or long term objectives. 2. The exploration of the opportunities or threat present in the external environment. 3. The study of organization's internal strength and weakness.
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Strategy Formulation
Strategy formulation includes:
1. Generating alternative strategies 2. Choosing particular strategy to pursue A sound strategic analysis's provides a basis for formulating strategy. There are three levels of strategies:
1. 2. 3. Functional Business Corporate

Although strategy formulation takes place on a number of levels, emphasis should be on the business level.
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ISSUES IN STRATEGY FORMULATION: i. Deciding what new business to enter, ii. What business to abandon, iii.How to allocate resources, iv.Whether to expand or diversify, v. Whether to enter international market, vi.To merge or to form joint venture, vii.How to avoid hostile take over, Due to limited resources strategist must decide the most appropriate strategy.
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Strategy evaluation
It is the final stage of the strategy implementation process. It is the primary mean for obtaining information whether or not a particular strategy works well. Strategy evaluation is needed, to put the organization on to the right direction. All strategies are subject to modification due to internal and external changes.
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Strategy implementation
The process of transforming intended strategy into realized strategy is called strategy implementation. It is also called the action stage of the strategic management process. It is considered the most difficult stage. Implementation requires personal discipline, commitment and sacrifices.

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Successful strategy implementation

Successful strategy implementation hinges upon manager's ability to: Motivate employees, Interpersonal skill - the strategy implementation affect all employees and divisional managers. Managers must decide on how best can we get the job done. Implementing means mobilizing strategy into actions.

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Key Terms In Strategic Management

There are eight (8) key terms that need to be discussed:
1. 2. 3. 4. 5. 6. 7. 8. The strategist Mission statement External opportunities and threat Internal strengths and weaknesses Long term objectives Strategies Annual objectives Policies

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 Strategists are individuals who are responsible for the success or failure of an organization. They are the chief executives officer, chairman of the board of directors, executive directors, chancellor, and dean, owner of a company or an entrepreneur. Strategist main responsibilities are:
1. 2. 3. Creating a context for change Building commitment and ownership Balancing stability and innovation

The Strategists

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Different Strategist may differ in term of:

1. 2. 3. 4. 5.
6.

Willingness to take risk, Concern for social responsibilities, Concern for profitability, Concern for short run vs. long run aims and Management style.
Attitude, values, ethics

Most strategists agreed that their social responsibility is to make profit to cover the cost of the future. Strategists evaluate social problems in term of potential cost and benefit to the firms and address social issues that could benefit the firms.
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Definition of Strategy
Strategy is the direction and scope of an organization over long term: which achieves advantage for the organization through its configuration of resources within a changing environment, to meet the needs of markets and to fulfill stakeholder's expectation.

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The characteristic of strategic decisions:

1. 2. It is likely to affect the long-term direction. Strategic decision is about to achieve advantage for the organization. 3. Strategic decision is concerned with the scope of an organization activity. Such as the degree of business diversification. i.e. : boundaries of business in term of the type of product and mode of services. Strategy is the matching of the activities of the organization to the environment in which it operates. That is in search of strategic fit. Strategy is also seen as building on or stretching an organization's resources and competences. - seizing new opportunities from existing resources. The strategy will be affected by environmental forces, availability of resources, values and power of the stakeholders.
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Integrating intuition and analysis Strategic management process can be described as an objective, logical, systematic approach for making decision in an organization. It attempts to organize qualitative information in a way that allows the decision to be made under condition of uncertainty. Judgment and gut feeling and intuition are essential to making good strategic decisions.

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Integrating intuition and analysis

Intuition is useful in making decision in situation of great uncertainty and precedent. Intuition or gut feeling is Feeling certain that you are right without knowing the reason. It is also useful when highly interrelated variables exist. This situation describes the very nature and heart of strategic management. Some may have extra ordinary ability to use intuition alone in deciding brilliant strategy. E.g. Will Durant - organize the G.M group. Alfred Sloan commented him as always outstandingly correct in his judgment.

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Adapting to change
The need to adapt to changes leads organization key strategic management questions such as:
What kind of business should we become? Are we in the right field? Should we reshape our business? What new competitors are entering our industry?

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The external opportunity and threat

External opportunity and threat refers to the social, cultural, economics, legal, political, technology and competitive trend that could significantly benefit or affect an organization in the future. These are the uncontrollable external factors that determine opportunity or threat to a particular organization. firms need to develop a strategy that take advantage of the external opportunities and avoid or attempt to reduce the impact of external threat for the success of the organization.
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Internal strength and weaknesses

The internal strength and weakness are organization controllable activities. Examples are management, marketing, finance /accounting, production/operation, research & development and all functional activities of the organization. The performance of internal factors can be determined by financial ratios, performance indicators, comparing with pass period, comparing with industry average.
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Business Vision & Mission

The vision statement should answer the basic question, What do we want to become in the future? A clear vision provides the foundation for developing a comprehensive mission statement. Vision is a very broad, most general and all inclusive goal statement. Vision describes:
Aspiration for the future, without specifying the means necessary to achieve the desired ends. Inspiration that asking for the best. The most or the greatest. A vision is an appeal to the emotions that goes beyond carrot and stick.
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 Many organizations have both a vision and mission statement, but the vision statement must be established first and foremost. The vision statement should be short, preferably one sentence, As many managers as possible should have contributed as input into developing the statement.

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Mission Statement
Mission statement is enduring statement of purpose that distinguishes one business from other similar firms. Mission statement is a statement of "reason for being". It identifies scope of operation in product or market terms. Mission stement sometimes called a creed statement, a statement of phillosophy, a statement of beliefs, a statement of business principles. Mission statement reveals what an organization want to be and whom it want to serve. It addresses the basic question that faces all - "what is our business?" A clear mission statement describes the value and priorities of the organizations. A mission statement charts the future direction of an organization.
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 Data shows that 60% of organization developed mission statement. Organization that has developed mission statement doing better than those that does not develop their mission statement.

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 Describe the unique characteristic of the organization. It establish boundaries for the strategy formulation It establish standard for organization performance along multiple dimensions (e.g. the stakeholders). It suggest standard for individual ethical behavior in the organization - values that guides the sense of responsibility and duty to the stakeholders.
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Mission statements establishes the followings:

The important of clear mission:

1. To ensure the unanimity of purpose within organization. 2. To provide a basis or standard, for allocation of resources. 3. To serve as a focal point for the individual to identify with organization purpose and direction. 4. To facilitate translation of objective into organization structure. 5. To establish a general tone or an organizational climate. 6. To specify organization purpose and the translation of this purpose into objectives in such a manner, cost, time and performance parameters can be assessed and controlled.
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The Characteristic Of A mission Statement

A mission statement normally has the following characteristics:
1. Declaration of attitude 2. A customer orientation 3. Declaration of social policy

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EVALUATING MISSION STATEMENTS

Components of A Mission Statement:
Customers: Who are the firm's customers? Product or services: What are firm's major product or services? Markets: Geographically, where does the firm compete? Technology: Is the firm technologically current? Concern for survival, growth and profitability: Is the firm committed to growth and financial soundness? Philosophy: What are the basic beliefs, values, aspirations and ethical priorities in the firm? Self-concept: What is the firm's distinctive competence or major competitive advantage? Concern for public image: Is the firm responsive to social, public and environmental concern? Concern for employee: Are employee valuable asset of the firm?
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Differentiating Vision and Mission Vision statement answers the question of "What do we want to become?" Mission statement answers the question of "What is our business?"

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Longterm objectives (goals) and annual objectives.

Objectives are specific result that an organization seeks to achieve in pursuing its basic mission. Long term means more than one year.

Annual Objective:
They are short-term objectives that integrate with the long-term objectives. They are the milestones that the organization has to achieve in order to achieve long term objectives.
Annual objective is important in strategy implementation while the long-term objective is important in the strategy formulation process. Objective should be challenging, measurable, consistent, reasonable and clear.

E.g. To achieve 30 % R.O.E. by the end of the year.

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Objective are important because:

Helps to carry out evaluation. Create synergy Reveal priorities Focus coordination Provide basis for effective planning. They state organizational directions.

A good objective should be: Challenging Measurable Consistent Reasonable, Clear or easily understood

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Policies Policy can be established at the corporate level and apply to an entire organization, at the divisional level it will apply to a single division or at functional level, it applies to a particular operational activities. Policies are the means by which annual objectives will be achieved.

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Policy includes:
Guidelines, rule and procedures established to support efforts to achieve stated objectives. Policies are guides to routine decisions and address repetitive situations. Important of policy Outline organization's expectation of its employees and managers. Allow constancy of purpose and coordination within and between organizational departments.

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Constancy of purpose through the strategic goals Constancy of purpose would prevent the organization from wandering aimlessly. The hierarchy of strategic goals spanning across Vision, mission and objectives contribute to this constancy of purpose. Business ethics and strategic management Business ethics can be defined as principles of conduct within organizations that guide decision-making and behavior.
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The study of strategic management evolved from military heritage. The term objective, mission, strength and weakness were first formulated in military exercise to address problems in the battlefield. In business strategy is formulated, implemented and evaluated to address business competition. In military the main issue of strategy development is to address conflict with enemy. Both must adapt through changes and constantly improve the organization to maintain alignment with the environment.
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Business Vs. Military Strategy

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