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STRATEGIC MANAGEMENT
OVERVIEW OF THE
STRATEGIC
MANAGEMENT PROCESS
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STRATEGIC MANAGEMENT
The term strategic management refers to themanagerial process of forming a strategic vision,
setting objectives, crafting a strategy, implementingand executing the strategy,
--and then over time initiating whatever corrective
adjustments in the vision, objectives, and executionare deemed appropriate.
Thomson and Strickland
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STRATEGIC MANAGEMENT
Strategic Management is the full set ofcommitments, decisions, and actionsrequired for a firm to achieve strategiccompetitiveness and earn above averagereturns.
Hitt, Ireland, and Hoskisson
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STRATEGIC MANAGEMENT
Strategic Management is the process through whichorganizations analyze and learn from their internal
and external environments,- establish strategic direction, create strategies thatare intended to achieve established goals, and
- execute those strategies, all in an effort to satisfy
key organizational constituencies, which are calledstakeholders.
Harrison and St. John
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Art & science offormulating,implementing, andevaluating,cross-
functional decisions that enable an
organization to achieve its objectives
Fred David
STRATEGIC MANAGEMENT
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Basic Concept
A companys Strategyconsists of the combination of
competitive moves and business approaches that
managers employ to please customers, compete
successfully, and achieve organizational objectives.(Thomson and Strickland)
Strategy
Integrated and coordinated set of commitments and actions
designed to exploit core competencies and gain a
competitive advantage. (Hitt, etc.)
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Basic Concept
Excellent execution of an excellent strategy
is the best test of managerial excellenceand the most reliable recipe for
organizational success.
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BUSINESS MODEL
A companys business model deals with
whether the revenue-cost profit economics ofits strategy demonstrate the viability of the
enterprise as a Whole..
Managements plan for making money in a
particular business.
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STRATEGY AND BUSINESS MODEL
A companys business model is more narrowly
focused--
Strategyrelates to a companys competitive and
business approaches (irrespective of the financial
and competitive outcomes it produces) while
A business modeldeals with whether the
revenues and costs flowing from the strategy
demonstrate business viability.Thomson and Strickland
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An Overview of the Strategic Management Process
The Five Tasks of Strategic Management
1 2 3 4 5
Developing a
Strategic VisionAnd Business
Mission
Improve/
Change
As Needed
Revise
As Needed
SettingObjectives
Crafting a
Strategy toAchieve the
Objective
Implementing
And ExecutingThe Strategy
Evaluating Performance,
Monitoring New Develop-ments, and Initiating
Corrective Adjustments
Revise
As Needed
Recycle to
Tasks 1, 2, 3, or
4 as Needed
Improve/
Change
As Needed
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Strategic Management Process
Dynamic & continuous
More formal in larger organizations
Strategic Management Model
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STRATEGIC VISION
A strategic vision is a roadmap of a
companys futureproviding specifics about technology and customer focus,
the geographic and product markets to be
pursued,
the kind of company that management istrying to create.
the capabilities it plans to develop, and
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STRATEGIC INTENT
Strategic intentis the leveraging of a firms
resources, capabilities, core competences toaccomplish the firms goals in the competitive
environment.
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MISSION STATEMENT
A companys mission statement is typically
focused on its present business scopewho we are and what we do.
Mission statements broadly describe an
organizations present capabilities, customer focus,activities and business makeup.
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Vision Statement
What do we want to become?
Mission StatementWhat is our business?
Vision and Mission Statements
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OBJECTIVES
Objectivesare an organizations
performance targetsthe results andoutcomes it wants to achieve.
They function as yardsticks for tracking an
organizations performance and progress.
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STRATEGIC AND FINANCIAL OBJECTIVES
Strategic objectives relate to outcomes that
strengthen an organizations overall businessposition and competitive viability.
Financial objectives relate to financial
performance targets management hasestablished for the organization to achieve.
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Specific results that an organizationseeks to achieve in pursuing its basicmission
Long-term means more than one year
Long-Term Objectives
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Long-Term Objectives
Essential for ensuring the firms success
Provide direction Aid in evaluation
Create synergy
Reveal priorities
Focus coordination
Provide basis for planning, organizing,
motivating, and controlling
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Short-term milestones that firms mustachieve to reach long-term objectives
Annual Objectives
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Means by which annual objectives willbe achieved
Policies
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STRATEGIC PLAN AND IMPLEMENTATION
A strategic plan consists of an
organizations mission and future direction,near-term and long-term performance
targets, and strategy.
Strategy implementation putting a freshlychosen strategy into action.
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STRATEGY EXECUTION
Strategy executionsupervising the ongoingpursuit of strategy, making it work, improving the
competence with which it is executed, and showingthe measurable progress in achieving the targetedresults.
Strategy execution is action-oriented, a make-it-happen process. The key tasks are competencebuilding, budgeting, policy-making, motivating,culture-building, and leadership.
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Nature of Competition: Basic concepts
Strategic Competitiveness
Achieved when a firm formulate & implements a value-
creating strategy
Competitive Advantage (CA)
Implemented strategy that competitors are unable to
duplicate or find too costly to imitate
Above Average Returns Returns in excess of what investor expects in comparison to
other investments with similar risk
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Nature of Competition: Basic concepts(Contd)
Risk
Investors uncertainty about economic gains/losses resultingfrom a particular investment
Average Returns
Returns equal to what investor expects in comparison to
other investments with similar risk
Strategic Management Process (SMP)
Full set of commitments, decisions and actions required for a
firm to achieve strategic competitiveness and earn above
average returns
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TEN SCHOOLS OF STRATEGY FORMATION
1. The Design School strategy formation
as a process of conception.
2. The Planning School strategy formation
as a formal process.
3. The Positioning School strategy as an
analytical process.
Minzberg, 1998
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TEN SCHOOLS OF STRAGTEGY FORMATION
4. The Entrepreneurial School - strategy formationas a visionary process.
5. The Cognitive School strategy formation as amental process.
6. The Learning School strategy formation as anemergent process.
7. The Power School strategy formation as aprocess of negotiation.
Minzberg, 1998
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TEN SCHOOLS OF STRAGTEGY FORMATION
8. The Cultural School strategy formation as acollective process.
9. The Environmental School strategy formationas a reactive process.
10. The Configuration School strategy formation
as a process of transformation.
Minzberg, 1998
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FIVE Ps For Strategy
1. Strategy is a Plan (intended)a direction, a guide, acourse of action into the future, a patch to get from here tothere.
2. Strategy is a Pattern (realized)that is consistency inbehavior over time.
3. Strategy is a Position (looking down)locating ofparticular products in particular markets.
4. Strategy is a Perspective (looking up)an organizationsfundamental way of doing things.
5. Strategy is a Ploy (maneuver)a specific maneuverintended to outwit an opponent or a competitor.
Minzberg, 1998
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ADVANTAGES AND DISADVANTAGES OF STRATEGY
1. Strategy sets direction. Advantage: The main role of strategy is to chart the course
of an organization in order for it to sail cohesively through
its environment. Disadvantage: Strategic direction can also serve as a set of
blinders to hide potential dangers.
2. Strategy focuses effort. Advantage: Strategy promotes coordination of activity.
Disadvantage: Goupthink
Minzberg, 1998
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ADVANTAGES AND DISADVANTAGES OF STRATEGY
3. Strategy defines the organization. Advantage: Enables people to understand their
organization and to distinguish it from others.
Disadvantage: Leads to stereotyping with loss of richcomplexity of the system
4. Strategy provides consistency. Advantage: Reduces ambiguity and provide order, and
facilitate action.
Disadvantage: Loss of creativity.
Minzberg, 1998
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STRATEGY: AREAS OF AGREEMENT
1. Strategy concerns both organization andenvironment.(inseparability of organization and
environment)2. The substance of strategy is complex..)(Because change brings about novel combinationsof circumstances)
3. Strategy affects overall welfare of the
organization.4. Strategy involves issues of both content(actions taken)and process. (how decided).
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ALTERNATIVE PERSPECTIVES ON STRATEGY
DEVELOPMENT
Situation Analysis
Environmental Determinism
Principle of Enactment
Deliberate Strategy
Emergent Strategy
Stakeholder Management
Resource-Based View
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ALTERNATIVE PERSPECTIVES ON STRATEGY
DEVELOPMENT
Situation AnalysisThe traditional process fordeveloping strategySWOT analysis. The results form the
basis for developing missions, goals, and strategies.
Environmental DeterminismDetermine which
strategy best fit environmental forces.
Principle of EnactmentThe firm can create its
environment through alliances, advertising, lobbying, etc.
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ALTERNATIVE PERSPECTIVES ON STRATEGY
DEVELOPMENT (contd)
Deliberate StrategyStrategy is deliberate.Managers plan to pursue an intended strategy.
Emergent StrategyManagers learn as they go.Strategy emerges from a stream of decisions.
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ALTERNATIVE PERSPECTIVES ON STRATEGY
DEVELOPMENT (contd)
Stakeholder ManagementOrganization is viewedfrom the perspective of its internal and external constituencies thathave a stake in the organization.
Resource-Based ViewThe firm is seen as a bundle ofresources. The important function is to acquire and manageresources to achieve competitive advantages leading to superior
performance.
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