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Strategic Management: An Overview
Dr A Jagan Mohan Reddy
Institute of Public Enterprise
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Strategic Management
Why do we exist? (Mission/Vision)
Where are we? (Situational Analysis)
Where do we want to be? (Goals/Objectives)
How are we going to get there? (Who,
Resources, When, Success/Failure)
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Mission/Vision
Top Management Establishes the Mission/Vision
Involves thinking strategically about
Future of company
Where are we going?
Tasks include
Creating a roadmap of the future
Deciding future business position to stake out
Providing long-term direction
Giving company a strong identity
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Entity
Strategy
Business Strategies
Functional Strategies
Operating Strategies
Two-Way Influence
Entity - Level
Managers
Business - Level
Managers
Operating
Managers
Functional
Managers
Two-Way Influence
Two-Way Influence
Strategy: Two-Way Process
Top Down
Bottom Up
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Three Considerations
External environment
Internal environment
How well are we doing now?
Situational Analysis
Current and Future Analysis of factors that can affect the
future
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. Economic conditions
. Legislative and regulatory conditions
. Political conditions
. Legal environment
. Technology
. Competition
.
Markets
. Suppliers
. Other
External Environment
1. Identify those forces likely to exert greatest influence overnext 1 - 3 years - Usuallyno more than 3 - 4 factors
quality as real drivers of change
2.Assess impact
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Internal Environment
. Skills, expertise, human capital
. Facilities and equipment
. Financial resources
. Customers
. Products/services
. Technology
. Quality
. Alliances
. Internal politics
S W O T represents the first letter in
S trengths
Weaknesses
Opportunities
Threats
A core competence is a well-performed
internal activity that is central to a
companys competitiveness and viability
A distinctive competence is a
competitively valuable activitythat a
companyperforms better than its rivals
S W
O T
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How Well Are We Doing Now?
Qualitative Assessment --
What is the Strategy?
Company
Scope
Recent Accomplishments
Alignment with functional
strategies, goals and
objectives
Quantitative Assessment --
What are the Results?
Measurement against
financial and strategicobjectives?
Two Key Steps
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Strategy to Tactics
Deliverables
Projects
Programs
Strategic Initiatives
Business Goals
Entity Goals
Vision
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Organizational Vision
Strategic
Initiative 1
Strategic
Initiative N
Program
Project 1 Project 2
Program
Project 1
Project 2
Project 3
Program
Project 1
Project 2
Project 3
Program
Project 1
Project 2
Project 3
Multiple Initiatives Multiple Projects
Prioritize
Dont over commit resources
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Goals/Objectives
without the last minute nothing would ever get done
Setting Goals/Objectives
Converts strategic mission/vision, and situational
assessment into specific performance targets
Creates yardsticks to track and measure performance
Pushes company to focus on results
Helpsprevent complacency and coasting
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Goals/Objectives
Objective-setting process is mostly
top-down, not bottom-up!
1. First, establish organization-wide objectives andperformance targets
2. Next, set business objectives
3. Then, establish functional
and departmentalobjectives
4. Individualobjectives are established last
EntityObjectives
Business Objectives
Functional Objectives
Operating Objectives
Top Down
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Goals/Objectives
Characteristics of Goals/Objectives
Represent commitment to achieve specific
performance targets
Well-stated objectives are Quantifiable
Measurable
Contain a deadline for achievement
Communicated in writing and spell-out how
much ofwhat kindof performance by when
and by who
Measureperformance
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Short range objectives lay the
foundation for long range objectives
Short-Range objectives
Targets to be achieved soon Serve as stair steps for reaching long-range
performance
Long-Range objectives
Targets to be achieved within3 to 5 years
Prompt actions nowthat willpermit reaching targetedlong-range performance later
Short or Long Range
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Crafting the Strategy Primarily a market-driven activity
Successful strategy developmentdepends on
Business vision
Perceptive analysis of theexternal and internal situation
Attracting and pleasingcustomers and stakeholders
Outcompeting rivals
Forging a competitive
advantage
Prioritizing
Executing the Strategy Primarily an operations-driven
activity
Successful strategy executiondepends on managements ability
Direct organizational change Manage multiple initiatives
Good organization-buildingand people management
Creating and nurturing astrategy-supportive culture
Continuous improvement
Getting things done andconsistently deliver goodresults
Is tougher than crafting strategy
Planning vs. Executing
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Executing Strategic Initiativestakes adept leadership to
Convincingly communicate
reasons for the new strategy
Overcome pockets of doubt and
resistance to change
Build consensus and enthusiasm
Resolve priority conflicts
Launch and manage a variety of
strategic initiatives at the same time
Secure commitment of concerned parties
Get all implementation pieces in place
and coordinated
Integrate many different departments to
smoothly function as a whole
Executing
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Implementing and executing strategy involves acompanys whole management team and all
of its employees
Just as every part of a watch plays a role in
making the watch function properly, it takes
all pieces of an organization working
cohesively for a strategyto be well-executed
Top-level managers must lead the
process and orchestrate major initiatives
Butthey must rely on the cooperation of
middle and lower-level managers to see thatthings go well in the various parts of the
organization and on employees to perform
their roles competently on a daily basis
A Team Effort
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How are we going to get there?
Dont confuse a plan withDont confuse a plan withexecutionexecution..
A plan is good intentions.A plan is good intentions.
You dont win with goodYou dont win with goodintentions!intentions!
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Management Cycle
Report Model
Set
Goals
Shared
Info
Plan
Monitor
Analyze
Resources
Constraints
Viability
Budgeting
Resource Allocation
Time Frame Performance
Efficiency
Benchmarking
Variances
Effectiveness
Modifications
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Who?
Ultimately, someone
has to be responsible
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Objectives (projects) may be departmental orcompany wide. In either
case, selection of the project participants is extremely important.
. Team members
.. Departmental
.. From many departments
within the company
. Matrix organization
management support
project member may be assigned to
the project effort on a part time basis
he/she may wind up with multiple
supervisors conflicts will have to
be resolved.
. Project manager/leader
Who?
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Work Quality
Human Resources TimeCommunications Financial Resources
Theproject manageris key to the objective/project success. Many hard
decisions will have to be made and it will test their leadership abilities.
Project Manager
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Project Manager Traits
Create vision
Execute vision
Motivator
Communicator
Empathetic, yet results oriented
Ethical Focused
Tenacious
Creates infrastructure for success
Manages expectations
Understands business risk
Knows when to cut losses Asks the hard questions
Answers the hard questions
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Project
Project Plan
Work Breakdown
Sub-components areidentified
Resources andresponsibilities are allocatedand assigned
Timelines are establishedfor completion
Monitoring schedule isestablished
Reporting requirements aredefined
Project and sub-componentsuccess are established
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MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Work
Breakdown
Tasks
Gantt Chart
Plan Actual
Communications/Monitoring
Effective communications and monitoring of plans is critical to the successful
implementation of strategic initiatives.
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Enthusiasm Disillusionment Panic
Search for the Guilty
Praise and Honors
for the Non-
participants
Punishment of the
Innocent
Unsuccessful Projects
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Successful Projects
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A management system should provideA management system should providea framework for picturing the majora framework for picturing the major
factors in the situation as an integratedfactors in the situation as an integratedwhole. It should be realistic. It shouldwhole. It should be realistic. It should
simplify the complex rather thansimplify the complex rather than
complicate the simple.complicate the simple.
George Odiorne George Odiorne
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MBO
Management by Objectives Peter Drucker, 1954, The Practice
of Management
Is a systematic and organizedapproach that allowsmanagement to focus on
achievable goals and attainthe best possible results fromavailable resources
Aims to increase individual andorganizational effectiveness byaligning organizational goalsand subordinate objectives
Clarifies and quantifiesobjectives to allow formonitoring, evaluation, andfeedbackthroughout thehierarchy of objectives
7. Individual objectives
a. Performance
b. Personal development
6. Department and unit objectives
5. Division objectives
4. More specific overall objectives
3. Overall organization objectives
2. Mission
1. Socio-economic purpose
Hierarchy of Objectives
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Setting Objectives
Objectives are set jointlythroughout the
organization by the superior andsubordinate
written and clearly statedwithemphasis on verifiable results
rather than activities andpersonality
should outline results inquantifiable terms for bothperformance and personaldevelopment (e.g. Quantity, Quality,Time. Cost, Skills, etc.)
should be challenging yetreasonable
should not neglect otherimportant aspects of a job thatcan not be quantified
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Control & Appraisal
Control
refers to the measurement of organizational performance
involves the measurement and, if necessary the correction of performance
Appraisal
refers to the evaluation of individual performance
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Appraisal
focuses on performance, not personalityfocuses on performance, not personality
supervisor self control rather than controlsupervisor self control rather than control
responsibility for evaluation and development rests primarily withresponsibility for evaluation and development rests primarily with
subordinate not supervisorsubordinate not supervisor an opportunity to learn from the past, but to focus on the future a greatan opportunity to learn from the past, but to focus on the future a great
amount of time should be spent on new objectivesamount of time should be spent on new objectives
shared, rational analysis of performance by the supervisor and subordinateshared, rational analysis of performance by the supervisor and subordinate
is not a fault finding session that both thesuperior and subordinate dislike
is a positive, constructive, and orientedtoward the future.
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Benefits of Strategic Management
Good strategic thinking and goodmanagement of the strategy-crafting,
strategy-executing process
guides entire firm regarding what it is
trying to do and to achieve
helps unify numerous strategy-relateddecisions across the company
creates a proactive atmosphere
promotes development of anevolving business model focused
on bottom-line (financial viability) success
provides basis for determining howbest to allocate company resources
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Strategic Planning Measurement & Control
3%
28%
33%
36%
Not clearly
established
General and
verbally
communicated
Written &
measurable
with target
dates
Written &measurable
with target
dates & used
to evaluate
personnel
performance
Goals &
Objectives
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Key Findings (Goals)
Perceived Sophistication
Performance
Goals
Companies who perceive they
have more sophistication in their
planning process tend to have
more clearly defined measurable,
performance objectives.
Companies with more strategic
planning knowledge tend to
have more clearly definedmeasurable, performance
objectives.
Strategic Planning Knowledge
Perform
ance
Goals
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Key Findings (Performance)
Clearly Defined, MeasureablePerformance Goals
Performance
Companies with more
clearly defined measurable,
performance objectives
tend to meet or exceed
their expectations
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Key Findings (Improved Knowledge)
Regardless of current
performance all companies
felt that better performance
results would be obtained
with increased
knowledge of the strategicplanning discipline Increased Knowledge of
Strategic Planning
P
erformance
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59%
30%
11%
0%
0%
Make it worse
No ImpactImprove Slightly
Improve ModeratelyImprove Significantly
Knowledge Impact
Needs
Improvement
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29%
40%
26%
6%
0%
Make it worse
No ImpactImprove Slightly
Improve ModeratelyImprove Significantly
Knowledge Impact
Met Expectations
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38%41%
19%
3%
0%
Make it worse
No ImpactImprove Slightly
Improve ModeratelyImprove Significantly
Knowledge Impact
Exceeded
Expectations
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57%
43%
0%
0%
0%
Make it worse
No ImpactImprove Slightly
Improve ModeratelyImprove Significantly
Knowledge Impact
Superior
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45%
0%
27%
27%
0%
Make it worse
No ImpactImprove Slightly
Improve ModeratelyImprove Significantly
Knowledge Impact
Did Not Do
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Make it worse
No ImpactImprove Slightly
Improve ModeratelyImprove Significantly
Overall Knowledge Impact