mgt 658 chap 1a what is strategic management

7/31/2019 Mgt 658 Chap 1a What is Strategic Management

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05/20/12 Strategic Management note / Chap 1 /PM Dr Nawawi Mohd Jan

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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 StrategyThe 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 goodmission statement


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Develop

Mission

Stement

Perform

external

audit

Perform

Internal

Audit

Esatablish

Long-term

Objective

Generate,

Evaluate,

and Select

Strategies

Establish

Policies

and Annual

Objectives

Allocate

Resources

Measure and

Evaluate

Performance

Strategy Formulation Stage Strategy

Implementation StageStrategic

Evaluation

A Comprehensive Strategic Management Model


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WHAT IS STRATEGIC MANAGEMENT

Defining Strategic ManagementStrategic 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 ofthe 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 rationalapproach 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 goodanticipation 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. Strategy formulation

2. Strategy implementation.

3. Strategy evaluation.


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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. Functional

2. Business

3. 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 strategyimplementation 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 dueto 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

implementationSuccessful strategy implementation hinges uponmanager's ability to:

Motivate employees,

Interpersonal skill - the strategy implementationaffect all employees and divisional managers.

Managers must decide on how best can we get

the job done.

Implementing means mobilizing strategy intoactions.


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Key Terms In Strategic

Management

There are eight (8) key terms that need to be discussed:

1. The strategist2. Mission statement

3. External opportunities and threat

4. Internal strengths and weaknesses

5. Long term objectives

6. Strategies

7. Annual objectives

8. Policies


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The StrategistsStrategists 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. Creating a context for change

2. Building commitment and ownership

3. Balancing stability and innovation


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Definition of Strategy

Strategy is the direction and scope of anorganization over long term: which

achieves advantage for the organization

through its configuration of resourceswithin 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. It is likely to affect the long-term direction.

2. Strategic decision is about to achieve advantage for theorganization.

3. Strategic decision is concerned with the scope of anorganization activity. Such as the degree of businessdiversification.

i.e. : boundaries of business in term of the type of product andmode of services.

Strategy is the matching of the activities of the organizationto the environment in which it operates. That is in search ofstrategic fit.

Strategy is also seen as building on or stretching anorganization's resources and competences. - seizing newopportunities from existing resources.

The strategy will be affected by environmental forces,availability of resources, values and power of thestakeholders.


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Integrating intuition and analysis

Strategic management process can be describedas an objective, logical, systematic approach formaking decision in an organization.

It attempts to organize qualitative information in away that allows the decision to be made undercondition of uncertainty.

Judgment and gut feeling and intuition areessential to making good strategic decisions.


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Integrating intuition and analysis

Intuition is useful in making decision in situation of greatuncertainty 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 hisjudgment.


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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 thatdetermine opportunity or threat to a particular

organization.

firms need to develop a strategy that take

advantage of the external opportunities and avoidor 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 areorganization controllable activities.

Examples are management, marketing,finance /accounting, production/operation,research & development and all functionalactivities of the organization.

The performance of internal factors can be

determined by financial ratios, performanceindicators, 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 thefuture?

A clear vision provides the foundation for developinga comprehensive mission statement.

Vision is a very broad, most general and all inclusivegoal 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 beyondcarrot 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 thestatement.


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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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Mission statements establishes the

followings:

Describe the unique characteristic of theorganization.

It establish boundaries for the strategyformulation

It establish standard for organizationperformance along multiple dimensions (e.g.the stakeholders).

It suggest standard for individual ethical

behavior in the organization - values thatguides the sense of responsibility and duty tothe stakeholders.


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The important of clear mission:

1. To ensure the unanimity of purpose withinorganization.

2. To provide a basis or standard, for allocation ofresources.

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 organizationalclimate.

6. To specify organization purpose and the translationof this purpose into objectives in such a manner,cost, time and performance parameters can beassessed and controlled.


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The Characteristic Of A mission

StatementA mission statement normally has the

following characteristics:

1. Declaration of attitude2. 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 orservices?

Markets: Geographically, where does the firm compete?

Technology: Is the firm technologically current?

Concern for survival, growth and profitability: Is the firmcommitted to growth and financial soundness?

Philosophy: What are the basic beliefs, values, aspirationsand ethical priorities in the firm?

Self-concept: What is the firm's distinctive competence ormajor competitive advantage?

Concern for public image: Is the firm responsive to social,public and environmental concern?

Concern for employee: Are employee valuable asset of thefirm?


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05/20/12 Strategic Management note / Chap 1 /PM Dr Nawawi Mohd Jan 33

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 toachieve in pursuing its basic mission.

Long term means more than one year.

Annual Objective:

They are short-term objectives that integrate with the long-termobjectives. 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 andapply 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 objectivescontribute to this constancy of purpose.

Business ethics and strategic management

Business ethics can be defined as principlesof conduct within organizations that guide

decision-making and behavior.


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05/20/12 St t i M t t / Ch 1 / 39

Business Vs. Military Strategy 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, implementedand 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 constantlyimprove the organization to maintain alignment

with the environment.

mgt 658 chap 1a what is strategic management

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