part 1 overview of strategic management
TRANSCRIPT
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Part 1 Overview of Strategic Management
Chapter 1
The Nature of Strategic Management
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“Without a strategy an organization is like a ship without a rudder, going round in circles. It’s like a tramp; it has no place to go”
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“He who will not worry about what is far off will soon find something worse than worry”
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THE PURPOSE
This chapter provides an over view of
Strategic Management Model of Strategic Management
Process Definition of Basic Activities & Terms Some Important Themes
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What is strategic management
All firms have strategy even if it is informal, unstructured & sporadic all organizations do not know where they are heading.
Game plan for sustainable competitive advantage
By adapting to changes
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Taking advantage of external opportunities & reduce impact of external threats
capitalize on their internal strengths & eliminate internal weaknesses
Represents a systematic, logical, & objective approach
Multiple functions
Tough managerial choices
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Strategic Management Process
Integrating Intuition & Analysis.
An objective, logical, systematic
approach for making major decisions
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Three Stages of Strategic Management Process
Strategy formulation Strategy implementation Strategy evaluation
*communication is the key:- understanding, commitment, ownership
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Strategy Formulation Includes
Developing a vision & mission Identifying external opportunities &
threats Determining internal strengths &
weaknesses Establishing long-term objectives Generating alternative strategies Choosing particular strategy
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Strategy formulation issues
What new business to enter, what business to abandon
Whether to expand operations or diversify, whether to enter international markets
Whether to merge or form a joint venture or Partnering or to buy a business or how to avoid a hostile take over
How to allocate resources Business ethics
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Global Vs. domestic operations Vision/Mission Matrix analysis Partnering Competitive analysis Governance & guidelines for conducting an internal/
external strategy assessment
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Strategy Implementation (action stage, the most difficult one)
Establish annual objectives Devise policies Motivate employees Allocate resources
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Strategy implementation issues includes
Developing a strategy supportive culture Creating an effective organizational structure Redirecting Marketing efforts or introducing new
marketing concepts Outsourcing Preparing budgets & doing financial analysis,
developing new controls Developing & utilizing information systems Linking employee compensation to organizational
performance Business ethics
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Strategy Evaluation
Why:- To know Strategies need modification
Three fundamental strategy evaluation activities
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Reviewing Internal & External factors
Measuring performance
Taking Corrective actions
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The Hierarchical Levels Involved
Corporate level
Divisional or Strategic Business Unit level
Functional
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Definition of Key terms & Activities
Competitive Advantage
Strategists
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They help gather, analyze & organize information. Track industry & competitive rends, develop forecasting models & scenario analysis, evaluate corporate & divisional performance, spot emerging market opportunities, identify business threats & develop creative action plans.
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Vision Statement Mission Statement Opportunities & Threats (external)
Economic Social Cultural Demographic Environmental Political, legal, governmental Technological Customers CompetitorsThese changes create different type of consumer
& consequently need for different type of product, services & strategies.
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Strength & Weaknesses (internal) Typically related to functional areas of the firm
(determined relative to competitors) Long Term Objectives
Objectives: - specific results in pursuing basic mission
Long-Term:- more than one year Why objectives:-
Give a direction Helps in evaluation Reveal priorities & create synergies &
coordination Basis for planning, organizing, motivating &
controlling activities
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Strategies Means for achieving long term objectives.,
important for formulation Business Strategies include
Geographic expansion (market development) Diversification Acquisition Product development Market penetration Retrenchment Divestiture Liquidation Joint ventures & partnership
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Annual Objectives
Short term milestones to reach long term objectives important for strategy implementation, become basis for resource allocation
Established at levels
Set for
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Policies Means by which annual objectives are
achieved, important for strategy implementation
Set for Developed at Outlines expectations Guidelines, rules & procedures to support
efforts to achieve the objectives. Particularly includes guides to decision making & address recurring situations
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Strategic Management Model
Logical starting point Dynamic & continuous Strategic meetings (retreats )
to update firms’ vision / mission, opportunities / threats, strengths/ weaknesses, strategies, objectives, policies & performance
Formality
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External AuditCH-3
Long Term ObjectivesCH-5
Internal AuditCH-4
Generate, Evaluate & select strategiesCH-6
Implement strategies Management IssuesCH-7
Implement strategies: Marketing, fin / Acc, R&D, MISCH-8
Measure & Evaluate performanceCH- 9
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Vision & MissionCh_2
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Benefits of Strategic Management
Financial Benefits Improvement in sales Improvement in profitability Improvement in productivity
.
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Non Financial Benefits: More proactive than reactive
Improved understanding of competitors’ strategy
Enhanced awareness of threats Reduced resistance to change Enhanced problem prevention capabilities Enhances interaction
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Better strategies for being more systematic, rationale, & logical
Leads to ownership & empowerment
Decentralized line manager planning is replacing centralized staff planning
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Guidelines for Effective Strategic Management
1. Ensure implementation 2. People not paper process. Keep it as simple & non
routine, eliminate jargon3. Attend to psychological, social, political,
information, administrative dimensions4. Stimulate thinking5. Open mindedness 6. Subjective factors such as attitudes towards risk,
concern for social responsibility & organizational culture will always affect strategy.
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Avoid Pitfalls
Pursuing too many strategies using SM to gain control over decision
& resources doing SM for sake of regulatory
requirements hastiness in formulation failure to communicate intuitive decision making
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Lack of top management support failure to measure performance not involving all the managers or key
employees failure to create a supportive climate for
change being over formal in planning that
flexibility & creativity are stifled
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Why Some Firms Do Not Do Strategy Planning
Poor reward structure Fire fighting Waste of time Too expensive Laziness Content with success
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Fear of failure Overconfidence Prior bad experience Self esteem Fear of the unknown Honest difference of opinion suspicion
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Themes
1. Global Considerations Impact Virtually All Strategic Decisions
A necessity A borderless world with global citizens The dynamics of political, economic &
cultural differences `
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2. Electronic commerce Has Become A Vital Strategic Management Tool
competitive advantage:- Direct Selling Communication Information B2B Expense, time, distance, space
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3. Natural Environment Has Become An Important Strategic Issue
defined as “surroundings in which an organization operates, including air, water, land, natural resources, flora, fauna, humans & their interrelation.” Some burning issues are global warming, bio-terrorism, increased pollution etc
social responsibility & business ethics issues