Strategic Management

Chapter I Strategic Management LECTURE# What is meant my strategic management Five tasks of strategic management Basic concept of strategic vision & business mission Setting objectives Crafting a strategy Strategy implementation, Evaluating & monitoring performance Who performs 5 tasks of strategic management Role of Directors in executing strategy Benefits of a strategic approach to managing Reference Thompson: Strategic Management Page 2 29 Learning Out come • Acquisition of the knowledge of the concept of strategic management; • Knowledge of the basic concepts of five tasks of management; • To identify the trustworthy knowledge of good management, • To know why a strategic vision is important; • Knowledge of the role of the Board of Directors in crafting & executing • strategy; • Benefits of a strategic approach to managing. Page I Strategic Management Introduction: The strategic planning and acting on these plans constitute a different management process which is termed as strategic management. 'Strategy' has been defined by Alfred D. Chandler as “the determination of the basic long term goals and objectives of an enterprise and the adoption of courses of action and the allocation of resources necessary for achieving these goals". A strategy reflects a firm's awareness of how to compete in a particular environment, to compete against whom, when, where and for what purpose. The emergence of strategic management appeared in the present business arena in consequence of the increased competition, increase of size & complexity in the business activity and greater intervention of the Government as a regulator and competitor in the free enterprise system. The strategic management is characterised by long range planning, new venture management, planning, programming, budgeting, preparing business policy, environmental forecasting and external & internal considerations in formulating & implementing plans. Strategic management is concerned with executing planned activities efficiently & effectively. The Strategic Management Process Without a strategy the organization is like a ship without a rudder. Joel Ross and Michael Kami. Strategic management is not a box of tricks or a bundle of techniques. It is analytical thinking and commitment of resources to action. The taskes of crafting, implementing and executing company strategies are the heart and soul of managing a business enterprise. 1 Basic Concept: A company's strategy consists of the combination of competitive moves and business approaches that managers employ to please customers, compete successfully, and achieve organizational objectives. A company's business model deals with whether the revenue cost profit economics of its strategy demonstrate the viability of the enterprise as a whole. 2. The Most Trustworthy signs of good management: Among all the things managers do, nothing affects a company's ultimate success or failure more fundamentally than how well its management team sets the company's long term direction, develops competitively effective strategic moves and business approaches, and implements what needs to be done internally to produce good. Excellent execution of an excellent strategy is the best test of managerial excellence-¬and the most reliable recipe (prescription) for organizational success. 3. The five tasks of strategic management: The strategy making/strategy implementing process consists of five interrelated managerial tasks. i. Forming a strategic vision of where the organization is headed so as to provide long term direction, delineate what kind of enterprise the company is trying to become, and infuse the organization with a sense of purposeful action. ii. Setting objectives converting the strategic vision into specific performance out comes for the company to achieve. The Strategic Management Process Without a strategy the organization is like a ship without a rudder. Joel Ross and Michael Kami. Strategic management is not a box of tricks or a bundle of techniques. It is analytical thinking and commitment of resources to action. The taskes of crafting, implementing and executing company strategies are the heart and soul of managing a business enterprise. I. Basic Concept: A company’s strategy consists of the combination of competitive moves and business approaches that managers employ to please customers, compete successfully, and achieve organizational objectives. A company's business model deals with whether the revenue cost profit economics of its strategy demonstrate the viability of the enterprise as a whole. 2. The Most Trustworthy signs of good management Among all the things managers do, nothing affects a company's ultimate success or failure more fundamentally than how well its management team sets the company's long term direction, develops competitively effective strategic moves and business approaches, and implements what needs to be done internally to produce good. Excellent execution of an excellent strategy is the best test of managerial excellence-¬and the most reliable recipe (prescription) for organizational success. 3. The five tasks of strategic management: The strategy making/strategy implementing process consists of five interrelated managerial tasks. i. Forming a strategic vision of where the organization is headed so as to provide long term direction, delineate what kind of enterprise the company is trying to become, and infuse the organization with a sense of purposeful action. ii. Setting objectives converting the strategic vision into specific performance out comes for the company to achieve. Page 4 iii. Crafting a strategy to achieve the desired outcomes. iv. Implementing and executing the chosen strategy efficiently and effectively. V. Evaluating performance and initiating corrective adjustments in vision, long term direction, objectives, strategy, or execution in light of actual experience, changing conditions, new ideas, and new opportunities. Figure I displays this process. Together, these five components define what we mean by the term strategic management. Letus examine this five¬ task framework in enough detail. 1. Developing a Strategic Vision: A strategic vision is a roadmap of a company's future providing specifics about technology and customer focus, the geographic and product markets to be pursued, the capabilities it plans to develop, and the kind of company that management is trying to create. Figure 1.1 The Five Tasks of Strategic Management Task 1 Task 2 Task 3 Task 4 Task 5 Developing a Crafting a Implementing Eveluiilkv Strategic Setting strategy to and perfomwwe, Vision and Objectives Achieve the Executing the Monftft Now Business Objectives Strategy Developments mission and Inibaft Coffectim A company's mission statement is typically focused on its present business scope “Who we are and what we do"; mission statements broadly describe an organization's present capabilities, customer focus, activities, and business makeup. Why a Strategic Vision is Important. We need to know the impact of new technologies on the horizon, how customer needs and expectations are changing, what it will take to overtake competitors, which promising market opportunities ought to be aggressively pursued, and all the other external and internal factors that drive what the company needs to be doing to prepare for the future. Examples of strategic visions and company mission statements. Avis Rent A Car "Our business is renting cars. Our mission is total customer satisfaction." Long John Silver's: "To be America's best quick service restaurant chain. We will provide each guest great tasting, healthful, reasonably priced fish, seafood, and chicken in a fast, friendly manner on every visit." 11. Setting Objectives: The purpose of setting objectives is to convert managerial statements of strategic vision and business mission into specific performance targets results and outcomes the organization wants to achieve. Setting objectives and then measuring whether they are achieved or not help managers track an organization's progress. Strategic objectives aim at results that reflect increased competitiveness and a stronger business position outcomes such as winning additional market share, overtaking key competitors on product quality or customer service or product innovation, achieving lower overall costs than rivals, boosting the company’s reputation with customers, winning a stronger foothold in international markets, exercising technological leadership, gaining a sustainable competitive advantage, and capturing attractive growth opportunities, Strategic objectives serve notice that management intends not only to deliver good financial performance but also to improve the organization's competitive vitality, business position, and long range business prospects. Ill. Crafting a strategy: A company's strategy represents management's answers to such fundamental business questions as whether to concentrate on a single business or build a diversified group of businesses, whether to cater to a broad range of customers or focus on a particular market niche, whether to develop a wide or narrow product line, whether to pursue a competitive advantage based on low cost or product superiority or unique organizational capabilities, how to respond to changing buyer preferences, how big a geographic market to try to cover, how to react to newly emerging market and competitive conditions, and how to grow the_ enterprise over the long term. Strategy & Strategic plans: A strategic plan consists of an organization's mission and future direction, near term and long term performance targets and strategy. The faster a company's external and internal environment changes, the more frequently that its short run and long run strategic plans have to be revised and updated annual changes may not be adequate. In today's world strategy life cycles are growing shorter, not longer. W. Implementing and Executing the Strategy: The strategy implementing/strategy executing task is the most complicated and time consuming part of strategic management. Strategy implementation concerns the managerial exercise of putting a freshly chosen strategy into place. Strategy execution deals with the managerial exercise of supervising the ongoing pursuit of strategy, making it work, improving the competence with which R is executed, and showing measurable progress in achieving the targeted results. Strategy execution is fundamentally an action oriented, make it happen process the key tasks are developing competencies and capabilities, budgeting, policy making, motivating, culture building, and leadership. V. Evaluating Performance, Monitoring New Developments, and Initiating Corrective Adjustments Comprise important tasks in strategic management. 4. Why strategic management is an ongoing process, not a start stop event: A company's vision, objectives, strategy, and approach to implementation are never final; evaluating performance, reviewing changes in the surrounding environment, and making adjustments are normal and nec5. Who Performs the fice tasks of strategic management : An organization's Chief Executive Officer, as captain of the ship, is the most visible and important strategy manager.Every manager is a strategy maker and strategy implementer for the area he or she supervises. 6. The Role of the Board of Directors in Crafting and Executing Strategy: Since lead responsibility for crafting and executing strategy fails to key managers, the chief strategic role of an organization's Board of Directors is to exercise oversight and see that the five tasks of strategic management are done in a manner that benefits shareholders. 7. Strategic Management Principle: The central role of the Board of Directors in the strategic management process is (1) to critically appraise and ultimately approve strategic action plans and (2) to evaluate the strategic leadership skills of the CEO and others. 8. The Benefits of a Strategic Approach To Managing: The advantages of first rate strategic thinking and conscious strategy management include (1) providing better guidance to the entire organization on the crucial point (2) making managers and organizational members more alert to new opportunities and threatening developments, (3) helping to unify the organization, (4) creating a more proactive management posture, (5) promoting the development of a constantly evolving business model that will produce sustained bottom line success for the enterprise, and (6) providing managers with a rationale for evaluating competing budget requests a rationale that argues strongly for steering resources into strategy supportive, results producing areas. essary parts of the strategic management process. 1. Define strategic management. 2. Name 5 tasks of strategic management. 3. What is meant by strategic vision & business mission? 4. How objectives are set? 5. Give an idea of crafting a strategy to achieve the objectives. 6. How strategy is implemented & & executed? 7. What is the fast stage of the strategic management? 8. What is the role of Directors in crafting & executing strategy? Section B: Broad questions 9. Give a brief account of the five tasks of strategic management. 10. What are the benefits of a strategic approach to managing? Page 9 _J