Strategic Management

By the end of this class you

should be able to:
1. Explain

the functions of management

2. Define and explain strategy and
strategic management
3. Explain why strategic management is
important
4. Explain the strategic management
process
5. Describe the levels of organizational
strategies

OBJECTIVE #1
Functions of Management

Planning, Organizing, Leading; & Controlling

(PLOC)

Planning
defining goals and objectives
deciding what type of activities the
company will engage in
determining the resources needed to
achieve the organizations goals &
objectives.

Functions of Management

Leading
Attracting

people to the organization.

Specifying

job responsibilities

Grouping

jobs into work units

Marshalling
Creating

and allocation of resources

good working conditions

Functions of Management

Organizing
Directing, motivating, and communication with
employees, individually & in groups.
Conflict resolution.
Controlling
Monitoring performance of people & units.
Provision of feedback or information about
progress.
Identification of performance problems & actions
to correct problems.

OBJECTIVE #2
Whats Strategy?
Strategy

is managements overall plan and

actions for deploying resources and skills
taking into consideration opportunities and
threats in the environment
to

achieve its mission, vision and objectives

to establish a favorable competitive position.

Strategy involves:

An organizations goals

A series of related decisions & actions

Takes into account key internal strengths

& weaknesses and external opportunities
threats

Analysis, communication, coordination, &

action

What is Strategic Management?

Focuses

on how managers formulate

and implement, and evaluate strategies
aimed at developing and maintaining
competitive advantage:
the

reason some firms enjoy higher

levels of performance than their rivals
or competitors.

Big picture view of an

organization influenced by
its external environment

 Strategic

management is therefore
concerned with overall PLOC

Four

aspects that set strategic

management apart:
Interdisciplinary
External

focus
Internal focus
Future directions

OBJECTIVE #3
Importance of Strategic Management
Gives

every employee a role to play in

making the firm successful
Applies

to all professional employees, not

just those in management
Allows decision-making, allocation of
resources and management of people to be
based on a firms strategic plan
Success as a manager (as measured by your
promotion, job security, and pay increases) is
often determined by your efforts &
departments contribution to overall
organizations success

Makes a difference in
performance levels
Research

suggest that successful

companies use strategic management
concepts & techniques
Success evolves from knowing what
youre doing and often implies having
a strategic plan

Importance of Strategic Management

Provides

systematic approach to uncertainties

that organizations face
Competitive

& global environment are dynamic

(changing)
Change, whether significant of minor, must be
recognized and analyzed, & dealt with
Strategic management allows for the analysis of the
situation (identifying the sources of change in
environment)

 Coordinates

and focuses employees

to achieve organizations goals

Allows

for team effort which is

coordinated for firm success

Allows

for development of a plan,

communication, coordination, &
cooperation among diverse depts &
functions

OBJECTIVE #4
Strategic Management Process

Establishing a mission, vision and objectives

Environmental Analysis

Internal Analysis

Strategy Formulation

Strategy Implementation

Strategic Control and Performance Evaluation

The Strategic Management Process

Internal
Analysis

Strategy
Formulation

Mission,
Vision &
Objectives
Environ.
Analysis

Strategy
Implementation

Strategic
Eval. &
Control

Mission, Vision & Objectives

A companys mission is a statement of

the

basic purpose or reason for its existence

its

values (role to stakeholders - customers,

employees, society, etc.).

The vision goes beyond the mission statement

clarifies the long-term direction of the company

(where the company is going)

reflects

managements aspirations for the company

Mission, Vision & Objectives

Objectives are yardsticks for tracking a companys

performance or end result.
Financial

performance objectives (e.g., ROA,

ROI, ROE, Dividend growth, Stock price, etc.).

Strategic

performance objectives (e.g., market

share, growth, innovation leader, customer service,
community & environmental responsibility, etc.)

Examples of Mission & Vision

Southwest Airlines:
Mission: To provide high quality service at a lower
price in the airline industry.
Vision: Opening air travel to a wider group of
leisure travelers while infusing the organization
with a sense of fun.
Apple Computer:
Mission: To bring the best personal computing
products and support to consumers around the
world.
Vision: One person, one computer.

Financial & Strategic Objectives

Alcan Aluminum
Financial: To outperform the average return on equity
of the S&Ps industrial stock index.
Strategic: To be lowest-cost producer of aluminum.
GE
Financial: To achieve an average of 10 inventory turns
and a corporate operation profits margin of 16% by
1998.
Strategic: To become most competitive enterprise in
the world by being #1 or #2 in market share in every
business the company is in.

Environmental Analysis

Involves the evaluation of the business environment

of the organization.
All

external influences that impact a companys

decision and performance.

Environment of firm classified by proximity into

(1) Macro-environment; and
(2) Micro-environment or task environment.

Environmental Analysis

The macro-environment consists of

The

international/national economy; changes in

demographic structures; social and political trends;
technology; and the natural environment.

The micro-environment consists of

The

industry environment such as competitors,

suppliers, customers; unions and employees; owners
and shareholders, etc.

Internal Analysis

Involves the evaluation of the inventory of the firms

resources and capabilities.

Resources/Capabilities can be classified as:

Tangible

resources: Financial or physical assets

Intangible

resources: brand name, reputation

(product & firm), organizational culture, etc.

Capabilities

or competencies: managerial ability,

specialized skill & knowledge base of employees,
etc.

Strategy Formulation

The strategy formulation process

involves designing a course of action for

addressing strategic issues facing the firm
after going through the external and internal
evaluation processes.

Actual strategy of a company involves:

Planned

or Intended Actions (Deliberate &

purposeful actions).

Reactive

or Emergent Actions (As-need

reactions to unanticipated events in firms
micro and macro environments).

Strategy Formulation

Strategy formulation is concerned with the

following parts of a company:
Corporate

(whole company) -- Corporate

strategies: Deals with businesses company
wants to be in & how to manage those
businesses

Businesses

-- Competitive strategies: How

to compete in specific business or industry

Functional

areas -- Functional strategies:

short goal-directed decisions & actions of
an organizations various functional
departments.

Strategy Implementation

Strategy implementation is the process of putting a

companys various strategies into action
development of programs, policies, budgets &
procedures.
It can take several months to years to complete.
Most difficult part of the strategy process.
The job of implementing strategy involves managers at
all levels

Strategic Control & Evaluation

Process by which desired outcomes (mission,

vision, & objectives) are compared with realized
outcomes to determine if there are gaps.

Initiate corrective actions by monitoring changes

in environment - competitor actions, new market
opportunities, customer needs & expectations.

Strategic Management
Process

On-going and continuous cycle of

Situation

Analysis : Internal evaluation &

Environmental scanning

Strategy

formulation

Strategy

implementation

Strategy

evaluation