Presentation on theme: "Strategic Management “Without a strategy the organization is like a ship without a rudder.” Joel Ross and Michael Kami."— Presentation transcript:
“Without a strategy the organization is like a ship without a rudder.” Joel Ross and Michael Kami
Chapter Roadmap What Is Strategy? – Identifying a Company’s Strategy – Strategy and the Quest for Competitive Advantage – Strategy Is Partly Proactive and Partly Reactive – Strategy and Ethics: Passing the Test of Moral Scrutiny The Relationship Between a Company’s Strategy and Its Business Model What Makes a Strategy a Winner? Why Are Crafting and Executing Strategy Important?
Thinking Strategically: The Three Big Strategic Questions 1. Where are we now? 2. Where do we want to go? – Business(es) to be in and market positions to stake out – Buyer needs and groups to serve – Outcomes to achieve 3. How will we get there? – A company’s answer to “how will we get there?” is its strategy
What Is Strategy? Consists of the combination of competitive moves and business approaches used by managers to run the company Management’s “game plan” to – Attract and please customers – Stake out a market position – Compete successfully – Grow the business – Achieve targeted objectives
Large-scale, future-oriented plan Used to interact within competitive environment to achieve company goals Provides a framework for managerial decisions Reflects a company’s awareness of the main elements of competition
Strategy is about affecting the overall activities of an organization in ways to make the organization a winner. Strategy is about survival in fierce (severe) competition.
Strategy – A Seminal (determining) Definition In his book, Russel L Ackoff (1970) discuss the characteristics of strategy. He describe three characteristics that define the concept of strategy. Strategy deals with concerns that are central to the livelihood and survival of the entire corporation and usually involve a large portion of the organizations resources.
Strategy represents new activities or areas of concern and typically addresses issues that are unusual for the organization rather than issues that lend themselves to routine decision making. Strategy has repercussive (consequence) for the way other, lower lend decisions in the organization are made
How to please customers How to respond to changing market conditions How to outcompete rivals How to grow the business How to manage each functional piece of the business and develop needed organizational capabilities How to achieve strategic and financial objectives Strategy is HOW to... The Hows That Define a Firm's Strategy
What Are a Company’s Strategic Choices? Trial-and-error organizational learning about – What has worked and – What has not worked Management’s appetite for taking risks Managerial analysis and strategic thinking about how best to proceed, given prevailing circumstances Strategic choices are based on...
Strategy Strategic Management A series of goal directed decisions and actions matching an organizations skills and resources with the opportunities and threats in its environment Analyze current situation Develop appropriate strategies Put strategies into action Evaluate, modify, or change strategy
Strategy Involves Strategic Management Organization’s goals Goal-oriented action Related decisions and actions Internal Strengths External opportunities and threats Planning Organizing Implementing Controlling
Dimensions of Strategic Decisions Strategic issues require top-management decisions – Strategic decisions overarch several areas of a firm’s operations – Usually only top management has the perspective needed to understand their broad implications – Usually only top managers have the power to authorize necessary resource allocations
Dimensions of Strategic Decisions Strategic issues require large amounts of the firm’s resources – They involve substantial allocations of people, physical assets, and money – Strategic decisions commit the firm to actions over an extended period – In highly competitive firms, achieving and maintaining customer satisfaction frequently involves commitment from every facet of the firm
Dimensions of Strategic Decisions Strategic issues often affect the firm’s long- term prosperity – Strategic decisions commit the firm for a long time, typically 5 years; however the impact lasts much longer – Once a firm has committed itself to a strategy, its image and competitive advantages are usually tied to that strategy – Firms become known for what they do and where they compete. Shifting away from that can jeopardize their previous gains.
Dimensions of Strategic Decisions Strategic issues are future-oriented – They are based on what managers forecast, rather than what they know – Emphasis is on the development of solid projections that will enable a firm to seek the most promising strategic options – A firm will succeed only if it takes a proactive (anticipatory) stance toward change
Dimensions of Strategic Decisions Strategic issues usually have multifunctional or multi-business consequences. – Strategic decisions have complex implications for most areas of the firm – Decisions about customer mix, competitive emphasis, or organizational structure involve a number of the firm’s SBUs, divisions, or program units
Dimensions of Strategic Decisions Strategic issues require considering the firm’s external environment – All businesses exist in an open system. They affect and are affected by external conditions that are largely beyond their control – Successful positioning requires that strategic managers look beyond operations and consider what relevant others are likely to do
Three Levels of Strategy Corporate level: board of directors, CEO & administration [Highest] Business level: business and corporate managers [Middle] Functional level: Product, geographic, and functional area managers [Lowest]
The Nature and Value of Strategic Management Strategic management: The set of decisions and actions that result in formulation and implementation of plans designed to achieve a company’s objectives
Nine Critical Tasks of Strategic Management Formulate the company’s mission Conduct an internal analysis Assess the external environment – competitive and general contexts Analyze the company’s options by matching its resources with the external environment Identify the most desirable options in light of the mission
Select a set of long-term objectives and grand strategies that will achieve the most desirable options Develop annual objectives and short-term strategies that are compatible with long- term objectives and grand strategies Implement the strategic choices Evaluate the success of the strategic process for future decision making
Alternative Strategic Management Structures
Characteristics of Strategic Management Decisions: Corporate Often carry greater risk, cost, and profit potential Greater need for flexibility Longer time horizons Choice of businesses, dividend policies, sources of long-term financing, and priorities for growth
Characteristics of Strategic Management Decisions: Functional Implement the overall strategy formulated at the corporate and business levels Involve action-oriented and operational issues Relatively short range and low risk Modest costs: depend upon available resources Relatively concrete and quantifiable
Characteristics of Strategic Management Decisions: Business Help bridge decisions at the corporate and functional levels Less costly, risky, and potentially profitable than corporate-level decisions More costly, risky, and potentially profitable than functional-level decisions Include decisions on plant location, marketing segmentation, and distribution
Formality in Strategic Management Formality is the degree to which participation, responsibility, authority, and discretion in decision-making are specified in strategic management
Forces Determining Formality Organizational Size Predominant Management Styles Complexity of Environment Production Process Problems in the Firm Purpose of the Planning System Stage of Firm’s Development
Benefits of Strategic Management Managers at all levels interact in planning and implementing strategy Similar to participative decision making Assessing strategy formulation requires looking at nonfinancial evaluations as well as financial ones Promoting positive behavioral consequences enables achievement of financial goals
Risks of Strategic Management Managers’ time away from other responsibilities Unrealistic expectations promised by strategy formulators Possible disappointment of participating subordinates if goal is not reached
A company’s strategy is a work in progress Changes may be necessary to react to – Fresh moves of competitors – Evolving customer preferences – Technological breakthroughs – Shifting market conditions – Crisis situations Why Do Strategies Evolve? (Develop)
Crafting Strategy Is an Exercise in Entrepreneurship Strategy-making is a market-driven activity that involves – Studying market trends and competitors’ actions – Keen observation of customer needs – Scrutinizing business possibilities based on new technologies – Building firm’s market position via acquisitions or new product introductions – Pursuing ways to strengthen firm’s competitive capabilities – Proactively searching out opportunities to Do new things or Do existing things in new or better ways