What is a Strategy?

Examples of Corporate Strategy in 2008  InBev purchase of Anheuser Busch  Domestic airlines charging fees for meals, bags, etc.  GE selling its appliance division A strategy is a business approach to a set of competitive moves that are designed to generate a successful outcome A strategy is management’s game plan for  Strengthening the organization’s competitive position  Satisfying customers  Achieving performance targets Three big questions involved in a strategy  Where are we now?  Where do we want to go?  How will we get there?

Tasks Involved in Strategic Management Defining business and stating a mission Setting measurable objectives Crafting a strategy to achieve objectives Implementing a strategy Evaluating performance of the strategy, reviewing new developments and taking corrective action

Developing a Mission & Objectives An organization’s Mission  Reflects management’s vision of what the organization seeks to do and become  Provides a clear view of what the organization is trying to accomplish for its customers  Indicates intent to take a business position An organization’s Objectives  Convert the mission into performance targets  Track performance over time  Must be achievable  Two types Financial – outcomes that relate to improving financial performance Strategic – outcomes that will result in greater competitiveness & stronger long-term market position

Examples of Types of Objectives Financial  Increase earnings growth from 10 to 15% per year  Boost return on equity investment from 15 to 20% in 2009  Achieve and maintain a AAA bond rating Strategic  Increase market share from 18 to 22% in 2009  Overtake rivals on quality or customer service by 2010  Attain lower overall costs that rivals by 2011  Become leader in new product introductions by 2010  Achieve technological superiority by 2012

What Does a Strategy Include? How to satisfy customers How to grow the business  Organic growth  Acquisition How to respond to changing industry and market conditions How to best capitalize on new opportunities How to manage each functional piece of business How to achieve strategic and financial objectives

What is a Strategic Plan A strategic plan maps  Where the organization is headed  Short and long range performance targets  Actions of management to achieve desired outcomes A strategic plan consists of  Mission statement  Strategic and financial performance objectives  Comprehensive strategy for achieving the objectives

Implementing Strategy Implementing a strategy involves  Creating fits between the way things are done and what it takes for effective strategy execution  Executing strategy efficiently and effectively  Producing desired results on time The most important fit is between a strategy and  Organizational capabilities  A reward structure  Internal support systems  Organizational culture

Evaluating Performance The tasks of strategic management are not one-time only exercises because  Times and conditions change  Events change over time  New ways to do things surface  New managers have different ideas take over Managers must  Constantly evaluate performance  Monitor situation and decide how well things are working  Make necessary adjustments Alter organization’s long-term direction Raise or lower performance objectives Modify strategy