17/9/2009 Nakato Ruth Chapter one Introduction and review of strategic management

17/9/2009 Nakato Ruth What is strategic management? Strategic management can be defined as the art and science of formulating, implementing, and evaluating cross functional decisions that enable an organisation to achieve its objectives.

17/9/2009 Nakato Ruth Strategic management focuses on intergrating management, marketing, finance/accounting, operation, research and development and computer information systems, to achieve organisational success.

17/9/2009 Nakato Ruth What is Strategic management?...  Stream of decisions taken over time by top managers which when understood as a whole reveal the goals they are seeking and the means used to reach those goals. –Strategic management emphasizes top management point of view –strategic management is long term and futureristic; strategic managers compete for long term survival.

17/9/2009 Nakato Ruth The Strategic Management Process Define the Business and Set a Mission Statement Step 1 Set Strategic Goals Step 2 Formulate a Strategy Step 3 Implement the Strategy Step 4 Evaluate and Correct as Needed Step 5

17/9/2009 Nakato Ruth Strategic management process… Step 1. Define the business (current business) and set a mission statement This involves the following; The mission statement; –the mission statement explains the reason as to why you exist as an organization. –asking the question ‘What is our business?’ is the same as asking the question –‘What is our mission?’ A business is defined by its mission.

17/9/2009 Nakato Ruth Strategic management process… Step1 Define the business (contd) –The mission defines the long-term vision of the organization in terms of what it wants to be and whom it wants to serve –A company's mission is its reason for being. The mission often is expressed in the form of a mission statement, which conveys a sense of purpose to employees and –potrays a company’s image to customers. –In the strategy formulation process, the mission statement sets the mood of where the company should go.

17/9/2009 Nakato Ruth Strategic management process… Step 1 Define the business (contd) A good mission statement will contain the following the purpose of the organization – a statement of the principal activities of a business or organization; its principal business aims – its mission as regards the position it aims to achieve in its chosen business; the key beliefs and values of the company; definitions of who are the major stakeholders in the business; the guiding principles that define the code of conduct that tells employees how to behave.

17/9/2009 Nakato Ruth Strategic management process… –Step 1 Define the business … –b) Look at the products & services Who are the customers ie the present & the previous ones –c) Look at compitence; what can you do & what cant you do? Do you have the capacity? Business that don’t have the capacity fail! ie the capacity to run a sch—teachers,

17/9/2009 Nakato Ruth Strategic management process… Step 2 Setting strategic goals. –Top management’s broad vision and mission are translated into operational strategic objectives. –Objectives are rules and guidelines i.e mile stones; –set objectives that are inline with the business. –Objectives should be smart; –when setting objectives look at the environment ( swot analysis), – look at your strenghts & weaknesses. –Look at your opportunities in the environment and your threats.

17/9/2009 Nakato Ruth Strategic management process… Step 3 Formulating a strategy to achieve the strategic objectives. A strategy is a course of action that explains how the enterprise will move from the business it is in now to the business it wants to be in –, given external opportunities and threats and internal strengths and weaknesses.

17/9/2009 Nakato Ruth A strategy enables you achieve your objectives & target. E.g. what should be done to increase the market share, or want to increase on the customer care; you have to evaluate the strategies and drop those that are not useful and avoid drop error. Incremental (old) using the strategy you used earlier to solve the current problem. Emergent (new developing a new strategy thus solving a problem you never faced be4 or developing new strategy.

17/9/2009 Nakato Ruth Strategic management process… Step 4; Implementing the strategy. –Drawing upon the functions of the management process allows management to translate strategy into actions and results. Actualizing the strategy. A good strategy with poor implementation is as good a poor strategy.

17/9/2009 Nakato Ruth Strategy implementation Strategy implementation means mobilizing employees and manager to put formulated strategies into action. Strategy implementation requires a firm to establish annual objectives, –devise policies,

17/9/2009 Nakato Ruth motivate employees, –and allocate resources so that formulated strategies can be executed. – Strategy implementation includes developing a strategy supportive culture, –creating an effective organizational structure, – redirecting marketing efforts, –preparing budgets, –developing and utilizing information systems, – and linking employee compensation to organizational performance.

17/9/2009 Nakato Ruth Strategic management process… Step 5; Strategy evaluation, monitoring and control –Evaluating performance and correcting as required. –Strategic control involves assessing the firm’s progress toward its strategic objectives and making corrections as needed. – Strategic control keeps the company’s strategy up to date.

17/9/2009 Nakato Ruth Strategy evaluation is the final stages in strategic management. There are three fundamental strategy evaluation activities: Reviewing external and internal factors that are the bases for current strategies. Measuring performance. Taking corrective actions. Strategy formulation, implementation and evaluation activities occur at three hierarchical levels in a large organization: –corporate, divisional or strategic business unit, and functional. By fostering communication and interaction among managers and employees across hierarchical levels, strategic managements help a firm function as a competitive team.

17/9/2009 Nakato Ruth Strategic management process… Step 5; Strategy evaluation (contd) Rumelt suggests that three questions are central to the challenge of strategy evaluation: 1. Are the objectives of the business appropriate? 2. Are the major policies and plans appropriate? 3. Do the results obtained to date confirm or refute critical assumptions on which the strategy rests?

17/9/2009 Nakato Ruth Key questions in strategic management These questions help you to follow the process well

17/9/2009 Nakato Ruth Key questions … Question 1 Where are we now as a business? Here you are looking at the current position. – Do it by SWOT analysis. –If you are in the right position then you are doing the right things. –If it is worse than before then find out where the problem is. This question answers, business definition, current position.

17/9/2009 Nakato Ruth Key questions… Question 2 Where do we want to be? Where are we going? As a business you want to be better than you were before!

17/9/2009 Nakato Ruth Key questions… Question 3 How do we get there? Here you are looking at the strategies. You have to be efficient and effective. You must do the right things (effective). You must do things right (efficient )

17/9/2009 Nakato Ruth Key questions… Question 4 How do we ensure arrival (Do it)? –This is implementation.

17/9/2009 Nakato Ruth Key questions… Question 5 How do we measure our progress? Have we reached there? Have we achieved what we wanted to achieve? Or we boarded a wrong bus? You can use your objectives to monitor your progress. You can also bench mark; looking at what you are doing and what your competitors are doing.

17/9/2009 Nakato Ruth Thank you