Strategic Management formulation Denis Manley

The Organisation

Strategic Management – Defined Art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve its objectives

Strategies in Action Amar Bhide Strategies for taking the hill won’t necessarily hold it. – Amar Bhide The early bird may get the worm, but the second mouse gets the cheese. – Unknown

Vision & Mission and Objectives Develop Alternative Strategies Strategic formulation Strategy Formulation Vision & Mission and Objectives Internal evaluation External evaluation Develop Alternative Strategies Strategy Selection

Strategy Implementation Organisational structure Annual Objectives Organisational structure Employee Motivation Resource Allocation

Strategy Evaluation Internal Review External Review Performance Metrics Corrective Actions

Examples of vision statements: “What do we want to become?” Agreement on the basic vision for which the firm strives to achieve in the long run is critically important to the firm’s success. Examples of vision statements: Ryanair wants to become the number one travel choice for all local residents and tourists in Europe. The Vision of Pepsi To become the leading producer and marketer of food and beverage products in the world

Mission Statements What is our business?” Reveal what an organization wants “will be” and whom it wants to serve (essentially like the aim) Essential for effectively establishing objectives and formulating strategies

Mission Elements Products Services Markets Customers Technology Employees Survival Growth Profit Public Image Philosophy Self-Concept

The essential components of a mission statement Components and Questions That a Mission Statement Should Answer 1. Customers: Who are the firm’s customers? 2. Products or services: What are the firm’s major products? 3. Markets: Geographically, where does the firm compete? 4. Technology: Is the firm technologically current? 5. Concern for survival, growth, and profitability: Is the firm committed to growth and financial soundness? 6. Philosophy: What are the basic beliefs, values, aspirations, and ethical priorities of the firm? 7. Self-concept: What is the firm’s distinctive competence or major competitive advantage? 8. Concern for public image: Is the firm responsive to social, community, and environmental concerns? 9. Concern for employees: Are employees a valuable asset of the firm?

Benefits of Mission statements Research results are mixed, however, firms with formal mission statements generally see a: 2x average return on shareholder’s equity Positive relationship to company performance 30% higher return on certain financial measures

Ryanair mission statement With Ryanair’s new technological planes we hope to please all of our European customers on their travel.(4,3) We hope to serve people of all ages while providing the best service money can buy.(1,2) We will bring our low price travel, with our dedication to helping our community(7,8) and with our marketing plan we hope to grow, while providing the best work experience for our employees. (5,9) We will treat everyone equally and with the upmost respect.

Long-Term Objectives Objectives are commonly stated in terms such as: growth in assets, profitability, market share degree and nature of diversification. Long-term objectives are needed at the corporate, divisional, and functional levels in an organization. Strategies represent actions to accomplish long-term objectives

Characteristics of objectives -- Long-Term Objectives Characteristics of objectives -- Measurable Realistic Understandable Challenging Hierarchical: corporate/ divisional/functional

Financial vs. Strategic Objectives It is a Trade-Off between both Maximize short-term financial objectives – harm long-term strategic objectives Example: Pursue increased market share at the expense of short-term profitability, Producing Higher product quality will impact on growth on revenues or profit.

Exam Question Explain how you, a CEO of an organisation, would set out to formulate a strategy to ensure the organisation competitive advantage. (9 marks) Describe three elements associated with an ideal mission statement. (9 marks) Explain, using suitable examples, some of the problems associated with deriving long term objectives (12 marks)