Strategic Management Strategic Planning& Competitiveness

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

What kind of business should we become? Are we in the right fields Are there new competitors What strategies should we pursue? How are our customers changing? Adapting to Change – Key Strategic Management Questions

Mission Statement – What is our business? Vision Statement – What do we want to become? Key Terms

Matt H. Evans, Mission Statements: Examples ComponentsComponents To Make People Happy To Explore the Universe and Search for Life and to Inspire the Next Generation of Explorers NASA Walt Disney Does a good job of expressing the core values of the organization. Also conveys unique qualities about the organization. Too vague and and unclear. Need more descriptive information about what makes the organization special.

Matt H. Evans, Vision C omponents How the organization wants to be perceived in the How the organization wants to be perceived in the future – what success looks like future – what success looks like An expression of the desired end state An expression of the desired end state Challenges everyone to reach for something Challenges everyone to reach for something significant – inspires a compelling future significant – inspires a compelling future Provides a long-term focus for the entire Provides a long-term focus for the entire organization organization

Matt H. Evans, Examples of Vision Descriptors Adept Aggressive Agile Aligned Assertive Available Best-in-class Challenging Clear Competent Complex Compliant Conservative Coordinated Critical Direct Equal Disciplined Effective Efficient Enduring Expanding Expert Fast Fast-paced Financially-sound Focused Growth Healthy Improving Incentivized Increasing Solid Solvent Stable State of the Art Strong Streamlined Sufficient Strategic Sustainable Timely Value-added Vigilant Visionary World-class Informative Innovative Leading Logical Major Nimble Pioneering Protected Organized Over-Arching Quick Ready Responsive Savvy Simple C omponents

Opportunities & Threats (External) Key Terms Analysis of Trends: Economic Social Cultural Demographic/Environmental Political, Legal, Governmental Technological Competitors

Strengths & Weaknesses (Internal) Key Terms Typically located in functional areas of the firm Management Marketing Finance/Accounting Production/Operations Research & Development Computer Information Systems

 Means by which long-term objectives are achieved Key Terms Strategies

© 2006 by Nelson, a division of Thomson Canada Limited What is Strategy? An integrated and coordinated set of commitments & actions designed to exploit core competencies and gains and gain a competitive advantage. A series of goal direceted decisions & actions Strategies is use of engagements for the object.

© 2006 by Nelson, a division of Thomson Canada Limited What is Strategy in different literature? “A unified, comprehensive, and integrated plan designed to ensure that the basic objectives of the enterprise are achieved.” (Glueck, 1980:9) “The pattern or plan that integrates an organization’s major goals, policies, and action sequences into a cohesive whole.” (Quinn, 1980) “A good strategy… neutralizes threats and exploits opportunities while capitalizing on strengths and avoiding or fixing weaknesses.” (Barney, 1997:17) “A pattern of resource allocation that enables firms to maintain or improve their performance.

All successful strategies are based on understanding of the organization’s competitive environment. The competitive environment is complex, and includes anything that can affect the organization’s position relative to that of its competitors. Competitive enviroment is related with organizations’ products, services and organizational resources. © 2006 by Nelson, a division of Thomson Canada Limited. 1-13

Why Strategy is important? To change on organizations needs Burning platform Mission Vision Leadership Strategic management Political management © 2006 by Nelson, a division of Thomson Canada Limited. 1-14

Mission & Vision Strategy Formulation External Opportunities & Threats Internal Strengths & Weaknesses Long-Term Objectives Alternative Strategies Strategy Selection

Matt H. Evans, Assessment Model: S W O T A ssessment External Assessment: Marketplace, competitor’s, social trends, technology, regulatory environment, economic cycles. Internal Assessment: Organizational assets, resources, people, culture, systems, partnerships, suppliers,... Easy to Understand Apply at any organizational level Needs to be Analytical and Specific Be honest about your weaknesses Good Points Possible Pitfalls SWOT

Strategic Manegement involves; Organization goals Goal- oriened action Related decision and actions Internal strengts External oppotunities and threats © 2006 by Nelson, a division of Thomson Canada Limited. 1-17

Strategic manegement Makes; Planning Organization Implementing Controlling © 2006 by Nelson, a division of Thomson Canada Limited. 1-18

Why is SM important? Given everyone a role Makes a difference in performance levels Provides systematic approach to uncertainities Coordinates & focuses employess © 2006 by Nelson, a division of Thomson Canada Limited. 1-19

Basic of Strategic Manegement There are four aspects are too important; Interdisciplinary External focus competition Internal factors Future direction And make: Situation analysis (analsis current situation) Formulation of strategies (decision strategies) Implementation of Strategies (putting strategies in action) Evaluation of strategies( evaluating & changing) © 2006 by Nelson, a division of Thomson Canada Limited. 1-20

External Audit Internal Audit Long-Term Objectives Generate, Evaluate, Select Strategies Implement Strategies: Mgmt Issues Implement Strategies: Marketing, Fin/Acct, R&D, CIS Measure & Evaluate Performance Mission & Vision Comprehensive strategic management model

© 2006 by Nelson, a division of Thomson Canada Limited The Strategic Management Process The full set of commitments, decisions, and actions required for a firm to achieve strategic competitiveness and earn above-average returns.

23 Strategy Implementation Organizational Structure and Structure and Controls Corporate Governance Strategic Leadership Strategy Formulation Strategic Competitiveness Above-Average Returns Strategic Intent Strategic Intent Strategic Mission Strategic Mission The External The External Environment The Internal The Internal Environment The Strategic Management Process Feedback Strategic Inputs Strategic Actions Strategic Outcomes Corporate- Level Strategy Level Strategy Cooperative Strategy Competitive Rivalry Competitive Rivalry and Competitive and Competitive Dynamics International Strategy Business-Level Strategy Acquisition and Acquisition and Restructuring Strategies

© 2006 by Nelson, a division of Thomson Canada Limited Strategic Management and Strategic Competitiveness Knowledge objectives 1.Define strategic competitiveness, competitive advantage and above average returns. 2.Describe the 21 st century competitive landscape and explain how globalization and technological changes shape it. 3.Use the industrial organization (I/O) model to explain how firms can earn above average returns. 4.Use the resource-based model to explain how firms can earn above-average returns.

© 2006 by Nelson, a division of Thomson Canada Limited Strategic Management and Strategic Competitiveness Knowledge objectives – continued… 5. Describe strategic intent and strategic mission and discuss their value. 6. Define stakeholders and describe their ability to influence organizations. 7.Describe strategists’ work. 8.Explain the strategic management process.

1. Adapting to change in external trends, internal capabilities and resources Achieving Sustained Competitive Advantage 2. Effectively formulating, implementing & evaluating strategies

Strategy Implementation Annual Objectives Policies Employee Motivation Resource Allocation

Strategy Evaluation Internal Review External Review Performance Metrics Corrective Actions

© 2006 by Nelson, a division of Thomson Canada Limited Desired Strategic Outcomes Strategic Competitiveness Achieved when a firm successfully formulates and implements a value-creating strategy. Occurs when a firm develops a strategy that competitors are not simultaneously implementing. Sustained Competitive Advantage Above-Average Returns Returns in excess of what an investor expects to earn from other investments with similar risk. Provides benefits which current and potential competitors are unable to duplicate.

© 2006 by Nelson, a division of Thomson Canada Limited Important definitions Risk An investor’s uncertainty about the economic gains or losses resulting from a particular investment. Returns equal to what an investor expects from other investments with similar amount of risk. Average returns Strategic management process The full set of committee's decisions and actions required for a firm to achieve strategic competitiveness and earn above average returns.

© 2006 by Nelson, a division of Thomson Canada Limited Intended, Emergent and Realized Strategies

© 2006 by Nelson, a division of Thomson Canada Limited Alternative Models of Superior Returns Industrial Organization Model The External Environment An Attractive Industry Strategy Formulation Assets and Skills Strategy Implementation Superior Returns Resource- Based Model Resources Capabilities Competitive Advantage An Attractive Industry Strategy Implementation Superior Returns O I O I

© 2006 by Nelson, a division of Thomson Canada Limited Four Attributes of Resources and Capabilities (Competitive Advantage) The firm is organized appropriately to obtain the full benefits of the resources in order to realize a competitive advantage. Valuable Allow the firm to exploit opportunities or neutralize threats in its external environment. Rare Possessed by few, if any, current and potential competitors. Costly to imitate When other firms cannot obtain them or must obtain them at a much higher cost. Organized to be exploited Resources and Capabilities

© 2006 by Nelson, a division of Thomson Canada Limited Core Competencies Resources and capabilities that meet these four criteria become a source of: Valuable Rare Costly to imitate Organized to be exploited Core Competencies Resources and Capabilities

© 2006 by Nelson, a division of Thomson Canada Limited Core Competencies are the basis for a firm’s Competitive advantage Strategic competitiveness Ability to earn above-average returns Core Competencies

© 2006 by Nelson, a division of Thomson Canada Limited CEO’s ranking of business importance 1. A strong & well thought out strategy 2. Maximizing customer satisfaction & loyalty 3. Business leadership, quality products & services 4. Concern for consistent profits 5. Strong & consistent profits

© 2006 by Nelson, a division of Thomson Canada Limited st Century Values Flexibility Speed to market Innovation Integration Handling challenges from constantly changing conditions Hypercompetition

© 2006 by Nelson, a division of Thomson Canada Limited The Global Economy One in which goods, services, people, skills, and ideas move freely across geographic borders

© 2006 by Nelson, a division of Thomson Canada Limited World competitiveness ratings

© 2006 by Nelson, a division of Thomson Canada Limited Technology and Technological Change Increasing rate of technological change and diffusion Perpetual innovation The information age Personal computers, cellular phones, artificial intelligence, virtual reality, massive databases, electronic networks, e-business Increasing knowledge intensity Information, intelligence, expertise, strategic flexibility.

© 2006 by Nelson, a division of Thomson Canada Limited Internally focused, it is the leveraging of a firms resources, capabilities, and core competencies to establish the firms goals in the competitive environment. Strategic Intent Together, strategic intent and strategic mission yield the insights required to formulate and implement strategies. Externally focused, it is a statement of a firms unique purpose and the scope of it’s operations in product and market terms. Strategic Mission

© 2006 by Nelson, a division of Thomson Canada Limited Stakeholders

© 2006 by Nelson, a division of Thomson Canada Limited Organizational strategists Top level managers, executives, top management team, or general managers

© 2006 by Nelson, a division of Thomson Canada Limited Organizational culture A complex set of ideologies, symbols and core values that influence how the firm conducts it’s business.

© 2006 by Nelson, a division of Thomson Canada Limited Predicting Outcomes of Strategic Decisions 1.Define the profit pool’s boundaries. 2.Estimate the pool’s overall size. 3.Estimate the size of the value chain. 4.Reconcile the calculations. The strategic management process calls for disciplined approaches to the development of competitive advantage.

Thanks… © 2006 by Nelson, a division of Thomson Canada Limited. 1-46