2. JANI AARTI En No: 140273111006

3.  By the end of this lecture, students should be able to: 1.Explain the functions of management 2.Define and explain strategy and strategic management 3.Explain why strategic management is important 4.Explain the strategic management process 5.Describe the levels of organizational strategies 6.Discuss the misconceptions about strategy and strategic management

4.  Planning, Organizing, Leading; & Controlling (PLOC)  Planning ◦ defining goals and objectives ◦ deciding what type of activities the company will engage in ◦ determining the resources needed to achieve the organization’s goals & objectives.

5.  Leading ◦ Attracting people to the organization. ◦ Specifying job responsibilities ◦ Grouping jobs into work units ◦ Marshalling and allocation of resources ◦ Creating good working conditions

6.  Organizing ◦ Directing, motivating, and communication with employees, individually & in groups. ◦ Conflict resolution.  Controlling ◦ Monitoring performance of people & units. ◦ Provision of feedback or information about progress. ◦ Identification of performance problems & actions to correct problems.

7.  Various disciplines in “management” emerge from the functions of management: ◦ Business Policy (formally called Strategic Planning) from the planning function. ◦ Organizational Behavior primarily from the leading function. ◦ Human Resources Management primarily from the organizing function. ◦ Strategic Management, originated from Business Policy, but focuses on overall management – PLOC – and beyond.

8.  Strategy is management’s overall plan and actions for deploying resources and skills taking into consideration opportunities and threats in the environment ◦ to achieve it’s mission, vision and objectives ◦ to establish a favorable competitive position.  Strategy involves: ◦ An organization’s goals ◦ A series of related decisions & actions ◦ Takes into account key internal strengths & weaknesses and external opportunities threats ◦ Analysis, communication, coordination, & action

9.  Focuses on how managers formulate and implement, and evaluate strategies aimed at developing and maintaining competitive advantage: ◦ the reason some firms enjoy higher levels of performance than their rivals or competitors.  Strategic management is therefore concerned with overall PLOC  Four aspects that set strategic management apart: ◦ Interdisciplinary ◦ External focus ◦ Internal focus ◦ Future directions “Big picture” view of an organization influenced by its external environment

10.  Field of Study ◦ Macroeconomics ◦ Microeconomics ◦ Strategic Management ◦ Finance ◦ Marketing ◦ Org. Behavior ◦ Human Resource Mgmt. ◦ Operations Mgmt.  Level of Analysis ◦ The economy ◦ Industries & markets ◦ Firms & businesses ◦ Investment Projects ◦ Products & services ◦ Individuals & Groups ◦ Tasks & Structure ◦ Plants

11.  Gives every employee a role to play in making the firm successful ◦ Applies to all professional employees, not just those in management ◦ Allows decision-making, allocation of resources and management of people to be based on a firm’s strategic plan ◦ Success as a manager (as measured by your promotion, job security, and pay increases) is often determined by your efforts & departments contribution to overall organization’s success  Makes a difference in performance levels ◦ Research suggest that successful companies use strategic management concepts & techniques ◦ Success evolves from “knowing what you’re doing” and often implies having a strategic plan

12.  Provides systematic approach to uncertainties that organizations face ◦ Competitive & global environment are dynamic (changing) ◦ Change, whether significant of minor, must be recognized and analyzed, & dealt with ◦ Strategic management allows for the analysis of the situation (identifying the sources of change in environment)  Coordinates and focuses employees to achieve organization’s goals ◦ Allows for team effort which is coordinated for firm success ◦ Allows for development of a plan, communication, coordination, & cooperation among diverse depts & functions

13.  Establishing a mission, vision and objectives  Environmental Analysis  Internal Analysis  Strategy Formulation  Strategy Implementation  Strategic Control and Performance Evaluation

14. Mission, Vision & Objectives Internal Analysis Environ. Analysis Strategy Formul- ation Strategy Implem- entation Strategic Eval. & Control

15.  A company’s mission is a statement of ◦ the basic purpose or reason for its existence ◦ its values (role to stakeholders - customers, employees, society, etc.).  The vision goes beyond the mission statement ◦ clarifies the long-term direction of the company (where the company is going) ◦ reflects management’s aspirations for the company

16.  Objectives are yardsticks for tracking a company’s performance or end result. ◦ Financial performance objectives (e.g., ROA, ROI, ROE, Dividend growth, Stock price, etc.). ◦ Strategic performance objectives (e.g., market share, growth, innovation leader, customer service, community & environmental responsibility, etc.)

17.  Southwest Airlines: ◦ Mission: To provide high quality service at a lower price in the airline industry. ◦ Vision: Opening air travel to a wider group of leisure travelers while infusing the organization with a sense of fun.  Apple Computer: ◦ Mission: To bring the best personal computing products and support to consumers around the world. ◦ Vision: One person, one computer.

18.  Alcan Aluminum ◦ Financial: To outperform the average return on equity of the S&P’s industrial stock index. ◦ Strategic: To be lowest-cost producer of aluminum.  GE ◦ Financial: To achieve an average of 10 inventory turns and a corporate operation profits margin of 16% by 1998. ◦ Strategic: To become most competitive enterprise in the world by being #1 or #2 in market share in every business the company is in.

19.  Involves the evaluation of the business environment of the organization. ◦ All external influences that impact a company’s decision and performance.  Environment of firm classified by proximity into (1) Macro-environment; and (2) Micro-environment or task environment.

20.  The macro-environment consists of ◦ The international/national economy; changes in demographic structures; social and political trends; technology; and the natural environment.  The micro-environment consists of ◦ The industry environment such as competitors, suppliers, customers; unions and employees; owners and shareholders, etc.