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Oct 24, 2015
Lecture 1: Introduction to Strategic Management(Chapter 1)Instructor: Moses Acquaah, Ph.D.377 Bryan BuildingPhone: (336) 334-5305 Email: [email protected]
Lecture ObjectivesBy the end of this lecture, students should be able to:Explain the functions of managementDefine and explain strategy and strategic managementExplain why strategic management is importantExplain the strategic management processDescribe the levels of organizational strategies Discuss the misconceptions about strategy and strategic management
OBJECTIVE #1Functions of ManagementPlanning, Organizing, Leading; & Controlling (PLOC)Planningdefining goals and objectivesdeciding what type of activities the company will engage indetermining the resources needed to achieve the organizations goals & objectives.
Functions of ManagementLeadingAttracting people to the organization.Specifying job responsibilitiesGrouping jobs into work unitsMarshalling and allocation of resourcesCreating good working conditions
Functions of ManagementOrganizingDirecting, motivating, and communication with employees, individually & in groups. Conflict resolution.ControllingMonitoring performance of people & units.Provision of feedback or information about progress.Identification of performance problems & actions to correct problems.
Disciplinary FocusVarious 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.
OBJECTIVE #2Whats Strategy?Strategy is managements overall plan and actions for deploying resources and skills taking into consideration opportunities and threats in the environmentto achieve its mission, vision and objectivesto establish a favorable competitive position.Strategy involves:An organizations goalsA series of related decisions & actionsTakes into account key internal strengths & weaknesses and external opportunities threatsAnalysis, communication, coordination, & action
What is Strategic Management?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 PLOCFour aspects that set strategic management apart:InterdisciplinaryExternal focusInternal focusFuture directionsBig picture view of anorganization influenced byits external environment
Strategic Managements UniquenessField of StudyMacroeconomicsMicroeconomicsStrategic ManagementFinanceMarketingOrg. BehaviorHuman Resource Mgmt.Operations Mgmt.Level of AnalysisThe economyIndustries & marketsFirms & businessesInvestment ProjectsProducts & servicesIndividuals & GroupsTasks & StructurePlants
OBJECTIVE #3Importance of Strategic ManagementGives every employee a role to play in making the firm successfulApplies to all professional employees, not just those in managementAllows decision-making, allocation of resources and management of people to be based on a firms strategic planSuccess as a manager (as measured by your promotion, job security, and pay increases) is often determined by your efforts & departments contribution to overall organizations successMakes a difference in performance levelsResearch suggest that successful companies use strategic management concepts & techniquesSuccess evolves from knowing what youre doing and often implies having a strategic plan
Importance of Strategic ManagementProvides systematic approach to uncertainties that organizations faceCompetitive & global environment are dynamic (changing)Change, whether significant of minor, must be recognized and analyzed, & dealt withStrategic management allows for the analysis of the situation (identifying the sources of change in environment)Coordinates and focuses employees to achieve organizations goalsAllows for team effort which is coordinated for firm successAllows for development of a plan, communication, coordination, & cooperation among diverse depts & functions
OBJECTIVE #4Strategic Management ProcessEstablishing a mission, vision and objectivesEnvironmental AnalysisInternal AnalysisStrategy FormulationStrategy ImplementationStrategic Control and Performance Evaluation
The Strategic Management ProcessMission, Vision & ObjectivesInternalAnalysisEnviron.AnalysisStrategyFormul-ationStrategyImplem-entationStrategicEval. &Control
Mission, Vision & ObjectivesA companys mission is a statement of the basic purpose or reason for its existenceits 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 managements aspirations for the company
Mission, Vision & ObjectivesObjectives are yardsticks for tracking a companys 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.)
Examples of Mission & VisionSouthwest 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.
Financial & Strategic ObjectivesAlcan AluminumFinancial: To outperform the average return on equity of the S&Ps industrial stock index.Strategic: To be lowest-cost producer of aluminum.GEFinancial: 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.
Environmental AnalysisInvolves the evaluation of the business environment of the organization.All external influences that impact a companys decision and performance.
Environment of firm classified by proximity into(1) Macro-environment; and (2) Micro-environment or task environment.
Environmental AnalysisThe macro-environment consists ofThe international/national economy; changes in demographic structures; social and political trends; technology; and the natural environment.
The micro-environment consists ofThe industry environment such as competitors, suppliers, customers; unions and employees; owners and shareholders, etc.
Internal AnalysisInvolves the evaluation of the inventory of the firms resources and capabilities.Resources/Capabilities can be classified as:Tangible resources: Financial or physical assetsIntangible resources: brand name, reputation (product & firm), organizational culture, etc.Capabilities or competencies: managerial ability, specialized skill & knowledge base of employees, etc.
Strategy FormulationThe strategy formulation process involves designing a course of action for addressing strategic issues facing the firm after going through the external and internal evaluation processes.Actual strategy of a company involves:Planned or Intended Actions (Deliberate & purposeful actions).Reactive or Emergent Actions (As-need reactions to unanticipated events in firms micro and macro environments).
Strategy FormulationStrategy formulation is concerned with the following parts of a company:Corporate (whole company) -- Corporate strategies: Deals with businesses company wants to be in & how to manage those businessesBusinesses -- Competitive strategies: How to compete in specific business or industryFunctional areas -- Functional strategies: short goal-directed decisions & actions of an organizations various functional departments.
Strategy ImplementationStrategy implementation is the process of putting a companys various strategies into actiondevelopment of programs, policies, budgets & procedures. It can take several months to years to complete.Most difficult part of the strategy process.The job of implementing strategy involves managers at all levels
Strategic Control & EvaluationProcess by which desired outcomes (mission, vision, & objectives) are compared with realized outcomes to determine if there are gaps.Initiate corrective actions by monitoring changes in environment - competitor actions, new market opportunities, customer needs & expectations.
Strategic Management ProcessOn-going and continuous cycle ofSituation Analysis : Internal evaluation & Environmental scanningStrategy formulationStrategy implementationStrategy evaluation
Misconceptions about Strategy & Strategic ManagementStrategy & strategic planning are deadEvery organization needs the focus and direction provided by its strategies and the strategic management processStrategy is strictly for top managementTop management play a crucial role, but everyone in the organization has a part to play.Strategy is about planningStrategic management process shows that strategy is not only about planning, but also about doing.
Misconceptions about Strategy & Strategic ManagementStrategy is stable and constantOrganizations compete i