1 STRATEGIC MANAGEMENT AND BUSINESS POLICY --- PART I: FOUNDATIONS THEME 1: STRATEGIC MANAGEMENT AS A STRATEGIC MANAGEMENT AS A MANAGEMENT SYSTEM MANAGEMENT SYSTEM © Alfonso VARGAS SÁNCHEZ
May 21, 2015
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STRATEGIC MANAGEMENT AND BUSINESS POLICY
---PART I: FOUNDATIONS
THEME 1:STRATEGIC MANAGEMENT AS A STRATEGIC MANAGEMENT AS A
MANAGEMENT SYSTEMMANAGEMENT SYSTEM
© Alfonso VARGAS SÁNCHEZ
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EXECUTIVES: ACTIVE MANAGEMENT PLAYERS
MAIN FUNCTIONSMAIN FUNCTIONS
INNOVATION STRATEGYSTRATEGYLEADERSHIP
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EXECUTIVES: ACTIVE MANAGEMENT PLAYERS
MAIN APTITUDESMAIN APTITUDES
AS A LEADER(EXPERTISE IN BUSINESS MATTERS)
STRONG MARKET-CUSTOMER ORIENTATION
AS A STRATEGIST (ORGANIZATIONAL CAPABILITIES)
SKILLS IN MANAGING PEOPLE (COMMUNICATION SKILLS)
FLEXIBILITY AND ABILITY FORMANAGING CHANGE
CAPACITY FOR NEGOTIATING AND SOLVING CONFLICTS
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ORGANIZATION CULTURE
BEHAVIORS & ATTITUDES
HUMANCOMPONENT
METHODS & TECHNIQUES
SYSTEMS & PROCESSES
TECHNICAL
COMPONENT
MANAGEMENT
based on resulting in
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THE MANAGEMENT PROCESS
SEQUENTIAL FUNCTIONS
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2
3 4
5O
RG
AN
IZ
E
P L AN
CO
NT
RO
L
MA
NA
GE
IN
TE
GR
A T E
CONTINUOUS FUNCTIONSCONTINUOUS FUNCTIONS
PR
OB
LE
MS
AN
AL
YS
IS
D E C I S I O N M A K I N G
C O
M M
U N
I C A
T I O
N
ELEMENTS
TASKS
IDE
AS
RE
FL
EC
TIO
N
HUMAN RESOURCES
LEADERSHIP
MA
TE
RIA
L R
ES
OU
RC
ES
AD
MIN
IST
RA
TIO
N
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Simple, consistent and
long-term objectives
Profound understanding of the competitive
environment
Objective appraisal
of resources
EFFECTIVE IMPLEMENTATION
Successful Strategy
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WHAT ARE THE PURPOSES OF STRATEGY IN AN ORGANIZATION?
PROVIDES ORIENTATION
A SOURCE OF ORGANIZA-
TIONAL COHERENCE
DEFINES THE ORGANIZATION
CONCENTRATES THE EFFORTS OF
ALL MEMBERS
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DANGER
“The strategy is to the organization like the blinders to the horse, an element which forces it to go straight and doesn’t allow it to turn aside the glance” (Mintzberg, Lampel and Ahlstrand, 1998).
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STRATEGY: CHARACTERISTICS
INTERACTIVE PROCESS BETWEEN COMPANY &
ENVIRONMENT
SHORT TERM OBJECTIVES & POLICIES
(adjustment of means )
LONG TERMOBJECTIVES
IMPROVEMENT OFCOMPETITIVENESS (questioning the nature
and structure of the firm)
MANY CONCEPTS MANY CONCEPTS BUT COMMON BUT COMMON
CHARACTERISTICSCHARACTERISTICS
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DISTINCTIVE FEATURES OF THE FIRM’S STRATEGY
• It is decided at the upper echelon of the organization.
• Making it is a management skill that is both a science and an art.
• It must take into account not only the company’s environment but also its resources and capabilities.
• It is devised to achieve certain basic objectives, and to determine the necessary lines of actionand the corresponding allocation of resources.
• (…).
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INTENDED STRATEGY
IMPLEMENTED STRATEGY
DELIBERATE STRATEGY
UNIMPLEMENTEDSTRATEGY
EMERGENT STRATEGY
Strategy is conceived as an organizational intention, defined and formulated in advance (deliberate strategy), but the implemented strategy also has an emergent component.
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THE FIRMTHE FIRM’’S STRATEGY S STRATEGY specifies the general objectives of the company and the main courses of action, in agreement with the organization’s present and potential resources, in order to secure its optimal insertion in the socioeconomic environment (Menguzzato and Renau, 1991).
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THE FIRMTHE FIRM’’S STRATEGYS STRATEGY: A certain pattern of behavior over a period of time. This behavior implies a way of using thecompany’s resources according to specific capabilities, taking into consideration the determining factors of the competitive environment, to reach a set of objectives and goals. This behavior will be more or less planned and emergent (AECA, 1999).
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STRATEGY: ELEMENTS OR COMPONENTS
SCOPE OF THE BUSINESS (product-market combinations)
COMPETITIVE ADVANTAGES(defensible position)
CAPABILITIES(resources, skills)
SYNERGIES(multiplying effect)
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SEQUENTIAL FUNCTIONS
Control
Manage
Integrate
Organize
Plan
CONTINUOUS FUNCTIONS
Decision Making
Communication
Analysis of Problems
M A N A G E M E N T A S A P R O C E S S
S T R A T S T R A T EE G I C M A N A G E M E N TG I C M A N A G E M E N T
Formulation
Control
I m p l e m e n t a t i o n
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PRESENT SITUATION
DESIRED SITUATION
STRATEGY
•Limited and uncertain information.
•Limited resources, present and future.
•Coordination in time and space.
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1
2
3
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AATTTIITTUUDD
PPRROOBBLLEEMM
T H I N K I N GT H I N K I N GP O S I T I O NP O S I T I O N
THE CARDINAL POINTS OF STRATEGIC MANAGEMENT
EE
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“The expression FIRM’S STRATEGY sounds so familiar that people suppose that devising it is an activity undertaken very often. The familiarity of the word contradicts the difficulty of the task. Most of the directors do not think strategically, in the sense that they do not usually question the question the main premises of the businessmain premises of the business in which they are operating. They fight for their market share in, say, the steel sector, instead of asking themselves if steel will continue being used in the same form or if the same amounts will be needed. They accept the knowledge of how steel is made, without asking themselves if it is out of date” (Bower, 1988).
STRATEGIC MANAGEMENT:
Process Organization
Vision & Mission
(Strategic Business Units)
External Analysis
Internal Analysis
Attractiveness:
Opportunities & Threats
Competitive Position:
Strengths & Weaknesses
Challenges & Impacts
Scenarios Generation
Objectives
Strategic Alternatives:
Formulation & Evaluation
Strategy Selection
Planning:
Strategic Plan & Contingent Plans
Organization
HH. RR. Management
Control
Strategic Problem
Organizational Culture
Corporate Social Responsibility
F
O
R
M
U
L
A
T
I
O
N
IMPLEMENTATION
CONTROL
STRATEGIC ANALYSIS
STRATEGIC PLANNING
STRATEGIC CONTROL
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Board of Directors
Analysis:
-Environment
-Competitors
-Clients
-Internal situation
General Guidelines
-Opportunities
-Threats
-Strengths
-Weaknesses
Scenarios generation:
Basic Assumptions
Scenarios:
General Objectives
& Strategic Options
Evaluation &
Decision
Strategic Surprises
Contingent Plans
Strategic Plan
-Functional Plans
-Division Plans
-Plan of Activities and Financial Investments
-Annual Operative Plan
Control – Dynamic Update
General Scheme of Planning in IBERIA
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DYNAMIC MODEL OF THE STRATEGY FORMATION PROCESS (AECA, 1999)
STRATEGIC
ANALYSIS
STRATEGIC FORMULATION
STRATEGIC IMPLEMENTATION
& CONTROL
STRATEGIC
PROGRAMMING
STRATEGIC THINKING
STRATEGYSTRATEGYEMERGENT PLANNED
STRATEGIC STRATEGIC
MANAGEMENTMANAGEMENT
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A DECISION IS STRATEGIC IF ...
• Adopting it changes some essential aspect of the nature of the company , like its product, its market and/or its technology.
• It gives rise to a different company in the future.
• It is based on the aims and missions of the company.
(and more...)
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INFORMATION:
Not very specific and of informal origin
(intuition, experience, personal contacts,
specialist media, etc.).
ACTION:
Risky - it may jeopardize the present and future resources
of the company.
STRATEGIC DECISIONS
CONTROL:
Results are difficult to evaluate, because enough time must be allowed for results to
become evident.
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PROXIMITY TO CLIENT
EMPHASIS ON ACTION
FOSTERING CREATIVITYSIMPLE STRUCTURESGOLD RULES
FOR EXCELLENCE
SPECIALIZATION
CLEAR AND SHARED VALUES
EFFECTIVE PARTICIPATION OF EMPLOYEES
SIMILTANEOUS CENTRALIZATION & DECENTRALIZATION 1
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5
4
37(Peters and Waterman)
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COMPETITIVENESS EVOLUTION
LEARN
DO WELL
DO BETTER
DO DIFFERENT
ENJOY WHAT YOU DOEmotional Intelligence
KNOW
DO
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KEYS FOR BUSINESS EXCELLENCE
• Preferential attention to human resources.
• Creativity, innovation and quality.
• Shared values, strongly implanted organizational culture.