PowerPoint Presentation by Charlie Cook PowerPoint Presentation by Charlie Cook The University of West Alabama The University of West Alabama Strategic Strategic Management Management Part 2 Planning Challenges in the 21st Part 2 Planning Challenges in the 21st Century Century
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PowerPoint Presentation by Charlie CookPowerPoint Presentation by Charlie CookThe University of West AlabamaThe University of West Alabama
Strategic Strategic Management Management
Part 2 Planning Challenges in the 21st CenturyPart 2 Planning Challenges in the 21st Century
• An integrated and coordinated set of An integrated and coordinated set of commitments & actions designed to exploit core commitments & actions designed to exploit core competencies and gains and gain a competitive competencies and gains and gain a competitive
• How to attract and please customers, how to How to attract and please customers, how to respond to changing market conditions, how to respond to changing market conditions, how to
compete successfully, how to grow the business, compete successfully, how to grow the business, how to achieve performance targets.how to achieve performance targets.
What is Strategy?What is Strategy?“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.
Identifying a company’s strategyIdentifying a company’s strategy
1. Diversify the org’s revenues and 1. Diversify the org’s revenues and earnings by entering new businesses.earnings by entering new businesses.Eg. TATAEg. TATA
2. Gain sales and market share via 2. Gain sales and market share via lower prices, better quality, customer lower prices, better quality, customer service, wider product selection.service, wider product selection.Eg. HULEg. HUL3. Respond to changing market 3. Respond to changing market conditions.conditions.
4. Entering new geographic markets4. Entering new geographic markets
4–5
5. To merge or acquire rival 5. To merge or acquire rival companies.companies.Eg. CISCO, TATA-Corus, Kingfisher-Eg. CISCO, TATA-Corus, Kingfisher-DeccanDeccan
6. To form strategic alliances and 6. To form strategic alliances and collaborative partnershipscollaborative partnershipsEg. Jet-KingfisherEg. Jet-Kingfisher
8. Managing R&D and other functional 8. Managing R&D and other functional departments.departments.
9. To strengthen competitive 9. To strengthen competitive capabilities and correct competitive capabilities and correct competitive weakness.weakness.
What makes a strategy a winnerWhat makes a strategy a winner
1. How well does the strategy fit the 1. How well does the strategy fit the company’s situation?company’s situation?
2. Is the strategy helping the company 2. Is the strategy helping the company achieve a sustainable competitive achieve a sustainable competitive advantage?advantage?
3. Is the strategy resulting in better 3. Is the strategy resulting in better company performance?company performance?
• Strategic PlanningStrategic Planning The process by which an organization makes The process by which an organization makes
decisions and takes actions that affect its long-run decisions and takes actions that affect its long-run performance.performance.
Strategic plan: Strategic plan: the output of the strategic planning the output of the strategic planning process that provides direction by defining its process that provides direction by defining its strategic approach to business.strategic approach to business.
• Competitive AdvantageCompetitive Advantage Is a central concept of strategic planning.Is a central concept of strategic planning. Can only be sustained if an organization continues to Can only be sustained if an organization continues to
out innovate competitors.out innovate competitors.
Benefits of Strategic PlanningBenefits of Strategic Planning
• EconomicEconomic Organizations that plan strategically outperform those Organizations that plan strategically outperform those
that do not.that do not.
• BehavioralBehavioral Identification of organizational and environmental Identification of organizational and environmental
conditions that may create problems in the long run.conditions that may create problems in the long run. Better decisions as a result of the group decision-Better decisions as a result of the group decision-
making process.making process. Participation in the planning process increases Participation in the planning process increases
participants understanding of how the plan is to be participants understanding of how the plan is to be implemented and their willingness to change.implemented and their willingness to change.
Strategic Analysis: Assessment in aStrategic Analysis: Assessment in aGlobal EnvironmentGlobal Environment
• The purpose of strategic analysis is to evaluate The purpose of strategic analysis is to evaluate the present situation of the organization.the present situation of the organization. Analysis requires three primary activities:Analysis requires three primary activities:
Assessing the mission of the organizationAssessing the mission of the organization
• The combined internal and external strategic The combined internal and external strategic analysis is referred to as a analysis is referred to as a SWOTSWOT analysis. analysis.SStrengthstrengths
Assessing the Mission of an Assessing the Mission of an OrganizationOrganization• The mission of an organization reflects its The mission of an organization reflects its
fundamental reasons for existence.fundamental reasons for existence.
• Though mission statements vary greatly, every Though mission statements vary greatly, every mission statement should describe three primary mission statement should describe three primary aspects of an organization:aspects of an organization:
1.1. The organization’s primary products or services.The organization’s primary products or services.
2.2. The organization’s primary target markets.The organization’s primary target markets.
3.3. The organization’s overall strategy for ensuring long-The organization’s overall strategy for ensuring long-term success.term success.
• Strategic DirectionStrategic Direction Direction of the organization toward success in the Direction of the organization toward success in the
long run.long run.
• VisionVision The ability to predict opportunities and threats in the The ability to predict opportunities and threats in the
future.future. A vision statement is intended to guide the organization in the A vision statement is intended to guide the organization in the
future, what the organization wants to become or where it future, what the organization wants to become or where it wants to be.wants to be.
Vision is derived from a careful analysis of the external and Vision is derived from a careful analysis of the external and internal environmentsinternal environments
• Purpose of External AnalysisPurpose of External Analysis To identify aspects of the external environment that To identify aspects of the external environment that
represent either an represent either an opportunityopportunity for or a for or a threatthreat to the to the organization.organization.
Opportunities: Opportunities: Those environmental trends on which the organization can Those environmental trends on which the organization can
capitalize and improve its competitive position.capitalize and improve its competitive position.
ThreatsThreats Conditions that jeopardize the organization’s ability to Conditions that jeopardize the organization’s ability to
prosper and its competitive position in the long term.prosper and its competitive position in the long term.
• Purpose of Internal AnalysisPurpose of Internal Analysis To identify the assets, resources, skills, and To identify the assets, resources, skills, and
processes that represent either processes that represent either strengthsstrengths or or weaknessesweaknesses for the organization. for the organization.
StrengthsStrengths Aspects of the organization’s operations that represent Aspects of the organization’s operations that represent
potential potential competitive advantagescompetitive advantages or or distinctive competenciesdistinctive competencies..
WeaknessesWeaknesses Areas that are in need of improvement.Areas that are in need of improvement.
Evaluating and choosing strategies that provide a Evaluating and choosing strategies that provide a competitive advantage and optimize the performance competitive advantage and optimize the performance of the organization in the long term.of the organization in the long term.
Casting the Vision for the Casting the Vision for the OrganizationOrganization• The development of a vision for the organization The development of a vision for the organization
is central to any strategic plan. is central to any strategic plan.
• Vision versus Mission Vision versus Mission
A A vision statementvision statement describes what the organization describes what the organization aspires to be in the long run.aspires to be in the long run.
A A mission statementmission statement describes the products, services, describes the products, services, and target markets for an organization.and target markets for an organization.
Are very broad statements of the results that an Are very broad statements of the results that an organization wishes to achieve in the long run.organization wishes to achieve in the long run.
Relate to the mission and vision of the organization Relate to the mission and vision of the organization and specify the level of performance that the and specify the level of performance that the organization wants to achieve.organization wants to achieve.
• Strategic AlternativesStrategic Alternatives Are developed in light of the organizational mission Are developed in light of the organizational mission
considering its strengths, weaknesses, opportunities, considering its strengths, weaknesses, opportunities, and threats, and its vision and strategic goals. and threats, and its vision and strategic goals.
• Grand StrategiesGrand Strategies Stability strategies:Stability strategies: intended to ensure continuity in intended to ensure continuity in
the operations and performance of the organization.the operations and performance of the organization. Growth strategies:Growth strategies: designed to increase the sales and designed to increase the sales and
profits of the organization.profits of the organization. Retrenchment strategies:Retrenchment strategies: designed to reverse designed to reverse
negative sales and profitability trends.negative sales and profitability trends.
The primary ways in which an organization can The primary ways in which an organization can compete in its chosen market(s).compete in its chosen market(s). Cost leadership:Cost leadership: competing on the basis of price. competing on the basis of price.
Differentiation:Differentiation: offering products or services that are offering products or services that are differentiated from those of competitors in some way.differentiated from those of competitors in some way.
Focus:Focus: avoiding competing in broad markets by targeting a avoiding competing in broad markets by targeting a narrow market segment.narrow market segment.
Best-Cost provider:Best-Cost provider: competing on the basis of both low-cost competing on the basis of both low-cost and differentiation.and differentiation.
Evaluating and Choosing StrategyEvaluating and Choosing Strategy
• Portfolio AssessmentPortfolio Assessment Provides a mechanism for evaluating an Provides a mechanism for evaluating an
organization’s portfolio of business, products and organization’s portfolio of business, products and services.services. Boston Consulting Group (BCG) Growth-Share matrixBoston Consulting Group (BCG) Growth-Share matrix General Electric Industry AttractivenessGeneral Electric Industry Attractiveness–Business Strength –Business Strength
matrixmatrix
• Decision MatricesDecision Matrices A decision matrix provides a method for evaluating A decision matrix provides a method for evaluating
alternative strategies according to the criteria that the alternative strategies according to the criteria that the organization’s leaders consider more important.organization’s leaders consider more important.
Strategy Implementation: Focusing on Strategy Implementation: Focusing on ResultsResults
• The best-formulated strategy is virtually The best-formulated strategy is virtually worthless if it cannot be implemented effectively.worthless if it cannot be implemented effectively. A direct, specific, clear strategy must be developed.A direct, specific, clear strategy must be developed. Strategies must be established at all levels of the Strategies must be established at all levels of the
organization to align each part of the organization organization to align each part of the organization with the organization’s overall mission and goals.with the organization’s overall mission and goals.
The organization’s system must be designed to The organization’s system must be designed to ensure that strategies can be institutionalized in its ensure that strategies can be institutionalized in its culture.culture.
Evaluation and Control: Achieving Evaluation and Control: Achieving Effectiveness and EfficiencyEffectiveness and Efficiency
• Strategic ControlStrategic Control Involves monitoring the implementation of the Involves monitoring the implementation of the
strategic plan to ensure quality and effectiveness in strategic plan to ensure quality and effectiveness in terms of organizational performance.terms of organizational performance.
Feedforward controlsFeedforward controls Are designed to identify changes in the external environment Are designed to identify changes in the external environment
or internal operations that affect organization’s ability to fulfill or internal operations that affect organization’s ability to fulfill its mission and meet its strategic goals.its mission and meet its strategic goals.
Feedback ControlsFeedback Controls Compare the actual performance of the organization to its Compare the actual performance of the organization to its
Information Technology and Strategic Information Technology and Strategic PlanningPlanning• PositivePositive
The increasing availability of information technology The increasing availability of information technology has had a tremendous impact on the ability of has had a tremendous impact on the ability of organizations to develop effective strategic plans.organizations to develop effective strategic plans.
• NegativeNegative Many organizations fail to use the information made Many organizations fail to use the information made
available by management information systems to available by management information systems to ensure effective strategic planning.ensure effective strategic planning.
• Every member, work group, department, and Every member, work group, department, and division of the organization must subscribe to division of the organization must subscribe to and support the organization’s strategy with its and support the organization’s strategy with its plans and actions.plans and actions.
There must be a good fit between the chosen strategy There must be a good fit between the chosen strategy and:and: the organizational structurethe organizational structure
the organizational culturethe organizational culture
the organizational leadershipthe organizational leadership
The Importance of Organizational The Importance of Organizational CultureCulture• Organizational CultureOrganizational Culture
Refers to the shared, emotionally charged beliefs, Refers to the shared, emotionally charged beliefs, values, and norms that bind people together.values, and norms that bind people together. Helps people make sense of the systems within an Helps people make sense of the systems within an
organization.organization.
Guides the behavior of and gives meaning to the members of Guides the behavior of and gives meaning to the members of the organization.the organization.
• The Importance of LeadershipThe Importance of Leadership
If an organization is to implement its strategy If an organization is to implement its strategy effectively, it must have the appropriate leadership.effectively, it must have the appropriate leadership.
Without effective leadership, an organization is Without effective leadership, an organization is unlikely to realize the benefits of its selected strategy.unlikely to realize the benefits of its selected strategy.
• Understand the realities of the external environment in Understand the realities of the external environment in which you operate.which you operate.
• Understand the importance of a thorough and accurate Understand the importance of a thorough and accurate assessment of the current situation of the organization.assessment of the current situation of the organization.
• A plan will be only as good as the analysis upon which it A plan will be only as good as the analysis upon which it is based.is based.
• Strategic vision is critical for ensuring a common Strategic vision is critical for ensuring a common strategic direction for the organization.strategic direction for the organization.
• Make sure that the mission statement is a working Make sure that the mission statement is a working document that provides direction for the members of the document that provides direction for the members of the organization.organization.
Implications for Leaders (cont’d)Implications for Leaders (cont’d)
• Strategic goals serve as targets for achievement. Make Strategic goals serve as targets for achievement. Make sure that they are specific, measurable, results oriented, sure that they are specific, measurable, results oriented, and have a established time for their achievement.and have a established time for their achievement.
• Strategy should be designed to provide the organization Strategy should be designed to provide the organization with a distinctive competitive advantage in the long run.with a distinctive competitive advantage in the long run.
• A strategic plan is meaningless if it is not implemented A strategic plan is meaningless if it is not implemented well.well.
• Provide for evaluation and control to be sure that Provide for evaluation and control to be sure that operations are on track for accomplishment of the operations are on track for accomplishment of the organization’s mission.organization’s mission.