1. concept of strategy
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8/8/2019 1. Concept of Strategy
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The Concept of Strategy:
Strategic Management involves creating organizations that generate
value in a turbulent world over a sustained period of time.
Leadership
Creativity Passion
Analysis
Build an organization that generates and respond
to change
Task involves:
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Hierarchy of Strategic Intent:
Refers to the purposes the organization strives to
achieve
Can be broad:
* Vision
* Mission
Can be more focused:
* Goals
* Objectives
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Vision:
Refers to the category of intentions that are broad, all -
inclusive and forward thinking
Describes the aspirations of for the future, without
specifying the means that will be used to achieve the
desired ends
Are personal things and often unwritten
Example: Statement such as ³Quality comes First´
But no company can afford to stop production if
quality is bad since quality improvement is a
continuous and gradually process
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Mission:
Refers to a statement that makes vision more tangible
Verbalizes the beliefs and directions towards which a
manager wants to lead the organization
Addresses issues that are explicit and serve to identify
what is unique about the character of the organization
No well established rules regarding what they must
include
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Attempts to answer the following
questions:
a. What is our reason for being? What is our basic
purpose?
b. What is unique or distinctive about our organization?
c. What is likely to be different about our business three
or five years in the future?
d. Who are, or who should be, our principal customers,
clients or key market segments?
e. What are our principal goods and services, present
and future?
f. What are our principal concerns?
g. What are the firm¶s basic beliefs, values, aspirations
and philosophical priorities?
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Examples of Mission Statements:
FORD MOTOR COMPANY
Ford Motor Company
is a worldwide leader in automotive
and automotive-related products and servicesas well as newer industries such as aerospace, communications and
financial products.
Our mission is toimprove continually our products and services
to meet our customers¶ needs, allowing us to prosper
as a business and to provide a reasonable return for our stockholders,
the owners of our business.
Source: Strategic Management ² Miller and Dess, Second International Edition, McGraw Hill Companies
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Examples«
AMERICAN AIRLINES
We will be the global market leader in air transportation and
related information services.
That leadership will be attained by:
Setting the industry standard for safety and security
Providing world-class customer service
Creating an open and participative work
environment which seeks positive changes, rewardsinnovation and provides growth, security and
opportunity to all employees
Provide consistently superior financial returns for
shareholders
Source: Strategic Management ² Miller and Dess, Second International Edition, McGraw Hill Companies
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Goals:
Refers to attempts made to make mission statements
more concrete
Goals are needed as mission statements hardly project
concrete directions for action Address both financial and non ± financial issues
Financial:
BOEING: Profitability as measured
against our ability to achieve andthen maintain a 20 % average annualreturn on Stockholder·s return.
REYNOLDS: To be an industryleader in profitability and growthand achieve an average ROE of 20 %.
Non - Financial:
BOEING: Integrity must pervade
our actions in all relationships,including those with our customers,suppliers and each other. This is acommitment to uncompromisingvalues and conduct.
GE: We will run only businesses
that are number one or numbertwo in their global markets.
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Facilitate reasoned trade-offs
Example:
a. Having simultaneous goals like low cost leadership and good
employee
b. During Recession may face a dilemma such asretaining employees or laying ± off employees;
one results in a loss and the other affects employee
relations
Goals:
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Can be reached with a stretch
In the words of Edwin Land, founder of Polaroid:
Goals that draw the greatest strengths out of people are
those they feel are manifestly important and nearly
impossible. Byconstantly setting goals that demand
more effort, an organization
is more likely to reach its
fullest potential.
Goals:
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Cut across functional areas: integrating force
Goals:
Based on following areas:
* Market Share and Brand Equity
* Productivity
* Profit Projection
* HRD
* Innovation
* Resource Planning
* Good Corporate Citizenship
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Objectives:
Are operational definition of goals
Define what will be accomplished in order to reach
the goals
Characteristics include:
* Can be measured
* Incorporate the dimension of time
* Reduce Conflict
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Forms of Strategy:
1. Intended Strategies
Represent the plans that managers develop
Provide guidelines for the means by which the
organization will work toward the ends it pursues
ExampleAT & T¶s Intended Strategy:
We are dedicated to being the world¶s best at bringing people
together ± giving them access to each other and to the information
and services they want and need ± anytime, anywhere.
We look at Customer satisfaction, employee satisfaction, Stock
Price and EVA.
We treat every one with respect and dignity, valuing individual
and cultural differences
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Categories of Guidelines:
Help in linking the organization to the intentions/goals
that are supposed to be reached.
Example:
AT & T¶s plans state that in order to reach its objective of 10 %
growth in earnings annually, its business units will focus on
high-margin products.
(A) Plans:
(ii) Other Examples: To maintain our desired rate of growth, we will open four new
stores in the next two years
To increase demand for our products, we will spend heavily
on advertising to establish brand recognition.
Timing is a critical element of plans
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Categories of Guidelines:
Guidelines explicitly stated or implicitly understood to
be part of the intended strategy
Example:
We will not depend on outside suppliers for the most critical
components for the assembly of our products.
(A) Policies :
We will not take on long-term debt
Usually stated in negative terms
We will fund future growth through retained earnings
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R ealized Strategies:
Entails reference to the past and to what has actually
developed
Realized Strategy different from Intended Strategy as
the latter seldom survives implementation in its
original form
Plans that do not materialize are Unrealized Elements
Example:
* A firm plans to develop a new product and diversify into
new markets. THIS IS INTENDED STAR TEGY
* The product is developed and successfully sold. THIS IS
R EALIZED STR ATEGY.
* Else the product is developed but fails to sell. THIS IS
UNR EALIZED STAR TEGY.
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Views of the Strategic Management Process:
Description Attempts to move an organization to a new strategic
position and maintain that position as efficiently and
directly as possible
Assumption Organizational Strategy lends itself to intellectual analysis
and formulation, the environment is predictable and
organizations are controllable
Benefits Has led to the development of many useful planning tools
and techniques
R ATIONAL PLANNING:
Limitations Plans must be quickly outdated by unexpected
developments; formal planning often breaks down in
implementation stage
Mnemonic Icon
Devise the shortest path
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Views of the StrategicManagement
Process:
Description Typically move to new strategic positions and maintain those
positions by making continuous adjustments
Assumption While there will be many mistakes, organizations can benefit
from them by discovering new ways of moving towards the
goals.
Benefits Emphasizes broad ± based involvement in management of the
firm and encourages risk taking by legitimizing mistakes
OR GANIZATIONAL LEAR NING:
Limitations May be stressful for individuals not used to unlearning the status
quo and learning new ways of managing.
Mnemonic Icon
Search for what works
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Views of the Strategic Management Process:
Description Organizational drift, from one strategy to the next, depending
on the unfolding of events beyond managers control
Assumption Managers lack the ability to forecast or enforce the
developments essential to developing a pre-ordained strategy
and therefore must continually adjust.
Benefits Encourages flexibility and concern of strategy
implementation
INCR EMENTALISM:
Limitations Does not encourage proactive efforts to control the
organization¶s future or destiny.
Mnemonic Icon
Wander about
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Views of the Strategic Management
Process:
Description Organizational drift, from one strategy to the next, depending
on the unfolding of events beyond managers control
Assumption Managers lack the ability to forecast or enforce the
developments essential to developing a pre-ordained strategy
and therefore must continually adjust.
Benefits Encourages flexibility and concern of strategy
implementation
INCR EMENTALISM:
Limitations Does not encourage proactive efforts to control the
organization¶s future or destiny.
Mnemonic Icon
Search for what works
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Strategic Planning Process:
LEVELStrategic Context Understanding
andAd justing to
Gaps
Identifying
R esources needed
to closeGap
Distributing
R esources
Monitoring
Progress
Corporate
Strategic Goals
Vision
Mission
Objectives
Business
Competitive
EnvironmentOpportunities
and Threats
Function
Internal
Situation
Strengths and
Weaknesses
1
2
3
4
5
6
7
8
9
10
11
12
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Steps in Strategic Management Process:
Evaluate performance in light off goals and identify gaps
Relate gaps to environmental conditions
Relate gaps to organizational capabilities
Identify future goals given understanding of gaps
Describe broad action plans aimed at meeting goals
Identify resources required by each function to implement plans
Aggregate needs by function into overall needs of business
Allocate resources across multiple business units
Reallocate resources across multiple functions
Deploy resources within functions
Monitor use of resources within functions
Monitor use of resources across businesses
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StrategicManagement vs. General
Management
Integrates various management functions
Oriented toward achieving organizational
goals
Considers broad range of stakeholders
Entails multiple time horizons
Concerned with both efficiency and
effectiveness