08/25/2005 welcome to strategy 4357 dr. gary vazzana dockery 400r
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08/25/200508/25/2005WELCOME TOWELCOME TO
StrategyStrategy43574357
DR. GARY VAZZANADR. GARY VAZZANA
DOCKERY 400RDOCKERY 400R
Introduction Topic 1Introduction Topic 1
• Business PolicyBusiness Policy deals with internal deals with internal company problems. company problems.
• Business StrategyBusiness Strategy deals with internal and deals with internal and external environments at the same time.external environments at the same time.
• Business StrategyBusiness Strategy involves long-range involves long-range planning of how a company, government planning of how a company, government unit or a non-profit organization is going unit or a non-profit organization is going to attain its objective given its internal to attain its objective given its internal and external environmentsand external environments..
Benefits of Strategic Benefits of Strategic ManagementManagement
• Clearer sense of strategic visionClearer sense of strategic vision• Sharper focus on what is strategically importantSharper focus on what is strategically important• Improved understanding of rapidly changing Improved understanding of rapidly changing
environmentenvironment• Improves organizational health and successImproves organizational health and success• Firms are more profitableFirms are more profitable• When lower level workers are involved in When lower level workers are involved in
strategic planning it helps motivation, broadens strategic planning it helps motivation, broadens sources of information and helps gain sources of information and helps gain commitment to plancommitment to plan
Three Key Strategic Three Key Strategic Questions the Strategic Questions the Strategic
Management Must Continue Management Must Continue To AskTo Ask
• Where is the organization now?Where is the organization now?• If no changes are made, where will the If no changes are made, where will the
organization be in one, two, five or ten organization be in one, two, five or ten years? Are the answers acceptable?years? Are the answers acceptable?
• If the answers are not acceptable, what If the answers are not acceptable, what specific actions should management specific actions should management undertake? What are the risks and undertake? What are the risks and payoffs involved?payoffs involved?
Learning OrganizationLearning Organization
A learning organization is skilled at creating, A learning organization is skilled at creating, acquiring, transferring knowledge, and at acquiring, transferring knowledge, and at modifying its behavior to reflect new knowledge modifying its behavior to reflect new knowledge and insightsand insights
The external environment is changing so quickly The external environment is changing so quickly that organizations must work on strategy that organizations must work on strategy development yearly to revise plansdevelopment yearly to revise plans
Strategy implementationStrategy implementation is continuous and is continuous and therefore we must have a Learning Organization.therefore we must have a Learning Organization.
Composition of Composition of Strategic ManagementStrategic Management
Strategic Management is Composed ofStrategic Management is Composed of
1.1. Environmental scanningEnvironmental scanning2.2. Strategy formulationStrategy formulation3.3. Strategy implementationStrategy implementation4.4. Evaluation and controlEvaluation and controlSee Figure 1.1 in text, the following model is used See Figure 1.1 in text, the following model is used
more often but is almost same model.more often but is almost same model.
8
TM-7
Strategic Management Strategic Management ModelModel
Strategy Formulation
Strategy Implementation
Evaluation and Control
Mission
Objectives
Strategies
Feedback/Learning
Environmental Scanning
Societal Environment
General Forces
Task Environment
Industry Analysis
Structure Chain of Command
Resources Assets, Skills
Competencies, Knowledge
Culture Beliefs, Expectations,
Values
Reason for existence
What results to accomplish by when Plan to
achieve the mission & objectives
Programs
Activities needed to accomplish a plan
Budgets
Cost of the programs Procedures
Sequence of steps needed to do the job
Process to monitor performanceand take corrective action
Performance
External
Internal
Go through decision- making process andDetermine alternative
strategy To select
Environmental VariablesEnvironmental Variables
Societal Environment
Economic
Forces
Technological
Forces
Political-Legal Forces
Sociocultural Forces
Internal Environment
Structure Culture
Resoures
Shareholders
Governments
Customers
Creditors
Communities
Competitors
Employees/
Labor Unions
Suppliers
Special
Interest
Groups
Trade Associations
TaskEnvironment
(Industry)
Two Categories of External Two Categories of External EnvironmentEnvironment
Societal EnvironmentSocietal EnvironmentComposed of general forces in environmentComposed of general forces in environment
1. Economic1. Economic
2. Technological2. Technological
3. Political-Legal3. Political-Legal
4. Socio-Cultural4. Socio-Cultural
Many texts such as Marketing text use Many texts such as Marketing text use similar categories.similar categories.
Give examples of Societal Give examples of Societal External EnvironmentExternal Environment
• Low rate of unemploymentLow rate of unemployment• Age distribution of populationAge distribution of population• Interest ratesInterest rates• Federal Regulations for Minimum WageFederal Regulations for Minimum Wage**Note this variables effect most **Note this variables effect most
companies in a similar way and companies in a similar way and therefore are not in the industry therefore are not in the industry environment of the organization.environment of the organization.
2nd Major Category of 2nd Major Category of External EnvironmentExternal Environment
Task EnvironmentTask EnvironmentComposed ofComposed of
• Groups in environment that directly Groups in environment that directly affect or are affected by the affect or are affected by the organization’s operationsorganization’s operations
• (Often called industry)(Often called industry)
Give an example of Give an example of task environment at task environment at
CMSUCMSU• Discussion of other state schoolsDiscussion of other state schools
• College age individuals in MissouriCollege age individuals in Missouri
• Cafeteria supply companiesCafeteria supply companies
• State government of MissouriState government of Missouri
TM-13
Internal EnvironmentInternal Environment
• The Internal Environment that we will use The Internal Environment that we will use in this class is: in this class is:
• a. Organizational Structure and a. Organizational Structure and Management,Management,
• b. Organizational culture and values, andb. Organizational culture and values, and• c. Organizational resources e.g. c. Organizational resources e.g.
production, financial, HRM, CIS etc.production, financial, HRM, CIS etc.
a. Organizational a. Organizational Structure isStructure is
The way a corporation is organized The way a corporation is organized in terms of communication, in terms of communication, authority, and workflow.authority, and workflow.
b. b. Corporate/OrganizationCorporate/Organization
al Cultureal CultureCorporate Culture is theCorporate Culture is the Collection of Collection of beliefs, expectations, and values beliefs, expectations, and values learnedlearned and and sharedshared by members and by members and transmittedtransmitted from one generation of employees to from one generation of employees to another.another.
It includes how ethical and socially It includes how ethical and socially responsible the company is.responsible the company is.
c. Internal Resourcesc. Internal Resources
An asset, competency, process, An asset, competency, process, skill, or knowledge controlled by skill, or knowledge controlled by the corporation (the corporation (Examples include Examples include marketing skills, financial strength, marketing skills, financial strength, MIS systems, production facilities.)MIS systems, production facilities.)
Definition of Strategy Definition of Strategy FormulationFormulation
Strategy Formulation isStrategy Formulation is
The process of developing long-range plans to deal effectively The process of developing long-range plans to deal effectively with environmental opportunities and threats in light of with environmental opportunities and threats in light of corporate strengths and weaknesses.corporate strengths and weaknesses.
Composed ofComposed of• MissionMission• ObjectivesObjectives• StrategiesStrategies
11stst let us look at Mission let us look at MissionCompanies should have a Companies should have a
mission whether they write mission whether they write it down or not.it down or not.
MissionMission
The purpose or reason for the corporation’s The purpose or reason for the corporation’s existence. It may be narrow or broad in scope.existence. It may be narrow or broad in scope.
NarrowNarrow BroadBroad
RailroadRailroad TransportationTransportation
InsuranceInsurance Financial ServicesFinancial Services
22ndnd Objectives ObjectivesOnce companies know Once companies know their Mission they can their Mission they can
come up with their come up with their objectives.objectives.ObjectivesObjectives
The end results of planned activity. The end results of planned activity. They state WHAT is to be They state WHAT is to be accomplished by WHEN. They accomplished by WHEN. They should be quantified, if possible.should be quantified, if possible.
Some Areas in Which to Some Areas in Which to Set ObjectivesSet Objectives
• Profitability (10% profit over next 5 years)Profitability (10% profit over next 5 years)• Growth ( have 40% growth by 4 years from now)Growth ( have 40% growth by 4 years from now)• Shareholder wealth (increase stock price by $10 in Shareholder wealth (increase stock price by $10 in
3 years)3 years)• Utilization of resourcesUtilization of resources• ReputationReputation• Contributions to employeesContributions to employees• Contributions to societyContributions to society• Market leadership (continue to be #1 in market Market leadership (continue to be #1 in market
share)share)• SurvivalSurvival• Personal needs of managementPersonal needs of management
3rd Strategy3rd StrategyStrategies can be set once Strategies can be set once
your objectives and your objectives and mission are set.mission are set.A Strategy is a A Strategy is a
A comprehensive master plan A comprehensive master plan stating HOW the corporation will stating HOW the corporation will achieve its mission and objectivesachieve its mission and objectives
A Strategy tells us HOW A Strategy tells us HOW organization aligns itself with its organization aligns itself with its external and internal environment. external and internal environment.
TM-22
Strategies are set a three Strategies are set a three levels in corporate levels in corporate
conglomerates.conglomerates.• Strategic or Corporate levelStrategic or Corporate level
• Divisional Level (also called Strategic Business Divisional Level (also called Strategic Business Unit (SBU) StrategyUnit (SBU) Strategy
• Functional/Departmental levelFunctional/Departmental level
Each level supports the other level.Each level supports the other level.
Hierarchy of StrategyHierarchy of Strategy
Functional Strategy
Business (Division Level)
Strategy
Corporate Strategy
Manufacturing Finance MarketingResearch
and Development
Human Resources
Strategic Business
Unit
Strategic Business
Unit
Strategic Business
Unit
Corporate Headquarters
Definition of Strategy Definition of Strategy ImplementationImplementation
Strategy ImplementationStrategy Implementation
The process of putting strategies into action The process of putting strategies into action through the development of through the development of • ProgramsPrograms• BudgetsBudgets• ProceduresProcedures
Definition of ProgramDefinition of ProgramProgramProgram
A statement of activities or steps needed to accomplish a single-use plan, e.g. a marketing program for a chosen strategy or a finance program for a chosen strategy.A statement of activities or steps needed to accomplish a single-use plan, e.g. a marketing program for a chosen strategy or a finance program for a chosen strategy.
Definition of BudgetDefinition of BudgetBudgetBudget
A statement of a corporation’s program in dollar terms or numerical term such as in units, days, # of employees, etc. A statement of a corporation’s program in dollar terms or numerical term such as in units, days, # of employees, etc.
A marketing budget for next year might be 5-8 % of net sales.A marketing budget for next year might be 5-8 % of net sales.A Finance budget for our strategy might be issue $10.000,000A Finance budget for our strategy might be issue $10.000,000In stock to finance our strategy.In stock to finance our strategy.
Definition of ProceduresDefinition of Procedures
ProceduresProcedures
A system of sequential steps or techniques that A system of sequential steps or techniques that describe in detail how to perform a particular describe in detail how to perform a particular task or job. task or job.
( We will not do procedures in our cases because it ( We will not do procedures in our cases because it becomes too detailed.)becomes too detailed.)
A marketing procedure might be how to buy A marketing procedure might be how to buy advertising space step-by-stepadvertising space step-by-step
A finance procedure might be how to issue stock A finance procedure might be how to issue stock step-by-step.step-by-step.
Definition of Evaluation Definition of Evaluation and Controland ControlEvaluation and ControlEvaluation and Control
The process of monitoring corporate activities and The process of monitoring corporate activities and performance results so that actual performance can be performance results so that actual performance can be compared with desired performance and initiating changes compared with desired performance and initiating changes when necessary.when necessary.
Our objectives will probably be what we will use for Our objectives will probably be what we will use for controlcontrol
Profitability (10% profit over next 5 years)Profitability (10% profit over next 5 years)• Growth ( have 40% growth by 4 years from now)Growth ( have 40% growth by 4 years from now)• Shareholder wealth (increase stock price by $10 Shareholder wealth (increase stock price by $10
in 3 years)in 3 years)
Triggering Events for Triggering Events for Strategic ChangeStrategic Change
• New CEONew CEO• External interventionExternal intervention• Threat of a change in ownershipThreat of a change in ownership• Performance gapPerformance gap
• Strategic decisions are rare, consequential, and Strategic decisions are rare, consequential, and
set direction for an organization.set direction for an organization.
Strategic Managment Process at Strategic Managment Process at Maytag Corporation : Mission & Maytag Corporation : Mission &
ObjectivesObjectivesStrategy FormulationStrategy Formulation
MissionMission • BroadBroad: To serve the best interests of shareowners, : To serve the best interests of shareowners,
customers, and employeescustomers, and employees• NarrowNarrow: To become a full-line globally-oriented major : To become a full-line globally-oriented major
home appliance manufacturer and marketerhome appliance manufacturer and marketer
ObjectivesObjectives• Increased profitabilityIncreased profitability• Number one in customer satisfaction next 3 yearsNumber one in customer satisfaction next 3 years• Number three in North American unit salesNumber three in North American unit sales
Strategic Management Process Strategic Management Process at Maytag Corporation: at Maytag Corporation:
Strategies & PoliciesStrategies & PoliciesStrategiesStrategies• To grow horizontally where the corporation is not yet well represented To grow horizontally where the corporation is not yet well represented
through external acquisition or joint venturesthrough external acquisition or joint ventures• To grow horizontally internally by improving efficiency and quality of To grow horizontally internally by improving efficiency and quality of
acquired companies and by using one business unit’s expertise in one acquired companies and by using one business unit’s expertise in one acquired are to introduce quality products from a business unit in another acquired are to introduce quality products from a business unit in another areaarea
• PoliciesPolicies• No cost reduction proposal will be approved if it reduces product quality No cost reduction proposal will be approved if it reduces product quality
in any wayin any way• Every product, from the least expensive to the highest priced, should be Every product, from the least expensive to the highest priced, should be
superior to the competition in overall quality and performancesuperior to the competition in overall quality and performance• The corporation must not emphasize market share at the expense of The corporation must not emphasize market share at the expense of
profitabilityprofitability• Business units must be managed for synergies, while simultaneously the Business units must be managed for synergies, while simultaneously the
specialized expertise among those units must be allowed to flourishspecialized expertise among those units must be allowed to flourish
Strategic Management Process Strategic Management Process at Maytag Corporation: Programs at Maytag Corporation: Programs
& Budgets& BudgetsProgramsPrograms• Work with Bosch-Siemens to develop joint marketing and Work with Bosch-Siemens to develop joint marketing and
supplier agreements for Hoover appliancessupplier agreements for Hoover appliances• Analyze and develop Asian markets through current Analyze and develop Asian markets through current
distributors and licensees and through joint venturesdistributors and licensees and through joint ventures• Develop new appliances for continental EuropeDevelop new appliances for continental Europe• Develop TV advertising for Jenn-Air and Magic ChefDevelop TV advertising for Jenn-Air and Magic Chef• Consolidate production of washers and dryers in Consolidate production of washers and dryers in
dedicated plantsdedicated plants
BudgetsBudgets• Prepare budgets for each planned programPrepare budgets for each planned program
Strategic Management Process Strategic Management Process at Maytag Corporation: at Maytag Corporation:
ProceduresProcedures
ProceduresProcedures• Develop procedures for joint purchasing and joint Develop procedures for joint purchasing and joint
marketing of Bosch-Siemens with Hoovermarketing of Bosch-Siemens with Hoover
• Coordinate marketing, manufacturing, and Coordinate marketing, manufacturing, and purchasing activities of business units through purchasing activities of business units through committeescommittees
• Research and development takes place in unit Research and development takes place in unit housing each product linehousing each product line
• Consolidate all advertising under one agency, but Consolidate all advertising under one agency, but establish internal advertising for each brand categoryestablish internal advertising for each brand category
Strategic Management Process Strategic Management Process at Maytag Corporation: at Maytag Corporation:
Evaluation & ControlEvaluation & ControlEvaluation & ControlEvaluation & Control• Require all business units to provide Require all business units to provide annualannual reports giving reports giving
operating revenues, costs, and expenses as well as operating revenues, costs, and expenses as well as identifiable assets in dollars, plus property additions and identifiable assets in dollars, plus property additions and deletions. Compare these against your objectives.deletions. Compare these against your objectives.
• Require all business units to provide Require all business units to provide quarterlyquarterly assessments assessments of competitive activity and overall trends affecting each of of competitive activity and overall trends affecting each of their product linestheir product lines
• Require all business units to inform corporate headquarters Require all business units to inform corporate headquarters before proceeding on any financially risky planbefore proceeding on any financially risky plan
Questions to AnswerQuestions to Answer
What is Strategic What is Strategic Management?Management?
ANSWER:ANSWER:
STRATEGIC MANAGEMENTSTRATEGIC MANAGEMENT• That set of managerial decisions That set of managerial decisions
and actions that determines the and actions that determines the long-run performance of a long-run performance of a corporationcorporation
Student Fill in YourselfStudent Fill in Yourself
What are the basic elements What are the basic elements of the Strategic of the Strategic
Management Process?Management Process?(Put processes in correct (Put processes in correct
sequence.)sequence.)
What processes supercede What processes supercede each other?each other?
Answer-in appropriate orderAnswer-in appropriate order
Evaluation and
Control
Strategy Implementation
Environmental Scanning
Strategy Formulation
What does it mean when What does it mean when author says Mission can be author says Mission can be
wide or narrow?wide or narrow?• Remember a mission should include at least a Remember a mission should include at least a
general idea what products the organization general idea what products the organization offers, its geographical scope, its view of offers, its geographical scope, its view of customers and the general environment.customers and the general environment.
• Give an example of a mission for DisneyGive an example of a mission for Disney• Give an example of a mission for CMSUGive an example of a mission for CMSU• Give an example of a mission for BudweiserGive an example of a mission for Budweiser
What are the key words What are the key words describing an objective?describing an objective?
What is the key word What is the key word describing a strategy?describing a strategy?
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