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Strategic Management Wael Abdel Hamid El-Maghrabi 4th Marketing 2013

Lecture 01 24/11/2012

Chapter1 INTRODUCTION

A strategic decision-making model based on the underlying process of:

1. Environmental scanning (Internal and External),2. Strategy formulation, 3. Strategy implementation “An organization’s mission is its purpose, or the reason

for its existence “ 4. Strategy evaluation and control.

Strategic management is the set of managerial decision and action that determines the long-run performance of a corporation.

Strategic management can be defined as the art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives.

As this definition implies, strategic management focuses on integrating management, marketing, finance/accounting, production/operations, research and development, and information systems to achieve organizational success.

A strategic plan is, in essence, a company’s game plan.

Objectives:

Objectives are the end results of planned activity

Strategies:

A strategy of a corporation is a comprehensive master plan stating how corporation will achieve its mission and its objectives. It maximizes competitive advantage and minimizes competitive disadvantage.

The typical business firm usually considers three types of strategy:

1. Corporate 2. Business3. Functional

Policies

A policy is a broad guideline for decision making that links the formulation of strategy with its implementation.


Evolution of Strategic Management

Phase 1 - Basic financial planning: Seek better operational control by trying to meet budgets.

Phase 2 - Forecast based planning: Seeking more effective planning for growth by trying to predict the future beyond next year.

Phase 3 - Externally oriented planning (strategic planning): Seeking increasing responsiveness to markets and competition by trying to think strategically.

Phase 4 - Strategic management: Seeking a competitive advantage and a successful future by managing all resources.

Corporations must develop strategic flexibility: the ability to shift from one dominant strategy to another.

Strategic flexibility demands a long term commitment to the development and nurturing of critical resources. It also demands that the company become a learning organization.

Following 8 steps strategic decision-making process is proposed 1. Evaluate current performance results2. Review corporate governance 3. Scan the external environment 4. Analyse strategic factors (SWOT) 5. Generate, evaluate and select the best alternative strategy 6. Implement selected strategies 7. Evaluate implemented strategies

Stages of Strategic Management

The strategic-management process consists of three stages: strategy formulation, strategy implementation, and strategy evaluation.

Strategy formulation: includes developing a vision and mission, identifying an organization’s OT, determining SW, establishing long-term objectives, generating alternative strategies, and choosing particular strategies to pursue.

Strategy-formulation issues: include deciding what new businesses to enter, what businesses to abandon, how to allocate resources, whether to expand operations or diversify, whether to enter international markets, whether to merge or form a joint venture, and how to avoid a hostile takeover.

Strategy-formulation decisions: commit an organization to specific products, markets, resources, and technologies over an extended period of time.


Top managers have the best perspective to understand fully the ramifications of strategy-formulation decisions; they have the authority to commit the resources necessary for implementation.

Strategy implementation: requires a firm to establish annual objectives, devise policies, motivate employees, and allocate resources so that formulated strategies can be executed.

Strategy implementation: includes developing a strategy-supportive culture, creating an effective organizational structure, redirecting marketing efforts, preparing budgets, developing and utilizing information systems, and linking employee compensation to organizational performance.

Strategy implementation: is often called the action stage of strategic management.

Implementing strategy: means mobilizing employees and managers to put formulated strategies into action.

Every division and department must decide on answers to questions, such as “What must we do to implement our part of the organization’s strategy?” and “How best can we get the job done?”

The challenge of implementation is to stimulate managers and employees throughout an organization to work with pride and enthusiasm toward achieving stated objectives

Strategy evaluation: 3 fundamental strategy-evaluations activities are

1) Reviewing external and internal factors that are the bases for current strategies.2) Measuring performance.3) Taking corrective actions.


Lecture 02 08/12/2012

Chapter... IIIIIIIIIIIIIIIIIIII

GOAL DIRECTED

VMOSA = Vision Mission Strategic Objectives Actions

Resources

Labourer Intensive Need Labourers

Capital Intensive Need Capital

Note: Some industries transform Labourers to Capitals like Cars’ Industries.

Human (Social) + Tools/Materials (Technology) = Socio-techno

Tangible Assets & (Intangible assets = Knowledge)

Tangible: makes things possible Intangible: makes thinks happinessOperateMaintainDevelop

Note: Capital is cowered, now we are talking about Zero-time management

Effectively: Doing right Things “It’s harder than Efficiency”

Efficiency: Doing Things right.

Normative = What Should

Manager Functions1. Planning “creating the future”2. Leading3. Organizing4. Controlling

Strategic Manager Functions = Manager Functions + Strategic planning

Mystery Shoppers Competitive Intelligence

Gather competitive intelligence ⇒ Assimilate information ⇒ Evaluate

“Resulting In a List of the Most Important Key External Factors”

Assignment: Famous characters


Lecture 03 05/01/2013

Chapter3. The External Assessment

Strategic Manager: Enhance and Excel organization performance positively in long term.

Strategy: is the Art of winning the ware.

Strategic Management

It’s about Strategy’s Decisions Formulation and Strategy’s Actions Implementations to Enhance Performance in Long Term. After that we can perform Strategy Evaluation

The Industrial Organization (I/O) View

(I/O) approach to competitive advantage advocates that external (industry) factors are more important than internal factors in a firm achieving competitive advantage and Performance determined by industry forces

Proponents of the I/O view, such as Michael Porter, contend that organizational performance will be primarily determined by industry forces. Porter’s 5- Forces Model.

Competitive Analysis: Porter’s Five-Forces Model


Perceptual Defence = Sometimes what I see as an opportunity, others see it as a threat.

Stages Questions

1 Environmental analysis and Situational analysis “As it is”

Where are we now? Place and stature,SW is more Important than OT

2 Strategy Formulation Business Planning

Where do we want to go?(VMOSA)

3 Strategy Implementation How can I go there?(Structure, leadership, Culture)

4 Evaluation and Control Are we there? KPI’s and Landmarks

Immigration: خارجية داخلية :Emigration,هجرة هجرة

IT becomes now ICT “Information communication Technology.

Change: Complex, Homogeneity, Number of factors.

YOU CAN TAKE THE HORSE TO RIVER BUT YOU CAN’T FORCE HIM TO DRINK

Assignment: Your imagination about Egypt after 2010


Lecture 04 20/01/2013

Chapter 4 Internal Assessment

“Notable Quotes”

"The difference between now and five years ago is that information systems had limited function. You weren’t betting your company on it. Now you are."

William Gruber

"Weak leadership can wreck the soundest strategy." Sun Tzu

"A firm that continues to employ a previously successful strategy eventually and inevitably fall victim to a competitor." William Cohen

"Great spirits have always encountered violent opposition from mediocre minds."

Albert Einstein

"The idea is to concentrate our strength against our competitor’s relative weakness."

Bruce Henderson

The Process of Gaining Competitive Advantage in a Firm

Weaknesses ⇒ Strengths ⇒ Distinctive Competencies1 ⇒ Competitive Advantage

Strategic management is a highly interactive process that requires effective coordination among management, marketing, finance/accounting, production/operations, R&D, and management information systems managers.

A key to organizational success is effective coordination and understanding among managers from all functional business areas.

Basis for Objectives & Strategies Internal strengths/weaknesses External opportunities/threats Clear statement of mission

Distinctive Competencies

Firm’s strengths that cannot be easily matched or imitated by competitors

Internal Audit

Involvement in performing an internal strategic-management audit provides a vehicle for understanding the nature and effect of decisions in other functional business areas of the firm.

المميزة . 1 الكفاءات


Resource-Based View (RBV)

The RBV approach to competitive advantage contends that internal resources are more important for a firm than external factors in achieving and sustaining competitive advantage “It’s different than Industrial Organizations (I/O)”.

Robert Grant concluded that the internal audit is more important

RBV contend that organizational performance will primarily be determined by internal resources that can be grouped into three all-encompassing categories:

1. Physical resources ”equipment, location, technology, raw materials, machines”2. Human resources “employees, training, experience, intelligence, knowledge, skills,

abilities”3. Organizational resources “firm structure, planning processes, information systems,

patents2, trademarks, copyrights, databases”

RBV theory asserts that it is advantageous for a firm to pursue a strategy that is not currently being implemented by any competing firm.

When other firms are unable to duplicate a particular strategy, then the focal firm has a sustainable competitive advantage, according to RBV theorists.

Empirical indicators

Three characteristics of resources enable a firm to implement strategies that improve its efficiency and effectiveness and lead to a sustainable competitive advantage. For a resource to be valuable, it must be either:

1. Rare 2. Hard to imitate 3. Not easily substitutable

Hardly to Imitate: when competitors can’t easily gain access to it.

Integrating Strategy and Culture

Organizational culture can be defined as “a pattern of behavior that has been developed by an organization as it learns to cope with its problem of external adaptation and internal integration, and that has worked well enough to be considered valid and to be taught to new members as the correct way to perceive, think, and feel.”

It’s a Resistant to change

May represent: Strength Weakness

االختراع . 2 براءات


Organizational Culture

Can be defined as “a pattern of behavior that has been developed by an organization as it learns to cope with its problem of external adaptation and internal integration, and that has worked well enough to be considered valid and to be taught to new members as the correct way to perceive, think, and feel.”

Integrating Strategy and Culture

It’s a Resistant to change

Organizational culture May represent: Strength Weakness

Organizational Culture Can Inhibit Strategic Management

Lorsch3 found that culture can inhibit strategic management in two basic ways:

1. First, managers frequently miss the significance of changing external conditions because they are blinded by strongly held beliefs.

2. Second, when a particular culture has been effective in the past, the natural response is to stick with it in the future, even during times of major strategic change.

Allarie4 and Firsirotu5 emphasized the need to understand culture: Culture provides an explanation for the insuperable difficulties a firm encounters when it attempts to shift its strategic direction.

The strategic-management process takes place largely within a particular organization’s culture.

3 ………………………………………………………4 ……………………………………………………….5 ………………………………………………………


The “right” culture:1. Become the essence and foundation of corporate excellence2. It is claimed that success or failure of reforms hinges on management’s

sagacity and ability to change the firm’s driving culture in time and in time with required changes in strategies.

Organization’s “Firms” culture Cultural products or dimensions are levers that strategists can use to

influence and direct strategy formulation, implementation, and evaluation activities.

An organization’s culture must support the collective commitment of its people to a common purpose. It must foster competence and enthusiasm among managers and employees.

A firm’s culture can become antagonistic to new strategies, with the result being confusion and disorientation.

An organization’s culture compares to an individual’s personality in the sense that no two organizations have the same culture and no two individuals have the same personality.

Organizational culture significantly affects business decisions and thus must be evaluated during an internal strategic-management audit.

If strategies can capitalize on cultural strengths, such as a strong work ethic or highly ethical beliefs, then management often can swiftly and easily implement changes.

However, if the firm’s culture is not supportive, strategic changes may be ineffective or even counterproductive.

The tension between culture and a firm’s strategy should be monitored so that it does not reach a point at which relationships are severed and the culture becomes antagonistic.

Ignoring the effect that culture can have on relationships among the functional areas of business can result in barriers to communication, lack of coordination, and an inability to adapt to changing conditions.

Note: Both culture and personality are enduring and can be warm, aggressive, and friendly, open, innovative, conservative, liberal, harsh, or likable.

Note: The resulting disarray among members of the organization would disrupt strategy formulation, implementation, and evaluation.

Example: The culture at Procter & Gamble (P&G) is so rigid that employees jokingly call themselves “Proctoids.”


Supportive Organizational Culture

In contrast, a supportive organizational culture can make managing much easier. Internal strengths and weaknesses associated with a firm’s culture sometimes are overlooked because of the inter-functional nature of this phenomenon.

It is important, therefore, for strategists to understand their firm as a sociocultural system.

Success is often determined by linkages between a firm’s culture and strategies.

Assignment: The relation between Organization culture and Strategy Implementation.

Culture is transparent glue which connects people in the same group or field of work

Culture Functions1. Internal Implementation2. External Adaptation


Lecture 05 02/02/2013

Chapter 2 Drivers, Business Vision & Mission

DriversIf you want to change behaviour, you have to change Drivers

Culture is the way to Change Behaviour THROUGH Drivers

Drivers Examples:

» Reward ”Identify looser and winner”» Role model» Nature of Work» The Structure

Fear vs. Freedom

Driver has to meet a motive to be effective

Drivers: are external, Motive: are internal

Driver and Motive may be:

» In same Direction of Motive» In same Direction of Driver » Opposite directions

It found that more creativity is coming from Low fear with High Freedom

Freedom is an experience; there is no Value-free society


Vision

It’s related to the future, “What do we want to become?"

Shared Vision Creates commonality of interests Reduce daily monotony Provides opportunity & challenge

Mission

The reason for being, “What is our Business?”

Mission statement

Enduring statement of purpose Distinguishes one firm from another Declares the firm’s reason for being

Mission statement also referred to as

» Creed statement “Often intended to define a corporate culture”» Statement of purpose» Statement of philosophy» Statement of business principles

Assignment: What’s the Creed statement of Johnson & Johnson (J&J) JNJ, www.jnj.com (Book page200)

Mission statement

It reveals what an organization wants to be and whom it wants to serve. Is Essential for effectively establishing objectives and formulating strategies.

Company’s business creed, or mission statement, is its commitment to achieve a particular goal, behave in a certain way or abide by a fundamental principle.

Specific questions that help form strategic vision/mission

What businesses we are in now and do we want to be in? What will our customers want in future? What are expectations of our stakeholders? Who will be our future competitors? Suppliers? Partners? What should our competitive scope be? How will technology impact our industry? What environmental scenarios are possible?


Mission elements “Misusers of Mission Quality”

Assignment: Mission Statement Evaluation Matrix between 2 companies in the same field

Values

VBO “Value Based Organizations”

We already talked about (Industry Based View) and RBV (Resources Based View)

We transform Values to a set of Actions

If we have to compare between Excellence (like Quality) and Business result (like profit or market share)


Most Admired Companies

APPLE Legendary CEO Steve Jobs and his colleagues are implementing a great strategic plan.

When CEOs from the big three American automakers, Ford, General Motors (GM), and Chrysler, showed up without a clear strategic plan to ask congressional leaders for bailout monies, they were sent home with instructions to develop a clear strategic plan for the future.

Jim Skinner, CEO of McDonald’s, says, “We do so well because our strategies have been so well planned out.

McDonald’s top management team says everything the firm does is for the long term.

McDonald’s for several years referred to their strategic plan as “Plan to Win.”

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