formulation, implementation and...
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Strategic Management
Formulation, Implementation and
Evaluation
Course Objectives
1. Understand the Strategic management concepts.
2. How to be a strategic thinker .
3. How to create a competitive advantages to your business.
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your business.
4. Develop students’ skills in strategy design, implementation and evaluation.
5. How culture differences affect management.
6. Develop the knowledge on the influence of social responsibility on business strategy.
Teaching Techniques
1. Lecturing and discussions.
2. Using cases in teaching : Real cases
and problem solving.
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and problem solving.
3. Presentations from students.
4. Group work, teamwork and
assignments.
Course Contents
�Concepts and definitions: Strategy, Strategic management, strategic planning, Importance of strategic management, Internal and external
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management, Internal and external environment analysis, competitive advantages, stakeholders, social responsibility and so on.
�Tools will be used in analysis, e.g., SWOT.
Course Contents continue
� Types of Strategies: Corporate-Level Strategies, Business Unit Strategies, Functional/operational Strategies.
� Strategy Formulation: Business Mission, strategy analysis and choice, corporate objectives and
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analysis and choice, corporate objectives and strategies.
� Strategy Implementation: Organizational Structure, assessment of Organizational Structure, restructuring and reengineering, short-term objectives and programs and activities.
Course Contents continue
�Strategy Evaluation and control:
processes of evaluation, measuring
performance and corrective action.
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performance and corrective action.
�Global Issues in strategic management:
global competition, managing cross-
cultures.
Strategic Management Defined
Art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives.
Strategy
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Strategy
“Top Management’s plan to attain outcomes consistent with the organization’s mission and goals” (Wright, Kroll and Parnell,1998)
Strategic management
A continuous process of change and
modification: intended strategy, realized
strategy.
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strategy.
ThreeThree--Stage ProcessStage Process
Strategy Formulation
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Strategy Implementation
Strategy Evaluation
Strategy Formulation
Vision & Mission
Strengths & Weaknesses
Opportunities & Threats
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Alternative Strategies
Long-Term Objectives
Strategy Selection
Strategy FormulationStrategy Formulation
Issues include:Issues include:�� What new businesses to enterWhat new businesses to enter
�� What businesses to abandonWhat businesses to abandon
How to allocate resourcesHow to allocate resources
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�� How to allocate resourcesHow to allocate resources
�� Expand operations or diversifyExpand operations or diversify
�� Enter international marketsEnter international markets
�� Merge or form joint ventureMerge or form joint venture
�� Avoidance of hostile takeoverAvoidance of hostile takeover
Strategy Implementation
Policies
Annual Objectives
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Employee Motivation
Resource Allocation
Strategy ImplementationStrategy Implementation
Action Stage of strategic management:Action Stage of strategic management:
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�� Most difficult stage Most difficult stage
�� Mobilizing employees and managersMobilizing employees and managers
�� Interpersonal skills are criticalInterpersonal skills are critical
�� Consensus on pursuing goalsConsensus on pursuing goals
Strategy Evaluation
External Review
Internal Review
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Performance Measurement
Corrective Action
Strategy EvaluationStrategy Evaluation
Final stage of strategic management:Final stage of strategic management:�� All strategies subject to future modification All strategies subject to future modification �� Success today is no guarantee of success Success today is no guarantee of success tomorrowtomorrow
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tomorrowtomorrow�� Success creates new and different problemsSuccess creates new and different problems�� ComplacencyComplacency\\satisfaction leads to demise satisfaction leads to demise \\end.end.
Prime Task of Strategic Prime Task of Strategic ManagementManagement
According to Peter Drucker…According to Peter Drucker…
The prime task is to think through the The prime task is to think through the
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The prime task is to think through the The prime task is to think through the overall mission of a businessoverall mission of a business
Ask the question:Ask the question:
What is our Business?What is our Business?
Integrating Intuition and AnalysisIntegrating Intuition and Analysis
The The strategic management processstrategic management processattempts to organize quantitative and attempts to organize quantitative and qualitative information under qualitative information under
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qualitative information under qualitative information under conditions of uncertainty.conditions of uncertainty.
Integrating Intuition and AnalysisIntegrating Intuition and Analysis
Intuition based on:Intuition based on:
�� Past experiencesPast experiences
�� JudgmentJudgment
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�� JudgmentJudgment
�� FeelingsFeelings
Useful for decision makingUseful for decision making
�� Conditions of great uncertaintyConditions of great uncertainty
�� Conditions with little precedentConditions with little precedent
Integrating Intuition and AnalysisIntegrating Intuition and Analysis
Intuition and judgmentIntuition and judgment
�� Management at all levelsManagement at all levels
�� Analyses are influencedAnalyses are influenced
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�� Analyses are influencedAnalyses are influenced
Analytical thinking and intuitive Analytical thinking and intuitive thinkingthinking
�� Complement each otherComplement each other
Adaptation to ChangeAdaptation to Change
Organizations must monitor eventsOrganizations must monitor events
�� OnOn--going processgoing process
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�� OnOn--going processgoing process
�� Internal and external eventsInternal and external events
�� Timely changesTimely changes
Adaptation to ChangeAdaptation to Change
Rate and magnitude of changesRate and magnitude of changes�� Increasing dramaticallyIncreasing dramatically
��EE--commercecommerce
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EE--commercecommerce
��DemographicsDemographics
��TechnologyTechnology
��MergerMerger--maniamania
�� Effective AdaptationEffective Adaptation�� LongLong--run focusrun focus
Adaptation to ChangeAdaptation to Change
Key strategicKey strategic--management questions:management questions:
�� What kind of business should we become?What kind of business should we become?
�� Are we in the right fields?Are we in the right fields?
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�� Are we in the right fields?Are we in the right fields?
�� Should we reshape our business?Should we reshape our business?
�� What new competitors are entering our What new competitors are entering our industry?industry?
�� What strategies should we pursue?What strategies should we pursue?
�� How are our customers changing?How are our customers changing?
Key TermsKey Terms
StrategistsStrategists�� Most responsible for success or failure of an Most responsible for success or failure of an organizationorganization
Various job titles:Various job titles:
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�� Various job titles:Various job titles:�� Chief executive officerChief executive officer
�� PresidentPresident
�� OwnerOwner
�� Chair of the BoardChair of the Board
�� Executive DirectorExecutive Director
�� EntrepreneurEntrepreneur
Key TermsKey Terms
Vision StatementVision Statement
�� What do we want to become?What do we want to become?
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�� What do we want to become?What do we want to become?
Mission StatementMission Statement
�� What is our business?What is our business?
Key TermsKey Terms
External Opportunities and ThreatsExternal Opportunities and Threats�� Significantly benefit or harm the organization in the Significantly benefit or harm the organization in the future.future.
Include the following trendsInclude the following trends::
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�� Include the following trendsInclude the following trends::�� EconomicEconomic
�� SocialSocial
�� CulturalCultural
�� Demographic EnvironmentalDemographic Environmental
�� Political, legal, governmentalPolitical, legal, governmental
�� TechnologicalTechnological
�� Competitive trendsCompetitive trends
Key TermsKey Terms
External Opportunities and ThreatsExternal Opportunities and Threats�� Largely beyond the control of a single Largely beyond the control of a single organization.organization.
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�� Basic tenetBasic tenet\\principleprinciple of strategic of strategic managementmanagement��Strategy formulation to: Strategy formulation to:
�� Take advantage of external opportunitiesTake advantage of external opportunities
�� Avoid or reduce impact of external threatsAvoid or reduce impact of external threats
Key TermsKey Terms
Environmental ScanningEnvironmental Scanning
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�� Industry AnalysisIndustry Analysis
��Process of conducting research and Process of conducting research and gathering and assimilating/integrate gathering and assimilating/integrate external informationexternal information
Key TermsKey Terms
Internal Strengths and WeaknessesInternal Strengths and Weaknesses�� Controllable activities performed especially Controllable activities performed especially well or poorly.well or poorly.
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�� Arise in functional areas of the businessArise in functional areas of the business::�� ManagementManagement�� MarketingMarketing�� Finance/accountingFinance/accounting�� Production/operationsProduction/operations�� Research & developmentResearch & development�� Computer Information SystemsComputer Information Systems
Key TermsKey Terms
Determining Internal Factors:Determining Internal Factors:
�� Financial ratiosFinancial ratios
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�� Financial ratiosFinancial ratios
�� Measuring performanceMeasuring performance
�� Industry averagesIndustry averages
�� Survey dataSurvey data
Key TermsKey Terms
LongLong--term objectives:term objectives:
�� MissionMission--driven pursuit of specific results more driven pursuit of specific results more than onethan one--year out.year out.
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than onethan one--year out.year out.
�� Essential for organizational successEssential for organizational success�� State directionState direction
�� Aid in evaluationAid in evaluation
�� Create synergyCreate synergy
�� Focus coordinationFocus coordination
�� Basis for planning, motivating and controllingBasis for planning, motivating and controlling
Key TermsKey Terms
StrategiesStrategies::�� Means by which longMeans by which long--term objectives will be term objectives will be achievedachieved..
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�� May include:May include:�� Geographic expansion, diversificationGeographic expansion, diversification�� AcquisitionAcquisition�� Product development, market penetrationProduct development, market penetration�� Retrenchment, divestitureRetrenchment, divestiture�� Liquidation, joint ventureLiquidation, joint venture
Key TermsKey Terms
Annual Objectives:Annual Objectives:
�� ShortShort--term milestones that organizations must term milestones that organizations must
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�� ShortShort--term milestones that organizations must term milestones that organizations must achieve to reach longachieve to reach long--term objectives.term objectives.
�� They should be SMART when writing them.They should be SMART when writing them.
Key TermsKey Terms
Policies:Policies:
�� Means by which annual objectives will be Means by which annual objectives will be
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�� Means by which annual objectives will be Means by which annual objectives will be achieved.achieved.
StrategicStrategic--Management ModelManagement Model
StrategicStrategic--Management Process Management Process ––
Dynamic and ContinuousDynamic and Continuous
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�� Dynamic and ContinuousDynamic and Continuous�� More formal in larger organizationsMore formal in larger organizations
StrategicStrategic--Management ModelManagement Model
1.1. Identify Organization’s existing:Identify Organization’s existing:
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•• VisionVision•• MissionMission•• ObjectivesObjectives•• StrategiesStrategies
StrategicStrategic--Management ModelManagement Model
2.2. Perform External AuditPerform External Audit3.3. Perform Internal AuditPerform Internal Audit4.4. Establish longEstablish long--term objectivesterm objectives
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4.4. Establish longEstablish long--term objectivesterm objectives5.5. Generate, evaluate, select strategiesGenerate, evaluate, select strategies6.6. Implement strategiesImplement strategies7.7. Measure and evaluate performanceMeasure and evaluate performance
Benefits of Strategic ManagementBenefits of Strategic Management
�� Proactive in shaping organization’s futureProactive in shaping organization’s future�� Initiate and influence activitiesInitiate and influence activitiesFormulate better strategiesFormulate better strategies
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�� Formulate better strategiesFormulate better strategies�� Systematic, logical, rational approachSystematic, logical, rational approach
Benefits of Strategic ManagementBenefits of Strategic Management
�� Financial benefitsFinancial benefits�� Improvement in salesImprovement in salesImprovement in profitabilityImprovement in profitability
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�� Improvement in profitabilityImprovement in profitability�� Improvement in productivityImprovement in productivity
Benefits of Strategic ManagementBenefits of Strategic Management
�� NonNon--Financial benefitsFinancial benefits�� Enhanced awareness of external threatsEnhanced awareness of external threats�� Improved understanding of competitors’ Improved understanding of competitors’ strategiesstrategies
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strategiesstrategies�� Increased employee productivityIncreased employee productivity�� Reduced resistance to changeReduced resistance to change�� Understanding of performanceUnderstanding of performance--reward reward relationshipsrelationships
�� Enhances problemEnhances problem--prevention capabilitiesprevention capabilities
Benefits of Strategic ManagementBenefits of Strategic Management
1.1. Identification of opportunitiesIdentification of opportunities2.2. Objective view of management problemsObjective view of management problems3.3. Improved coordination and controlImproved coordination and controlMinimizes adverse conditions and changesMinimizes adverse conditions and changes
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4.4. Minimizes adverse conditions and changesMinimizes adverse conditions and changes5.5. Decisions to better support objectivesDecisions to better support objectives6.6. Effective allocation of time and resourcesEffective allocation of time and resources7.7. Internal communication among personnelInternal communication among personnel
Benefits of Strategic ManagementBenefits of Strategic Management
8.8. Integration of individual behaviorsIntegration of individual behaviors9.9. Clarifies individual responsibilitiesClarifies individual responsibilities10.10.Encourages forward thinkingEncourages forward thinking
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10.10.Encourages forward thinkingEncourages forward thinking11.11.Encourages favorable attitude toward Encourages favorable attitude toward changechange
12.12.Discipline and formality to the Discipline and formality to the management of the businessmanagement of the business
�� Poor reward structuresPoor reward structures
�� FireFire--fightingfighting
Why Some Firms Do Why Some Firms Do NoNo
Strategic PlanningStrategic Planning
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�� FireFire--fightingfighting
�� Waste of timeWaste of time
�� Too expensiveToo expensive
�� LazinessLaziness
�� Content with successContent with success
�� Fear of failureFear of failure
�� OverconfidenceOverconfidence
�� Prior bad experiencePrior bad experience
Why Some Firms Do Why Some Firms Do NoNo
Strategic Planning (Cont’d)Strategic Planning (Cont’d)
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�� Prior bad experiencePrior bad experience
�� SelfSelf--interestinterest
�� Fear of the unknownFear of the unknown
�� SuspicionSuspicion
Business ethics defined:Business ethics defined:
�� Principles of conduct within Principles of conduct within organizations that guide decision organizations that guide decision
Business Ethics and Strategic Business Ethics and Strategic
ManagementManagement
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organizations that guide decision organizations that guide decision making and behavior.making and behavior.
Good business ethics:Good business ethics:
prerequisite for good strategic prerequisite for good strategic
Business Ethics and Strategic Business Ethics and Strategic
ManagementManagement
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�� prerequisite for good strategic prerequisite for good strategic managementmanagement
Code of business ethics:Code of business ethics:
Provides basis on which policies can be Provides basis on which policies can be
Business Ethics and Strategic Business Ethics and Strategic
ManagementManagement
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�� Provides basis on which policies can be Provides basis on which policies can be devised to guide daily behavior and devised to guide daily behavior and decisions at the workplacedecisions at the workplace
Internet privacy Internet privacy
Emerging ethical issue of immense Emerging ethical issue of immense
Business Ethics and Strategic Business Ethics and Strategic
ManagementManagement
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�� Emerging ethical issue of immense Emerging ethical issue of immense proportionproportion
Internet and business ethics Internet and business ethics ----
Business Ethics and Strategic Business Ethics and Strategic
ManagementManagement
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�� 3838% of companies store and review % of companies store and review employees email messagesemployees email messages
�� Up from Up from 1515% in % in 19971997
�� 5454% of companies monitor % of companies monitor employees’ Internet connectionsemployees’ Internet connections
Business actions Business actions alwaysalways unethical include:unethical include:
•• Misleading advertisingMisleading advertising
Business Ethics & Strategic Business Ethics & Strategic
PlanningPlanning
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•• Misleading advertisingMisleading advertising
•• Misleading labelingMisleading labeling
•• Environmental harmEnvironmental harm
•• Poor product or service safetyPoor product or service safety
•• Padding expense accountsPadding expense accounts
•• Insider tradingInsider trading
•• Dumping flawed products on foreign marketsDumping flawed products on foreign markets
Nature of Global CompetitionNature of Global Competition
Companies conduct business across bordersCompanies conduct business across borders�� International or multinational corporationsInternational or multinational corporations
�� Parent company Parent company
Host countryHost country
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�� Host countryHost country
�� Strategy implementation more difficultStrategy implementation more difficult�� Cultural differencesCultural differences
�� Norms, values, work ethicsNorms, values, work ethics
�� Absorb excess capacityAbsorb excess capacity
�� Reduce unit costsReduce unit costs
�� Spread economic risks over wider Spread economic risks over wider
Advantages of International Advantages of International
OperationsOperations
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�� Spread economic risks over wider Spread economic risks over wider marketsmarkets
�� LowLow--cost production facilitiescost production facilities
�� Competition may be less intenseCompetition may be less intense
�� Reduced tariffs, lower taxesReduced tariffs, lower taxes
�� Economies of scaleEconomies of scale
�� Different social, cultural demographic, Different social, cultural demographic, legal forces may create difficult legal forces may create difficult communicationcommunication
Disadvantages of International Disadvantages of International
OperationsOperations
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communicationcommunication
�� Weaknesses of foreign competition may Weaknesses of foreign competition may be underestimatedbe underestimated
�� Barriers to communication and effective Barriers to communication and effective management of personnelmanagement of personnel
�� Complications from different monetary Complications from different monetary systemssystems