handouts - st mgmt lecture 1

3/12/2012

1

2012

Dr. Ali Abu-Rahma

Strategic Management __________________________________________

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2012

Dr. Ali Abu-Rahma

Strategic Management ___________________________________________

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STRATEGIC MANAGEMENT The Basics

Strategic Managers

Operating Managers

• Long term objectives and goals.

• How to win in future

competition.

• Strategic budget.

• Where to do business.

• What technology to use.

• What kind of products/

services to offer.

• What capability to build.

• How to respond to the society’s

expectations & constrains.

• Near term objectives.

• How to win in near term competition.

• Operating budget.

• Production goals.

• Plant expansion plans.

• Marketing plans.

• Promotion plans.

• Distribution plans.

• Products servicing plans.

• How to relate the firm to

public/customers.

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Strategic Workers

Operating Workers

• Capability building.

• Inventing/Acquiring

technology.

• Developing

products/services.

• Market testing

• Launching

products/services.

• Entering new markets

• Capability building

• Purchasing.

• Promoting / Advertising.

• Selling.

• Distributing.

• Servicing.

Strategic Management Asks Three

Questions

•Where are we? 1

• Where do we want to be? 2

• How do we get there? 3

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Mass Marketing Era Post Industrial Era Mass Production Era

The Changing Environment

The Age of Discontinuity

Acceleration of change

Increased complexity in the environment

Speed of change

Unpredictability of events

Invisibility of the future

The danger of extrapolating past success behavior into the future

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Acceleration of Change

1990 2000 2002 2004 2006 2008 2010

Computer Users

Internet Users

TV-Household

Energy Consumption

Cellular Subscribers

3G Mobile Users

Speed of Change

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

X-Ray Tube (18 Years)

Television (12 Years)

Radar (15 Years)

Nuclear Reactor (10 Years)

Atomic Bomb (6 Years)

Cloning (10 Years)

Handheld Cellular Phones(5 Years)

3D Films (15 Years)

Electric Car (10 Years)

Blue Ray Disc (6 Years)

Human Genome Project (13 Years)

Portable MP3 Players (4 Years)

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Competitive Data

The Business Engine

New Businesses/ markets/ products/ services/ technology

Operating

Near Term Profit Making

Shareholders

Lenders Funds

Profits

Strategic Data

Sales

Investment

Investment

Environment

Strategic Development Long Term Growth

New & Existing

Products/ Markets

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Firm’s Behavior Alternatives

Market

Present New

Pro

duct

Present Competition Market

Innovation

New Product

Innovation

Product &

Market

Innovation

Strategic Alternatives

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Key Success Factors

KEY SUCCESS FACTORS

Innovation

Timing

Min Cost

Max Market Share

Product Innovation

Product Image

Max Market Share

Technology Breakthrough

(starts new cycle)

Emergence

Accelerated

Growth

Decelerated

Growth

Maturity

Decline

Time

Market Demand

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2012

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Role of General Management

General Management

= Guidance and Control of the Firm as a Whole

Strategic Management

= Generating Future Profit Potential

Operating Management

= Making Profit

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Role of Strategic Management

1900-1950 1950-1980 1980 +

Growth

Enhancer

Survival/ Success

Necessity

Entrepreneur’s

Luxury

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2012

Dr. Ali Abu-Rahma


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Ways to Study a Firm

Corporate

Managers

Line & Staff Managers

R&D Production Marketing

To

p-D

ow

n A

pp

roach

Bo

tto

m-U

p A

pp

roac

h

Workers

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The New Ball Game

• High turbulence:

– Complexity of the environment.

– Novelty of changes.

– Rabidity of changes.

– Unpredictability of change.

• Extrapolation is dangerous.

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2012

Dr. Ali Abu-Rahma


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Set of managerial decisions and actions that determines the long-run performance of a

firm.

“

”

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Dr. Ali Abu-Rahma


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Why is it Important?

• Vision for the future

• Focus on what is strategically

important

• Understanding of the changing

environment

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2012

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Strategic Thinking

The Learning Organization:

An organization skilled at creating,

acquiring, and transferring knowledge and

at modifying its behavior to reflect new

knowledge and insights.

Less Bureaucratic and More Flexible

Skilled in acquiring, creating, and transferring knowledge

Solve Problems Systematically

Try new Approaches

Learning from the Past

Learning Organization

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2012

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Basic Model

• Environmental Scanning 1

• Strategy Formulation 2

• Strategy Implementation 3

• Evaluation and Control 4

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Environmental Scanning

• SWOT

• General forces in the environment:

–Economic

– Socio-cultural

–Political

–Legal

–Technological

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SOCIAL

ENVIRONMENT

INTERNAL

ENVIRONMENT

Structure

Culture

Resources

TASK

ENVIRONMENT (Industry)

Government

Customers

Creditors

Labor Union

Special

Interest Group

Trade

Associates

Comptitors

Shareholders

Suppliers

Communities

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• Industry Environment

– Shareholders

– Suppliers

– Employees/Labor Unions

– Competitors

– Trade Associations

– Customers

– Govt.

– etc

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2012

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• Internal Environment:

– Structure

– Culture

– Resources

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Strategy Formulation

Vision

Mission

Goals

Objectives

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Mission

Vision

Policy

Operational Plans

Sub Goals

Short Term Goals

Mid Term Goals

Long Range Goals

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Strategies

Strategy: Plan to achieve mission, goals, and

objectives

3 levels:

– Corporate

– Business

– Functional

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2012

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Management Role in Strategic

Management

• CEO and Senior staff

• Board of Directors

– Monitor

– Evaluate

– Influence

– Initiate

– Determine

Strategy Levels – Large Organizations

Corporate-Level Strategies

Business-Level Strategies

Functional-Level Strategies

Operating-Level Strategies

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Policies

• Guideline for decision making.

• Is a link to strategy formulation.

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Strategy Implementation

Programs: A Plan Of Action Aimed At Accomplishing A Clear

Business Objective, With Details On What Work Is To Be Done, By

Whom, When, And What Means Or Resources Will Be Used.

Projects: Set Of Interrelated Tasks To Be Executed Over A Fixed

Period And Within Certain Cost And Other Limitations.

Budgets: An Estimate Of Costs, Revenues, And Resources Over

A Specified Period, Reflecting A Reading Of Future Financial

Conditions And Goals.

Procedures: Course Of Action (With Definite Start And End

Points)that Must Be Followed In The Same Order To Correctly

Perform A Task.

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2012

Dr. Ali Abu-Rahma


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Corporate-Level Strategies

Business-Level Strategies

Functional-Level

Strategies

Overall Direction of Company and Management of its

Business

Competitive and Cooperative Strategies

Maximizing Resource

Productivity

3 Types of Strategy

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3 Types of Strategy

Functional Strategy:

Technological leadership.

Technological followership.

Corporate strategy:

Stability.

Growth.

Retrenchment.

Business strategy:

Competitive strategies.

Cooperative strategies.

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2012

Dr. Ali Abu-Rahma


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Agency Theory

–Objectives of owners & agents in conflict

–Difficult for owners to verify agent performance

Risk Sharing Problem Owners & agents risk assessment in conflict Owner

Agents

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2012

Dr. Ali Abu-Rahma


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Stewardship Theory

Executives more motivated to act in best interest of the corporation than their own

self-interests. Theory that over time, senior executives tend to view corporation as

extension of selves.

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Evaluation & Control

• Actual performance compared with desired

performance.

• Performance is the end result of activities:

e.g. ROI

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Strategic Management Process

Define the organizational mission

Set long-range goals and objectives

Develop strategies to reach the objectives

Implement projects to reach the objectives

Make corrective actions as projects proceed

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Process

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Review and

Revise Mission

Assess External

Environment

(Threats and Opportunities)

Assess Internal

Environment

(Strengths and Weaknesses)

Set New Goals and Objectives

Develop a Portfolio of

Strategic Choices

Implement Strategic Projects

Select Strategic Projects

Evaluate Project Performance

Str

ateg

ic P

lan

nin

g Str

ateg

ic I

mp

lem

enta

tion

Where are we?

Where do we

want to be?

How do we get there?

Level 1

Repetitive: No Change

Level 2

Expanding: Slow incremental change

Level 3

Changing: Fast Incremental Change

Level 4

Discontinuous

Level 5

Surprisful

5 Levels of Environment

handouts - st mgmt lecture 1

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