Lecture 1 Introduction to Strategic Management Chapter 1 Instructor Moses Acquaah Ph D 377 Bryan Building Phone 336 334 5305 Email acquaah uncg edu

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Lecture 1 Introduction to Strategic Management Chapter 1 Instructor Moses Acquaah Ph D 377 Bryan Building Phone 336 334 5305 Email acquaah uncg edu Powered By Docstoc
					Lecture 1: Introduction to
 Strategic Management
       (Chapter 1)
 Instructor: Moses Acquaah, Ph.D.
        377 Bryan Building
       Phone: (336) 334-5305
     Email: acquaah@uncg.edu
            Lecture Objectives
   By the end of this lecture, students should be able
    1. Explain the functions of management
    2. Define and explain strategy and strategic management
    3. Explain why strategic management is important
    4. Explain the strategic management process
    5. Describe the levels of organizational strategies
    6. Discuss the misconceptions about strategy and strategic
        OBJECTIVE #1
    Functions of Management
 Planning, Organizing, Leading; &
  Controlling (PLOC)
 Planning
    – defining goals and objectives
    – deciding what type of activities the
      company will engage in
    – determining the resources needed to
      achieve the organization’s goals &
     Functions of Management
   Leading
    – Attracting people to the organization.
    – Specifying job responsibilities
    – Grouping jobs into work units
    – Marshalling and allocation of resources
    – Creating good working conditions
     Functions of Management
   Organizing
    – Directing, motivating, and communication with
      employees, individually & in groups.
    – Conflict resolution.
   Controlling
    – Monitoring performance of people & units.
    – Provision of feedback or information about
    – Identification of performance problems &
      actions to correct problems.
           Disciplinary Focus
   Various disciplines in “management”
    emerge from the functions of management:
    – Business Policy (formally called Strategic
      Planning) from the planning function.
    – Organizational Behavior primarily from the
      leading function.
    – Human Resources Management primarily
      from the organizing function.
    – Strategic Management, originated from
      Business Policy, but focuses on overall
      management – PLOC – and beyond.
                  OBJECTIVE #2
                  What’s Strategy?
   Strategy is management’s overall plan and actions for
    deploying resources and skills taking into
    consideration opportunities and threats in the
    – to achieve it’s mission, vision and objectives
    – to establish a favorable competitive position.
   Strategy involves:
    – An organization’s goals
    – A series of related decisions & actions
    – Takes into account key internal strengths & weaknesses and
      external opportunities threats
    – Analysis, communication, coordination, & action
    What is Strategic Management?
   Focuses on how managers formulate and implement,
    and evaluate strategies aimed at developing and
    maintaining competitive advantage:
    – the reason some firms enjoy higher levels of performance
        than their rivals or competitors.
 Strategic management is therefore concerned with
  overall PLOC
 Four aspects that set strategic management apart:
    –   Interdisciplinary
    –   External focus                   “Big picture” view of an
    –   Internal focus                 organization influenced by
    –   Future directions               its external environment
        Strategic Management’s
   Field of Study              Level of Analysis
    – Macroeconomics             – The economy
    – Microeconomics             – Industries & markets
    – Strategic Management       – Firms & businesses
    – Finance                    – Investment Projects
    – Marketing                  – Products & services
    – Org. Behavior              – Individuals & Groups
    – Human Resource Mgmt.       – Tasks & Structure
    – Operations Mgmt.           – Plants
          OBJECTIVE #3
Importance of Strategic Management
   Gives every employee a role to play in making the firm
    – Applies to all professional employees, not just those in
    – Allows decision-making, allocation of resources and
      management of people to be based on a firm’s strategic plan
    – Success as a manager (as measured by your promotion, job
      security, and pay increases) is often determined by your efforts
      & departments contribution to overall organization’s success
   Makes a difference in performance levels
    – Research suggest that successful companies use strategic
      management concepts & techniques
    – Success evolves from “knowing what you’re doing” and often
      implies having a strategic plan
Importance of Strategic Management
   Provides systematic approach to uncertainties that
    organizations face
    – Competitive & global environment are dynamic (changing)
    – Change, whether significant of minor, must be recognized and
      analyzed, & dealt with
    – Strategic management allows for the analysis of the situation
      (identifying the sources of change in environment)
   Coordinates and focuses employees to achieve
    organization’s goals
    – Allows for team effort which is coordinated for firm success
    – Allows for development of a plan, communication,
      coordination, & cooperation among diverse depts & functions
        OBJECTIVE #4
Strategic Management Process
 Establishing a mission, vision and
 Environmental Analysis
 Internal Analysis
 Strategy Formulation
 Strategy Implementation
 Strategic Control and Performance
 The Strategic Management


                        Strategy   Strategy   Strategic
                        Formul-    Implem-    Eval. &
Vision &
                         ation     entation   Control

    Mission, Vision & Objectives
   A company’s mission is a statement of
    – the basic purpose or reason for its existence
    – its values (role to stakeholders - customers,
      employees, society, etc.).

   The vision goes beyond the mission statement
    – clarifies the long-term direction of the company
      (where the company is going)
    – reflects management’s aspirations for the company
    Mission, Vision & Objectives
   Objectives are yardsticks for tracking a
    company’s performance or end result.
    – Financial performance objectives (e.g., ROA,
      ROI, ROE, Dividend growth, Stock price, etc.).

    – Strategic performance objectives (e.g., market
      share, growth, innovation leader, customer
      service, community & environmental
      responsibility, etc.)
Examples of Mission & Vision
   Southwest Airlines:
    – Mission: To provide high quality service at a
      lower price in the airline industry.
    – Vision: Opening air travel to a wider group of
      leisure travelers while infusing the organization
      with a sense of fun.
   Apple Computer:
    – Mission: To bring the best personal computing
      products and support to consumers around the
    – Vision: One person, one computer.
            Financial & Strategic
   Alcan Aluminum
    – Financial: To outperform the average return on
      equity of the S&P’s industrial stock index.
    – Strategic: To be lowest-cost producer of aluminum.
   GE
    – Financial: To achieve an average of 10 inventory
      turns and a corporate operation profits margin of
      16% by 1998.
    – Strategic: To become most competitive enterprise in
      the world by being #1 or #2 in market share in every
      business the company is in.
       Environmental Analysis
   Involves the evaluation of the business
    environment of the organization.
    – All external influences that impact a company’s
      decision and performance.

   Environment of firm classified by proximity
    (1) Macro-environment; and
    (2) Micro-environment or task environment.
       Environmental Analysis
   The macro-environment consists of
    – The international/national economy; changes in
      demographic structures; social and political
      trends; technology; and the natural environment.

   The micro-environment consists of
    – The industry environment such as competitors,
      suppliers, customers; unions and employees;
      owners and shareholders, etc.
              Internal Analysis
 Involves the evaluation of the inventory of the
  firm’s resources and capabilities.
 Resources/Capabilities can be classified as:
    – Tangible resources: Financial or physical assets
    – Intangible resources: brand name, reputation
      (product & firm), organizational culture, etc.
    – Capabilities or competencies: managerial
      ability, specialized skill & knowledge base of
      employees, etc.
         Strategy Formulation
   The strategy formulation process
    – involves designing a course of action for
      addressing strategic issues facing the firm after
      going through the external and internal evaluation
   Actual strategy of a company involves:
    – Planned or Intended Actions (Deliberate &
      purposeful actions).
    – Reactive or Emergent Actions (As-need
      reactions to unanticipated events in firm’s micro
      and macro environments).
          Strategy Formulation
   Strategy formulation is concerned with the
    following parts of a company:
    – Corporate (whole company) -- Corporate
      strategies: Deals with businesses company wants
      to be in & how to manage those businesses
    – Businesses -- Competitive strategies: How to
      compete in specific business or industry
    – Functional areas -- Functional strategies: short
      goal-directed decisions & actions of an
      organization’s various functional departments.
      Strategy Implementation
   Strategy implementation is the process of
    putting a company’s various strategies into
    – development of programs, policies, budgets &
 It can take several months to years to
 Most difficult part of the strategy process.
 The job of implementing strategy involves
  managers at all levels
Strategic Control & Evaluation
 Process by which desired outcomes
  (mission, vision, & objectives) are
  compared with realized outcomes to
  determine if there are gaps.
 Initiate corrective actions by monitoring
  changes in environment - competitor
  actions, new market opportunities,
  customer needs & expectations.
        Strategic Management

   On-going and continuous cycle of
    – Situation Analysis : Internal evaluation &
      Environmental scanning
    – Strategy formulation
    – Strategy implementation
    – Strategy evaluation
Misconceptions about Strategy &
    Strategic Management
   Strategy & strategic planning are dead
    – Every organization needs the focus and direction
      provided by its strategies and the strategic
      management process
   Strategy is strictly for top management
    – Top management play a crucial role, but everyone
      in the organization has a part to play.
   Strategy is about planning
    – Strategic management process shows that strategy
      is not only about planning, but also about doing.
Misconceptions about Strategy &
    Strategic Management
   Strategy is stable and constant
    – Organizations compete in dynamic environments.
      Flexibility and change needed to respond to
      environmental opportunities & threats, & strength
      and weaknesses
   Strategic management outlines ultimate
    destination & route
    – It establishes a systematic approach to analyzing
      relevant information & using it to design,
      implement, & evaluate appropriate strategies.