Business Strategic Management

1Business Strategic Management2What is strategic management?A continuous, iterative process aimed at keeping an organization as a whole approporiately matched to its environment (Certo and Peter)Keeping the business in tune with management and marketing forces both outside and inside the firm3Benefits of strategic managementEstablish the missionFormulate philosophyEstablish policiesSetting objectivesDeveloping strategyPlan the organi-zational structureProvide personnelEstablish proceduresProvide facilitiesProvide capitalSet standardsEstablish programs and plansControl informationActivate people4Steps to strategic managementEnvironmental analysisEstablish organizational directionStrategy formulationStrategy implementationStrategic control5Environmental analysisProcess of examining the organization’s environment to determine:StrengthsWeaknessesOpportunitiesThreats6Environmental structureGeneral environmentSocial, economic, political, legal, technicalOperating environmentInternational, supplier, labor, competition, customerInternal environmentOrganizational, marketing, financial, personnel, production7Methods of environmental forecastingExpert opinionTrend extrapolationTrend correlationDynamic modelingCross-impact analysisMultiple scenariosDemand/hazard forecasting8Establish organizational directionEstablishing an organizational direction for the company involves determining two indicators:Organizational mission –the reason why the organization existsObjectives –measurable targets to track the growth of the business910Key objective areasMarket standingInnovationProductivityResource levelsProfitabilityManager performance and developmentWorker performance and attitudeSocial responsibility11Types of objectivesProfitabilityGrowthMarket shareSocial responsibilityEmployee welfareProduct QualityServiceR&DDiversificationEfficiencyFinancial stabilityResource conservationMgt & labor development12Strategy formulationWhat are the purpose(s) and objective(s) of the organization?Where is the organization presently going?What critical environmental factors does the organization currently face?What can be done to achieve organizational objectives more effectively in the future?13Growth-share matrix2468101214182022Market Growth Rate (percent)10.05.02.01.00.50.1Relative Market ShareStarsCash CowsDogsQuestion Marks14Formulating business strategiesStructural analysis of competitive forcesThreat of new entrantsBargaining power of suppliersBargaining power of buyersThreat of substitute productsRivalry among existing competitorsStrategic alternatives15Formulating functional strategiesOperations strategyFinancial strategyMarketing strategyHuman resource strategy16Strategy implementationCommander approachOrganizational change approachCollaborative approachCultural approachCrescive approach17The material for this presentation was taken from:Strategic Management:Concepts and ApplicationsSamuel C. Certo and J. Paul PeterRandom House Business Division18Commander approachManager determines “best” strategyManager uses power to see strategy implementedThree conditions must be metManager must have powerAccurate and timely information is availableNo personal biases should be present19Commander approachLimitationsCan reduce employee motivation and innovationAdvantagesManagers focus on strategy formulationWorks well for younger managersFocuses on objective rather than subjective20Organizational change approachFocuses on the organizationBehavioral tools are usedIncludes focusing on the organization’s staffing and structureOften more effective than CommanderUsed to implement difficult strategies21Organizational change approachLimitationsManagers don’t stay informed of changes occuring within the environmentDoesn’t take politics and personal agendas into accountImposes strategies in a “top-down” formatCan backfire in rapidly changing industries22Collaborative approachEnlarges the Organizational Change ApproachManager is a coordinatorManagement team members provide inputGroup wisdom is the goal23Collaborative approachAdvantagesIncreased quality and timeliness of informationImproved chances of effective implementationLimitationsContributing managers have different points of view and goalsManagement retains control over the process24Cultural approachIncludes lower levels of the companyBreaks down barriers between manage-ment and workersEveryone has input into the formulation and implementation of strategiesWorks best in high resource firms25Cultural approachAdvantageMore enthusiastic implementationLimitationsWorkers should be informed, intelligentConsumes large amounts of timeStrong company identity becomes handicapCan discourage change and innovation26Crescive approachAddresses formulation and implemen-tation simultaneouslySubordinates develop, champion, and implement strategies on their own“Bottoms-up” approachUltimate strategy is sum of all “success-ful” approaches27Crescive approachAdvantagesEncourages middle management to participateStrategies are more operationally soundLimitationsResources must be availableTolerance must be extended28Strategic controlTypically consists of three stepsMonitoring performanceComparing performance to standardsTaking corrective action where needed