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Strategic Management Themes

Global considerations impact virtually all strategic decisions

Information technology has become a vital strategic management tool

Natural environment and business ethics have become important strategic


issues

What is Strategic Management ?


Art and Science of formulating, implementing, and evaluating

cross functional decisions that enable an organization to achieve


its objectives.
Strategic management focuses on integrating management,
marketing, finance / accounting, production / operations, research
and development, and computer information system to achieve
organizational success.

STAGES OF STRATEGIC MANAGEMENT

Strategy
Formulation

Strategy
Implementation
1. Establish annual

1. Developing Business Mission


2. SWOT Analysis
3. Long Term Objectives
4. Alternative Strategies
5. Choosing particular strategy
6. Deciding New businesses to
enter or abandon
7. How to allocate resources
8. Expand or Diversify
9. Joint Venture
10. Merger / Acquisition

objectives
2. Device policies

Strategy
Evaluation

3. Motivate Employees
4. Allocate resources

1. Reviewing external and

5. Developing supportive
culture
6. Creating effective Org.
Structure
7. Redirecting marketing
efforts
8. Preparing budgets
9. Developing and utilizing
MIS

internal factors
2. Measuring performance
3. Taking corrective actions

Key terms in Strategic Management

Strategists
Mission Statement
Opportunities and Threats
Strengths and Weaknesses
Long Term Objectives
Strategies
Annual Objectives
Policies

Strategists
Strategists are individuals who are most responsible for the success or
failures of an organisation.
Strategists have various job titles such as Chief executive officer,
President, Owner, Chair of the Board, Executive Director or Entreprenur

Top Ten Personal Behaviour for the CEOs in 2010*


Conveys Strong Sense of Vision
2.Links Compensation to Performance
3.Communicates Frequently with Employees
4.Emphasizes Ethics
5.Plans for Management Succession
6.Communicates Frequently with Customers
7.Reassigns or Terminates Unsatisfactory Employees
8.Rewards Loyalty
9.Makes All Major Decisions
10.Behaves Conservatively
1.

* Fortune Magazine Columbia University Survey of 1500 Senior Executives including 870 CEOs

Top Ten Knowledge and Skills for CEOs in 2010


Strategy Formulation
2.Human Resource Management
3.Marketing and Sales
4.Negotiation
5.Accounting and Finance
6.International Economics and Politics
7.Science and Technology
8.Handling Media and Public Speaking
9.Production
10.Computer Literacy
1.

Mission Statement
Enduring statements of purpose that distinguishes one business
from other similar firms.
A mission statement identifies the scope of firms operations in
product and market terms.
It addresses the basic question that faces all strategists What is

our Business?
A clear mission statement describes the values and priorities of an
organisation.
A mission statement broadly charts the future direction of an

organisation.

External Opportunities and Threats


This refers the economic, social, cultural, demographic,
environmental, political, legal, governmental, technological and
competitive trends and events that could significantly benefit or
harm an organisation in the future.
Opportunities and threats are largely beyond the control of a single
organisation.

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Strengths and weaknesses


Internal strengths and weaknesses are organisations controllable
activities that are performed especially well or poorly.
They arise in the management, marketing, finance, production, research
and development, and computer information systems activities of a
business.
Strengths and weaknesses are determined relative to competitors.

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Long term objectives

Objectives can be defined as specific results that an organisation


seeks to achieve in pursuing its basic mission.
Long term means more than one year.
Objectives are essential for organisations success because they
state direction; create synergy; reveal priorities; focus coordination;
and provide a basis for effective planning, organising, motivating and
controlling activities.

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Strategies
Strategies are the means by which long term objectives will be achieved.

Business strategies may include geographic expansion, diversification,


acquisition, product development, market penetration, retrenchment,
liquidation and joint venture.

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Annual Objectives
1. Annual objectives are short term milestones that organisations
must achieve to reach long term objectives.
2. Annual objectives should be measurable, quantitative,
challenging, realistic, consistent, and prioritised.
3. They should be established at the corporate, divisional and
functional levels in a large organisation.

4. Annual objectives are specially important in strategy


implementation, whereas long term objectives are particularly
important in strategy formulation.
5. Annual objectives represent the basis for allocating resources.

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Policies
Policies are the means by which annual objectives will be
achieved.
Policies include guidelines, rules and procedures established to
support efforts to achieve stated objectives.
Policies are guides to decision-making and address repetitive or
recurring situations.

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Stages of Strategic Management


I. Strategy formulation

Developing a business mission

Identifying an organizations external opportunities and threats

Determining internal strengths and weaknesses

Establishing long term objectives

Generating alternative strategies

Choosing particular strategies to pursue

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Strategy formulation Issues:

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

How to avoid a hostile takeover

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II. Strategy implementation

Establish annual objectives


Devise policies
Motivate employees
Developing a strategy supportive culture
Creating an effective organizational structure
Redirecting marketing efforts
Preparing budgets
Developing and utilizing information systems
Linking employee compensation to organizational
performance

The challenge is to stimulate managers and employee through out


an organization to work with pride and enthusiasm toward
achieving stated objectives

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III. Strategy evaluation

Reviewing external and internal factors that are the bases


for current strategies

Measuring performance and

Taking corrective actions

Strategy evaluation is needed because success today is no


guarantee of success tomorrow! Successes always create new
and different problems; complacent organizations experience
demise.

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Integrating intuition and analysis

Based on past experiences,judgment, and feelings, intuition


is essential to making good strategic decisions

Intuition is particularly useful for making decisions in


situations of great uncertainty or little precedent.

Adapting to change
The strategic management process is based on the
belief

that organizations should continually monitor

internal and external events and trends so that timely


changes can be made as needed.
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Feedback
A comprehensive Strategic Management Model

Perform
External
Audit

Develop
Mission
Statement

Establish
Long- term
Objectives

Generate,
Evaluate and
Select
Strategies

Establish
policies
And
Annual
Objectives

Allocate
Resources

Measure
and
Evaluate
Performance

Perform
Internal
Audit

Strategy Formulation

Strategy Implementation

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Strategy evaluation

Forces Influencing Design of Strategic Management Systems


Toward more formality
and more details

I. Organization
Small one plant companies
Large companies
II. Management styles
Policy maker
Democratic
Authoritarian
Day-to-day-operational thinker
Intuitive thinker
Experienced in planning
Inexperienced in planning

Toward less formality


and fewer details

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Toward more formality


and more details

III. Complexity of environment

Toward less formality


and fewer details

Stable environment
Turbulent environment
Little competition
Many markets and customers
Single market and customer
Competition severe
IV. Complexity of production processes
Long production lead time
Short production lead times
Capital intensive
Labour intensive
Integrated manufacturing processes
Simple manufacturing processes
High technology
Low technology
Market reaction time for new product is short

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Toward less formality and


fewer details

Toward more formality


and more details

V. Nature of problems
Facing new, complex, tough problems
having Long range aspects
Facing tough short range problems
VI. Purpose of planning system
Coordinate division activities
Train managers

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