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Strategic Management DefinedThe set of managerial decisions and actions thatdetermines the long-run performance of a corporation. Itincludes: environmental scanning (internal & external) strategy formulation strategy implementation evaluation and controlIt focuses on integrating management, marketing,finance/accounting, production/operations, research anddevelopment, and computer information systems toachieve organizational success.
Benefits of Strategic ManagementClearer sense of strategic visionSharper focus on what is strategicallyimportantImproved understanding of rapidlychanging environment
Three Key Strategic QuestionsWhere is the organization now?If no changes are made, where will theorganization be in one, two, five or tenyears? Are the answers acceptable?If the answers are not acceptable, whatspecific actions should managementundertake? What are the risks and payoffsinvolved?
Strategic Management ModelEnvironmental Strategy Strategy Evaluation Scanning Formulation Implementation and Control External Mission Reason for Societal existence Environment Objectives General Forces What results to Task Strategies accomplish Environment by when Plan to Industry Analysis achieve the Policies mission & Internal objectives Broad guidelines for Programs Structure decision ProcessChain of Command making Activities to monitor needed to performance Culture Budgets and take accomplishBeliefs, Expectations, a plan corrective Cost of the Values action programs Procedures Resources Sequence Assets, Skills of steps Competencies, needed to Knowledge do the job Performance Feedback/Learning
Environmental ScanningMonitoring, evaluating and disseminating informationfrom the environment to key people within thecorporation.Scan via SWOT analysis: Look for opportunities/threats in the external environment Look for strengths/weaknesses in the internal environment
Strategy FormulationThe process of developing long-range plans to dealeffectively with environmental opportunities and threats inlight of corporate strengths and weaknesses.Composed of: Mission Objectives Strategies Policies
MissionThe purpose or reason for the corporation’sexistence. It tells who the company is, what theydo as well as what they’d like to become.
ObjectivesThe end results of planned activity. They stateWHAT is to be accomplished by WHEN. Theyshould be quantified, if possible.Should be specific, measurable and obtainable.
StrategiesA strategy is a comprehensive master plan stating HOW thecorporation will achieve its mission and objectives. There are threetypes:Corporate - a corporation’s overall direction and the management ofits businesses.Business - emphasizes improving the competitive position of acorporation’s products or services in a specific industry or marketsegment.Functional - concerned with developing a distinctive competence toprovide a company or business unit with a competitive advantage.
Hierarchy of Strategy Corporate Corporate Headquarters Strategy Strategic Strategic Strategic Business (Division Business Business Business Unit Unit Unit Level) Strategy Research Human FunctionalManufacturing Finance Marketing and Resources Strategy Development
PoliciesBroad guidelines for making decisions.E.g. - 3M’s policy requiring researchers to spend15% of their time working on something otherthan their primary project.
Strategy ImplementationThe process of putting strategies and policies into actionthrough the development of: Programs - statements of activities or steps needed to accomplish a single-use plan. Budgets - statements of a corporation’s programs in dollar terms. Procedures - systems of sequential steps or techniques that describe in detail how to perform particular tasks or jobs.
Evaluation and ControlThe process of monitoring corporateactivities and performance results so thatactual performance can be compared withdesired performance.
Strategic Decision-Making Process 3(a) 3(b) Scan and Analyze Assess External External Factors: Environment: • Opportun- • Societal ities • Task • Threats1(a) 1(b) 2 5(a) 5(b) 6(a) 6(b) 7 8 Examine and Review Select Generate Evaluate the Corporate Strategic Review and and Select Implement Evaluate Revise as and Strategies: Evaluate Current Current: Governance: Factors Evaluate • Mission • Board of (SWOT) Necessary: Strategic Recommend • Programs and Performance • Mission Best • Budgets Control Results • Objectives Directors in Light of Alterna- • Strategies • Top Man- Current • Objectives tives Alternative • Procedures • Policies agement Situation 4(a) 4(b) Scan and Assess Analyze Internal Internal Environment: Factors: • Structure • Strengths • Culture • Weak- • Resources nesses Strategy Strategy Evaluation Formulation: Implementation and Steps 1 – 6 Step 7 Control: Step 8