Module 1 - Strategic Management

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STRATEGIC MANAGEMENT

Prime Johnson V. Feliciano, CPA


What is STRATEGIC
MANAGEMENT?
Given the many challenges and opportunities in the
global marketplace, today’s managers must do more
than set long-term strategies and hope for the best.

Rather than seeing their role as merely custodians of


the status quo, today’s leaders mut be proactive,
anticipate change, and continually refine and, when
necessary, make dramatic changes to their strategies.
What is STRATEGIC
MANAGEMENT?
Strategic Management consist of analyses, decisions and actions
an organization undertake in order to create and sustain
competitive advantages. This definition captures two main
elements that go to the hearth of the field of strategic
management.
First, the Strategic management of an organization entails three
ongoing processes: analyses, decisions and actions. Strategic
management is concerned with the analysis of strategic goals (vision,
mission and strategic objectives) along with the analysis of the
internal and external environments of the organization. Next, leaders
must make strategic decisions. These decisions, broadly speaking,
address to two basic questions: What industries should we compete
in? How should we compete in those industries? These questions also
involve an organization's domestic and international operations. And
last are the actions that must be taken. Decisions are of little use, of
course, unless they are acted on. Firms must take the necessary
actions to implement their strategies. This requires leaders to allocate
necessary resources and to design the organizations to bring the
intended strategies to reality.
Second, the essence of strategic management is the study of why
some firms outperform others. Thus, managers need to determine
how a firm os to compete so that it can obtain advantages that are
sustainable over a lengthy period of time. That means focusing on two
fundamental questions:

• How should we compete in order to create competitive advantages


in the marketplace?

• How can we create competitive advantages in the marketplace that


are unique, valuable, and difficult for rivals to copy or substitute?
Sustainable competitive advantage cannot be achieved through
operational effectiveness alone. The popular innovations of the last
two decades- total quality, just in time, benchmarking, business
process reengineering, outsourcing- are all about operational
effectiveness.

Operational effectiveness means performing similar activities better


than rivals.
FOUR KEY ATTRIBUTES OF
STRATEGIC MANAGEMENT
First, strategic management is directed toward overall
organizational goals and objective.

As noted by David Novak, CEO of Yum Brands


“ I tell people that once you ge a job you should act like run the
place Not in terms of ego, but in terms of how you think about
your piece of the business. Think about your piece of the
business and the total business. This way, you’ll always have a
broader perspective.
FOUR KEY ATTRIBUTES OF
STRATEGIC MANAGEMENT
Second, strategic management includes multiple stakeholders
in decision making.

Third, strategic management requires incorporating both


short-term and long-term perspectives..
FOUR KEY ATTRIBUTES OF
STRATEGIC MANAGEMENT

Fourth, strategic management involves the recognition of


trade-offs between effectiveness and efficiency.

As noted by Meg Whitman, Hewlett-Packard’s CEO,


“Less than perfect strategy execution against the right strategy
will probably work. A 100% execution against the wrong
strategy won’t”.
THE STRATEGIC MANAGEMENT
PROCESS
Strategy analysis, strategy formulation, and strategy
implementation.
INTENDED VS. REALIZED STRATEGIES
Intended strategy- strategy in which organizational decisions
are determined only by analysis.
Realized strategy- strategy in which organizational decisions
are determined by both analysis and unforeseen
environmental developments, unanticipated resource
constraints, and/or changes in managerial preferences.
THE STRATEGIC MANAGEMENT
PROCESS
Strategy analysis study of firms external and internal
environments, and their fit with organizational vision and
goals.
Analyzing Organizational Goals and Objectives.
Analyzing the external environment of the firm.
Assessing the Internal environment of the firm.
Assessing a firm’s intellectual assets.
THE STRATEGIC MANAGEMENT
PROCESS
Strategy analysis
We measure, study, quantify, analyze every single piece of our
business. But then you’ve got to b able to take all that data
and information and transform it into change in the
organization and improvements in the organization and the
formalization of the business strategy.

-Richard Anderson, CEO of Delta Air Lines


THE STRATEGIC MANAGEMENT
PROCESS
Strategy formulation- decisions made by firms regarding
investments, commitments and other aspects of operations
that create and sustain competitive advantage.
Formulating business-level stratey
Formulating corporate-level strategy
Formulating international strategy
Formulating strategy and competitive dynamics
THE STRATEGIC MANAGEMENT
PROCESS
Strategy formulation
“You can have the best operations. You can be the most adept
at whatever it is that you’re doing. But, if you have a bad
strategy, it’s all for naught.”

-Fred Smith, CEO of FedEx


THE STRATEGIC MANAGEMENT
PROCESS
Strategy implementation- actions made by firms that carry out
the formulated strategy, including strategic controls,
organizational design, and leadership.
Strategic control and corporate governance
Creating effective organizational designs
Creating a learning organization and an ethical organization
Fostering corporate entrepreneurship
“We could leave our strategic plan on an airplane, and it
wouldn’t matter. It’s all about execution.”
-John Stumpf, CEO of Wells Fargo
THE ROLE OF CORPORATE GOVERNANCE AND
STAKEHOLDER MANAGEMENT
Corporate Governance- the relationship among various
participants in determining the direction and performance of
corporation. The primary participants are (1) the shareholders,
(2) the management (lead by the Chief Executive Officer), and
(3) the Board of Directors.
THE ROLE OF CORPORATE GOVERNANCE AND
STAKEHOLDER MANAGEMENT
The key elements of Corporate Governance
Management
(Headed by the CEO)

Shareholders Board of Directors


(Owners) (Elected by the shareholders
to represent their interests)
THE ROLE OF CORPORATE GOVERNANCE AND
STAKEHOLDER MANAGEMENT
Corporate Governance- the relationship among various
participants in determining the direction and performance of
corporation. The primary participants are (1) the shareholders,
(2) the management (lead by the Chief Executive Officer), and
(3) the Board of Directors.
Stakeholder management- a firm's strategy for recognizing
and responding to the interests of all its salient stakeholders.
“We are here to serve the shareholder and create shareholder value. I insist
that the only person who owns the company is the person who paid good
money for it
-Robert Luts, former Chrysler vice chairman
THE ROLE OF CORPORATE GOVERNANCE AND
STAKEHOLDER MANAGEMENT
Zero Sum or Symbiosis? There are two opposing ways of
looking at the role of stakeholder management. The first one
can be termed “zero sum”. Here, the various stakeholders
compete for the organization’s resources: the gain of one
individual or group is the loss of another individual or group.
There will always be conflicting demands on organizations.
However, organizations can achieve mutual benefit through
stakeholder symbiosis, which recognizes that stakeholders are
dependent upon each other for their success and well-being.
Social responsibility and Environmental Sustainability

Organizations cannot ignore the interests and demands of


stakeholders such as citizens and society in general that are
beyond its immediate constituencies- customers, owners,
suppliers, and employees. The realization that firms have
multiple stakeholders and that suppliers, and employees. The
realization tat firms have multiple stakeholders and that
evaluating their performance must go beyond analyzing their
financial results has led to a new way of thinking about
businesses and their relationship to society.
Social responsibility and Environmental Sustainability
Social responsibility- the expectation that businesses or
individuals will strive to improve the overall welfare of society.

Environmental sustainability is the responsibility to conserve


natural resources and protect global ecosystems to support
health and wellbeing, now and in the future.
Social responsibility and Environmental Sustainability

The Triple Bottom Line: Incorporating Financial as well as


Environmental and Social Costs
Many companies now measuring what has been called a
“triple bottom line.” This involves assessing financial, social,
and environmental performance. Shell, NEC, Procter &
Gamble, and others have recognized that failing to account for
the environmental and social costs of doing business poses
risk to the company and its community.
ORGANIZATIONAL VISION
A vision is a goal that is “massively inspiring, overarching, and
long term.” It represents a destination that is driven by and
evokes passion.
Clearly, vision statements are not a cure-all. Sometimes they
backfire and erode a company’s credibility. Visions fail for
many reasons, including the following:

• Irrelevance
• Not the Holy Grail
• Too much Focus Leads to Missed Opportunities
• An Ideal Future Irreconciled with the Present
MISSION STATEMENTS

Mission Statement- a set of organizational goals that identifies


the purpose of the organization, its basis of competition, and
competitive advantage.

A company’s mission statement differ from its vision in that it


encompasses both the purpose of the company and the basis
of competition and competitive advantage.
MISSION STATEMENTS
WELLPOINT HEALTH NETWORK (Vision and Mission statement)
Vision
Wellpoint will redefine our industry:
Through a new generation of consumer-friendly products that put individuals back in
control of their future.
Mission
The Wellpoint companies provide health security by offering a choice of quality
branded health and related financial services designed to meet the changing
expectations of individuals, families, and their sponsors throughout a lifelong
relationship.
STRATEGIC OBJECTIVES
Strategic objectives- a set of organizational goals that are used
to put into practice the mission statement and that are specific
and cover a well-defined time frame.
Strategic objectives are used to operationalize the mission
statements.
For objectives to be meaningful, they need to satisfy several
criteria. An objective must be:
• Measurable
• Specific
• Appropriate
• Realistic
• Timely

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