STRATEGIC MANAGEMENT and Business Policy

CENTER FOR PRODUCTIVITY AND COMPETITIVENESS (ARIA SA)

Contents
Introduction to Strategic Management and Business Policy Basic concepts of strategic management Corporate governance and social responsibility Scanning the Environment Environmental scanning and industry analysis Internal scanning: organizational analysis Strategy Formulation Situation analysis and business strategy Corporate strategy Functional strategy and strategic choice Strategy Implementation and Control Organizing for action Staffing and directing Evaluation and control Other Strategic Issues Managing technology and innovation Entrepreneurial ventures and small businesses

Part One: INTRODUCTION TO STRATEGIC MANAGEMENT AND BUSINESS POLICY

CHAPTER 1: BASIC CONCEPTS OF STRATEGIC MANAGEMENT

1.1. The Study of Strategic Management

Strategic management a set of managerial

decisions and actions that determines the long-run performance of the corporation, it includes:

Environmental scanning Strategy formulation Strategy implementation Evaluation and control

1.1.1. Phases of Strategic Management

Phase 1. Basic financial planning

Phase 2. Forecast-based planning

Phase 3. Externally oriented planning (strategic

planning) Phase 4. Strategic management

1.1.2. Benefits of strategic management

Clearer sense of strategic vision for the firm.

Sharper focus on what is strategically important.

Improved understanding of a rapidly changing

environment.
Q.

Where is the organization now? (Not where do we hope it is!) If no changes are made, where will the organization be in one year? Two years? Five years? Ten years? Are the answers acceptable? If the answers are not acceptable, what specific actions should management undertake? What are the risks and payoffs involved?

1.2. Globalization
Globalization - the internationalization of markets

and corporations.

1.3. Creating a Learning Organization

Learning organization an organization skilled at

creating, acquiring, and transferring knowledge, and at modifying its behavior to reflect new knowledge and insights.

Skills: Solving problems systematically; Experimenting with new approaches; Learning from their own experience and past history as well as from the experience of others; Transferring knowledge quickly and efficiently throughout the organisation.

1.4. Basic Model of Strategic Management

SM Elements: Environmental scanning; Strategy formulation; Strategy implementation; Evaluation and control.
Environmental scanning Strategy formulation Strategy implementation Evaluation and Control

1.4. Basic Model of Strategic Management

Environmental Scanning
External
Societal Environment
General forces

Strategy Formulation
Mission
Reason for existence

Strategy Implementation

Evaluation and Control

Objectives
What results to accomplish by when

Task Environment
Industry analysis

Strategies
Plan to achieve the mission & objectives

Internal
Structure
Chain of command

Policies
Broad guidelines for decision-making making

Programs
Activities needed to accomplish a plan

Culture
Beliefs, expectations, values

Resources
Assets, skills, competencies, knowledge

Budgets
Cost of the programs

Procedures
Sequence of steps needed to do the job

Performance
Process to monitor performance and take corrective action

1.4.1. Environmental Scanning

Environmental scanning the monitoring,

evaluating, and disseminating of information from the external and internal environment to key people within the corporation. Strategic factors those external and internal elements that will determine the future of the corporation. SWOT Analysis:

Strengths and Weaknesses - internal environment; Opportunities and Threats - external environment.

Environmental variables

Societal Environment
Socio-cultural Forces
Shareholders Governments Special Interest Groups Customers

Task Environment (Industry)

Internal Environment
Structure Culture Resources

Economic Forces
Suppliers Employees / Labor Unions Competitors Trade Associations

Political-Legal Forces

Creditors

Communities

Technological Forces

1.4.2. Strategy Formulation

Strategy formulation the development of long-

range plans for the effective management of environmental opportunities and threats, in light of corporate strengths and weaknesses. It includes:

Mission; Objectives; Strategies; Policies.

- Mission and Vision

Mission and Vision The purpose or reason for the organizations existence; The organizations future course, the customer focus it should have, the market position it should try to occupy, and the business activities to be pursued; It is unique to the organization; It is not to make a profit
What business we want to be in, where we are headed, and the kind of company we are trying to create.

The elements of a strategic mission and vision Define what business the company is presently in; Decide on a long-term strategic course for the company to pursue; Communicate the vision in ways that are clear, exciting, and inspiring.

- Objectives
Objectives: The end results of planned activity; Specific performance targets of the strategic vision and mission; Quantifiable and with a deadline for achievement:
How much performance? What kind of performance? By when?

Financial vs. Strategic

- Strategies
Strategies a comprehensive master plan stating

how the corporation will achieve its mission and objectives

Corporate strategy; Business strategy; Functional strategy.

Hierarchy of strategy
Corporate Strategy

Business (Division Level) Strategy

Functional Strategy

- Policies
Policies a broad guidelines for decision making

that links the formulation of strategy with its implementation

1.4.3. Strategy Implementation

Strategy implementation process by which

strategies and policies are put into action through:

Programs statement of activities; Budgets statement in financial terms; Procedures system of sequential steps or techniques that describes in detail how a particular task or job is to be done Standard Operating Procedures (SOP).

1.4.4. Evaluation and Control

Evaluation and Control the process in which

corporate activities and performance results are monitored in order to compare actual performance with the desired ones.

1.4.5. Feedback / Learning Process

Feedback/Learning Process revision or correction

of the decisions made earlier.

1.5. Initiation of Strategy: Triggering Events

New CEO;

External intervention;
Threat of a change in ownership; Performance gap.

1.6. Strategic Decision Making

Strategic decisions deal with the long-run future of

the entire organization. Characteristics:

Rare; Consequential; Directive.

1.6.1. Modes of Strategic Decision Making

Entrepreneurial mode;

Adaptive mode;
Planning mode; Logical incrementalism.

1.6.2. Strategic Decision-Making Process

3(a) Scan and assess external environment: - societal; - task. 4(a) Scan and assess internal environment: - structure; - culture; - resources. 3(b) Analyze external factors: - opportunities; - threats

1(a) Evaluate Current Performance Results

1(b) Examine and Evaluate the Current: - mission; - objectives; - strategies; - policies

2 Review Corporate Governance: - Board of directors; - Top management

4(b) Analyze internal factors: - strengths; - weaknesses.

5(a) Select strategic factors (SWOT) in light of current situation

8 Evaluate and control

7 Implement strategies: - programs; - budgets: - procedures.

6(b) Select and recommend best alternative

6(a) Generate and evaluate strategic alternatives

5(b) Review and revise as necessary: - mission; - objectives.

1.6.2. Strategic Decision-Making Process

2(a) Scan environment: -Societal trends; -Industry potential 3(a) Assess internal factors: -Assets; -Expertise; -Abilities; -Experience. 6 (b) Prepare business plan: -Management profile; -Develop internal environment; -Develop performance projections 2(b) Locate potential opportunities and likely threats

1 Develop basic business idea: -products/services - customer/markets

3(b) Consider personal goals in terms of strengths and weaknesses

4 Analyze strategic factors (SWOT) in light of current situation

5 Feasible business opportunity?

No Step 1

Yes

8 Evaluate performance against projections

7 Implement business plan:

6 (a) Develop: -Mission

-Actions -Procedures

-Objectives -policies