Strategic Management. Dr.: Naglaa Hegazy

Transcription

1 Strategic Management Dr.: Naglaa Hegazy 1

2 Strategic Management Is defined as the set of decisions and actions that result in the making and implementation of plans designed to achieve a company s objectives. It comprises nine critical tasks: 1. Formulate the company s mission, which consists of general statements about its purpose, philosophy, and goals. 2. Conduct an analysis that reflects the company s internal conditions and capabilities. 3. Assess the company s external environment, including both the competitive and the general contextual factor 2

3 4. Analyze the company s options by matching its resources with the external environment. 5. Identify the most wanted options by evaluating each option in light of the company s mission. 6. Select a set of long-term objectives and grand strategies that will achieve the most wanted options. 3

4 7. Develop annual objectives and short-term strategies that are compatible with the selected set of long-term objectives and grand strategies. 8. Implement the strategic choices by means of planned resource allocations in which the matching of tasks, people, structures, technologies, and reward systems is emphasized. 9. Evaluate the success of the strategic process as an input for future decision making. 4

5 As these nine tasks indicate, strategic management involves the planning, directing, organizing, and controlling of a company s strategy-related decisions and actions. By strategy, managers mean their large-scale, future-oriented plans for interacting with the competitive environment to achieve company objectives. A strategy is a company s game plan. 5

6 Although that plan does not detail all future deployment of people, finances, material, and information, it does provide a framework for managerial decisions. A strategy reflects a company s awareness of how, when, and where it should compete; against whom it should compete; and for what purposes it should compete 6

7 Benefits of Strategic Management Using the strategic management approach, managers at all levels of the firm interact in planning and implementing. Therefore, an accurate assessment of the impact of strategy formulation on organizational performance requires financial and nonfinancial evaluation criteria measures of behavior-based effects. 7

8 Benefits of Strategic Management In fact, promoting positive behavioral consequences also enables the firm to achieve its financial goals. However, regardless of the profitability of strategic plans, several behavioral effects of strategic management improve the firm s benefit. 8

9 Benefits of Strategic Management Strategy formulation activities enhance the firm s ability to prevent problems. Managers who encourage their assistants to plan are helped in their monitoring and forecasting responsibilities by assistants who are aware of the needs of strategic planning. 9

10 Benefits of Strategic Management Group-based strategic decisions are likely to be drawn from the best available alternatives. The strategic management process results in better decisions because group interaction generates a bigger variety of strategies and because forecasts based on the specialized perspectives of group members improve the filtering of options. 10

11 Benefits of Strategic Management The involvement of employees in strategy formulation improves their understanding of the productivity-reward relationship in every strategic plan and, increases their motivation. Gaps and overlaps in activities among individuals and groups are reduced as participation in strategy formulation clears up differences in roles. 11

12 Benefits of Strategic Management Resistance to change is reduced. The contributors in strategy formulation may be no more pleased with their own decisions than they would be with authoritarian decisions, their greater awareness of the parameters that limit the available options makes them more likely to accept those decisions. 12

13 Components of the Strategic Management Model 1. Company Mission the company mission describes the company s product, market, and technological areas of importance in a way that reflects the values of the strategic decision makers 13

14 One of the Samsung Group chairmen, changed the company mission by following his own style of management. He separated a paper manufacturing plant and Department Store from other operations. This act of downscaling reflected a different management philosophy that preferred specialization, so changing the direction and scope of the organization. 14

15 Social Responsibility Social responsibility is a critical consideration for a company s strategic decision makers because the mission statement must express how the company plans to contribute to the societies that sustain it. A firm needs to set social responsibility goals for itself, just as it does in other areas of corporate performance. 15

16 2. Internal Analysis The company evaluates the quantity and quality of the company s financial, human, and physical resources. It also evaluates the strengths and weaknesses of the company s management and organizational structure. Finally, it compares the company s past successes with the company s current capabilities in an attempt to identify the company s future capabilities. 16

17 3. External Environment A firm s external environment consists of all the conditions and forces that affect its strategic options and define its competitive situation. The strategic management model shows the external environment as three interactive segments: the remote, industry, and operating environments. 17

18 GROWTH/EXPANSION STRATEGY Organizations generally seek growth in sales, market share or some other measure as a primary objective. When growth becomes a goal and organization's motive is to seek sizeable growth, it takes the shape of an expansion plan

19 WHEN TO USE EXPANSION STRATEGY? The question can be answered in two ways: Concentrated Growth When the firm's industry is resistant to major technological progress: When the firm's target markets can accept more of the product - that is there are gaps that leave the firm with alternatives When the firm's product markets are unique, to put off competitors from trying to enter the firm's segment When the firm's inputs are stable in price, quantity and are available in the amounts, at the times required

20 when the market is fairly stable without seasonal changes

21 Diversified growth When the firm aims at unusual growth in assets, revenues and profits When the environment gives the organization an unusually large number of opportunities, to be used by the firm's resource When there is great environmental uncertainty, firms start a search for new businesses.

22 Diversified growth When the firm finds diversification to be more profitable than intensification When the firm has extra resources that could be profitability used in new projects When the firm finds cooperation in its existing businesses and the new ones

23 Concentration or Market penetration It is the strategy of a firm that directs its resources to the profitable growth of a single product, in a single market, with a single technology. The firm tries to use its knowledge, in a defined competitive market and increase the sale of its existing products in the existing markets

24 Concentration or Market penetration Increasing sales to current customers (buy tea and take sugar free offers). Woo customers away from competitor products (offer Chevrolet cars at an attractive price to attract potential buyers of Toyotas). Convert non-users into users

25 Concentration or Market penetration Market penetration reduces the amount of resources needed to increase market share or sales revenues, and as such is a low-risk strategy. However, it is also a high-risk strategy, as you are putting 'all eggs in one basket'

26 Market Development It consists of marketing existing products in new markets. The firm tries to achieve growth by finding new uses for the existing products and tap new customers on that basis (within the country or outside the country). The firm can add new channels of distribution to expand the customer reach of the product. It can also enter new market segments, by coming out with different products for each price segment, undertaking cosmetic changes in color, taste, packaging etc

27 Product development Product development strategy tries to achieve growth through new products in existing markets. This strategy is often adopted to attract satisfied customers to extend the life cycle of current products or to take advantage of a favorite reputation or brand name. A new car style, a second formula of shampoo for oily hair

28 Diversification (Horizontal Integration): A single-product strategy is always a risky one. Because the firm has put its survival on a single product, (or a small basket of products like Colgate) the organization has to work very hard to ensure the success of that product. Given the risk of a single-product strategy, most large organizations today operate in several different businesses, industries or markets.

29 The BCG Growth-Share Matrix

30 Stars Stars: have a high share of a high-growth market and require large amounts of cash to support their rapid and significant growth. They have additional growth potential and so, profits should be returned into this business for future growth and profits

31 Cash cows 'cash cows' (provide lot of cash for the firm) have a high market share of a slowly growing market. As a result, they tend to generate more cash than is necessary to maintain their market position. Cash cows are often former stars and can be valuable in a portfolio.

32 Question marks 'question marks' have a small share of a high growth market. The question mark business is risky, since there is already a market leader in that business. 'question marks require lot of funds to invest in a factory, equipment and personnel, in order to keep up with the fast-growing market.

33 Dogs 'dogs' have a small share of a low-growth market. They may barely support themselves, or they may even drain cash resource that other products have generated. Usually, dogs are harvested, divested or liquidated (if turnaround is not possible).

34 4. Long-Term Objectives The results that an organization plans over a multi-year period are its long-term objectives. Such objectives typically involve some or all of the following areas: profitability, return on investment, competitive position, technological leadership, productivity, employee relations, public responsibility, and employee development. 34

35 5. Short-Term Objectives Short-term objectives are the desired results that a company seeks over a period of one year or less. They are consistent with the firm s long-term objectives. Companies have many short-term objectives to provide guidance for their functional and operational activities. Thus, there are short-term marketing activity, raw material usage, employee turnover, and sales objectives as examples. 35

36 6. Action Plans Action plans translate generic and grand strategies into action by including four elements. First, they identify specific actions to be undertaken in the next year or less as part of the business s effort to build competitive advantage. 36

37 6. Action Plans (cont.) Second they establish a clear time frame for completing each action. Third action plans create accountability by identifying who is responsible for each action in the plan. Fourth, each action has one or more specific, immediate objectives that the action should achieve. 37

38 7. Functional Tactics Each business function needs to undertake activities that help build a sustainable competitive advantage. These short-term, limited-scope plans are called functional tactics. 38

39 7. Functional Tactics (cont.) An intensive ad campaign, an inventory reduction, and an starting loan rate are examples of tactics. Managers in each business function develop tactics that delineate the functional activities undertaken in their part of the business and usually include them as a core part of their action plan. Functional tactics are detailed statements of the means or activities that will be used to achieve short-term objectives and establish competitive advantage. 39

40 FORMULATING A MISSION The product or service of the business can provide benefits at least equal to its price. The product or service can satisfy a customer need of specific market segments that is currently not being met adequately. The technology that is to be used in production will provide a cost- and quality- competitive product or service. With hard work and the support of others, the business can not only survive but also grow and be profitable. 40

41 FORMULATING A MISSION The management philosophy of the business will result in a favorable public image and will provide financial and psychological rewards for those who are willing to invest their labor and money in helping the business to succeed. The entrepreneur s self-concept of the business can be communicated to and adopted by employees and stockholders. 41

42 mission A company mission is designed to accomplish six outcomes: To ensure agreement of purpose within the organization. To provide a basis for motivating the use of the organization's resources. To develop a basis, or standard, for allocating organizational resources To establish a general organizational environment..

43 mission To serve as a focal point, for those who can identify with the organization's purpose. To facilitate the translation of objectives and goals into a work structure, involving the assignment of tasks to responsible elements within the organization. To specify organizational purposes and the translation of these purposes into goals, in such a way that cost, time, and performance factors can be assessed and controlled

44 Company Philosophy The statement of a company s philosophy, often called the company creed, usually accompanies or appears within the mission statement. It reflects or specifies the basic beliefs, values, aspirations, and philosophical priorities to which strategic decision makers are committed in managing the company. Fortunately, the philosophies vary little from one firm to another. 44

45 Company Self-Concept A major determinant of a firm s success is the extent to which the firm can relate functionally to its external environment. To achieve its proper place in a competitive situation, the firm realistically must evaluate its competitive strengths and weaknesses. This idea that the firm must know itself is the essence of the company self-concept. The idea is not commonly integrated into theories of strategic 45

46 Importance of planning Planning provides direction Planning provides direction and sense of purpose for the organization.without,plan and goals, organization merely react to daily occurrences without considering what will happen in the long-run. Plan avoid this drift situation and ensure that short-rang efforts will support and harmonize with future goals. 46

47 Planning provides a unifying framework Planning focus people to continually address their efforts to the most work rather than the least important. In the absence of a plan, unifying focus on company objectives may be missing. A plan tells every one what the organization hopes to achieve and what the contribution of each department must be, and who is to utilize resources to achieve the goals 47

48 Planning is economical Effective plans coordinate organizational work and eliminate unproductive effort. Guess work is banished.facilities are employed to the best advantage.waste motion and idle facilities are removed. By focusing attention on what is to be done. How and when it is to be done, plans helps an organization to utilize its physical and human resources in an economical way. 48

49 Planning reduce the risks of uncertainty Planning helps an organization to cope with an uncertain future.it helps management to anticipate the future and prepare for the risks by making necessary provisions to meet the unexpected turn of event. Planning enables a managers, to affect rather than accept the future.in the absence of the plan, the firms in much more likely to sit back and let things happen and then react to these happening in crisis mode 49

50 Planning facilities decision making Decision-making involves searching of various alternative courses of action,evaluation them and selecting the best one.planned targets serve as the criteria for the evaluation of different alternative so that the best one may be chosen. If there are no plans for the future,there are few guideline for making current decision for example decision have to be made in present for the product to be introduced three years in the future.when future plans exist, decisions consistent with the future plans are made 50

51 Planning encourages innovation creativity planning involves looking ahead and preparing for the future. The process of looking ahead,forces an organization to be alert of opportunities and threats in the environment, it forces managers to find out new and improved ways of doing things in order to remain competitive and avoid the threats in the environment. It compels the managers to be creative and innovative all the time planning helps managers to visualize problems early and take suitable remedial steps 51

52 What is management Its not easy to define the term management Most definition of the word :management: emphasize one common idea: its concerned with the achievement of objective through the efforts of the people performing certain function Management is the accomplishment of results through the efforts of other people Management is the art of getting things through and with the people in formally organized groups Management is the process by which managers 52

53 What is management Creates, direct, maintain and operate purposive organization through systematic, coordinated, cooperative human effort. Management is the coordination of all resources through the process of planning, organizing, leading, and controlling in order to achieve objectives It is means decision-making We can broadly define the term: management is concerned with resources,tasks and goals.it moreover it is the process of planning,organizing, 53

54 What is management Leading and controlling to achieve organizational objective through the coordinated use of human and material resources 54

55 Management As A process Management as a process refers to a series of inter-related function,such as planning, organizing, leading and controlling.management process suggest that all managers perform certain function in order to realize goals Management it should be noted is a social process it is concerned with relation among people at wok. A manager sets the objectives of an organization he provides an environment that is helpful to group action in order to achieve the organization goals. 55

56 Management as an activity Management refers to a separate class of activities which are performed by managers. Managerial activity consists of planning, organizing,leading and controlling.these activities are performed to get the work done by and with people. 56

57 As a economic resource Management is one of the factor of production Along with land,labor, and capital in modern firm the effective use of the five M s of management (money,materials,manpower,machinery, and methods of ways of doing things) 57

58 As a system of authority Managers working at top levels enjoy more authority than people working at lower levels. Top management determines objectives and provides direction to enterprise activities. Middle management (departmental heads like work manager,finance manager) interprets and explains the policies by the top management,they transmit orders,instruction and decisions downward and carry the problems and suggestion upward. 58

59 Lower management(first line supervisors) is concerned with routine day- to-day matters 59

60 Characteristics of management Management is intangible it cannot be seen.it is an unseen force.however,its presence can felt by results of its efforts in the form of production,sales and profits. Management is goal-oriented management seeks to achieve goal this goal may be economic or non- economic.in business organization the primary goal is to produce and distribute goods with a view to make profit. In service organization, the goal might be customer service(educational institution) 60

61 Characteristics of management Management is universal management is an all-pervasive activity. It is needed in all types of organization e.g., university, club, government business the basic principles of management are applicable in business as well as in order to organizations.these principles,however need careful application depending on situational demands 61

62 Characteristics of management Management is a group activity: Management is concerned with getting things done through people. People join group in order to achieve results. management helps people in realizing individual as well as group goals in a coordinated way 62

63 Characteristics of management Management is dynamic : management is dynamic and growth- oriented function. It efforts to envision problems before they turn into dangers and take suitable steps. Management is a system of authority 63

64 FUNCTIONS OF MANGMENT Planning: Organizing: Leading CONTROLLING: 64

65 planning Planning: Planning is the process of making decisions of the future. It is the process of determining enterprise objectives and selecting future courses of action necessary for their accomplishment. It is the process of deciding in advance what is to be done, when and where is to be done, how it is to be done and by whom. 65

66 Planning(cont.) Planning provides direction to enterprise activities.it helps manager cop to change. It enables managers to measure progress is not satisfactory. Planning is a fundamental function of management are influenced by the planning process. 66

67 organizing Organizing: Organizing is concerned with the arrangement of an organization s resources People, materials, technology and finance in order to achieve enterprise objectives. It involves decisions about the division of work, allocation of authority and responsibility and the coordination of tasks. The function increases in importance as a firm grows. A structure is created to cope with problems created by growth. Through this formal structure, the various work activities are defined, classified, 67

68 Organizing (CONT.) 68

69 Organizing (CONT.) arranged and coordinate. Thus, organizing refers to certain dynamic aspects: what tasks are to be done? Who is to do them? how the tasks are to be grouped? Who is to report to whom? Where the decisions have to be made? 69

70 leading Leading: The function of guiding and supervising the activities of the subordinates is known as leading. According to dale, direction is telling people what to do and seeing that they do it to the best of their ability. Acquiring physical and human assets and suitably placing them on job will not suffice; what is more important is that people must be directed towards organizational goals. This work involves four important elemants: 70

71 Leading(cont.) Leadership: leadership is the process of influencing the action of person or a group to attain desired objective.a manager has to get the work done with and through people. The success of an organization depends upon the quality of leadership shown by its managers. 71

72 Leading(cont.) Motivation:,motivation is the work a manager performs to move, encourage and drive people to take required action. it is the process of stimulating people to take desired course of action. in order to motivate employees, managers must provide a congenial working atmosphere coupled with attractive incentive 72

73 Leading(cont.) Communication: Communication is the transfer of information and understanding from one person to other. its away of reaching others with ideas, facts,and thoughts. Significantly,communication always involves tow people : a sender and receiver. Effective communication is important in organizations because managers can accomplish very little without it 73

74 Leading(cont.) Supervision : it getting the work done it is not enough for managers to tell the subordinates what they are required to do. They also to watch and control the activities of the subordinates. Supervision is seeing that subordinates do their work and do it as directed it involves overseeing employees at wok 74

75 controlling The objective of controlling is to ensure that action contribute to goal accomplishment. It helps in keeping the organization activities on the right with plans and goals.in controlling performance are observed. measured and compared with what had been planed. If the measured performance is found waiting, the manager must find reasons and take corrective action.is performance is not found waiting., some planning decision must be made altering the origonal plan. 75

76 Controlling (cont.) Controlling includes four things: Setting stander of performance Measuring actual performance Comparing actual performance against stranded Taking corrective action to ensure goal accomplishment 76

77 Deming Cycle 77

78 Deming Cycle(CONT.) 78

79 Levels of management(cont.) Top management Middle management Lower management 79

80 Levels of management(cont.) All managers position involve performance of management function (planning, organize, leading and controlling)but there are difference among managerial jobs.the difference arise because of the existence of the various levels of management in topical organization. the term of levels of organization refer to a line of demarcation between various managerial positions 80

81 Levels of management(cont.) Top management: Determines objective and policies Designs the basic operating an financial structure of an organization Provides guidance and direction Lays down standards of performance, maintains good public, relations. 81

82 Levels of management (cont.) Middle management : Interprets and explains policies framed by top management Participates in operating decisions Trains other management 82

83 Levels of management(cont.) Lower management: Plans day-to-day operation Assigns jobs to workers Provides supervision and control over work Arrange material tools and equipment Maintains discipline 83

84 THANK YOU 84