1. Basic Concepts of Strategic
Management
"Effective managers live in the present – but concentrate on the future."
James L. Hayes
2. What is Strategy?
• A combination of the words
stratos, which meant “army”, and
agein meaning “to lead”.
Greek Language (6th century BC)
3. What is Strategy?
• A strategy is a comprehensive
action plan that identifies long-term
direction and guides resource
utilization to accomplish
organizational goals
with sustainable competitive
advantage.
4. Strategic Management
Process of formulating,
implementing, and evaluating,
strategies to accomplish long-term
goals and sustain competitive
advantage.
6. Phases of Strategic Management
Basic financial Forecast-based Strategic Strategic
planning: planning: planning: management:
-little analysis; -more thorough -more thorough -analysis of external
analysis; -analysis; and internal
environment;
-info coming from -internal info + -internal info +
within the firm; environmental data; environmental data + -implementation,
forecast future trends; evaluation and control;
-only managers are -only managers are -made by planning -made by lower level
involved; involved; staff (top managers) managers+
+ consultants; top managers+
-takes 2-3 weeks; -takes one month; consultants;
-meet once a year; -throughout the year;
- one year plan -three to five years
-plan - five-year plans - five-year plans
7. Benefits of Strategic Management
• Clear sense of strategic vision of
the firm
• Sharper focus on what is
strategically important
• Improved understanding of a
rapidly changing environment
8. Main Questions
• Where is organization now?
• If no changes are made, where will
the organization be in 1,2,5 years?
• If the answers are not acceptable,
what specific actions should
management undertake?
• What are risks and payoffs
involved?
9. Basic Model of Strategic
Management
Environmental Evaluation
Strategy Strategy
Scanning and
Formulation Implementation
Control
11. Environmental Scanning
Opportunities & Threats (External)
Analysis of Trends:
• Economic
• Social
• Cultural
• Demographic/Environmental
• Political, Legal, Governmental
• Technological
• Competitors
12. Environmental Scanning
Strengths & Weaknesses (Internal)
Typically located in functional areas of the firm
• Management
• Marketing
• Finance/Accounting
• Production/Operations
• Research & Development
• Computer Information Systems
14. Strategy Formulation
Vision Statement –
What do we want to become?
Mission Statement –
What is our business?
15. Strategy Formulation
Key Strategic Questions
by Peter Drucker
• What is our business mission?
• Who are our customers?
• What do our customers
consider value?
• What have been our results?
• What is our plan?
16. Vision Examples
To be the happiest place on earth.
To be the world’s best quick service restaurant.
17. Mission Statement Example
We should build good ships here
– at a profit if we can
– at a loss if we must
– but always good ships
-- Newport News Shipbuilding
(since foundation in 1886)
19. WellPont health Network’s
Vision and Mission
WellPoint redefine our industry: through a new
generation of consumer-friendly products that
put individuals back in control of their future.
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.
20. Importance of Mission
Benefits from a strong mission
Unanimity of Purpose
Resource Allocation
Mission
Organizational Climate
Focal point for work
structure
21. Products
Services Markets
Customers
Technology
Mission
Employees
Elements
Survival
Growth
Profit
Public
Image
Self-Concept Philosophy
22. Strategy Formulation
Objectives
The end results of planned activity:
• what is to be accomplished
• by when
• it should be quantified if possible
“…increase profits 10% over last year”
23. Strategy Formulation
Types of Strategies Corp
Level
A Large Company
Division Level
Functional Level
Operational Level
24. Strategy Formulation
Strategies
• Corporate strategy directs the organization
as a whole toward sustainable competitive
advantage.
• Business strategy sets the strategic
direction for a single business unit or product
line.
• Functional strategy guides the use of
resources to implement business strategy.
25. Being Better versus Being Different
Playing the Game Better Playing the Game Differently
Focus on your existing Try to identify:
strategic position and try to • new or unexploited customer
improve it and make it better. segments to focus on (a new
Practices such as “WHO”)
restructuring, refocusing, • new customer needs that no
process reengineering, quality competitor is currently satisfying
programs, empowering (a new “WHAT”)
employees, and the like, all • new ways of producing,
aim to achieve this delivering, selling or distributing
your products or services (a new
“HOW”)
…to be successful, a company must be able to do BOTH!
Constantinos Markides
26. Strategy Formulation
Policies
A policy is a broad guideline for decision making that
links the formulation of strategy with its implementation.
• Maytag Company: Maytag will not approve any cost reduction
proposal if it reduces product quality in any way.
• 3M: Researches should spend 15% of their time working on
something other than their primary project.
• GE: GE must be number one or two wherever it competes.
• Intel: Intel cannibalizes its own product line with better products
before a competitor does so.
28. Strategy Implementation
• A program is a statement of the activities or
steps needed to accomplish a single-use
plan.
• A budget is a statement of a corporation’s
program in terms of dollars.
• Procedures are a system of steps or
techniques that describe in detail how a
particular task or job is to be done.
31. Strategic Decisions Characteristics:
• Rare: strategic decisions are unusual and
typically have no precedent to follow
• Consequential: strategic decisions commit
substantial resources and demand a great
deal of commitment from people on all
levels.
• Directive: strategic decisions set precedents
for lesser decisions and future actions
throughout an organization.
