STRATEGIC

MANAGEMENT
VISION, MISSION,
OBJECTIVES & GOALS
 VISION
• Core ideology

• Envisioned future

• Specific

• Interest of shareholders

• Communicated to all
 MISSION
It is an enduring statement of purpose that
distinguishes one business from other similar
firms.
Features
• Clarity
• Broad & enduring
• Identity & image
• Realistic
• Specific
• Values, beliefs & philosophies
• Expression of vision
 Strategic Planning
Strategy: A process that results in an outcome, which is the basis
for organizational decisions and actions.
Strategic Thinking: determination of basic long-term goals and
objectives of an enterprise , adoption of courses of action.
Strategic planning is a process that involves the review of market
conditions; customer needs; competitive strengths and weaknesses;
sociopolitical; legal; and economic conditions; technological
developments; and the availability of resources that lead to the specific
opportunities or threats facing the organization
Strategic Planning involves taking information from the environment
and deciding upon an organizational mission and upon objectives,
strategies, and a strategic architecture.
Important in the highly competitive and global economy.
Uncertainty, instability and changing environment rule rather than an
exception.
 Strategic Management
• Set of decisions and actions used to
implement strategies that will provide a
competitively superior fit between the
organization and its environment so as to
achieve organizational goals
 Strategic Management
Managers ask such questions as...
What changes and trends are
occurring?
Who are our customers?
What products or services should we
offer?
How can we offer these products or
services most efficiently?
 Purpose of Strategy
• The plan of action that
prescribes resource
allocation and other activities
for dealing with the
environment, achieving a
competitive advantage, that
help the organization attain
its goals
Strategies focus on:
● Core competencies
● Developing synergy
 Three Levels of Strategy in
Organizations
Corporate-Level Strategy:
What business are we in?
Corporation

Business-Level Strategy:
How do we compete?

Textiles Unit Chemicals Unit Auto Parts Unit

Functional-Level Strategy:
How do we support the business-level
strategy?

Finance R&D Manufacturing Marketing

Strategic Management Process

Scan External Identify Strategic

Environment – Factors –
National, Opportunities,
Global Threats Implement
Strategy via
Evaluate Formulate Changes in:
Current Mission, Define new Strategy – Leadership
SWOT Mission culture,
Goals, Corporate,
Strategies Goals, Grand Business, Structure, HR,
Strategy Functional Information &
control
Scan Internal systems
Identify Strategic
Environment – Core
Factors –
Competence,
Strengths,
Synergy, Value
Weaknesses
Creation
 Checklist for Analyzing
Organizational Strengths and
WeaknessesHuman Resources
Management and Organization Marketing
Management quality Distribution channels Employee experience,
Staff quality Market share education
Degree of centralization Advertising efficiency Union status
Organization charts Customer satisfaction Turnover, absenteeism
Planning, information, Product quality Work satisfaction
control systems Service reputation
Grievances
Sales force turnover
Finance Production Research and Development
Profit margin Plant location Basic applied research
Debt-equity ratio Machinery obsolescence Laboratory capabilities
Inventory ratio Purchasing system Research programs
Return on investment Quality control New-product innovations
Credit rating Productivity/efficiency Technology innovations
 BCG matrix
• Boston Consulting Group matrix evaluates
strategic business units with regard to the
firms growth rate and market share
• Strategic Business Units: divisions within
the organization by product or service to
establish goals and objectives that are in
harmony with the firms overall mission and
to assign responsibility for profits and
losses
 Portfolio Strategy
• Mix of business BCG Matrix
units and
product lines that
fit together in a
logical way to
provide synergy
and competitive
advantage
 Five Forces Affecting Industry
Competition
•Internet reduces Potential New
barriers to entry Entrants

Internet blurs differences among

competitors in an industry

Threat of Substitute Rivalry Bargaining

Products among Power of
Competitors Buyers
•Internet expands market size, but •Internet shifts greater power
creates new substitution threats to end consumers

•Internet tends to increase the

bargaining power of suppliers Bargaining Power of Suppliers
 The Five Forces
1. Level of Rivalry in an industry: how intense
is the current competition with competitors?
Increased competition results in lower profits.
2. Potential for entry: how easy is it for new
firms to enter the industry?
Easy entry leads to lower prices and profits.
3. Power of Suppliers: If there are only a few
suppliers of important items, supply costs rise.
4. Power of Buyers: If there are only a few, large
buyers, they can bargain down prices.
5. Substitutes: More available substitutes tend
to drive down prices and profits.
 Porters value chain
• Value chain is all the activities an organization undertakes to create
value for a customer
• Primary activities:
– Inbound Logistics - involve relationships with suppliers and include all the activities
required to receive, store, and disseminate inputs.
– Operations - are all the activities required to transform inputs into outputs (products and
services).
– Outbound Logistics - include all the activities required to collect, store, and distribute the
output.
– Marketing and Sales - activities inform buyers about products and services, induce
buyers to purchase them, and facilitate their purchase.
– Service - includes all the activities required to keep the product or service working
effectively for the buyer after it is sold and delivered.
• Secondary activities are:
– Procurement - is the acquisition of inputs, or resources, for the firm.
– Human Resource management - consists of all activities involved in recruiting, hiring,
training, developing, compensating and (if necessary) dismissing or laying off personnel.
– Technological Development - pertains to the equipment, hardware, software,
procedures and technical knowledge brought to bear in the firm's transformation of inputs
into outputs.
– Infrastructure - serves the company's needs and ties its various parts together, it
consists of functions or departments such as accounting, legal, finance, planning, public
affairs, government relations, quality assurance and general management.
 Competitive Edge Through
Competitive Strategies
• Differentiation = attempt to distinguish
products or services from that of
competitors
• Cost leadership = aggressively seeks
efficient facilities, pursues cost reductions,
and uses tight cost controls to produce
products more efficiently than competitors
• Focus = concentrates on a specific
regional market or buyer group
 Tools for Putting
Environment
Strategy into
Organization
Action
Leadership
 Persuasion
 Motivation
 Culture/values

Structural Design
 Organization Chart Human Resources
 Teams  Recruitment/selection
Strategy  Centralization  Transfers/promotions Performance
 Decentralization,  Training
 Facilities, task design  Layoffs/recalls

Information and Control Systems

 Pay, reward system
 Budget allocations
 Information systems
 Rules/procedures
 Business-level Strategies
market segments
Many Low-Cost Differentiation
Number of

Few Focused Focused

Low-Cost Differentiated

Low Cost Differentiation

Strategy
 Business Strategies
– Low-cost: gain a competitive advantage by
driving down organizational costs.
• Managers manufacture at lower cost, reduce waste.
• Lower costs than competition mean lower prices.
– Differentiation: gain a competitive advantage
by making your products different from
competitors.
• Differentiation must be valued by the customer.
• Successful differentiation allows you to charge more
for a product.
– Stuck in the middle: It is difficult to
simultaneously become differentiated and low
 Business Strategies
• Firms also choose to serve the entire
market or focus on a few segments.
– Focused low-cost: try to serve one segment of
the market but be the lowest cost in that
segment.
• Company seeks to achieve this in large retail chains.
– Focused differentiated: Firm again seeks to
focus on one market segment but is the most
differentiated in that segment.
• BMW provides a good example.
 Functional-level Strategies
• Seeks to have each department add
value to a good or service.
• Marketing, service, production all add
value to a good or service.
– Value is added in two ways:
1. lower the operational costs of providing the
value in products.
2. add new value to the product by differentiating.
– Functional strategies must fit with business
level strategies.
Goals for successful functional
strategies:
1. Attain superior efficiency: the measure of
outputs for a given unit of input.
2. Attain superior quality: products that reliably
do the job they were designed for.
3. Attain superior innovation: new, novel
features about the product or process.
4. Attain superior responsiveness to
customers: Know the customer needs and fill
them.