STRATEGIC MANAGEMENT:

A GLIMPSE ON THE BASICS

GILBERT P. VALDEZ JR., DBA
CORE FACULTY MEMBER – GRADUATE STUDIES IN BUSINESS
WHAT IS MANAGEMENT?

HUMAN BEING capable

MAN of carrying out the managerial
functions.
MATURED enough charged
AGE with the responsibility
to attain objectives.
EQUIPPED with appropriate
MENT concepts, principles, theories
and techniques of management.
MANAGEMENT DEFINED:

• Management
• The process of getting things done, effectively and
efficiently, through and with other people
• Efficiency
• Means doing the thing correctly; refers to the relationship
between inputs and outputs; seeks to minimize resource costs
• Effectiveness
• Means doing the right things; goal attainment
EFFICIENCY AND EFFECTIVENESS
ORGANIZATION
• Is a system of consciously coordinated activities or forces
of two or more (Kreitner & Kinichi, 1989)
• Structure describes the form of departments, and
hierarchy. It influences the organization’s efficiency and
effectiveness.
• People incorporate the skills, attitudes, social interaction
of the members of the organization.
• Task depicts the goals of the individual and the
organization.
ORGANIZATION
• A systematic arrangement of people brought together
to accomplish some specific purpose; applies to all
organizations—for-profit as well as not-for-profit
organizations.
• Where managers work (manage)
• Common characteristics
• Goals
• Structure
• People
COMMON CHARACTERISTICS OF
ORGANIZATIONS
• Social entity – people and roles as building
blocks
• Goal-directed – organizational purpose at
base of existence
• Deliberately structured activities – perform
work; create outputs
• Permeable boundaries – outside
interactions; impacts from environment
ORGANIZATIONS CONTIN….

Organizations continually interact

with their environment

Inputs  Transformation  Outputs

• “Orchestra in concert with a number of professionals
playing quite different instruments and performing
separate and often difficult tasks. Each
instrumentalist, like so many large organizations, is
indeed a specialist in a particular field whose work
must be integrated with the work of others to make
up the whole. The manager’s job is more than what
the concert – goer sees. It includes planning the
performance, helping to select those numbers that
the orchestra can best perform, presiding at
rehearsals, and doing many of the things that are
PEOPLE DIFFERENCES
• Operatives
• People who work directly on a job or task and
have no responsibility for overseeing the work of
others

• Managers
• Individuals in an organization who direct the
activities of others
ORGANIZATIONAL LEVELS
IDENTIFYING MANAGERS
• First-line managers
• Supervisors responsible for directing the day-to-day
activities of operative employees

• Middle managers
• Individuals at levels of management between the first-line
manager and top management

• Top managers
• Individuals who are responsible for making decisions
about the direction of the organization and establishing
policies that affect all organizational members
MANAGEMENT PROCESS ACTIVITIES
 ESSENTIAL MANAGERIAL FUNCTIONS
Selecting missions and objectives - and the
strategies, policies, programs, and procedures for
PLANNING achieving them; decision making; the selection of
a course of action from among alternatives.

Establishing an intentional structure of roles for

ORGANIZING people to fill in an organization.

Filling, and keeping filled, the positions in the

STAFFING organization structure with competent people.

Influencing people so that they will contribute to

LEADING organization and group goals.

Measuring and correcting individual and

CONTROLLING organizational performance to ensure that events
conform to plans.
PLANNING

Vision and Mission

Strategizing
Goals and Objectives
Includes defining goals, establishing strategy,
and developing plans to coordinate activities
PLANNING: ITS NATURE & PURPOSE
What kind of
Organization
Structure to have
Which helps
us know
What kind of
People we need
Necessary And when Which affects
the kind of
PLANS For
leadership we
deciding
How most have &
direction
Objectives & Effectively
how to To lead people
In order to
achieve them ensure success
By furnishing of plans
Standards
Of control
ORGANIZING

Organization Design
Culture
Social Networks
Includes determining what tasks to be done, who is
to do them, how the tasks are to be grouped, who
reports to whom, and where decisions are to be made
PURPOSE OF ORGANIZING

PRINCIPLE OF UNITY OF OBJECTIVES

ORGANIZATION ENABLE
STRUCTURE INDIVIDUAL TO
CONTRIBUTE TO
ENTERPRISE
OBJECTIVES
EFFECTIVE
 PRINCIPLE OF
ORGANIZATIONAL EFFICIENCY
STRUCTURED TO
AID THE
ORGANIZATION ACCOMPLISHMEN
T OF ENTERPRISE
OBJECTIVES
WITH MINIMUM OF
EFFICIENT
UNSOUGHT
CONSEQUENCES OR
COST
LEADING

Leadership
Decision Making
Communications
Groups/Teams
Motivation
Includes motivating employees, directing the activities of others,
selecting the most effective communication channel, and resolving
conflicts
 LEADING . . . .

PROCESS OF INFLUENCING
PEOPLE SO THAT THEY WILL
CONTRIBUTE TO ORGANIZATION
& GROUP GOALS
•MOTIVATION
•LEADERSHIP
•COMMUNICATION
 PRINCIPLE OF
HARMONY OF OBJECTIVES

GOALS OF HARMONIZE GOALS OF

ENTERPRISE INDIVIDUALS
CONTROLLING

• Systems/Processes
• Strategic Human Resources
CONROLLING: ITS NATURE & PURPOSE

PRINCIPLE OF THE
PURPOSE OF CONTROL

ENSURE PLANS SUCCEED

•DETECTING DEVIATIONS FROM PLANS
•FURNISHING BASIS FOR TAKING ACTIONS
•TAKING ACTION TO CORRECT POTENTIAL OR
ACTUAL UNDESIRED DEVIATIONS
PRINCIPLE OF
CONTROL RESPONSIBILITY

•DELEGATION OF AUTHORITY

CONTROL •ASSIGNMENT OF TASKS

•RESPONSIBILITY FOR
OBJECTIVES
PRINCIPLE OF
EFFICIENCY OF CONTROLS

CONTROL •DETECT & ILLUMINATE

TECHNIQUES & NATURE & CAUSES OF
APPROACHES DEVIATIONS

•AT A MINIMUM COSTS OR

OTHER UNSOUGHT
CONSEQUENCES
DISTRIBUTION OF TIME PER ACTIVITY BY
ORGANIZATIONAL LEVEL
GENERAL SKILLS FOR MANAGERS
• Conceptual skills
• A manager’s mental ability to coordinate all of the
organization’s interests and activities
• Interpersonal skills
• A manager’s ability to work with, understand, mentor, and
motivate others, both individually and in groups
• Technical skills
• A manager’s ability to use the tools, procedures, and
techniques of a specialized field
• Political skills
• A manager’s ability to build a power base and establish the
right connections
SPECIFIC SKILLS FOR MANAGERS

• Behaviors related to a manager’s effectiveness:

• Controlling the organization’s environment and its
resources.
• Organizing and coordinating.
• Handling information.
• Providing for growth and development.
• Motivating employees and handling conflicts.
• Strategic problem solving.
THE ORGANIZATION & ITS EXTERNAL ENVIRONMENT

ORGANIZATION

Technological
Economic

Social
Ethical
Political & legal
Both IM and global management
examine the same environments.
 Business
Environment

Extern Interna
al l
 Internal

• Value System
• Mission and Objectives
• Organizational Structure
• Culture
• Quality of Human Resources
• Labor Unions
• Physical Resources and Technological Capabilities
• Mission – states organization’s purpose,
reasons for existence; describes what
organization does for whom
• Vision – overall direction of organization;
picture of where organization sees self in future
• Values – organization’s basic philosophy,
principles, ideals; sets ethical tone
 External

• Micro Environment Macro Environment

• Suppliers of Inputs Economic
• Customers Political-Legal
• Marketing Intermediaries Technological
• Competitors Global
• Publics Socio-cultural
Components of the General Environment
Economic

Demographic
Sociocultural
Industry
Environment

Competitive
Environment
Political/
Legal Global

Technological
Environments of an Organization
SOCIAL TECHNOLOGICAL
VARIABLES VARIABLES
COMPETITORS SU
PP

S
CUSTOMERS

IO L
UT IA
N
LI

IT C
EMPLOYEES ER
ST AN S
ORGANIZATION
IN FIN

NT
LA IONS
M E
N
UN

SHAREHOLDERS /BOD VER

BO

GO
SPECIAL-INTEREST
R

THE MEDIA GROUPS

ECONOMIC POLITICAL
VARIABLES VARIABLES

DIRECT- INDIRECT-ACTION
ACTION
THE BASICS OF
STRATEGIC
MANAGEMENT
If a man takes thought about what
is distant, he will find sorrow near
at hand. He who will not worry
about what us far off will soon find
something worse than worry

=confucious=
Plans are less important than planning.
=Dale McConkey=
WHAT IS STRATEGY?

STRATEGY IS THE OVERALL PLAN FOR

DEPLOYING RESOURCES TO
ESTABLISH A FAVORABLE POSITION.
TACTIC IS A SCHEME FOR A SPECIFIC
MANEUVER.
KEY TERMS IN STRATEGIC
MANAGEMENT
COMPETITIVE ADVANTAGE
• Strategic management is all about gaining
and maintaining competitive advantage. This
term can be defined as “anything that a firm
does especially well compared to rival firms”.
• STRATEGIST
• Arethe individuals who are most responsible for
the success or failure of an organization.
Strategists have various job titles, such as chief
executive officer, president, owner, chair, of the
board, executive director, chancellor, dean, or
entrepreneur. Strategists help an organization
gather, analyze, and organize information. They
track industry and competitive trends, develop
forecasting models and scenario analyses,
evaluate corporate and divisional performance,
• VISION
Answers the question “What do we want to become?”.
It is often the first step in strategic planning,
preceding even development of a mission statement.
Many vision statements are a single sentence.
Ex. “OUR VISION IS TO TAKE CARE OF YOUR VISION”
• MISSION
• Are enduring statements of purpose that distinguish one
business from other similar firms. A mission statement
identifies the scope of a firm’s operations in product and
market terms. It addresses the basic question that faces
all strategists: “What is our business?”. A clear mission
statement describes the values and priorities of an
organization. A mission statement broadly charts the
future direction of an organization.
EXTERNAL OPPORTUNITIES AND THREATS

• Refer to economic, social, cultural, demographic,

environmental, political, legal, governmental, technological
and competitive trends and events that could significantly
benefit or harm an organization in the future. Opportunities
and threats are largely beyond the control of a single
organization thus the word external.
INTERNAL STRENGTHS AND WEAKNESSES

• Are an organization’s controllable activities that are

performed especially well or poorly. They arise in the
management, marketing, finance/accounting,
production/operations, research and development and
management information systems activities of a business.
Organizations strive to pursue strategies that capitalize on
internal strengths and eliminate internal weaknesses.
LONG TERM OBJECTIVES

• Can be defined as specific results that an organization seeks

to achieve in pursuing its basic mission. Long term means
more that one year. Objectives are essential for
organizational success because they state direction, aid in
evaluation, create synergy, reveal priorities, focus
coordination and provide a basis for effective planning,
organizing, motivating and controlling activities. Long term
objectives are especially important in strategy formulation.
STRATEGIES

• Are the means by which long term objectives will be

achieved. Business strategies may include geographic
expansion, diversification, acquisition, product development,
market penetration, retrenchment, divestiture, liquidation
and joint ventures.
ANNUAL OBJECTIVES

• Are short term milestones that organizations must achieve to

reach long term objectives. Like long term objectives, annual
objectives should be measurable, quantitative, challenging,
realistic, consistent and prioritized. They should be
established at the corporate, divisional and functional levels
in a large organization. Annual objectives are especially
important in strategy implementation.
POLICIES

• Are the means by which annual objectives will be achieved.

Policies include guidelines, rules and procedures established
to support efforts to achieve stated objectives. Policies are
guides to decision making and address repetitive or recurring
situations.
STRATEGIC MANAGEMENT

• Can be defined as the art and science of formulating,

implementing and evaluating cross-functional decisions that
enable an organization to achieve its objectives. It focuses on
integrating management, marketing, finance/accounting,
production/operations, research and development, and
computer information systems to achieve organizational
success.
STRATEGIC MANAGEMENT PROCESS

• Three stages:
• Strategy Formulation
• Strategy Implementation
• Strategy Evaluation
STRATEGY FORMULATION

• Includes developing a vision and mission, identifying an

organization’s external opportunities and threats,
determining internal strengths and weaknesses, establishing
long-term objectives, generating alternative strategies and
choosing particular strategies to pursue.
STRATEGY IMPLEMENTATION

• Requires a firm to establish annual objectives, devise

policies, motivate employees, and allocate resources so that
formulated strategies can be executed. It includes developing
a strategy-supportive culture, creating an effective
organizational structure, redirecting marketing efforts,
preparing budgets, developing and utilizing information
systems, and linking employee compensation to
organizational performance.
STRATEGY EVALUATION

• Is the final stage in strategic management. Managers

desperately need to know when particular strategies are not
working well; strategy evaluation is the primary means for
obtaining this information. All strategies are subject to future
modification because external and internal factors constantly
changing.
WHY SOME FIRMS DO NO STRATEGIC
PLANNING
• Poor reward structures • Overconfidence
• Firefighting • Prior bad experience
• Waste of time • Self interest
• Too expensive • Fear of the unknown
• Laziness • Honest difference of opinion
• Content with success • Suspicion
• Fear of failure
PITFALLS OF STRATEGIC PLANNING
• Using strategic planning to gain control over decisions and resources
• Doing strategic planning only to satisfy accreditation or regulatory requirements
• Too hastily moving from mission development to strategy formulation
• Failing to communicate the plan to employees, who continue working in the dark
• Top managers making many intuitive decisions that conflict with the formal plan
• Top managers not actively supporting the strategic planning process
• Failing to use plans as a standard for measuring performance
• Delegating planning to a “planner” rather than involving all managers
• Failing to involve key employees in all phases of planning
WHAT DO WE WANT TO BECOME?

• A vision statement should answer the basic question,

“What do we want to become?”
• The vision statement should be short, preferably one
sentence, and as many managers as possible should have
input into developing the statement.
VISION STATEMENT EXAMPLES

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WHAT IS OUR BUSINESS?

• Mission statement
• a declaration of an organization’s “reason for being.”
• answers the pivotal question “What is our business?”
• essential for effectively establishing objectives and formulating
strategies
• reveals what an organization wants to be and whom it wants to serve
• Also called a creed statement, a statement of purpose, a statement of
philosophy, a statement of beliefs, and a statement of business
principles
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VISION VERSUS MISSION

• Shared vision creates a commonality of interests that can lift

workers out of the monotony of daily work and put them into
a new world of opportunity and challenge.

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 THE PROCESS OF DEVELOPING
VISION AND MISSION STATEMENTS
• Select several articles about these statements and ask all managers
to read these as background information.
• Ask managers themselves to prepare a vision and mission statement
for the organization.
• Merge these statements into a single document and distribute the
draft statements to all managers
• Process should create an “emotional bond” and “sense of mission”
between the organization and its employees
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 IMPORTANCE OF VISION AND
MISSION STATEMENTS

1. To ensure unanimity of purpose within the organization

2. To provide a basis, or standard, for allocating organizational resources
3. To establish a general tone or organizational climate
4. To serve as a focal point for individuals to identify with the
organization’s purpose and direction
5. To facilitate the translation of objectives into a work structure
6. To specify organizational purposes

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 CHARACTERISTICS OF A MISSION
STATEMENT
• First, a good mission statement allows for the generation
and consideration of a range of feasible alternative objectives
and strategies without unduly stifling management creativity.
• Second, a mission statement needs to be broad to reconcile
differences effectively among, and appeal to, an
organization’s diverse stakeholders
• Stakeholders
• include employees, managers, stockholders, boards of directors,
customers, suppliers, distributors, creditors, governments (local,
state, federal, and foreign), unions, competitors, environmental
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groups, and the general public.
BENEFITS OF HAVING A CLEAR
MISSION AND VISION

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A CUSTOMER ORIENTATION

A mission statement should:

•define what the organization is and what the
organization aspires to be
•be limited enough to exclude some ventures and
broad enough to allow for creative growth
•distinguish a given organization from all others
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A CUSTOMER ORIENTATION
A mission statement should also:
• serve as a framework for evaluating both current and
prospective activities
• be stated in terms sufficiently clear to be widely
understood throughout the organization
• A good mission statement reflects the anticipations of customers.
• The operating philosophy of organizations should be to identify
customers’ needs and then provide a product or service to fulfill
those needs.
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MISSION STATEMENT COMPONENTS
1. Customers—Who are the firm’s customers?
2. Products or services—What are the firm’s major products or
services?
3. Markets—Geographically, where does the firm compete?
4. Technology—Is the firm technologically current?
5. Concern for survival, growth, and profitability—Is the firm
committed to growth and financial soundness?
6. Philosophy—What are the basic beliefs, values, aspirations, and
ethical priorities of the firm?
7. Self-concept—What is the firm’s distinctive competence or major
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competitive advantage?
MISSION STATEMENT COMPONENTS

8. Concern for public image—Is the firm responsive to

social, community, and environmental concerns?
9. Concern for employees—Are employees a valuable asset
of the firm?

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CHARACTERISTICS OF A
MISSION STATEMENT

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