Benefits of Strategic Thinking and a Strategic Approach to Managing

  Guides entire firm regarding what it is we are trying to do and to achieve Makes managers more alert to winds of change, new opportunities, and threatening developments Unifies numerous strategy-related decisions and organizational efforts Creates a proactive atmosphere Promotes development of an evolving business model focused on bottom-line success Provides basis for competing and achieving competitive advantage

   

HELPS A COMPANY PREPARE FOR THE FUTURE!

Figure 1-1: The Five Tasks of Strategic Management

Task 1
Develop Vision and Mission

Task 2

Task 3
Formulate Strategy to Achieve Goals & Objectives

Task 4
Implement and Execute Strategy

Task 5
Monitor, Evaluate, and Take Corrective Action

Set Goals & Objectives

Revise as Needed

Revise as Needed

Improve/ Change

Improve/ Change

Recycle as Needed

Who Performs the Five Strategic Management Tasks?



Senior Corporate Executives Managers of Subsidiary Business Units Functional Area Managers Operating Managers

Strategic Role of a Board of Directors



Critically appraise and ultimately approve strategic action plans Evaluate strategic leadership skills of the CEO and candidates to succeed the CEO

Why is a Strategic Vision Important?

 A managerial imperative exists to look beyond today and think strategically about
Impact of new technologies How customer needs and expectations are changing What it will take to outrun competitors Which promising market opportunities ought to be aggressively pursued External and internal factors driving what a company needs to do to prepare for the future

VISION
STATEMENT ABOUT A COMPANYS LONG-TERM DIRECTION

MISSION
DEFINES COMPANYS BUSINESS

1. PRODUCT / MARKET 2. TERRITORY / GEOGRAPHY

Missions vs. Strategic Visions

 A mission statement  A strategic vision concerns a firms future focuses on current business activities -business path -who we are and where we are going what we do Markets to be pursued Current product and service offerings Future technologyproduct-customer Customer needs focus being served Kind of company that Technological and business capabilities management is trying to create

Example of Vision & Mission

Intel
Our vision: Getting to a billion connected computers worldwide, millions of servers, and trillions of dollars of e-commerce. Intels core mission is being the building block supplier to the Internet economy and spurring efforts to make the Internet more useful. Being connected is now at the center of peoples computing experience. We are helping to expand the capabilities of the PC platform and the Internet.

Simple Mission Statements

Eastman Kodak
We are in the picture business.

Wit Capital
(an Internet startup company)
Our mission is to be the premier Internet investment banking firm focused on the offering and selling of securities to a community of online individual investors.

Examples of Mission Statements

Otis Elevator
Our mission is to provide any customer a means of moving people and things up, down, and sideways over short distances with higher reliability than any similar enterprise in the world.

Avis Rent-a-Car
Our business is renting cars. Our mission is total customer satisfaction.

Example of Mission Statement

(a unique grocery store chain)
Our mission: To give our customers the best food and beverage values that they can find anywhere and to provide them with the information required for informed buying decisions. We provide these with a dedication to the highest quality of customer satisfaction delivered with a sense of warmth, friendliness, fun, individual pride, and company spirit.

Example of Mission Statement

Ritz-Carlton Hotels
The Ritz-Carlton Hotel is a place where the genuine care and comfort of our guests is our highest mission. We pledge to provide the finest personal service and facilities for our guests who will always enjoy a warm, relaxed yet refined ambiance. The Ritz-Carlton experiences enlivens the senses, instills well-being, and fulfills even the unexpressed wishes and needs of our guests.

Setting Goals & Objectives

Second Task of Strategic Management

 Converts strategic vision and mission into specific performance targets  Creates yardsticks to track performance  Pushes firm to be inventive and focused on results  Helps prevent complacency and coasting

GOALS
BROAD TARGETS

OBJECTIVES
QUANTIFIED & TIME-BASED

Financial Goals & Objectives



Strive for stock price appreciation equal to or above the S&P 500 average Maintain a positive cash flow every year Achieve and maintain a AA bond rating Grow earnings per share 15% annually Boost annual return on investment (or EVA) from 15% to 20% within three years Increase annual dividends per share to stockholders by 5% each year

   

Strategic Goals
 Increase firms market share  Overtake key rivals on quality or customer service or product performance  Attain lower overall costs than rivals  Boost firms reputation with customers  Attain stronger foothold in international markets  Achieve technological superiority  Become leader in new product introductions  Capture attractive growth opportunities

What is Strategy?
 A companys strategy consists of the set of competitive moves and business approaches that management is employing to run the company  Strategy is managements game plan to
Attract and please customers Stake out a market position Conduct operations Compete successfully Achieve organizational objectives

Without a strategy the organization is like a ship without a rudder, going around in circles.
Quote

Thinking Strategically: The Three Big Strategic Questions

1. Where are we now? 2. Where do we want to go?
Business(es) to be in and market positions to

stake out?
Buyer needs and groups to Outcomes to achieve?

serve?

3. How do we get there?

The Hows That Define a Firm's Strategy

    

How to grow the business How to please customers How to outcompete rivals How to respond to changing market conditions How to manage each functional piece of the business and develop needed organizational capabilities How to achieve goals & objectives
Strategy is HOW to . . .

Figure 1-2: A Companys Strategy is Partly Planned and Partly Reactive

Company Experiences, Know-how, Resource Strengths and Weaknesses, and Competitive Capabilities

Actual Compan y Strategy

What is a Strategic Plan?

Where firm is headed -Strategic vision and business mission Short and long term performance targets -- Strategic & financial goals & objectives Action approaches to achieve targeted results -- A comprehensive strategy

Figure 2.1: Levels of Strategy-Making in a Diversified Company

Corporate-Level Managers

Corporate Strategy
Two-Way Influence

BusinessLevel Managers Functional Managers

Business Strategies
Two-Way Influence

Functional Strategies
Two-Way Influence

Operating Managers

Operating Strategies

Figure 2-1: Levels of Strategy-Making in a Single-Business Company

Executive-Level Managers

Business Strategy
Two-Way Influence

Functional Managers

Functional Strategies

Two-Way Influence

Operating Managers

Operating Strategies

Figure 2.4: Networking of Missions, Goals/Objectives, and Strategies

Level 1
CorporateLevel Managers
Corporate-wide Strategic Vision
Two-Way Influence

Corporate Level Objectives

Two-Way Influence

Corporate Level Strategy

Two-Way Influence

Level 2
Business-Level Managers

Business Level Strategic Vision

Two-Way Influence

Business Level Objectives

Two-Way Influence

Business Level Strategies

Two-Way Influence

Level 3
Functional Managers
Functional Missions
Two-Way Influence

Functional Objectives
Two-Way Influence

Functional Strategies
Two-Way Influence

Level 4
Plant Managers, Lower-Level Supervisors

Operating Missions

Operating Objectives

Operating Strategies

Figure 2.5: Factors Shaping the Choice of Company Strategy

Social, political, regulatory and community factors Competitive conditions and industry attractiveness Company opportunities and threats to companys well-being

External Factors

Companys Strategic Situation

Determine relevance of internal and external factors

Identify and evaluate alternatives

Craft the strategy

Resource strengths, capabilities, and weaknesses

Influences of key executives

Shared values and company culture

Internal Factors

Table 4.1: SWOT Analysis What to Look For

Potential Resource Strengths
Powerful strategy Strong financial condition Strong brand name image/reputation Widely recognized market leader Proprietary technology Cost advantages Strong advertising Product innovation skills Good customer service Better product quality Alliances or JVs

Potential Resource Weaknesses

No clear strategic direction Obsolete facilities Weak balance sheet; excess debt Higher overall costs than rivals Missing some key skills/competencies Subpar profits Internal operating problems . . . Falling behind in R&D Too narrow product line Weak marketing skills

Potential Company Opportunities

Serving additional customer groups Expanding to new geographic areas Expanding product line Transferring skills to new products Vertical integration Take market share from rivals Acquisition of rivals Alliances or JVs to expand coverage Openings to exploit new technologies Openings to extend brand name/image

Potential External Threats

Entry of potent new competitors Loss of sales to substitutes Slowing market growth Adverse shifts in exchange rates & trade policies Costly new regulations Vulnerability to business cycle Growing leverage of customers or suppliers Reduced buyer needs for product Demographic changes

Figure 1-3: Companys Strategy -What to Look For

Actions to diversify Actions to strengthen resources & capabilities How functional activities are managed Efforts to pursue new opportunities or defend against threats Actions to outcompete rivals Responses to changing external circumstances Actions to alter geographic coverage Actions to merge or acquire rival companies

Pattern of Actions That Define Strategy

Actions to form strategic alliances and collaborative partnerships