STRATEGIC MANAGEMENT

1. STRATEGIC MANAGEMENT

2. Session objectives • Upon completing this session you should be able to: • Define an strategic management • Identify elements of strategic management • Recognize model of the strategic planning process • Identify components of a strategic plan • Understand the place of information systems in the strategic process

3. Strategic Management – Defined • Art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve its objectives

4. Strategic Plan In essence, the strategic plan is a company’s game plan

5. Management Marketing Finance/Accounting Production/Operations Research & Development MIS Strategic Plan & Integration Strategic management achieves a firm’s success through integration ––

6. Strategy Formulation Vision & Mission External Opportunities & Threats Internal Strengths & Weaknesses Long-Term Objectives Alternative Strategies Strategy Selection Strategy Formulation

7. Strategy Formulation Issues • New business opportunities • Businesses to abandon • Allocation of resources • Expansion or diversification • International markets • Mergers or joint ventures • Avoidance of hostile takeover

8. Strategy Implementation Annual Objectives Policies Employee Motivation Resource Allocation Strategy Implementation

9. Implementation Issues Action Stage of Strategic Management • Most difficult stage • Mobilization of employees & managers • Interpersonal skills critical • Consensus on goal pursuit

10. Strategy Evaluation Internal Review External Review Performance Metrics Corrective Actions Strategy Evaluation

11. Evaluation Issues Final Stage of Strategic Management • Subject to future modification • Today’s success no guarantee of future success • New & different problems • Complacency leads to demise

12. Drucker of Strategic Mgt • Think through the overall mission of a business. Ask the key question: “What is our Business?” (Peter Drucker)

13. Intuition & Analysis • The strategic management process attempts to organize quantitative and qualitative information under conditions of uncertainty

14. Integrating Intuition & Analysis • Intuition is based on: • Past experiences • Judgment • Feelings Intuition isuseful for decision making in: • Conditions of great uncertainty • Conditions with little precedent

15. Integrating Intuition & Analysis Intuition & Judgment Involve management at all levels Influence all analyses

16. Integrating Intuition & Analysis Analytical Thinking Intuitive Thinking

17. Adapting to Change • Organizations must monitor events • Ongoing process • Internal and external events • Timely changes

18. Adapting to Change “Anything that a firm does especially well compared to rival firms” Strategic Management is Gaining and Maintaining Competitive Advantage

19. Adapting to Change • Adapting to change in external trends, internal capabilities, and resources Achieving Sustained Competitive Advantage • Effectively formulating, implementing, and evaluating strategies

20. Adapting to Change Rate & magnitude of change increasing dramatically E-commerce Demographics Technology

21. Adapting to Change Effective Adaptation Requires long-term focus

22. What kind of business should we become? Are we in the right fields? Are there new competitors? What strategies should we pursue? How are our customers changing? Adapting to Change – Key Q?

23. Vision Statement – What do we want to become? Mission Statement – What is our business? Vision & Mission

24. Largely beyond the control of a single organization Opportunities & Threats (External)

25. Opportunities & Threats • Analysis of Trends: • Economic • Social • Cultural • Demographic/Environmental • Political, Legal, Governmental • Technological • Competitors

26. Process of conducting research and gathering and assimilating external information Opportunities & Threats Environmental Scanning (Industry Analysis)

27. Basic Tenet of Strategic Management Opportunities & Threats Take advantage of External Opportunities Strategy Formulation Avoid/minimize impact of External Threats

28. Controllable activities performed especially well or poorly Strengths & Weaknesses (Internal)

29. Strengths & Weaknesses • Typically located in functional areas of the firm • Management • Marketing • Finance/Accounting • Production/Operations • Research & Development • Computer Information Systems

30. Assessing the Internal Environment Strengths & Weaknesses Financial Ratios Internal Factors Performance Metrics Industry Averages Survey Data

31. Mission-driven pursuit of specified results more than one year out Long-term Objectives

32. Long-term Objectives • Essential for ensuring the firm’s success • Provide direction • Aid in evaluation • Create synergy • Focus coordination • Basis for planning, motivating, and controlling

33. Means by which long-term objectives are achieved Strategies

34. Strategies • Example strategies • Geographic expansion • Diversification • Acquisition • Market penetration • Retrenchment • Liquidation • Joint venture

35. Short-term milestones that firms must achieve to attain long-term objectives Annual Objectives

36. Means by which annual objectives will be achieved Policies

37. Strategic Management Process • Examine existing situation • Audit external environment • Audit internal environment • Establish long-term objectives • Generate, evaluate, and select strategies • Implement selected strategies • Measure & evaluate performance

38. Benefits of Strategic Management • Proactive in shaping firm’s future • Initiate and influence firm’s activities • Formulate better strategies • Systematic, logical, rational

39. Financial Benefits • Improvement in sales • Improvement in profitability • Productivity improvement

40. Nonfinancial Benefits • Improved understanding of competitors’ strategies • Enhanced awareness of threats • Reduced resistance to change • Enhanced problem-prevention capabilities

41. Example Strategies in Action McDonald’s Corp 2007 The world’s largest restaurant chain by number of outlets, Big Mac is doing fantastic both in the United States and abroad. In past months, McDonald’s began opening drive-through restaurants in China, closed 25 sites in the United Kingdom, and disposed of a supply-chain operation in Russia. Big Mac in 2007 opened 800 new restaurants in China, Japan, and Russia. Shares of McDonald’s stock increased 42 percent in 2006 as sales for the year eclipsed $41 billion. Big Mac is working to eliminate trans-fats from their food (New York City is requiring this of all restaurants in 2007). McDonald’s plans in 2008 to turn ownership of about 2,300 restaurants in Canada and the United Kingdom over to licensees.