DEFINING THE STRATEGIC DIRECTION OF A FIRM

DEFINING THE STRATEGIC DIRECTION OF A FIRM Key questions 1.What business are we in?( business definition) 2.Why are we in business?(defining mission of the business) 3.Where do we want to be?(where are we going)

Business definition A business should be defined on the basis of the need satisfied. (read on the Maslow's needs of hierarchy) i.e. what needs do customers seek to satisfy through using a product or service. Since customers needs always change a well defined business should provide answers to the following ;

business definition… What business is the company in currently? Who are our current customers? Who will be our customers? What should be the company’s business? What will the company be in the future? However definition and redefinition take place all the time.

2. Why are we in business? This is answered by a business clearly defining its mission. A mission is a fundamental unique aim or purpose that sets an organization apart, from others of its kind. A mission guides the company’s strategic objectives.

Characteristics of a good mission; a) it should be stated in terms of the firms pdcts, mkt, technology & position of the firm in the industry. E.g the mission of the institute of computer science; “to be a centre of excellence of teaching and research in applied and multi-disciplinary computing and information technology for community development” It should set the boundaries of the business. It should consist of a long term vision of what kind of organisation the company intends to become and where it wants to be. It should define the major competitive scopes within which the company is to operate.(industry, market, geographical scope

3. Objectives and Goals A goal is broad aim of an organisation. A goal does not have to be smart. Objectives are specific targets that an organization seeks to achieve. Objectives must be smart. Objectives must be consistent with the mission otherwise they will not be achieved.

Objectives and Goals… Objectives provide yardsticks for organizations performance. Objectives should not be static because the environment changes. Organizations must set objectives in key result areas. This is where performance is evaluated. where results are critical & are highly demanded. Objectives resulting in mkt care, growth objectives, customer care, sales, profitability

Nature and scope objectives; scope means “how far” What is the range of objectives you can set. a) corporate objectives: Top level can be called corporate level, so objectives which are set at top level are called corporate objectives, objectives are set to cover the entire organisation. Purpose and scope, long Term Survival b) Business objectives: Business level an org sets business objectives, to business unit, & must be in conformity with the corporate objectives. Strategic business units (SBU) are different units within the entire org. e.g. Mukwano group of companies –SBUs Mukwano oils, Mukwano tea, Mukwano soap

Nature and scope objectives… c) Functional objectives; These are objectives set at deparmental levels/functional levels with in the organisation. Examples are; - production objectives -marketing objectives -finance &accounting objectives etc d) Operational objectives; even with functional objectives there operational objectives. E.g under marketing( advertising, sales promotion. Under accounting(auditing, bad debts, receiving cashiers

Objectives and Goals (conclusion) Corporate objectives are less specific & long term in nature. As you go up in the management level they become less specific & less detailed. As you go lower they become specific & detailed. Objectives in an organization are hierarchical in nature from corporate objectives to operational objective. Objectives must be consistent. They must not conflict. In strategic management we advice for a tradeoff, the ability to give in or fore go one for purposes of the other.

Why do orgns set objectives? To justify their existence in the eyes of stakeholders Objectives help in coordination of decisions & reduce conflicts. Objectives provide standards for accessing organizational performance.

Management levels, decision &skill requirement Managers get things done by taking decisions. An effective manager is measured by the results he/she have achieved in a specific period in an organisation. Therefore different skills are required to achieve these results at different levels of management.

Management levels, Decision &Skill Requirement… Administrative decisions Operational decisions Strategic decisions Top level Middle level First line managers (lower level)

1. Strategic Decisions: These are decisions taken at top level mgt. They are long term in nature withban external orienation. They address questions like; a) Where are we known as a business? b) Where do we want to be? c) How do we get there? d) How do we ensure arrival? E) How do we monitor our progress there? Have you boarded the right bus?

2. Administrative decisions: These are concerned with structuring the firm ‘s resources, decisions related to acquisition & development of resources both human & capital are taken. They have an internal orientation. Pre- occupied within the organisation.

3. Operational decisions; These are decisions aimed at maximizing the efficiency of organizational resources. They are concerned with current operations e.g. budgeting, scheduling of operations, supervision of performance, inventory control etc.

Skill requirement: Skill means technical knowledge, competence Different skills are required to achieve results at each level in management. an effective manager should exhibit some level of competence. Skills are grouped into three levels.

Skill requirement… Human relations or people skills Interpersonal skills Technical skills Conceptual skills

Skill requirement… These skills are needed in varying proportions. a)conceptual skills; these are skills that enable managers to think for the organisation (thinking skills). These decisions help to coordinate and integrate the entire organizational activities towards one common goal.

Skill requirement… b) human relations skill/ interpersonal or people skill; these skills are needed inorder to understand people & be able to to motivate them. Since managers work with & through people.

Skill requirement… C) Technical skills; These are skills required in highly specialized areas. They consititute the ability to use tools, procedures, procedures and techniques of a special nature.

Strategic Management Responsibilities of Managers a) Establishing the mission; deciding on the business or businesses that the company should engage in and other fundamentals that will guide and characterize the business, such as continuous growth. A mission is usually enduring and timeless.

Strategic Management Responsibilities of Managers… b) Formulating a company philosophy Establishing the beliefs, values, attitudes and unwritten guidelines that add up to “the way we do things around here.” c) establishing policies; Deciding on plans of action to guide the perfomance of all major activitoies in carrying out strategy in accordance with company philosophy.

Strategic Management Responsibilities of Managers… d) setting objectives Deciding on achieving targets with a defined time range. Objectives are designed to aid in making operational plans for carrying out strategy. e) developing the strategy Developing concepts, ideas, and plans for achieving objective ssuccessfully and meeting and beating the competition.

Strategic Management Responsibilities of Managers… f) Planning the organizational structure. Developing the plan of organization and the activities that help people work together to perform activities in accordance with strategy philosophy and policies. g) Providing personnel; Recruiting, selecting and developing people to fill the positions in the organisational plan.

Strategic Management Responsibilities of Managers… h) establishing procedures Determining and prescribing how all important and recurrent activities will be carried out. i) Providing facilities Providing the plant, equipment and other physical facilities required to carry out the business.

Strategic Management Responsibilities of Managers… j) providing capital Making sure the business has the money and credit needed for working capital and physical facilities. k) setting standards Establishing measures of performance that will enable the business to best achieve its long-term objectives successfully.

Strategic Management Responsibilities of Managers l) Establishing management programs and operational plans – developing programs and plans governing activities and the use of resources that, when carried out in accordance with established strategy, policies, procedures, and standards will enable people to achieve particular objectives. These are phases of the total planning process which includes strategic planning.

Strategic Management Responsibilities of Managers M) providing control information; Supplying facts and figures to help people follow the strategy, policies, procedures, and programs to keep alert to forces at work inside and outside the business. To measure overall company performance against established plans and standards

Strategic Management Responsibilities of Managers… n) Activating people; Commanding and motivating people to act in accordance with philosophy, policies, procedures and standards in carrying out the plans of the company.

Course work one Giving relevant examples and illustrations identify and discuss five key stages involved in crafting and executing the Strategic Management process. Done in your respective groups. Hand in next week Thursday 3 rd October 2013.

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