THE STRATEGIC MANAGEMENT PROCESS G. Tyge Payne (2)

Strategic Management Process 1. Analysis (Where are we now?) Strategic goals (vision, mission, strategic objectives) Internal and external environment of the firm 2. Strategic decisions (Where are we going?) What industries should we compete in? How should we compete in those industries? 3. Actions (How do we get there?) Allocate necessary resources Design the organization to bring intended strategies to reality

Formulating Directions - Develop Vision/Mission (1) -Set Objectives (2) Organizational Culture Stakeholder Influence Values / Ethics Opportunities and Threats from Economic, Political, Technological etc Sources Strategic Analyses (3) Strategic Control (6) External Environment Opportunities and Threats from Competition and Key Stakeholders Competitor/Stakeholder Internal Organization Organizational Culture Stakeholder Influence Values / Ethics Strategy Formulation (4) -Formulate and Consider Alternatives -Make Strategy Choice Implementation (5) Context of Strategy (type of organization, culture, values, life cycle competitive position)

The Strategic Management Process – Competing for Advantage

Developing a Vision and Mission (1) Begins with thinking strategically about: The firm’s future business makeup Where to take the firm The task is to: Create a roadmap of a company’s future Decide what future business position to stake out Provide long-term direction Give the firm a strong identity

Setting Objectives (2) Establishing OBJECTIVES Converts vision/mission into specific performance targets Creates yardsticks to track performance Pushes firm to be inventive and focused Helps prevent coasting and complacency if targets require stretch

Types of Objectives Required Financial Objectives Strategic Objectives Outcomes focused on improving a firm’s financial performance. Outcomes focused on improving a firm’s competitiveness and its long-term business position. -- May include social objectives.

Strategic Analysis (3) A complete strategic analysis requires one to extensively examine the organization from all angles: the outside, the inside, and the fit between. External Analysis Environmental Forecasting The General Macro-environment Porters 5-forces Model Strategic Groups Internal Analysis Resource Strengths/Weaknesses Value Chain Strategic Fit

Strategy Formulation (4) Strategic Formulation involves determining whether to: Concentrate on a single business or several businesses (diversification) Cater to a broad range of customers or focus on a particular niche Develop internationally or not Develop a wide or narrow product/service line Pursue a competitive advantage based on Low cost or Differentiation – product / service superiority or unique organizational capabilities

Porter’s Generic Strategies Strategy 1 Cost Leadership Strategy 2 Differentiation Strategy 3A Cost Focus Strategy 3B Focus Competitive Advantage Lower Cost Differentiation Competitive Scope Broad Target Narrow

Implementing Strategy (5) Creating fits between way things are done and what it takes for effective strategy execution Getting the organization to execute strategy proficiently and efficiently Producing excellent results in a timely manner Strategy Implementation: an internal, operations-driven activity involving organizing, budgeting, motivating, culture-building, supervising, and leading to “make the strategy work” as intended!

Control & Evaluating Performance (6) The “processes” of strategic management are not a one-time only exercise because Times and conditions change Events unfold Better ways to do things emerge New managers with different ideas take over Thus, corrective adjustments are often needed to: Alter long-term direction Redefine the business Raise or lower performance objectives Modify the strategy Improve strategy execution