Lo11. LO1
Examine the framework of strategic
management process and identify
the context within which strategies
are formulated. Examine the
importance of mission statements.
2. Why do some organizations succeed
while others fail?
Define Strategy: Strategy is a set of related actions that
managers take to increase their company’s
performance.
• Strategic Leadership
– Task of most effectively managing a company’s strategy-
making process
• Strategy Formulation
– Task of determining and selecting strategies
• Strategy Implementation
– Task of putting strategies into action to improve a company’s efficiency
and effectiveness
Competitive Advantage results when a
company’s strategies lead to superior
performance compared to competitors
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3. Superior Performance and
Sustainable Competitive
• Advantage
Superior Performance
– One company’s profitability relative to that of other
companies in the same or similar business or industry
– Maximizing shareholder value is the ultimate goal of profit
making companies
– When a company’s profitability is greater than the average
of all other companies in the same industry & competing for
the same customers
Sustained Competitive Advantage
When a company’s strategies enable it to maintain
above average profitability for a number of years
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Company. All rights reserved.
4. Strategic Managers
• Corporate-Level Managers
– Oversee the development of strategies for the whole organization.
The CEO is the principle general manager who consults with other
senior executives
– Allocating resources among businesses, deciding which businesses if
any it needs to get rid of and which new businesses if any it should
acquire
• Business-Level Managers
– Transfer corporate strategy into concrete strategies for individual
businesses.
• Functional-Managers
– Responsible for supervising a particular task or operation (e.g.
marketing, operations, accounting, human resources)
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Company. All rights reserved.
5. Levels of Strategic Management
Figure 1.4
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Company. All rights reserved.
6. Strategic Leadership
Good leaders of the strategy-making process
have a number of key attributes:
• Vision, eloquence, and consistency
• Articulation of the business model
• Commitment
• Being well informed
• Willingness to delegate and empower
• The astute use of power
• Emotional intelligence: self-awareness, self- regulation,
motivation, empathy, social skills
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7. The Five Steps of the
Strategy Making Process
Select the corporate mission and the major corporate
goals.
Analyze the external competitive environment to identify
opportunities and threats.
Analyze the organization’s internal environment to
identify its strengths and weaknesses.
Select strategies that:
– Build on the organization’s strengths and correct its weaknesses – in
order to take advantage of external opportunities and counter external
threats
– Are consistent with organization’s mission and major goals
– Are congruent and constitute a viable business model
Implement the strategies.
strat
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Company. All rights reserved.
8. Crafting the Organization’s Mission
Statement
Provides a framework or context within
which strategies are formulated, including:
Mission –
The reason for existence – what an organization does
Vision –
A statement of some desired future state
Values –
A statement of key values that an organization is
committed to
Major Goals –
The measurable desired future state that an
organization attempts to realize
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9. The Mission
The mission is a statement of a company’s
reason for existence today.
• What is it that the company does?
– Who is being satisfied (what
customer groups)?
– What is being satisfied (what
customer needs)?
– How customer needs are being satisfied (by what
skills, knowledge, or distinctive competencies)?
A company’s mission is best approached from
a customer-oriented business definition.
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10. Abell’s Framework
for Defining the Business
Figure 1.6
Source: D. F. Abell, Defining the Business: The Starting Point of
Strategic Planning (Englewood Cliffs, Prentice Hall, 1980), p. 7.
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Company. All rights reserved.
11. The Vision
What would the company like to achieve?
A good vision is meant to stretch a company by
articulating an ambitious but attainable future state.
The vision of Ford is “to become the world’s
leading consumer company for automotive
products and services.”
Nokia is the world’s largest manufacturer of
mobile phones and operates with a simple but
powerful vision: “If it can go mobile, it will!”
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Company. All rights reserved.
12. Values
The values of a company should state:
How managers and employees should
conduct themselves
How they should do business
What kind of organization they need to build
to help achieve the company’s mission
Organizational culture
• The set of values, norms, and standards that control how
employees work to achieve an organization’s mission and
goals
• Often seen as an important source of competitive advantage
In high-performance organizations, values
respect the interests of key stakeholders.
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13. Values at Nucor
“Management is obligated to manage Nucor in such a way that
employees will have the opportunity to earn according to their
productivity.”
“Employees should be able to feel confident that if they do
their jobs properly, they will have a job tomorrow.”
“Employees have the right to be treated fairly and must believe
that they will be.”
“Employees must have an avenue of appeal when they believe
they are being treated unfairly.”
At Nucor, values emphasizing pay for performance, job
security, and fair treatment for employees help to create
an atmosphere that leads to high employee productivity.
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14. Major Goals
A goal is a precise and measurable desired
future state that a company must realize if
it is to attain its vision or mission.
Key characteristics of well-constructed goals:
1. Precise and measurable – to provide a yardstick or
standard to judge performance
2. Address crucial issues – with a limited number of key
goals that help to maintain focus
3. Challenging but realistic – to provide employees with
incentive for improving
4. Specify a time period – to motivate and inject a
sense of urgency into goal attainment
Focus on long-run performance and
competitiveness.
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Company. All rights reserved.
15. External Analysis
Purpose is to identify the strategic opportunities and
threats in the organization’s operating environment
that will affect how it pursues its mission.
External Analysis requires an assessment of:
Industry environment in which company operates
• Competitive structure of industry
• Competitive position of the company
• Competitiveness and position of major rivals
The country or national environments
in which company competes
The wider socioeconomic or macroenvironment that
may affect the company and its industry
• Social • Legal • Technological
• Governmental • International • Macroeconomic
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16. Internal Analysis
Purpose is to pinpoint the strengths and weaknesses
of the organization. Strengths lead to superior
performance and weaknesses to inferior performance.
Internal analysis includes an assessment of:
Quantity and quality of a
company’s resources and
capabilities
Ways of building unique
skills and company-specific
or distinctive competencies
Building & sustaining a competitive advantage
requires a company to achieve superior:
• Efficiency • Innovations
• Quality • Responsiveness to customers
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17. Selecting Strategies: SWOT
Analysis and Business Model
SWOT analyses help to identify strategies that align
a company’s resources and capabilities to its
environment – in order to create and sustain a
competitive advantage.
Functional strategies should be consistent with and
support the company’s business level and global
strategies.
• Functional-level strategy – directed at operational effectiveness
• Business-level strategy – businesses’ overall competitive themes
• Global strategy – expand, grow and prosper at a global level
• Corporate-level strategy – to maximize profitability and profit growth
When taken together, the various strategies
pursued by a company must lead to a
viable business model.
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18. Strategy Implementation
After choosing a set of congruent strategies to
achieve competitive advantage, managers
must put those strategies into action:
• Implementation and execution of the strategic
plans
• Design of the best organization structure
• Consistency of strategy with company culture
• Control systems to measure and monitor progress
• Governance systems for legal and ethical
compliance
• Consistency with maximizing profit and profit
growth
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19. ⑥ The Feedback Loop
Managers must monitor strategy execution:
• To determine if strategic goals and objectives are
being achieved
• To evaluate to what extent competitive advantage is
being created and sustained
Managers must monitor and reevaluate for
the next round of strategy formulation and
implementation
Strategic planning is ongoing.
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20. Group Assignment 1
• Craft a mission statement for a company your
group agrees on (assume you are the
executives) (i.e. could be the company you
work in), which includes:
– The reason for existence – what an organization
does
– A statement of some desired future state (vision)
– A statement of key values that an organization is
committed to (values)
– The measurable desired future goals (goals)