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Examine the framework of strategic
 management process and identify
the context within which strategies
   are formulated. Examine the
importance of mission statements.
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
 Copyright © Houghton Mifflin
                                         1|2
 Company. All rights reserved.
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

    Copyright © Houghton Mifflin
                                    1|3
    Company. All rights reserved.
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)

    Copyright © Houghton Mifflin
                                           1|4
    Company. All rights reserved.
Levels of Strategic Management
                                      Figure 1.4




Copyright © Houghton Mifflin
                                1|5
Company. All rights reserved.
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

Copyright © Houghton Mifflin
                                   1|6
Company. All rights reserved.
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


 Copyright © Houghton Mifflin
                                         1|7
 Company. All rights reserved.
 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
Copyright © Houghton Mifflin
                                   1|8
Company. All rights reserved.
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.
 Copyright © Houghton Mifflin
                                     1|9
 Company. All rights reserved.
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.
Copyright © Houghton Mifflin
                                                    1 | 10
Company. All rights reserved.
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!”
Copyright © Houghton Mifflin
                                    1 | 11
Company. All rights reserved.
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.
Copyright © Houghton Mifflin
                                   1 | 12
Company. All rights reserved.
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.
Copyright © Houghton Mifflin
                                      1 | 13
Company. All rights reserved.
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.
Copyright © Houghton Mifflin
                                        1 | 14
Company. All rights reserved.
 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
Copyright © Houghton Mifflin Company. All rights reserved.                            1 | 15
 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
Copyright © Houghton Mifflin Company. All rights reserved.                           1 | 16
 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.
 Copyright © Houghton Mifflin Company. All rights reserved.               1 | 17
 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


Copyright © Houghton Mifflin Company. All rights reserved.   1 | 18
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.


Copyright © Houghton Mifflin Company. All rights reserved.   1 | 19
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)

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Lo1

  • 1. 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 Copyright © Houghton Mifflin 1|2 Company. All rights reserved.
  • 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 Copyright © Houghton Mifflin 1|3 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) Copyright © Houghton Mifflin 1|4 Company. All rights reserved.
  • 5. Levels of Strategic Management Figure 1.4 Copyright © Houghton Mifflin 1|5 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 Copyright © Houghton Mifflin 1|6 Company. All rights reserved.
  • 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 Copyright © Houghton Mifflin 1|7 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 Copyright © Houghton Mifflin 1|8 Company. All rights reserved.
  • 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. Copyright © Houghton Mifflin 1|9 Company. All rights reserved.
  • 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. Copyright © Houghton Mifflin 1 | 10 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!” Copyright © Houghton Mifflin 1 | 11 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. Copyright © Houghton Mifflin 1 | 12 Company. All rights reserved.
  • 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. Copyright © Houghton Mifflin 1 | 13 Company. All rights reserved.
  • 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. Copyright © Houghton Mifflin 1 | 14 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 Copyright © Houghton Mifflin Company. All rights reserved. 1 | 15
  • 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 Copyright © Houghton Mifflin Company. All rights reserved. 1 | 16
  • 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. Copyright © Houghton Mifflin Company. All rights reserved. 1 | 17
  • 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 Copyright © Houghton Mifflin Company. All rights reserved. 1 | 18
  • 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. Copyright © Houghton Mifflin Company. All rights reserved. 1 | 19
  • 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)