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Strategic Management part_03_03
- 1. Strategic Management 1 PRESENTED BY Dr. Ramadan Babers https://www.linkedin.com/in/ramadan-babers-phd-78976345/ Part_03_03
- 2. Strategic Model 2 Planning the Strategic Planning Process Establishing Strategic Direction Gap Analysis & Objective Setting External Scanning SWOT Analysis Internal Scanning Customer Value Determination Organizational Value Determination Developing Business Strategy Action Planning Implementation AuditingResults Stablishing the PlanData Collection 1 2 3 4 5 6 7
- 4. 4 1 • Developing Strategies 2 • Identifying Key Performance Areas 3 • Business Strategies (4 definitions) 4 • Strategy Development 5 • Organizing the Strategy Development Establishing Strategic Direction (Vision & Mission)
- 5. 5 “Having imagined the future, a company must find a path that leads from today to tomorrow.” -Competing for the Future, Hamel and Prahalad, p.105
- 6. 6 Vision Mission Business Drivers Stratesgy01 SO01 SO02 SO03 Stratesgy02 Stratesgy03 Stratesgy04 What we want to be How we want to achieve the vision The key factors that must be recognized as critical to success of the mission Concise statements that explain how each business driver will be addressed. May be more than 1 strategy for each business driver Strategic objectives are the metrics (numerical goals) by which achievement of the strategies are measured SMART objective Developing Strategies
- 7. 7 The vital few performance areas critical to the future survival and prosperity of the organization. Identifying Key Performance Areas Driving Forces • Changes in the long-term industry growth rate • Product and Marketing innovation • Technological change • Changes in cost and efficiency • Entry or exit of major firms • Reductions in uncertainty and business risk • Regulatory influences and government policy changes • Diffusion of technical know-how across more companies and more countries • Growing buyer preferences (who buys the product) (changing societal concerns,attitudes, and lifestyles)
- 8. 8 • The Actions a business willtake to widenthe advantage ithas overits competitors. • The Bridges between an organization’s current reason for being and its long term vision. • The broad Paths an organization chooses to achieve its mission and key business drivers. • The Process by which the organization more clearly defines what its future approach to business willbe and how that future willbe achieved; Business Strategies (4 definitions) A B 2P Business Strategies
- 9. 9 Strategy Development The organization must focus its creativityand develop a more detailed view of its future and how to achieve it. o How shall we organize ourselves for desired future/customers/products/services o How will wedeal with new technologies/economic logic/investment/risk and monitor& manage this changes. • organization’s vision,values, and key business drivers. • strengths, core competencies,and opportunities • issues facing the organization discoveredin the external scan Review Then, thinkingabout what we want the organization to be five years from now, ask the following questions:
- 10. 10Organizing the Strategy Development The three components of earnings growth or value creation Improvingthe current business or businesses Growing new business Anticipating and managing industry change • Improving quality productivity Sales or margins • Reducing costs cycle time • Buildingon core competencies • Developingnew competencies • Searching for new markets • Creating new businesses • Understanding the external environment • Anticipating change • Leveraging strengths • Protecting weaknesses • Adapting creatively to changes in the industry Generally business strategies should cover the three value creation categories ehT . ygetarts htworg ssenisub ,elpmaxe roF.tnetsisnoc yllanretni eb osla dluohs seigetarts eroc eht ni ssenevititepmoc niatniam ot dedeen latipactrevid tonnacssenisub
- 11. Strategic Model 11 Planning the Strategic Planning Process Establishing Strategic Direction Gap Analysis & Objective Setting External Scanning SWOT Analysis Internal Scanning Customer Value Determination Organizational Value Determination Developing Business Strategy Action Planning Implementation AuditingResults Stablishing the PlanData Collection 1 2 3 4 5 6 7 8
- 12. 12 Gap Analysis & Objectives Setting
- 13. 13 1 • Gap Analysis 2 • Strategic Gap & Objectives 3 • Selecting and Quantifying the Strategic Objectives 4 • Financial Objectives & Strategic Objectives Gap Analysis & Objectives Setting
- 14. 14Gap Analysis Is the process through which a company compares its actual performance with its expected performance Steps of Gap Analysis 1. Use historical data to measure the current performance of the organization 2. Analyse the data that was collected 3. Define the organizational goals 4. Close the gap
- 15. 15 if a small resturant wanted to become a top tourist destination but currently only served locals, a strategic gap analysis would look at the changes required for the resturant to meet its future These changes might include: 1. Relocating to an area with more tourists 2. changing the menu to appeal to out-of-town visitors 3. Hiring more staff so the resturant's hours become more convenient for travelers Strategic Gap Analysis Example If a business doesn't know where it stands in relation to its future, it is not likely to achieve success.
- 16. 16Strategic Gap A strategic gap is a shortfall between the value-creation capability required for success and the organization’s current capability in that area - The Northbound Train Karl Albrecht, p. 183 Strategic Objectives The corporate level performance measurements or initiatives the organization must achieve in order to survive, prosper, and reach its vision or purpose over the near or intermediate term
- 17. 17Selecting and Quantifying the Strategic Objectives These objectives can be quantified as in a specific earnings growth target. They are measurable and generally are to be achieved over the next twelve to twenty-four months. They also • Balance short and long term results • Over the long run the strategic objectives must identify and satisfy all stakeholders interests: Customers / Shareowners / Employees / Environment / Community / Suppliers / Government
- 18. 18 Consider the following points when developing strategic objectives: • Build on strengths • Shore up weaknesses • Explore and take advantage of opportunities • Thwart threats • Develop needed competencies • Close strategic gaps For example, one gap may be that declining revenues in the regulated business require new sources of revenue from non-regulated lines of business to fill the earning gap. Another may be that success may require that employees master a new skill or use of a new technology to gain a competitive advantage desired to meet the organization’s long term vision. Selecting and Quantifying the Strategic Objectives (cont.)
- 19. 19 Financial Objectives Strategic Objectives • Faster revenue growth • Faster earnings growth • Higher dividends • Wider profit margins • Higher returns on invested capital • Stronger bond and credit ratings • Bigger cash flows • A rising stock price • A bigger market share • A higher, more secure industry rank • Higher product quality • Lower costs relative to key competitors • Broader or more attractive product line • A stronger reputation with customers • Superior customer service • Recognition as a technology leader and/or product innovator
- 20. Strategic Model 20 Planning the Strategic Planning Process Establishing Strategic Direction Gap Analysis & Objective Setting External Scanning SWOT Analysis Internal Scanning Customer Value Determination Organizational Value Determination Developing Business Strategy Action Planning Implementation AuditingResults Stablishing the PlanData Collection 1 2 3 4 5 6 7 8 9
- 21. 21 Action Planning (Aligning the Organization to the Vision and Strategy)
- 22. 22 1 • The Action Planning Process 2 • Why Do Organizations Fail to Execute Strategy? 3 • Strategy-Focused Organization 4 • Communicate Communicate Communicate 5 • Train Train Train Action Planning
- 23. 23 The Action Planning Process • The organization should be given the opportunity to review, discuss, and internalize the organization’s vision, strategies, and objectives • More detailed action plans developed toimplement the strategic plan, that should be developedby each division or departmentor teams • individual performance plans should reflect specific work activities for individuals that support the overall organization’s business plan • Need several iterations of reviewingand goal setting at each level in the organization
- 24. 24Why Do Organizations Fail to Execute Strategy? 9 of 10 companies fail to execute strategy. • The Vision Barrier – Only 5% of the work force understands the strategy • The Management Barrier – 85% of executive teams spend less than one hour per month discussing strategy • The Resource Barrier – 60% of organizations do not link budgets to strategy • The People Barrier – Only 25% of managers have incentives linked to strategy
- 25. 25 Strategy-Focused Organization • Translate the strategy into operational terms • Mobilize change through executive leadership • Align the organization to the strategy • Govern to make strategy a continual process • Motivate to make strategy everyone’s job
- 26. 26 Organizations are most successful when everyone knows how what he or she does contributes to the overall success of the enterprise (face-to-face sessions) Communicate Communicate Communicate
- 27. 27 Train Train Train The training should include: • How to deal with the new strategies • Understanding the business • How the company makes money • Information on the cost structure and profit margins • Improving the business processes • Awareness of the customer and the competitive environment
- 28. Strategic Model 28 Planning the Strategic Planning Process Establishing Strategic Direction Gap Analysis & Objective Setting External Scanning SWOT Analysis Internal Scanning Customer Value Determination Organizational Value Determination Developing Business Strategy Action Planning Implementation AuditingResults Stablishing the PlanData Collection 1 2 3 4 5 6 7 8 9 10
- 30. 30 1 • Implementations 2 • Measurement and Audit of Results 3 • Developing a Continuous Improvement Process 4 • PDCA Cycle Implementation & Auditing
- 31. 31 Implementation • Strategy must ultimately become part hcae tahw fo yad yreve gniod si nosrep • If the plan becomes separate yreve gniod era ew tahw morf evah ew ,yadfailed ot nalp lufgninaem a poleved • Constantly measuring and refining our actions
- 32. 32 Measurement and Audit of Results Routine audits or assessments are essential eht ekam ot dna ytilibatnuocca niatniam ot adjustments Several methods are routinely utilized: • Quarterly, results or performance review meetings with line management • Employee and customer surveys. • Financial results audits • Comprehensive organization assessments • European Economic Area (EEA) Policy Reform and Institutional Assessment • Malcolm Baldrige National Quality Award Assessment
- 33. 33 Developing a Continuous Improvement Process Ongoing Environmental Scanning the organization must • Conduct ongoing environmental scanning or intelligence gathering. • Scan and analyze for trend lines or discontinuities that can destroy the value of the enterprise, or conversely provide the opportunities for growth and renewal. • Continuously evaluate the value it provides to its customers relative to the competition
- 34. 34 PDCA Cycle Plan / Do / Check / Adjust (PDCA) cycle of continuous improvement forms the basis for many of the world’s quality or total quality management (TQM) programs
- 35. End Q & A 35