Strategic Management Exam Notes

9 September 2016

Means several things to several people at different points of time. (‘Strategy is a series of goals and objectives that is used to run business’ (Strategy is an attempt to combine organizations activity and available resources to achieve stated objectives. (Strategy is the roadmap we use to get to where we want to go’ (Strategy is the framework that helps us achieve our Vision and Mission.

The policy will emphasize core strategies of Unity, Poverty eradication and restructuring society. (Outline Perspective Plan 3 (2001 –2010) : Though it has similar objectives as the NVP, the OPP 3 focuses on the development of an knowledge society and an environmentally sustainable development initiative. VIEWS OF LEADING THINKERS Strategy ? ‘The art of the employment of battles as a means to gain the object of war’ B. H. Liddell Hart, Strategy (1967) ‘…the employment of battles to gain the end of war.

Carl von Clausewitz ‘What one does to counter a competitor’s actual and predicted moves’ George Steiner, Strategic Planning (1979) o‘Strategy is a plan, a how, a means of getting from here to there’ Rise and Fall of ing(1 (Competitive strategy is ‘about being different’.

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It means deliberately choosing a different set of activities to deliver a unique mix of value. ’ Michael Porter, ‘What is Strategy? ’ Harvard Business Review (Jan/Feb 1993) Emergence of Strategy Where did it come from: (A military concept and discipline.

Reflects the organizations response to environmental pressures. oStrategic management integrates management, marketing, finance, production and information systems to achieve organizational success. STRATEGIC MANAGEMENT defined ‘Strategic management is a set of decisions and actions that result in the formulation and implementation of plans designed to achieve an organizations objectives. ’ John A Pearce II & Richard Robinson Strategic Management, McGraw Hill, 2007 Formulation will involve defining vision & mission, doing a situational analysis, determining objectives and formulating strategies.

Strategy implementation will involve marshaling the required resources, establishing policy and allocating resources. •Strategy evaluation involves appraising how well the organization has performed Strategic Planning (Strategic planning is a process to determine the organizations game plan (direction and path) including establishing long range objectives the abilities and opportunities. (Strategic planning may involve personnel at three tiers: a. Corporate level. –involves whole enterprise b. Business Unit or Department level –product or service based c. Functional level (Strategic management processes:

Strategy formulation -Strategy implementation -Strategy evaluation •Benefits of Strategic Management Financial Benefit: -Improvement in sales -Improvement in profitability -Productivity improvement Benefits of Strategic Management Non-Financial Benefits: •Improved understanding of competitors strategies •Mission congruence •Enhanced awareness of threats •Reduced resistance to change •Enhanced problem-prevention capabilities Key Strategic Management Questions What kind of business should we become? •Are we in the right field? •Are there new competitors? •What strategies should we pursue?

How are our customers changing? The Fundamentals Key Question in Strategic Management Peter Drucker: –Think through the overall mission of a business. Ask the key question: “What is our Business? ” Vision, Mission, Values –link to Strategy Defining vision, mission & values-foundation for the Strategy Comprehensive Strategic Management Model Fred David © Formulation Implementation Evaluation STRATEGIC MANAGEMENT PROCESS •Strategic Management is an analytical, dynamic and creative process. The Eight Step Strategic Management Process: Stage 1 Modality Stage 2 Modality

Stage 3 Modality Experiential Learning Exercise Experiential Exercise 1E –Strategic Planning at a Local Company. Fred David Pg. 78 (12 th . ed) Surf the Internet and find an organization that does strategic planning. Examine the written mission statement and do a critique that answers the question if the mission statement adequately reflects the business activities. To answer this question students are encouraged to read further on the characteristics of a good mission statement. Answers to typed out and presented at the next class. Key Terms Vision Statement – What do we want to become?

Mission Statement – What is our business? Values -Our Ethos? Vision, Mission, Values –Link to Strategy By defining our Vision, identifying the Mission and establishing the Values of the organization, we are consciously placing our planning initiatives on a firm footing and linking it to the Strategic direction. Vision –what we want to be Mission – why we exist (business) Values – what we believe in Strategy- How are we going to get there The Mission Statement •Mission Statements usually contain four different parts: •Who You Are •What You Offer •Who You Serve •How You Serve 3 Key Conditions for Success:

Organization to develop capable planners through training and rotation of personnel including line managers and division heads. (Reinforced Management Process: Long Range Planning and strategy formulation processes, budgets, market goals, appraisals and management incentives to ensure goal congruence. (Supportive Value Systems: The organizations value system and quality of work should be part of the management process. But flexible enough to cope with changes in the environment Mission Statement Benefits of a strong mission statement MAF DIRECTION STATEMENT

Vision: The Malaysian Armed Forces to be a Credible Armed Force. Mission: To realize and deliver Combat ready Forces in order to protect national sovereignty and integrity VISION & MISSION (LECTURE 2) STRATEGIC MANAGEMENT -define Strategic management is a set of decisions and actionsthat result in the formulation and implementation of plans designed to achieve an organizations objectives. ’ John A Pearce II & Richard Robinson Strategic Management, McGraw Hill, 2007 DEFINING A PLAN -A Plan is a deliberate, conscious, organized attempt to change the future by taking action in the present.

It involves ends, or objectives, actions to reach those objectives, resources to make actions possible, and a strategy or approach for doing this in the most effective way. Graduate School of Public and International Affairs University of Pittsburg. WHY PLAN? -desire to change the status quo and refocus our objectives. -control uncertainty and turbulence in the environment -to control the future through action of the -achieve consensus on goals and strategies. -to meet challenges posed by competitors. THE VISION STATEMENT (What is a Vision Statement’?

As part of the exercise, write a vision and mission -statement for your university. -Your mission statement should follow the characteristics you have been taught and present your justification. -To answer this question students are encouraged to read further on the characteristics of a good mission statement. -Answers are to be typed out and presented at the next class. EXTERNAL AUDIT (LECTURE 3) oThe external environment represents factors which are beyond the control of an organization. oThis analysis provides information on key environmental trends: (Demographic movements & changes(e. g. aging population) (Information technology usage

Key External Forces PESTE -Political, governmental & legal forces -Economic and competitive forces -Social, cultural & demographic forces -Technological forces -Ecological forces MACRO ENVIRONMENTAL SCANNING Macro Environmental Factors (PESTE ) affects productivity and performance. MACRO ENVIRONMENTAL SCANNING (Social Factors Beliefs, values, attitudes, opinions and lifestyles, is often the result of cultural, ecological, demographic, religious, educational and ethnic conditioning. Technological Factors Concerns technological change -should avoid obsolescence and promote innovation.

Adopting new technologies help improve productivity. (Ecological Factors Ecology is the relationship between man, other living things and the natural environment involving the soil, water and air. Issues like pollution (oil spills), impact air pollution, environmental impact (open burning) and soil stability can affect productivity, general health and project completion. ‘It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change. ’ –Charles Darwin Key External Forces & the Organization ORGANIZATION’S EXTERNAL ENVIRONMENT

Macro Environment Political, Economic, Social, Technological, Ecological MICRO / INDUSTRY ANALYSIS oFactors that directly affect the organization ( micro environment) oAnalysis determines how the immediate environmental forces affect the success, profitability or growth potential of the firm. oMichael Porter’s Five Forces Model is the best known conceptual framework in use for this analysis. The Five-Forces Model of Competition -Porters Five Forces Model of competitive analysis is used to develop strategies in many industries. -The intensity of competition among industries varies depending on the industry.

Internal Audit Performing an internal strategic-management audit provides a good opportunity for understanding the nature and effect of decisions on other functional areas of the organization. Internal Audit Internal Audit ‘… focuses on the identifying and evaluating the functional areas of any organization for it’s internal strengths and weaknesses …including the process activities and the support activities. ’ PUBLIC SECTOR SYSTEMS FRAMEWORK UPNM ORGANIZATIONAL FRAMEWORK Training, Consultation, Research, Publication. PROCESS ACTIVITIES (PUBLIC SECTOR) Process Activities …relates to core business functions that have an external client.

In a training organization like UPNM they are: (Training (Consulting (Research (Publications When evaluating the strengths and weakness of the processes it is important to pay attention to individual and group skills, its functioning and the use of technology. SUPPORT ACTIVITIES (PUBLIC SECTOR) Support Activities ……. relate to activities that do not have an external client but are important for the efficient functioning of the core business. for UPNM it would be the support activities or staff functions like administration, finance and technical matters (IT networks) … eg. Library, scientific and engineering labs.

Management Functions of Management •Planning •Organizing •Motivating •Staffing •Controlling MANAGEMENT FUNCTIONS •Five basic functions: i. Planning Involves setting vision, mission and goals, strategic plan, action plans and policies including doing risk analysis. ii. Organizing iii. Identify job scope, role and tasks, delegation of powers, establishing a chain of command and coordinating training requirements. iii. Motivating –Effective Leadership by motivating staff to get the jobs done under minimal supervision. Also establishing effective communication and conflict management. iv.

Staffing –Human Resource management -recruiting, selecting, training, career development and compensation. . v. Controlling –Setting performance standards, measuring actual performance, standard deviation and taking remedial action. Management Marketing •Marketing –Is transferring of products or services from the producer to the user at a pre-determined price, quantity and quality. •Marketing Mix –The Marketing mix is a blend of product, distribution, promotion and pricing strategies (based on 4Ps -product, price, place and promotion) that can give the organization the competitive edge.

Marketing (Product ( –The marketing mix is essentially geared towards marketing the product or output of the organization. –Products will undergo four life cycle phases: introductory stage, growth stage, maturity stage, and decline stage. Product Life Cycle Phase 1. -Introductory stage:a new product could face high-failure rate, little competition, frequent product modification and limited distribution Phase 2 -Growth stage:. In this stage, sales typically grow at an increasing rate and competitors may enter the market but existing competitive edge will see profits rise rapidly in this stage.

Phase 3 -Maturity stage: the longest stage of the product life cycle when sales rate decreases due to the emergence of niches marketers who concentrate on specific segments of a market. Phase 4 –Declining stage: features a long-run drop in sales due to changing consumer tastes and the emergence of substitutes. PRODUCT LIFE CYCLE Marketing Opportunity Analysis Finance/Accounting Determining financial strengths & weaknesses key to strategy formation Finance/Accounting Audit Financial Ratios Financial Ratios ii. Leverage ratio measures the extent to which the firm has been financed by debt.

Forward Integration Strategies Gain Control Over If: Current distributors – expensive or unreliable Availability of quality distributors – limited Firm competing in industry expected to grow markedly Firm has both capital & HR to manage new business of distribution Current distributors have high profit margins (c) Horizontal integration strategy : This strategy aims to reduce the number of competitors as the company would choose an acquisition, joint venture or strategic alliance to reduce competition.

Malaysian Plantation and Banking sectors have adopted this strategy to reduce competition and achieve competitive strength in overseas markets. Horizontal Integration Strategies Ownership or Control of – Firm’s competitors Backward Integration Strategies Producer controls the availability of raw material supplies in terms of pricing, quality, supply and choice. Guidelines – 3. The Diversification Strategy Diversification is basically increasing the number of outputs produced or services rendered. Key question is how to increase the variety of activities in its present operations.

There are four decisions that come under this category: a. Concentric diversification strategy -increase the variety of its manufactured products, related to its present operations. E. g. Bata shoes produces shoe polish b. Conglomerate diversification strategy is adding variety in a different or unrelated sector. Penang Port Corp also operates NDSB, Ferry Co & a small Nigerian shipyard. a. c. Horizontal diversification strategy–often having to diversify due to requests by regular clients to provide additional service. Eg. Air Asia has Tune hotels and tour facilities.

Goodyear ServitcarTyreShop also provides one stop automobile repair services. 4. Turnaround Strategies These strategies are actions commonly used by corporations facing negative growth. -negative growth rate, rate of return, making loss with no dividend payout. Retrenchment Strategy – Option to cut overhead costs without forsaking increase in productivity and efficiency.

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