Introduction to strategic management
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This document provides an overview of key concepts in strategic management including definitions of strategic planning, management control, and operational control. It also discusses mission and vision statements, goal setting, gap analysis, strategic choice, and performance measurement. Multinational strategies and issues are briefly covered along with benchmarking, the product lifecycle, and sources of risk and uncertainty.
Introduction to strategic management
- 1. Introduction to strategic management Dr Bryan Mills
- 2. Topics Definitions Information Mission/vision/objectives Gap analysis KPI Multinationals PLC Benchmarking
- 3. Definitions Strategic Planning Overall policies and objectives Management Control Effective and efficient use of resources Operational Control Specific tasks are effective and efficient
- 4. Definitions Planning……………………….. Decision making………………… Strategic decisions……………….. Control………………….
- 5. Information Future Uncertainty Forecasts and Estimates Use of sensitivity analysis DCF Project evaluation Managing cash and operations Post implementation review
- 6. The issues: What makes estimating hard? Financial Reporting Treatment of overheads Neat rather than useful Internal focus Infelxible Historic costs Strategic issues Complex models
- 8. Mission versus Vision Vision – Where is the business going (to)? Mission – What is the business for?
- 9. Vision What the business is now What it could be in an ideal world What the ideal world would be like
- 10. Our vision : to become the world's leading company for automotive products and services. Our mission : we are a global, diverse family with a proud heritage, passionately committed to providing outstanding products and services. Our values : We do the right thing for our people, our environment and our society, but above all for our customers.
- 11. Guess who to organize the world’s information and make it universally accessible and useful. and: Leading in our chosen markets Delivering an outstanding client experience based on excellence in sales, service and solutions Achieving a superior, ethically based, long-term return for our shareholders Building highly motivated, high-performance teams Creating a challenging, rewarding and fun work environment
- 12. Mission Elements of mission Detail Purpose Why – for shareholders and satisfy stakeholders Strategy Nature of business; products/services; competitive position; competence; competitive advantage Policies and standards of behaviour Mission converted to practice Value and Culture Basic (unstated?) beliefs
- 13. Mission Brief, flexible, distinctive and open-ended Identity of whom the organisation exist to benefit Nature of the firms business Ways of competing (price, etc.) Principles of business Commitment to customers
- 14. Mission and Planning Inspires planning Screens new plans Affects the implementation
- 15. Goals and Objectives Goals – long term Objectives – short-term to achieve goals Goals expressed as SMART objectives Specific Measurable Attainable Result-oriented Time-bound
- 16. Goal Congruence Across departments – horizontal At all levels – vertical Over time
- 17. Goal types Goal Comment Ideological Goals Organisation’s mission Formal Goals Imposed by individuals/groups Shared Personal Goals Individuals reach consensus System Goals Independent of mission – derive from organisations existence as an organisation
- 18. Goal Setting Top-down Bottom-up By precedent- historic By diktat By consensus
- 19. Goal Setting Political process involving bargaining Shareholder – profits Employees – salaries Managers – power Customers – quality Conflict between these objectives?
- 20. Corporate Objectives Corporate – whole Profit; market share; growth; cashflow; ROCE; risk; Customer satisfaction; quality; Industrial relations; Added value; EPS Unit – individual unit Commercial – increase number of customers (sales dept.) Public sector – more nursery places (LEA) General – resources; market; staff development; innovation; productivity; technology
- 21. Primary and Secondary Obj. ‘ opportunity cost’ of objectives Limit to the number of objectives a manger can pursue Should be one primary core objective And other secondary objective Primary – growth in profits Secondary – sales growth; innovation; quality; resource management
- 22. Secondary Financial Technology Product design and development R&D Quality Product market Market leader Coverage (range) Position Expansion
- 23. Ranking objectives and trade-offs Never enough time Degrees of achievement 15% sales growth; 10% profit growth, £2m negative cashflow; reduced quality 8% sales growth; 5% profit growth, £0.5m positive cashflow; quality
- 24. Department plans and objectives Document the responsibility Prepare responsibility charts Manager’s main objective Programme for achieving that Sub-objectives Critical assumptions Prepare activity schedules
- 26. Social Audit Recognise rationale for engaging Identify programme which are congruent with mission Determine objectives and priorities Specify nature and range of resources required Evaluate company involvement in programmes past, present and future
- 27. Ethics and ethical conduct Social responsibilities – general stance Ethics – how we (organisations) conduct ourselves Amoral – ACCA – condone any action that help aim. Definition – right or wrong not valid Legalistic – letter of law only Responsive – see gain in ethics Emerging ethical (ethically engaged) – active Ethical organisations – total ethical profile
- 28. Impact of corporate code Commitment by senior management Discourage previous behaviour Staff need to be onboard Tension between code and performance Statement of ethical conduct and specific codes of practice
- 29. Gap Analysis Gap analysis –compare ultimate objective with expected performance Determine targets Establish what would happen if we did nothing Planning gap Between forecast position from carrying on as is (NOT where we are now) and forecast desired
- 30. Gap Analysis Want Carry on as is Time M Share
- 31. Gap and ANSOFF Profit/market share Target Forecast min Improve existing Product dev. Market pen.
- 33. Strategic choice Strategic Options Generation Creative Strategic Options Evaluation Acceptable Sustainable Feasible Environmentally fit Strategic Selection Competitive strategy How to Market strategy Where to Institutional strategy Method (relationship with other organisations)
- 34. Assessment Mission Objectives Evaluate Create Corporate Plan Assess external environment, O pportunities and T hreats, P olitical, E conomic, S ocial and T echnological Assess the internal environment, S trengths and W eaknesses Develop mission statement, or if one already exists establish how it relates to the above assessment Develop objectives using mission and assessment Consider alternative ways of achieving these objectives Develop a corporate plan featuring the above objectives and mission.
- 35. What do you think are the differences between Strategic and Operational?
- 36. Discuss Unrealistic plans Inconsistent goals Poor communication Inadequate performance measurement
- 37. Not everything that counts can be counted, and not everything that can be counted counts False alarms Disproportionate focus on direct costs Efficiency v effectiveness Machine standard hour irrelevant as long as capacity exists Gaps missed New products Customer satisfaction Employee involvment
- 38. Strategic control Time-lag Source of comp. adv. risks linkages Influencers
- 39. Critical Success Factors Money : positive cash flow, revenue growth, and profit margins. Your future : Acquiring new customers and/or distributors. Customer satisfaction : How happy are they? Quality : How good is your product and service? Product or service development : What's new that will increase business with existing customers and attract new ones? Intellectual capital : Increasing what you know that's profitable. Strategic relationships : New sources of business, products and outside revenue. Employee attraction and retention : Your ability to do extend your reach. Sustainability : Your personal ability to keep it all going.
- 40. Four basic types of CSFs according to Rockart: Industry CSFs resulting from specific industry characteristics; Strategy CSFs resulting from the chosen competitive strategy of the business; Environmental CSFs resulting from economic or technological changes; and Temporal CSFs resulting from internal organizational needs and changes . http://www.e-competitors.com/Strategy/SBUPlanning/SBUPositioning/SBU_Critical.htm
- 41. Strategic Performance Measures Desirable Features Focus on long run Identify and communicate drivers of success Support organisational learning Basis for reward Characteristics Measurable; Meaningful; Defined by Srtat.; Consistent; Re-evaluated Regularly; Acceptable
- 43. PLC Intro. Growth Maturity Decline Financial High risk High risk Medium Low CSF Time to Launch Market share/comp. Adv Retention Timely exit Info Research Market share Costs Exit Control Milestones DCF ROI Free cash flow Cash User User Generator Generator Ret on Cap Not Imp. Not Imp. Important Important Growth Vital Vital New Uses Negative Profit None important Important V Imp.
- 44. Multinationals Central headquarters in one country and subsidiaries on others Extend PLCycle Less competition High growth Reduce risk
- 45. Competitive Strategy (multinational) Cost Leadership – economies of scale Differentiation – new product for overseas Focus – core segment of customers Pre-empt competition from overseas
- 46. Can you think of some other reasons/problems?
- 47. Control and Structure Global Matrix Global Opportunities High Global Product structure Global hierarchy Low International Division (single division) Global geographic structure (multiple) Low High Multidomestic Opportunities
- 48. Protectionism Tariffs – tax on import. %of value ( ad valorem ) or per unit (specific) Quota – limit on quantity Minimum local content rules Minimum prices – anti-dumping Embargos Subsidies for domestic Bureaucracy Exchange Controls and Policy
- 49. Benchmarking Internal Functional – regardless of industry Competitive- direct competition Strategic – action and change
- 50. Stages of Benchmarking Set objectives KPI Select organisations Measure Comapre Design improvements Monitor
- 51. Risk and Uncertainty Physical Economic Business PLC Political Financial
- 52. Where next?
- 53. http://www.emeraldinsight.com/content_images/fig/3300080110004.png GE McKinsey Matrix