STRATEGIC MANAGEMENT

Dr. Santosh Kumar, PGDHM, MPhil, PhD. Associate Professor IIHMR, Jaipur

COURSE OBJECTIVES
What

is the strategy? What is strategic management? Why strategic management? Who does strategic management? What is Strategic Planning How to do the strategic management ?

STRATEGIC MANAGEMENT
Before we discuss the strategic management, just think about your self when you passed your MBBS/MD. What other degree(s) and training(s) did your acquire after your MBBS /MD ? Why did you acquire these degrees ?

STRATEGIC MANAGEMENT
Somehow there are organizations that effectively manage change, continuously adapting their bureaucracies, strategies, systems, products, services and cultures to survive the shocks and prosper from the forces that decimate others . . . they are the masters of what I call renewal. -Robert H. Waterman, Jr. The Renewal Factor

STRATEGY?
What Does Strategy Mean?

WHAT DOES STRATEGY MEAN?

Greek Word STRATEGO meaning to plan the destruction of ones enemies through effective use of resources

Hence, a lot of term commonly used in relation to strategy - objectives, mission, strengths, weaknesses - were developed by the military.
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WHAT DOES STRATEGY MEAN?

Goal Measures

Resources
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WHAT DOES STRATEGY MEAN?

It is a means to reach or achieve the vision, the goal It is the means by which organizations differentiate itself with others It is the means by which organizations can positions itself between its external and internal environments Strategy is to the organization what personality is to the person

 Hospital

without a strategy is like a ship without rudder going around in circles. A firm without a strategy like Columbus like when he went to search for America. When he left Europe he did not know where he is going, when he reached America he did not know where he was and when he returned he could not tell where he went. A hospital manager must know where it is leading and why it is going? A job of manger is to ..

WHAT DOES A STRATEGY LOOK LIKE?

It differentiates the hospital from others and /or gives distinct competitive advantage. Operational efficiency: Cost efficiency, Innovations (in product, delivery, packaging etc.) Reverse Innovation Focus on Prevention of care Focus of on Primary healthcare WHOs focus on elderly and patient safety Day Care Surgery

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WHAT DOES A STRATEGY LOOK LIKE?

The San Jose Museum of Modern Art is a relatively new institution. They chose an innovative acquisition strategy in pursuit of their mission to in crease opportunities to experience world class art for their community: they chose to rent a collection, rather than buy one. Rather than slowly accumulate a collection, the traditional strategy for art museums, San Jose negotiated with the Museum of Modern Art in New York (which is only able to display some 10 percent of its collection at anyone time) to borrow a museum full of art on a rotating basis, drawing on the best collection in the world.

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WHAT DOES A STRATEGY LOOK LIKE?

The mission of the NAMES Project Foundation, sponsor of the AIDS Memorial Quilt, is to help bring an end to the AIDS epidemic. In addition to memorializing the victims of AIDS and drawing public attention to the AIDS epidemic, the Quilt displays are designed to carry prevention messages as well. Early on, the NAMES Project organized public displays of the Quilt allover the country. In the past few years however, the organization was able to adapt its delivery strategy in order to reach more people. Rather than producing all community displays each year through its own network, the organization now also recruits collaborative hosts in high schools, corporations, communities of faith, and elsewhere which allow NAMES to display the Quilt in three to four times as many locations each year.
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WHAT DOES A STRATEGY LOOK LIKE?

One local Humane Society provided a wide range of services, including shelter and new homes for stray pets, a spay and neuter clinic, and euthenasia for unwanted animals. After many years spent caring for neglected animals, the society shifted its strategy toward prevention. To implement the strategy all programs were instructed to develop and implement an education component to their service, and the staff increased their efforts to pass legislation designed to prevent unwanted pets and animal abuse.
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STRATEGY VS. TACTICS

Strategies are forward-looking and long term. They provide the guidelines for growth. With strategies, you are in reality, speaking of future performance gaps and how you are going to overcome them. Tactics is short term Example: By definition Strategy means to destroy enemy, tactics is how to attack enemy? do we do frontal attack, or sidewise attack or do we withdraw?

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STRATEGIC MANAGEMENT
Strategic management is

a positioning of an organization between external

(?) environment and internal (?) situation

a future-oriented plan that provides decisionmaking guidelines In organization by practicing strategic management, managers understand the present, think about the future, and recognize the signals that suggest change

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STRATEGIC MANAGEMENT
Chartering the long term direction of the hospital Setting the realistic goals and objectives of the hospital Analyzing both the internal and external environment Formulating and executing the strategies Creating a long-term value for stakeholders

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WHY STRATEGIC MANAGEMENT?

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WHY STRATEGIC MANAGEMENT?

Demographic Shifts Population mobility Increasing Costs of sophisticated computer based technologies Complicated network of cares Increasing Competition Shortage of resources Changing role for public health

.
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STRATEGIC MANAGEMENT IN THE HEALTH CARE INDUSTRY

Strategic management concepts have been employed within health care organizations only in the past 25 to 30 years. Prior to this time, individual health care organizations had few incentives to employ strategic management because typically they were independent, freestanding, not - for - profit institutions, and health services reimbursement was on a cost - plus basis.

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WHAT ARE THESE?

1950s Theory Y Management by Objectives Quantitative Mgt Diversification 1960s Managerial Grid T-Groups Matrix Management Conglomeration
Centralization/Decentralizati ons

1970 Zero-Based Budgets Participative Mgt Portfolio Mgt Quantitative MBAs

1980s Theory Z One-Minute Managing Organization Culture Intrapreneuring Downsizing MBWA (Mgt by Wandering Around) TQM/CQI

1990s Customer Focus Quality Improvement Reengineering Benchmarking Resource-Based View

2000s Six Sigma Balanced Score Card Transformational Leadership Self-Managed Teams Dynamic Capabilities Virtual Organizations Blue Oceans 20

WHEN STRATEGY NOT NEEDED?

When we have a tons of money to throw away When no competition/No challenge Monopoly situations

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STRATEGIC PLANNING
Although Strategic Planning is sometimes used interchangeably with strategic management, the term strategic planning is actual process of creating the strategy. The development of strategic management begins with long term planning called strategic planning. Long - range planning developed in the 1950s in many organizations because operating budgets were difficult to prepare without some idea of future sales and the flow of funds. Post - WWII economies were growing and the demand for many products and services was accelerating.

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STRATEGIC PLANNING
Long - range forecasts of demand enabled managers to develop detailed marketing and distribution, production, human resources, and financial plans for their growing organizations. The objective of long - range planning is to predict for some specified time in the future the size of demand for an organization s products and services and to determine where demand will occur. Many organizations have used long - range planning to determine facilities expansion, hiring forecasts, capital needs, and so on.

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STRATEGIC PLANNING

As industries became more volatile, long - range planning was replaced by strategic planning because the assumption underlying long - range planning is that the organization will continue to produce its present products and services thus, matching production capacity to demand is the critical issue.

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STRATEGIC PLANNING

However, the assumption underlying strategic planning is that there is so much economic, social, political, technological, and competitive change taking place that the leadership of the organization must periodically evaluate whether it should even be offering its present products and services, whether it should start offering different products and services, or whether it should be operating and marketing in a fundamentally different way.

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WHAT STRATEGIC PLANNING IS NOT

Strategic planning is not forecasting Strategic planning is not the simple application of quantitative techniques to business planning. Strategic planning is concerned with making decisions today that will affect the organization (product line) and its future. Strategic planning does not eliminate risk, it helps managers access the risks they must take by gaining a better understanding of the parameters involved in their decisions.

SIMPLIFIED PROCESS OF STRATEGIC PLANNING

The process of strategic planning is a step-by-step approach three key questions that lie at the heart of any business strategy: What are you going to sell? Who are your target customers? How can you beat or avoid your competition? If you can answer these three questions well, you have a strategy.

SIMPLIFIED PROCESS OF STRATEGIC PLANNING (CONT.)

Theres no denying that a simplified process involves complex issues. The process involves digesting a lot of information and requires some fairly difficult analysis. Good strategic planning should be simplified not simplistic. Good intentions alone does not get the job done.

SIMPLIFIED PROCESS OF STRATEGIC PLANNING (CONT.)

You need to see it big at first. Start at a high level. Sift through all of the noise to get to the important details The next step is do the things that matter very well. Occasionally, go back up to the high level to make sure everything is still on course.

SIMPLIFIED PROCESS OF STRATEGIC PLANNINGSTART BY STUDYING THE WAY IT IS NOW

You need to gather basic information and facts without making any judgments. Based on this information you build some assumptions, again without making judgments. This process is the central part of the planning process and needs to be reviewed in detail because this information is the foundation for all further strategy discussions and decisions.

1. 2. 3.

Data External Situation Internal Situation Capabilities and competencies

4.

Ideas Assumptions

Analysis 5. Strategic assessment Strategic Issues

6.

Direction Strategies

7.

Commitment Mission Statement Goals Objectives

8. 9. 10.

Implementation Action Plans Budgets Schedules

SIMPLIFIED PROCESS OF STRATEGIC PLANNING- HOW IT WORKS

Planning
Gather Information Assess Capabilities Make Assumptions Make Strategic Assessments Formulate Strategy Establish Goals and Objectives Formulate Tentative Action Plans Finalize Action Plans

Monitor Developments and Progress

Execution

TOTAL ORGANIZATIONAL PLANNING

Strategic Planning Long Term Business Plan Market Plan Shorter Term Business Plan Marketing Information

Sales Plan

Key Account Strategy

Target Account Strategy

Maintenance Account Strategy

Why Bother Account Strategy Strategic

Territory Plans

Action Plans

Tactical

Key and Target Account Plans

Control & Evaluation

START BY STUDYING THE WAY IT IS NOW

The course to your vision, like all navigation, starts with a known position. What markets should you pursue Who are your competitors Where is your competitive advantage What are your strengths What are your weaknesses Figuring out point A is the first essential step to charting a course to get to point B. So get your bearings! Where are you today?

P O S I T I O N I N G

Which segments / customers will we concentrate on ?

CUSTOMER TARGETS

Whom will we challenge for these customers?

COMPETITOR TARGETS

What incentives will we provide to get them to buy from us rather than from competitors?

CORE STRATEGY

DEFINING AND SELECTING KEY/TARGET ACCOUNTS

Strong High Weak

Invest / Grow
ACCOUNT ATTRACTIVENESS

Selectively Invest Manage for Cash / Withdraw

Maintain

Size Growth Profitability Location Purchasing criteria and processes Current suppliers Status of customer (prestige)

Low

BUSINESS STRENGTHS

Product range Product efficacy (the power to produce an effec ) Service quality (inc. distribution) Price Associated services (e.g. Tech advice) Reputation/image Past experience Quality of sales staff

ACCOUNT PORTFOLIO ANALYSIS

Strong
High Strength of Position Weak TARGET
Attractiveness: Accounts are potentially attractive since they offer high opportunity, but sales organization currently has weak position with accounts. Sales call strategy: Selected accounts should receive a high level of sales calls to strengthen the sales organizations position.

KEY
Attractiveness: Accounts are very attractive since they offer high opportunity and sales organization has strong position.

Sales call strategy: Accounts should receive a high level of sales calls since they are the sales organizations most attractive accounts.

Account Opportunity

MAINTENANCE
Attractiveness: Accounts are somewhat attractive since sales organization has strong position, but future opportunity is limited. Sales call strategy: Accounts should receive a moderate level of sales calls to maintain the current strength of the sales organizations position. And, efforts should be made to replace field sales calls with telephone sales.

WHY BOTHER
Attractiveness: Accounts are very unattractive since they offer low opportunity and sales organization has weak position. Sales call strategy: Accounts should receive no field sales calls and a minimum of inside sales resources.

Low

ACCOUNT SEGMENTATION AND PRIORITIZATION

High KEY ACCOUNTS
10-20% of your account base
80% of your GP$ Receives less than 50% of your resources

TARGET ACCOUNTS
(Your competitions Key Accounts)

ACCOUNT ATTRACTIVENESS

Gets very little attention

MAINTENANCE ACCOUNTS
40-45% of your account base 10-15% of your GP$ Receives 30-40% of your resources

WHY BOTHER? ACCOUNTS

30-40% of your account base Less than 5% of your GP$ Receives 20-30% of your resources Creates 90% of your headaches

Low Strong

YOUR STRENGTH OF POSITION

Weak

Sales Team and Selling Effort

Strong
Sales Channel: Major Account PROGRAMS Selling Effort: Heavy by Specialist

KEY

TARGET
Sales Channel: Direct Marketing, Teleselling, and Field Selling Heavy (best prospects) Low (other prospects)

ACCOUNT OPPORTUNITY

Sales Channel:

Field Selling and Inside Sales Heavy

Selling Effort:

Selling Effort:

MAINTENANCE
Sales Channel: Inside Sales Field Selling and Teleselling Moderate

WHY BOTHER
Sales Channel: Teleselling, Direct Marketing, and Some Inside Low

Selling Effort:

Selling Effort:

Weak

Strong

COMPETITIVE POSITION

Weak

Changing Business Environment

Leads to
Changing Selling Environment

The Selling Ballgame

*
Better Understanding of Customers Needs

Resulting in
Harder to Get and Hold Customers and It Costs More!

*
* *

Better Selectivity
Better Selling Strategies Better Time & Territory Management

Implications

PROCESS OF STRATEGIC MANAGEMENT

Mission/ Vision

Objectives

Situational Analysis

Competitive Advantage Implement Strategies

Formulate Strategies

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SITUATIONAL ANALYSIS
-External

Environment

-Internal Environment
Which one should be done first? -Developing

Mission (?) Vision (?)

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EXTERNAL ENVIRONMENTS ANALYSIS

Opportunity: favorable environment for the organization

which it can take advantage of but is not in the control of the organization

Threat: situation potentially damaging to the organization

and is not under the control of the organization

INTERNAL ENVIRONMENT ANALYSIS

Strength: Resources, capacity and capability for attainment

of goals

Weakness: limitation, fault and defect in the organization

which obstructs effective use of resources

WHAT IS VISION?

Type of organization aimed for tomorrow Dream to come true Visual and persuasive outline of the organization goal that promotes the synergic use of resources and capabilities

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VISION
Years ago, a modest entrepreneur had a fried dough traveling shop on a crowded avenue. With his great creativity, he decided to install a luminous sign advertising and sell big and good quality fried doughs. This, together with his personal friendliness made a successful business. He was even able to send his kid to the University. When his son finished College and came back home, he told his father: don't you realize the crisis ahead? control tightly your costs daddy!. His father thought about it: My son has studied a lot and knows a lot. Perhaps he is right. He started selling smaller doughs, to act concerned; he even removed the light advertisement from the shop in order to save light. He slowly run out of business until he ended up closing the shop. On his way back home, he still was thinking: My son was right!, a big crisis was indeed approaching my business! 47 His Vision determined his behaviour and decisions.

VISION
Often the vision we have from our Organization determines our decisions and the actions we take on a daily basis. This tends to happen mostly in a unconscious way. Decisions like spend versus save, taking versus avoiding risks, sharing versus preserving, and many more, are affected by the type of vision of our Organization. The port of destination tends to be more relevant than we think and impacts on the way we travel.
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WHAT IS THE MISSION?

Foundation

(reason for being) of a organization. Strategic statement that helps an organization know what it is doing right What is the purpose of our organization? What do we do, or will we do? For which reasons? For whom do we provide our service?
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VALUES
What

are the values? Which ways of working do we consider constructive and effective in our organization? Rules and procedures that describe the general attitude and professional relations in our organization (EFQM*) What are we known for? What does final customer value or appreciate from our organization?
* EFQM: European Foundation for Quality Management
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VALUES
Example:
Open to changes in the sector Focused on our customer Open workplace, diverse and of mutual support Service quality/professional service

In a certain large chain of department stores, the value of customer satisfaction is so relevant for their image and business that, when hiring new personnel (even for temporary o seasonal positions) the training sessions start and are focused on value of customer service, before even dealing with the specific training of the department or area for which the new employee is hired. This value and this way of working and communicating with customers has been the key to the success of the company

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NATIONAL HEALTH SYSTEM - MEXICO

Vision: The National Health Program pursues the creation of a universal health system, fair, based on solidarity, plural, efficient, with high quality, preventive, decentralized, participatory and focused on development. Mission: To contribute to a fair human development, inclusive and sustainable, through the promotion of health as a shared social goal and through the universal access to integral high quality services that satisfy the needs and fulfill the expectations of the population, as well as bring professional opportunities to health care providers, in a framework of a fair resource financing and usage, transparent and efficient, with a wide citizen involvement. Values: Fairness, person self-governing and shared social responsibility

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GROUP WORK

Please develop Mission Statement for your Hospital

1. External Environment (Opportunity and Threats) 2. Internal Environment (Strengths and weaknesses)

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ENVISIONING

Nine Dots Problem Game

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GROUP WORK

Please do the situational analysis for your hospital

1. External Environment (Opportunity and Threats) 2. Internal Environment (Strengths and weaknesses)

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Keeping in view the impact of the points/ issues identified in each category on your project, please rank all the issues (in each category separately) on the scale of 1-10 where 1is lowest and 10 is highest.

Issues

Impact on the Possibility of Org/Programme continuing to next 3-5 years (110) (1-10)

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SWOT ANALYSIS
Internal Strength 1. 2. External opportunity Strategy 1 (Invest) Clear matches of 1. strengths and 2. Internal Weakness 1. 2.

Strategy 2( Defend) Areas of

threat matched by areas of strength indicate a need to mobilize resources either alone or with others.

opportunities lead to comparative advantage.

External Threat 1. 2.

Strategy 3 (Decide):
Areas of opportunity matched by areas of weakness require a judgment call: invest or divest; collaborate.

Strategy 4 (Damage
Control): Areas of threat matched by areas of weakness indicate need for damage control.
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Feasibility Analysis
Apply a list of criteria to all alternative strategies
Identify one which satisfies most of the criteria
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Feasibility Criteria

Criteria of feasibility

Question

Status of strategy (high, medium or low) S1 S2 S3 S4

Technological

Is the technology developed enough?

Resource
Political Ethical Administrative

Are the necessary resources available?

Will there be strong opposition? Is it consistent with prevailing values? Can it be administered effectively?

Coast effectiveness Is it Cost effective? Congruence Speed/pace Is it consistent with project objectives? Will it achieve the desired outcome more rapidly
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STEPS FOR TRANSLATING STRATEGY INTO ACTION

Tasks to be Completed Time-frame Person Responsible Resource Needed Costs

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