Strategic Management Process

An Overview

SEQUENCE
1. Thinking Strategically 2. Five Tasks of Strategic Management 2.1. Developing Mission and Strategic Vision 2.2. Setting Objectives 2.3. Crafting a Strategy 2.4 Implementing & Executing Strategy 2.5 Evaluating Performance and Initiating Corrective Adjustments 1. Characteristics of Strategic Management Process

1- Thinking Strategically

Thinking Strategically
First-rate strategic thinking is conscious strategy management as opposed to freewheeling improvisation, gut feel, and hoping for good luck. Doing a good job of managing inherently requires good strategic thinking. Todays managers have to think strategically about their organizations position and about the impact of changing conditions. (Continued)

They have to monitor the organizations external environment and internal capabilities closely enough to know when to institute strategy changes. They have to know the business well enough to determine what kinds of strategic changes to initiate. Simply said, the fundamentals of strategic management need to drive the whole approach to managing organizations.

Three Big Strategic Questions

1. Where are we now? 2. Where do we want to go?
Business(es) to be in and market positions to stake out? Buyer needs and groups to serve? Outcomes to achieve?

3. How do we get there?

Advantages
1. Providing better guidance to the entire organization on the

crucial point of what it is we are trying to do,; threatening developments;

2. Making employees more alert to new opportunities and

3. Helping to unify the organization; 4. Creating a more proactive management posture; 5. Promoting development of a constantly evolving business

model that will produce sustained bottom-line success for the enterprise; and budget requests a rationale that argues strongly for steering resources into strategy-supportive, results-producing areas.

6. Providing managers with a rationale for evaluating competing

Chief Executive Officer of a successful company put it well when he said:

In the main, our competitors are acquainted with the same fundamental concepts and techniques and approaches that we follow, and they are as free to pursue them as we are. More often than not, the difference between their level of success and ours lies in the relative thoroughness and selfdiscipline with which we and they develop and execute our strategies for the future.

2- Five Tasks of Strategic Management

Strategic management is not a box of tricks or a bundle of techniques. It is analytical thinking and commitment of resources to action. Peter Drucker

Strategic Management
The term strategic management refers to the managerial process of forming a strategic vision, setting objectives, crafting a strategy, implementing and executing the strategy, and then over time initiating whatever corrective adjustments in the vision, objectives, strategy, and execution are deemed appropriate.

The Five Tasks

Developing a Strategic Vision and Mission Setting Objectives Crafting a Strategy Implementing and Executing the Strategy Evaluating Performance and Initiating Corrective Adjustments

The Five Tasks

Task 1
Develop a Strategic Vision and Mission

Task 2

Task 3
Craft a Strategy to Achieve Objectives

Task 4
Implement and Execute Strategy

Task 5
Monitor, Evaluate, and Take Corrective Action

Set Objectives

Revise as Needed

Revise as Needed

Improve/ Change

Improve/ Change

Recycle as Needed

2.1.

Developing Mission and Strategic Vision

Strategic Vision
A strategic vision is a roadmap of a companys futureproviding specifics about technology and customer focus, the geographic and product markets to be pursued, the capabilities it plans to develop, and the kind of company that management is trying to create.

Strategic Vision
A roadmap of a companys future

Future technology-product-customer focus Geographic and product markets to pursue Capabilities to be developed Kind of company that management is trying to create

Mission Statement
A companys mission statement is typically focused on its present business scope "who we are and what we do"; mission statements broadly describe an organizations present capabilities, customer focus, activities, and business makeup.

Missions vs. Strategic Visions

A mission statement focuses on current business activities -who we are and what we do

Current product and service offerings Customer needs being served Technological and business capabilities

A strategic vision concerns a firms future business path -- where we are going
Markets to be pursued Future technologyproduct-customer focus Kind of company that management is trying to create

2.2.

Setting Objectives

Objectives
Objectives are an organizations performance targetsthe results and outcomes it wants to achieve. They function as yardsticks for tracking an organizations performance and progress.

Strategic Objectives
Strategic objectives relate to outcomes that strengthen an organizations overall business position and competitive vitality; Financial objectives relate to the financial performance targets management has established for the organization to achieve.

Setting of Objectives
Financial Objectives Strategic Objectives
Outcomes focused on improving longterm, competitive business position

Outcomes focused on improving financial performance

2.3.

Crafting a Strategy

Without a strategy the organization is like a ship without a rudder.

Joel Ross and Michael Kami

What Is Strategy?
A strategy consists of the competitive efforts and business approaches that managers employ to please customers, compete successfully, and achieve organizational objectives. Strategy is both proactive (intended and deliberate) and reactive (adaptive). Strategies are partly visible and partly hidden to outside view.

What Is a Business Model?

A companys business model deals with whether the revenue-cost-profit economics of its strategy demonstrate the viability of the enterprise as a whole.
Look at the revenue streams the strategy is expected to produce Look at the associated cost structure and potential profit margins Do the resulting earnings streams and ROI indicate the strategy makes sense and that the company has a viable business model?

Why Are Strategies Needed?

To proactively shape how a companys business will be conducted To mold the independent actions and decisions of managers and employees into a coordinated, company-wide game plan

Crafting a Strategy
Involves deciding how to

Respond to changing buyer preferences Respond to new market conditions Grow the business over the long-term Achieve performance targets Outcompete rivals

Strategy is Partly Planned and Partly Reactive

Company Experiences, Know-how, Resource Strengths and Weaknesses, and Competitive Capabilities
y trateg s oned Aband atures fe

gy New initiativ es plus ong oing strategy fea tures contin u ed from prior p eriods
to ctions a ptive re stances Ada m g circu hangin

Planned Stra t

Actual Company Strategy

y Strateg e Reactiv

Understanding Strategy What to Look For

Actions to diversify Actions to strengthen resources & capabilities How functional activities are managed Efforts to pursue new opportunities or defend against threats Actions to outcompete rivals Responses to changing external circumstances Actions to alter geographic coverage Actions to merge or acquire rival companies

Pattern of Actions That Define Strategy

Actions to form strategic alliances and collaborative partnerships

Strategic Approaches to Future Market Conditions

Company Approaches
Reactive/Follower Proactive/Leader

Future Market Conditions

Rapid Revolutionary Change

Keep from being swamped by the waves of change

Aggressively altering strategy to make waves and drive change Anticipating change and initiating strategic actions to ride the crest of change

Gradual Evolutionary Change

Revising strategy (hopefully in time) to catch the waves of change

Source: Adapted from Derek F. Abell, Competing Today While Preparing for Tomorrow, Sloan Management Review 40, No. 3 (Spring 1999), p. 75.

Strategy Selection
Each of the four basic strategy-making approaches has strengths and weaknesses, and each is workable in the "right" situation.

An Ongoing Process
Strategy making is fundamentally a market-driven and customer-driven entrepreneurial activitythe essential qualities are a talent for capitalizing on emerging market opportunities and evolving customer needs, a bias for innovation and creativity, an appetite for prudent risk taking, and a strong sense of what needs to be done to grow and strengthen the business. The march of external and internal developments dictate that a companys strategy change and evolve over timea condition that makes strategy making an ongoing process, not a one-time event.

Strategies and Long-Term Performance

Trailblazing strategies can be the key to better long-term performance. Business history shows that high-performing enterprises often initiate and lead, not just react and defend. They launch strategic offensives to out-innovate and outmaneuver rivals and secure sustainable competitive advantage, then use their market edge to achieve superior performance. Aggressive pursuit of a creative strategy can propel a firm into a leadership position, paving the way for its products and services to become the industry standard. High-achieving enterprises are nearly always the product of proactive management, rather than the result of lucky breaks or a long run of good fortune.

What is a Strategic Plan?

Where firm is headed -Strategic vision and business mission Short and long term performance targets -- Strategic and financial objectives Action approaches to achieve targeted results -- A comprehensive strategy

Strategic Plans
A strategic plan consists of an organizations mission and future direction, near-term and longterm performance targets, and strategy. The faster a companys external and internal environment changes, the more frequently that its short-run and long-run strategic plans have to be revised and updatedannual changes may not be adequate. In todays world strategy life cycles are growing shorter, not longer.

2.4 Implementing & Executing Strategy

Strategy Implementation
Strategy implementation and execution is an action-oriented, make-it-happen process involving people management, developing competencies and capabilities, budgeting, policy-making, motivating, culture-building, and leadership. Excellent execution of an excellent strategy is the best test of managerial excellenceand the most reliable recipe for organizational success.

Strategy Execution
Strategy implementation concerns the managerial exercise of putting a freshly chosen strategy into place. Strategy execution deals with the managerial exercise of supervising the ongoing pursuit of strategy, making it work, improving the competence with which it is executed, and showing measurable progress in achieving the targeted results. Strategy execution is fundamentally an action-oriented, make-it-happen processthe key tasks are developing competencies and capabilities, budgeting, policy making, motivating, culture-building, and leadership.

2.5 Evaluating Performance and Initiating Corrective Adjustments

Evaluating Performance
A companys vision, objectives, strategy, and approach to implementation are never final; Evaluating performance, reviewing changes in the surrounding environment, and making adjustments are normal and necessary parts of the strategic management process.

Best-Managed Organizations
Two factors separate the best-managed organizations from the rest:
1. Superior strategy making and entrepreneurship, and 2. Competent implementation and execution of the chosen strategy.

Quality of managerial strategy making and strategy implementing has a significant impact on organization performance. An organization that lacks clear-cut direction, has vague or undemanding objectives, has a muddled or flawed strategy, or cant seem to execute its strategy competently is a company whose performance is probably suffering, whose business is at long-term risk, and whose management is lacking. The better conceived an organizations strategy and the more proficient its execution, the greater the chances the company will be a leading performer in its markets and truly deserve a reputation for talented management.

Tightly-Knit Process
Strategic management is a tightly-knit process. The boundaries between the five tasks are conceptual, not fences that prevent some or all of them being done together.

Broad Participation
Every company manager has a strategy-making/ strategy-implementing roleit is flawed thinking to view strategic management as solely the province of senior executives. Broad participation in a companys strategycreating exercises is usually a strong plus. Corporate Enterpreneuring relies upon middle and lower-level managers and teams to spot new business opportunities, develop strategic plans to pursue them, and create new businesses.

Characteristics of Strategic Management Process

Characteristics
Need to do the five tasks never goes away. Boundaries among the five tasks are blurry. Strategizing is not isolated from other managerial activities. Time required comes in lumps and spurts. The Big Challenge is to get the best strategy
Supportive performance from employees, Perfect current strategy, and Improved strategy execution

Strategic Management Principle

The role of Board of Directors in the strategic management process is to critically appraise and ultimately approve strategic action plans and to evaluate the strategic leadership skills of the CEO and others in line to succeed the incumbent CEO.

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