Professional Documents
Culture Documents
Definition
y Strategic management is a set of decisions and
actions that result in the formulation and implementation of plans designed to achieve company objectives. y Strategy is a large-scale, future oriented plans for interacting with the competitive environment to achieve company objectives. y Strategy provides a framework of managerial decisions.
environment analysis including competitive and general contextual factors y Identify alternative strategic choices y Identify the most desirable in light of its resources and external environment y Select long-term objectives and grand strategies
Contd
y Develop annual objectives and short-term
directors, chief executive and administrative officers. y Business level comprising of business and corporate managers at SBUs. y Functional level comprised of managers of product, geographic, and functional areas.
Contd
y Business level decisions y Help bridge decisions at corporate and functional level y Are less costly, risky, and potentially profitable than corporate level decisions
authority and discretion in decision making is specified. They include: y Entrepreneurial mode: associated with ownermanager of small firms. y Planning mode: associated with large firms that operate under comprehensive, formal planning system. y Adaptive mode: associated with medium-sized firms
improves their understanding and motivation y Gaps and overlaps in activities are reduced y Resistance to change is reduced
action choice y Strategic control and y Long-term objectives continuous improvement y Generic and grand strategies
Company Mission
principal products or service and primary customer needs to satisfy. y It answers the question: what business we are in?
Formulating a Mission
y The mission should state the basic type of
product or service to be offered, the primary markets or customer groups to serve; the technology to be used in production or delivery; the firms fundamental concern for survival through growth and profitability; the firms managerial philosophy; the public image the firm seeks; and self-concept those affiliated with the firm should have of it.
Vision Statement
y The vision statement is sometime developed to
express the aspirations of the executive leadership. y It presents the firms strategic intent that focuses the energies and resources of the company on achieving a desirable future. y The vision and mission are frequently combined into a single statement.
Board of Directors
y The group of stock-holder representatives and
strategic managers responsible for overseeing the creation and accomplishment of company mission. y In the current business environment, they are accepting the challenge of shareholders and other stakeholders to become actively in establishing the strategic initiatives of the company that they serve.
defining company mission, strategic managers must recognize the legitimate rights of the firms claimants. y These include not only the stockholders and employees but also outsiders affected by the firms actions. (stakeholders) y The mission statement should incorporate:
y Identified stakeholders
Cont d
y Understanding of stakeholders claims y Reconciliation of the claims and assignment of
priorities to them y Coordination of the claims with other elements of the company mission
business has a duty to serve society in general as well as the financial interest of stockholders. y CSR should be viewed as a component in the decision-making process of business that must determine, among other objectives, how to maximize profits. y CSR costs are more than offset in the long-run by an improved company image and increased community goodwill.
buyer power with consumers becoming more interested in buying products from socially responsible companies. y The globalization of business: CSR has become more complex as companies increasingly transcend national borders.
must identify all stakeholder groups and weigh their relative rights and abilities to affect the firms success. y Social Audit attempts to measure a companys actual social performance against its social objectives.
societys beliefs about the action of an individual or group that are right or wrong. y Central to the belief that companies should be operated in a socially responsive way for the benefit of all stakeholders is the belief that managers will behave in an ethical manner.
corporate fabric. Managed properly, CSR programs can confer significant benefits to participants in terms of reputation, hiring, motivation, and retention and as a means of building and cementing valuable partnerships. y The challenge for management, then, is to know how to meet the companys obligations to all stakeholders without compromising the basic need to earn a fair return of its owners.
the control of the firm that influence its choice of direction and action, organizational structure and internal processes. y These factors can be divided into three;
y Remote environment y Industry environment y Operating environment
Remote Environment
y Comprises of factors that originate beyond, and
Contd
y Economic factors: these relate to nature and
direction of economy.
y Consumption patterns, availability of credit,
disposable income, interest rates, inflation rates and growth trend of GDP.
y Social
factors: involves beliefs, values, attitudes, opinions and lifestyles of persons in firms external environment.
y Change in social attitudes leads to change in
Contd
y Political
factors: defines the legal and regulatory parameters within which the firm operates.
y Antitrust laws, tax programs, minimum wage
Contd
y Ecological factors: relate to threats to natural
environment.
y Ecology is the relationship among human
beings and other living things and the air, soil and water that supports them. Pollution is threat to ecology due to human activity. y Ecological concerns are global warming, loss of habitant and biodiversity, as well as air water and land pollution.
Industry Environment
y Refers to general conditions for competition
that influence al businesses that provide similar products and services. y The five forces driving industry competition according to Porter are; y Determinants of entry y Determinants of rivalry y Determinants of supplier power y Determinants of buyer power y Determinants of substitution threat
Barriers to Entry
y Economies of scale deter entry by forcing the
entrants to come in large scale or accept a cost advantage. y Product differentiation creates a barrier by forcing entrants to spend heavily to overcome customer loyalty. y Capital requirements creates a need to invest large financial resources in order to compete. y Cost advantages independent of size
Contd
y Access to distribution channels: a new food
product must displace others from the supermarket shelf via price breaks, promotions or intense selling efforts. y Government policy: can limit or even close entry to industry.
Powerful Buyers
y Can squeeze profitability out of an industry. A
supplier group
Substitute Products
y They limit the potential of the industry unless it
Powerful Buyers
y Customers can drive down prices or demand
questions:
y What are boundaries in the industry? y What is the structure of the industry? y Which firms are our competitors? y What are the major determinants of
competition?
Operating environment
y These are factors in the immediate competitive
situation that affect a firms success in acquiring needed resources. y These factors are:
y Firms competitive position y Composition of its customers y Its reputation among supplier and creditors y Ability to attract capable employees
Contd
y Competitive position: includes market share,
bread the of product line, relative product quality, financial position, effectiveness of sales distribution, price competitiveness, technological position among others. y Customer profiles: include geographical, demographic, psychographic and buyer behavior. y Suppliers and creditors : dependable relationship between the firm, creditors and the supplier is essential. Other factors include reputation and human resources
Conclusion
y Assessing the potential impact of changes in
external environment offers a real advantage. y It enables decision makers to narrow the range of the available options and to eliminate options that are clearly inconsistent with the forecast opportunities. y It generally leads to the elimination of all but the most promising options.