Basic Concepts of Strategic Management
Basic Concepts of Strategic Management
Basic Concepts of
Strategic Management
a. Phase of Strategic Management
1. The Study of Strategic b. Benefits of Strategic
Management Management
Strategic planning was the number two tool used by decision makers just
behind customer relationship management. Planning the strategy of large,
multidivisional corporations can be complex and time consuming. It often
takes slightly more than a year for a large company to move from situation
assessment to a final decision agreement. It is needed to ensure that strategic
planning leads to successful performance.
GLOBAL IZATION, INNOVATION, AND SUSTAINABILITY:
CHALLENGES TO STRATEGIC MANAGEMENT
The ability to create unique value and grow an organization
requires innovation skill. Today, the term used to describe a
business’s sustainability is the triple bottom line. This phrase was
first used by John Elkington in 1994 to suggest that companies
prepare three different bottom lines in their annual report.
• Traditional Profil/Loss
Portfolio Presentation
Impact Of Innovation 61% were
spending more
money on The top five most
innovation in innovative
2014 than in companies were
2013 Apple, Google,
75% of respondents Samsung,
Innovation, as the term is used in reported that Microsoft, and
business, is meant to describe new innovation IBM
products, services, methods, and investment was
primarily aimed at
organizational approaches that allow the
long-term advantage 70% of executives
business to achieve extraordinary returns. and current felt their own
Boston Consulting Group (BCG) found that competitive companies
innovation is a top 3 priority for three- advantage innovation
capabilities were
quarters of the companies in the 2014 BCG only aver-age and
global innovation survey. They also found 13% felt they were
that: weak.
Sustainability refers to the use of business practices to manage the triple bottom
line. That triple bottom line involves:
1. The management of traditional profit/loss
2. The management of the company’s social responsibility and
3. The management of its environmental responsibility
B. Objectives: Listing Expected Results Objectives are the end results of planned activity. They should be stated as action verbs and tell employees what is to
be accomplished and when, with appropriate metrics. The achievement of corporate objectives should result in the fulfillment of a corporation’s mission. The term
goal is often used interchangeably with the term objective. Some of the areas in which a corporation might establish its goals and objectives are:
D. Policies: Setting Guidelines A policy is a broad guideline for decision making that links the formulation of a strategy with its implementation.
Companies use policies to make sure that employees throughout the firm make decisions and take actions that support the corporation’s mission,
objectives, and strategies.Consider the following company policies:
• 3M: 3M says researchers should spend 15% of their time working on something other than their primary project. (This supports 3M’s strong product
development strategy)
• Google: Google’s health care plan includes their onsite medical staff. Any employee who feels ill at work can make an appointment with the doctor at
the Googleplex. This supports the Google HRM functional strategy to support its employees.
• General Electric: GE must be number one or two wherever it competes. (This supports GE’s objective to be number one in market capitalization.)
• Starbucks: All Starbucks employees are offered a Total Pay Package that includes a 401(k) savings plan, stock options, and an employee stock
purchase plan. This goes a long way toward their goal of having every employee feel like a partner in the business.
• Ryanair: Ryanair charges for everything a passenger might want or need on a flight. The only thing you get with your ticket is the right to a seat on the
plane (and that seat depends upon how fast you can run across the tarmac to the plane).
Strategy implementation is a process by which strategies and policies are put into action through the
3. Strategy development of programs, budgets, and procedures. This process might involve changes within the
implementation overall culture, structure, and/or management system of the entire organization.
Performance is the end result of activities.49 It includes the actual outcomes of the strategic
management process. The practice of strategic management is justified in terms of its ability
to improve an organization’s performance, typically measured in terms of profits and return
on investment. For evaluation and control to be effective, managers must obtain clear,
prompt, and unbiased information from the people below them in the corporation’s hierarchy.
Using this information, managers compare what is actually happening with what was
originally planned in the formulation stage.
■ New CEO:
By asking a series of Performance gap:
embarrassing A performance gap
questions, a new CEO Strategic inflection point:
exists when
cuts through the veil of Coined by Andy Grove, past-
External intervention: Threat of a change performance does not
complacency and CEO of Intel Corporation, a
A firm’s bank suddenly in ownership: meet expectations.
forces people to strategic inflection point is what
refuses to approve a Another firm may
question the very Sales and profits happens to a business when a
new loan or suddenly initiate a takeover by
reason for the either are no longer major change takes
demands payment in buying a company’s
corporation’s increasing or may place due to the introduction of
full on an old one. A key common stock.
existence. new technologies, a different
customer complains even be falling.
about a serious product regulatory environment, a change
defect. in customers’ values, or a change
in what customers prefer
STRATEGIC DECISION MAKING
One effective means of putting the strategic decision-making process into action is through a technique known as the
strategic audit. A strategic audit provides a checklist of questions, by area or issue, that enables a systematic analysis to be
made of various corporate functions and activities.
A strategic audit is a type of management audit and is extremely useful as a diagnostic tool for pinpointing corporatewide
problem areas and to highlight organizational strengths and weaknesses. A strategic audit can help determine why a certain
area is creating problems for a corporation and help generate solutions to the problem. The critical question needed for a
detailed strategic analysis of any business it needed based on particular companies in defferent part of countries.
An analyst can develop responses to these sub questions when they are needed for a complete strategic analysis of a
company.