Objective

To look at an organization from

an entrepreneur perspective
Integrate the knowledge gained
in earlier core courses
The Strategic Management Process

Internal
Analysis

Strategy Strategy Strategic

Mission,
Formul- Implem- Eval. &
Vision &
ation entation Control
Objectives

Environ.
Analysis
Definition of Strategic Management

The process of analyzing the current

situation, developing appropriate
strategies, putting those strategies
into action and evaluating,
modifying or changing those
strategies as needed
 Strategy
 A company’s strategy consists of the competitive
moves, internal operating approaches, and action
plans devised by management to produce successful
performance.

 Strategy is management’s “game plan” for running

the business.

 Managers need strategies to guide HOW the

organization’s business will be conducted and HOW
performance targets will be achieved.
Levels of Strategy
 Levels of Strategy
1. Corporate-level Strategy
The set of strategic alternatives that an organization
chooses from as it manages its operations
simultaneously across several industries and several
markets.
2. Business-level Strategy
How the organization conducts business in a particular
industry.
3. Functional-level Strategy
Strategy developed for specific functional areas
such as marketing, finance, and so forth.
Levels of Strategy-Making

Corporate
Strategy

Business
Strategies

Functional
Strategies
 Basic Activities of Strategic
Management
Strategic Intent Strategic Intent
Situation Strategy
Analysis Formulation

Strategy Strategy
Evaluation Implementation

Strategic Intent Strategic Intent

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 Characteristics of Strategic
Management

Interdisciplinary
Four aspects
that set apart External focus
Strategic Internal focus
Management
Future direction

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 Misconceptions
Strategic Management
 Strategic Management is dead
– Every organization needs the focus and direction
provided by its strategies and the strategic
management process
 Strategy is strictly for top management
– Top management play a crucial role, but everyone
in the organization has a part to play.
 Strategy is about planning
– Strategic management process shows that strategy
is not only about planning, but also about doing.
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 Misconceptions about
Strategic Management
 Strategy is stable and constant
– Organizations compete in dynamic environments.
Flexibility and change needed to respond to
environmental opportunities & threats, & strength and
weaknesses
 Strategic management outlines ultimate
destination & route
– It establishes a systematic approach to analyzing
relevant information & using it to design, implement,
& evaluate appropriate strategies.
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 Strategic Management’s Uniqueness

 Field of Study  Level of Analysis

– Macroeconomics
– Microeconomics
– Strategic Management
– Finance
– Marketing
– Org. Behavior
– Human Resource Mgmt.
– Operations Mgmt.
– The economy
– Industries & markets
– Firms & businesses
– Investment Projects
– Products & services
– Individuals & Groups
– Tasks & Structure
– Plants

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 Three Big Strategic Questions
 Where Are We
Now?

 Where Do we Want
to Go?

 How Will We Get

There?
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Three Elements of a Strategic Vision

Use the mission statement as a

starting point

Develop a strategic vision that

spells out a course to pursue

Communicate the vision in a

clear and exciting manner
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 Mission, Vision & Objectives

 A company’s mission is a statement of

– the basic purpose or reason for its existence
– its values (role to stakeholders - customers,
employees, society, etc.).

 The vision goes beyond the mission statement

– clarifies the long-term direction of the company
(where the company is going)
– reflects management’s aspirations for the company

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 Mission, Vision & Objectives
 Objectives are yardsticks for tracking a
company’s performance or end result.
– Financial performance objectives (e.g.,
ROA, ROI, ROE, Dividend growth, Stock
price, etc.).

– Strategic performance objectives (e.g.,

market share, growth, innovation leader,
customer service, community &
environmental responsibility, etc.)
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 Examples of Mission & Vision
 Southwest Airlines:
– Mission: To provide high quality service at a lower
price in the airline industry.
– Vision: Opening air travel to a wider group of
leisure travelers while infusing the organization with
a sense of fun.

 Apple Computer:
– Mission: To bring the best personal computing
products and support to consumers around the
world.
– Vision: One person, one computer.

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 Financial & Strategic Objectives
 Aluminum Company
– Financial: To outperform the average return on equity
of the S&P’s industrial stock index.
– Strategic: To be lowest-cost producer of aluminum.

 GE
– Financial: To achieve an average of 10 inventory turns
and a corporate operation profits margin of 16% by
20XX.
– Strategic: To become most competitive enterprise in
the world by being #1 or #2 in market share in every
business the company is in.
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 Business Definition and Mission:
broad or narrow?
 Diversified companies have broader mission
and business definitions than single-business
enterprises

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 An example: The Gillette Co.
 … a globally focused consumer products company
that seeks competitive advantage in quality, value-
added personal care and personal use products.
We compete in four large, worldwide businesses:
personal grooming products, consumer portable
power products, stationery products and small
electrical appliances
 … our mission is to achieve or enhance clear
leadership, worldwide, in the existing or new core
consumer product categories in which we choose
to compete
2
 The mission of Hallmark
 What business is Hallmark in? What is its mission? What
does it stand for?
 Customers buy not only cards, but also candles, party
supplies, crystal items, bath products, fine pens and pencils
and jewellery.
 Hallmark’s self-defined mission
– Bring quality to social expression

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 Defining a Company’s Business
 A good business definition incorporates
three factors
– Customer needs -- What is being
satisfied
– Customer groups -- Who is being
satisfied
– Technologies and competencies
employed -- How value is delivered to
customers to satisfy their needs (an
indication of how integrated a firm is)

2
 Characteristics of a Mission Statement
 Defines current business activities
 Highlights boundaries of current business
 Conveys
– Who we are,
– What we do, and
– Where we are now
 Company specific, not generic—
so as to give a company its own identity
A company’s mission is not to make a profit !
The real mission is always—“What will we do
to make a profit?” 2
 Characteristics of a Strategic Vision
 Charts a company’s future
strategic course
 Defines the business makeup for
5 years (or more)
 Specifies future technology-
product-customer focus
 Indicates capabilities to be
developed
 Requires managers to exercise
foresight
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 Strategic inflection points
 Sometimes there’s an order of
magnitude change in a company’s
environment that dramatically alters its
prospects and mandates radical
revision of its strategic course
 Andy Grove, Intel’s CEO calls them
strategic inflection points

2
 Intel’s strategic inflection points
– Intel encountered two strategic inflection points
within the past 15 years
– First came in mid-1980s when Intel’s principal
business (70% of revenue) was memory chips
» 1985 - Decided to withdraw from memory chips,
absorb a $173 million write-off and go all out in
microprocessors
» 2001 – over 80% of world’s PCs had ‘Intel inside’; was
one of the 10 most profitable companies in 2000
earning after-tax profits of $7.3 bn on revenues of
$29.4 bn
2
 Intel example (contd)
 Second inflection point
– 1998 – opting to focus on becoming the pre-
eminent building-block supplier to the Internet
economy
– The top management saw Intel having a major
role in getting a billion computers connected to
the Internet worldwide, installing millions of
servers (containing even more powerful Intel
processors) and building an internet
infrastructure that would support trillions of
dollars of e-commerce and serve as a basis of
worldwide communication system 2
 Objectives
 Why?
– They help define the organization in its
environment (justify existence, legitimize in the
eyes of the government, customers and society at
large, attract people to work for the organization)
– They help in coordinating decisions and decision
makers
– They provide standards for assessing
organizational performance
– They are more tangible targets than mission
statements 3
 Characteristics of objectives
 Objectives should be understandable
 Objectives should be concrete and specific
 Objectives should be related to a time
frame
 Objectives should be measurable and
controllable
 Objectives should be challenging
 Different objectives should correlate with
each other
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 Concept of Strategic Intent
A company exhibits strategic intent when it
relentlessly pursues an ambitious strategic
objective and concentrates its competitive
actions and energies on achieving that
objective!