Strategic Management

Dr. I.G. Chowdhury

Date: 23-02-2010
 Planning
• Planning is future thinking.

• Planning is integrated decision making.

• Format of plans of our time:

- Annual Budget
- 5 Year Plan
- Perspective Plan
 STRATEGIC PlanNING

• Strategic Plan is the new plan format:

- PRSP
- MDG
- Vision 2021

Q.What is the difference ?

Q. What is strategy ?
 Strategy

• Strategy is a direction, an aspired position to be

attained at the end of the plan period.

• Strategic Plan is a long-term plan.

• Strategic Plan is a shared plan.

• Strategic Plan is a leader-driven plan.

 Strategic management

• The whole activity is divided into a group of inter-

related tasks called strategic directions or themes.

• Each task within a theme is a measurable

outcome with dates of completion.

• The total process of developing a strategic plan

and implementing it successfully in known as
Strategic Management
 Strategic plan
Example

• We have just completed the first PRSP.

It was a three year plan covering the
period 2005-2007.

• The overall direction of the plan was

Unlocking the Potential
i.e. the human capability.
 PRSP
Strategic Direction

• Employment
• Nutrition
• Quality Education
• Local Governance
• Maternal Health
• Sanitation & Safe Water
• Criminal Justice
 Example
PRSP-II

• Planning is a continuous process though for

ease of implementation it is divided into chunks
of activities.

• We are now in the midst of the second PRSP

covering plan period 2009-11. The theme of the
plan is Moving Ahead.

• Intermediate plans such as national budgets are

prepared with reference to goals and objectives
of the long-term plans.
 Management by results
• Strategic Management is also known as management by
results ie how far the gap between the present and the
future position has been bridged.

• Attaining the desired results require successful

implementation of activities under each strategic theme
or direction.

• Effective implementation requires SMART (specific,

measurable, attainable, realistic, timed) objectives.

• Unless something is measurable it is not attainable.

 IMPLEMENTATION
PRSP

• Implementation of a strategic Direction entails

satisfying several measures of performance. We shall
look at one such direction though not directly related
to the PRSP.

• HDI is a widely used measure of poverty developed

through the initiatives of the United nations.

• HDI is a composite index based on three basic

factors of development:
- a long and healthy life
- access to knowledge
- decent standard of living
 HDI
Human Development Index

• According to this measure Bangladesh ranks

146 among 182 nations.

• Bangladesh is considered a medium level

country (0.5 – 0.8) in terms of human
development.

• Bangladesh score is 0.543 in 2009. It has

consistently improved from a very low 0.347 in
1975
 MBO
• This process of implementation with set dates is also
known as MBO (Management by Objective) in
management parlance.

• MBO was a very popular management tool of the sixties.

• Like any other management practice it has merits and

demerits,
- Merit in being very focused
- Demerit in being regimented (command and control
style).
 Strategic Management
5 Tasks
PLAN
• Vision : Long-term destination
• Objective : Targets to attain
• Strategy : Activities related to vision

MANAGEMENT
• Implementation : Doing
• Evaluation : Being there
 Framework

• Vision Future Position

• Objectives Metrics of measurement

SMART

• Strategy Decision making re Vision

Choosing between alternatives

• Tools of Analysis SWOT, PEST + more

 Framework

• Tools of Implementation: Leadership

Culture
Ethics

• Measures of Evaluation: Financial

Strategic
 Vision

• Big Hairy Audacious Goal (BHAG)

• Examples: - Vision 2020 Malaysia

- Vision 2021Bangladesh
- Digital Bangladesh

• If you don't know where you are going, any road will take you
there...Alice in Wonderland
 Bangladesh 2015
Out of the LDC

• Out of LDC is the Position that the country seeks

to attain.

• This requires achieving set of economic targets

to work together (synergy).

• The GDP of a country is the sum total of values

created by all sectors of economy
– agriculture, industry and service.

Q. Who does what ?

 Factor advantages
contradictions

• Cheap labour ? Germany has one of the highest wages

• Bountiful natural resources? Less than 20% land in Japan is useable

• Government intervention? Aircraft and software in Japan failed to

take-off

•  Management practices? Germany and Sweden allow labour

representation in management

• Germany has negative balance of payment, high wages

and strong currency. Yet it enjoys enviable position in
automobile and machinery.
 Towards competitive advantage

Q.What factors led to the development of some nations into

the home base for very successful industries?

- Switzerland for pharmaceutical and dairy products

- Sweden for heavy trucks
- America for personal computers
- Italy for ceramic tiles
- Japan for consumer electronics
 Factor inadequacy

• The failure to draw a definite conclusion may be due

to the inadequacy of the earlier economic theories of
absolute and comparative advantages.

• Factors that may have led to the inadequacy include;

- technology changes can affect scale of
production advantage
 Competitive Advantage

- capital and skilled labour can easily move

between nations

- firms compete globally where sources are

procured from one place, processed in
another and sold everywhere

- transportation and labour cost has diminished

dramatically to make some factors almost
redundant 
 Competitive advantage

• The world today is very competitive. Just look

back how many banks, hospitals or insurance
companies were there in the nineties. In addition
we have newer areas of businesses opening up
all the time from internet to wirelss.

• Competition constantly changes the landscape in

which new products, new ways of marketing, new
production processes and whole new market
segments emerge.
 Creative destruction

• There is no equilibrium in competition.

• Static efficiency at a point of time is rapidly

overcome by a faster rate of progress.

• Firms continuously improve the design or quality

of their own products/services that can destroy
their own successful brands. This is Creative
Destruction.
 In search of Competitive advantage

• How can a nation create the

environment in which its firms are
able to improve and innovate faster
than foreign rivals in a particular
industry?
Towards Competitive Advantage
Porter
 Competitive Advantage
Porter’s Diamond
• Factor Conditions:
- Basic factors such as land, labour, capital, raw
material
- Advanced factors such as technological know-how,
managerial sophistication
- Physical infrastructure such as roads, railways and
ports

• Demand Conditions
- Home demand leading to demanding and
sophisticated consumers
 Diamond
• Related and Supporting Industries
- Cluster of supporting industries such as
semiconductor industries feeding into personal
computers as has happened in the USA during the
1980s.

• Firm Strategy, Structure and Rivalry

- Managerial ideologies such as Japan emphasizing
on engineering aspects of production while the USA
stressing on Finance led to different patterns of
growth in the related industries.
 GCI
Global Competitive Index
• The index has been developed and monitored at
the WEF (World Economic Forum) held every
year at Davos.

• The report "assesses the ability of countries to

provide high levels of prosperity to their citizens.

• The global competitive index purports to measure

how productively a country uses available
resources.
 GCI
Global Competitive Index
• "The countries are evaluated as per score in 12
factors divided into 3 broad categories;
- Basic requirements
- Efficiency enhancers
- Innovation factors

- In the 2009-10 GCI Rankings Bangladesh occupies

106th position amongst 133 nations
with In- #49, Sl- #79, P- #101, N- #125.
 A. Basic Requirements

- Institution
- Infrastructure
- Macro-economy
- Health & education

• B- #108, N- #119, P- #114, S- #89 (Overall)

• B- #105, N- #106, P- #113, S- #38 (Health & Education)
 B. Efficiency Enhancers

- Higher education and training

- Goods market efficiency
- Labor market efficiency
- Financial market sophistication
- Technological readiness
- Market size

• B- # 97, N- #125, Pak- # 92, S- #74 (Overall)

• B- #129, N- #124, Pak- #118, S- #64 (Higher Ed & T)
 C. Innovation & Sophistication
Enhancers
- Business sophistication
- Innovation.
• B- #114, N- 129, P- #84, S- #44

• Income thresholds for stages of development GDP per capita (US$)

- Stage 1: Factor driven < 2,000
Transition from Stage 1 to Stage 2 : 2,000–3,000

- Stage 2 : Efficiency driven 3,000–9,000

Transition from Stage 2 to Stage 3 : 9,000–17,000

- Stage 3 : Innovation driven > 17,000

 Convergence
Public & private sector

• The gap between public and private sector is

much shorter than the earlier days.

• Then, the public sector had almost total control

on our life, from school to hospital to university
to job.

• Now the public and private sector compete

among themselves. Yet managing a public
sector is somewhat different from private sector.
 management
public & private sector

• Differences :
- a wide range of stakeholders with
conflicting interests are able to exert significant
impact on the agency’s performance.

- the resource flow to the agency is often

less direct than cash payment as part of a
commercial transaction.
Stakeholders
 management

• Differences:
– Limited flexibility and autonomy
– Goals are often vague

– The leader's authority is limited

– Political interference and scrutiny by outsiders

– Broad accountability is required

– Performance expectations shift continually
 management

• Similarity:
- Customer Satisfaction is as important
- Resources must be used as efficiently

- Must be innovative to be in the race

- Must create value
Value creation links customers
/stakeholders need with organization’s
actual or potential capabilities.
 Competition

• Organizations, whether in the public or the private

sector, must compete.

• At the national level, a nation competes with

another such as Bangladesh seeking a larger
share in the Indian market.

• Japan Inc. is a well-known term in business

vocabulary as the country fiercely promotes
company interests internationally.
 Competition

• Competition for a public sector

organization comes not just from other
government instrumentalities but also from
private sector firms
willing and able to take over some or all of
its activities
from being a full function supplier to
specific activities e.g. outsourcing
 Competition
Examples

• Public Sector competing Private Sector

- BTTB and Grameen Phone
- BTV and ATN

• Public Sector competing Public Sector

- Bangladesh Railway & BRTC
- LGRD & Roads and Highways
 Strategic management
• How these competitions are fought are the
subject matter of strategic management.

• Strategy is not built on vacuum – it needs

analysis of resources and capabilities.

• SWOT, PEST are some of the frequently used

tools in strategic management.

• We shall look at some of these tools.

 ANALYSIS
Know your enemy (Sun Tzu, 500 BC)

High Equal
chance of Win
losing
Equal chance
Win
of losing

Know
Yourself Equal
Lose chance of
losing
Equal chance
Lose of losing

Low

L Know your enemy H

 ANALYSIS
GAP
Value for money HR upgrade
100%

GAP

50%
IT packaging

100% 100%

Innovation sales support distribution

 ANALYSIS
BOSTON MATRIX

High
Problem
Star child

Market
Growth
Cash
Dog
cow

Low

H Market Share L
 ANALYSIS
INTENSITY OF COMPETITION

Five Forces Low Medium High

Rivalry X

New entrants Threat X

Buyer bargaining X

Supplier bargaining X

Substitute threat X

OVERALL X
ANALYSIS
VALUE CHAIN
 Group Exercise

#1. Future gazing –

list 3 possible future scenarios that
profoundly may impact the country …
a larger SAARC in thenEC style

#2. Vision statement – about 5 lines

…. out of the LDC into MIC
 Group Exercise
#3. SWOT
- list 3 in each category

#4. Strategy
– list 3 courses of action

#5. Major impediments to overcome

- list 3

#6. Indicators to monitor

- list 3
 Mission

• Materializing the vision comes through

successfully implementing the task list.

• It begins with the mission.

Mission relates to what you do, how you do.
 Strategy

• Strategy is a road map of the journey to

the vision.

• Having all the ingredients in place does

not guarantee success.

• Good Strategy + Bad Implementation =

Chaos
 objectives

• Objectives are metrics of measurement along the

road to implementation.

• The should be SMART

- Specific
- Measurable
- Attainable
- Realistic
- Timed
 Implementation
Leadership
• Effective strategy is a function of the style of
leadership, leading or being led.

• The context of leadership has changed over

time. Leader today is considered a coach than a
task master.

• More emphasis is given on softer elements of

management e.g. delegation and motivation.
 Implementation
Communication
• The vision needs sharing with members of the
team, else there is no team. This requires
communication.

• Lateral communication can be more difficult than

vertical communication. The vision requires
different styles of communication with different
stakeholders.

• Health for All, Freedom from Hunger are better

understood by all.
 Implementation
Culture
• Culture is the way people think, behave and
interact.

• Organizational Culture evolves as it learns to

cope with its problem of external adaptation and
internal integration, that has worked well enough
to be considered valid and to be taught to new
members as the correct way to perceive, think &
feel.
 Evaluation
Doing the right things

• Evaluation is not an easy task, more so

in the public sector that have more
qualitative than quantitative metrics of
measurement.

• Qualitative indicators such as motivation,

emotional bonding, are as important as
the quantitative indicators such as ROI.
 Evaluation
Balancing the outcome
• The organization growth needs balancing between
the elements of growth.

• A skewed growth is problematic.

• A healthy national GDP growth but Gini is problem.

• A good company growth at the cost R&D can affect

sustainability.
 Evaluation
Balanced Scorecard
• Managed through a composite scorecard having both
qualitative and quantitative outcomes.

• Profit +Employee Motivation +Customer Satisfaction = ?

• These factors are kept side-by-side on a dashboard, not

added up.

• If a pilot flying an can fly an aircraft with such meters why

can’t an organization be managed?.
 Change Management
• Strategy is not cast in stone. While being
implemented, the business environment is
continuously scanned for possible changes.

• A strategy may need adjusting to adapt to such

changes.

• Changes may range from fine tuning to total

rejection. Why continue building a bridge if the
river bed has shifted meanwhile?
 Change Management
• ‘”when the facts change, I change my mind” …Keynes

• This is change management, the precursor to

strategic management.

• Yet it was in the 1890s the head of the US Patent Office

applied for closure of the office as everything that could
be invented had been invented.

• Sam Watson, founder of IBM, once commented that the

world ‘has a market for may be five computers.