Strategic Management

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Strategic Management

• Engineering Management
• ELE 2EMT

George Alexander G.Alexander_at_latrobe.edu.au http/
/www.latrobe.edu.au/eemanage/
Lecture 7 14 September 2007
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Last Lecture

• The planning process
• Major components
• Organisational mission
• Nature of organisational goals
• Benefits of goals, levels of goals
• Goals and performance
• Goal content, goal commitment, work behaviour,
  other process components
• Possible problems with goals

• Linking goals and plans
• Levels of plans, extent of recurring use, time
  spans of goals and plans, plans and promoting
  innovation, possible obstacles to planning
• Management by Objectives
• Steps in the MBO process
• Strengths and weaknesses of MBO
• Assessing MBO

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This week

• The concept of strategic management
• Competitive analysis in strategy formulation
• Formulating corporate level strategy
• Formulating business level strategy
• Strategy implementation

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Business Planning Framework

• Where are we now?
• What business are we in?
• Where do we want to go?
• What is necessary to close the gap?
• How do we make it all happen?

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The Concept of Strategic Management

• Most well-run organisations try to develop and
  follow strategies, which are large-scale action
  plans for interacting with the environment to
  achieve long-term goals (Jauch Glueck 1988
  Pearce Robinson 1988).
• It is important to recognise that strategic
  management is oriented towards
• Achieving long-term goals,
• Weighs important environmental elements,
• Considers major internal organisational
  characteristics, and
• Involves specific strategy development.

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The Strategic Management Process

• Strategy Formulation
• Identify organisational mission and strategic
  goals
• Perform competitive situation analysis,
  considering both external environment and
  internal organisational factors.
• Develop the strategies to reach the strategic
  goals
• Strategy Implementation
• Effective implementation of the strategic plan
• Brilliantly formulated strategies will not
  succeed if they are implemented ineffectively

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The Importance of Strategic Management

• The process helps organisations to identify and
  develop a competitive advantage.
• It provides direction such that the organisation
  knows where to expend its efforts.
• It demonstrates the need for innovation in the
  organisation new ways of thinking and doing
  things.
• It can involve managers at various levels in the
  planning process. This makes it more likely that
  the plans will be understood and committed to.

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Strategy implementation
Strategy formulation
assess environmental factors
Identify current mission and strategic goals

• Conduct competitive analysis
• strengths
• weakness
• opportunity
• threats

• Develop specific strategies
• corporate
• business
• functional

carry out strategic plans
maintain strategic control
assess organisational factors
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Conducting Competitive Analysis

• Strengths on which to capitalise,
• Weaknesses you need to address,
• Opportunities available to you, and
• Threats that could adversely affect you.

SWOT Analysis
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SWOT Analysis
External Factors
Key Opportunities
Key Threats
Internal Factors
Key Strengths
Most Likely
Possible
Key Weaknesses
Possible
Unlikely
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Organisational Assessment
Skills levels (competency profiles)
The organisations strengths and weaknesses
Information systems (up-to-date)?
Organisational culture
Tangible assets (buildings and equipment)
Sales and distribution channels
Liquidity (and other financial dimensions)
Organisational structure (flexibility)
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Environmental Assessment
Competitor Analysis
Industry and Market Analysis
Political Regulatory Analysis
Technological Analysis
The organisation
Social Analysis
Human Resources Analysis
Economic Analysis
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Levels of Strategy

• Corporate-Level Strategy
• the businesses an organisation will operate
• co-ordination of strategies
• allocation of resources
• Business-Level Strategy
• strategic business units
• focusing on a particular business
• Functional-Level Strategy
• managing functional area to support
  business-level strategy
• the day-to-day management of business

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Formulating functional-level strategy

• Functional level strategies spell out
• how functional areas can bolster
• business-level strategy.
• Example An RD department might accelerate
  innovation to provide new products before
  competitors.

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CORPORATE STRATEGY
Corporate Level
Business Level
Business 1 Strategy
Business 2 Strategy
Business 3 Strategy
Functional Level
Operations Management Strategy
R D Strategy
Financial/ Accounting Strategy
Marketing Strategy
Human Resources Strategy
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Co-ordinating Levels of Strategy

• Co-ordinating strategies across the levels is
  critical to maximising strategic impact
• Business-level strategy is enhanced when
  functional-level strategies support it.
• Corporate-level strategy will have more impact
  when supported by business-level strategies
  complementing each other.
• Thus, the three levels must be co-ordinated as
  part of the Strategic Management.
• Top-Down or Bottom-Up approach ?

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Strategy implementation

• Carrying out strategic plans
• Technology
• Human resources
• Reward systems
• Decision processes
• Structure
• Maintaining strategic control
• Monitoring environment
• Assessing effects of actions
• Monitoring results

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concentration
Vertical integration
Growth
Diversification
Stability
GRAND STRATEGIES
harvest
turnaround
divestiture
Defensive
bankruptcy
liquidation
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Growth Strategy

• Concentration
• Market development
• Product development
• Horizontal integration
• Vertical Integration
• Backward integration, business grows by becoming
  its own supplier
• Forward integration, business growth encompasses
  a role previously fulfilled by a customer

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Growth Strategy - Cont.

• Diversification
• Conglomerate diversification when an organisation
  diversifies into areas unrelated to its current
  business
• Concentric diversification when an organisation
  diversifies into related, but distinct, business
• Growth strategies can be implemented by
• Internal growth
• An acquisition
• A merger

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Stability Strategy

• Maintaining the status quo or growing in a
  methodical, but slow, manner.
• Adopted by small privately owned businesses
• Reasons for adopting this strategy
• Avoid risk
• Provide an opportunity to recover after a period
  of an accelerated growth
• Lets company hold on to current market share
• May occur through default

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Defensive Strategy

• Harvest entails minimising investments while
  attempting to maximise short-run profits and cash
  flow, with the long-run intention of exiting the
  market.
• A turnaround is designed to reverse a negative
  trend and restore the organisation to appropriate
  levels of profitability.
• A divestiture involves an organisation's selling
  or divesting of a business or part of a business.
• Liquidation entails selling or dissolving an
  entire organisation

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Strategy implementation some obstacles in real
life
Credibility of the plan
Leads to lack of real commitment
Perceived lack of management commitment
Absence of budget/resources to implement
Overwhelmed by day to day events
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References

• Bartol, K.M., Martin, D.C., Tein, M., Matthews,
  G., Management A Pacific Rim Focus,
  McGraw-Hill, 2002.

Thanks for your attention