Chapter 08

Strategic Management

It’s a long-term perspective of management. What managers do to develop the

organization’s strategies. Strategic management  can be used to

determine mission, vision, values, goals, objectives, roles and responsibilities, timelines, etc.

StrategiesThe decisions and actions that determine

the long-run performance of an organization.

Strategic Management

Current Mission

Situational Analysis

Strategy Formulation

Strategy Implementation

Strategic Control (Review + Evaluation)

Strategic Management Process

SW (Internal Audit) OT (External Audit)

1. Corporate level 2. Business level

3. Functional level

1. Corporate level2. Business level 3. Functional level

A statement of the purpose of the organization, what the organization is going to do? What it want to achieve is stated in mission statement.

Which portion of the mission statement is to be accomplished by the organization.

1. Current Mission

Components of Mission Statement

"McDonald's brand mission is to be our customers' favorite place and way to eat." 

We place the customer experience at the core of all we do.

We are committed to our people.We believe in the McDonald's System.We operate our business ethically.We give back to our communities.We grow our business profitably.We strive continually to improve.

Sample Mission Statement

Situational Analysis

National/Local Companies

1.SWOT Analysis (Macro & Micro) 2. PEST Analysis

(Macro )

Multinational Companies

(MNCs)

1.SWOT Analysis (Macro & Micro)

2.PESTEL Analysis (Macro )

2. Situational Analysis

1. Factor Listing Step 2. TOWS Matrix

3. Critical Region

This area is to be focused.

4. Management Decision

Management decision about overall position of analysis or factors.

2.1 Steps in SWOT Analysis

Strengths ----------------

Opportunities-----------------

Weaknesses -----------------

Threats ----------------

OS OW

TS TW

S W

O

T

O WD

Strengths (Examples) •Excellent sales staff with strong knowledge of existing products•Good relationship with customers•Good internal communications•High traffic location•Successful marketing strategies•Reputation for innovation

Weaknesses (Examples) •Currently struggling to meet deadlines - too much work?•High rental costs•Market research data may be out of date•Cash flow problems•Holding too much stock•Poor record-keeping

Opportunities (Examples) •Similar products on the market are not as reliable or are more expensive•Loyal customers•Product could be on the market for Christmas•Customer demand - have asked sales staff for similar product

Threats (Examples) •Competitors have a similar product•Competitors have launched a new advertising campaign•Competitor opening shop nearby•Downturn in economy may mean people are spending less

2.2 Steps in SWOT Analysis …...

Strengths

•Government Backing•Surplus of Rs. 50 Carore Annually •Central location in city •Competent and Active Top Management

Weaknesses

•Poor Infrastructure •Unqualified faculty •Administrative structure in complex

Opportunities

•Hire PhD Faculty •Increase in Admissions every year. •Improve Infrastructure /Sub Campuses •Start new degree program

Threats

•Other universities are planning to come in Faisalabad. •HEC policies •HEC may stop funding. •Political Pressure

GCUF ….

Political Factors Econ0mical Factors Social Factors Technological Factors

2.3 PEST Analysis

Political Factors Econ0mical Factors Social Factors Technological Factors Environmental Factors Legal Factors

2.4 PESTEL Analysis

3. Strategy Formulation

Corporate Strategy

Grand Strategy 1.Growth ***Integrati

on***

Diversificati

on***Penetratio

n

2.Stability

3. Retrenchment***Divest

*** Joint Venture ***Liquidation

Portfolio Strategy

***Portfolio (Business entity)

*** SBU *** Overall activities

are different of different SBUs

3.1 Corporate Level

C

SBU 1

SBU 2

P L

C

3.1.1.1 BCG (Boston Consultant Group Matrix) Growth share matrix

3.1.1 Tools for Portfolio Strategies…..

L

H

H L

Mark

et

Gro

wth

Market Share

STARS• More investment would be fruitful.

Cash Cows • Maximum milking.•Investment may be controlled on it.•Earnings > Expenses.• Harvest (Cash Withdrawals)

?• Investment in needed to increase market share.•Investment from cash cows.

Dogs • Divest•End•Do not invest anything•Just sell it.

3.1.1.2 GE (General Electric Business Screen)

3.1.1 Tools for Portfolio Strategies…..

X + #+ # 0# 0 .

X : Investment & Hold

+: Invest selectively and build

#: Stable

0: Harvest

.: Divest

H

M

L

H M L

Business Strength

Mark

et

Att

racti

ven

es

s

Business level Strategies

Miles & Snow Model

1 . P r o s p e c t o r ( L o o k i n g f o r t h e

n e w

c u s t o m e r s )2 . D e f e n d e r ( L e a d e r ) 3 . R e a c t o r ( A g a i n s t A c t i o n ) 4 . A n a l y z e r ( B a s e d

o n

a n a l y s i s )

M.J. Porter Model (Generic Competitive

Strategy) 1. C os t L e a d er s hi

p ( N ok ia )2.

Di

ff er e nt

ia ti o n 3.

Fo

cu s (On

ly 1

asp ect

of

pro

du

c t e.g

.N

okia

: D

ura

bil

ity)

3.2 Business Level