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Strategic ManagementStrategic
Management
ProcessProcess
An OverviewAn Overview
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SEQUENCESEQUENCE
1.1. Thinking StrategicallyThinking Strategically
2.2. Five Tasks of Strategic ManagementFive Tasks of Strategic Management
2.1.2.1. Developing Mission and Strategic VisionDeveloping Mission and Strategic Vision
2.2.2.2. Setting ObjectivesSetting Objectives
2.3.2.3. Crafting a StrategyCrafting a Strategy
2.42.4 Implementing & Executing StrategyImplementing & Executing Strategy
2.52.5 Evaluating Performance and InitiatingEvaluating Performance and Initiating
Corrective AdjustmentsCorrective Adjustments
1.1. Characteristics of Strategic Management ProcessCharacteristics of Strategic Management Process
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1-1- Thinking StrategicallyThinking Strategically
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Thinking StrategicallyThinking
Strategically
First-rate strategic thinking is conscious strategyFirst-rate strategic thinking is conscious strategymanagement as opposed to freewheelingmanagement as opposed to freewheeling
improvisation, gut feel, and hoping for good luck.improvisation, gut feel, and hoping for good luck.
Doing a good job of managing inherently requiresDoing a good job of managing inherently requires
good strategic thinking.good strategic thinking.
Todays managers have to think strategically aboutTodays managers have to think strategically about
their organizations position and about the impact oftheir organizations position and about the impact of
changing conditions.changing conditions.
(Continued)(Continued)
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They have to monitor the organizations externalThey have to monitor the organizations external
environment and internal capabilities closelyenvironment and internal capabilities closelyenough to know when to institute strategy changes.enough to know when to institute strategy changes.
They have to know the business well enough toThey have to know the business well enough todetermine what kinds of strategic changes todetermine what kinds of strategic changes to
initiate.initiate.
Simply said, the fundamentals of strategicSimply said, the fundamentals of strategic
management need to drive the whole approach tomanagement need to drive the whole approach to
managing organizations.managing organizations.
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Three Big Strategic QuestionsThree Big
Strategic Questions
1.1. Where are we now?Where are we now?2.2. Where do we want to go?Where do we want to go?
Business(es) to be in and marketBusiness(es) to be in and marketpositions to stake out?positions to stake out?
Buyer needs and groups to serve?Buyer needs and groups to serve?
Outcomes to achieve?Outcomes to achieve?
3.3. How do we get there?How do we get there?
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AdvantagesAdvantages1.1. Providing better guidance to the entire organization on theProviding better guidance to the entire organization on the
crucial point of what it is we are trying to do,;crucial point of what it is we are trying to do,;
2.2. Making employees more alert to new opportunities andMaking employees more alert to new opportunities andthreatening developments;threatening developments;
3.3. Helping to unify the organization;Helping to unify the organization;
4.4. Creating a more proactive management posture;Creating a more proactive management posture;
5.5. Promoting development of a constantly evolving businessPromoting development of a constantly evolving business
model that will produce sustained bottom-line success for themodel that will produce sustained bottom-line success for theenterprise; andenterprise; and
6.6. Providing managers with a rationale for evaluating competingProviding managers with a rationale for evaluating competingbudget requests a rationale that argues strongly forbudget requests a rationale that argues strongly for
steering resources into strategy-supportive, results-producingsteering resources into strategy-supportive, results-producingareas.areas.
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Chief Executive Officer of a successfulChief Executive Officer of a successful
company put it well when he said:company put it well when he said:
In the main, our competitors are acquaintedIn the main, our competitors are acquainted
with the same fundamental concepts andwith the same fundamental concepts and
techniques and approaches that we follow,techniques and approaches that we follow,
and they are as free to pursue them as weand they are as free to pursue them as we
are. More often than not, the differenceare. More often than not, the difference
between their level of success and ours liesbetween their level of success and ours lies
in the relative thoroughness and self-in the relative thoroughness and self-discipline with which we and they developdiscipline with which we and they develop
and execute our strategies for the future.and execute our strategies for the future.
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2- Five Tasks2- Five Tasks
ofof
Strategic ManagementStrategic Management
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Strategic management is not a box ofStrategic management is not a box of
tricks or a bundle of techniques. It istricks or a bundle of techniques. It is
analytical thinking and commitment ofanalytical thinking and commitment of
resources to action.resources to action.
Peter DruckerPeter Drucker
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Strategic ManagementStrategic Management
The termThe term strategic managementstrategic managementrefers torefers to
the managerial process of forming athe managerial process of forming a
strategic vision, setting objectives, craftingstrategic vision, setting objectives, crafting
a strategy, implementing and executinga strategy, implementing and executing
the strategy, and then over time initiatingthe strategy, and then over time initiating
whatever corrective adjustments in thewhatever corrective adjustments in the
vision, objectives, strategy, and executionvision, objectives, strategy, and executionare deemed appropriate.are deemed appropriate.
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The Five TasksThe Five Tasks
Developing a Strategic Vision and MissionDeveloping a Strategic Vision and Mission
Setting ObjectivesSetting Objectives
Crafting a StrategyCrafting a Strategy
Implementing and Executing the StrategyImplementing and Executing the Strategy
Evaluating Performance and InitiatingEvaluating Performance and InitiatingCorrective AdjustmentsCorrective Adjustments
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The Five TasksThe Five Tasks
Craft a
Strategy
to Achieve
Objectives
Set
Objectives
Develop a
Strategic
Vision
andMission
Implement
and
Execute
Strategy
Improve/
Change
Revise as
Needed
Revise as
Needed
Improve/
Change
Recycle
as Needed
Task 1 Task 2 Task 3 Task 4 Task 5
Monitor,
Evaluate,
and Take
CorrectiveAction
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2.1.2.1. Developing Mission and Strategic VisionDeveloping Mission and Strategic Vision
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Strategic VisionStrategic Vision
AA strategic visionstrategic vision is a roadmap of ais a roadmap of a
companys futureproviding specificscompanys futureproviding specifics
about technology and customer focus, theabout technology and customer focus, the
geographic and product markets to begeographic and product markets to be
pursued, the capabilities it plans topursued, the capabilities it plans to
develop, and the kind of company thatdevelop, and the kind of company that
management is trying to create.management is trying to create.
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Strategic VisionStrategic Vision
A roadmap of a companys futureA roadmap of a companys future
Future technology-product-customerFuture technology-product-customer
focusfocus
Geographic and product markets toGeographic and product markets to
pursuepursue
Capabilities to be developedCapabilities to be developed
Kind of company that management isKind of company that management is
trying to createtrying to create
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Mission StatementMission Statement
A companysA companys mission statementmission statementis typicallyis typically
focused on its present business scopefocused on its present business scope
"who we are and what we do"; mission"who we are and what we do"; mission
statements broadly describe anstatements broadly describe an
organizations present capabilities,organizations present capabilities,
customer focus, activities, and businesscustomer focus, activities, and business
makeup.makeup.
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Missions vs. Strategic VisionsMissions vs. Strategic Visions
AA missionmission statementstatement
focuses onfocuses on currentcurrent
business activities --business activities --
who we are andwho we are and
what we dowhat we do Current product andCurrent product and
service offeringsservice offerings
Customer needs beingCustomer needs being
servedserved
Technological andTechnological and
business capabilitiesbusiness capabilities
AA
strategic visionstrategic vision
concerns a firmsconcerns a firms
futurefuture business pathbusiness path
---- where we arewhere we are
goinggoing Markets to be pursuedMarkets to be pursued
Future technology-Future technology-
product-customerproduct-customerfocusfocus
Kind of company thatKind of company that
management ismanagement is
trying to createtrying to create
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2.2.2.2. Setting ObjectivesSetting Objectives
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ObjectivesObjectives
ObjectivesObjectives are an organizationsare an organizations
performance targetsthe results andperformance targetsthe results and
outcomes it wants to achieve. Theyoutcomes it wants to achieve. They
function as yardsticks for tracking anfunction as yardsticks for tracking anorganizations performance and progress.organizations performance and progress.
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Strategic ObjectivesStrategic Objectives
Strategic objectivesStrategic objectives relate to outcomesrelate to outcomes
that strengthen an organizations overallthat strengthen an organizations overall
business position and competitive vitality;business position and competitive vitality;
Financial objectivesFinancial objectives relate to the financialrelate to the financial
performance targets management hasperformance targets management has
established for the organization toestablished for the organization to
achieve.achieve.
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Setting of ObjectivesSetting of Objectives
Outcomes focusedOutcomes focusedon improvingon improving
financialfinancial
performanceperformance
Outcomes focusedOutcomes focusedon improvingon improving long-long-
term,term, competitivecompetitive
business positionbusiness position
Financial Objectives Strategic Objectives
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2.3.2.3.
Crafting a StrategyCrafting a Strategy
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Without a strategy the organization isWithout a strategy the organization is
like a ship without a rudder.like a ship without a rudder.
Joel Ross and Michael KamiJoel Ross and Michael Kami
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What Is StrategyWhat Is Strategy??
AA strategystrategyconsists of the competitive effortsconsists of the competitive efforts
and business approaches that managersand business approaches that managersemploy to please customers, competeemploy to please customers, competesuccessfully, and achieve organizationalsuccessfully, and achieve organizationalobjectives.objectives.
Strategy is both proactive (intended andStrategy is both proactive (intended and
deliberate) and reactive (adaptive).deliberate) and reactive (adaptive).
Strategies are partly visible and partly hidden toStrategies are partly visible and partly hidden to
outside view.outside view.
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What Is a Business Model?What Is a Business Model?
A companysA companys business modelbusiness modeldeals withdeals withwhether the revenue-cost-profit economicswhether the revenue-cost-profit economicsof its strategy demonstrate the viability of theof its strategy demonstrate the viability of theenterprise as a whole.enterprise as a whole.
Look at the revenue streams the strategy is expected toLook at the revenue streams the strategy is expected toproduceproduce
Look at the associated cost structure and potentialLook at the associated cost structure and potentialprofit marginsprofit margins
Do the resulting earnings streams and ROI indicate theDo the resulting earnings streams and ROI indicate thestrategy makes sense and that the company has astrategy makes sense and that the company has aviable business model?viable business model?
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Why Are Strategies Needed?Why Are Strategies Needed?
ToToproactivelyproactively
shape how ashape how a
companyscompanysbusiness willbusiness will
bebe
conductedconducted
To mold theTo mold the
independentindependent
actions andactions anddecisions ofdecisions of
managers andmanagers and
employees into aemployees into acoordinated,coordinated,
company-widecompany-wide
game plangame plan
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Involves decidingInvolves deciding howhowtoto Respond to changing buyer preferencesRespond to changing buyer preferences
Respond to new market conditionsRespond to new market conditions
Grow the business over the long-termGrow the business over the long-term
Achieve performance targetsAchieve performance targets
Outcompete rivalsOutcompete rivals
Crafting a StrategyCrafting a Strategy
Strategy is PartlyStrategy
is Partly PlannedPlanned
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Strategy is PartlyStrategy is Partly PlannedPlannedandand Partly ReactivePartly Reactive
Newinitiativesplusongoingstrategyfeaturescontinuedfrompriorperiods
Adaptivereactionsto
changingcirc
umstances
Abandonedstrate
gy
features
Actual
Company
Strategy
Company
Experiences,
Know-how,Resource
Strengths and
Weaknesses,
andCompetitive
Capabilities
PlannedStrategy
ReactiveStrate
gy
Understanding StrategyUnderstanding
Strategy
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Understanding Strategy Understanding Strategy
What to Look ForWhat to Look For
Pattern
of ActionsThat Define
Strategy
Actions to strengthen
resources &
capabilities
Actions to diversify Actions to outcompete rivals
Responses to
changing external
circumstances
Actions to alter
geographic
coverage
Actions to form strategic
alliances and collaborative
partnerships
How functional
activities are
managed
Efforts to pursue
new opportunities ordefend against threats
Actions to merge oracquire rival companies
Strategic Approaches toStrateg
ic Approaches to
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Strategic Approaches toStrategic Approaches to
Future Market ConditionsFuture Market Conditions
Keep from being
swamped by thewaves of change
Source: Adapted from Derek F. Abell, Competing Today While Preparing for Tomorrow, Sloan Management Review 40, No. 3 (Spring 1999), p. 75.
Company ApproachesReactive/Follower Proactive/Leader
Futur
eMa
rket
Con d
itions
Rapid
Revolutionary
Change
Gradual
Evolutionary
Change
Aggressively
altering strategy tomake waves and
drive change
Revising strategy(hopefully in time)to catch the waves
of change
Anticipatingchange andinitiating strategicactions to ride the
crest of change
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Strategy SelectionStrategy Selection
Each of the four basic strategy-makingEach of the four basic strategy-making
approaches has strengths and weaknesses,approaches has strengths and weaknesses,
and each is workable in the "right" situation.and each is workable in the "right" situation.
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An Ongoing ProcessAn Ongoing Process
Strategy making is fundamentally a market-driven andStrategy making is fundamentally a market-driven and
customer-driven entrepreneurial activitythe essentialcustomer-driven entrepreneurial activitythe essential
qualities are a talent for capitalizing on emerging marketqualities are a talent for capitalizing on emerging market
opportunities and evolving customer needs, a bias foropportunities and evolving customer needs, a bias for
innovation and creativity, an appetite for prudent risk taking,innovation and creativity, an appetite for prudent risk taking,and a strong sense of what needs to be done to grow andand a strong sense of what needs to be done to grow and
strengthen the business.strengthen the business.
The march of external and internal developments dictate thatThe march of external and internal developments dictate thata companys strategy change and evolve over timeaa companys strategy change and evolve over timea
condition that makes strategy making an ongoing process,condition that makes strategy making an ongoing process,
not a one-time event.not a one-time event.
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Strategies and Long-TermStrategies and Long-Term
PerformancePerformanceTrailblazing strategies can be the key to better long-termTrailblazing strategies can be the key to better long-termperformance. Business history shows that high-performingperformance. Business history shows that high-performingenterprises often initiate and lead, not just react and defend.enterprises often initiate and lead, not just react and defend.
They launch strategic offensives to out-innovate and out-They launch strategic offensives to out-innovate and out-maneuver rivals and secure sustainable competitivemaneuver rivals and secure sustainable competitiveadvantage, then use their market edge to achieve superioradvantage, then use their market edge to achieve superiorperformance.performance.
Aggressive pursuit of a creative strategy can propel a firmAggressive pursuit of a creative strategy can propel a firminto a leadership position, paving the way for its products andinto a leadership position, paving the way for its products andservices to become the industry standard.services to become the industry standard.
High-achieving enterprises are nearly always the product ofHigh-achieving enterprises are nearly always the product of
proactive management, rather than the result of lucky breaksproactive management, rather than the result of lucky breaksor a long run of good fortune.or a long run of good fortune.
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What is a Strategic PlanWhat is a Strategic Plan??
Where firm is headed --Strategic vision and
business mission
Action approaches to achievetargeted results -- Acomprehensive strategy
Short and long term performancetargets -- Strategic and
financial objectives
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Strategic PlansStrategic Plans
AA strategic planstrategic plan consists of an organizationsconsists of an organizations
mission and future direction, near-term and long-mission and future direction, near-term and long-
term performance targets, and strategy.term performance targets, and strategy.
The faster a companys external and internalThe faster a companys external and internal
environment changes, the more frequently thatenvironment changes, the more frequently that
its short-run and long-run strategic plans have toits short-run and long-run strategic plans have to
be revised and updatedannual changes maybe revised and updatedannual changes may
not be adequate. In todays world strategy lifenot be adequate. In todays world strategy life
cycles are growing shorter, not longer.cycles are growing shorter, not longer.
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2.42.4 Implementing & ExecutingImplementing & ExecutingStrategyStrategy
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Strategy implementation and execution is an
action-oriented, make-it-happen process
involving people management, developing
competencies and capabilities, budgeting,policy-making, motivating, culture-building,
and leadership.
Excellent execution of an excellent strategy is
the best test of managerial excellenceand
the most reliable recipe for organizational
success.
Strategy implementation and execution is an
action-oriented, make-it-happen process
involving people management, developing
competencies and capabilities, budgeting,policy-making, motivating, culture-building,
and leadership.
Excellent execution of an excellent strategy is
the best test of managerial excellenceand
the most reliable recipe for organizational
success.
Strategy ImplementationStrategy Implementation
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Strategy ExecutionStrategy Execution
Strategy implementationStrategy implementation concerns the managerial exerciseconcerns the managerial exerciseof putting a freshly chosen strategy into place.of putting a freshly chosen strategy into place.
Strategy executionStrategy execution deals with the managerial exercise ofdeals with the managerial exercise of
supervising the ongoing pursuit of strategy, making it work,supervising the ongoing pursuit of strategy, making it work,improving the competence with which it is executed, andimproving the competence with which it is executed, andshowing measurable progress in achieving the targetedshowing measurable progress in achieving the targetedresults.results.
Strategy execution is fundamentally an action-oriented,Strategy execution is fundamentally an action-oriented,make-it-happen processthe key tasks are developingmake-it-happen processthe key tasks are developingcompetencies and capabilities, budgeting, policy making,competencies and capabilities, budgeting, policy making,motivating, culture-building, and leadership.motivating, culture-building, and leadership.
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2.52.5 Evaluating Performance and InitiatingEvaluating Performance and Initiating
Corrective AdjustmentsCorrective Adjustments
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Evaluating PerformanceEvaluating Performance
A companys vision, objectives, strategy,A companys vision, objectives, strategy,
and approach to implementation are neverand approach to implementation are never
final;final;
Evaluating performance, reviewingEvaluating performance, reviewing
changes in the surrounding environment,changes in the surrounding environment,
and making adjustments are normal andand making adjustments are normal and
necessary parts of the strategicnecessary parts of the strategic
management process.management process.
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Best-Managed OrganizationsBest-Managed OrganizationsTwo factors separate the best-managed organizations from the rest:Two factors separate the best-managed organizations from the rest:
1.1. Superior strategy making and entrepreneurship, andSuperior strategy making and entrepreneurship, and
2.2. Competent implementation and execution of the chosen strategy.Competent implementation and execution of the chosen strategy.
Quality of managerial strategy making and strategy implementing has aQuality of managerial strategy making and strategy implementing has a
significant impact on organization performance.significant impact on organization performance.
An organization that lacks clear-cut direction, has vague orAn organization that lacks clear-cut direction, has vague orundemanding objectives, has a muddled or flawed strategy, or cantundemanding objectives, has a muddled or flawed strategy, or cantseem to execute its strategy competently is a company whoseseem to execute its strategy competently is a company whoseperformance is probably suffering, whose business is at long-term risk,performance is probably suffering, whose business is at long-term risk,
and whose management is lacking.and whose management is lacking.
The better conceived an organizations strategy and the more proficientThe better conceived an organizations strategy and the more proficientits execution, the greater the chances the company will be a leadingits execution, the greater the chances the company will be a leadingperformer in its markets and truly deserve a reputation for talentedperformer in its markets and truly deserve a reputation for talentedmanagement.management.
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Tightly-Knit ProcessTightly-Knit Process
Strategic management is a tightly-knitStrategic management is a tightly-knit
process.process.
The boundaries between the five tasks areThe boundaries between the five tasks are
conceptual, not fences that prevent someconceptual, not fences that prevent some
or all of them being done together.or all of them being done together.
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Broad ParticipationBroad Participation
Every company manager has a strategy-making/Every company manager has a strategy-making/strategy-implementing roleit is flawed thinking tostrategy-implementing roleit is flawed thinking toview strategic management as solely the provinceview strategic management as solely the provinceof senior executives.of senior executives.
Broad participation in a companys strategy-Broad participation in a companys strategy-creating exercises is usually a strong plus.creating exercises is usually a strong plus.
Corporate Enterpreneuring relies upon middle andCorporate Enterpreneuring relies upon middle andlower-level managers and teams to spot newlower-level managers and teams to spot newbusiness opportunities, develop strategic plans tobusiness opportunities, develop strategic plans to
pursue them, and create new businesses.pursue them, and create new businesses.
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CharacteristicsCharacteristics
ofof
Strategic Management ProcessStrategic Management Process
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CharacteristicsCharacteristics
Need to do the five tasksNeed to do the five tasks nevernevergoes away.goes away.
Boundaries among the five tasks are blurry.Boundaries among the five tasks are blurry.
Strategizing is not isolated from otherStrategizing is not isolated from othermanagerial activities.managerial activities.
Time required comes in lumps and spurts.Time required comes in lumps and spurts.
The Big Challenge is tThe Big Challenge is to get the best strategyo get the best strategy Supportive performance from employees,Supportive performance from employees,
Perfect current strategy, andPerfect current strategy, and
Improved strategy executionImproved strategy execution
St t i M t P i i lSt t
i M t P i i l
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Strategic Management PrincipleStrategic Management Principle
The role of Board of Directors in theThe role of Board of Directors in thestrategic management process is tostrategic management process is to
critically appraise and ultimatelycritically appraise and ultimatelyapprove strategic action plans andapprove strategic action plans and
to evaluate the strategic leadershipto evaluate the strategic leadership
skills of the CEO and others in lineskills of the CEO and others in line
to succeed the incumbent CEO.to succeed the incumbent CEO.
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THANK YOUTHANK YOU