Lecture 1: Introduction to Lecture 1: Introduction to Strategic ManagementStrategic Management

(Chapter 1)(Chapter 1)

Instructor: Moses Acquaah, Ph.D.

377 Bryan Building

Phone: (336) 334-5305

Email: acquaah@uncg.edu

Lecture ObjectivesLecture Objectives

By the end of this lecture, students should be able to:1. Explain the functions of management

2. Define and explain strategy and strategic management

3. Explain why strategic management is important

4. Explain the strategic management process

5. Describe the levels of organizational strategies

6. Discuss the misconceptions about strategy and strategic management

OBJECTIVE #1OBJECTIVE #1Functions of ManagementFunctions of Management

Planning, Organizing, Leading; & Controlling (PLOC)

Planning– defining goals and objectives– deciding what type of activities the

company will engage in– determining the resources needed to

achieve the organization’s goals & objectives.

Functions of ManagementFunctions of Management

Leading– Attracting people to the organization.– Specifying job responsibilities– Grouping jobs into work units– Marshalling and allocation of resources– Creating good working conditions

Functions of ManagementFunctions of ManagementOrganizing

– Directing, motivating, and communication with employees, individually & in groups.

– Conflict resolution.Controlling

– Monitoring performance of people & units.– Provision of feedback or information about

progress.– Identification of performance problems &

actions to correct problems.

Disciplinary FocusDisciplinary Focus

Various disciplines in “management” emerge from the functions of management:– Business Policy (formally called Strategic

Planning) from the planning function.– Organizational Behavior primarily from the

leading function.– Human Resources Management primarily

from the organizing function.– Strategic Management, originated from

Business Policy, but focuses on overall management – PLOC – and beyond.

OBJECTIVE #2OBJECTIVE #2What’s Strategy?What’s Strategy?

Strategy is management’s overall plan and actions for deploying resources and skills taking into consideration opportunities and threats in the environment– to achieve it’s mission, vision and objectives– to establish a favorable competitive position.

Strategy involves:– An organization’s goals– A series of related decisions & actions– Takes into account key internal strengths & weaknesses and

external opportunities threats– Analysis, communication, coordination, & action

What is Strategic Management?What is Strategic Management? Focuses on how managers formulate and implement,

and evaluate strategies aimed at developing and maintaining competitive advantage:– the reason some firms enjoy higher levels of performance

than their rivals or competitors. Strategic management is therefore concerned with

overall PLOC Four aspects that set strategic management apart:

– Interdisciplinary– External focus– Internal focus– Future directions

“Big picture” view of anorganization influenced byits external environment

Strategic Management’s Strategic Management’s UniquenessUniqueness

Field of Study– Macroeconomics– Microeconomics– Strategic Management– Finance– Marketing– Org. Behavior– Human Resource Mgmt.– Operations Mgmt.

Level of Analysis– The economy– Industries & markets– Firms & businesses– Investment Projects– Products & services– Individuals & Groups– Tasks & Structure– Plants

OBJECTIVE #3OBJECTIVE #3Importance of Strategic ManagementImportance of Strategic Management Gives every employee a role to play in making the firm

successful– Applies to all professional employees, not just those in

management– Allows decision-making, allocation of resources and

management of people to be based on a firm’s strategic plan– Success as a manager (as measured by your promotion, job

security, and pay increases) is often determined by your efforts & departments contribution to overall organization’s success

Makes a difference in performance levels– Research suggest that successful companies use strategic

management concepts & techniques– Success evolves from “knowing what you’re doing” and often

implies having a strategic plan

Importance of Strategic ManagementImportance of Strategic Management

Provides systematic approach to uncertainties that organizations face– Competitive & global environment are dynamic (changing)– Change, whether significant of minor, must be recognized

and analyzed, & dealt with– Strategic management allows for the analysis of the situation

(identifying the sources of change in environment) Coordinates and focuses employees to achieve

organization’s goals– Allows for team effort which is coordinated for firm success– Allows for development of a plan, communication,

coordination, & cooperation among diverse depts & functions

OBJECTIVE #4OBJECTIVE #4Strategic Management ProcessStrategic Management ProcessEstablishing a mission, vision and

objectivesEnvironmental AnalysisInternal AnalysisStrategy FormulationStrategy ImplementationStrategic Control and Performance

Evaluation

The Strategic Management The Strategic Management ProcessProcess

Mission, Vision &

Objectives

InternalAnalysis

Environ.Analysis

StrategyFormul-

ation

StrategyImplem-entation

StrategicEval. &Control

Mission, Vision & ObjectivesMission, 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

Mission, Vision & ObjectivesMission, Vision & ObjectivesObjectives 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.)

Examples of Mission & VisionExamples of Mission & VisionSouthwest 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.

Financial & Strategic Financial & Strategic ObjectivesObjectives

Alcan Aluminum– 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 1998.

– Strategic: To become most competitive enterprise in the world by being #1 or #2 in market share in every business the company is in.

Environmental AnalysisEnvironmental AnalysisInvolves the evaluation of the business

environment of the organization.– All external influences that impact a company’s

decision and performance.

Environment of firm classified by proximity into(1) Macro-environment; and

(2) Micro-environment or task environment.

Environmental AnalysisEnvironmental Analysis

The macro-environment consists of– The international/national economy; changes in

demographic structures; social and political trends; technology; and the natural environment.

The micro-environment consists of– The industry environment such as competitors,

suppliers, customers; unions and employees; owners and shareholders, etc.

Internal AnalysisInternal AnalysisInvolves the evaluation of the inventory of

the firm’s resources and capabilities.Resources/Capabilities can be classified as:

– Tangible resources: Financial or physical assets– Intangible resources: brand name, reputation

(product & firm), organizational culture, etc.– Capabilities or competencies: managerial

ability, specialized skill & knowledge base of employees, etc.

Strategy FormulationStrategy FormulationThe strategy formulation process

– involves designing a course of action for addressing strategic issues facing the firm after going through the external and internal evaluation processes.

Actual strategy of a company involves:– Planned or Intended Actions (Deliberate &

purposeful actions).– Reactive or Emergent Actions (As-need

reactions to unanticipated events in firm’s micro and macro environments).

Strategy FormulationStrategy Formulation

Strategy formulation is concerned with the following parts of a company:– Corporate (whole company) -- Corporate

strategies: Deals with businesses company wants to be in & how to manage those businesses

– Businesses -- Competitive strategies: How to compete in specific business or industry

– Functional areas -- Functional strategies: short goal-directed decisions & actions of an organization’s various functional departments.

Strategy ImplementationStrategy Implementation

Strategy implementation is the process of putting a company’s various strategies into action– development of programs, policies, budgets &

procedures. It can take several months to years to

complete.Most difficult part of the strategy process.The job of implementing strategy involves

managers at all levels

Strategic Control & EvaluationStrategic Control & Evaluation

Process by which desired outcomes (mission, vision, & objectives) are compared with realized outcomes to determine if there are gaps.

Initiate corrective actions by monitoring changes in environment - competitor actions, new market opportunities, customer needs & expectations.

Strategic Management Strategic Management ProcessProcess

On-going and continuous cycle of– Situation Analysis : Internal evaluation &

Environmental scanning– Strategy formulation– Strategy implementation– Strategy evaluation

Misconceptions about Strategy & Misconceptions about Strategy & Strategic ManagementStrategic Management

Strategy & strategic planning are 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.

Misconceptions about Strategy & Misconceptions about Strategy & Strategic ManagementStrategic 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.