Strategic Managenent

8/8/2019 Strategic Managenent

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STRATEGIC MANAGEMENT

DR. I.G. CHOWDHURY

DATE: 23-02-2010


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PLANNING

Planning is future thinking.

Planning is integrated decision making.

Format of plans of our time:- Annual Budget

- 5 Year Plan

- Perspective Plan


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STRATEGIC PLANNING

Strategic Plan is the new plan format:

- PRSP

- MDG

- Vision 2021

Q. What is the difference ?

Q. What is strategy ?


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STRATEGY

Strategy is a direction, an aspired position to beattained 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.


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The whole activity is divided into a group of inter-related tasks called strategic directions orthemes.

Each task within a theme is a measurableoutcome with dates of completion.

The total process of developing a strategic planand implementing it successfully in known asStrategic Management


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STRATEGIC PLAN

Example

We have just completed the first PRSP.It was a three year plan covering theperiod 2005-2007.

The overall direction of the plan wasUnlocking the Potential

i.e. the human capability.


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PRSPStrategic Direction

Employment

Nutrition

Quality Education

Local Governance

Maternal Health

Sanitation & Safe Water

Criminal Justice


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EXAMPLE

PRSP-II

Planning is a continuous process though forease of implementation it is divided intochunks of activities.

We are now in the midst of the second PRSPcovering plan period 2009-11. The theme ofthe plan is Moving Ahead.

Intermediate plans such as national budgetsare prepared with reference to goals andobjectives of the long-term plans.


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MANAGEMENT BY RESULTS

Strategic Management is also known as management byresults ie how far the gap between the present and thefuture position has been bridged.

Attaining the desired results require successfulimplementation of activities under each strategic themeor direction.

Effective implementation requires SMART (specific,measurable, attainable, realistic, timed) objectives.

Unless something is measurable it is not attainable.


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IMPLEMENTATIONPRSP

Implementation of a strategic Direction entailssatisfying several measures of performance. We shalllook at one such direction though not directly relatedto the PRSP.

HDI is a widely used measure of poverty developedthrough the initiatives of the United nations.

HDI is a composite index based on three basicfactors of development:

- a long and healthy life- access to knowledge- decent standard of living


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HDIHuman Development Index

According to this measure Bangladesh ranks146 among 182 nations.

Bangladesh is considered a medium levelcountry (0.5 0.8) in terms of humandevelopment.

Bangladesh score is 0.543 in 2009. It hasconsistently improved from a very low 0.347 in1975


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MBO

This process of implementation with set dates is alsoknown as MBO (Management by Objective) inmanagement parlance.

MBO was a very popular management tool of the sixties.

Like any other management practice it has merits anddemerits,

- Merit in being very focused- Demerit in being regimented (command and control

style).


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5 Tasks

PLAN

Vision : Long-term destination

Objective : Targets to attain Strategy : Activities related to vision

MANAGEMENT Implementation : Doing

Evaluation : Being there


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FRAMEWORK

Vision Future Position

Objectives Metrics of measurementSMART

Strategy Decision making re Vision

Choosing between alternatives

Tools of Analysis SWOT, PEST + more


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FRAMEWORK

Tools of Implementation: Leadership

Culture

Ethics

Measures of Evaluation: Financial

Strategic


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VISION

Big Hairy Audacious Goal (BHAG)

Examples: - Vision 2020 Malaysia- Vision 2021Bangladesh

- Digital Bangladesh

Ifyou don't know where you are going, any road will takeyouthere...Alice in Wonderland


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BANGLADESH 2015Out of the LDC

Out of LDC is the Position that the country seeksto attain.

This requires achieving set of economic targetsto work together (synergy).

The GDP of a country is the sum total of valuescreated by all sectors of economy

agriculture, industry and service.

Q. Who does what ?


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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 totake-off

Management practices? Germany and Sweden allow labourrepresentation in management

Germany has negative balance of payment, high wagesand strong currency. Yet it enjoys enviable position inautomobile and machinery.


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TOWARDS COMPETITIVE ADVANTAGE

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


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FACTOR INADEQUACY

The failure to draw a definite conclusion may bedue to the inadequacy of the earlier economictheories of absolute and comparative

advantages.

Factors that may have led to the inadequacyinclude;

- technology changes can affect scale ofproduction advantage


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COMPETITIVE ADVANTAGE

- capital and skilled labour can easily movebetween nations

- firms compete globally where sources areprocured from one place, processed inanother and sold everywhere

- transportation and labour cost hasdiminished dramatically to make somefactors almost redundant


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The world today is very competitive. Just lookback how many banks, hospitals or insurancecompanies were there in the nineties. In addition

we have newer areas of businesses opening upall the time from internet to wirelss.

Competition constantly changes the landscapein which new products, new ways of marketing,new production processes and whole newmarket segments emerge.


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CREATIVE DESTRUCTION

There is no equilibrium in competition.

Static efficiency at a point of time is rapidlyovercome by a faster rate of progress.

Firms continuously improve the design or quality

of their own products/services that can destroytheir own successful brands. This is CreativeDestruction.


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IN SEARCH OF COMPETITIVE ADVANTAGE

How can a nation create theenvironment in which its firms areable to improve and innovate fasterthan foreign rivals in a particularindustry?


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TOWARDS COMPETITIVE ADVANTAGE

Porter


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Porters Diamond

Factor Conditions:

- Basic factors such as land, labour, capital, rawmaterial

- Advanced factors such as technological know-how,managerial sophistication

- Physical infrastructure such as roads, railways andports

Demand Conditions

- Home demand leading to demanding andsophisticated consumers


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DIAMOND

Related and Supporting Industries

- Cluster of supporting industries such assemiconductor industries feeding into personal

computers as has happened in the USA during the1980s.

Firm Strategy, Structure and Rivalry

- Managerial ideologies such as Japan emphasizingon engineering aspects of production while the USAstressing on Finance led to different patterns ofgrowth in the related industries.


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GCIGlobal Competitive Index

The index has been developed and monitored atthe WEF (World Economic Forum) held everyyear at Davos.

The report "assesses the ability of countries toprovide high levels of prosperity to their citizens.

The global competitive index purports to measurehow productively a country uses availableresources.


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GCIGlobal Competitive Index

"The countries are evaluated as per score in 12factors divided into 3 broad categories;

- Basic requirements

- Efficiency enhancers- Innovation factors

- In the 2009-10 GCI Rankings Bangladeshoccupies 106th position amongst 133 nations

with In- #49, Sl- #79, P- #101, N- #125.


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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)


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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)


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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 : 2,0003,000

- Stage 2 : Efficiency driven 3,0009,000

Transition from Stage 2 to Stage 3 : 9,00017,000

- Stage 3 : Innovation driven > 17,000


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CONVERGENCEPublic & private sector

The gap between public and private sector ismuch shorter than the earlier days.

Then, the public sector had almost total controlon our life, from school to hospital to universityto job.

Now the public and private sector competeamong themselves. Yet managing a publicsector is somewhat different from private sector.


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MANAGEMENTPUBLIC & PRIVATE SECTOR

Differences :

- a wide range of stakeholders withconflicting interests are able to exert

significant impact on the agencysperformance.

- the resource flow to the agency is often

less direct than cash payment as part of acommercial transaction.


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STAKEHOLDERS


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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


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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 organizationsactual or potential capabilities.


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COMPETITION

Organizations, whether in the public or theprivate sector, must compete.

At the national level, a nation competes withanother such as Bangladesh seeking a largershare in the Indian market.

Japan Inc. is a well-known term in businessvocabulary as the country fiercely promotescompany interests internationally.


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COMPETITION

Competition for a public sectororganization comes not just from othergovernment instrumentalities but also fromprivate sector firms

willing and able to take over some or all ofits activities

from being a full function supplier tospecific activities e.g. outsourcing


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COMPETITIONEXAMPLES

Public Sector competing Private Sector

- BTTB and Grameen Phone

- BTV and ATN

Public Sector competing Public Sector- Bangladesh Railway & BRTC

- LGRD & Roads and Highways


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How these competitions are fought are thesubject matter of strategic management.

Strategy is not built on vacuum it needsanalysis of resources and capabilities.

SWOT, PEST are some of the frequently used

tools in strategic management.

We shall look at some of these tools.


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ANALYSIS

Know your enemy (Sun Tzu, 500 BC)

High

Know

Yourself

Low

L Know your enemy H

Equal chanceof losing Win

LoseEqual chance

of losing

Equalchance of

losingWin

Lose

Equalchance of

losing


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ANALYSISGAP

Value for money HR upgrade

GAP

IT packaging

100% 100%

Innovation sales support distribution

100%

50%


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StarProblem child

Cashcow

Dog

ANAL IBO ON MA RIX

High

Ma

k

t

G

o

th

Lo

H Ma

k

t

ha

L

St r

Pr blem

child

C sh

c wD


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ANALYSISINTENSITY F PETITI N

F v F c Low Medium High

Rivalry X

Newentrants Threat X

Buyer argaining X

Supplier argaining X

Substitutethreat X

OVERALL X


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ANALYSISVALUE CHAIN


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GROUP EXERCISE

#1. Future gazing

list 3 possible future scenarios

that profoundly may impact thecountry

a larger SAARC in thenEC style

#2. Vision statement about 5 lines

. out of the LDC into MIC


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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


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MISSION

Materializing the vision comes throughsuccessfully implementing the task list.

It begins with the mission.

Mission relates to what you do, how you do.


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STRATEGY

Strategy is a road map of the journey tothe vision.

Having all the ingredients in place doesnot guarantee success.

Good Strategy + Bad Implementation =Chaos


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OBJECTIVES

Objectives are metrics of measurement alongthe road to implementation.

The should be SMART

- Specific

- Measurable

- Attainable- Realistic

- Timed


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IMPLEMENTATION

Leadership

Effective strategy is a function of the style ofleadership, leading or being led.

The context of leadership has changed overtime. Leader today is considered a coach than atask master.

More emphasis is given on softer elements ofmanagement e.g. delegation and motivation.


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IMPLEMENTATION

Communication

The vision needs sharing with members of theteam, else there is no team. This requirescommunication.

Lateral communication can be more difficult thanvertical communication. The vision requiresdifferent styles of communication with different

stakeholders.

Health for All, Freedom from Hunger are betterunderstood by all.


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IMPLEMENTATION

Culture

Culture is the way people think, behave andinteract.

Organizational Culture evolves as it learns tocope with its problem of external adaptation andinternal integration, that has worked well enoughto be considered valid and to be taught to newmembers as the correct way to perceive, think &feel.


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EVALUATION

Doing the right things

Evaluation is not an easy task, more soin the public sector that have morequalitative than quantitative metrics ofmeasurement.

Qualitative indicators such asmotivation, emotional bonding, are asimportant as the quantitative indicatorssuch as ROI.


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EVALUATION

Balancing the outcome

The organization growth needs balancingbetween 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 canaffect sustainability.


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EVALUATION

Balanced Scorecard

Managed through a composite scorecard having bothqualitative and quantitative outcomes.

Profit +Employee Motivation +Customer Satisfaction = ?

These factors are kept side-by-side on a dashboard, notadded up.

If a pilot flying an can fly an aircraft with such meters whycant an organization be managed?.


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CHANGE MANAGEMENT

Strategy is not cast in stone. While beingimplemented, the business environment iscontinuously scanned for possible changes.

A strategy may need adjusting to adapt to suchchanges.

Changes may range from fine tuning to totalrejection. Why continue building a bridge if theriver bed has shifted meanwhile?


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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 Officeapplied for closure of the office as everything that couldbe inventedhad been invented.

Sam Watson, founder of IBM, once commented that theworld has a market for may be five computers.

Strategic Managenent

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