Management Evolution Timeline

Timeline of Management Evolution

• In 400 BC, management emerged as a distinct competency separate from technical skills and knowledge.
• Middle Ages (476 AD - 1450 AD): Guilds, associations of artisans and merchants, provided handmade goods like bread, armor, and swords.
• Industrial Revolution (late 1700s - 1800s): Significant changes in living and working conditions occurred alongside the invention of the steam engine.
• Early 1900s: Cars were assembled by craftsmen who modified parts to fit, pioneered by Henry T. Ford.
• Scientific Era (1940s-1950s): Frederick Taylor measured productivity via quota, while Henri Fayol, the "Father of Modern Management" contributed the "14 Principles" and "5 Functions of Management".
• 1954: Management by Objective (MBO) was introduced as a framework for managing businesses based on their unique needs and goals. Total Quality Management was invented after WWII, and Peter Drucker, "Father of Scientific Management"
• 21st Century: Characterized by technology and globalization.

Objectives of Strategic Management

• Setting Direction defines an organization's vision, mission, and long-term goals to provide a clear path.
• Creating Competitive Advantage involves developing strategies to give the organization an edge.
• Effective Resource Allocation, ensures optimal distribution including financial, human, and technological assets.
• Adapting to Change involves scanning external factors, anticipating changes, and formulating proactive strategies to remain flexible in the business environment.
• Enhancing Performance involves achieving financial growth, increasing market share, improving operational efficiency, and delivering value to stakeholders.
• Long-Term Sustainability means strategically considering the social, environmental, and ethical aspects to foster responsible and sustainable business practices.

Reasons Strategic Management is Important

• It provides a Competitive Advantage by helping businesses identify their strengths and differentiate themselves.
• Strategic Management helps with Resource Allocation by helping businesses select and assign resources to projects and tasks effectively.
• It enables Risk Management, by helping businesses identify, assess, and control threats to their operations.
• Strategic Management facilitates Adaptation to Change, by helping businesses develop strategies to adapt to a changing environment.
• It drives Performance Improvement, by helping businesses improve employee performance through goal setting and employee involvement.
• Ultimately, it contributes to Profit Increase, by helping businesses identify and capitalize on opportunities.

Defining Strategic Management

• Strategic Management is the art and science of formulating, implementing, and evaluating cross-functional decisions to achieve organizational objectives, which is a company's game plan.
• Staying one step ahead of competitors, and allows businesses to be competitive.

Steps in the Strategic Management Process

• In Strategy Formulation, Vision and Mission statements define aspirations ("what we want to become") and purpose ("what our business is").

Mission Statements

• An enduring statement of purpose serves as a long-term message which explains what the company stands for.
• Mission statements distinguish one firm from another and declares the firm's reason for existence by addressing the question: "Why does this company exist?"

Importance of Mission Statements

• Fosters Unanimity of Purpose, ensuring everyone is on the same page.
• Guides Resource Allocation, in deciding how to use time, money, and people.
• Shapes Organizational Climate, or the feeling/vibe in the workplace.
• Acts as a Focal Point for Work Structure, in deciding role requirements, team construction, and work processes.
• Shared Vision promotes common interests, ensuring that everyone is on the same team, working together for the same reason.
• It reduces daily monotony and makes every work day feel less boring.
• Provides opportunity & challenge by giving people chances to learn, grow, and take on exciting new challenges.

External Factors: Opportunities and Threats

• External Opportunities and Threats involve analyzing trends outside the organization that could either help or harm it, which involves "watching" trends in the market, industry, and economy.
• Includes Economic factors (money situations), Social factors (lifestyles/habits), Cultural factors (values/beliefs/traditions).
• Demographic/Environmental factors, and Political, Legal, and Governmental policies/regulations.
• Technological factors (new tools/software/tech changes), and Competitors.

Key External Players

• Competitors and suppliers are key external forces.

Internal Strengths and Weaknesses

• Internal strengths and weaknesses refer to controllable activities performed well or poorly inside the organization.

Key Areas for Analysis

• Management: Top management, supervisors, unit heads, and employees.
• Marketing: Customer analysis (knowing customers), product/service promotion and sales, package design, pricing, distribution, marketing research.
• Finance/Accounting: Investment (capital budgeting), financing, dividend decisions, with financial ratio analysis.
• Production/Operations: Focusing on process workflow/efficiency and capacity, while Managing inventory, workforce, and product quality.
• Research & Development: Developing new products (first to market), improving existing products, and improving manufacturing processes.
• Management Information Systems (MIS): Includes Information Systems, leaders (CIO/CTO), security, user-friendliness, and e-commerce.

Analyzing for Strengths and Weaknesses

• The goal is to use strengths to gain competitive advantage and fix weaknesses to avoid internal problems.

Long-Term Objectives

• Long-term objectives involve specific results an organization seeks to achieve in pursuing its mission (over one year).
• Such objectives provide direction, aid in evaluation, create synergy, reveal priorities, focus coordination, and provide a basis for management.

Alternative Strategies

• Alternative strategies facilitate achieving long-term objectives.
• Geographic expansion, diversification, acquisition, product development, market penetration, retrenchment, and divestiture.

Specific Strategies

• Liquidation: Shutting down the business and selling its assets
• Joint venture: Partnering with another company to work on a specific project

Strategy Selection

• Strategy selection involves choosing the best strategy to achieve long-term goals, based on internal/external factors.

Vertical Integration Strategies

• Forward Integration: Control distributors and retailers.
• Backward Integration: Control of suppliers.

Intensive Strategies

• Market penetration, market development (new markets), and product development (existing/new products).

Diversification Strategies

• Related and/or unrelated products or service offerings.

Defensive Strategies

• Retrenchment, business divestiture and/or liquidation (selling of tangible assets)

Strategy Implementation

• Strategy implementation involves using short-term goals and policy guidelines.
• It includes employee motivation and optimal resource allocation.

Strategy Evaluation: Internal Review

• Internal review is a systematic examination of an organization's functional units to uncover strengths (competitive advantage) and weaknesses (internal problems).
• The 3 keys here are physical resources, human resources, organizational resources.
• It helps identify what's working, aligns resources with goals, and supports better decision-making and future planning.

Integrating Strategy and Culture

• This means ensuring a company's plans match its values, beliefs, and ways of working.

External Review

• The assessment of outside factors affecting an organizations performance, it cannot control, but must respond to.
• Long-term oriented, measurable, and applicable to competing firms in a hierarchical approach.

Porter's Five Forces

• Rivalry among Competing Firms: High competition forces companies to attract customers through price cuts and product improvements
• Bargaining Power of Consumers: Customers with many options can demand better service/lower prices, affecting business profitability
• Bargaining Power of Suppliers: Limited suppliers can increase costs for businesses
• Potential Development of Substitute Products: Many substitutes require businesses to innovate and maintain customer loyalty.
• Potential Entry of New Competitors: Easy market entry increases competition, making success harder for existing businesses

Measuring and Correcting Performance

• Performance Measurement assesses individual/group success.
• Corrective Action intervenes to fix mistake inside the organization.

Why Strategic Planning Fails

• Lack of knowledge, poor rewards, fire fighting, high cost, laziness, contentment, fear, overconfidence, bad experience, self-interest, difference of opinion and/or suspicion drive strategic planning failures.