Strategic Management: Vision & Strategy

Introduction

• Three key questions in strategic management: "Where are we?", "Where are we going?", and "How are we going to get there?"

Assessing the Current State (Where are We?)

• Assessing an organization involves analyzing both internal and external performance.
• Internal assessment includes financial data, historical trends, and benchmarking against competitors.
• Other organizational performance indicators include quality, productivity, human resources, and customer satisfaction/retention.

Defining the Future Direction (Where are We Going?)

• Organizational leadership sets the vision for the company.
• Key leaders include the CEO, COO, CFO, President, and Chair.
• Vision defines what the organization aspires to be, aligning with the mission and core values.

Creating Strategies to Achieve the Vision (How are We Going to Get There?)

• Strategies are created through a vision statement that inspires staff
• A vision statement directs business growth and is motivating
• Example vision: "To provide access to the world's information in one click." - Google

Core Concepts and Definitions

• Mission: A public declaration of purpose and major organizational commitments.
• Goals: Crucial for managing a successful organization and setting standards for measuring success.
• SMART Goals: Specific, Measurable, Achievable, Relevant, Time-bound.
• Organizational Performance: How well an organization achieves its vision, mission, and goals, including financial outcomes, operational efficiency, and employee engagement.
• Performance Measure: A data-driven metric to assess the effectiveness and efficiency of an organization.
• Performance Measurement: Systematically collecting, analyzing, and evaluating progress towards desired outcomes, goals, and objectives.

Examples of Performance Measurements

• Tracking accounting department's ability to collect overdue receivables.
• Monitoring the speed of new product design in engineering.
• Tracking liquidity of funds in the finance department.
• Monitoring inventory in materials management.
• Measuring scrap in production.
• Tracking new sales from existing customers by the sales staff.

Performance Benchmarking

• Involves measuring and analyzing an organization's performance against competitors or industry leaders.
• A benchmark helps organizations understand their standing and identify areas for improvement.
• Enables businesses to analyze past performance, compare against industry standards, and improve processes.

Balanced Scorecard

• A strategic management tool, providing a comprehensive view of organizational performance.
• Considers financial, customer, internal processes, and learning & growth perspectives.
• Aligns organizational activities with strategic goals.

Triple Bottom Line (TBL)

• A sustainability framework, encourages organizations to consider people, planet, and profit when making decisions.
• People: Socially responsible actions.
• Planet: Environmentally sustainable practices.
• Profit: Traditional organizational purpose.

Approaches to Quantitative Analysis

• Financial Analysis: Ratio analysis for comparing firms or annual trends.
• Market-Based Analysis: Determines how the firm compares to competitors.
• General Quantitative Analysis: Utilizes other data sets for financial, market-based, and general insights.

Measures to Analyze a Firm's Market Position

• Market Share: Firm's total product revenue divided by total revenue in the industry. Measures the percentage of the market that a firm has.
• Price-Earnings (P/E) Ratio: Stock price divided by earnings per share. Determines the cost to invest in a company to receive $1.00 in earnings.

Analyzing a Firm's Market Position

• Achieved through SWOT analysis, market analysis, and financial ratio analysis
• This helps to assess internal capabilities, external factors and financial health.

SWOT Analysis

• Strengths: Internal capabilities that give a competitive advantage.
• Weaknesses: Internal limitations hindering performance.
• Opportunities: External factors to leverage for advantage.
• Threats: External factors with negative impacts.

Market Analysis Components

• Market Size and Growth: Understanding of market size and potential
• Customer Needs and Preferences: Identification of what is needed or preferred.
• Competitive Landscape: Analyze strengths and weaknesses of competitors
• Pricing Strategies - Evaluate the pricing and differentiation

Financial Ratio Analysis

• Profitability Ratios - Assess the ability to generate profits
• Liquidity Ratios - Evaluate the ability to meet short term obligations
• Solvency Ratios - Assess the ability to meet long term obligations
• Efficiency Ratios - Measure the effectiveness of using assets
• Market Value Ratios - Comparison determine if a stock is under or over priced

Economic Value Creation

• Economic Value Creation (EVC) is the difference between what a customer is willing to pay (WTP) and the cost incurred to produce the product.
• May vary across firms where a product may incur a different cost of production

Competitive Advantage

• A characteristic that allows a company to outperform it's rivals.
• It's about creating a value that is difficult to replicate.