Basic Concepts Of Strategic Management PDF

Basic Concepts OF Strategic Management  SUSTAINABILITY AND STRATEGIC AUDIT (SUSTRA730) BASIC CONCEPTS OF STRATEGIC THE TRIPLE BOTTOMLINE: MANAGEMENT The management of traditional...

Basic Concepts OF Strategic Management  SUSTAINABILITY AND STRATEGIC AUDIT (SUSTRA730) BASIC CONCEPTS OF STRATEGIC THE TRIPLE BOTTOMLINE: MANAGEMENT The management of traditional profit/loss STRATEGIC MANAGEMENT The management of the company’s A set of managerial decisions and social responsibility actions that determines the long-run the management of its environmental performance of a corporation responsibility Includes o Internal and external THEORIES OF ORGANIZATIONAL environmental scanning ADAPTATION o Strategy formulation Population theory o Strategy implementation Institution theory o Evaluation and control Strategic choice perspective Organizational learning theory PHASES OF STRATEGIC CONTROL Basic financial Phase 1 planning POPULATION THEORY Phase 2 Forecast-based Inability of an organization to adapt to planning the changing conditions after Externally oriented establishment Phase 3 strategic planning Strategic INSTITUTION THEORY Phase 4 management Organizations adapt to changing conditions by imitating other BENEFITS OF STRATEGIC successful organizations MANAGEMENT Attainment of appropriate match or fit STRATEGIC CHOICE PERSPECTIVE for the organization’s environment, Organizations adapt to changing strategy, structure and processes conditions and also have the Strategic planning becomes opportunity and power to reshape the increasingly important as the environment environment becomes more unstable Clearer sense of strategic vision for ORGANIZATIONAL LEARNING the firm Organizations adjust defensively to Sharper focus on what is strategically the changing environment by using important offensive knowledge and techniques Improved understanding in changing to fit itself in the environment. environment CREATING A LEARNING ORGANIZATION GLOBALIZATION The integrated internalization of STRATEGIC FELXIBILITY markets and corporations The ability to shift from one dominant strategy to another and requires INNOVATION o Long term commitment Describes new products, services, o To the development and methods and organizational nurturing of critical resources approaches that allow the business to achieve extraordinary return LEARNING ORGANIZATION Implementation of potential An organization skilled at creating, innovations that truly drives business acquiring and transferring knowledge to be remarkable. and at modifying its behavior to reflect new knowledge and insights SUSTAINABILITY Skilled at FOUR MAIN ACTIVITIES The use of business practices to o Solving problems manage the triple bottom line systematically  SUSTAINABILITY AND STRATEGIC AUDIT (SUSTRA730) o Experimenting with new o Maximizes resource approaches productivity o Learning from their own experiences and past history as POLICIES/POLICY well as from the experiences of Broad guidelines for decision making others a broad guideline for decision making o Transferring knowledge quickly that links the formulation of a and efficiently throughout the strategy with its implementation organization PROGRAMS ORGANIZATIONAL LEARNING Activities needed to accomplish a Is a critical component of plan competitiveness in a dynamic environment BUDGETS Cost of the programs STRATEGIC MANAGEMENT ELEMENTS: Environmental scanning PROCEDURES Strategy formulation Sequence of steps needed to do the Strategy implementation job Evaluation and control PERFORMANCE Actual results MISSION the end result of organizational Reason for existence activities The purpose or reason for the includes the actual outcomes of the organization’s existence strategic management process VISION Describes what the organization NATURAL ENVIRONMENT would like to become Resources and climate OBJECTIVES SOCIETAL ENVIRONMENT What results to accomplish by when General forces The end results of planned activity TASK ENVIRONMENT STRATEGIES/ STRATEGY Industry analysis Plan to achieve the mission and objectives STRUCTURE forms a comprehensive master Chain of command approach that states how the corporation will achieve its mission CULTURE and objectives Beliefs, expectations, values maximizes competitive advantage and minimizes competitive RESOURCES disadvantage Assets, skills, competencies and knowledge HIERARCHY OF STRATEGY 1. Corporate Strategy ENVIRONMENTAL SCANNING o Overall direction of company Gathering information and management of its The monitoring, evaluating and business disseminating of information from the 2. Business Strategy external and internal environments to o Competitive and cooperative key people within the organization strategies SWOT analysis 3. Functional Strategy  SUSTAINABILITY AND STRATEGIC AUDIT (SUSTRA730) STRATEGY FORMULATION CONSEQUENTIAL Developing long-range plans Strategic decisions commit Process of investigation, analysis and substantial resources and demand a decision making that provides the great deal of commitment from company with the criteria for people at all levels. attaining a competitive advantage Includes defining the competitive DIRECTIVE advantages of the business Strategic decisions set precedents for (strategy), crafting the corporate lesser decisions and future actions mission, specifying achievable throughout an organization. objectives and setting policy guidelines. MINTZBERG’S MODES OF STRATEGIC DECISION MAKING STRATEGY IMPLEMENTATION Entrepreneurial Putting strategy into action Planning a process by which strategies and Adaptive policies are put into action through Logical incrementalism the development of programs, budgets and procedures STRATEGIC DECISION-MAKING EVALUATION AND CONTROL PROCESS Monitoring performance 1. Evaluate current performance results a process in which corporate activities 2. Review corporate governance and performance results are 3. Scan and assess the external monitored so that actual performance environment can be compared with desired 4. Scan and assess the internal corporate performance environment 5. Analyze strategic (SWOT) factors FEEDBACK/LEARNING PROCESS 6. Generate, evaluate and select the best revise or correct decisions based on alternative strategy performance 7. Implement selected strategies 8. Evaluate implemented strategies TRIGGERING EVENTS something that acts as a stimulus for a change in strategy and can include: STRATEGIC AUDIT o  New CEO provides a checklist of questions, by o  External intervention area or issue, that enables a o  Threat of change of systematic analysis to be made of ownership various corporate functions and o  Performance gap activities o  Strategic inflection point STRATEGIC DECISIONS deal with the long-term future of an CORPORATE GOVERNANCE entire organization and have three Role of the board of directors characteristics: o  Rare CORPORATION o  Consequential a mechanism established to allow o  Directive different parties to contribute capital, expertise and labor for their mutual benefit RARE A corporation is an artificial being Strategic decisions are unusual and created by operation of law, having typically have no precedent to follow. the right of succession and the powers, attributes, and properties  SUSTAINABILITY AND STRATEGIC AUDIT (SUSTRA730) expressly authorized by law or NONFINANCIAL AND SUSTAINABILITY incidental to its existence. (Sec. 2, ISSUES R.A. 11232) 11. Maintain a COMPREHENSIVE AND Not more than fifteen (15) – any COSTY-EFFICIENT COMMUNICATION person, partnership[, association or CHANNEL cooperation [sec. 10, RA, 11232] 12. Have strong and effective internal Number of directors/ trustees, 5 control system to ensure integrity, minimum. 15 maximum (Sec. 1, RA transparency and proper governance 11232) 13. Treat all shareholders/ members Governed by the board of directors FAIRLY AND EQUITABLY that oversees the top management 14. RIGHTS TO STAKEHOLDERS must be with the agreement of the respected shareholders. 15. Creation of a SYMBIOTIC WORKING ENVIRONMENT CORPORATE GOVERNANCE 16. Be SOCIALLY RESPONSIBLE in all the relationship among the board of dealing with the communities in directors, top management and which it operates. shareholders in determining the direction and performance of the RESPONSIBILITIES OF THE BOARD corporation. 1. Effective board leadership 2. Strategy of the organization PRINCIPLES OF CORPORATE 3. Risk vs. initiative GOVERNANCE 4. Succession planning 1. should be headed by COMPETENT, 5. Sustainability WORKING BOARD 2. fiduciary roles, responsibilities, Due care accountabilities by the BOARD, the Board is to direct not manage the articles of incorporation and by-laws affairs. and any legal pronouncements and guidelines should BE CLEARLY MAKE ROLE OF THE BOARD IN STRATEGIC KNOWN TO ALL DIRECTORS MANAGEMENT 3. Board commits should be set up the 1. MONITOR developments inside and SUPPRORT THE EFFECTIVE outside the corporation PERFORMANCE of the board’s 2. EVALUATE AND INFLUENCE function management proposals, decisions 4. The directors should DEVOTE TIME and actions AND ATTENTION to perform duties as 3. INITIATE AND DETERMINE the well as the sufficient time to BE corporation’s mission and strategies. FAMILIAR WITH THE CORPORATION’S BUSINESS BOARD OF DIRECTORS’ CONTINUUM 5. Board should endeavor to excerise an OBJECTIUVE AND INDEPENDENT JUDGEMENT in all affairs 6. Assessment process to measure Board’s effectiveness 7. Board should be duty-bound to apply HIGHLY ETHICAL STANDARDS. 8. Should establish corporate disclosures policies and procedures 9. Establish standards for the APPROPRIATE SELECTION OF EXTERNAL AUDITOR 10. Ensure that the company DISCLOSES MEMBERS OF A BOARD OF DIRECTORS MATERIAL, REPORTABLE Inside directors Officers or executive employed by the  SUSTAINABILITY AND STRATEGIC AUDIT (SUSTRA730) corporation when two corporations have directors Executives of other who serve on the board of a third firm firms but are not Outside directors employees of the STAGGERED BOARDS board’s corporation only a portion of board members states that stand for re- election when directors problems arise in serve more than one year terms corporations because the agents CRITERIA FOR A GOOD DIRECTOR: (top management) 1. Willingness to challenge are not willing to Agency theory management when necessary bear responsibility for their decisions 2. Special expertise that is important unless they own a to the company substantial amount 3. Available for outside meetings to of stock in the advise management corporation 4. Expertise on global issues proposes that, 5. Understands the firm’s key because of their technologies and processes long tenure with the corporation, ORGANIZATION OF THE BOARD Stewardship theory insiders (senior the size of the board is determined by executives) tend to the corp’s charter and by-laws identify with the most corporations have quite a bit of corporation and its success discretion in determining board size. Large = 10 directors (publicly held) Not employed by Affiliated the corporation, Small = 4 – 5 members (privately directors handle legal or held) insurance work The most effective boards accomplish Used to work for much of their work through the corporation, committees Retired executive partly responsible Although they do not usually have directors for past decisions legal duties, most committees are affecting current granted full power to act with the strategy authority of the board between board Descendants of the meetings. founder and own Family directors significant blocks of LEAD DIRECTOR stocks consulted by the Chair/CEO regarding CODETERMINATION board affairs and coordinates the annual evaluation of the CEO The inclusion of a corporation’s workers on its board, began only EVALUATING GOVERNANCE recently in the United States S&P CORPORATE GOVERNANCE SCORING INTERLOCKING DIRECTORATES SYSTEM ownership structure and influence useful for gaining both inside information about an uncertain financial stakeholder rights and environment and objective expertise relations] about potential strategies and tactics financial transparency and information disclosure DIRECT INTERLOCKING DIRECTORATE board structure and processes when two firms share a director or ENTERPRISE RISK MANAGEMENT when an executive of one firm sits on a process, effected by an entity's the board of a second Board of Directors, Management and other personnel, applied in strategy setting and across the enterprise that  SUSTAINABILITY AND STRATEGIC AUDIT (SUSTRA730) is designed to identify potential provide change and movement in an events that may affect the entity, organization by providing a vision for manage risks to be within its risk that change appetite, and provide reasonable assurance regarding the achievement CHARACTERISTICS OF EFFECTIVE of entity objectives. CEOS: The CEO articulates a strategic vision AVOIDING GOVERNANCE for the corporation. IMPROVEMENTS The CEO presents a role for others to 1. Multiple classes of stock identify with and to follow. 2. Public to private ownership The CEO communicates high 3. Controlled companies performance standards and also show confidence in the followers’ abilities TRENDS IN CORPORATE GOVERNANCE to meet these standards. Boards shaping company strategy Institutional investors active on STRATEGIC PLANNING STAFF boards charged with supporting both top Shareholder demands that directors management and the business units and top management own significant in the strategic planning process stock RESPONSIBILITIES: More involvement of non-affiliated o Identify and analyze company- outside directors wide strategic issues, and Increased representation of women suggest corporate strategic and minorities alternatives to top Boards evaluating individual directors management Smaller boards o Work as facilitators with Splitting the Chairman and CEO business units to guide them positions through the strategic planning Shareholders may begin to nominate process board members Society expects boards to balance profitability with social needs of society THE ROLE OF THE TOP MANAGEMENT Top management responsibilities involve getting things accomplished through and with others in order to meet the corporate objectives are multidimensional and are oriented toward the welfare of the total organization EXECUTIVE LEADERSHIP the directing of activities toward the accomplishment of corporate objectives, sets the tone for the entire corporation STRATEGIC VISION description of what the company is capable of becoming TRANSFORMATIONAL LEADERS