Lesson 1 Nature of Strategic Planning.pdf

Strategic Management in Tourism and Hospitality and Total Quality Management Eden Almario-Camacho, MBA Course Professor The Nature of Strategic Planning Objectives: Ensure a regular and adequate supply of funds to the concerned; Provide sufficient returns to the sharehol...

Strategic Management in Tourism and Hospitality and Total Quality Management Eden Almario-Camacho, MBA Course Professor The Nature of Strategic Planning Objectives: Ensure a regular and adequate supply of funds to the concerned; Provide sufficient returns to the shareholders, which will depend upon the earning capacity, market price of the shareholders’ share, and expectations; Pursue optimum funds utilization. Once the funds procured, they should be utilized in the maximum possible way at the least cost; Ensure safety on investment, i.e., funds should be invested in safe ventures to achieve an adequate rate of return; Plan a sound capital structure. Describe the strategic management process; Discuss the nature of strategy formulation, implementation, and evaluation activities; Describe the benefits of good strategic management; and Topics Lesson 1: Introduction Lesson 2: What is all about strategic management in tourism and hospitality industry? Lesson 3: What is strategic management? Lesson 4: Key terms in strategic management? Lesson 5: Benefits of strategic management? Lesson 6: Why some firms do not do strategic planning? Lesson 7: Pitfalls in strategic planning? Lesson 8: Guidelines for effective strategic management? Lesson 9: Comparing business and military strategy Lesson 1: Introduction What’s the company’s present situation? Where does the company need to go from here? How should it go there? What is strategy? Strategy A company’s strategy is management’s game plan for growing the business, staking out market position, attracting and pleasing customers, competing successfully, conducting operations, and achieving targeted objectives. Lesson 2: What is all about strategic management in tourism and hospitality industry? Strategic Management is an inconstant process where any change in the environment where the organization is operating will result in a change in the strategies of the organization. Strategic Planning in Tourism Industry is the development of priorities based on strategies for planning developing and marketing of a destination. Strategy and the Quest for Competitive Advantage The central thrust of a company’s strategy involves crafting moves to strengthen the company’s long- term competitive position and financial performance. Indeed, what separates a robust approach from an ordinary or weak one management’s ability to forge a series of moves, both in the marketplace and internally that makes the company distinctive, tilts the playing field in the company’s favor by giving buyers a reason to prefer its products or services, and produces a sustainable competitive advantage over rivals. Four of the most frequently used strategic approaches to setting a company apart from rivals and achieving a sustainable competitive advantages are: 1. Strive to be the industry’s low cost provider, thereby aiming for a cost based competitive advantage over rivals. 2. Out-competing rivals based on such differentiating features as higher quality, broader product and service selection, added performance, better service, more attractive styling, technological superiority, or excellent value for the money/ 3. Focusing on a narrow market niche and winning competitive edge by doing a better job than serving buyers’ unique needs and tastes constituting the niche. 4. Developing expertise and resource strengths give the company competitive capabilities that rivals can’t easily imitate or trump their abilities. What makes a strategy a winner? How well does the strategy fit the company’s situation? Is the strategy helping the company achieve a sustainable competitive advantage? Is the strategy resulting in better company performance? Lesson 3: What is Strategic Management? Strategic Management can be defined as the art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives. Stages of Strategic Management Strategy formulation Strategy implementation Strategy evaluation Lesson 4: Key Terms In Strategic Management A. Competitive Advantage B. Strategists C. Vision and Mission Statements D. External Opportunities and Threats E. Internal Strengths and Weaknesses F. Long-Term Objectives G. Strategies H. Annual Objectives I. Policies A. Competitive Advantage Competitive advantage is defined as anything that a firm does exceptionally well compared to rival firms. B. Strategists Are individuals who are most responsible for the success or failure of an organization. C. Vision and Mission Statements Vision statements answer the question: “What do we want to become?” Mission statements are “enduring statements of purpose that distinguish one business from other similar firms. D. External Opportunities and Threats It refers to economic, social, cultural, demographic, environmental, political, legal, governmental, technological, and competitive trends ad events that could significantly benefit or harm an organization in the future. E. Internal Strengths and Weaknesses Internal Strengths and Weaknesses are an organization’s controllable activities that are performed exceptionally well or poorly. F. Long-Term Objectives Objectives can be defined as specific results that an organization seeks to achieve in pursuing its primary mission. Long term means more than one year. G. Strategies Strategies are how long-term objectives will be achieved. For example, business strategies may include geographic expansion, diversification, acquisition, product development, market penetration, retrenchment, divestiture, liquidation, and joint venture. H. Annual Objectives Short-term milestones that organizations must achieve to reach long-term objectives. I. Policies Policies are how annual objectives will be achieved. Policies include guidelines, rules, and procedures established to support efforts to achieve stated goals. Policies are most often stated in management, marketing, finance/accounting, research and development, and computer information systems activities. Lesson 5: Benefits of Strategic Management The principal benefit of strategic management has been to help organizations formulate better strategies using a more systematic, logical, and rational approach to strategic use. Financial Benefits Nonfinancial benefits  Greenley (Greenley G.F. “Does Strategic Planning Improve Company Performance?” Long range planning 19 no. 2 stated that strategic management offers these benefits: It allows for identification, prioritization, and exploitation of opportunities. It provides an objective view of management problems. It represents a framework for improved coordination and control activities. It minimizes the effects of adverse conditions and changes. It allows major decisions to better support established objectives. It allows a more effective allocation of time and resources to identified opportunities. It allows fewer resources and less time to be devoted to correcting erroneous or ad hoc decisions. It creates a framework for internal communication among personnel. It helps integrate the behavior of individuals into a total effort. It provides a basis for clarifying individual responsibilities. It encourages forward-thinking It provides a cooperative, integrated, and enthusiastic approach to tackling problems and opportunities. It encourages a favorable attitude toward change. It gives a degree of discipline and formality to the management of a business. Lesson 6: Why some firms do not do strategic planning Lack of knowledge or Fear of failure experience Overconfidence Poor reward structures Prior bad experience Fire fighting Self-interest Waste of time Fear of the unknown Too expensive Honest difference of Laziness opinion Content with success Suspicon Lesson 7: Pitfalls in strategic planning Using strategic planning to gain control over decisions and resources. Doing strategic planning only to satisfy accreditation or regulatory requirements Too hastily moving from mission development to strategy formulation. Failing to communicate the plan to employees, who continue working in the dark. Top managers making many intuitive decisions that conflict with the formal plan. Top managers not actively supporting the strategic planning process. Failing to use plans as a standard for measuring performance. Lesson 7: Pitfalls in strategic planning Delegating planning to a “planner” rather than involving all managers. Failing to involve key employees in all phases of planning. Failing to create a collaborative climate supportive of change. Viewing planning as unnecessary or unimportant. Becoming so engrossed in current problems that sufficient or no planning is done. Being so formal in planning that flexibility and creativity are stifled. Lesson 8: Guidelines for effective strategic management 1. An integral part of strategy evaluation must be to evaluate the quality of the strategic management process. 2. An important guideline for effective strategic management is open-mindedness. 3. Strategic decisions require trade-offs such as long-range versus short-range considerations or maximizing profits versus increasing shareholders’ wealth. 4. Subjective factors such as attitudes toward risk, concern for social responsibility, and organizational culture will affect strategy-formulation decisions, but organizations must remain as objective. Lesson 9: Comparing business and military strategy A strong military heritage underlies the study of strategic management 1. Terms such as objectives, mission, strengths, and weaknesses were first formulated to address problems on the battlefield. 2. Military strategy is based on an assumption of conflict. 3. The similarities between military and business strategy can be seen in Sun Tzu’s The Art of War. If you don’t know where you are going, any road will take you there. -The Koran End of presentation 