Strategic Management OPMN07B Lyceum of the Philippines University PDF

STRATEGIC MANAGEMENT OPMN07B Lyceum of the Philippines University Cavite Campus Take the Lead! LEARNING OUTCOMES  PRELIM HIGHLIGHTS WHAT IS STRATEGY?  PRELIM HIGHLIGHTS WHAT IS MANAGEMENT? ...

STRATEGIC MANAGEMENT OPMN07B Lyceum of the Philippines University Cavite Campus Take the Lead! LEARNING OUTCOMES  PRELIM HIGHLIGHTS WHAT IS STRATEGY?  PRELIM HIGHLIGHTS WHAT IS MANAGEMENT?  STRATEGY Is a set of related actions that managers take to increase their company’s performance. For most, if not all, companies, achieving superior performance relative to rivals is the ultimate challenge. If a company’s strategies result in superior performance, it is said to have a competitive advantage.  MANAGEMENT Management is how businesses organize and direct workflow, operations, and employees to meet company goals. The primary goal of management is to create an environment that empowers employees to work efficiently and productively. A solid organizational structure guides employees and establishes the tone and focus of their work.  KEY FUNCTIONS OF MANAGEMENT Planning The first function of a manager is to set goals. These goals may be for individual employees, departments, or the entire organization, depending on the manager's level of responsibility.  KEY FUNCTIONS OF MANAGER Organizing Meeting organizational goals requires putting the right people in the right places. Managers can play an important role in choosing workers for positions and projects. Knowing how to group people and help them build relationships often significantly affects how well the group works together.  KEY FUNCTIONS OF MANAGER Motivating Managers help motivate employees to show up and stay productive. This includes sharing a common vision, encouraging them to develop their strengths, and inspiring them to do their best work at all times.  KEY FUNCTIONS OF MANAGER Evaluating Managers typically spend time measuring the success of their teams and how well they meet goals. The more they understand what works and doesn't work, the better prepared they are to make decisions in the future. PRELIM HIGHLIGHTS Basic Questions STRATEGIC MANAGEMENT  STRATEGIC MANAGEMENT Strategic management is the process of setting goals, procedures, and objectives in order to make a company or organization more competitive. STRATEGIC MANAGEMENT STRATEGIC MANAGEMENT STAGES OF STRATEGIC MANAGEMENT STAGES OF STRATEGIC MANAGEMENT STRATEGIC MANAGEMENT STRATEGY FORMULATION STAGES OF STRATEGIC MANAGEMENT STAGES OF STRATEGIC MANAGEMENT  STRATEGIC MANAGEMENT Example: Imagine your company is introducing a brand new service line and wants to implement a strategic management process to ensure execution goes smoothly. You’ll first want to evaluate a few things about your current processes and future goals  STRATEGIC LEADERSHIP, COMPETITIVE ADVANTAGE, AND SUPERIOR PERFORMANCE Strategic leadership is concerned with managing the strategy-making process to increase the performance of a company, thereby increasing the value of the enterprise to its owners, its shareholders. To increase shareholder value, managers must pursue strategies that increase the profitability of the company and ensure that profits grow). To do this, a company must be able to outperform its rivals; it must have a competitive advantage.  STRATEGIC LEADERSHIP, COMPETITIVE ADVANTAGE, AND SUPERIOR PERFORMANCE  Superior Performance It refers to a maximizing shareholder value is the ultimate goal of profit- making companies, for two reasons. First, shareholders provide a company with the risk capital that enables managers to buy the resources needed to produce and sell goods and services. Risk capital is capital that cannot be recovered if a company fails and goes bankrupt. Shareholders will not provide risk capital unless they believe that managers are committed to pursuing strategies that provide a good return on their capital investment  Superior Performance Second, shareholders are the legal owners of a corporation, and their shares therefore represent a claim on the profits generated by a company. Thus, managers have an obligation to invest those profits in ways that maximize shareholder value. Of course managers must behave in a legal, ethical, and socially responsible manner while working to maximize shareholder value. By shareholder value, we mean the returns that shareholders earn from purchasing shares in a company. These returns come from two sources: (a) capital appreciation in the value of a company’s shares and (b) dividend payments.  Superior Performance EXAMPLE SCENARIO For example, between January 2 and December 31, 2012, the value of one share in Company X increased from ₱60.33 to ₱68.90, which represents a capital appreciation of ₱8.57. In addition, Company X paid out a dividend of ₱1.59 per share during 2012. Thus, if an investor had bought one share of Company X on January 2 and held on to it for the entire year, the return would have been ₱10.16 (₱8.57 + ₱1.59), a solid 16.8% return on the investment. One reason Company X’s shareholders did well during 2012 was that investors believed that managers were pursuing strategies that would both increase the long-term profitability of the company and significantly grow its profits in the future.  Superior Performance It emerges when talented workers willingly and unreservedly harness and invest their talents in an organized and optimally productive manner COMPETITIVE ADVANTAGE AND A COMPANY’S BUSINESS MODEL  COMPETITIVE ADVANTAGE Managers do not make strategic decisions in a competitive vacuum. Their company is competing against other companies for customers. Competition is a rough-and-tumble process in which only the most efficient and effective companies win out. It is a race without end. To maximize shareholder value, managers must formulate and implement strategies that enable their company to outperform rivals—that give it a competitive advantage. A company is said to have a competitive advantage over its rivals when its profitability is greater than the average profitability and profit growth of other companies competing for the same set of customers. The higher its profitability relative to rivals, the greater its competitive advantage will be. A company has a sustained competitive advantage when its strategies enable it to maintain above-average profitability for a number of years.  COMPETITIVE ADVANTAGE Competitive Advantages occurs when a Company’s profitability is greater than the average profitability of firms in its industry The term "competitive advantage" traditionally refers to the business world, but can also be applied to a country, organization, or even a person who is competing for something.  COMPETITIVE ADVANTAGE Competitive advantage refers to factors that allow a company to produce goods or services better or more cheaply than its rivals. These factors allow the productive entity to generate more sales or superior margins compared to its market rivals. Competitive advantages are attributed to a variety of factors including cost structure, branding, the quality of product offerings, the distribution network, intellectual property, and customer service.  COMPETITIVE ADVANTAGE To build a competitive advantage, a company can use one of three main methods:  BUSINESS MODEL A business model is managers’ conception of how the set of strategies their company pursues should work together as a congruent whole, enabling the company to gain a competitive advantage and achieve superior profitability and profit growth. In essence, a business model is a kind of mental model, or gestalt, of how the various strategies and capital investments a company makes should fit together to generate above-average profitability and profit growth.  BUSINESS MODEL The term business model refers to a company's plan for making a profit. It identifies the products or services the business plans to sell, its identified target market, and any anticipated expenses. Business models are important for both new and established businesses. They help companies attract investment, recruit talent, and motivate management and staff.  BUSINESS MODEL A business model encompasses the totality of how a company will: BUSINESS MODEL COMPETITIVE ADVANTAGE AND A COMPANY’S BUSINESS MODEL INDUSTRY DIFFERENCES IN PERFORMANCE  PERFORMANCE IN NONPROFIT ENTERPRISES A final point concerns the concept of superior performance in the nonprofit sector. By definition, nonprofit enterprises such as government agencies, universities, and charities are not in “business” to make profits. Nevertheless, they are expected to use their resources efficiently and operate effectively, and their managers set goals to measure their performance.  PERFORMANCE IN NONPROFIT ENTERPRISES The performance goal for a business school might be to get its programs ranked among the best in the nation. The performance goal for a charity might be to prevent childhood illnesses in poor countries. The performance goal for a government agency might be to improve its services while not exceeding its budget. The managers of nonprofits need to map out strategies to attain these goals. They also need to understand that nonprofits compete with each other for scarce resources, just as businesses do.  STRATEGIC MANAGERS Managers are the linchpin in the strategy-making process. It is individual managers who must take responsibility for formulating strategies to attain a competitive advantage and for putting those strategies into effect. They must lead the strategy-making process  STRATEGIC MANAGERS GENERAL MANAGERS FUNCTIONAL MANAGERS Who are responsible for supervising a Who bear responsibility for particular function, that is, a task, the overall performance of activity, or operation, such as the company or for one of its accounting, marketing, research and major self-contained subunits development (R&D), information or divisions. technology, or logistics.  COMPANY is a collection of functions or departments that work together to bring a particular good or service to the market. If a company provides several different kinds of goods or services, it often duplicates these functions and creates a series of self-contained divisions (each of which contains its own set of functions) to manage each different good or service. The general managers of these divisions then become responsible for their particular product line. The overriding concern of general managers is the success of the whole company or the divisions under their direction; they are responsible for deciding how to create a competitive advantage and achieve high profitability with the resources and capital they have at their disposal LEVELS OF STRATEGIC MANAGEMENT  LEVELS OF STRATEGIC MANAGEMENT CORPORATE-LEVEL MANAGERS The corporate level of management consists of the chief executive officer (CEO), other senior executives, and corporate staff. These individuals occupy the apex of decision making within the organization. The CEO is the principal general manager. In consultation with other senior executives, the role of corporate-level managers is to oversee the development of strategies for the whole organization. This role includes defining the goals of the organization, determining what businesses it should be in, allocating resources among the different businesses, formulating and implementing strategies that span individual businesses, and providing leadership for the entire organization.  LEVELS OF STRATEGIC MANAGEMENT KEY ASPECTS OF CORPORATE-LEVEL STRATEGY INCLUDE:  LEVELS OF STRATEGIC MANAGEMENT KEY ASPECTS OF CORPORATE-LEVEL STRATEGY INCLUDE: LEVELS OF STRATEGIC MANAGEMENT EXAMPLE:  LEVELS OF STRATEGIC MANAGEMENT BUSINESS-LEVEL MANAGERS A business unit is a self-contained division (with its own functions—for example, finance, purchasing, production, and marketing departments) that provides a product or service for a particular market. The principal general manager at the business level, or the business-level manager, is the head of the division. The strategic role of these managers is to translate the general statements of direction and intent that come from the corporate level into concrete strategies for individual businesses. Whereas corporate- level general managers are concerned with strategies that span individual businesses, business-level general managers are concerned with strategies that are specific to a particular business.  LEVELS OF STRATEGIC MANAGEMENT FUNCTIONAL-LEVEL MANAGERS Functional-level managers are responsible for the specific business functions or operations (human resources, purchasing, product development, customer service, etc.) that constitute a company or one of its divisions. Thus, a functional manager’s sphere of responsibility is generally confined to one organizational activity, whereas general managers oversee the operation of an entire company or division. Although they are not responsible for the overall performance of the organization, functional managers nevertheless have a major strategic role: to develop functional strategies in their areas that help fulfill the strategic objectives set by business- and corporate-level general managers. An equally great responsibility for managers at the operational level is strategy implementation: the execution of corporate- and business-level plans  LEVELS OF STRATEGIC MANAGEMENT CORPORATE-LEVEL MANAGERS BUSINESS-LEVEL MANAGERS A corporate level strategy comes into play when an organization has multiple A business level strategy zooms in on a businesses operating in different specific business within the organization. markets. It sets the overall direction It focuses on creating a game plan for the entire organization. It decides tailored specifically for that business unit which markets to compete in, how to to achieve success in its corner of the allocate resources across the market. organization, and similar big-picture things.  Mission Statement The first component of the strategic management process is crafting the organization’s mission statement, which provides the framework—or context—within which strategies are formulated. A mission statement has four main components: a statement of the raison d’être of a company or organization—its reason for existence—which is normally referred to as the mission; a statement of some desired future state, usually referred to as the vision; a statement of the key values that the organization is committed to; and a statement of major goals.  Vision The vision of a company defines a desired future state; it articulates, often in bold terms, what the company would like to achieve. In its early days, Microsoft operated with a very powerful vision of a computer on every desk and in every home. To turn this vision into a reality, Microsoft focused on producing computer software that was cheap and useful to business and consumers. In turn, the availability of powerful and inexpensive software such as Windows and Office helped to drive the penetration of personal computers into homes and offices.  Values The values of a company state how managers and employees should conduct themselves, how they should do business, and what kind of organization they should build to help a company achieve its mission. Insofar as they help drive and shape behavior within a company, values are commonly seen as the bedrock of a company’s organizational culture: the set of values, norms, and standards that control how employees work to achieve an organization’s mission and goals. An organization’s culture is commonly seen as an important source of its competitive advantage. Values  Well-constructed goals have four main characteristics: They are precise and measurable. Measurable goals give managers a yardstick or standard against which they can judge their performance. They address crucial issues. To maintain focus, managers should select a limited number of major goals to assess the performance of the company. The goals that are selected should be crucial or important ones.  Well-constructed goals have four main characteristics: They are challenging but realistic. They give all employees an incentive to look for ways of improving the operations of an organization. If a goal is unrealistic in the challenges it poses, employees may give up; a goal that is too easy may fail to motivate managers and other employees. They specify a time period in which the goals should be achieved, when that is appropriate. Time constraints tell employees that success requires a goal to be attained by a given date, not after that date. Deadlines can inject a sense of urgency into goal attainment and act as a motivator. However, not all goals require time constraints COMPONENTS OF A MISSION STATEMENT EXTERNAL, INTERNAL  EXTERNAL ANALYSIS The second component of the strategic management process is an analysis of the organization’s external operating environment. The essential purpose of the external analysis is to identify strategic opportunities and threats within the organization’s operating environment that will affect how it pursues its mission. EXTERNAL ANALYSIS EXTERNAL ANALYSIS EXTERNAL ANALYSIS  INTERNAL ANALYSIS Internal analysis, the third component of the strategic planning process, focuses on reviewing the resources, capabilities, and competencies of a company. The goal is to identify the strengths and weaknesses of the company. INTERNAL ANALYSIS  SWOT ANALYSIS AND THE BUSINESS MODEL The next component of strategic thinking requires the generation of a series of strategic alternatives, or choices of future strategies to pursue, given the company’s internal strengths and weaknesses and its external opportunities and threats. The comparison of strengths, weaknesses, opportunities, and threats is normally referred to as a SWOT analysis. The central purpose is to identify the strategies to exploit external opportunities, counter threats, build on and protect company strengths, and eradicate weaknesses.  STRATEGY IMPLEMENTATION Once managers have chosen a set of congruent strategies to achieve a competitive advantage and increase performance, managers must put those strategies into action: strategy has to be implemented. Strategy implementation involves taking actions at the functional, business, and corporate levels to execute a strategic plan.  STRATEGY IMPLEMENTATION Implementation can include, for example, putting quality improvement programs into place, changing the way a product is designed, positioning the product differently in the marketplace, segmenting the marketing and offering different versions of the product to different consumer groups, implementing price increases or decreases, expanding through mergers and acquisitions, or downsizing the company by closing down or selling off parts of the company. STRATEGY IMPLEMENTATION  STRATEGIC PLANNING IN PRACTICE Scenario Planning Scenario planning involves formulating plans that are based upon “what-if” scenarios about the future. In the typical scenario-planning exercise, some scenarios are optimistic and some are pessimistic. Teams of managers are asked to develop specific strategies to cope with each scenario. A set of indicators is chosen as signposts to track trends and identify the probability that any particular scenario is coming to pass. The idea is to allow managers to understand the dynamic and complex nature of their environment, to think through problems in a strategic fashion, and to generate a range of strategic options that might be pursued under different circumstances. STRATEGIC PLANNING IN PRACTICE Scenario Planning  STRATEGIC PLANNING IN PRACTICE Decentralized Planning A mistake that some companies have made in constructing their strategic planning process has been to treat planning exclusively as a top-management responsibility. This “ivory tower” approach can result in strategic plans formulated in a vacuum by top managers who have little understanding or appreciation of current operating realities. Consequently, top managers may formulate strategies that do more harm than good. Correcting the ivory tower approach to planning requires recognizing that successful strategic planning encompasses managers at all levels of the corporation. Much of the best planning can and should be done by business and functional managers who are closest to the facts; in other words, planning should be decentralized. STRATEGIC PLANNING IN PRACTICE Decentralized Planning STRATEGIC PLANNING IN PRACTICE TECHNIQUE FOR IMPROVING DECISION MAKING TECHNIQUE FOR IMPROVING DECISION MAKING  REFERENCES v https://images.search.yahoo.com/search/images;_ylt=AwrjW614Rs5mOfIAAlZXNyoA;_ylu=Y29sbwNncTEEcG9zAzEEdnRpZAMEc2VjA3BpdnM-?p=superior+performance+example&fr2=piv- web&type=E210US91215G0&fr=mcafee#id=19&iurl=https%3A%2F%2Fglobal-uploads.webflow.com%2F5f442fc2524d56a89638a487%2F61c23dafe1065086046117ec_ordinal%2520data.png&action=click V https://images.search.yahoo.com/search/images;_ylt=AwrjedspVc5msT0AOyNXNyoA;_ylu=Y29sbwNncTEEcG9zAzEEdnRpZAMEc2VjA3BpdnM-?p=Coca-Cola&fr2=piv- web&type=E210US91215G0&fr=mcafee#id=3&iurl=http%3A%2F%2F1000logos.net%2Fwp-content%2Fuploads%2F2016%2F11%2Fcoca-cola-emblem.jpg&action=click V https://images.search.yahoo.com/search/images;_ylt=AwrO.uh7dc5m4CUDYcNXNyoA;_ylu=Y29sbwNncTEEcG9zAzEEdnRpZAMEc2VjA3BpdnM-?p=external+analysis+pictures&fr2=piv- web&type=E210US91215G0&fr=mcafee#id=2&iurl=https%3A%2F%2Fi2.wp.com%2Fwww.business-to-you.com%2Fwp-content%2Fuploads%2F2019%2F09%2FSWOT-Analysis.png%3Fw%3D1387%26ssl%3D1&action=click v https://images.search.yahoo.com/search/images;_ylt=AwrjZRRGe85mAsgyvUOJzbkF;_ylu=c2VjA3NlYXJjaARzbGsDYnV0dG9u;_ylc=X1MDOTYwNjI4NTcEX3IDMgRmcgNtY2FmZWUEZnIyA3A6cyx2OmksbTpzYi10b3AEZ3ByaWQDbk VybUlJbmZRVFN6cGNJakltTW56QQRuX3JzbHQDMARuX3N1Z2cDMQRvcmlnaW4DaW1hZ2VzLnNlYXJjaC55YWhvby5jb20EcG9zAzAEcHFzdHIDBHBxc3RybAMwBHFzdHJsAzM3BHF1ZXJ5A2RlY2VudHJhbGl6ZWQlMjBwbGFubmlu ZyUyMHNhbXBsZSUyMHBpY3R1cmUEdF9zdG1wAzE3MjQ4MDgwNjk-?p=decentralized+planning+sample+picture&fr=mcafee&fr2=p%3As%2Cv%3Ai%2Cm%3Asb-top&ei=UTF- 8&x=wrt&type=E210US91215G0#id=47&iurl=https%3A%2F%2Fwww.betterup.com%2Fhs-fs%2Fhubfs%2FImported_Blog_Media%2Fdecentralization%2520in%2520management%2520- %2520decentralized%2520vs%2520centralized%2520management-1.png%3Fwidth%3D1000%26height%3D571%26name%3Ddecentralization%2520in%2520management%2520- %2520decentralized%2520vs%2520centralized%2520management-1.png&action=click  THANK YOU Instructor: Ms. Charity Kaye D. Tallada Should you have any questions, email me at [email protected] Lyceum of the Philippines University Cavite Campus Take the Lead!