Strategic Management PDF

Lesson 1: INTRODUCTION TO STRATEGIC MANAGEMENT  Functional-Level Strategy: Plan specific actions for departments like Strategic Management is a crucial aspect of business that involves planning, marketing, finance, and op...

Lesson 1: INTRODUCTION TO STRATEGIC MANAGEMENT  Functional-Level Strategy: Plan specific actions for departments like Strategic Management is a crucial aspect of business that involves planning, marketing, finance, and operations to support the business-level strategy. monitoring, analyzing, and assessing everything necessary for an organization to meet its goals and objectives. Evaluate and Select Strategies. Assess the feasibility, acceptability, and suitability of different strategic options. Use tools like the BCG Matrix and Porter’s Five Forces to What are the fundamental concepts and significance of strategic management in evaluate and select the best strategies. business? Develop Action Plans. Create detailed action plans outlining the steps to implement Fundamental Concepts of StraMa the chosen strategies. Assign responsibilities, allocate resources, and set timelines for Strategic Intent. Clarifies the purpose of an organization’s existence and its long-term each action. goals. It includes the mission, vision, and objectives of the organization. STRATEGY IMPLEMENTATION Environment Scanning. It involves analyzing internal and external environments to This step involves putting the formulated strategies into action. It includes allocating identify strengths, weaknesses, opportunities, and threats (SWOT analysis). resources, establishing a suitable organizational structure, and managing change to ensure effective strategies are executed. Strategy Formulation. Developing plans and policies to achieve the organization’s objectives. This includes defining the business strategy, operational strategies, and Develop Action Plans transformational strategies.  Corporate-level Strategy: Breakdown strategies into specific tasks and activities. Strategy Implementation. Executing the formulated strategies effectively. This  Assign Responsibilities: Designate individuals or teams responsible for each involves resource allocation, organizational structure, and managing change. task.  Set Timelines: Establish deadlines and milestones to track progress. Strategy Formulation. Monitoring and assessing the performance of the implemented strategies to ensure they meet the desired goals. This includes making necessary Allocate Resource adjustments to improve performance.  Financial Resources: Budget allocation for various activities.  Human Resources: Assign the right people with the necessary skills. Significance of Strategic Management  Physical Resources: Ensure availability of equipment, technology, and Provide Direction. Strategic management gives the organization clear direction by facilities. defining its mission, vision, and objectives. Establish Organizational Structure Improve Performance. Strategic management helps improve organizational  Design Structure: Create an organizational structure that supports the performance and efficiency by setting clear goals and monitoring progress. strategy (e.g., functional, divisional, matrix).  Define Roles: Clearly define roles and responsibilities to avoid confusion. Adapt to Change. It enables organizations to adapt to changes in the external  Communication Channels: Set up effective communication channels to environment, ensuring long-term sustainability and competitiveness. ensure smooth information flow. Resource Allocation. It helps efficiently allocate resources, ensuring they are used Manage Changes effectively to achieve the organization’s goals.  Change Management Plan: Develop a plan to manage resistance and ensure a smooth transition. Competitive Advantage. Through strategic planning and implementation,  Training and Development: Train employees with the necessary skills. organizations can gain a competitive edge in the market.  Stakeholder Engagement: Involve stakeholders to gain their support and commitment Strategic management is essential for any organization aiming for long-term success and growth. It helps navigate the complexities of the business environment and Monitor and Control achieve sustainable competitive advantage.  Performance Metrics: Involve stakeholders to gain their support and commitment. What are the key components of the strategic management process?  Regular Reviews: Conduct progress reviews to identify any issues or deviations. ENVIRONMENTAL SCANNING This involves analyzing both the internal and external environments of the  Adjustments: Make necessary adjustments to the plan based on feedback organization. Tools like SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) and performance data. are commonly used to identify factors impacting the organization. STRATEGY EVALUATION Define the scope. Determine what you need to know and the specific areas you want This step involves implementing the formulated strategies. It includes allocating to focus on. This could include market trends, competitor analysis, regulatory changes, resources, establishing a suitable organizational structure, and managing change to technological advancements, and socio-economic factors. ensure effective strategies are executed. Gather Data. Internal Sources include company reports, employee feedback, and Strategy evaluation is a crucial part of the strategic management process. It involves financial statements. External Sources include industry reports, market research, news assessing a strategy’s effectiveness in achieving the organization’s goals and making articles, and government publications. necessary adjustments. Analyze Trends. Examine the collected data to identify patterns and trends. Tools like Setting Performance Standards. Establish clear, measurable criteria to evaluate the SWOT analysis and PESTEL can be useful. strategy's success. These standards could include financial metrics, market share, customer satisfaction, and other key performance indicators (KPIs). Interpret and Apply Findings. Interpret the data in the context of your organization. Determine how the identified trends and patterns impact your business and what Measuring Actual Performance. Collect data to measure the strategy’s actual strategic actions are necessary. performance against the established standards. This includes financial reports, market analysis, customer feedback, and operational metrics. Report and Communicate. Communicate your findings to stakeholders through reports, presentations, or meetings to ensure everyone is aligned and informed about Comparing Performance with Standards. Analyze the data to compare actual the strategic direction. performance with the set standards. Identify any deviations or gaps between the expected and exact outcomes. STRATEGY FORMULATION In this phase, strategies are developed based on the insights gained from Analyzing Deviations. Investigate the reasons behind any deviations from the environmental scanning. This includes defining the business strategy, setting performance standards. This could involve looking into internal factors (e.g., resource objectives, and determining the best action to achieve these goals. allocation, employee performance) and external factors (e.g., market changes, competitive actions). Strategy formulation is a critical phase in the strategic management process where an organization develops plans and policies to achieve its objectives. Taking Corrective Actions. Based on the analysis, decide on corrective actions to improve performance. This could involve revising the strategy, reallocating resources, Define the Mission and Vision. The Mission Statement clarifies the organization’s or implementing new initiatives. purpose and primary objectives, while the vision statement describes the organization's desired future position. How does strategic management play a role in achieving competitive advantage? Set Objectives. Establish specific, measurable, achievable, relevant, and time-bound Identifying Opportunities and Threats (SMART) goals that align with the mission and vision. Through environmental scanning, strategic management helps organizations identify market opportunities and potential threats. This allows them to capitalize on favorable Formulate Strategies. conditions and mitigate risks.  Corporate-level Strategy: Determine the organization's overall scope and Leveraging Strengths and Addressing Weaknesses direction (cost leadership, merger, acquisition). By conducting internal analysis, organizations can leverage their strengths and address  Business-level Strategy: Develop competitive strategies for individual their weaknesses, ensuring they are wellpositioned to compete effectively. business units (cost leadership, differentiation). Creating Unique Value Propositions Strategic management involves formulating strategies that create unique value propositions. This could be through differentiation (offering unique products or  Draft the Vision Statement: Create an aspirational, clear, and inspiring vision services) or cost leadership (offering products at a lower price than competitors). statement that describes your business's desired future state and the impact you aim to make. Aligning Resources and Capabilities Effective strategy implementation ensures that resources and capabilities are aligned  Draft the Mission Statement: Develop a concise and operational mission with the strategic goals. This includes optimizing human resources, financial resources, statement that explains what your business does, who it serves, and why it exists. and technological capabilities to support the strategy.  Align with Strategy: Ensure that both statements align with your strategic goals Adapting Market Changes and objectives. They should provide a foundation for your business strategy. Strategic management enables organizations to be agile and responsive to market changes. By continuously monitoring and evaluating strategies, organizations can  Involve Stakeholders: Engage employees, stakeholders, and customers in the adapt quickly to new trends, technologies, and competitive actions. process. Their input can provide valuable insights and foster a sense of ownership. Enhancing Customer Satisfaction By focusing on customer needs and preferences, strategic management helps  Refine and Simplify: Review and refine your statements to ensure they are clear, organizations develop products and services that enhance customer satisfaction and concise, and jargon-free. Aim for simplicity and clarity. loyalty. This can lead to a stronger market position and repeat business.  Communicate and Embed: Once finalized, communicate your vision and mission statements clearly to all stakeholders. Embed them into your company culture Lesson 2: VISION, MISSION, and OBJECTIVES and daily operations. Vision A vision statement describes the organization's desired future position. It answers the How can you align organizational objectives with the company’s vision and mission question, "Where do we want to go?" It is aspirational and outlines what the to guide strategic decisions? organization aims to achieve in the long term, providing a sense of direction and inspiration. Aligning Organizational Objectives Understand the Vision and Mission: Ensure that all team members clearly understand Mission the company’s vision and mission. This provides a foundation for aligning objectives. A mission statement defines the organization’s purpose and primary objectives. It answers the question: What do we do? Who do we serve? And Why do we do it? It Breakdown the Vision and Mission: Translate the broad vision and mission into clearly and concisely describes the organization’s core purpose and focus. specific, actionable goals. Identify what success looks like in the context of your vision and mission. Objectives Objectives are specific, measurable goals that the organization aims to achieve within Set SMART Objectives: Develop objectives that are Specific, Measurable, Achievable, a certain timeframe. They are actionable steps that help realize the mission and vision. Relevant, and Timebound (SMART). These should directly support the vision and Objectives are often broken down into smaller, more manageable tasks and used to mission. track progress and performance. Prioritize Objectives: Determine which objectives are most critical to achieving the How do vision, mission, and objectives differ in a strategic context? vision and mission. Focus resources and efforts on these high-priority areas. VISION Integrate into Strategic Planning: Incorporate the aligned objectives into the strategic Purpose: The vision statement outlines the organization's long-term aspirations and planning process. Ensure that all strategic decisions and initiatives are evaluated based desired future state. on their alignment with the vision and mission. Focus: It is forward-looking and inspirational, clearly showing what the organization Communicate Clearly: Regularly communicate the vision, mission, and aligned aims to achieve. objectives to all stakeholders. This ensures everyone is on the same page and working towards common goals. Example: “Premier research university transforming communities in the ASEAN and beyond.” Monitor and Adjust: Continuously monitor progress towards the objectives. Be prepared to adjust strategies and objectives as needed to stay aligned with the vision MISSION and mission. Purpose: The mission statement defines the organization’s core purpose, primary objectives, and approach to achieving them. Engage Employees: Involve employees in aligning objectives. Their insights and buy-in are crucial for successful implementation. Focus: It is present-focused and operational, explaining what the organization does, who it serves, and why it exists. Lesson 3: EXTERNAL ENVIRONMENT ANALYSIS External Environment Example: “USeP shall contribute to inclusive growth and sustainable development In business, it refers to all the factors and influences outside a company that can affect through continual innovation in proactive academic programs, impactful research for its operations, performance, and strategies. These factors are beyond the company’s utilization, economically empowering community services, and sustainable resource control but can significantly impact its success. Understanding and adapting to these management.” external elements is crucial for businesses to thrive. OBJECTIVES How can you conduct an external environmental analysis using the PESTEL and Purpose: Objectives are specific, measurable, attainable, relevant, and time-bound Porter’s Five Forces frameworks? goals the organization aims to achieve within a particular timeframe. PESTEL Analysis Focus: They are actionable and detailed, breaking down the mission into achievable Stands for Political, Economic, Social, Technological, Environmental, and Legal factors. steps and milestones. This framework helps you understand the macro-environmental factors that could influence your business. Example: “Increase renewable energy production by 20% within the next two years.” Political Factors: Assess government policies, political stability, tax regulations, trade STRATEGIC CONTEXT restrictions, and labor laws. Changes in trade policies can affect import/export Vision: Sets the overarching direction and long-term goals, guiding strategic planning activities. and decision-making.  Identify relevant political factors: Look at government policies, political stability, tax regulations, trade restrictions, and labor laws. Mission: Provides a foundation for the organization’s strategy, ensuring daily  Assess their impact: Determine how these factors influence your business operations align with the core purpose. operations and strategy. For example, changes in trade policies can affect import/export activities Objectives: Translate the mission and vision into concrete actions, enabling the organization to track progress and measure success. Economic Factors: Examine economic growth, inflation rates, exchange rates, and unemployment levels. These factors influence consumer purchasing power and How can you craft clear and compelling vision and mission statements for a business? business costs.  Examine economic conditions: Consider economic growth, inflation rates, Steps in Crafting Vision and Mission exchange rates, and unemployment levels.  Identify Core Values and Purpose: Understand your business's fundamental  Evaluate their effects: Analyze how these economic conditions impact values and purpose. What principles guide your organization? What is your core consumer purchasing power, business costs, and overall market demand. purpose? Social Factors: Look at demographic changes, cultural trends, health consciousness,  Define Your Audience: Determine your primary customers or stakeholders. Who and lifestyle changes. These factors can affect market demand and consumer behavior. are you serving, and what are their needs?  Understand social trends: Look at demographic changes, cultural trends, health consciousness, and lifestyle changes.  Visualize the Future: Envision where you want your business to be in the next 5 to 10 years. What long-term impact do you want to achieve?   Determine their influence: Assess how these social factors affect market demand and consumer behavior. For instance, a growing emphasis on sustainability can drive demand for eco-friendly products. Technological Factors: Consider technological advancements, R&D activity, automation, and innovation. Staying updated with technology can provide competitive advantages.  Identify technological advancements: Consider technological innovations, R&D activity, automation, and digital transformation.  Analyze their impact: Evaluate how staying updated with technology can provide competitive advantages or how technological changes might disrupt your industry Environmental Factors: Evaluate ecological regulations, climate change, and sustainability initiatives. Businesses may need to adapt to new environmental standards.  Evaluate environmental conditions: Look at environmental regulations, How do external factors impact an organization’s strategic decisions? climate change, and sustainability initiatives.  Assess their implications: Determine how these factors affect your business Economic Factors activities and compliance requirements. For example, stricter Market Conditions: Economic downturns or booms can affect consumer spending and environmental laws may require changes in production processes. investment. During a recession, a company might focus on cost-cutting measures, while in a booming economy, it might invest in expansion. Legal Factors: Review laws related to consumer rights, safety standards, and employment regulations. Compliance with legal requirements is crucial for business Interest Rates: High interest rates can increase borrowing costs, leading businesses to operations. reconsider large capital investments or expansion plans.  Review legal requirements: Consider laws related to consumer rights, safety standards, and employment regulations. Political and Legal Factors  Understand their impact: Analyze how compliance with legal requirements Regulatory Changes: New laws or regulations can necessitate changes in business is crucial for business operations and how legal changes might affect your operations. For example, stricter environmental regulations might require investments industry. in cleaner technologies. Political Stability: In politically unstable regions, companies might avoid long-term investments or seek to diversify their operations to mitigate risks. Social and Cultural Factors Consumer Preferences: Shifts in societal values, such as a growing preference for sustainable products, can drive companies to innovate and adapt their product lines. Demographic Changes: Aging populations or increasing urbanization can influence market demand and strategic focus areas. Technological Factors Innovation: Rapid technological advancements can create new opportunities for product development and operational efficiencies. Companies need to stay ahead of technological trends to remain competitive. Porter’s Five Forces Analysis Porter’s Five Forces framework helps analyze the competitive environment of an Disruption: Emerging technologies can disrupt existing business models, prompting industry. companies to adapt or risk obsolescence. Threat of New Entrants: Assess how easy or difficult it is for new competitors to enter Environmental Factors the market. Factors include capital requirements, brand loyalty, and regulatory Climate Change: Environmental concerns can lead to changes in resource availability barriers. and operational costs. Companies might adopt sustainable practices and invest in  Identify Barriers to Entry: Consider factors like capital requirements, green technologies to comply with regulations and meet consumer expectations. economies of scale, brand loyalty, and regulatory barriers.  Evaluate Impact: Determine how easy or difficult it is for new competitors Natural Disasters: Events like floods or earthquakes can disrupt supply chains and to enter the market. High barriers to entry reduce the threat of new operations, leading to the development of robust contingency plans. entrants. Competitive Factors Bargaining Power of Suppliers: Evaluate suppliers’ power over the business. High Industry Rivalry: High competition can drive strategic decisions related to pricing, supplier power can affect costs and supply chain stability. marketing, and product differentiation. Companies might invest in innovation or  Assess Supplier Concentration: Look at the number of suppliers and their customer service to gain a competitive edge. uniqueness.  Analyze Supplier Power: If there are few suppliers or if they offer unique New Entrants: The threat of new competitors entering the market can influence products, they have more power to influence prices and terms. High strategies related to market positioning and barriers to entry. supplier power can increase costs for businesses. How can you identify opportunities and threats in the external environment that Bargaining Power of Buyers: Analyze customers’ influence on pricing and quality. High could affect business strategy? buyer power can drive prices down and demand higher quality.  Evaluate Buyer Concentration: Consider the number of buyers and their Perform a SWOT Analysis purchasing power.  Strengths: Identify internal strengths that can be leveraged.  Determine Buyer Influence: If buyers are few and purchase large volumes,  Weaknesses: Recognize internal weaknesses that need improvement. they can demand lower prices and higher quality. High buyer power can  Opportunities: Use insights from PESTEL to identify external opportunities. reduce profitability.  Threats: Use insights from PESTEL to identify external threats. Threat of Substitute Products or Services: Identify the availability of alternative Conduct Market Research products or services. The high threat of substitutes can limit profitability.  Survey and Interviews: Gather insights directly from customers, suppliers, and  Identify Substitutes: Look for alternative products or services that fulfill the industry experts. same need.  Competitive Analysis: Study competitors’ strategies, strengths, and weaknesses.  Assess Substitute Threat: High availability of substitutes can limit  Industry Reports: Review reports and publications from industry analysts and businesses’ prices and affect market share. market research firms. Industry Rivalry: Examine the intensity of competition among existing firms. Factors Monitor Trends and News include the number of competitors, rate of industry growth, and product  Industry News: Stay informed about the latest developments in your industry. differentiation.  Economic Indicators: Monitor financial trends that could impact your business.  Analyze Competitive Intensity: Examine the number of competitors,  Technological Indicators: Follow advancements in technology that could create industry growth rate, and product differentiation. new opportunities or threats.  Evaluate Rivalry Impact: High competition can lead to price wars, increased marketing costs, and reduced profitability. Engage in Scenario Planning  Develop Scenarios: Create different scenarios based on potential changes in the external environment.  Analyze Impacts: Assess how each scenario could affect your business and develop strategies to address them. Use Strategic Tools and Frameworks High market growth but low market share. These products have potential but require  BCG Matrix: Evaluate your product portfolio to identify growth opportunities. substantial investment to increase market share.  Ansoff Matrix: Explore growth strategies such as market penetration, market development, product development, and diversification. DOGS Low market growth and low market share. These products may not generate much Collaborate with Stakeholders profit and could be candidates for divestiture.  Internal Teams: Engage with different departments to gather diverse perspectives. What are the company’s key resources and capabilities, and how do they provide a  External Partners: Collaborate with suppliers, customers, and industry partners strategic advantage? to gain insights. PHYSICAL RESOURCES This includes tangible assets like buildings, machinery, technology, and inventory. For example, a company with state-of-the-art manufacturing facilities can produce high- Lesson 4: INTERNAL ENVIRONMENT ANALYSIS quality products efficiently. Internal Environment Refers to the elements within an organization that influence its operations and HUMAN RESOURCES decision-making. A well-managed internal environment can lead to enhanced Skilled and experienced employees, leadership, and management teams. Talented efficiency, increased employee engagement, and better strategic alignment. employees can drive innovation and improve operational efficiency. Organizational Culture. The shared values, beliefs, and behaviors within the company. FINANCIAL RESOURCES A positive culture boosts employee morale and productivity. Access to capital, strong cash flow, and financial stability. Financial strength allows a company to invest in new opportunities and weather economic downturns. Management Practices. The methods and styles of managing employees and resources. Effective management practices lead to better decision-making and INTELLECTUAL PROPERTY efficiency. Patents, trademarks, copyrights, and proprietary technologies. These can provide a competitive edge by protecting unique products or processes. Employees. The workforce of the organization. Their skills, attitudes, and engagement levels significantly impact the company’s performance. BRAND and REPUTATION A strong brand and positive reputation can attract customers, partners, and top talent. Work Progresses. The procedures and workflows used to complete tasks. Streamlined It also helps in building customer loyalty and trust. processes enhance productivity and reduce errors. How do internal strengths and weaknesses influence strategic decisions? Organizational Structure. The hierarchy and communication channels within the company. A clear structure promotes efficient coordination and decision-making. Internal Strengths Leveraging Core Competencies: Strengths such as unique skills, advanced technology, How can an organization assess its internal environment using the Resource-Based or strong brand reputation can be leveraged to gain a competitive advantage. For View (RBV) and VRIO frameworks? example, a company with a strong R&D department might focus on innovation-driven strategies. Resource-Based View A model that sees resources as key to superior firm performance. If a resource exhibits Resource Allocation: Organizations tend to allocate more resources to areas where VRIO attributes, the resource enables the firm to gain and sustain a competitive they have strengths. This ensures that they maximize their potential and achieve better advantage. outcomes. VRIO Framework Strategic Partnerships: Strong internal capabilities can attract partnerships and The tool used to a analyze firm’s internal resources and capabilities to find out if they collaborations, enhancing growth opportunities and market reach. can be a source of sustained competitive advantage. The term VRIO comes from the words value, rarity, imitability and organization. Internal Weaknesses Identify Improvement Areas: Recognizing weaknesses helps organizations identify areas that need improvement. This could involve investing in employee training, upgrading technology, or restructuring processes. Risk Management: Understanding internal weaknesses allows companies to develop strategies to mitigate risks. For instance, if a company has a weak supply chain, it might diversify its suppliers to reduce dependency. Strategic Focus: Weaknesses can also help in setting realistic goals and focusing on achievable targets. This prevents overextension and ensures that the organization works within its capabilities. BCG Matrix The BCG Matrix, also known as the Growth-Share Matrix, is a strategic business tool developed by the Boston Consulting Group in the 1970s. It helps companies analyze their product lines or business units based on market growth and market share. The matrix is divided into four quadrants. STARS Consume a significant amount of cash but also generate large cash flows. As the market matures and the products remain successful, stars will migrate to become cash cows. Stars are a company’s prized possession and are top-ofmind in a firm’s product portfolio. COWS Cash flows generated by cash cows are high and are generally used to finance stars and question marks. Products in the cash cows quadrant are “milked” and firms invest as little cash as possible while reaping the profits generated from the products. QUESTION MARKS