finish the homework
Topic 4
Strategic Management Process:
Achieving & Sustaining Competitive Advantage
•Reminder – work on JAP & readings
• Two key words in this unit are “Achieving” & “Sustaining”.
• In life, we put in hard work to achieve some milestone(s).
• E.g – good grades in education, financial management, physical fitness,
sports performance etc.
• Achievement calls for, effort, sacrifices to be made, & prices to be paid. We
feel good and experience a sense of satisfaction, when we achieve these
milestones.
• But after achievement comes the rigorous part of sustaining our
achievements.
• E.g. - once sports teams achieve success, there is pressure on the team to
sustain that achievement.
- when we reach a certain level of fitness, we need to sustain it;
continued hard work
• Similarly, once an organization achieves an advantaged position through the formulation of strategies, they must strive to sustain and build on this advantage.
• In the last three units, we have discussed:
(1)the role of the manager,
(2) the organization and its environment,
(3) the formulation of strategies to optimize resources,
(4) the need to constantly reinvent & have sustainable competitive advantage.
• In all this, strategy was a key term in our discussions. Now in unit 4, we look at achieving and sustaining that competitive advantage as an organization.
Topic 4 is divided into the following topics:
1. Strategic Management
2.Firm Vision and Mission
3.The Role of Strategic Analysis in Formulating a Strategy
4.Strategic Objective and Levels of Strategy
5.Planning Firm Actions to Implement Strategies
6.Measuring and Evaluating Strategic Performance
1. Strategic Management
• Strategic management is the optimization of a firm’s resources in strategic ways to reach its goals and objectives
• Q: How is strategic management different from management?
• A: While both are important, management is about how the organization is operating in the “here and now”, strategic management focuses on the future.
• Strategic management is about creating paths for future success
• Its about finding new ways to be competitive in the future.
• Another way to distinguish between management and strategic management is to see management as the “what” the organization does now and strategic management as the “how” for the future.
• Therefore, for managers, understanding the
Strategic Management Process (SMP) is critical
for success.
• To understand the SMP, lets look at the
Strategy Cycle (see diagram ).
• A strategy cycle spells out the steps in the
strategic management process.
• Different texts have varying steps in the
strategy cycle; ranging from 5 to 12 in some
cases.
• We will be looking at a strategic cycle that
contains six steps. In this unit, we will discuss
each step, in detail.
2. Firm Vision and Mission
• At the core of every organization is its vision and mission statement.
• The vision statement captures the organizations reason for being.
• Why does the organization exist? Why was the organization founded?
What is the organization trying to accomplish?
• A vision statement ought to be a simple statement or two that declares
clearly why the business or organization exists.
• The mission statement takes the “why” of the vision statement and
explains “how” the vision will be fulfilled.
•The vision and mission statements of an
organization are foundational, since strategy,
budgets, human resource planning and a host of other organizational dynamics will be of little use, if
an organization does not have a defined purpose and
direction.
Mission Statement Vision Statement
About A Mission statement talks about HOW you will get to where you
want to be. Defines the purpose and primary objectives related
to your customer needs and team values.
A Vision statement outlines WHERE you want to be. Communicates both
the purpose and values of your business.
Answer It answers the question, “What do we do? What makes us
different?”
It answers the question, “Where do we aim to be?”
Time A mission statement talks about the present leading to its
future.
A vision statement talks about your future.
Function It lists the broad goals for which the organization is formed. Its
prime function is internal; to define the key measure or
measures of the organization's success and its prime audience is
the leadership, team and stockholders.
It lists where you see yourself some years from now. It inspires you to give
your best. It shapes your understanding of why you are working here.
Change Your mission statement may change, but it should still tie back to
your core values, customer needs and vision.
As your organization evolves, you might feel tempted to change your
vision. However, mission or vision statements explain your organization's
foundation, so change should be kept to a minimum.
Developing a
statement
What do we do today? For whom do we do it? What is the
benefit? In other words, Why we do what we do? What, For
Whom and Why?
Where do we want to be going forward? When do we want to reach that
stage? How do we want to do it?
Features of an
effective statement
Purpose and values of the organization: Who are the
organization's primary "clients" (stakeholders)? What are the
responsibilities of the organization towards the clients?
Clarity and lack of ambiguity: Describing a bright future (hope);
Memorable and engaging expression; realistic aspirations, achievable;
alignment with organizational values and culture.
3. The Role of Strategic Analysis in Formulating a Strategy
• Having looked at the first step in the strategy cycle – vision and
mission, we now come to the second step which is strategy analysis.
• In Topic 3, we surveyed tools and frames that help assess &
analyze an organization’s internal & external environment.
• This information is vital to formulating viable strategies, making
informed decisions & in the writing of business plans for start ups.
Strategic analysis will help raise and answer the following questions in
the formulation of strategies:
1. “What sort of products and services must we embark upon?”
2. “Do we have the internal capabilities to initiate and sustain this
venture?”
3. “Do we possess current technologies?
4. How is our level of staffing? Do they need training and upskilling?
5. “Who are our competitors and what range of products will they
offer?”
6. “How can we offer something better in terms of quality and price?”
• As managers walk their teams through these questions, they will
have a better picture on the direction & type of strategies they
need to formulate. Is it cost, differentiation or focus strategy?
• Please revisit Topic 3 and review our discussions on the
environment of the organization in relation strategy formulation.
4. Strategic Objectives and Levels of Strategy • We now look at Step 3(develop objectives) & step 4(create and choose strategies) of the strategy cycle.
• Having understood the place and importance of analysis in strategy formulation, we now take another step in this unit to look at big picture objectives and levels of strategies to reach those objectives.
• The information gleaned from the analyses will help in establishing realistic objectives and deciding on which level of strategy the organization will pursue.
• Section 9.4 introduces three levels of strategy and helps us understand the important connection between Strategies, objectives and actions.
1st level of strategy - the business-level strategy; deals with the internal aspects of
the organization. Involves evaluating how a business organizes its activities, its
internal resources & capabilities, & in keeping with these if they will pursue a cost
leadership or differentiation strategy with the products/services on offer.
2nd level - the corporate strategy which has to do with the future of the organization.
This is at a higher level than the business level strategy & involves decisions if the
business should expand, shrink or continue at the same level of operation.
• For instance, are there business units that need to shut down?
• Are there units that are doing extremely well that need to be supported?
• Are there new units that ought to open up to increase year-round revenue instead of
seasonal revenues?
The BCG Matrix
• The BCG Matrix (exhibit 9.7 in your text) is a helpful tool that gives managers a quick picture on which business units are doing well and which units are not.
• The BCG matrix plots market share against market growth and has four quadrants: question mark, star, cash cow, dog.
• For example, business units in star category are doing well and need investment and support and business units in dog category need to be shut down.
• Video: BCG Matrix Video 1
• Video: BCG Matrix Video 2
• 3rd level - the international strategy & similar to the corporate
level strategy except that its focus is on the geographic
dimensions of the business.
• Are there foreign markets the organization can enter and expand?
• What opportunities are there?
• And how can the business exploit these opportunities?
Table 9.1 - Readings How Grand Strategies Are Translated into Objectives and Actions
Grand Strategy Strategic Objective Potential Action
Business-Level
Strategy
Growth Increase business revenue by 25% • Introduce a new product.
• Expand to a new location.
Corporate-Level
Strategy
Growth Increase corporate revenue by 10% • Acquire a competitor.
• Expand to a new country.
• Develop a business in a new
industry.
International Strategy Growth Attract 10% overall market share in a new
country
• Export products to that country.
• Acquire a local company in that
country to gain their customers.
5. Planning Firm Actions to Implement Strategies
• This step deals with the implementation of the strategies.
• Having looked at the flow from strategy, to objectives, to actions, we now
build and expand on the types of actions an organization will take in
keeping with its objectives.
• Focus is on what, when, how of the action steps, the resources required,
allocation of staffing, and required technology to carry out these actions
and reach goals in a timely manner.
• A helpful tool to evaluate goals is the SMART framework (See Exhibit
9.10 – reading )
• Weak Goal Example 1: I’m going to write a book.
• SMART Goal Example:
• Specific: I’m going to write a 60,000-word sci-fi novel.
• Measurable: I will finish writing 60,000 words in 6 months.
• Achievable: I will write 2,500 words per week.
• Relevant: I’ve always dreamed of becoming a professional writer.
• Time-bound: I will start writing tomorrow on January 1st, and finish
June 30th.
• Weak Goal Example 2: I’m going to get a better job.
• SMART Goal Example:
• Specific: I’m going to become a search engine optimization (SEO) specialist for a leading software-as-a-service (SaaS) company like Shopify and work remotely.
• Measurable: I will apply to a minimum of 8 job applications within two months.
• Achievable: I’ve worked as an SEO specialist for two years in an office for an accounting firm, and I’m good at my job.
• Relevant: I enjoy collaborating with interesting people, contributing to something innovative, and join a company with room for me to grow.
• Time-bound: I will apply to 8 suitable job applications within two months by submitting 1 application per week.
Group Discussion
• Each of the following statements is a goal or objective, but it is not expressed very
clearly. Rewrite each statement as a SMART goal.
o Amazon wants to improve product delivery times.
o Starbucks baristas should make customized drinks more quickly.
o Sales associates should sell more cars this month.
o McDonald’s needs more customers at dinnertime.
o FedEx wants to compete with UPS.
o Lyft wants to increase revenue.
6: Measuring and Evaluating Strategic Performance
• Measuring is a very key part of our lives
• We measure our height and weight; we measure the quantity of
ingredients that go into any preparation
• In sports, performances are measured to track progress.
• What you cannot measure you cannot manage, what you cannot measure
you cannot improve, or, what you cannot observe you cannot measure.
• From these statements, measuring is essential to management and
progress, & measurements must be observable.
• Once the strategy/strategies have been decided upon and implemented,
measuring and evaluating the success of the implementation is crucial.
• Are the results on track?
• Is performance above or below standards set?
• Are the outcomes in alignment with the vision and mission of organization?
• If not, what corrective actions/measures need to be taken?
• All these questions and more need to be asked when measuring and
evaluating strategies.
• This is step 6 in the strategy cycle.
• Video: Prof Felix Oberholzer-Gee, HBS, Author: Better, Simpler,
Strategy
• What Is Strategy? It’s a Lot Simpler Than You Think
Summary of Topic 4
• Work on Readings for Topic 4