15 to 20 minutes ppt

STRATEGIC MANAGEMENT

DEFINITION, THEORIES & PRACTICES – SESSION 1

MEANS END

Strategy

STRATEGIC MANAGEMENT MODEL

2

Objectives of this session:

1. What is Strategy & Strategic Management?

2. Theories of Strategy

3. Purpose, Vision and Mission

4. Stages of Strategic Management

5. Strategy Frameworks: PESTLE, Porter’s 5 Forces, SWOT….

sanits591.wordpress.com/2014/09/11/strategic- decisions-thinking-planning-move-act/

DEFINITION

3 en.oxforddictionaries.com/ www.apm.org.uk/

Strategy A plan of action designed to achieve a long-term or overall aim

Strategic Management Strategic management is the identification, selection and implementation of an organisation’s long- term goals and objectives.

STRATEGY & STRATEGIC MANAGEMENT

Strategy is a framework for making decisions about how you will play the game of business.

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Strategic Management is the art and science of formulating, implementing, and evaluating cross- functional decisions that enable an organization to achieve its objectives

www.forbes.com/sites/annlatham Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Strategic plan is a company’s game plan.

STRATEGY & STRATEGIC MANAGEMENT

Strategic Decisions “…decisions that deliberately do something ‘different’ from competitors and if that difference leads to sustainable advantage”, Michael Porter, HBR, 1996

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Strategic Management and Operational Efficiency are equally important to any organization but are uniquely different in their nature and consequence

www.forbes.com/sites/annlatham Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

“Strategies are the result of a complex interaction and synergy between different activities that produce value

and not the activities in themselves” Michael Porter, HBR, 1996

Strategic

Management

STRATEGIC MANAGEMENT IN CONSTRUCTION

a. In 2014 construction output was £103 billion, 6.5% of GDP, and comprised 2.1 million jobs, 6.3% of the UK jobs total.1

b. Construction is a highly fragmented industry and over 99% of businesses are comprised of SMEs (956,000).

Need to take place within the context of the industry; broadly classified into:

1. Building (housing, industrial, commercial, etc)

2. Civil Engineering

3. Repair & Maintenance

4. Materials manufacture

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Government Construction Strategy 2016-20, March 2016

Strategic Management in Construction; David Langford

CONSTRUCTION Market & Industry

Market

 A market is a demand side concept, having both an economic and social dimension.

 Based on consumer needs and is characterised by the ‘law of one price’.

 Consumer’s ability to substitute one product for another

Industry

 An industry is the supply side concept.

 An arbitrary boundary within which firms compete to produce related or similar products

 Based on production technology and defined by the markets chosen by the firms

7 https://theqnote.com/construction-industry-trends-how-to-build-a-strategy-for-innovation/  https://www.constructionnews.co.uk/farmerreview

 Industries are relatively stable based around production capabilities

 Markets are transient and are determined by consumer needs, substitutes and price

THE PLANNING PYRAMID

8http://www2.pathfinder.org/site/DocServer/Strategic_Planning.pdf https://sheilamargolis.com/core-culture-and-five-ps/the-five-ps-and- organizational-alignment/purpose/

Principles Beliefs: What does the organisation stand for?

Mission Purpose: Why does the

organisation exist?

Goals/Objectives Direction: What does the

organisation want to achieve?

Strategies/Tactics Operations: How will the

organisation accomplish its goals?

Businesses exist to make a profit, but they also exist to

make a difference.

Goals/Objectives Strategic, Tactical,

Operational

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THEORIES OF STRATEGY

What is Strategy – and Does it Matter?, R.Whittington,2000

The Classical Perspective

Manager has near to complete control – guided by rationality, opportunism and self-interest

The Evolutionary Perspective

Based on behavioural differences between firms and on market selection, random events and positive feedback

The Processual Perspective

Believes that outcomes emerge from interactions between individuals and between individuals and the environment - unpredictable

Systemic Perspective

Argues that the above three approaches suffer a “narrow” view. Strategic behaviour is influenced by culture, class and educational background

THEORIES OF STRATEGY

10Strategy for Business, Mariana Mazzucato (2002)

Classical Approach

Supreme goal is Profitability “the strategic aim of a business is to earn a return on capital, and if in any particular case the return in the long run is not satisfactory, the deficiency should be corrected or the activity abandoned” Alfred Sloan (1963: 49)

Evolutionary Approach

Markets, not managers, choose the prevailing strategies within a particular environment. Simple truth - good performers survive, weaker ones perish

Processual Approach (Carnegie School)

Based on: i. The cognitive limits on rational action (“bounded rationality or “adaptive

rationality”) ii. The micro-politics of organisations

Systemic Perspective

The driving force here are the cultural rules in a local society. People’s economic activity and behaviour is deeply embedded in a network of social relations which may include family, state, professional and educational backgrounds, and even religion and ethnicity.

STRATEGIC V OPERATIONAL

Strategic Planning

 Long-term (usually 5-10 years)

 Focuses on future achievements and conditions

 Usually integrates several functions, levels, components simultaneously

 Integrates strategies for resource mobilization with activities (sustainability plans)

 Usually requires ratification from governing sources

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Operational Planning

 Short-term (usually 1 year or less)

 Achievements or targets annual

 Planned activities represent choices already made; alternates are not considered

 Tend to focus on one unit or related set of activities

 Resources for implementation usually already identified

 No formal action or ratification required

Difference between Strategic & Operational Planning

Adapted from Haines, Stephen G. Successful Strategic Planning: Building a High-Performance Business. Crisp Publications, Inc. Menlo Park, CA, USA. 1995. http://www2.pathfinder.org/site/DocServer/Strategic_Planning.pdf

https://sixdisciplines.com/blog/strategic-vs-operational-planning/

Strategic Planning is about being Different

Operational Planning is about being Better

FLYWHEEL EFFECT VS DOOM LOOP

12https://expertprogrammanagement.com/2018/05/hedgehog-concept/ MLA (7th ed.), Collins, James C. Good to Great: Why Some Companies Make the Leap ... and Others Don't. New York, NY: HarperBusiness, 2001

https://www.youtube.com/watch?v=5x8ckUwnJ9Q

THE HEDGEHOG CONCEPT

BENEFITS & LIMITATIONS OF STRATEGIC PLANNING

Benefits

 Motivating staff

 Building a common vision

 Confronting key issues and solving problems

 Defining roles and responsibilities

 Challenging the status quo

 Allowing managers and policy makers to focus

 Explaining or exposing your organisation to others

 Develop a renewed sense of organisation mission and consensus

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Limitations

 Can be expensive

 Not every organisation or staff is ready

 May lead to a strait jacket outcome- raison d'être

 Too complex or difficult for staff to understand

 Issues with “inclusive”? Is it all?

 Consistency over a long period of time

 Respond to emergent strategies

Benefits & Limitations of Strategic Management

Adapted from Haines, Stephen G. Successful Strategic Planning: Building a High-Performance Business. Crisp Publications, Inc. Menlo Park, CA, USA. 1995. http://www2.pathfinder.org/site/DocServer/Strategic_Planning.pdf

https://sixdisciplines.com/blog/strategic-vs-operational-planning/

PURPOSE VISION

MISSION VALUES ETHICS

14Strategic Management: Principles and Practice, 2nd edition. Barry Witcher & Vinh Sum Chau

PURPOSE Purpose is the primary reason and basic reason for an organisation to exist

VISION Statement of its aspiration or a future intent. Kind of a North Star

MISSION Explains why an organisation exists. A statement of its present main activities

VALUES The expected collective norms and behaviour of everybody in the organisation

ETHICS The universal morals that an organisation adopts and abides by.

VISION V MISSION

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Vision Mission

Purpose

Tells what an organization aims to achieve. States what a company is currently doing.

Answers the question

What do we want to become? What do we do?

Includes

 Objectives  Values

 Customers  Products/Services  Markets  Technology  Concern for survival  Philosophy  Self-Concept  Concern for public image  Concern for employees

Future or present time?

Talks about the future Talks about the present

For whom it is developed?

Employees of the company Employees, customers, suppliers, distributors, partners and communities

Which one is created first?

Developed first Developed only when vision is available

How often does it change?

Rarely changes because it takes years to achieve most of the objectives

Product-oriented missions change every time when a company decides to venture into a new product market.

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PURPOSE VISION MISSION VALUES

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Our Values

We demonstrate excellence in

education and student

engagement

We are global in our outlook and impactful in all

that we do

We are an independent and

autonomous organization

allowing staff the freedom to

operate but with responsibility to

deliver We are innovative,

enterprising and entrepreneurial

Our ethos is one of support, trust,

integrity and respect whilst

valuing diversity

We develop sustainable

partnerships and support

communities with whom we engage

COVENTRY UNIVERSITY CORPORATE STARTEGY

STRATEGIC OBJECTIVES

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OBJECTIVES & STRATEGIC MANAGEMENT

A. An Objective is a statement of a specific outcome that is to be achieved

B. Objectives must be meaningful and clear to the people who devise and

use them, including those who manage them

C. Must be linked to measures of progress to help monitor and control

D. Based on dialogue, consensus, transparent and clearly understood by all

E. Emphasis is on team-work & team-results

F. Strategic Intent can be quite different from objectives

G. End target is clear though means not prescriptive allowing for creativity,

flair and innovation

H. Generally objectives must be SMART:

S p e c i f i c

M e a s u r a b l e

A c t i o n a b l e

R e a l i s t i c

T i m e - b o u n d

STRATEGIC OBJECTIVES

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The Balanced Scorecard

A. Introduced by Robert Kaplan and David Norton in HBR, 1992

B. Most widely adopted methodology in recent times

C. Suitable for any kind of organisation

D. A balanced scorecard is comprised of a limited number of strategic

objectives and measures

E. Each objective has its own set of measures

F. Objectives and measures are decided in four different perspectives

G. The chosen objectives and measures should answer the four

fundamental questions

i. Financial Perspective

ii. Customer perspective

iii. Internal business process perspective

iv. Learning & growth perspective

STRATEGIC OBJECTIVES The Balanced Scorecard

https://www.clearpointstrategy.com/full-exhaustive-balanced-scorecard-example/

STRATEGIC OBJECTIVES

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The Balanced Scorecard

Four perspectives as a framework for objectives & measures

Financial Perspective Objective: To maximise financial returns to the owners of an organisation’s capital Measured by: 1. Return on capital employed 2. Payments (e.g. dividends) to owners 3. Cash flow

Customer Perspective Objective: To sustain customer relationships Measured by: 1. Customer satisfaction and delight index 2. Repeat purchase patterns 3. Brand awareness in target segments

Internal Processes perspective Objective: To create and maximise value in the customer-vendor relationship Measured by: 1. Value stream analysis (to minimise non-value creation activities) 2. Value chain activities (co-ordination, optimisation activities) 3. Continuous improvement

Learning & Growth Perspective Objective: To motivate people and develop competencies Measured by: 1. Recruitment & retention rates 2. Skills and training index 3. Employee conditions and satisfaction index

INDUSTRY LIFE CYCLES

22https://slideplayer.com/slide/4696795/ https://www.slideshare.net/StratMgtAdvisor/sm-lecture-two-the-environment-15980289

THE EXTERNAL ENVIRONMENT

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Scope is open and exploratory

Scanning To identify early changes in the

environment

Scenarios To be sensitive to possibilities of

changes context

Monitoring To detect trajectories and changes in

ongoing events

Forecasting To gauge effect of projections of

possible outcomes

Scope is focussed and directed

Scanning Delivers an overview of the whole and general environment

Scenarios Imaginary possible events & their consequences

Monitoring Checking regularly for developing changes in the environment

Forecasting Prediction of possibilities based on calculations and existing data

PEST OR PESTEL FRAMEWORK

Why do PEST or PESTEL analysis?

• Identify the current external factors affecting an organization

• Identify the external factors that may change in the future

• Exploit the changes (opportunities) or defend against them (threats) better than competitors would do

• Outcome of PEST is an understanding of the overall picture surrounding the company

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Variations of PEST

 STEP = PEST in more positive approach

 PESTEL = PEST + Environmental + Legal

 PESTELI = PESTEL + Industry analysis STEEP = PEST + Ethical

 SLEPT = PEST + Legal

 STEEPLE = PEST + Environmental + Legal + Ethical

 STEEPLED = STEEPLE + Demographic

 PESTLIED = PEST + Legal + International + Environmental + Demographic

 LONGPEST = Local + National + Global factors + PEST

PEST is an analysis of the political, economic, social and technological factors in the external environment of an organisation, which can affect its activities and performance

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PESTEL model involves the collection and portrayal of information about external factors which have, or may have an impact on the business

PEST OR PESTEL FRAMEWORK

25https://www.strategicmanagementinsight.com/privacy-policy.html

..important thing about PESTLE analysis is …the influences are

pervasive

PESTEL ANALYSIS Political Factors Government stability and likely changes Bureaucracy Corruption level Tax policy (rates and incentives) Freedom of press Regulation/de-regulation Trade control Import restrictions (quality and quantity) Tariffs Competition regulation Government involvement in trade unions and agreements

Environmental Law Education Law Anti-trust law Discrimination law Copyright, patents / Intellectual property law Consumer protection and e- commerce Employment law Health and safety law Data protection law Laws regulating environment pollution

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TEMPLATE

PESTEL analysis should involve as many managers as possible:

Step 1. Gather information about political, economic, social and technological changes + any other factor(s)

Step 2. Identifying which of the PEST factors represent opportunities or threats

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PESTEL ANALYSIS Economic Factors

Growth rates Inflation rate Interest rates Exchange rates Unemployment trends Labour costs Stage of business cycle Credit availability Trade flows and patterns

Level of consumers’ disposable income Monetary policies Fiscal policies Price fluctuations Stock market trends Weather Climate change

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TEMPLATE

PESTEL analysis should involve as many managers as possible:

Step 1. Gather information about political, economic, social and technological changes + any other factor(s)

Step 2. Identifying which of the PEST factors represent opportunities or threats

https://www.strategicmanagementinsight.com/privacy-policy.html

PESTEL ANALYSIS Socio-cultural Factors Health consciousness Education level Attitudes toward imported goods and services Attitudes toward work, leisure, career and retirement Attitudes toward product quality and customer service Attitudes toward saving and investing Emphasis on safety Lifestyles Buying habits

Religion and beliefs Attitudes toward “green” or ecological products Attitudes toward and support for renewable energy Population growth rate Immigration and emigration rates Age distribution and life expectancy rates Sex distribution Average disposable income level Social classes Family size and structure Minorities

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TEMPLATE

PESTEL analysis should involve as many managers as possible:

Step 1. Gather information about political, economic, social and technological changes + any other factor(s)

Step 2. Identifying which of the PEST factors represent opportunities or threats

https://www.strategicmanagementinsight.com/privacy-policy.html

PESTEL ANALYSIS Technological Factors Basic infrastructure level Rate of technological change Spending on research & development Technology incentives Legislation regarding technology Technology level in your industry Communication infrastructure Access to newest technology Internet infrastructure and penetration

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TEMPLATE

PESTEL analysis should involve as many managers as possible:

Step 1. Gather information about political, economic, social and technological changes + any other factor(s)

Step 2. Identifying which of the PEST factors represent opportunities or threats

https://www.strategicmanagementinsight.com/privacy-policy.html

PESTEL ANALYSIS Environmental (Ecological) Factors Weather Climate change Laws regulating environment pollution Air and water pollution Recycling Waste management Attitudes toward “green” or ecological products Endangered species Attitudes toward and support for renewable energy

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TEMPLATE

PESTEL analysis should involve as many managers as possible:

Step 1. Gather information about political, economic, social and technological changes + any other factor(s)

Step 2. Identifying which of the PEST factors represent opportunities or threats

https://www.strategicmanagementinsight.com/privacy-policy.html

PESTEL ANALYSIS Legal Factors Anti-trust law Discrimination law Copyright, patents / Intellectual property law Consumer protection and e-commerce Employment law Health and safety law Data Protection

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TEMPLATE

PESTEL analysis should involve as many managers as possible:

Step 1. Gather information about political, economic, social and technological changes + any other factor(s)

Step 2. Identifying which of the PEST factors represent opportunities or threats

https://www.strategicmanagementinsight.com/privacy-policy.html

SWOT ANALYSIS

32 http://gdahp-maff.org/blog/swot-analysis-of-the-livestock-sub-sector-in-cambo/ https://www.builder-resources.com/SWOT-Analysis.html

involves the collection and portrayal of information about internal and external factors

which have, or may have, an impact on business

SWOT ANALYSIS

33 http://gdahp-maff.org/blog/swot-analysis-of-the-livestock-sub-sector-in-cambo/ https://www.strategicmanagementinsight.com/privacy-policy.html

involves the collection and portrayal of information about internal and external factors

which have, or may have, an impact on business

Benefits of SWOT Analysis

1. Simple to do and practical to use 2. Clear to understand 3. Focuses on the key internal and external factors affecting

the company 4. Helps to identify future goals 5. Initiates further analysis

Limitations of SWOT Analysis

1. Excessive lists of strengths, weaknesses, opportunities and threats

2. No prioritisation of factors 3. Factors are described too broadly 4. Factors are often opinions not facts 5. No recognized method to distinguish between strengths and

weaknesses, opportunities and threats

PORTER’S FIVE FORCES

34 https://www.business-to-you.com/porters-five-forces/ https://www.strategicmanagementinsight.com/privacy-policy.html

Industry attractiveness & profitability

PORTER’S GENERIC STRATEGY

35https://slideplayer.com/slide/7399352/

END OF SESSION - 1

36https://www.khorus.com

"Vision without action is a daydream. Action without vision is a nightmare.”

Japanese proverb

THANK YOU

ab6937@coventry,.ac.uk