STRATEGIC MANAGEMENT:
A GLIMPSE ON THE BASICS
GILBERT P. VALDEZ JR., DBA
CORE FACULTY MEMBER – GRADUATE STUDIES IN BUSINESS
WHAT IS MANAGEMENT?
HUMAN BEING capable
MAN of carrying out the managerial
functions.
MATURED enough charged
AGE with the responsibility
to attain objectives.
EQUIPPED with appropriate
MENT concepts, principles, theories
and techniques of management.
MANAGEMENT DEFINED:
• Management
• The process of getting things done, effectively and efficiently,
through and with other people
• Efficiency
• Means doing the thing correctly; refers to the relationship between
inputs and outputs; seeks to minimize resource costs
• Effectiveness
• Means doing the right things; goal attainment
EFFICIENCY AND EFFECTIVENESS
ORGANIZATION
• Is a system of consciously coordinated activities or forces of two or
more (Kreitner & Kinichi, 1989)
• Structure describes the form of departments, and hierarchy. It
influences the organization’s efficiency and effectiveness.
• People incorporate the skills, attitudes, social interaction of the
members of the organization.
• Task depicts the goals of the individual and the organization.
ORGANIZATION
• A systematic arrangement of people brought together to
accomplish some specific purpose; applies to all organizations—
for-profit as well as not-for-profit organizations.
• Where managers work (manage)
• Common characteristics
• Goals
• Structure
• People
COMMON CHARACTERISTICS OF ORGANIZATIONS
• Social entity – people and roles as building blocks
• Goal-directed – organizational purpose at base of
existence
• Deliberately structured activities – perform work; create
outputs
• Permeable boundaries – outside interactions; impacts
from environment
ORGANIZATIONS CONTIN….
Organizations continually interact
with their environment
Inputs Transformation Outputs
• “Orchestra in concert with a number of professionals playing quite
different instruments and performing separate and often difficult
tasks. Each instrumentalist, like so many large organizations, is
indeed a specialist in a particular field whose work must be
integrated with the work of others to make up the whole. The
manager’s job is more than what the concert – goer sees. It includes
planning the performance, helping to select those numbers that the
orchestra can best perform, presiding at rehearsals, and doing many
of the things that are required to make the final concert notable…
(Kreitner and Kinichi, 1989)
PEOPLE DIFFERENCES
• Operatives
• People who work directly on a job or task and have no
responsibility for overseeing the work of others
• Managers
• Individuals in an organization who direct the activities of others
ORGANIZATIONAL LEVELS
IDENTIFYING MANAGERS
• First-line managers
• Supervisors responsible for directing the day-to-day activities of
operative employees
• Middle managers
• Individuals at levels of management between the first-line manager and
top management
• Top managers
• Individuals who are responsible for making decisions about the direction
of the organization and establishing policies that affect all organizational
members
MANAGEMENT PROCESS ACTIVITIES
ESSENTIAL MANAGERIAL FUNCTIONS
Selecting missions and objectives - and the
strategies, policies, programs, and procedures for
PLANNING achieving them; decision making; the selection of
a course of action from among alternatives.
Establishing an intentional structure of roles for
ORGANIZING people to fill in an organization.
Filling, and keeping filled, the positions in the
STAFFING organization structure with competent people.
Influencing people so that they will contribute to
LEADING organization and group goals.
Measuring and correcting individual and
CONTROLLING organizational performance to ensure that events
conform to plans.
DISTRIBUTION OF TIME PER ACTIVITY BY
ORGANIZATIONAL LEVEL
GENERAL SKILLS FOR MANAGERS
• Conceptual skills
• A manager’s mental ability to coordinate all of the organization’s interests and
activities
• Interpersonal skills
• A manager’s ability to work with, understand, mentor, and motivate others, both
individually and in groups
• Technical skills
• A manager’s ability to use the tools, procedures, and techniques of a specialized
field
• Political skills
• A manager’s ability to build a power base and establish the right connections
SPECIFIC SKILLS FOR MANAGERS
• Behaviors related to a manager’s effectiveness:
• Controlling the organization’s environment and its resources.
• Organizing and coordinating.
• Handling information.
• Providing for growth and development.
• Motivating employees and handling conflicts.
• Strategic problem solving.
END OF LECTURE 1
THE BUSINESS AND
ITS ENVIRONMENT
THE ORGANIZATION & ITS EXTERNAL ENVIRONMENT
ORGANIZATION
Technological
Economic
Social
Ethical
Political & legal
Both IM and global management
examine the same environments.
Business
Environment
External Internal
Internal
• Value System
• Mission and Objectives
• Organizational Structure
• Culture
• Quality of Human Resources
• Labor Unions
• Physical Resources and Technological Capabilities
• Mission – states organization’s purpose, reasons for
existence; describes what organization does for whom
• Vision – overall direction of organization; picture of where
organization sees self in future
• Values – organization’s basic philosophy, principles, ideals;
sets ethical tone
External
• Micro Environment Macro Environment
• Suppliers of Inputs Economic
• Customers Political-Legal
• Marketing Intermediaries Technological
• Competitors Global
• Publics Socio-cultural
Components of the General Environment
Economic
Demographic
Sociocultural
Industry
Environment
Competitive
Environment
Political/
Legal Global
Technological
Environments of an Organization
SOCIAL TECHNOLOGICAL
VARIABLES VARIABLES
COMPETITORS
CUSTOMERS
EMPLOYEES
ORGANIZATION
SHAREHOLDERS /BOD
SPECIAL-INTEREST
THE MEDIA GROUPS
ECONOMIC POLITICAL
VARIABLES VARIABLES
DIRECT-ACTION INDIRECT-ACTION
THE BASICS OF
STRATEGIC
MANAGEMENT
If a man takes thought about what is distant,
he will find sorrow near at hand. He who
will not worry about what us far off will
soon find something worse than worry
=confucious=
Plans are less important than planning.
=Dale McConkey=
WHAT IS STRATEGY?
STRATEGY IS THE OVERALL PLAN FOR
DEPLOYING RESOURCES TO ESTABLISH A
FAVORABLE POSITION.
TACTIC IS A SCHEME FOR A SPECIFIC MANEUVER.
KEY TERMS IN STRATEGIC MANAGEMENT
COMPETITIVE ADVANTAGE
• Strategic management is all about gaining and
maintaining competitive advantage. This term can be
defined as “anything that a firm does especially well
compared to rival firms”.
• STRATEGIST
• Are the individuals who are most responsible for the success or
failure of an organization. Strategists have various job titles,
such as chief executive officer, president, owner, chair, of the
board, executive director, chancellor, dean, or entrepreneur.
Strategists help an organization gather, analyze, and organize
information. They track industry and competitive trends,
develop forecasting models and scenario analyses, evaluate
corporate and divisional performance, spot emerging market
opportunities, identify business threats, and develop creative
action plans.
• VISION
Answers the question “What do we want to become?”. It is
often the first step in strategic planning, preceding even
development of a mission statement. Many vision statements
are a single sentence.
Ex. “OUR VISION IS TO TAKE CARE OF YOUR VISION”
• MISSION
• Are enduring statements of purpose that distinguish one business
from other similar firms. A mission statement identifies the scope of a
firm’s operations in product and market terms. It addresses the basic
question that faces all strategists: “What is our business?”. A clear
mission statement describes the values and priorities of an
organization. A mission statement broadly charts the future direction
of an organization.
• Is a set of strategies to realize your vision
EXTERNAL OPPORTUNITIES AND THREATS
• Refer to economic, social, cultural, demographic, environmental, political,
legal, governmental, technological and competitive trends and events that
could significantly benefit or harm an organization in the future. Opportunities
and threats are largely beyond the control of a single organization thus the
word external.
INTERNAL STRENGTHS AND WEAKNESSES
• Are an organization’s controllable activities that are performed especially
well or poorly. They arise in the management, marketing, finance/accounting,
production/operations, research and development and management
information systems activities of a business. Organizations strive to pursue
strategies that capitalize on internal strengths and eliminate internal
weaknesses.
LONG TERM OBJECTIVES
• Can be defined as specific results that an organization seeks to achieve in
pursuing its basic mission. Long term means more that one year. Objectives are
essential for organizational success because they state direction, aid in
evaluation, create synergy, reveal priorities, focus coordination and provide a
basis for effective planning, organizing, motivating and controlling activities.
Long term objectives are especially important in strategy formulation.
STRATEGIES
• Are the means by which long term objectives will be achieved. Business
strategies may include geographic expansion, diversification, acquisition,
product development, market penetration, retrenchment, divestiture,
liquidation and joint ventures.
ANNUAL OBJECTIVES
• Are short term milestones that organizations must achieve to reach long term
objectives. Like long term objectives, annual objectives should be measurable,
quantitative, challenging, realistic, consistent and prioritized. They should be
established at the corporate, divisional and functional levels in a large
organization. Annual objectives are especially important in strategy
implementation.
POLICIES
• Are the means by which annual objectives will be achieved. Policies include
guidelines, rules and procedures established to support efforts to achieve
stated objectives. Policies are guides to decision making and address
repetitive or recurring situations.
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. It focuses on integrating
management, marketing, finance/accounting,
production/operations, research and development, and computer
information systems to achieve organizational success.
STRATEGIC MANAGEMENT PROCESS
• Three stages:
• Strategy Formulation
• Strategy Implementation
• Strategy Evaluation
STRATEGY FORMULATION
• Includes developing a vision and mission, identifying an
organization’s external opportunities and threats,
determining internal strengths and weaknesses,
establishing long-term objectives, generating alternative
strategies and choosing particular strategies to pursue.
STRATEGY IMPLEMENTATION
• Requires a firm to establish annual objectives, devise policies,
motivate employees, and allocate resources so that formulated
strategies can be executed. It includes developing a strategy-
supportive culture, creating an effective organizational structure,
redirecting marketing efforts, preparing budgets, developing and
utilizing information systems, and linking employee compensation to
organizational performance.
STRATEGY EVALUATION
• Is the final stage in strategic management. Managers
desperately need to know when particular strategies are
not working well; strategy evaluation is the primary means
for obtaining this information. All strategies are subject to
future modification because external and internal factors
constantly changing.
WHY SOME FIRMS DO NO STRATEGIC PLANNING
• Poor reward structures • Overconfidence
• Firefighting • Prior bad experience
• Waste of time • Self interest
• Too expensive • Fear of the unknown
• Laziness • Honest difference of opinion
• Content with success • Suspicion
• Fear of failure
PITFALLS OF 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
• Delegating planning to a “planner” rather than involving all managers
• Failing to involve key employees in all phases of planning
WHAT DO WE WANT TO BECOME?
• A vision statement should answer the basic question, “What do we want to
become?”
• The vision statement should be short, preferably one sentence, and as many
managers as possible should have input into developing the statement.
VISION STATEMENT EXAMPLES
2-66
WHAT IS OUR BUSINESS?
• Mission statement
• a declaration of an organization’s “reason for being.”
• answers the pivotal question “What is our business?”
• essential for effectively establishing objectives and formulating
strategies
• reveals what an organization wants to be and whom it wants to
serve
• Also called a creed statement, a statement of purpose, a
statement of philosophy, a statement of beliefs, and a
statement of business principles 2-67
VISION VERSUS MISSION
• Shared vision creates a commonality of interests that can lift workers out of
the monotony of daily work and put them into a new world of opportunity
and challenge.
2-68
THE PROCESS OF DEVELOPING VISION AND
MISSION STATEMENTS
• Select several articles about these statements and ask all managers to read these as
background information.
• Ask managers themselves to prepare a vision and mission statement for the
organization.
• Merge these statements into a single document and distribute the draft statements to
all managers
• Process should create an “emotional bond” and “sense of mission” between the
organization and its employees
2-69
IMPORTANCE OF VISION AND
MISSION STATEMENTS
1. To ensure unanimity of purpose within the organization
2. To provide a basis, or standard, for allocating organizational resources
3. To establish a general tone or organizational climate
4. To serve as a focal point for individuals to identify with the organization’s purpose
and direction
5. To facilitate the translation of objectives into a work structure
6. To specify organizational purposes
2-70
CHARACTERISTICS OF A MISSION STATEMENT
• First,
a good mission statement allows for the generation and
consideration of a range of feasible alternative objectives and
strategies without unduly stifling management creativity.
• Second, a mission statement needs to be broad to reconcile
differences effectively among, and appeal to, an organization’s
diverse stakeholders
• Stakeholders
• include employees, managers, stockholders, boards of directors, customers,
suppliers, distributors, creditors, governments (local, state, federal, and
foreign), unions, competitors, environmental groups, and the general public.2-71
BENEFITS OF HAVING A CLEAR MISSION AND
VISION
2-72
A CUSTOMER ORIENTATION
A mission statement should:
•define what the organization is and what the organization
aspires to be
•be limited enough to exclude some ventures and broad enough
to allow for creative growth
•distinguish a given organization from all others
2-73
A CUSTOMER ORIENTATION
A mission statement should also:
•serve as a framework for evaluating both current and
prospective activities
•be stated in terms sufficiently clear to be widely understood
throughout the organization
• A good mission statement reflects the anticipations of customers.
• The operating philosophy of organizations should be to identify
customers’ needs and then provide a product or service to fulfill
those needs. 2-74
MISSION STATEMENT COMPONENTS
1. Customers—Who are the firm’s customers?
2. Products or services—What are the firm’s major products or services?
3. Markets—Geographically, where does the firm compete?
4. Technology—Is the firm technologically current?
5. Concern for survival, growth, and profitability—Is the firm committed to
growth and financial soundness?
6. Philosophy—What are the basic beliefs, values, aspirations, and ethical
priorities of the firm?
7. Self-concept—What is the firm’s distinctive competence or major
competitive advantage? 2-75
MISSION STATEMENT COMPONENTS
8. Concern for public image—Is the firm responsive to social, community, and
environmental concerns?
9. Concern for employees—Are employees a valuable asset of the firm?
2-76
CHARACTERISTICS OF A
MISSION STATEMENT
2-77
