Introduction to strategic

management
Dr Bryan Mills

Topics

Definitions
Information
Mission/vision/objectives
Gap analysis
KPI
Multinationals
PLC
Benchmarking

Definitions
Strategic Planning
Overall policies and objectives

Management Control
Effective and efficient use of resources

Operational Control
Specific tasks are effective and efficient

Definitions

Planning..
Decision making
Strategic decisions..
Control.

Information
Future Uncertainty
Forecasts and Estimates
Use of sensitivity analysis
DCF
Project evaluation
Managing cash and operations
Post implementation review

The issues:
What makes estimating hard?
Financial Reporting
Treatment of overheads
Neat rather than useful
Internal focus
Infelxible
Historic costs
Strategic issues
Complex models

Mission versus Vision

Vision Where is the business going (to)?
Mission What is the business for?

Vision
What the business is now
What it could be in an ideal world
What the ideal world would be like

 Our vision: to become the world's leading

company for automotive products and
services.
Our mission: we are a global, diverse family
with a proud heritage, passionately
committed to providing outstanding products
and services.
Our values: We do the right thing for our
people, our environment and our society, but
above all for our customers.

Guess who
1. to organize the worlds information and make it
universally accessible and useful.
2. and:
1.
2.
3.
4.
5.

Leading in our chosen markets

Delivering an outstanding client experience based on excellence
in sales, service and solutions
Achieving a superior, ethically based, long-term return for our
shareholders
Building highly motivated, high-performance teams
Creating a challenging, rewarding and fun work environment

Mission
Elements of mission

Detail

Purpose

Why for shareholders and satisfy

stakeholders

Strategy

Nature of business; products/services;

competitive position; competence;
competitive advantage

Policies and standards of behaviour

Mission converted to practice

Value and Culture

Basic (unstated?) beliefs

Mission
Brief, flexible, distinctive and open-ended
Identity of whom the organisation exist to
benefit
Nature of the firms business
Ways of competing (price, etc.)
Principles of business
Commitment to customers

Mission and Planning

Inspires planning
Screens new plans
Affects the implementation

Goals and Objectives

Goals long term
Objectives short-term to achieve goals
Goals expressed as SMART objectives
Specific
Measurable
Attainable
Result-oriented
Time-bound

Goal Congruence
Across departments horizontal
At all levels vertical
Over time

Goal types
Goal

Comment

Ideological Goals

Organisations mission

Formal Goals

Imposed by individuals/groups

Shared Personal Goals

Individuals reach consensus

System Goals

Independent of mission derive from

organisations existence as an
organisation

Goal Setting

Top-down
Bottom-up
By precedent- historic
By diktat
By consensus

Goal Setting
Political process involving bargaining
Shareholder profits
Employees salaries
Managers power
Customers quality

Conflict between these objectives?

Corporate Objectives
Corporate whole
Profit; market share; growth; cashflow; ROCE;
risk; Customer satisfaction; quality; Industrial
relations; Added value; EPS

Unit individual unit

Commercial increase number of customers
(sales dept.)
Public sector more nursery places (LEA)
General resources; market; staff development;
innovation; productivity; technology

Primary and Secondary Obj.

opportunity cost of objectives
Limit to the number of objectives a
manger can pursue
Should be one primary core objective
And other secondary objective
Primary growth in profits
Secondary sales growth; innovation; quality;
resource management

Secondary
Financial
Technology
Product design and development
R&D
Quality

Product market

Market leader
Coverage (range)
Position
Expansion

Ranking objectives and tradeoffs

Never enough time
Degrees of achievement
15% sales growth; 10% profit growth, 2m
negative cashflow; reduced quality
8% sales growth; 5% profit growth, 0.5m
positive cashflow; quality

Department plans and

objectives
Document the responsibility
Prepare responsibility charts
Managers main objective
Programme for achieving that
Sub-objectives
Critical assumptions

Prepare activity schedules

Hierarchy of objectives

Social Audit
Recognise rationale for engaging
Identify programme which are congruent
with mission
Determine objectives and priorities
Specify nature and range of resources
required
Evaluate company involvement in
programmes past, present and future

Ethics and ethical conduct

Social responsibilities general stance
Ethics how we (organisations) conduct
ourselves
Amoral ACCA condone any action that
help aim. Definition right or wrong not valid
Legalistic letter of law only
Responsive see gain in ethics
Emerging ethical (ethically engaged) active
Ethical organisations total ethical profile

Impact of corporate code

Commitment by senior management

Discourage previous behaviour
Staff need to be onboard
Tension between code and performance
Statement of ethical conduct and specific
codes of practice

Gap Analysis
Gap analysis compare ultimate objective
with expected performance
Determine targets
Establish what would happen if we did nothing

Planning gap
Between forecast position from carrying on as
is (NOT where we are now) and forecast
desired

Gap Analysis
M Share

Want

Carry on
as is

Time

Gap and ANSOFF

Target
Profit/
market
share

Market
pen.

Product
dev.
Improve
existing
Forecast
min

http://seekingalpha.com/article/128370-tesco-a-look-at-britain-s-top-retailer

Strategic choice
Strategic Options Generation
Creative

Strategic Options Evaluation

Acceptable
Sustainable
Feasible
Environmentally fit

Strategic Selection
Competitive strategy
How to

Market strategy
Where to

Institutional strategy
Method (relationship with other organisations)

Assessment

Assess the internal

environment,
Strengths and
Weaknesses

Assess external environment,

Opportunities and Threats,
Political, Economic, Social and
Technological

Mission

Develop mission statement, or if one already exists

establish how it relates to the above assessment

Objectives

Develop objectives using mission and assessment

Evaluate

Create
Corporate
Plan

Consider alternative ways of achieving these

objectives

Develop a corporate plan featuring the above

objectives and mission.

What do you think are the

differences between Strategic and
Operational?

Discuss

Unrealistic plans
Inconsistent goals
Poor communication
Inadequate performance measurement

Not everything that counts can be

counted, and not everything that
can be counted counts
False alarms
Disproportionate focus on direct costs
Efficiency v effectiveness
Machine standard hour irrelevant as long as
capacity exists

Gaps missed
New products
Customer satisfaction
Employee involvment

Strategic control
linkages

Time-lag

Influencers

Source of
comp. adv.

risks

Critical Success Factors

Money: positive cash flow, revenue growth, and profit
margins.
Your future: Acquiring new customers and/or distributors.
Customer satisfaction: How happy are they?
Quality: How good is your product and service?
Product or service development: What's new that will
increase business with existing customers and attract new
ones?
Intellectual capital: Increasing what you know that's profitable.
Strategic relationships: New sources of business, products
and outside revenue.
Employee attraction and retention: Your ability to do extend
your reach.
Sustainability: Your personal ability to keep it all going.

 Four basic types of CSFs according to Rockart:

Industry CSFs resulting from specific industry
characteristics;
Strategy CSFs resulting from the chosen competitive
strategy of the business;
Environmental CSFs resulting from economic or
technological changes; and
Temporal CSFs resulting from internal organizational
needs and changes.

http://www.e-competitors.com/Strategy/SBUPlanning/SBUPositioning/SBU_Critical.htm

Strategic Performance Measures

Desirable Features
Focus on long run
Identify and communicate drivers of success
Support organisational learning
Basis for reward

Characteristics
Measurable; Meaningful; Defined by Srtat.;
Consistent; Re-evaluated Regularly;
Acceptable

http://utdallas.edu/~vxc054000/ba3365/img/fig6.jpg

But

PLC

Intro.

Growth

Maturity

Decline

Financial

High risk

High risk

Medium

Low

CSF

Time to
Launch

Market
Retention
share/comp
. Adv

Timely exit

Info

Research

Market
share

Costs

Exit

Control

Milestones

DCF

ROI

Free cash
flow

Cash

User

User

Generator

Generator

Ret on Cap Not Imp.

Not Imp.

Important

Important

Growth

Vital

Vital

New Uses

Negative

Profit

None

important

Important

V Imp.

Multinationals
Central headquarters in one country and
subsidiaries on others
Extend PLCycle
Less competition
High growth
Reduce risk

Competitive Strategy (multinational)

Cost Leadership economies of scale
Differentiation new product for
overseas
Focus core segment of customers
Pre-empt competition from overseas

Can you think of some other

reasons/problems?

Control and Structure

Global
Opportunities

High Global
Product
structure

Global
hierarchy
Global
Matrix

Low International
Division
(single division)

Global
geographic
structure
(multiple)

Low
Multidomestic Opportunities

High

Protectionism
Tariffs tax on import. %of value (ad
valorem) or per unit (specific)
Quota limit on quantity
Minimum local content rules
Minimum prices anti-dumping
Embargos
Subsidies for domestic
Bureaucracy
Exchange Controls and Policy

Benchmarking

Internal
Functional regardless of industry
Competitive- direct competition
Strategic action and change

Stages of Benchmarking
1.
2.
3.
4.
5.
6.
7.

Set objectives
KPI
Select organisations
Measure
Comapre
Design improvements
Monitor

Risk and Uncertainty

Physical
Economic
Business
PLC
Political
Financial

Where next?

GE McKinsey Matrix

http://www.emeraldinsight.com/content_images/fig/3300080110004.png

http://www.softducks.com/image/icon/B/BCG-Growth-Share-Matrix-Software-90495.gif

http://theexecutiveperspective.com/2010/06/01/igor-ansoffs-strategy-development-process/

http://www.vectorstudy.com/management_theories/img/porters_competitive_strategies.gif