Strategic Management: Introduction

Key Takeaways

hello everyone welcome to our lecture um in strategic management so let's first introduce what strategic management is okay but first off all right let me share with you uh some notable quotes so according to abraham lincoln if we know where we are and something about how we got there we might see where we are trending and if the outcomes which lie naturally in our course are unacceptable to make timely change okay um according to um ross and kami without a strategy an organization is like a ship without a rudder going around in circles it's like a it has no place to go and according to david hurst the formulation of strategy can develop competitive advantage only to the extent that the process can give meaning to workers in the trenches so um these notable quotes uh that i shared with you is actually in relation to strategic management because if there is no strategy in a business as mentioned by ross and kami it's like a ship down it's just going around circles there is no objective or um a means to accomplish that uh objective to be successful so that's how important strategy is um according the month to david first if there is no strategy okay there would be no competitive advantage for the business but okay before we go there i would like to share with you mcdonald's i'm sure you're very familiar with mcdonald's so why is mcdonald's okay number one still number one in the world maybe not in the philippines because uh you know it's so well that jollibee is number one in the philippines but mcdonald's is actually number one around the world so why is mcdonald's doing great in a weak economy so there was actually a recession in the u.s in 2007 but yeah in 2008 when companies were actually struggling mcdonald's increase its revenues from 22.7 uh billion dollars to okay in 2007 to 23.5 billion in 2008. so why is that okay despite of the recession so basically mcdonald's added um outlets okay about 650 all right even though other restaurants um struggled okay so mcdonald's even lowered their prices and they even expanded their menu so what is the reason why they're still doing great so according to james skinner the ceo of mcdonald's okay that time says we do well because our strategies have been so well planned out so it simply uh shows that mcdonald's okay had a very very good strategies or strategy so they planned all of their strategies and when there was a recession in the us uh their company okay was not affected all right so mcdonald's top management team says everything the firm does is for the long term so mcdonald's for several years uh refer to their strategic plan okay as a plan to me so the strategy has been to increase sales at existing locations so how uh what did they do they improved the manu they remodeled their dining rooms what else they extended hours they even added snacks okay the company has avoided deep cut or deep price cuts on its menus so mcdonald's was the only one of the three large u.s firms that saw its stock price rise in 2008 okay so it only shows how important strategic uh management or strategic planning is okay so first so what is strategic management so as you can see here the definition says that is the art and science of formulating implementing and evaluation evaluating rather cross-functional decisions that enable an organization to achieve its objectives so as you can see the definition implies that strategic management okay focuses basically on um integrate uh integrating management there is management here marketing finance accounting what else uh production operations including research and formulation or research and development rather and information system to achieve organizational success so sometimes it says here the term strategic management is used to refer to strategy formulation implementation and evaluation so the strategic management okay in this text is used with the term strategic planning so strategic um planning is often used in the business where us when we speak of your strategic management it's definitely used for academia okay let's continue so the purpose of strategic management is basically it says here to exploit and create new different opportunities for tomorrow so it's also a long-range planning in contrast to optimize for tomorrow the trends of today so a strategic plan is of course in essence a company's game plan just like basketball okay team they need to have a good game plan for them to succeed okay so a company must also have a good strategic plan to compete okay successfully in this uh what will we say um competitive business environment so a strategic plan is basically the result okay from tough uh tough managerial choices among the numerous good alternatives and signals commitment to specific markets okay policies procedures and operation in you of other less desirable course of plan all right so let's continue so the strategic management process is basically um let's talk about your strategic management process so it is basically a sequential set of analysis and choices that can increase the likelihood that an organization will choose good strategy okay that of course generate um competitive advantage so we will talk about what competitive advantage is later on so the strategic management process basically has or consists of three stages we have your strategy formulation strategy implementation and finally your strategy evaluation first let's talk about uh strategy formulation so strategy formulation basically includes um developing vision and mission okay there so when we speak of your strategic vision talks about the future path of the business okay where are we going or where where is the business going a mission on the other hand of course focuses on current business activities who we are what do we do so that is the question or questions that would be answered by the mission so there you go uh in strategy for emulation you also identify uh external opportunities and threats you also determine your internal strengths and weaknesses we call it your environmental scanning so when you say environmental scanning you look at the threats or possible threats of the business um but you have to determine also your uh opportunities uh what else your strengths what are the strengths of the business it could be excellent customer service that could be a strength what could be the weaknesses of the business maybe poor management that could be a weakness okay so you also establish long-term objectives you generate alternative strategies and of course you now choose a particular strategy to pursue right so strategy formulation also include deciding what business to enter what business to abandon okay how to allocate resources so for example if you are in um restaurant company so if a certain menu is not favored or it's not preferred by your customers why do you keep on cooking so how to allocate resources whether to expand operations or diversify whether to enter international markets okay whether to merge or to form a joint venture and of course this is very very important you have to avoid okay hostile takeover right there you go so the second strategy or the second process rather of uh strategic management is now okay strategy implementation so when we talk of strategy implementation it requires that a firm has to establish okay annual objectives they have to devise policies what else motivate employees allocate resources that formulated strategies can be executed so strategy implementation basically includes developing a strategy supportive culture okay you create an effective organizational structure what else you redirect marketing efforts of course you have to prepare your budgets as well you develop and utilize information system and you link okay employees compensation to organizational performance okay so that is in your strategy okay implementation in addition to that when we speak of your uh strategy implementation this is also called the action stage okay so successful strategy implementation hinges upon okay managers ability to motivate employees why because employees are the ones okay who will be uh what um uh doing the job in fulfilling the plan in the business they are the employees they are the workers so they are the frontliners so it is more than or more an art than science so strategy formulated but not implemented implemented serve no useful purpose so implementing strategy means you mobilize your employees and of course your managers to put forward your formulated strategies into action so uh it's often considered to be the most difficult stage in strategic management okay why because it requires personal discipline commitment and of course sacrifice all right there so basically uh interpersonal skills are especially critical for the success of the business or the success of the strategy implementation okay why because um strategy implementation activities affect all employees and managers in an organization okay all right let's continue next is of course your strategy evaluation so this is basically the final stage in strategic management so all strategies are of course subject to future modification why because external and internal factors are actually constantly changing so in business there will always be changes okay uh that's why in business you need to keep on updating okay your management or your strategies because um external when you speak of your external factors it could include your competitors okay your customers the things that you cannot control okay are changing internal factors are also changing why because of the effect perhaps of your external factors okay all right so there are three fundamental strategy evaluation activities it includes the following okay reviewing external and internal factors that are the basis of or for current strategies so you have to review external and internal factors uh what else you measure the performance also of your employees perhaps the performance of the business overall and uh you take corrective actions so strategy evaluation is needed because success today is no guarantee for success tomorrow which is true because to survive um all organizations must identify and of course identify the changes and adopt to those changes okay so success always creates new and different problems complacent organizations experience okay demise okay so according to water man uh in today's business environment more than in any preceding air era the only uh constant is change so change is always constant therefore successful organizations effectively should effectively manage change okay continuously adopting their bureaucracy strategies systems products and cultures to survive the shock and prosper from the forces that decimate the competition so they have to continually adopt to changes okay the need to adopt to change could lead to the success of the organization okay all right now let's talk about some of the key uh terminologies in strategic management so number one we have here your competitive advantage so what is competitive advantage when we speak of your competitive advantage we're talking about anything that a firm does okay especially well compared to rival firms like for example why is it that um okay um or let's say yeah mcdonald's is still number one in the world despite of other competitors or why is it that jollibee is doing very very well in the philippines okay despite of its rival mcdonald's so there is a competitive advantage perhaps for jollibee it's number one in the philippines because they know okay the tastes and preference of filipino people so when a firm can do something that rival firms cannot do or own something that rival firms uh desire that can represent a competitive advantage so for example here uh in a global economic recession simply having an ample cash on the firm's balance sheet can provide a major competitive advantage some catch uh cash rather rich firms are buying distressed rivals so they take over 30 there might be a hostile takeover of other firms why because they have the cash they have the money okay so bhp billiton as you can see here is the world's largest miner is seeking to buy rival firms in australia and south america they wanted to take it over why they have the money they are the world's uh largest firm in terms of money uh freeport yeah mock copper and gold company also desires to expand its portfolio by acquiring distressed rival firms uh french drug companies sanofi okay aventis okay is also trying to acquire distressed rival firm to boost its drug development and diversification and you are very familiar with um this company of course johnson and johnson's or johnson and johnson in the united states uh they also tried to acquire a distressed rival firm so they have uh or this means of um business acquiring a distress firm or a rival firm can be an excellent um excellent strategy in a global economic recession so it could be a an excellent strategy because of course if there is recession businesses might go bankrupt but because they have the money they can do it they can do so all right let's continue so a firm says here must try to achieve a sustained competitive advantage how how do they do that they have to continually adopt the changes in external uh trends and events and internal capabilities compet uh competencies and resources and effectively formulate implement and evaluate strategies that capitalize upon these factors what factors are we talking about okay um the internal capabilities competencies and resources so normally a firm can sustain a competitive advantage for a certain period of time due to rival firms imitating and undermining that advantage however okay in business you have to obtain um sustainable competitive advantage so it's very important that you sustain your competitive advantage okay all right now let's continue so another key term in strategic management is strategies so strategists are individuals who are most responsible for the success or failure of an organization so strategists have various job titles such as chief executive officer ceo president owner okay what else uh chair of the board executive director chancellor okay for schools could be the dean okay or an entrepreneur all right there you go so strategies can basically help an organization uh gather analyze and organize information so they basically uh track the industry and competitive trends and then they developed forecast or forecasting models and scenario analyses okay so these are the jobs of your strategies all right another key term or terms in strategic management would be your vision and mission statements so when we speak of your vision statement okay it answered the question what do we want to become so uh developing a vision statement is often considered the first step in strategic planning preceding even the development of a mission statement so we're talking about the future what do the company envision to become in the future what do they want to become okay so for example here the visual statement of stokes eye clinic in florence south carolina or carolina is our vision is to take care of your vision so here is another example okay of vision statement of mcdonald's and jollibee so for mcdonald's to be the world's best quick service restaurant okay being the best means providing outstanding quality service cleanliness and value so that we make every customer in every restaurant smile for jollibee okay their vision is to be the best tasting qsr what is qsr quick service restaurant or to be the most endearing brand that has ever been futuristic so there you go all right mission statements on the other hand are enduring statements of purpose that distinguish one business from other similar firms so it addresses the basic question that faces all strategies so what is our business okay what is our business um a clear mission statement describes the values and priorities of the organization so basically a mission statement identifies uh the scope of a firm's operation in product and of course in market terms so developing a mission statement compels uh strategists to think about the nature and scope of present operation and to assess the potential attractiveness of future market and activities okay so a mission statement is a constant reminder to employees of why the organization exists okay and what the founders uh envisioned when they put their fame and fortune at risk to okay breathe life into their dreams okay all right so other kid oh so before we go there here are some mission statements of google coca-cola ge virgin okay wire i don't know how to pronounce it properly you know wire view parker uh south southwest so google's mission is to organize the world's information and make its universally oh sorry make it universally accessible and useful so that is what they want to do now or to refresh for coca-cola to refresh the world to inspire moments of optimism and happiness to create value okay and make a difference these are some examples of your mission statements all right okay so other example here of your jollibee and kfc and okay there you go all right let's continue so other key terms in strategic management would be your external opportunities and threats so external in business external factors are the things that the business cannot control because it's outside the business so external opportunities and external threats refer to economic social cultural demographic environmental political legal governmental technological and competitive uh trends and events that could significantly benefit so that is opportunity okay opportunities if it could benefit the firm or harm an organization if it harms the organization then that is definitely a threat an example for that would be the existence of competitors it could be a threat okay so opportunities and threats are largely beyond the control of single organization thus the world at the word extern now so in a global economic recession a few opportunities and threats that face many firms are the following so it could be availability of capital that can no longer be taken for granted what else consumers or customers expect green operation and operations and products meaning to say like for example the some customers or consumers nowadays would prefer a company that would offer organic uh products or maybe offer something that is healthier or environmental friendly products okay uh marketing has moving rapidly to the internet so it could be a threat for other companies but it could be opportunity for other companies right so there you go all right what else yeah uh too much debt can crush even the best firms if you have a lot of uh utang of course it could crush your firm what else layoffs are rampant among many firms as revenues and profits fall and credit sources dry up okay there is reduced capital spending in response to reduced consumer spending so if there is reduced consumer spending of course it would affect the business all right okay now let's talk about your internal strengths and weaknesses so within the company uh internal strengths and weaknesses are an organization's controllable okay because within the company controllable activities that are performed especially well or poorly so they arise in the management marketing finance okay accounting production operations research and development and management information systems activities of a business identifying and evaluating organizational strengths and weaknesses okay in the functional areas of a business is an essential strategy management okay activity so organizations strive to pursue strategies that capitalize on internal strengths and try now to eliminate internal weaknesses what could be an example of internal strength it could be as i mentioned earlier excellent customer service okay done by the employees so what could be a weakness it could be poor management or mismanagement of the business so they have to capitalize on their internal strengths and try now to eliminate or maybe um yeah eliminate internal weaknesses so let's continue strengths and weaknesses are basically determined relative to competitors so relative deficiency or superiority is important information strengths and weaknesses can be determined by elements of being of being rather than performance so for example a strength may involve ownership of natural or yeah natural resources or maybe a historic reputation for quality strengths and weaknesses may be determined uh relative to a firm's own objectives so for example high levels of inventory turnover may not be a strength to a firm that seeks to never okay so other key terms in strategic management would include your long-term objectives okay so objectives can be defined a specific result that an organization seeks to achieve in pursuing its basic mission so long-term uh means it's more than a year it's more than a year so objectives are essential for organizational success because they state direction aid in evaluation uh create synergy reveal priorities focus coordination and provide a basis for effective planning organizing motivating and of course controlling activities so objectives should be challenging it should be measurable consistent what else reasonable and it has to be clear all right so in a multi-dimensional firm objectives should be established for the overall company and of course for each division and that is your objective okay another term or key term in strategic management would be strategies so strategies are the means by which long-term objectives will be achieved so strategies are potential actions that require top management decisions and large amounts of firms resources okay there you go what else we also have here your annual objective so if we have long term we also have your annual objectives so um short-term short-term milestones that organizations must achieve okay to reach the long-term objectives so like long-term objectives annual objectives okay should be measurable quantitative challenging realistic consistent and it should be prioritized okay there you go so we'll end our introduction of strategic management here thank you very much for joining me for this lecture