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STRATEGIC MANAGEMENT
The Basics

Dr. Ali Abu-Rahma ___________________________________________ 2012 Strategic Management

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Dr. Ali Abu-Rahma Strategic Management 2012

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Strategic Managers
Long term objectives and goals. How to win in future competition. Strategic budget. Where to do business. What technology to use. What kind of products/ services to offer. What capability to build. How to respond to the societys expectations & constrains. Near term objectives.
How to win in near term competition.

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Operating budget. Production goals. Plant expansion plans. Marketing plans. Promotion plans. Distribution plans. Products servicing plans. How to relate the firm to public/customers.

Operating Managers

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Strategic Workers
Capability building. Inventing/Acquiring technology. Developing products/services. Market testing Launching products/services. Entering new markets Capability building Purchasing. Promoting / Advertising. Selling. Distributing. Servicing.

Operating Workers

Strategic Management Asks Three Questions

Where are we? Where do we want to be? How do we get there?

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The Changing Environment

Mass Production Era

Mass Marketing Era

Post Industrial Era

The Age of Discontinuity

Acceleration of change
Increased complexity in the environment Speed of change Unpredictability of events Invisibility of the future The danger of extrapolating past success behavior into the future

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Acceleration of Change
Cellular Subscribers

3G Mobile Users
TV-Household Energy Consumption Internet Users Computer Users

1990

2000

2002

2004

2006

2008

2010

Speed of Change
X-Ray Tube (18 Years) Television (12 Years) Radar (15 Years) Nuclear Reactor (10 Years) Atomic Bomb (6 Years) Handheld Cellular Phones(5 Years) 3D Films (15 Years) Cloning (10 Years) Portable MP3 Players (4 Years) Human Genome Project (13 Years) Blue Ray Disc (6 Years) Electric Car (10 Years)

1900

1910

1920

1930

1940

1950

1960

1970

1980

1990

2000

2010

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The Business Engine

Profits Competitive Data Strategic Data

Environment
Strategic Development
Long Term Growth

Sales

Investment

New Businesses/ markets/ products/ services/ technology

Operating
Investment

Near Term Profit Making

New & Existing Products/ Markets

Funds

Shareholders Lenders

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Strategic Alternatives
Firms Behavior Alternatives Market Present New Market Present Competition Innovation Product & Product New Market Innovation Innovation

Product

Key Success Factors

Market Demand

Maturity Accelerated Growth Emergence

Innovation Timing

Decelerated Growth

Decline

Min Cost
Max Market Share

Product Innovation Max Market Share Product Image Technology Breakthrough (starts new cycle) Time

KEY SUCCESS FACTORS

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Dr. Ali Abu-Rahma Strategic Management 2012

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Role of General Management

General Management = Guidance and Control of the Firm as a Whole Strategic Management = Generating Future Profit Potential Operating Management = Making Profit
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Dr. Ali Abu-Rahma Strategic Management 2012

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Role of Strategic Management

Entrepreneurs Luxury
1900-1950 1950-1980

Survival/ Success Necessity

1980 +

Growth Enhancer
Dr. Ali Abu-Rahma Strategic Management 2012
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Ways to Study a Firm

Corporate Managers Top-Down Approach Bottom-Up Approach

Line & Staff Managers

R&D

Production
Workers

Marketing

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Dr. Ali Abu-Rahma Strategic Management 2012

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The New Ball Game

High turbulence:
Complexity of the environment. Novelty of changes. Rabidity of changes. Unpredictability of change.

Extrapolation is dangerous.
Dr. Ali Abu-Rahma Strategic Management 2012
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Strategic Management

of managerial decisions and Set actions that determines the long-run performance of a firm.

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Dr. Ali Abu-Rahma Strategic Management 2012

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Why is it Important?
Vision for the future Focus on what is strategically important Understanding of the changing environment
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Dr. Ali Abu-Rahma Strategic Management 2012

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Strategic Thinking
The Learning Organization: An organization skilled at creating, acquiring, and transferring knowledge and at modifying its behavior to reflect new knowledge and insights.
Dr. Ali Abu-Rahma Strategic Management 2012
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Learning Organization
Less Bureaucratic and More Flexible Skilled in acquiring, creating, and transferring knowledge Solve Problems Systematically Try new Approaches Learning from the Past

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Basic Model
1 2 3 4 Environmental Scanning Strategy Formulation Strategy Implementation Evaluation and Control
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Dr. Ali Abu-Rahma Strategic Management 2012

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Environmental Scanning
SWOT General forces in the environment:
Economic Socio-cultural Political Legal Technological
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Dr. Ali Abu-Rahma Strategic Management 2012

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SOCIAL ENVIRONMENT
TASK ENVIRONMENT
(Industry)

Government Customers Creditors Labor Union

INTERNAL ENVIRONMENT

Communities Suppliers Shareholders Comptitors

Structure Culture Resources Special Interest Group Trade Associates

Environmental Scanning
Industry Environment
Shareholders Suppliers Employees/Labor Unions Competitors Trade Associations Customers Govt. etc
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Dr. Ali Abu-Rahma Strategic Management 2012

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Environmental Scanning
Internal Environment:
Structure Culture Resources

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Dr. Ali Abu-Rahma Strategic Management 2012

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Strategy Formulation
Vision Mission

Goals

Objectives
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Dr. Ali Abu-Rahma Strategic Management 2012

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Sub Goals
Long Range Goals

Short Term Goals Mid Term Goals

Vision

Operational Plans Policy

Mission

Strategies
Strategy: Plan to achieve mission, goals, and objectives 3 levels:
Corporate Business Functional
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Dr. Ali Abu-Rahma Strategic Management 2012

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Management Role in Strategic Management

CEO and Senior staff Board of Directors
Monitor Evaluate Influence Initiate Determine
Dr. Ali Abu-Rahma Strategic Management 2012
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Strategy Levels Large Organizations

Corporate-Level Strategies Business-Level Strategies Functional-Level Strategies
Operating-Level Strategies

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Policies
Guideline for decision making. Is a link to strategy formulation.

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Dr. Ali Abu-Rahma Strategic Management 2012

Strategy Implementation
Programs: A Plan Of Action Aimed At Accomplishing A Clear
Business Objective, With Details On What Work Is To Be Done, By Whom, When, And What Means Or Resources Will Be Used.

Projects: Set Of Interrelated Tasks To Be Executed Over A Fixed

Period And Within Certain Cost And Other Limitations.

Budgets: An Estimate Of Costs, Revenues, And Resources Over

A Specified Period, Reflecting A Reading Of Future Financial Conditions And Goals.

Procedures: Course Of Action (With Definite Start And End

Points)that Must Be Followed In The Same Order To Correctly Perform A Task.
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Dr. Ali Abu-Rahma Strategic Management 2012

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Corporate-Level Strategies Business-Level Strategies Functional-Level Strategies

Maximizing Resource Productivity Competitive and Cooperative Strategies Overall Direction of Company and Management of its Business
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3 Types of Strategy

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Dr. Ali Abu-Rahma Strategic Management 2012

3 Types of Strategy
Corporate strategy: Stability. Growth. Retrenchment. Functional Strategy: Technological leadership. Technological followership. Business strategy: Competitive strategies. Cooperative strategies.

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Dr. Ali Abu-Rahma Strategic Management 2012

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Agency Theory
Objectives of owners & agents in conflict Difficult for owners to verify agent performance Risk Sharing Problem Owners & agents risk assessment in conflict
Agents

Owner
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Stewardship Theory
Executives more motivated to act in best interest of the corporation than their own self-interests. Theory that over time, senior executives tend to view corporation as extension of selves.

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Dr. Ali Abu-Rahma Strategic Management 2012

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Evaluation & Control

Actual performance compared with desired performance. Performance is the end result of activities: e.g. ROI

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Dr. Ali Abu-Rahma Strategic Management 2012

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Strategic Management Process

Define the organizational mission Set long-range goals and objectives Develop strategies to reach the objectives Implement projects to reach the objectives

Make corrective actions as projects proceed

Strategic Management Process

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Review and Revise Mission

Strategic Planning

Where are we?

Assess External Environment (Threats and Opportunities)

Assess Internal Environment (Strengths and Weaknesses)

Where do we want to be?

Set New Goals and Objectives

Develop a Portfolio of Strategic Choices

Strategic Implementation

Select Strategic Projects

How do we get there?

Implement Strategic Projects

Evaluate Project Performance

5 Levels of Environment
Level 5 Surprisful Level 4 Discontinuous Level 3 Changing: Fast Incremental Change

Level 2 Expanding: Slow incremental change Level 1 Repetitive: No Change

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