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Strategic management. Power point presentation DR. Shareef Mahgoub. Strategic Management Process. 1.4. Planning. Serves as a guide for making decisions The act of setting goals, developing strategies, outlining tasks, creating timelines
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Strategic management • Power point presentation • DR. Shareef Mahgoub
Planning • Serves as a guide for making decisions • The act of setting goals, developing strategies, outlining tasks, creating timelines • Each part of a business develops its own plan to guide its operations • All plans must work together toward the business’ overall goals.
Importance of Planning • Most important function of management • The difference between higher profits or huge loses, expansion or failure • All managers are involved with planning in some way • Deciding to expand and build a new building to deciding on work schedules
Importance of Planning • Mangers use their plans to determine whether the business is making progress • It encourages managers to be more specific in their decisions • Planning in a large business is like a jigsaw puzzle. All the pieces must work together • Coordination to avoid conflict & missed opportunities • Sharing plans between departments helps each see how their plans effect another
Levels of Planning Managers plan on two levels • Strategic planning (upper management) • Long term • Provides broad goals & direction for the entire business • Operational (mid-level management) • Short term • Identifies specific activities for EACH area of the business
Setting Goals You will never know when you have arrived if you don’t know where you are going. Goal – Is a specific statement of a result the business expects to achieve Characteristics of Effective Goals: 1. Specific & Meaningful 3. Clearly Communicated 2. Achievable (realistic) 4. Consistent with each other and overall company
Operation Planning • Determines the: • How it will be done • Who will do it • What resources are needed to do it • Operational plans direct the day-to-day activities of a business
Planning Tools • Budgets – most widely used tool • Schedules – deadlines • Standards – Quality, Quantity, Time, Cost • Policies – general rule for the whole business • Procedure – steps followed to perform certain work • Research – Gathering information
What is Strategic Management? • Application of the basic planning process at the highest levels of the company • Top management sets goals for the performance of the company • Carefully formulating, implementing, and evaluating plans and strategies
What is Strategic Management? • Most important part is developing strategic plans • Plans must remain current as changes occur inside and outside the company • Involves many levels of management • Top level formally develops basic plans • Different departments may be asked to develop plans for their own areas • A solid plan guarantees that plans are coordinated and are supported by everyone in the company
Strategic Management Approach • Three phases critical to the success of the process • Formulation • Developing the strategic plan • Implementation • Putting the formulated plan to work • Evaluation • Continuously evaluating and updating the strategic plan
Formulating Strategy Developing the grand- and business-level strategies to be used by the company • Company’s strengths/weaknesses and threats/opportunities shape the strategies • First step is to understand the current position of the company • Identify mission, identify past and present strategies, diagnose the company’s past and present performance, set objectives for the company’s operation
Formulating Strategy • Identify the mission statement • Outlines why the company exists • Describes the company’s basic products and/or services and defines markets and sources of revenue • Designed to accomplish several goals and ensures a common purpose within the company
Identifying Past and Present Strategies • Companies need to understand and appreciate their corporate history • Strategic managers should ask • Has past strategy been developed? • If not, can past history of the company be analyzed to identify the strategy that has evolved? • If yes, has the strategy been recorded in writing?
Diagnosing Past and Present Performance • A corporate planner must decide if past strategies worked and if strategic changes are needed by asking: • How is the company currently performing? • How has it performed during the past few years? • Is the performance trend moving up or down?
Setting Goals • Concise statements that provide direction employees and set standards for achieving the company’s strategic plan • Established in many areas (see handout) • Goals must be reevaluated as the environment and opportunities change • Multiple goals are used to reflect the desired performance
Policies, Procedures, and Rules • Policies are broad general guides to action that establish boundaries within which employees must operate • “answering all written customer complaints in writing within 10 days”
Policies, Procedures, and Rules • Procedures are detailed series of related steps/tasks written to implement a policy • Define methods through which policies are achieved • “the customer service representative must note the complaint of Form 622 and forward the yellow copy of the form…” • Rules detail specific and definite corporate actions that employees must follow • Leave little doubt about what is to be done • “no smoking in the conference room”
Implementing Strategy • Action stage of strategic management • Managers determine and implement the most appropriate company structure, motivate employees, develop short-range goals, and establish functional strategies • Strategy must fit with current company policies • Or conflicting policies must be changed
Evaluating and Controlling the Strategic Plan • Process of continuously monitoring the company’s progress toward its long-range goals and mission • Managers should ask: • Does the grand strategy need revising? • Where are problems likely to occur? • Basic strategy evaluation strategies: • Review external and internal factors that are the bases for current strategies • Measure performance • Take corrective action
SWOT Analysis • Strengths, Weaknesses, Opportunities, Threats • Process that allows companies to evaluate overall health • Internal (SW) – Can Control • External (OT) – Can’t Control • Most important result of a SWOT analysis is the ability to draw conclusions about the attractiveness of the company’s situation and the need for strategic action
Evaluating and Controlling the Strategic Plan • Emphasis is making the company’s managers aware of the problems that are likely to occur and of the actions to take if they do arise • Plan ahead and avoid disaster • Strategic planning and evaluation should be done on a predetermined schedule and as frequently as necessary, determined by internal and environmental factors