EHRMA

1. EHRMA Strategic Management By Dr. Harold D. Harlow

2. Strategic Management Defined: • Set of managerial decisions and actions that determines the long-run performance of a firm. • Set of managerial actions and decision,separate from operations, that determines the future profitability/success of the firm.

3. Managers Two Primary Responsibilities • Operational Work • Actions and plans less than one year. • Daily and weekly activities to “get the work of the business done well” • Strategic Work • More than one year future orientation. • Often crowded out by operational work. • The most important work is strategic. Although not usually urgent in most environments, essential to the future profit making potential of the firm.

4. Business Policy Defined: General management orientation that looks inward for properly integrating the firm’s functional activities.

5. Four Phases ofStrategic Management • Basic financial planning • Forecast-based planning • Externally-oriented planning (strategic) • Strategic management(Choose functional strategies to support firm and SBU strategies)

6. Strategic Management Benefits: • Clearer sense of strategic vision for the firm • Sharper focus on what is strategically important • Improved understanding of a rapidly changing environment

7. Strategic Management Not always a formal process can be ad hoc: • Where is the organization now? (Not where do we hope it is!) • If no changes are made, where will the organization be in 1 year, 2 years, 5 years, 10 years? • What specific actions should management undertake? What are the risks and payoffs involved?

8. Global Stategic Issues • European Union(EU) • Economic integration of 15 member countries • North American Free Trade Agreement(NAFTA) • Improved trade among 3 member countries • Mercosur • Free-trade area among Argentina, Brazil, Uruguay, and Paraguay • Association of South East Asian Nations(ASEAN) • Attempting to link members into a borderless economic zone

9. E-Commerce 7 Trends: • Internet forcing companies to transform themselves • Market access and branding are changing, causing disintermediation of traditional distribution channels • Balance of power shifting to the consumer • Competition is changing

10. 7 Trends (continued) • Pace of business increasing drastically • Internet purchasing corporations out of their traditional boundaries • Knowledge becoming a key asset and source of competitive advantage

11. Adaptation to Changing Environmental Conditions Strategic flexibility: • Demands a long-term commitment to the development and nurturing of critical resources • Demands that the firm become a learning organization

12. Learning Organizations Defined: An organization skilled at creating, acquiring, and transferring knowledge and at modifying its behavior to reflect new knowledge and insights.

13. Learning Organizations Four Main Activities: • Solving problems systematically • Experimenting with new approaches • Learning from their won experiences and that of others • Transferring knowledge quickly and efficiently throughout the organization

14. Strategic Management Model Environmental Evaluation and Control Strategy Strategy Evaluation and Control and Control Scanning Formulation Implementation Mission External Reason for Societal existence Objectives Environment General Forces What results to Strategies Task accomplish Environment by when Plan to Industry Analysis achieve the Policies mission & Internal objectives Broad guidelines for Programs Structure Process decision to monitor Chain of Command making Activities performance needed to Budgets Culture and take accomplish corrective Beliefs, Expectations, a plan Cost of the action Values programs Procedures Resources Sequence Assets, Skills of steps Competencies, needed to Knowledge Performance do the job Feedback/Learning

15. Basic Model of Strategic Management Four Basic Elements

16. Environmental Scanning Defined: The monitoring, evaluating, and disseminating of information from the external and internal environments to key people within the firm.

17. Environmental Scanning

18. Environmental Scanning Identify strategic factors • SWOT Analysis • Strengths, Weaknesses • Opportunities, Threats • Internal Environment • Strengths & Weaknesses • Within the organization but not subject to short-run control of management • External Environment • Opportunities & Threats • External to the organization but not subject to short-run control of management

19. Strategy Formulation Defined: Development of long-range plans for the effective management of environmental opportunities and threats in light of corporate strengths and weaknesses.

20. Strategy Formulation Mission Statement • Purpose or reason for the organization’s existence • Promotes shared expectations among employees • Communicates public image important to stakeholders • Who we are, what we do, what we’d like to become

21. Strategy Formulation Maytag Corporation Mission Statement To improve the quality of home life by designing, building, marketing, and servicing the best appliances in the world.

22. Strategy Formulation Objectives • The end results of planned activity • What is to be accomplished • Time in which to accomplish it • Quantified when possible

23. Strategy Formulation Goals vs. Objectives A goal is an open-ended statement of what one wants to accomplish with no quantification of what is to be achieved and no time criteria for completion.

24. Goals & Objectives Corporate goals and objectives include: • Profitability (net profits) • Growth (increase in total assets, etc.) • Utilization of resources (ROE or ROI) • Market leadership (market share)

25. Strategies Defined: A strategy of a corporation forms a comprehensive master plan stating how the corporation will achieve its mission and objectives. It maximizes competitive advantage and minimizes competitive disadvantage.

26. Strategies 3 Types of Strategy • Corporate strategy • Business strategy • Functional strategy

27. Strategies Corporate Strategy • Stability • Growth • Retrenchment

28. Strategies Business Strategy • Competitive strategies • Cooperative strategies

29. Strategies Functional Strategy • Technological leadership • Technological followership

30. Hierarchy of Strategy Corporate Strategy Business (Division Level) Strategy Functional Strategy

31. Policies Defined: Broad guidelines for decision making that link the formulation of strategy with its implementation.

32. Strategy Implementation Programs Strategy Implementation Budgets Procedures

33. Initiation of Strategy • New CEO • External intervention • Threat of change in • ownership • Performance gap • Strategic inflection point Stimulus for change in strategy Triggering event

34. Strategic Decision Making Strategic Decisions • Rare • Consequential • Directive

35. Strategic Decision Making

36. Strategic Decision Making

38. StrategyBasic Concepts

39. Who Makes Strategy? • General Management Function. • Top level managers develop strategy of the firm. • Not operations activity • Must be allowed adequate time and resources to be successful. • Key point: Operational work tends to crowd out strategic management work.

40. What is Strategy? • Strategy has three levels: • Firm level • Business level or Strategic Business Unit Level • Functional or departmental level. • Directional goals to guide future decision making • Formal planning sessions may occur

41. Strategy Questions • What is the current strategy, implicit or explicit? • What assumptions have to hold for the current strategy to be viable? • What is happening in the larger, social and educational environments? • What are our growth, size, and profitability goals? • In which markets will we compete? • In which businesses? • In which geographic areas?

42. Strategy Questions-Continued • To what customers or users? • How will the selling/buying decisions be made? • How will we distribute our products and services? • What technologies will we employ? • What capabilities and capacities will we require? • Which ones are core? • What are our management capabilities and capacities? • Is our “corporate culture” supportive of our strategy? • What will we make, what will we buy, and what will we acquire through alliance? • What are our options? • On what basis will we compete

43. Why • Proven significant gains in performance from explicit strategy development • Different functional areas may have different strategies. • Dysfunctional suboptimal decisions dependent on functional manager professional orientation. • What is needed is a “guiding strategic hand” for each business function.

44. Where strategy comes from? • Formal planning • Ad hoc by consensus of firm managers • External-Reaction to environment • Internal-Firm Resources available

45. When is ( New) Strategy Needed? • When firm performance does not meet expectations. • When firm is changed in some significant way. • New managers • Firm is sold or merged with another firm. • When paradigmic changes occur in business model.

46. Firm Level Strategies • Growth • Mergers and Acquisitions • Organic (Depends on Industry Life cycle and competitiveness) • Vertical or Horizontal Integration • Economies of Scale or Scope • Disinvestment / Retrenchment

47. Mission • Rationale for the firm: Its reason for existance. • Needed to drive the firm to the intermediate goals and objectives • Specific within a certain time period. • Specific about competition and markets to be captured.

48. Vision • An overriding very long range view of the firm and where it might be in 10-20 years. Corporate vision is a short, succinct, and inspiring statement of what the organization intends to become and to achieve at some point in the future, often stated in competitive terms. Vision refers to the category of intentions that are broad, all-inclusive and forward-thinking.  It is the image that a business must have of its goals before it sets out to reach them. It describes aspirations for the future, without specifying the means that will be used to achieve those desired ends.

49. Mission and Vision Answer the Strategic Questions • Who are we? • What do we do? • Why are we here? • What kind of company are we? • What kind of company do we want to become? • What kind of company must we become to survive and prosper in our community

50. Emergent Strategy • Mintzberg • Strategy is a plan, a "how," a means of getting from here to there. • Strategy is a pattern in actions over time; for example, a company that regularly markets very expensive products is using a "high end" strategy. • Strategy is position; that is, it reflects decisions to offer particular products or services in particular markets. • Strategy is perspective, that is, vision and direction.