2_Strategic Management Process

Five Steps in the Basic Management Process

O PfAc ECi

1. Setting objectives

2. Making basic planning forecasts

3. Reviewing alternative courses of action

4. Evaluating which options are best

5. Choosing and implementing your plan

Hierarchy of Goals

• views the goals from the top of the firm down to frontline employees as a chain

• The company president sets a long-term goal, then the vice president sets their own goal according to the initial goal set, and so on and so forth down the line of employees until even their subordinates have their own goals in line with the top goal

Policies

broad guidelines delineating how employees should act

Procedures

spell out what to do in a specific situation

step-by-step approach to performing tasks

Strategic Plan

ISaW —> EOT (SWOT)

• company’s overall plan for matching its internal strengths and weaknesses with the external opportunities and threats in order to maintain a competitive position

• “What are we now as a business and where do we want to be?”

Strategy

course of action

Strategic Management

IE

• process of identifying and executing the strategic plan by matching company’s capabilities with the demands of the environment

• Note: A strategic plan contains strategies to reach the end goal. The strategies will be executed in strategic management

strategic management → strategic plan → strategy → strategic goal

Broad to specific:

strategic management → strategic plan → strategic goal → strategy

Strategic Management Process

DANTFIE

1. Define the company’s current business

2. Perform external and internal “audits”

3. Formulate a new direction

4. Translate the mission into strategic goals

5. Formulate strategies to achieve strategic goals

6. Implement the strategies

7. Evaluate performance

Note: Summary is, the company should first define what their business is currently. They then branch into identifying stregnths and weaknesses (internal) and general company environment (external). Given this data, the company should formulate a NEW direction by identifying what they want to become (vision) and what they should do in order to be what the want to become (mission). Given the mission, it is divided into smaller goals (strategic goals). These smaller goals are further broken down into specific tasks (strategies). After the goals and tasks have been laid out, the strategies will then be executed and eventually evaluated. Repeat step 5 if strategic goals are not met.

From specific to broad: strategy ⇒ strategic goals ⇒ mission statement

Define the company’s current business (SMP)

PHD

• What products are they selling?

• How are they being sold?

• How do the products differ from other competitors?

Perform external and internal “audits” (SMP)

• Study both the firm’s environment and the internal strengths and weaknesses

• Methods ESP

  1. Environmental scan worksheet

  2. SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats)

  3. PEST Analysis (Political, Economic, Social, Technological)

Environmental Scan Worksheet (Audit Method)

PEC

• includes economic, competitive, and political trends

• has information on the company’s environment (external)

looks at broad trends & provides insights into the external environment that may affect business operations & strategy

SWOT Analysis (Audit Method)

• Strengths and Weaknesses (internal)

• Opportunities and Threats (external)

provide a balanced view of internal capabilities and external factors, guiding strategic decisions based on this comprehensive assessment

PEST Analysis (Audit Method)

• all external factors

  • Political, Economic, Social, Technological

Formulate a new direction (SMP)

• What should our business be?

• Essence of the business

• Vision Statement

  • general statement of the firm’s intended direction

  • what the company wants to become

  • future-oriented

• Mission Statement

  • what the company’s main tasks are today

  • present-oriented

Translate the mission into strategic goals (SMP)

• What would the mission statement mean for each department?

• Laid out goals in accordance with the broad mission statement task

Formulate strategies to achieve strategic goals (SMP)

Having specific courses of action in order to achieve strategic goals

Implement the strategies (SMP)

Putting plans into action

Evaluate performance (SMP)

• Assessment of the progress of their strategic decisions

• If it doesn’t work out as planned, re-strategize

Types of Strategies

CorComF

1. Corporate Strategy

2. Competitive Strategy

3. Functional Strategy

Corporate Strategy (ToS)

identifies portfolio of businesses that, in total, comprise the company and how these businesses relate to each other

• Subtypes: CoDiVer CoGe

  1. Concentration Strateg

  2. Diversification Strategy

  3. Vertical Integration Strategy

  4. Consolidation Strategy

  5. Geographic Expansion

Concentration Strategy (corporate subtype)

• single-business

• one product line in one market

Diversification Strategy (corporate subtype)

• expansion by adding new product lines

• example: Apple introducing self-driving cars

Vertical Integration Strategy (corporate subtype)

• expansion by producing its own raw materials or by directly selling their products

• example: Apple stores being established

Consolidation Strategy (corporate subtype)

• Reducing company size by merging with other business units or companies into a single, larger organization

• pros/purpose:

  • operational efficiency,

  • eliminating competition, and

  • getting access to new markets

• example: Disney acquiring Marvel and Fox

Geographic Expansion (corporate subtype)

• entering new territorial markets

• example: Jollibee in USA and UAE

Competitive Strategy (ToS)

• identifies how to build and strengthen the business’ competitive position in the marketplace

• how one company competes with another company

• Competitive Advantage

  • factors that allow a company to differentiate its product or service from those of its competitors to increase market share

  • what makes a company better than other companies?

• Three Standard Competitive Strategies

  1. Cost leadership

  2. Differentiation

  3. Focus

Cost leadership (competitive strategy)

becoming the low-cost leader in the industry; prices

Differentiation (competitive strategy)

seeks to be unique along dimensions valued by buyers; innovation

Focus (competitive strategy)

market niche; targeting specific markets (often minorities)

Functional Strategy (ToS)

what each department must do to help the business accomplish its strategic goals

Strategic Human Resource Management

PoPra → eComBe

• formulating and executing human resource policies and practices that produce employee competencies and behaviors the company need to achieve its goals

• dynamic, not static

  • this means that HR managers should identify where each HR activity is now and where it should be to support strategic goals

  • how to transform HR activities in order to align with and support the company goals

Process (SHRM)

ID PoPra

• identify company’s strategic goals

• determine employee competencies and behaviors required to achieve the goal

• produce HR policies and practices to produce said competencies and behaviors

PoPra → eComBe → strategic goals

Tools (SHRM)

MicroSD

1. Strategy Map

2. HR Scorecard

3. Digital Dashboards

Strategy Map (SHRM tool)

• summarizes the role of each department in achieving the company’s strategic goals

• clarifies employees’ “line of sight” by visually linking efforts → company’s ultimate goals

HR Scorecard (SHRM tool)

• process for assigning financial and nonfinancial goals or metrics to the strategy map chain of activities required for achieving company strategic goals

• “balanced scorecard” planning approach - balances hard data (finances) with soft data (customer satisfaction) to measure overall performance

• a specific evaluation standard for activities in the strategic map

  • standards in the HR scorecard must be met in order to assume that the activity in the strategy map is executed successfully

Digital Dashboards (SHRM tool)

• desktop graphs and charts showing how the company is doing on all metrics from the HR scorecard

• specific measurement of performance in one activity in the strategy map according to the metrics set in the HR scorecard

Human Resource Metrics

quantitative gauge of a human resource management activity

Benchmarking

comparing the results of high-performing companies → current company to understand what makes them better

Strategy-Based Metrics

• measures the activities that contribute to achieving a company’s strategic goals

• measure of internal performance as opposed to comparison with other companies

HR metrics vs Strategy-based metrics:

• HR Metrics: operational efficiency (w/in HR itself) (e.g., employee turnover rate)

• Strategy-based metrics: How HR activities contribute/impact (e.g., Training Return on Investment)

HR Audit

CEE

• analysis of the completeness, efficiency, and effectiveness of HR functions

• generally involves using a checklist to review functions and ensuring adherence to federal law and company policies

High Performance Work Systems

• set of HRM policies and practices that produce superior employee performance

• Managers use HR metrics to assess company performance and compare them with other firms

• The steps in ensuring high-performance systems must be illustrated

  • can be in the form of hiring based on validated tests and extensive training for employees

• High-performance work systems aspire to encourage employee involvement and self management

  • They aim to nurture a motivated workforce

Employee Engagement

PsyConCom

• being psychologically involved in, connected to, and committed to getting one’s jobs done

• engaged employees = high connectivity with work tasks = more effort to accomplish task related goals

• Managers can improve employee engagement through supportive supervision IDEAS

  1. focusing support and coaching on employees’ strengths

  2. make sure employees understand how their departments contribute to company goals

  3. make sure employees see how their efforts contribute to achieving company goals

  4. make sure employees get a sense of accomplishment from working in the company

  5. make sure employees are involved