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Strategic Management: Defining & Implementing Grand Designs

Chapter 6: Strategic Management – Realizing a Grand Design

I. Foundations of Strategic Management

Strategic management is the process of formulating and implementing strategies to achieve organizational goals. It begins with establishing the fundamental principles of the organization:

  • Values: These define what an individual or organization stands for. They are the core beliefs and principles guiding behavior and decisions.

  • Vision: This is a long-term goal; what an organization aspires to be or achieve in the future. For example, Steve Jobs' vision for Apple involved constantly pushing technological boundaries and user experience.

  • Mission: This states what an organization does, its fundamental purpose, and its reason for existence. It describes the organization's current business and objectives.

II. Strategic Planning Process

Strategic planning is a dynamic and iterative process that typically occurs every 3 years, involving several key steps:

A. Market Analysis

Before formulating strategies, organizations must thoroughly understand their market:

  • Market Size: Is the market growing or shrinking?

  • Market Segments: Identifying distinct groups of customers within the market.

  • Competition: Understanding the landscape of rivals and their offerings.

  • Positioning: Determining where the organization currently fits and where it desires to fit in the market relative to competitors.

B. Defining Strategies

  • Strategies are 4-6 areas of focus that enable the organization to achieve its vision and mission.

  • They must be truly representative of the organization's values.

  • Example Strategic Plan: Achieve 6\% $ growth in Europe through technological innovation.

C. Operational or Tactical Plans

Operational or tactical plans detail the specific actions required to achieve the broader strategic plan. They provide a roadmap for execution.

  • Typically, there are 3 tactics designed to support each strategy.

  • Example Strategy: Achieve 6\% $ growth in Europe through technological innovation.

  • Example Tactic: Implement new ERP software to improve production and decrease customer lead time by 12\% $.

D. Business Plan & Reviews

  • An Annual Business Plan integrates strategies and tactics, often with specific sales and profit targets.

  • Monthly Operating Reviews are conducted to track progress against plans, make necessary adjustments, and ensure alignment.

III. ARAMARK Refreshment Services: A Case Study

ARAMARK's Refreshment Services division provides a practical example of strategic implementation, led by figures like Joe Neubauer.

A. Business Overview

  • Over \$900 Million in Annual Sales in North America.

  • Operates in a \$5 Billion market with two major segments: Office Coffee and Vending.

  • Serves over 50,000 customers in North America, providing coffee, snacks, and other beverages.

  • Employs over 14,000 individuals in a route-based distribution system.

B. Organizational Structure

ARAMARK's structure demonstrates a clear hierarchy:

  • President

  • Regional Vice Presidents (RVP)

  • District Managers (DM)

  • Vice Presidents for functional areas: HR, CFO, Sales, Marketing

  • Supporting roles: Human Resources Director (HRD), Regional Financial Director (RFD), Regional Sales Director (RSD), Regional Marketing Director (RMD)

C. Strategic Example: Single Serving Coffee (Keurig)

One of ARAMARK's key strategies involved the adoption and promotion of single-serving coffee systems, like Keurig, capitalizing on market trends for convenience and variety.

D. Keurig Tactics

To execute the Keurig strategy, ARAMARK deployed specific tactics:

  • New Customer Acquisition: Utilize the sales force to sell Keurig systems to new clients.

  • Existing Customer Penetration: Sell Keurig systems and associated products to current customers through Customer Service Sales Representatives (CSSRs) and drivers.

  • Significant Opportunity: Converting just 10\% $ of existing customers represents an annual opportunity of $$ \$20,200,000 $.

IV. Levels of Strategy

Organizations typically employ strategies at three distinct levels:

  • Corporate-Level Strategy:

    • Focuses on the organization as a whole.

    • Decisions are made by executives, often referred to as the