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THE STRATEGICMANAGEMENT
PROCESS
STRATEGIC MANAGEMENT
Specific way to manage the company
aimed at adjusting the companys
activities to future changes in the
environment and taking up decisions
focused on the long term.
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Managements job is not to see
the company as it is.but as it
can become.
John W. Teets
CEO, Greyhound Corporation
The McGraw-Hill Companies, Inc., 1998Irwin/McGraw-Hill
Katedra Zarz dzania w Gospodarce SGH
To think Strategically
means:
# Strive to recognize opportunities and threats many
years ahead
# Apply methods of analysis and planning facilitating
creation and implementation of the strategic plans
# Do not get used to the existing plans and be ready to
alter the way the company acts in line with the
changing vision and the changing environment
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STRATEGIC MANAGEMENT
Focus on the future Taking into account various time horizons
Adjustment of the resources to the level oforganizational goals
Comprehensive approach to the organizationintegrating its functions and areas of activity
Very strong consideration of external andinternal conditions
Taking into account various stakeholders
Mirosaw JarosiskiKatedra Zarzdzania w Gospodarce, SGH
6 Mirosaw JarosiskiKatedra Zarzdzania w Gospodarce, SGH
Stakeholders
Individuals or groups of people having a stake in
organisations actions who can affect the organisation
(who make demands/file requests towards the
organisation and have the means to execute them)
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7 Mirosaw JarosiskiKatedra Zarzdzania w Gospodarce, SGH
Stakeholders
MixedInternal External
Managers Employees Committees
Labour Unions Employees families Local environment Partners in the
network
Consumers Buyers Suppliers Banks Shareholders Regulatory
bodies Government
Ministries
8 Mirosaw JarosiskiKatedra Zarzdzania w Gospodarce, SGH
Stakeholders Analysis
Identification of main stakeholders
Stakeholders distance to organisationassessment
Stakeholders power assessment
Conclusions for the organisation:
Whom to keep in touch with on everydaybasis?
Whom to invite to cooperate?
Whom to defend against?
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Stakeholders Analysis
HOSPITAL
Energytraders
Competitors
StateSanitary
Inspection LabourUnions
Chambersof differentprofessions
Foundingauthority
Localmedia
CountyCouncil
NationalHealthFund
PatientsThe Minister
of Health
Pharmaceuticalcompanies
Othersuppliers
SocialInsuranceInstitution
TaxOffice
SupremeAuditOffice
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Craft a
Strategy
to Achieve
Objectives
Set
Objectives
Develop a
Strategic
Vision
& Mission
Implement
& Execute
Strategy
Evaluate &
Make
Corrections
Improve/Change
Revise asNeeded
Revise asNeeded
Improve/Change
Recycleas Needed
Task 1 Task 2 Task 3 Task 4 Task 5
The Five Tasks
of Strategic Management
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Developing a Vision and Mission
Indicates the long-term coursemanagement has charted forthe organization
Charts a strategic path
Our futuredirectionwill be . . .
The First Task of Strategic Management
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Developing a Vision and Mission
A strategic visiondescribes the route a companyintends to take in developing and strengtheningits business.
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Developing a Strategic Vision
A strategic visionreflectsaspirations of managers
Presents a desired futurestate of the company
Provides a panoramic view of wherewe are going
Captures the emotions ofemployees and steers them
in a common direction Is challenging and a bit beyond a
companys immediate reach
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Developing a Strategic Vision
A strategic visionis aroadmap of a companysfuture --
Charts a companys future
strategic course
Defines the business
makeup in distant future
Provides a company with its
own special identity and path
to follow
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Examples: Vision Statement
McDonalds Corporation
McDonalds vision is to dominate the global
foodservice industry. Global dominance means
setting the performance standards for customer
satisfaction while increasing market share and
profitability through our Convenience,
Value, and Execution Strategies.
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Examples: Vision Statement
Our vision: Getting to a billion connected computers
worldwide, millions of servers, and trillions of dollars
of e-commerce.
Intel
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Examples: Vision Statement
eBayProvide a global trading platform where practically
anyone can trade practically anything.
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Examples of Strategic Visions
WyethOur vision is to lead the way to a healthier world.
By carrying out this vision at every level of ourorganization, we will be recognized by our
employees, customers, and shareholders as thebest pharmaceutical company in the world,
resulting in value for all. We will achieve this by: Leading the world in innovation by linking pharmaceutical,
biotech, and vaccines technologies
Making quality, integrity, and excellence hallmarksof the way we do business
Attracting, developing, and motivating the best people
Continually growing improving our business
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SPECIFIC QUESTIONS THAT HELPFORM STRATEGIC VISION
What business are we in now?
What business do we want to be in?
What environmental scenarios are possible?
How will technology impact our industry?
What new or different customer needs should wemove to satisfy?
What new or different buyer segments should weconcentrate on?
What new geographic or product markets should we
pursue? What kind of company should we try to become?
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Definitions: Broad - Narrow Scope
Broad Definition
Beverages
Childrens products
Furniture
Global maildelivery
Travel & tourism
Narrow Definition
Soft drinks
Toys
Wrought iron lawn
furniture
Overnight packagedelivery
Ship cruises in theCaribbean
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WHAT MAKES A GOOD VISION!
A strategic vision exists only as words and has noorganizational impact
unless and until it wins the commitmentof company personneland energizes them to act
in ways thatmove the company along the intended strategic path!
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Communicating the Vision
A strategic vision should be widelyshared among all employees
When all employees are committed tofirms long-term direction
Daily execution of strategy is improved
Better choices are maid
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DEVELOPING MISSION
An organizations MISSION
Reflects managements vision ofwhat firm seeks to do & become
Provides clear view of what firm istrying to accomplish for itscustomers
Indicates intent to stake out aparticular business position
COMPANY'S MISSION IS ADDRESSED
INTERNALLY EXTERNALLY
Managers
Directors
Employees
Local Society
Competitors
Suppliers
Clients
Investors
COMPANY'S MISSION
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Missions vs. Strategic Visions
A missionstatement focuses
on currentbusiness
activities
Business(es)
company is in
now
Customer needs
currently beingserved
A strategic visionconcerns a firms
futurebusiness path
The kind of
company it is
trying to become
Customer needs to
be satisfied in
the future
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Examples: Mission Statements
Otis Elevator
Our missionis to provide any customer a meansof moving people and things up, down, andsideways over short distances with higher
reliability than any similar enterprise in the world.
Our businessis renting cars. Our missionis
total customer satisfaction.
Avis Rent-a-Car
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Examples: Mission Statements
The missionof the American Red Cross
is to improve the quality of human life;
to enhance self-reliance and concern for
others; and to help people avoid,
prepare for, and cope with emergencies.
American Red Cross
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Intels Strategic Inflection Points
Prior to mid-1980s
Focus on memory chips
Starting in mid-1980s
Abandon memory chip business and
Become supplier ofmicroprocessors to PC industry
Make PC central appliance inworkplace and home
Be undisputed leader in driving
PC technology forward 1998
Shift focus from PC technology tobecoming the preeminent buildingblock supplier to the Internet Economy
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Examples: Mission andVision Statements
Intel
To be the preeminent building blocksupplier to the new computing
industry worldwide.
1980
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Examples: Mission Statement
Intels core missionis being the building block
supplier to the Internet economy and spurring
efforts to make the Internet more useful.
Being connected is now at the center of
peoples computing experience. We are
helping to expand the capabilities of the PC
platform and the Internet.
Intel1998
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Strategic Inflection Point
Business declines
Business goes on to new heights
Inflection point
Old vision
New vision
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Business Mission:
McDonalds
Serving a limited menu of hot, tasty food quicklyin a clean, friendly restaurant for a good value toa broad base of fast-food customers worldwide.
McDonalds serves approximately 30 million customers dailyat 20,000-plus restaurants in over 90 countries.
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The McGraw-Hill Companies, Inc.Irwin/McGraw-Hill
Good mission statement
A good mission statement describes a companys
business makeup and purposein language
specific enoughto give the company its own
identityand distinguish it from
other enterprisesin the same or other industries!
Mission Statement of the Warsaw School of
Economics Warsaw School of Economics is the oldest economic school in Poland.
Striving for European approach of its academic activity, it combinesmore than a 100-year-old tradition with todays activity and futurechallenges.
Teaching and bringing up the School aims at transferring up-to-dateknowledge, solid working skills, and social responsibility. Its scientificresearch is guided by the respect for truth and the benefit of the society.
The School educates and makes research in the field of economy andmanagement on the basis of the achievements in social science.
Our graduates, equipped with up-to-date general and specialistknowledge, contribute substantially to economic, social and political lifeat home and abroad. Together with professors, administrative staff,students and the representatives of societies affiliated with the Schoolthey create its image, promoting its outputs and realising its mission.
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Capturing the Vision in a Slogan
FedEx
Satisfying worldwide demand for fast,
time-definite, reliable distribution.
Home Depot
Helping people improve the
places where they live and work.
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Craft a
Strategy
to Achieve
Objectives
Set
Objectives
Develop a
Strategic
Vision
& Mission
Implement
& Execute
Strategy
Evaluate &
Make
Corrections
Improve/Change
Revise asNeeded
Revise asNeeded
Improve/Change
Recycleas Needed
Task 1 Task 2 Task 3 Task 4 Task 5
The Five Tasks
of Strategic Management
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Setting Objectives
Establishing OBJECTIVES
Converts vision into specific
performance targets
Creates yardsticks to track performance
Pushes firm to be inventiveand focused
The Second Task of Strategic Management
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Types of Objectives Required
Outcomes focused onimproving a firms
financialperformance
Outcomes focused onimproving a firmscompetitivenessandits long-term businessposition
Financial Objectives Strategic Objectives
$
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Example: Financial Objectives
To achieve a 20% return on equity.
To achieve a net sales growth rate of 10% per year.
To maintain an average earnings per share growth rateof 15% per year.
To maintain total debt-to-total capital at 40% or less.
To pay out 25% to 35% of net income in dividends.
To make selective acquisitions which complement our
current businesses and can enhance our overall returns. To dispose of those parts of our businesses which do
not or cannot generate adequate returns or do not fitwith our business strategy.
McCormick & Company
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The McGraw-Hill Companies, Inc.Irwin/McGraw-Hill
Increase sales to 4.2 million cars and trucksby 2008 (up from 3 million in 2003)
Cut purchasing costs 20% and halve thenumber of suppliers
Have zero net debt
Maintain a return on invested capital of 20%
Maintain a 10% or better operating margin
Example: Financial Objectives
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Example: Nikes Strategic Objectives
Protect and improve Nikes position as thenumber one athletic brand in America.
Build a strong momentum in growing fitness market.
Intensify the companys effort to develop products thatwomen need and want.
Explore the market for products specifically designedfor the requirements of maturing Americans.
Direct and manage the companys internationalbusiness as it continues to develop.
Continue the drive for increased margins throughproper inventory management and fewer,better products.
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Strategic or Financial Objectives --
Which Take Precedence? Pressures for better short-term financial
performancebecome pronounced when
Firm is struggling financially
Resource commitments for new strategicinitiatives may hurt bottom-line for several years
Proposed strategic moves are risky
A firm that consistently passes up opportunities to
strengthen its long-term competitive position Risks diluting its competitiveness
Risks losing momentum in its markets
Can hurt its ability to fend off rivals challenges
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The Concept of Strategic Intent
A company exhibits STRATEGIC INTENT
when it relentlesslypursues an ambitious
strategic objective and concentrates its
competitive actions and energies on
achieving that objective!
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The Concept of Strategic Intent
Indicates firms intent to stakeouta particular position overthe long-term
Serves as a rallying cry foremployees to do their very best
Signals deep-seatedcommitmentto winning
Entails sustained, aggressiveactionsto take market shareaway from rivalsand achieveamuch stronger market position
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Short-Term andLong-Term Objectives
Short-Termobjectives Targets to be achieved soon (1 - 2 years)
Serve as stair stepsfor reaching long-range performance
Indicate speedof progress & level ofperformance being aimed for
Long-Termobjectives Targets to be achieved within longer
period (3 to 5 years)
Calls for actions nowthat will permit
reaching targeted long-rangeperformance later
Pushmanagers to weigh impact oftodays decisions on future performance
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3 Rules for Establishing Objectives
Objectives should representcommitment to achievespecific performancetargetsstated in quantifiableterms
They must contain a deadlinefor
achievement Objectives should be challenging
but attainable
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The Home Depots Objectives
Be the number one destination for professionalcontractors, whose business accounted forroughly 30 percent of 2006 sales
Improve in-stock positions so customers can findand buy exactly what they need
Deliver differentiated customer service and theknow-how that our customers have come toexpect from The Home Depot
Repurchase $22.5 billion of outstanding shares
during 2008 Open 55 new store locations with 5 store
relocations in 2008
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The Objectives at Yum! Brands
(KFC, Pizza Hut, Taco Bell)
Open 100 KFC restaurants in Vietnam by 2010
Expand Taco Bell restaurant concept to Dubai, India,Spain and Japan during 2008 and 2009
Increase number of international restaurant locationsfrom 12,000 in 2007 to 15,000 in 2012
Increase operating profit from international operationsfrom $480 million in 2007 to $770 million in 2012
Expand Pizza Huts menu to include pasta and chickendishes
Decrease the number of company owned restaurantunits in U.S. from 20% of units in 2007 to less than 10%of units by 2010
Increase the number of Taco Bell units in the U.S. by2%3% annually between 2008 and 2010
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S.M.A.R.T.
S.M.A.R.T. - Simple, Measurable, Achievable,Relevant, Timely defined.
S.M.A.R.T. - Simple, Measurable, Ambitious,Realistic, Timely defined.
S.M.A.R.T. - Specific, Measurable, Ambitious,Realistic, Tangible.
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S.M.A.R.T.E.R.
S.M.A.R.T.E.R. - Simple, Measurable, Achievable,Relevant, Timely defined, Exciting, Recorded.
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Craft a
Strategy
to Achieve
Objectives
Set
Objectives
Develop a
Strategic
Vision
& Mission
Implement
& Execute
Strategy
Evaluate &
Make
Corrections
Improve/Change
Revise asNeeded
Revise asNeeded
Improve/Change
Recycleas Needed
Task 1 Task 2 Task 3 Task 4 Task 5
The Five Tasksof Strategic Management
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The McGraw-Hill Companies, Inc.Irwin/McGraw-Hill
Crafting a Strategy
A companys strategyconsists ofcombined actions management hastaken & intends to take that deal with
How to makemanagements
strategic vision a reality
Achieving strategic & financial objectives
The Third Task of Strategic Management
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Katedra Zarzdzania w Gospodarce SGH
Definitions of Strategy
1947 Von Neuman & MorgensternStrategy is a series of actions by a firm that are dedicated on
according to the particular situation.
1969 AndrewsStrategy is the pattern of objectives, purposes or goals and
major policies and plans for achieving these goals, stated in
such a way as to define what business the company is in or is
to be in and the kind of company it is or is to be.
1976 McCarthyStrategy is an unified, comprehensive and integrated plan
designed to assure that the basic objectives of the enterprise
are achieved.
1979 MinzbergStrategy is a mediating force between the organization and its
environment: consistent patterns in streams of organizational
decisions to deal with the environment.
STRATEGIC PERSPECTIVE OF VISION
Exp
ec
ta
tions
Time
Vision - Year t
Long-range objectives - Year t-5
Short-range objectives - Year t-8
Strategies in execution - Year t-10
Momentof planning
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Strategizing Is HOW To . . .
Make the strategic vision a reality
Achieve performance targets
Please customers
Out-compete rivals
Achieve sustainable competitiveadvantage
Strengthen firms long-termcompetitive position
Respond to changingmarket conditions
Our game planfor running thecompany willbe . . .
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A Companys Strategy IsPartly Proactive and Partly Reactive
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Why Do Strategies Evolve?
There is alwaysan ongoing needto react to
Shifting market conditions
Fresh moves of competitors
New technologies
Evolving customer preferences
Political and regulatory changes
New windows of opportunity The crisis of the moment
Levels of Strategy-Making
Businessstrategies
Operational strategies
Functional strategies
Corporate strategy
SBU SBU SBU SBU
Plant/Unit
Plant/Unit
Plant/Unit
Plant/Unit
Plant/Unit
Corp. HQ
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Corporate Strategy fora Diversified Company
CorporateStrategy
How MuchDiversification
Kind of Diversification
Responses toChanging Conditions
Efforts to BuildCompetitiveAdvantage ViaDiversification
Moves to Strengthen
Positions and Profitsin Present Businesses
Moves to capturesynergy amongbusiness units
Approach toCapital Allocation(investment priorities)
Moves to Divest
Weak Units andAdd New Businesses
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Strategy Components of
a Single-Business Company
BusinessStrategy
Strategic Alliancesand CollaborativePartnerships
Responses to Changing Conditions
Basic CompetitiveApproach
Moves toSecureCompetitiveAdvantage
Geographic coverage;approach to verticalintegration
ManufacturingStrategy
MarketingStrategy
R & DStrategy
Human ResourcesStrategy Finance Strategy
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Networking of Missions,Objectives, and Strategies
Level 1
Level 2
Level 3
Level 4
CorporateLevel
Objectives
Overall Scopeand Strategic
Vision
CorporateLevel
Strategy
BusinessLevel
Objectives
BusinessLevel
Strategic Vision
BusinessLevel
Strategies
FunctionalObjectives
FunctionalStrategies
OperatingObjectives
OperatingStrategies
Two-Way Influence Two-Way Influence Two-Way Influence
Two-Way Influence Two-Way Influence
Corporate-LevelManagers
Business-LevelManagers
FunctionalManagers
Plant Managers,Lower-Level Supervisors
Two-Way Influence Two-Way Influence
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What Is a Strategic Plan?
Its strategic visionand business mission
Its strategy
Its strategicandfinancial objectives
A
Companys
Strategic PlanConsists of
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What is a Business Model?
A companys business model addresses How do we makemoney in this business?
Is the strategy that management is pursuing capable ofdelivering good bottom-line results?
Do the revenue-cost-profit economics of the companysstrategy make good business sense?
Look at the revenue streams thestrategy is expected to produce
Look at the associated cost structureand potential profit margins
Do the resulting earnings streams andROI indicate the strategy makes sense and that thecompany has a viable business model?
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Microsofts Business Model
Employ a cadre of highly skilled programmers to develop proprietarycode; keep source code hidden from users
Sell resulting OS and software packages to PC makers and users atrelatively attractive prices to achieve a 90% or more market share
Most costs in developing software are fixed; variable costs aresmall; once break-even volume is reached, revenues from additionalsales are almost pure profit
Provide technical support to users at no cost
Rejuvenate revenues by periodically introducing next-generationsoftware with features inducing PC users to upgrade their operatingsystems
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Redhat LinuxsBusiness Model
Rely on collaborative efforts of volunteer programmers to create thesoftware
Collect and test enhancements and new applications submitted byvolunteer programmers for evaluation and inclusion in new releases ofLinux
Market upgraded and tested family of Red Hat products to largecompanies, charging a subscription fee that includes 24/7 support within1 hour in 7 languages
Make source code open and available to all users
Make money by providing fee-based training, consulting, softwarecustomization, and client-directed engineering to Linux users
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Craft a
Strategy
to Achieve
Objectives
Set
Objectives
Develop a
Strategic
Vision
& Mission
Implement
& Execute
Strategy
Evaluate &
Make
Corrections
Improve/Change
Revise asNeeded
Revise asNeeded
Improve/Change
Recycleas Needed
Task 1 Task 2 Task 3 Task 4 Task 5
The Five Tasks
of Strategic Management
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Implementing and Executing Strategy
Creating fitsbetween way
things are done and what it
takes for effective strategy
execution
Producing excellent
resultsin a timely
manner
The Fourth Task of Strategic Management
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Strategy implementationis an
internal, operations-driven activity
involving organizing, budgeting,
motivating, culture-building,
supervising, and leading tomake the strategy work
as intended!
Strategy Implementation
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Building a capable organization Allocating resourcesto strategy-critical activities
Establishing strategy-supportive policies
Instituting best practicesand programs forcontinuous improvement
Installing information, communication, andoperating systems
Motivatingpeople to pursue the target objectives
Tying rewardsto achievement of results
Creating a strategy-supportive corporate culture
Exerting the leadershipnecessary to drive the processforward and keep improving
What Does Strategy ImplementationInvolve?
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Craft a
Strategy
to Achieve
Objectives
Set
Objectives
Develop a
Strategic
Vision
& Mission
Implement
& Execute
Strategy
Evaluate &
Make
Corrections
Improve/Change
Revise asNeeded
Revise asNeeded
Improve/Change
Recycleas Needed
Task 1 Task 2 Task 3 Task 4 Task 5
The Five Tasks
of Strategic Management
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Evaluating Performance
Constant checking of strategic plansand their implementation to see ifthey are up-to-date in order to foreseethe need for
change of strategic direction
rdo: H. Steinmann, G. Schreygg, Zarzdzanie, podstawy kierowania przedsibiorstwem, Oficyna wydawnicza PolitechnikiWrocawskiej, Wrocaw 1995.
Mirosaw JarosiskiKatedra Zarzdzania w Gospodarce, SGH
The Fifth Task of Strategic Management
StrategyObjectivesVision& Mission
StrategyExecution
Strategic Control
Analysis
Improve/change
Reviseas needed
Improve/change
Reviseas needed
Strategic Management Process
Mirosaw JarosiskiKatedra Zarzdzania w Gospodarce, SGH
8/22/2019 Lecture 1 managent tingement consul
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Strategic Management
To reduce risks
companies should perform strategic analysis
and
prepare strategies for growth and competitivestrategies
Mirosaw JarosiskiKatedra Zarzdzania w Gospodarce, SGH
Strategic Management
Even a deficient strategic plan
or
a strategic plan which has not been executedproperly
is better than
being unaware of the direction the company shouldtake
Prof. Maria Romanowska
Mirosaw JarosiskiKatedra Zarzdzania w Gospodarce, SGH