Principle Of Management Report 2012

PRINCIPLES OF MANAGEMENT Chapter 8 Strategic Management Submitted to: Sir Sikandar Shuja Toor Submitted by: Malik Khizer Abbas Dated: 22th May , 2012

The University of Lahore CS & IT Dept.

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Principle Of Management Report 2012

ACKNOWLEDGEMENT
Alhamdulillah, I am very grateful to the Almighty ALLAH, who have bestowed me the will to complete my documentation about Strategic Management which is connected to my scheme Principles of Management. Apart from the efforts of me, the success depends largely on the encouragement and guidelines of many others.Here, I would like to take this opportunity to express my highest gratitude and compliment to the people who are involved directly or indirectly in this project especially my beloved & respected Sir Sikandar Shuja Toor who is my lecturer. Who give me motivation,inspiration, develop my skills and made me the habitual of hardwork.

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Principle Of Management Report 2012

TABLE OF CONTENTS
INTRODUCTION1 THE IMPORTANCE OF STRATEGIC MANAGEMENT.2 a)What Is Strategic Management? b)Why Is Strategic Management Important? THE STRATEGIC MANAGEMENT PROCESS3 Step 1: Identifying the Organizations Current Mission, Objectives, and Strategies Step 2: External Analysis Step 3: Internal Analysis Step 4: Formulating Strategies Step 5: Implementing Strategies Step 6: Evaluating Results TYPES OF ORGANIZATIONAL STRATEGIES.4 a)Corporate Strategy b)Business (Competitive) Strategy c)Functional Strategy Corporate Portfolio Analysis...5 STRATEGIC MANAGEMENT IN TODAYS ENVIRONMENT..6 a)New Directions in Organizational Strategies

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Principle Of Management Report 2012

1.

INTRODUCTION

Effective managers recognize the role that strategic management plays in their organizations performance. Throughout this chapter, I discover that good strategies can lead to high organizational performance. 2. THE IMPORTANCE OF STRATEGIC MANAGEMENT Managers must carefully consider their organizations internal and external environments as they develop strategic plans. They should have a systematic means of analyzing the environment, assessing their organizations strengths and weaknesses, identifying opportunities that would give the organization a competitive advantage, and incorporating these findings into their planning. The value of thinking strategically has an important impact on organization performance. A. 1. What Is Strategic Management? Strategic management is what managers do to develop the organizations

strategies. 2. Strategic management involves all four of the basic management functions

planning, organizing, leading, and controlling. B. 1. Why Is Strategic Management Important? Strategic management has a significant impact on how well an organization

performs. 2. In todays business world, organizations of all types and sizes must manage

constantly changing situations. 3. Todays companies are composed of diverse divisions, units, functions, and

work activities that must be coordinated. The University Of Lahore

Principle Of Management Report 2012 4. make. 3. THE STRATEGIC MANAGEMENT PROCESS The strategic management process is a six-step process that encompasses strategic planning, implementation, and evaluation. A. Strategic management is involved in many of the decisions that managers

Step 1: Identifying the Organizations Current Mission,

Objectives, and Strategies

Every organization needs a mission, which is a statement of the purpose of an organization. The mission statement addresses the question: What is the organizations reason for being in business? 2. B. 1. The organization must identify its current objectives and strategies, as well.

Step 2: External Analysis

Managers in every organization need to conduct an external analysis. Influential

factors such as competition, pending legislation, and labor supply are included in the external environment. 2. After analyzing the external environment, managers must assess what they have Opportunities are positive trends in

learned in terms of opportunities and threats.

external environmental factors; threats are negative trends in environmental factors. 3. Because of different resources and capabilities, the same external environment

can present opportunities to one organization and pose threats to another. C. 1.

Step 3: Internal Analysis

Internal analysis should lead to a clear assessment of the organizations

resources and capabilities. 2. Any activities the organization does well or any unique resources that it has

are called strengths.

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Principle Of Management Report 2012 3. Weaknesses are activities the organization does not do well or resources it

needs but does not possess. 4. The organizations major value-creating skills and capabilities that determine

its competitive weapons are the organizations core competencies. 5. Organizational culture is important in internal analysis; the companys culture

can promote or hinder its strategic actions. 6. SWOT analysis is an analysis of the organizations strengths, weaknesses,

opportunities, and threats. D. 1.

Step 4: Formulating Strategies

After the SWOT, managers develop and evaluate strategic alternatives and

select strategies that are appropriate. 2. E. 1. Strategies need to be established for corporate, business, and functional levels.

Step 5: Implementing Strategies

A strategy is only as good as its implementation.

F. Step 6: Evaluating Results

1. 4. How effective have the strategies been? Are adjustments necessary?

TYPES OF ORGANIZATIONAL STRATEGIES Strategic planning takes place on three different and distinct levels: corporate,

business, and functional. A. Corporate Strategy Corporate strategy is an organizational strategy that determines what businesses a company is in, should be in, or wants to be in, and what it wants to do with those businesses.

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Principle Of Management Report 2012 There are three main types of corporate strategies: Growth strategy is a corporate strategy that is used when an organization wants to grow and does

so by expanding the number of products offered or markets served, either through its current business(es) or through new business(es). Stability strategy is a corporate strategy characterized by an absence of significant change in what the organization is currently doing. Renewal strategy is a corporate strategy designed to address organizational weaknesses that are leading to performance declines. Two such strategies are retrenchment strategy and turnaround strategy. Corporate Portfolio Analysis is used when an organizations corporate strategy involves a number of businesses. Managers can manage this portfolio of businesses using a corporate portfolio matrix, such as the BCG matrix. The BCG matrix is a strategy tool that guides resource allocation decisions on the basis of market share and growth rate of SBUs. Business (Competitive) Strategy A business strategy (also known as a competitive strategy) is an organizational strategy focused on how the organization will compete in each of its businesses. The Role of Competitive Advantage. A competitive advantage is what sets an organization apart, that is, its distinctive edge. An organizations competitive advantage can come from its core competencies.

Quality as a Competitive Advantage. If implemented properly, quality can be one way for an organization to create a sustainable competitive advantage. The University Of Lahore

Principle Of Management Report 2012 Sustaining Competitive Advantage. An organization must be able to sustain its competitive advantage; it must keep its edge despite competitors action and regardless of major changes in the organizations industry. 4. Michael Porters work explains how managers can create and sustain a

competitive advantage that will give a company above-average profitability. a. Industry analysis is an important step in Porters framework. He says there are Porter proposes that the following five factors

five competitive forces at work in an industry; together, these five forces determine industry attractiveness and profitability. can be used to assess an industrys attractiveness: 1)

Threat of new entrants.

new competitors will come into the industry? Managers should

How likely is it that

assess barriers to entry, which are factors that determine how easy or difficult it would be for new competitors to enter the industry. 2)

Threat of substitutes.

How likely is it that products of other industries could be substituted for a companys products? 3)

Bargaining power of buyers.

How much bargaining power do buyers (customers) have? 4)

Bargaining power of suppliers.

How much bargaining power do a companys suppliers have? 5)

Current rivalry.

How intense is the competition among firms that are currently in the industry? 5. According to Porter, managers must choose a strategy that will give their

organization a competitive advantage. Porter identifies three generic competitive The University Of Lahore

Principle Of Management Report 2012 strategies. Which strategy managers select depends on the organizations strengths and core competencies and the particular weaknesses of its competitor(s). a. Cost leadership strategy

Business or competitive strategy in which the organization competes on the basis of having the lowest costs in its industry. b. Differentiation strategy

Business or competitive strategy in which a company offers unique products that are widely valued by customers. c. Focus strategy

Bbusiness or competitive strategy in which a company pursues a cost or differentiation advantage in a narrow industry segment. 6. An organization that has been not been able to develop either a low cost or a

differentiation competitive advantage is said to be stuck in the middle. 7. Subsequent research indicates that it is possible, though very difficult, for

organizations that are stuck in the middle to achieve high performance. C. Functional Strategy Functional strategy is the strategies used by an organizations various functional departments to support the business or competitive strategy. 5. A. STRATEGIC MANAGEMENT IN TODAYS ENVIRONMENT The Rule of Three. Competitive forces in an industry, if kept relatively free

from government interference or other special circumstances, will inevitably create a situation where three companies dominate any given market.

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Principle Of Management Report 2012 B. 1. New Directions in Organizational Strategies E-Business Strategies.

Using the Internet, companies have created knowledge bases that employees can tap into anytime, anywhere. differentiation or focus. E-business as a strategy can be used to develop a sustainable competitive advantage; it can also be used to establish a basis for

2.

Customer Service Strategies.

These strategies give customers what they want, communicate effectively with them, and provide employees with customer service training.

3. Innovation Strategies . These strategies focus on breakthrough products and can include the application of existing technology to new uses. An organization that is first to bring a product innovation to the market or to use a new process innovation is called a first mover.

The End
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