PHD R.

Wahabi Done by: 2nd year GE EL KAOUNI Kenza EL KAOUNI Kaoutar ABHIR Siham ELGHAZI Jihane HATERBOUCH Samah

What Is Strategy ? A strategy is a comprehenan sive plan of action that sets critical direction for organization and guides the allocation of its ressources.

Strategic management is a process through which managers formulate and implement strategies geared to optimize strategic goal achievement, given available environmental and internal conditions.
DavidStrategic C. Martin

management is a level of managerial activities under setting goals and over Tactics to achieve long term objectives.

Management kathryn M. Bartol &

Strategic management process is an objective and logical approach for making major decisions in an organization. In some situations, intuition is essential to make good strategic decisions: Uncertainty Little precedent. Highly interrelated variables Immense pressure to be right Choice among several plausible alternatives Analytical thinking and intuitive thinking complement each others.

Unrealized strategy

Emergent strategy
Henry Mintzbergz Patterns in strategy formation May 1978. Management Science

Strategic management process is the full of commitments, decisions and actions required to achieve strategic competitiveness and earn above-average profits.

ASSESSING THE MODES :Each mode can be relatively as long as it is matched to an appropriate situatio

Responsabl e

Objectives

Kinds of Innovatio organizations n Depends of the top leaders

Entrepreneuri Chief Searches for new Small or young al Which have a executive opportunities Mode strong leader or

serious trouble

Adaptive Mode

Reacting to problems than seeking opportunities Satisfy power groups Specialists Have a bold to help vision with the strategic managme

Organizations Ability of that face rapidly managers changing

Planning Mode

Organizations with a large resources

When? Before that managers develop plans for their individual departments Why? So these individual departments' plans can be based on a larger plan for the entire organization! What is strategic planning?
Managers at all levels must participate & support it

Organizations must offer to society a value creation , beneficial services & products

All plans should be derived from the SP while contributing to its achievement !

Strategic & Operational Plans

Most managers wont directly develop the SP. they may be involved in it: They influence it by providing information & suggestions for their particular areas of responsibility. They must be aware of what it involves as well as the results because their objectives should be derived from it

Organizational & Operational Objectives - Strategies Organizational objectives & strategies (SP) are the source of Operational objectives & strategies for individual departments.

Business decisions are not simply efficient/inefficient, effective/ineffective; they are also "good" or "bad . The organization must have a decision-making process that allows ethical considerations to influence strategic decisions The examination of ethical issues can be done at three levels: individual organizational societal

The dilemma of ethical decision making arises out of the conflicts between what is good for individuals, organisations, and society.

Ethical conflicts between individuals and organization: personal values of employees conflict with the organizational tasks Ethical conflicts between organizational and societal interests : selling harmful goods, using public goods without paying... Ethical conflicts between individuals and society arise when individuals acting in self-interest harm collective interests.

Companies have to establish/communicate ethical standards and decision making procedures to their

Forecasting Strategic Social Issues: In each area of social responsibility, managers need to forecast the emergence and life cycle of strategic social issues by instituting issues management programs. Organizing for Social Responsibility: If socially responsive behaviour is to be encouraged within organizations, it cannot be left up to the personal preferences of individual managers but must be institutionalized with appropriate organizational authority and resources. Socially Responsible Strategies : to know if organizatins assure that corporate domain choice strategies and competitive strategies are responsive to social needs and do not harm the public interest? Evaluating the consequences Adopting a strategy toward stakeholders of the firm

The establishment of a variety of regulations and regulatory agencies has ensured that corporations meet at least their minimal social responsibilities. Departments in charge of the government relations function

Ensure compliance with regulations, Confirming that all necessary information is filled with designated agencies participating in shaping of regulations that affect the company.

Growth

Retrenchment

Stability

Combination

Growth strategy organizations operations.

Increasing the level of the

Necessary for the long-run survival in some industries. Different ways to persue Growth:
Internally Use existing strengths in new and productive ways A form of concentration

Externally

Actions that can change the basic nature of an organization A form of diversification.

Forward integration involves gaining ownership or increased control over distributors or retailers. It also could be justified when a company believes it can perform the functions of suppliers effectively and efficiently. It allows better control over suppliers. It is costly and often involves the company in businesses with which the managers are unfamiliar.

Following are some of the competitive advantages of integration:

Backward integration is a strategy of seeking ownership or increased control of a firm's suppliers. The company takes control of the source ofits inputs, including raw material and labour. This strategy can be especially appropriate when a firm's current suppliers are unreliable, too costly, or cannot meet the firm's needs.

Horizontal integration refers to a strategy of seeking ownership of or increased control over a competitors firm that is at the same level in the production and marketing process. One of the most significant trends in strategic management today. Mergers, acquisitions, and takeovers among competitors:

Market development: identify and develop new markets for existing products. Its persued when:

Existing products are radically modified or nrw ones with new characteristics are created in order newly defined needs. This strategy is used when:

Typical charcteristics of companies that are in turnaround situations

Once consensus has been achieved that trouble exists, the turnaround can begin. The turnaround team needs to select one or two activities offering the greatest opportunity to affect company performance. Achieving a positive cash flow. Cash outflows must be stopped in the short run. Curtailing investments and dividend payments.

The barriers that impede an organization from following a divestment strategy have been described as follows: Structural (or Economic). Characteristics of a businesss technology and its fixed and working capital impede exit. Corporate strategy. Relationships between the various business units within an organization may deter divestment of a particular business unit. Managerial. Aspects of companys decision making process inhibit exit from an unprofitable business. Such aspects may be: Exit is taken externally as a sign of failure. Exit threatens specialized managers careers.

Other strategic options can be considered like:

Definitio n

Adaptive Strategy

Porte r

Emergent Strategies

Othe rs

Strategy formulation at the business level within the strategic business units- is concerned primarily with how to compete.

Customers are the foundation or essence of an organization's business-level strategies.

Two frameworks in which business units formulate strategy are the adaptive strategy typology and Porters competitive strategies.

The adaptive strategy framework was developed from the study of business strategies by Raymond Miles and Charles Snow

Stability The fit Between the strategy and the business units environment, internal structure, and managerial processes

Flexibility

Stability

A Firms strenghts ultimately fall into one of two headings

Cost Advantage

differentiation

A differentiation strategy involves attempting to develop products and services that offers unique attributes that are valued by customers; Differentiation can take many forms (Design, Brand image, Customer Service)

 Still,

there are vulnerabilities associated with a differentiation strategy.

If costs are too high, customers may choose less costly alternatives ; Customer tastes and needs can change, so businesses following a differentiation strategy must carefully assess customers' shifting requirements.

Is the business-level strategy in which the organization aggressively seeks efficient facilities, pursues cost reductions, and uses tight cost controls to produce products more efficiently than competitors (Similar Products)
Cost leadersh ip Strategy Differentiat ion

Is the business-level strategy in which the organization concentrates on a specific regional market, product line, or buyer group.

Porter use this term to describe organizations that are unable to gain a competitive advantage by one of the strategies.

There is some similarity between Porters strategies and Miles and Snows adaptive typology.

Not all strategic planning is rational and systematic as the prior approaches suggest. There is another side to the process that cannot be neglected which is the incremental-emergent view. Highly successful company plot strategy as a general sense of direction, but recognize that the future is uncertain Top managers at the best organizations sense opportunity where others cant act while others hesitate, and demur when others plunge Robert H. Waterman, The Renewal Factor.

"Organizations ...[may] pursue ... umbrella strategies: the broad outlines are deliberate while the details are allowed to emerge within them" (Mintzberg, 1994, p. 23-25; Hax & Majluf, 1996, p. 17).

Differences In:

They describe strategies for use of environmental resources and acceptable environmental impacts of the companys activities. Ecological strategies try to minimize long-term environmental damages by managing the companys inputs, throughputs, and outputs.

SETTING CORPORATE PURPOSE AND DIRECTION

A description of the business as you want it to be

Long-Term future Dream Seeing the optimal future for the business

Leadershipis the capacity to translatevisioninto reality.WarrenG.Bennis

What Is Our Business? Firms Unique purpose

The scope of its operations in product and market terms that distinguishes one organization from other similar enterprises

Which groups of customers or clients does the firm wish to attract?

how will the needs of the customers and clients be satisfied?

Define Or Redefine MISSION

Which functions does the business wish to perform?

To Examine And Restate What Is Our Business? What It Should It Be?

Peter Drucker argues that the mission statement defines the organization.

Only a clear definition of the mission and purpose of the organization makes possible clear and realistic business objectives.

Formal Written Document

Implicitly Understood

The mission of Apple Computers: "To make a contribution to the world by making tools for the mind that advance humankind."

Honda: We will crush, squash, and slaughter Yamaha

Corporate missions must show how historical values and business operations are to be transformed into future values and operations. The following steps can help managers to develop useful mission statements:

Developing corporate missions:

Step 1: Analyze historical missions, values, and business operations and practices. Step 2: Consult organizational stakeholders about directions the company should take . Step 3: Resolve conflicting demands through discussions with relevant stakeholders or by making judgments that balance competing demands. Rank demands to give them relative importance with respect to each other. Step 4: Describe the company's values, guiding philosophy, business domains, and its role in society in a way that key stakeholder demands are fulfilled. Step 5: Share the draft mission statement with key managers and stakeholders; seek feedback and make modifications. Step 6: Discuss the mission statement with all members of the organization and explain how it should be used for strategy-making and strategy-guiding operations.

Characteristics of a mission statement:

1.Market Rather than Product Focus:

A business is not defined by the company's name, statutes, or articles of incorporation. It is defined by the want the customer satisfies when he buys a product or service. To satisfy the customer is the mission and purpose of every business. The question "What is our business?" can, therefore, be answered only by looking at the business from the outside, from the point of view of customer and market. Peter Drucker:

2. Achievable: While the mission statement should "stretch" the organization toward more effective performance, it should at the same time be realistic and achievable.

3. Motivational

4. Specific: As we mentioned earlier, public relations should not be the primary purpose of a statement of mission, which must be specific and provide direction and guidelines to management when it chooses between alternative courses of action. In other words, to produce the highest-quality products at the lowest possible cost sounds very good, but it does not provide direction for management. The questions related to the mission statement need to be asked and answered at the inception of an organization and whenever it is experiencing serious problems.

Relationship to Goals, Objectives, Strategies, and Policies

Resul ts

The Policy

Strategy = the master plan for achieving the desired results

a- External influences on goal formulation

the formulation process must take into consideration the claims of the various groups otherwise it would endanger Its existence

terest Groups with claims on the organization's resour

b -Internal influence on goal formulation

The motivations of managers are more complex than the pursuit of goals imposed . They are not 1D individuals

the organization's goals may be modified by the values, ideas... Reflected in the personal goals of management.

Its doubtful that the organizational goals will perfectly match the individuals goals

Goal modification

All of these contribute to the individual managers persuadability

Business goals and targets

are stead at different levels of concreteness and for different time horizons to illustrate the continuity across these four levels. They commit the organization to pursuit certain courses of action and limit it from pursuing others. Members are motivated to fulfill performance expectations if they have participated in setting them in the first place, and also if members believe that goals are achievable and realistic. Goals describe what a business must achieve in the next two to three years in terms of specific performance indicators. Targets specify performance expectations in even more specific terms and shorter terms than goals.

Top managers may believe that setting higher goals will make organizational members strive harder to achieve them line managers may be turned off by this pressure tactic. They may react by sabotaging the whole direction-setting process, making it a meaningless ritual for the organization.

The tendency to underestimate goals arises from lack of good information about what is feasible. It also may be due to defensive inclinations of managers who prefer to accept lower goals and then overachieve on them.

The use of goals has several major benefits

Strategic goals : targets set by top management. They address issues relating to the organization as a whole and may sometimes be stated in fairly general terms. Tactical goals: targets set by middle management for specific departments or units. They spell out what must be done by various departments to achieve the results outlined in the strategic goals. Operational goals: are targets set by lower management that address specific, measurable outcomes required from the lower levels.

Hierarchy of goals: At each level goals need to be synchronized so that efforts at the various levels are channelled ultimately toward achieving the major goals

At least three main types of goals can be identified:

is ones attachment to, or determination to reach, a goal. Without commitment, setting specific, challenging goals will have little impact on performance. Six factors positively influence goal commitment:

Types of objectives Private businesses have profit objectives. If profits fail to meet investors expectations, a company may lose investors.

each SBU and/or functional area must establish its own objectives. Normally, the steps in this process are as follows:

They are performance targets, normally of less than one year's duration, that are used by management to achieve the organization's long-range objectives. They should be derived from an in depth evaluation of the organization's long-range objectives. Such an evaluation should result in a listing of priorities of the objectives. Such a system ensures that all objectives are consistent with, not working against each other. Some examples of short-range objectives might be:

To increase profits by 5 percent during the next year. To open ten new retail outlets during the next year.

Mix og th organizational objectives

No one mix is applicable to all organizations Managers responses to what to do in actual practice to establish a mix of objectives give the following ranking of the importance of organizational objectives:
MOST IMPORTANT

Organizational efficiency High productivity Profit maximization Organization growth Inductrial leadership Organizational stability Employee welfare Social welfare
LEAST IMPORTANT

Organizations have multiple objectives that must be orchestrated to avoid conflicts.

Priority of Objectives: Managers always face alternative objectives, and they must establish priorities if they want to allocate resources in a rational way (mission critical). Conflicts among Objectives. The process of establishing objectives and setting priorities must not overlook the interest groups, and plans must incorporate and integrate their interests Measuring Objectives: Objective must be measurable to be effective. On difficult objectives-if employees accept them-result in better performance than easier objectives. Profitability objectives: include the ratios of:
1. 2. 3.

profits to sales, profits to total 35- sets, profits to capital (net worth). Both quantities in this ratio are taken from the income statement (regarded as a better test of performance than the balance sheet)

Marketing objectives Thus well-managed organizations measure performance in such areas as market share, sales volume, number of outlets carrying the product, and number of new products developed.

Productivity objectives are measured with ratios of output to input. Other factors being equal, the higher the ratio, the more efficient is the use of inputs. Some managers contend that the ratios of value added to sales and to profit are the superior measures of productivity. Physical and financial objectives reflect the firm's capacity to acquire resources sufficient to achieve its objectives. Their measurement is comparatively easy since numerous accounting measures can be used. Liquidity measures, such as the current ratio, working capital turnover, debt/equity ratio, and accounts receivable, and inventory turnover. Quality objectives Quality derives from meeting or exceeding customer expectations on each dimension. The What Managers Are Reading segment discusses a popular book that tells managers to choose one of three possible "market disciplines" operational excellence, customer intimacy, or product leadership. Other objectives: Objectives for innovation, employee

The Role of the Organization's Mission

Without verifiability and specificity, objectives will not provide a clear direction for managerial decision making, nor will they permit an assessment of organizational performance.

statements of how objectives are to be accomplished. Planning is a task that every manager, whether a top-level executive or a firstline supervisor, must perform. Stating an objective does not guarantee its accomplishment. A plan must be developed to inform people what to do in order to fulfill the objectives. The plan states which approach is to be taken. Planning should answer the following questions:

Planning is critical at every level in the organization. At the top-management level, the primary concern is with strategic planning, Strategic plans are designed to implement the broad based plans of top management.

Typical operational plans in a business firm might include:

Production plans: Dealing with the methods and technology needed by people in their work. Financial plans: Dealing with the money required to support various operations. Facilities plans: Dealing with facilities and layouts required to support task activities. Marketing plans: Dealing with the requirements of selling and distributing goods or services. Human resource plans: Dealing with the recruitment, selection, and placement of people into various jobs.

Budgets are single-use plans that commit resources to activities, projects, or programs. They are powerful management tools, which allocate scarce resources among multiple and often competing uses. Good managers are able to bargain for and obtain adequate budgets to support their work units' needs. They are also able to achieve performance objectives while remaining within budget.

Managers typically become involved with three basic types of budgets:

Financial budgets usefulness depends mainly on how flexible budgets are with regard to changes in conditions. Two principal means exist to provide flexibly: variable budgeting and moving budgeting.

Variable budgeting provides for the possibility that actual output deviates from planned output. It recognizes that variable costs are related to output, while fixed costs unrelated to output. the actual profit varies, depending on the complex relationship between costs and output. Variable budgeting requires adjustments in all supporting budgets for completeness. The production, marketing, and administrative budgets must likewise allow for the impact of output variation.

Moving budgeting is the preparation of a budget for a fixed period (say, one year) with periodic updating at fixed intervals (such as one month). EX: a budget is prepared in December for the next 12 months (January through December).At the end of January; the budget is revised and projected for the next 12 months, (February through January). In this manner, the most recent information is included in the budgeting process. Premises and assumptions are being revised constantly as management learns from experience. Moving budgets have the advantage of systematic re-examination; they have the disadvantage of being costly to maintain.

Formulating strategies matrixes

Strengths (S) Internal factors

1 2 . . . 10 1 2 . . . 10

Weaknesses (W)

External It comes

1 2 . . . 10

after collecting and gathering factors data about the industry and competitors. Opportunities Consists (O) listing strategies : of SO four components. WO strategies
Generate strategies here Generate strategies that that use strengths to take advantage of take advantage of opportunities by opportunities overcoming weaknesses

A- strenghts B- weaknesses c- opportunities Threats (T) ST strategies : 1 D- threats

2 . . . 10

WT strategies :

Generate strategies that Generate strategies that use strengths to avoid minimize weaknesses the threats and avoid threats

Distinct competence Competitive advantage Strong brand name Innovative Cost and price leader Skilled employees Hight technology

discover untapped potential identify distinct competences

 Weak

market share Poor marketing skills Poor product developpement identify : -gaps in performance and vulnerabilities and fallacious assumptions about their existing strategies.

 Growth

in new markets Global expension New product developping Quality improvement Economic advantage identify opportunities so as to diversify new markets, new products,new technologies.

 New

entry of competitors Supplier cost increases Changes of technology Strong customer pressure identify threats in order to face them and find strategies. provide an adequate defence against them

1-learning/experience curve: Used to justify hight prices of new products or to discourage competition. The cost per unit produced decreases as the cumulative production increases. The slope of this curve represents the percentage of learning.

A) short-run profit princing strategy:based on making profits resulted on the hightest prices versus the reduced cost per unit. B ) Barrier pricing strategy:based on lowing prices as the cost drop and the cumulative volume of production increases. less competition

 Portfolio

planning; Porters competitive strategies; Miles and snows adaptation model; Product life cycles; Incremental-emergent approach.

 An

approach of the organization busnisses of individuals and collective contribution to archieve the main goals.

BCG growth share market; GEB screen buz screen; Product/market evolution matrix

 Developped

in 1971 by General

Electric; Is the most popular strategy; Is used to best allocation of ressources infruction of market share and growth of SBUs Is also used in multibusiness or multiproduct situations.

Invest or Divest

Substantial investment

Divest or Liquidate

Maintain without investment

1- stars: have hight market share and growth buz;, require continuous investment. 2- question marks: have low market share but a hight growth market; require investment to take advantage of the growing market , but it doesnt relatively generate enough cash.

 3-

cash cow: have hight market share but low growth market; generate more cash in order to support stras and question marks. 4- dogs:have low market share and growth; need to be harversted and get rid of.

 The

corporation has to have cash cows to keep stars and question marks; Sale and liquidation recommended for dogs and growth for question marks and stars; Help to prioritize ressource allocations.

 Developped

by General Electric; Based on Long term industry attractiveness and business strenght /competitive position; Includes more data.

 The

terminology is more palatable to managers; It includes more information about the business; Specify in finer distinctions businesses.

 Doesnt

provide a means for identifying businesses; Doesnt specify strategies that should be followed by various busnisses.

 Aggressive Conservative Defensive Competitive

 Financial Strength (FS) Competitive Advantage (CA)

 Environmental Stability (ES) Industry Strength (IS)

Internal Strategic Position

External Strategic Position

Competitive Advantage CA
Market share Product quality Product life cycle Customer loyalty Competitions capacity utilization Technological know-how Control over suppliers & distributors

Industry Strength (IS)

Growth potential Profit potential Financial stability Technological know-how Resource utilization Ease of entry into market Productivity, capacity utilization

1.

2.

Select a set of variables to define FS, CA, ES, & IS Assign a numerical value:
1. 2.

From +1 to +6 to each FS & IS dimension From -1 to -6 to each ES & CA dimension

3.

Compute an average score for each FS, CA, ES, & IS

4.Plot the average score on the appropriate axis 5.Add the two scores on the x-axis and plot the point. Add the two scores on the y-axis and plot the point. Plot the intersection of the new xy point 6.Draw a directional vector from the origin through the new intersection point.

CA : Competitive Advantage FS : Financial Strength IS : Industry Strength ES : Environment Stability

A firm with major competitive advantage in a high-growth industry

A financially troubled firm in a very unstable industry

A firm whose financial strength is a dominating factor in the industry

A firm that has achieved financial strength in a stable industry that is not growing ; the firm has no major competitive advantage

The IE Matrix is similar to the BCG Matrix in that both tools involve plotting organization divisions in a schematic diagram Also, the size of each circle represents the percentage sales contribution of each division, and pie slices reveal the percentage profit contribution of each division in both the BCG and IE Matrix.

Grow and Build

Harvest or Divest Hold and Maintain

1st

, the axes are different. d 2n , information required by IE Matrix is more that what is required in BCG Matrix. 3rd , the strategic implication of each matrix is different.

Is an other popular tool for formulating alternative strategy an addition of SWOT, SPACE, BCG and IE matrix. The Grand Stategy is based on two evaluative dimensions: competitive position and merket growth.

Rapid market growth

II
Weak competitive position

I
Strong competitive position

III

I V

Slow marker growth

The Grand Strategy Matrix

This technique objectively indicates which alternative strategy are best. This technique comprise 3 stages:
( The EFE Matrix, IFE Matrix, and Competitive Profile matrix that comprise Stage1, coupled with the SWOT, SPACE, BCG, IE and Grand Strategy that make up Stage 2, provide the needed information for setting up the QSPM = Stage 3 .)

 Market development Market penetration Product development Horizontal integration Divestiture / Liquidation

Market development Market penetration Product development Forward integration Backward integration Horizontal integration Concentric diversification

Retrenchment Concentric diversification Horizontal diversification Conglomerate diversification Divestiture / Liquidation

Horizontal integration Concentric diversification Conglomerate diversification Joint venture

Strategists should use good intuitive judgment in selecting strategies to include in a QSPM. The QSPM determines the relative attractiveness of various strategies based on the extent to which key external and internal critical success factors are capitalized upon or improved.

1.

The scope or domain of action within which the organization tries to achieve its objectives. The skills and resources that the organization will use to achieve its objectives (distinctive competence). Advantages the organization expects to achieve over its competitors through its skill and resource deployments (competitive advantage). Synergies that will result from the way the organization deploys its skills and resources.

2.

3.

4.

Also called life-cycle portfolio matrix, is a 15 cell matrix in which business are plotted according to the business units, business strength, or competitive position, and the industrys stage in the evolutionary product/market life cycle.

Strategy implementation is the process by

which strategies and policies are put into action through the development of programs, budgets and procedures Strategy implementation means putting the strategy to work, or putting it into action

Implementation definitions: definitions

IMPLEMENTATING STRATEGIC DECISIONS:

Five critical managerial tasks emerge that are vital to successful implementation

According to Dennis Hykes, implementable strategic plan have, as a minimum, three characteristics:

The macro-design process involves the stimultaneous selection and development of a variety of managerial tools:

Two key questions for effective macro-design are:

Committee Organization

committee is a gop of people formally appointed and organiyed to consider certain matters. They are a form of matrix organization superimposed on the existing organizational structure.

Committee

Permanent or standing

Temporary

Generally in charge of or supplementary to the line and staff functions

Board of Directors:
It is a type of committee that is ideally responsible for formulating, changing, and evaluating an organizations strategy. A responsible and effective board should

In the past,they functioned passively. Elected according to their participation to the capital.

Responsibilities

of theBoards:

Advantages

Inconvenients

 They

are combinations of the different organizational structure options.

As

the complexity of business continue to increase, organieations have responded with increasingly complex structures

Strong need for both specialization and centralization Because procedures are formalized, the overall structure is mechanical and job roles are are highly structured. These characteristics allow maintenance of the tight controls required to achieve the low-cost position.

 Decentralization

of decision-making The overall structure needs to be flexible and job roles less structured. The marketing and the R&D functions are often dominant in the differentiation strategy implementation.

 Low

levels of formalization to respond quickly to marketplace change.