STRATEGIC MANAGEMENT

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STRATEGIC MANAGEMENT

• ACHMAD SOBIRIN
• FAKULTAS EKONOMI UNIVERSITAS ISLAM INDONESIA

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STRATEGY

• Insight into
• how to
• create value

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Management ChallengesAfter reading this chapter,
you should be able to

• Understand how to implement the steps in the
  strategic management process.
• Identify the factors that account for a firms
  sustained superior performance.
• Link external and internal environment data to
  determine a firms strategic intent and mission.

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Management Challenges (continued)

• Conduct an analysis of the firms strengths,
  weaknesses, opportunities, and threats.
• Evaluate the firms internal resources and
  capabilities.
• Chose an appropriate business strategy at the
  corporate and business-unit level of analysis.

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ORGANIZATION ICEBERG
OUTSIDE VIEW OF THE ORGANIZATION
INSIDE THE ORGANIZATION
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Philosophy of the founders mission/vision GOAL
S

• strategy
• structure organizational
  culture
• system

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Articulating a vision

• Envision future
• 10-to-30 year-BHAG
• (Big, Hairy, Audacious
• Goals)
• Vivid description

Core ideology - core values - core purpose
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CORE VALUES ARE A COMPANYS ESSENTIAL TENETS
Merck corporate social responsibility unequivocal
excellence all aspects of the company science
based innovation honesty and integrity profit,
but profit from work that benefit
humanity Philip Morris the right of freedom of
choice winning-beating others in good
fight encouraging individual initiative opportunit
y based on merit no one is entitled to
anything hard work and continuous self improvement
Sony elevation of the Japanese culture and
national status being a pioneer-not following
others doing the impossible encouraging
individual ability and creativity Walt Disney no
cynicism nurturing and promulgation of wholesome
American values creativity, dreams and
imagination fanatical to consistency and
detail preserving and control the Disney magic
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Core purpose is a company reason for being
3M to solve unsolvable problems
innovatively CARGILL to improve the standard of
living a round the world FANNIE MAE to
strengthen the social fabric by continually
democratizing home ownership HP to make
technical contributions for the advancement and
welfare of humanity LOST ARROW CORPORATION to
be a role model and a tool for social
change PACIFIC THEATERS to provide a place to
flourish and to enhance the community
McKinsey Company to help leading corporations
and governments be more successful Merck to
preserve improve human life Niketo experience
the emotion of competition, winning and crushing
competitors Sony to experience the joy of
advancing and applying technology for the benefit
of the public Telecare corporation to help
people with mental impairments realize their full
potential Wal-Mart to give ordinary folk the
chance to buy the same thing as rich people
Walt Disney to make people happy
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Big, hairy, audacious goals aid long-term vision
Target BHAGs can be quantitative or
qualitative Become a 125 b. company by year
2000 (Wal-Mart, 1990) democratize the auto mobile
(Ford, early 1990s) Become the company most
known for changing world-wide poor quality image
of Japanese products (Sony, early 1950s) Become
most powerful, the most serviceable the most
far-reaching world financial institution that has
never been (City Bank, predecessor of Citicorp,
1915) Become the dominant player in commercial
aircraft being the wold into the jet age
(Boeing,1950)
Common enemy BHAGs involve David Vs. Goliath
thinking Crush Adidas (Nike, 1960s) Yamaha wo
Tsubusu! - we will destroy Yamaha (Honda,
1970s) Role model BHAGs suit up-and-coming Becom
e the Harvard of the West (Stanford University,
1940s) Internal transformation BHAGs suit large,
established organization Become number one number
two in every market we serve revolutionize
this company to have the strengths a big company
combined with the lineness agility of a small
company (General Electric,1980s)
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Putting all together Sony in the 1950s
Core ideology Core values elevation of the
Japanese culture and national status being a
pioneer-not following others doing the
impossible encouraging individual ability and
creativity Purpose to experience the sheer joy
of innovation the application of technology for
the benefit and pleasure of the general public
Envisioned future BHAG become the company most
known for changing the worldwide poor quality
image of Japanese product VIVID DESCRIPTION We
will create products that become pervasive around
the world. We will be the first Japanese company
to going into the U.S. market and distribute
directly. We will succeed with innovations that
US companies have failed at - such as the
transistor radio.. Fifty years from now, our
brand name will be as well known as any in the
rival the most innovative companies anywhere ..
Made in Japan will mean something fine, no
something shoddy
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What values do excellent companies hold?

• A belief in being the best
• A belief in the importance of details of
  execution, the nuts and belts of doing the job
  well
• A belief in the importance of people as
  individuals
• A belief in superior quality and service
• A belief that most members of the organization
  should be innovators, as well as the belief in
  its corollary, willingness to support failure
• A belief in the importance of abnormality to
  enhance communication
• Explicit belief in and recognition of the
  importance of economic growth and profits.

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Corporate vision
Horizon revision
quantitative content
Strategic question
What do we stand for? Why do we exist what are we
committed to do?
long long long
Seldom, for clarification, seldom, for
clarification only seldom, for clarification only
Shared values Mission Goals
None none none
Strategic plan
Strategies how do we achieve our
medium annually, if very little
long-term goals
necessary
Tactics what short-term
short- annually, as high
programs are needed? Medium necessary
How will we measure progress? Who has primary
responsibility? When must the programs be
completed?
Annually, as necessary
Short - medium
accountability
High
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HARD SOFT SYSTEM TOOLS (THE 7 Ss)
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MISI ORGANISASI
--- ALASAN, CITA-CITA DAN TUJUAN YANG HENDAK
DICAPAI ATAS DIDIRIKANNYA SEBUAH ORGANISASI
ELEMEN-ELEMEN PENTING

• FILOSOFI ORGANISASI
• TUJUAN
• ORGANIZATION SELF - CONCEPT
• PROJECTED IMAGE
• JASA-JASA YANG HENDAK DITAWARKAN
• PASAR YANG HENDAK DISASAR

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CONTENTS OF MISSION STATEMENT

• Statement of purpose
• statement of values/beliefs
• Distinctive competence/strength
• Desired competitive position
• Competitive strategy
• Specific behavior standards
• Specific non financial objectives
• Specific customers served
• Products/services offered
• Unique identity
• Desired public images
• Location of business

• Technology defined
• Concern for survival
• Concern for satisfying customers
• Concern for employees
• Concern for suppliers
• Concern for society
• Concern for shareholder
• Statement of vision

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SEVEN SPIRITS OF MATSUSHITA
SERVICE TO THE PUBLIC FAIRNESS AND
HONESTY TEAMWORK FOR THE COMMON CAUSE
UNTIRING EFFORT FOR IMPROVEMENT COURTESY
AND HUMILITY ACCORD WITH NATURAL LAWS
GRATITUDE FOR BLESSINGS
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Peranan manajer dalam organisasi
Formal authority and status

• Decisional roles
• entrepreneur
• disturbance handler
• resource allocator
• negotiator

• Interpersonal roles
• figurehead
• leader
• liaison

• Informational roles
• monitor
• disseminator
• spoke-person

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KONSEP STRATEGI

• Strategic management is defined as a continuous
  iterative process aimed at keeping an
  organization as a whole appropriately matched to
  the environment

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DIMENSIONS OF THE CONCEPT OF STRATEGY
Definition proposed by Definition of Strategy Key dimension identified in the definition
Chandler (1962) Strategy is the determination of the basic, long-term goals of an enterprise and the adoption course of actions and the allocation of resources necessary to carry out the goals Strategy is a means of establishing the organizational purpose (in term of its long-term objectives, action programs, and resource allocation priorities)
Schendel and Hatten (1972) Strategy is the basic goals and objectives of the organization, the major programs of action chosen to reach these goals and objectives, and the major pattern of resource allocation used to relate the organization to its environment
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Argyris (1985) Strategy formulation and implementation include identifying opportunities and threats in the organizations environment, evaluating the strengths and weaknesses of the organization, designing structures, defining roles, hiring appropriate people, and developing appropriate reward to keep the people motivated and make contribution Strategy is a response (continuous and adaptive) to external opportunities and threats and internal strengths and weaknesses that affect organization
Mintzberg (1979) Strategy is a mediating force between the organization and its environment there are consistent pattern of streams of organizational decisions to deal with the environment
Steiner and Miner (1977) Strategy is forging of company missions, setting objectives for the organization in light or external and internal force, formulating specific policies and strategies to achieve objectives, and ensuring their proper implementation so that the basic purpose and objectives of the organization will be achieved

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Learned, Christensen, Andrews, and Guth (1965) Strategy is the pattern of objectives, purpose, or goals and major policies and plans for achieving these goals, stated in such a way as to define what businesses the company is in or should be in and the kind of company it is or will be Strategy defines the competitive domain of the firm. That is, one of the central concerns of strategy is defining the businesses the firm is in or should be in
Andrews (1980) Corporate strategy defines the businesses in which the company will compete, preferably in a way that focuses resources to convert distinctive competence into competitive advantage Business strategy is the determination of how a company will compete in a given business and position itself among the competitors Strategy engages all the hierarchical levels of the firm corporate, business and functional
Porter (1985) Strategy (competitive) is the search for favorable competitive position in an industry, the fundamental arena in which competition occurs. Competitive strategy aims to establish a profitable and sustainable position against the forces that determine industry competition Strategy is vehicle for achieving competitive advantage
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Andrews (1980) Corporate Strategy is the pattern of decision in a company that determines and reveals its objectives, purposes, or goals, produces the principal policies and plans for achieving those goals, and defines the range of businesses the company is to pursue, the kind of economic and human organization it is or intends to be, and the nature of the economic and noneconomic contribution it intends to make to its shareholders, employees, customers and communities Strategy is motivating force for stakeholders who directly or indirectly receive the benefits or costs derived from the action of the firm
Chaffee (1985) Strategy is defines as orienting metaphor or frames of reference that allow the organization and environment to be understood by organizational stakeholders. On this basis, stakeholders are motivated to believe and to act in ways that are expected to produce favorable result for the organization
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AND OVER HERE, LADIES AND GENTLEMEN THE
STRATEGIC MANAGEMENT BEAST
To be perfectly frank, Im not nearly as smart
as your seem to think I am
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HANG ON, LADIES AND GENTLEMEN, YOU HAVE YET TO
MEET THE WHOLE BEAST
This is
Not a Cow
This is an organizational chart that shows the
different parts of a cow, In a real cow, the
parts are not aware that theyre parts. They do
not have trouble sharing information They
smoothly and naturally work together as one unit.
As a cow. And you have only one question to
answer. Do you want your company to work like a
chart? Or a cow?
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Planning, Plans, and Planners around the Black B
of Strategy Formation
Inputs to Process (Planners, plans)
Outputs of the Process (Planning, Plans, Planner)
Strategy Formation
Support for the Process (Planners)
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Forms of Strategy (Mintzberg and Waters 1985)
Intended Strategy
Deliberate Strategy
Realized Strategy
Unrealized Strategy
Emergent Strategy
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Dimensions of Strategy
Strategy Process
Strategy Content
Strategy Context
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The Strategic Management Process

• Strategic management involves the major
  decisions, business choices, and actions that
  chart the course of the entire enterprise.

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The Strategic Management Process

• Strategic management involves both long-range
  thinking and adaptation to changing conditions.

• A strategy is successful if it provides the firm
  with sustainable competitive advantage.
• Competitors will be unable to duplicate what the
  firm has done or will find it too difficult or
  expensive.

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Conventional Strategic Planning
Objectives
Formulation
Strategies
Programs
Budgets
Implementation
Actions
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THE NEW STRATEGY PARADIGM
The Competitive Challenge
Not Only
Reengineering processes Organizational
transformation Competing for market share
But Also
Regenerating strategies Industry
transformation Competing for opportunity share
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THE NEW STRATEGY PARADIGM
Finding the Future
Not Only
But Also
Strategy as learning Strategy as
positioning Strategic plans
Strategy as forgetting Strategy as
foresight Strategy architecture
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THE NEW STRATEGY PARADIGM
Mobilizing for the Future
Not Only
But Also
Strategy as fit Strategy as resume allocation
Strategy as stretch Strategy as resource
accumulation and leverage
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THE NEW STRATEGY PARADIGM
Getting to the Future First
Not Only
But Also
Competing within an existing industry
structure Competing for product
leadership Competing as a single
entity Maximizing the ratio of new product
hits Minimizing time-to-market
Competing to shape future industry
structure Competing for core competence
leadership Competing as a coalition Maximizing
the rate of new market learning Minimizing time
to global pre-emotion
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The Design School The Planning School The
Positioning School The Entrepreneurial
School The Cognitive School The Learning School
Strategy formation as a process of
conception Strategy formation as a formal
process Strategy formation as an analytical
process Strategy formation as a visionary
process Strategy formation as a mental
process Strategy formation as an emergent process
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The Power School The Cultural School The
Environmental School The Configuration School
Strategy formation as a process of
negotiation Strategy formation as a collective
process Strategy formation as a reactive
process Strategy formation as a process of
transformation
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Old Business Environment
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New Business Environment
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Levels of Strategy
Network Q
Alliance P
Corpration Y
Network Level
Corpration X
Corpration Z
Business B
Condition T
Business L
Corporation X
Corporate Level
Business A
Business B
Business C
Business B
HRM
R D
Finance
Business Level
Marketing Sales
Operations
Marketing Sales
Product
Functional Level
Price
Place
Pomotion
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Conventional View of Strategy

• What business are in?
• How will we compete?

Strategy

• Marketing, manufacturing, finance, HR, etc.

Functional Strategies

• What critical tasks must get done to execute the
  strategy?

Key Success Factors

• Design practices and systems (recruitment and
  selection, performance management, training and
  development, etc.)

Organizational Alignment

• Monitor aligment and compliance

Senior Management Role
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A Values-Based View of Strategy

• What are our basic principles?
• What do we believe in?

Fundamental Values or Beliefs
Design Management Practices That Reflect and
Embody These Values

• What policies and practices are consistent with
  these values?

• What can we do for the customer better than our
  competitors?

Use These to Build Core Capabilities

• Given our capabilities, how can we deliver value
  to customers in a way our competitors cannot
  easily imitate?

Invent a Strategy That Is Consistent with the
Values and Uses the Capabilities to Complete in
New and Unusual Ways

• Senior management manages the values and
  culture of the firm.

Senior Managements Role
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Context in Which Competitive Strategy Is
Formulated

• Company Strengths and Weaknesses

Industry Opportunities and Threats (Economic and
Technical)
Factors External to the Company
Competitive Strategy
Factors Internal to the Company
Personal Values of the Key Implementers
Broader Societal Expectations
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FLOW OF STRATEGIC PROCESS

• Select
• strategic
• factors
• opportunities
• threats

Scan external environment

• Evaluate
• examine the
• current
• mission
• objective
• strategies
• policies

evaluate current performance result

• Review
• strategic
• managers
• BOD
• Top Mgt.

Analyze strategic factors (SWOT) in line of
current situation

• Scan
• internal
• environment
• structure
• culture
• resource

• Select
• strategic
• factors
• strengths
• weaknesses

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FLOW OF STRATEGIC PROCESS (CONTINUED)

• review and
• revise as
• necessary
• mission
• objective

• Implement
• strategies
• programs
• budgets
• procedures

Generate evaluate strategic alternatives
Select and recommend the best alternatives
Evaluate and control
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GRAND STRATEGY

• GROWTH
• STABILITY
• RETRENCHMENT

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Force Driving Industry Competition
POTENTIAL ENTRANTS
Threat of new entrants
INDUSTRY COMPETITORS Rivalry Among Existing
Firms
Bargaining power of suppliers
Bargaining power of buyers
BUYERS
SUPPLIERS
Threat of substitute products or services
SUBSTITUTES