The Strategy-Making and Strategy-Executing Process

Posted on Sep 6, 2024 in Other subjects

The Strategy-Making, Strategy-Executing Process

• Develop Vision and Mission

• Establish Objectives (Strategic and Financial)

• Craft Strategy to Achieve Objectives Using SWOT

• Implement Strategy

• Evaluate Performance and Take Corrective Action

Characteristics of a Strategic Vision

• Well-Stated Vision Statements:

• Are distinctive and specific to a particular organization.

• Avoid generic language.

• Excite strong emotions.

• Are challenging and ambitious.

Mission vs. Strategic Vision

• A mission statement focuses on current business activities: “who we are and what we do.”

• Current product and service offerings

• Customer needs being served

• Technological and business capabilities

• A strategic vision concerns a firm’s future business path: “where we are going.”

• Markets to be pursued

• Future technology-product-customer focus

• Kind of company management is trying to create

Characteristics of Objectives

• Represent a commitment to achieve specific performance targets.

• Well-stated objectives are:

• Quantifiable

• Measurable

• Contain a deadline for achievement.

• Spell out how much of what kind of performance by when.

Types of Objectives Required

Outcomes focused on improving financial performance.

Outcomes focused on improving long-term, competitive business position.

Examples: Financial Objectives

• X% increase in annual revenues

• Diversified revenue base

Examples: Strategic Objectives

• Winning additional market share (or reaching X% market share)

• Consistently getting new or improved products to market ahead of rivals

• Overtaking key competitors on product performance, quality, or customer service

Concept of Strategic Intent

A company exhibits strategic intent when it relentlessly pursues an ambitious strategic objective and concentrates its competitive actions and energies on achieving that objective!

Crafting a Strategy

• Strategy consists of the combination of competitive moves and business approaches used by managers to run the company.

• Management’s “game plan” to stake out a market position, attract and please customers, compete successfully, conduct operations, and achieve organizational objectives.

• Requires SWOT as the first step!

Fig. 1.2: A Company’s Strategy Is Partly Planned and Partly Reactive

What Is a Business Model?

• A business model addresses “How do we make money in this business?”

• Is the strategy capable of delivering good bottom-line results?

• Do the revenue-cost-profit economics of the strategy make good business sense?

• Look at revenue streams the strategy is expected to produce.

• Look at the associated cost structure and potential profit margins.

• Do resulting earnings streams and ROI indicate the strategy makes sense and the company has a viable business model for making money?

Relationship Between Strategy and Business Model

Strategy – Deals with a company’s competitive initiatives and business approaches.

Business Model – Concerns whether revenues and costs flowing from the strategy demonstrate the business can be amply profitable and viable.

Striving for Competitive Advantage

• The central thrust of a company’s strategy involves moves to strengthen a company’s:

• Long-term competitive position and

• Financial performance

• Key components of strategy:

• Offensive moves

• Defensive moves

The Hows That Define a Firm’s Strategy

• How to grow the business

• How to please customers

• How to outcompete rivals

• How to respond to changing market conditions

• How to manage each functional piece of the business and develop needed organizational capabilities

• How to achieve strategic and financial objectives

Linking Strategy With Ethics

• A company’s ethics and high moral standards go beyond merely complying with laws and regulations.

• A strategy that exemplifies high ethical and moral standards addresses:

• Issues of duty

• What is morally responsible

• What it is “right” to do and not do

• A strategy is not ethical unless it can pass moral scrutiny.

A Firm’s Ethical Responsibilities to Its Stakeholders

What Is a Strategic Plan?

Who Participates in Crafting a Company’s Strategy?

• Senior corporate executives

• Managers of business units and key VPs

• Functional area managers

• Operating managers

• But the CEO is ultimately responsible.

Levels of Strategy-Making in a Diversified Company

Levels of Strategy-Making in a Single-Business Company

Tasks of Corporate Strategy

Moves to achieve diversification.

• Actions to boost performance of individual businesses.

• Capturing valuable cross-business synergies to provide 1 + 1 = 3 effects!

• Establishing investment priorities and steering corporate resources into the most attractive businesses.

Tasks of Business Strategy

• Initiating approaches to produce successful performance in a specific business.

• Crafting competitive moves to build sustainable competitive advantage.

• Developing competitively valuable competencies and capabilities.

• Uniting strategic activities of functional areas.

• Gaining approval of business strategies by corporate-level officers.

Functional & Operational Strategies

• Functional – Game plan for a strategically-relevant function, activity, or business process, e.g., finance (CFO), marketing (Chief Marketing Officer), etc.

• Operational – Game plan for all other operating units (management levels) in the firm, e.g., department level, project managers, etc.

Uniting the Company’s Strategy-Making Effort

• A firm’s strategy is a collection of initiatives implemented by managers at all organizational levels.

• Separate levels of strategy must be unified into a cohesive, company-wide action plan.

• Pieces of strategy should fit together like the pieces of a puzzle.

Tests of a Winning Strategy

• GOODNESS OF FIT TEST

• How well is the strategy matched to the firm’s situation?

• COMPETITIVE ADVANTAGE TEST

• Does the strategy lead to a sustainable competitive advantage?

• PERFORMANCE TEST

• Does the strategy boost firm performance?

• Action-oriented, operations-driven activity aimed at shaping the performance of core business activities in a strategy-supportive manner.

• Tougher and more time-consuming than crafting strategy.

• Key tasks include:

• Improving the competence and efficiency of the strategy being executed.

• Showing measurable progress in achieving targeted results.

What Does Strategy Implementation and Execution Include?

• Building a capable organization

• Allocating resources to strategy-critical activities

• Establishing strategy-supportive policies

• Instituting best practices and programs for continuous improvement

• Installing needed information, communication, and operating systems

• Motivating people to pursue the target objectives

• Tying rewards to the achievement of results

• Creating a strategy-supportive corporate culture

• Exerting the leadership necessary to drive the process forward and keep improving

• Tasks of crafting and implementing the strategy are not a one-time exercise.

• Customer needs and competitive conditions change.

• New opportunities appear; technology advances; any number of other outside developments occur.

• One or more aspects of executing the strategy may not be going well.

• New managers with different ideas take over.

• Organizational learning occurs.

• Set milestones for reviews.

Strategic Role of a Board of Directors

• Critically appraise and ultimately approve strategic action plans.

• Evaluate strategic leadership skills of the CEO and candidates to succeed the CEO.

Good Strategy + Good Strategy Execution = Good Management

• Crafting and executing strategy are core management functions.

• Among all the things managers do, nothing affects a company’s ultimate success or failure more fundamentally than how well its management team charts the company’s direction, develops competitively effective strategic moves and business approaches, and pursues what needs to be done internally to produce good day-in/day-out strategy execution.