Strategic Management
formulation
Denis Manley
The Organisation
Organisational
Organisational
Problem
Level
Strategic
Senior Management
General or Middle
Management
Tactical
Knowledge or Data
Workers
Knowledge
Operations
Production Workers
P ro duct io n
Fin an ce/
Sales/
Hum an
acco un t in g
m ark et in g
Reso urces
Strategic Management –
Defined
Art & science of formulating,
implementing, and evaluating,
cross-functional decisions that
enable an organization to achieve
its objectives
Strategies in Action
Strategies for taking the hill won’t
necessarily hold it. –
Amar Bhide
The early bird may get the worm, but the
second mouse gets the cheese. –
Unknown
Strategic formulation
Strategy Formulation
Vision & Mission and Objectives
Internal evaluation
External evaluation
Develop Alternative Strategies
Strategy Selection
Strategy Implementation
Annual Objectives
Organisational structure
Employee Motivation
Resource Allocation
Strategy Evaluation
Internal Review
External Review
Performance Metrics
Corrective Actions
Vision
“What do we want to become?”
Agreement on the basic vision for which
the firm strives to achieve in the long run is
critically important to the firm’s success.
Examples of vision statements:
Ryanair wants to become the number one travel choice for all
local residents and tourists in Europe.
The Vision of Pepsi To become the leading producer and marketer
of food and beverage products in the world
Mission Statements
What is our business?”
Reveal what an organization wants “will be”
and whom it wants to serve (essentially like
the aim)
Essential for effectively establishing
objectives and formulating strategies
Customers
Products
Services
Markets
Technology
Employees
Mission
Elements
Survival
Growth
Profit
Public
Image
Self-Concept
Philosophy
The essential components of a
mission statement
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Components and Questions That a Mission Statement Should Answer
1.
Customers: Who are the firm’s customers?
2.
Products or services: What are the firm’s major products?
3.
Markets: Geographically, where does the firm compete?
4.
Technology: Is the firm technologically current?
5.
Concern for survival, growth, and profitability: Is the firm committed to
growth and financial soundness?
6.
Philosophy: What are the basic beliefs, values, aspirations, and ethical
priorities of the firm?
7.
Self-concept: What is the firm’s distinctive competence or major
competitive advantage?
8.
Concern for public image: Is the firm responsive to social, community,
and environmental concerns?
9.
Concern for employees: Are employees a valuable asset of the firm?
Benefits of Mission statements
Research results are mixed, however, firms with
formal mission statements generally see a:
• 2x average return on shareholder’s equity
• Positive relationship to company
performance
• 30% higher return on certain financial
measures
Ryanair mission statement
• With Ryanair’s new technological planes we
hope to please all of our European customers on
their travel.(4,3) We hope to serve people of all
ages while providing the best service money can
buy.(1,2) We will bring our low price travel, with
our dedication to helping our community(7,8)
and with our marketing plan we hope to grow,
while providing the best work experience for our
employees. (5,9) We will treat everyone equally
and with the upmost respect.
Long-Term Objectives
• Objectives are commonly stated in terms such as:
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growth in assets,
profitability,
market share
degree and nature of diversification.
• Long-term objectives are needed at the corporate,
divisional, and functional levels in an organization.
• Strategies represent actions to accomplish long-term
objectives
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Long-Term Objectives
Characteristics of objectives -Measurable
Realistic
Understandable
Challenging
Hierarchical: corporate/ divisional/functional
Financial vs. Strategic Objectives
It is a Trade-Off between both
Maximize short-term financial objectives – harm
long-term strategic objectives
Example: Pursue increased market share at the
expense of short-term profitability,
Producing Higher product quality will impact on
growth on revenues or profit.
Exam Question
• Explain how you, a CEO of an
organisation, would set out to formulate a
strategy to ensure the organisation
competitive advantage. (9 marks)
• Describe three elements associated with
an ideal mission statement. (9 marks)
• Explain, using suitable examples, some of
the problems associated with deriving long
term objectives (12 marks)