Strategic management -riham adel- Lecture 1.pdf

strategic management basics easily illustrated by DR Riham adel for AAST students

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Strategic Management Course

MBA Class, Fall 2023/2024 - Graduate School of Business
Professor: Prof. Dr. Riham Adel

2. Thinking Strategically N a
s— —
Aclear understanding of why a company exists?
= Why the company matters to the marketplace? ys N
"= Do the company products/services offer customers value that can't be matched?
= Does the company approach of doing business is different from rivals?

= Does its way of doing business help the company offer a superior value?

= How the company’s offering be distinctive and important in the customers’ mind?

= How would customers be affected if the company doesn’t exist?

Strategy Spells out the company approach to exploit its
capabilities & resources to create value to customers. In effect, PY, \

the crafting of a strategy is pursuing an array of choices about 4

how to compete. Thinking Strategically is about choosing the

“How's of Strategy”. It is about competing differently from rivals.

Don'ts
Prepared by: Prof. Riham Adel

3. u > Goals “What?”
Strategy “How? Firms wants
to achieve results to achieve

Means to End

Good Strategy making and rogress required
execution are signs of good Strategy 1
management and outstanding Ma
performance in the market.

The Firms Face
assical Strate;
How is the industry likely to

1. Defi Strategy. A
Stine Strategy evolve? What actions can be taken

2. Describe the strategic management process. to change this evolution? How can

3. Define competitive advantage and explain its relation- firms gain advantages in this
ship to economic value creation

industry? How sustainable are
Describe two different measures of competitive
ad 5 come these advantages? The answers
advantage.
Explain the difference between emergent and intended that firms develop for these

strategies.

questions help determine the
. Discuss the importance of understanding a firm's

strategy even if you are not a senior manager in a firm's Strategy.
firm Prepared by: Prof. Riham Adel

4. EFFECTIVENESS

me Organization Performance

EFFICIENCY

Low

Low efficiency/

customers eue but that is too
expensive for them to buy.

High efficiency/
High effectiveness

Manager chooses the right
goals to pursue and makes
good use of resources to
achieve these goals.
Result: A product that
customers want at a quality
and price that they can afford.

High efficiency/
Low effectiveness

Manager chooses
inapppropriate goals, but
makes good use of resources
to pursue these goals.
Result: A high-quality product
that customers do not want.

_ Preparedby:

5. -Wwuar To DO What is Strategy? ~

-WHATNOT TO DO | y nn oe
-HON & WHY The set of goardirectos —SHTOTE DY
actions a firm takes gt curr
| to gain and sustain — «
GOOD STRATEGY superior performance “

relative to competitors

A good strategy consists of three elements: EX An

dl L als A conducting a critical and
1. Diagnosis of the competitive challenge. This EEE Tan
element is accomplished through analysis of the firm’s RSS

E z an approach on how to
external and internal environments. deal with the identified

2. Addressing the competitive challenge. This element ugs IS is

é 4 & Pi Then communicate it in
is accomplished through strategy formulation, resulting PARA

in the firm’s corporate, business, and functional BERTA toms come

strategies employees involved, to
. effectively implement

3. A set of coherent actions to implement the firm’s RTE
guiding policy. This element is accomplished through HE Id

g . actions.
strategy implementation Prepared by: Prof. Riham Adel

6. Environmental

Scanning:
Gathering
Information

External

Natural
Environment
Resources and
climate
jetal
Environment
General forces
Task
Environment
Industry analysis

Internat

‘Structure:
Chain of command
Cultur
Beliofs, expectations,

Resources:

Assets, skills,
competencies,

knowledge

Strategy
Formulation:

Developing
Long-range Plans

Mission y
Essence Objectivos I

existence

What A
resuhsıo Strategies F3
accomplish =
by when
Y La Pol
mission &
objectives Broad
juidelines
jor decision
making

Strategy
Implementati

Strategic Management Model

Putting Strategy
Into Act

>
Programs —

Activities
needed to
accomplish
a plan Cost of the
programs

Budgets ==

Procedures

‘Sequence
orstens

needed to
do the job

Evaluation
and Control:

TT +

Performance

Actual results

7. Impact of Strategic Management on Performance

Strategic Analysis ——— Strategic Choice ———> Strategic Implementation

|

Evaluation Process

Analyzing current Deciding on Putting strategies Evaluating and
> e R a changing
situation strategies into action =

str.

Environmental

|
Scanning

Strategy | Evaluation
I ii and
Implementation r> Garten

r
eee ee ee CeCe sirio

+
Feedback/Learning: Make corrections as needed

Strategy
Formulation

A

A

Prepared by: Prof. Riham Adel

8. An effective strategic management process lays the foundation for sustainable competitive
advantage. egic leaders design a process to formulate and implement strat Strategic
leadership pertains to executives’ use of power and influence to direct the activities of
others when pursuing an organization’s goals.” The first step in this process is to define a
firm’s vision, mission, and values.

To define these basic principles, strategic leaders can ask these questions:

Vision. What do we want to accomplish ultimately?
Mission. How do we accomplish our goals?

Values, What commitments do we make, and what guardrails do we put in place, to act
both legally and ethically as we pursue our vision and mission?

WHAT DO STRATEGIC LEADERS DO? summer Pal Eee

According to the upper-echelons theory,
organizational outcomes including strategic
choices and performance levels reflect the
values of the top management team.

The upper-echelons theory favors the idea
that strong leadership is the result of
both innate abilities and learning.

vision
A statement about
what an organization
ultimately wants

to accomplish; it
captures the company’s
aspiration

mission

Description of what an
organization actually
does—the products and
services it plans to
provide, and the markets
in which it will compete,

core values statement
Statement of principles
to guide an organization
as it works to achieve
its vision and fulfill

its mission, for both
internal conduct and
external interactions; it
often includes explicit
ethical considerations.

Prepared by: Prof. Riham Adel

9. The Firm performance is determined primarily by two factors:

Industry Effects describe the underlying structure of the industry.
The structure of an industry is determined by elements common to all
industries. The firm performance is attributed to the industry in
which the firm competes.

Firm effects give an answer to the questions “why firms within the
same industry differ? ; How differences among firms can lead to
competitive advantage?”. The firm performance is attributed to the
actions managers take.

Other Effects
[Business Cycle Effects,

The key point is that managers’ En
actions tend to be more f
important in determining firm

performance than the forces
exerted on the firm by its ="
external environment

industry effects
Firm performance
attributed to the
structure of the industry
in which the firm
competes.

firm effects

Firm performance
attributed to the
actions managers take.

Prepared by: Prof. Riham Adel

10. MISSION

VISION STATEMENT

PRINCIPLES.

MEASUREMENT FRAMEWORK Ho:

STRATEGIES
Core Elements }
INITIATIVES. one” Oo 11 ETT
Who are we? KPIs Prod a.
Lifetime ethics 2
principals
belies -
Why are we here? E
Why are we in this buisiness? AN
Ifthe market changed, what would we still be e N,»

What do we do?
What do we want

hs tactics |

20+ years doing that were doing now? hex
How does this work fulfill our core values and
L ethics?
5-20 years |
| = How can we change our
world/industry/community? ES

5 Year: i When do we do it?
alas strategic goals What do we want o accomplish? k

When do we want to accomplish it?

to contribute?
How do we get there?
short term goals
projects
resources
staffing
Prepared by: Prof. Riham Adel

11. D External

Analysis
Mission ==» Objectives D Strategic ==) Strategy =D Competitive
Choice Implementation Advantage
> Internal
Analysis

ompany's Strategy Evolves over Time

Changing circumstances and ongoing management
efforts to improve the strategy cause a company’s
strategy to evolve over time—a condition that
makes the task of crafting a strategy a work in
progress, not a onetime event.

Intended strategy: Deliberate strategy: Realized strategy:
A strategy a firm thought ==» An intended strategy > The strategy a firm is
it was going to pursue. a firm actually actually pursuing.
implements.
ad al
> Fi
Emergent strategy:
Unrealized strategy: A strategy that emerges
An intended strategy a Aa
firm does not actually radically reshaped once
implement. implemented.

CORE CONCEPT

À company’s strategy explains why the company
matters in the marketplace by specifying an
approach to creating superior value for customers
and determining how capabilities and resources will
be ullized to deliver the desired value to customers.

CORE CONCEPT

A company’s business model sets forth how its:
strategy and operating approaches will create value
for customers, while at the same time generate
ample revenues to cover costs and realize a profit.
The two elements of a company’s business model
are its (1) customer value proposition and (2) its
profit formula.

CORE CONCEPT
Acompany achieves sustainable competitive
advantage when an attractively large number of
buyers develop a durable preference for its prod-
ucts or services over the offerings of competitors,
despite the efforts of competitors to overcome or
erode its advantage.

Prepared by: Prof. Riham Adel

12. Why a Company’s Strategy Evolves over Time ,,,,

Abandoned E À
(7 strategy elements E
Deliberate Strategy Elements |

The important point that
Planned new initiatives plus fhe (ak Of CARE a

ongoing strategies continued Siren) is not a ONE
from prior periods Time Event but is always a

work-in-progress. A
company strategy is a
Unplanned reactive responses blend of:

to changing circumstances (1) Proactive Moves
by management (2) Adaptive Reactions

Emergent Strategy Elements
A Companys Strategy Is a Blend of Planned Initiatives and ans
Reactive Adjustments

Prepared by: Prof. Riham Adel

13. The Three Tests of a Winning Strategy

1. How well does the strategy fit the company’s situation? To qualify as a aa
winner, a strategy has to be well matched to the company’s external and
internal situations. The strategy must fit competitive conditions in the IN
industry and other aspects of the enterprise’s
external environment. At the same time, it A winning strategy must fit the company's external
should be tailored to the company’s collec- and internal situation, build sustainable competitive
tion of competitively important resources advantage, and improve company performance.

and capabilities. It’s unwise to build a strat-

egy upon the company’s weaknesses or pursue a strategic approach that
requires resources that are deficient in the company. Unless a strategy
exhibits tight fit with both the external and internal aspects of a compa:
ny’s overall situation, it is unlikely to produce respectable first-rate busi- Pp
ness results,

How Do You Define It? = by: Prof. Riham AGG?

14. The Three Tests of a Winning Strategy

2. Is the strategy helping the company achieve a sustainable competitive
advantage? Strategies that fail to achieve a durable competitive advan-
tage over rivals are unlikely to produce superior performance for more
than a brief period of time. Winning strategies enable a company to
achieve a competitive advantage over key rivals that is long lasting. The
bigger and more durable the competitive edge that the strategy helps
build, the more powerful it is.

3. Is the strategy producing good company performance? The mark of a win-
ning strategy is strong company performance. Two kinds of performance
improvements tell the most about the caliber of a company’s strategy:

(1) gains in profitability and financial strength and (2) advances in the
company’s competitive strength and market standing.

How Do You Define It? Prepared by: Prof. Riham