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1. Briefly explain strategic management in your own words.
Strategic management is the process of describe the organization's mission, vision and objectives, developing policies and plans, projects and programs in order to achieve the objectives of the firm, and then distribute resources to conduct the policies and plans, projects and programs. In other words, strategic management is the ways of drafting, implementing and evaluating cross-functional decisions that will enable an organization to achieve its long-term objectives. (David, 1989). Strategic management involves adapting the organization to its business environment. Strategic management is a level of managerial activity under setting goals and over Tactics. Strategic management provides overall direction to the enterprise.
The features of the strategic managements are as following:
Strategic management is non-repetitive so each conditions is unique and requires to be assessed in its own circumstances.
Strategic management provides direction to entire organization.
Strategic management requires strategy formation and implementation.
Strategic management is partially planned and partially unplanned.
Strategic management is done at several levels: overall corporate strategy, and individual business strategies.
Strategic management involves both conceptual and analytical thought processes.
In conclusion, strategic management is an ongoing process that evaluates and controls the business and the industries in which the company is involved; assesses its competitors and sets goals and strategies to meet all existing and potential competitors; and then reassesses each strategy annually or quarterly to determine how it has been implemented and whether it has succeeded or needs replacement by a new strategy to meet changed circumstances, new technology, new competitors, a new economic environment., or a new social, financial, or political environment (Lamb, 1984).
2. How do you explain the success of firms that do not use a formal strategic planning process?
Success in today's business environment requires that a company's leaders have the ability to create a vision of the organization's future direction as well as the course it needs to get there. Strategic management is concerned with the future success of the business and may entail major changes in the benefits to be offered customers, in organizational capacity, and in competitive posture.
When we look at the internal and external factors in the business we are doing, we see that the factors such as market segments, competition, economy, regulations, etc. are changing regularly. Without challenging all of those working assumptions, particularly market segments, competition, opportunities, threats, industry scenario and winner's profile, the company cannot craft their revised course and direction, goals, objectives and action plans. So, strategic planning helps organization set a much clearer direction for the future. If you fail to plan, you are planning to fail. By acting on this, strategic management actually gives the organization direction, a sense of identity and unity towards what the business goal. Strategic management has an importance of towards business success.
In conclusion, strategic management takes into consideration the company's vision and mission. Strategic management helps in achieving the organizational goals in an effective and efficient manner and monitoring the implementation of strategy using a system interlinked with the long term vision of the corporations. Improved strategic management processes may also facilitate the development of the more complex management structural that are needed as firms grow.
3. Few people reach the top-management level. Why, then, is it important for all business majors to study the field of strategic management?
Management is known as the highest level of business planning. Strategic Management's focus is to build a strong business foundation which will subsequently reflect on collaborated efforts involving each and every single individual of an organization so strategic management process is the concern of every single person in the organization because of this issue, it is important for all business majors to study the field of strategic management.
In more detailed terms, strategic management determines what the objectives of a business are. How to develop the ways of achieving the determined objectives and what are the resources needed in order to achieve the objectives. It also covers the core objectives of an organization; it involves developing a mission statement wherein it covers the landscape assessment of the organization, such as how the operations would run and who will be the people assigned to play the key roles within the organization's landscape. Another area is the vision statement, wherein through Strategic Management, the organization will establish key objectives to respond to the gray areas and unmet needs of their business, deciding for which will entail consideration of both short-term and long-term offerings of the organization. Every person included major should study the strategic management in order to know and implement their responsibilities towards the company's missions.
The next step of strategic management is to develop a strategic plan which will efficiently and effectively run in order to meet their goals and objectives. In formulating a strategic plan, Strategic Management comes in to delegate individuals who are equipped with the adequate knowledge, experience and skills with the needs and objectives of the business. After delegation, distribution of responsibilities for tasks and processes will follow which calls for the combined efforts of all employees, in this phase they would need to effectively communicate their responsibilities and determine their deliverables.
As a final point, strategic management calls for the allocation of the precise quantity of resources to the diverse aspects of the business in order for those assigned to the specific goals will be able to attain their objectives. This varies from providing the employees with the exact resources to ratifying systems wherein employees will receive the essential and needed training, all processes of work are tested, and at the same time all generated data and information is well documented. In order to effectively and strategically manage the business, every facet of the organization should meet their needs so that in the long run, all aspects of the work involved will run seamlessly and will function as an integrated whole.
4. In what ways do you believe the strategic planning approach of not-for-profit organizations would differ from that of profit-oriented organizations?
Simply put, strategic planning determines where an organization is going over the next year or more, how it's going to get there and how it'll know if it got there or not. The focus of a strategic plan is usually on the entire organization. The focus of the planning activities is often different between for-profits and nonprofits.
The typical profit seeking firm relies almost solely on the sale of its good and services to the public for its sales and revenue. For-profits tend to focus more on activities to maximize profit. On the other hand, nonprofits tend to focus more on matters of board development, fundraising and volunteer management. Not-for-profit organizations also serve the public as profit seeking companies but those firms mostly depend on membership fees, endowments, donations, contributions in addition to revenue. Their priority is not maximizing their profit because they have other incomes. So the target usage of strategic planning is different for profit seeking and not for profit organizations.
However, not for profit organizations may use strategic planning for their fund raising operations. A strategic plan doesn't guarantee they'll reach or exceed their fund-raising goals. But at the very least, it provides them with a clear, well-lighted path to reach them. Fund raising in the absence of a good strategic plan is like going on a hike in the middle of the night without a flashlight or map.
In conclusion, because of the structure and target difference between profit seeking and not for profit organizations, their priorities about revenue are different. So they use strategic planning for different purposes.
Case Study Exercises:
1. What do Michael Moore's documentary, wealthy Saudi investors such as the bin Laden family, George H.W. Bush, and former Prime Minister John Major have to do with the transformation of the Carlyl Group?
When the founders of the company close to the retirement age, they decided to refashion their firm radically. They want their firm more ambitious, more diverse and more lasting.
Before the decision, some of the wealthy Saudi investors had some money into the company. After 9/11, those Saudi investors might create a bad image on to public eye because none of the US citizen, want any of the company, person or country that support the terrorism. So, giving back of the Saudi investors money would be a big strike for the company. For instance, The Saudi Arabian relatives of Osama bin Laden were also investors in Carlyle until October 2001 when the family sold its $2.02 million investment back to the firm in light of the public controversy surrounding bin Laden's family after the terrorist attack on September 11, 2001. The bin Laden family has publicly disowned the al-Qaeda leader. Osama bin Laden has not publicly known or acknowledged economic interest in Saudi Binladin Group (SBG), whose investments were in part managed by the Carlyle Group until the arrangement was terminated by mutual consent (bibliotecapleyades.net).
The other point is George H. W. Bush and John Mayor were their senior advisers. According to new radical change of Carlyle, it was told that those two were no longer a member of the Carlyle Family because they hurt the company's image.
2. Discuss two of the "red flags" that accompany Carlyl's radical makeover.
One of the red flag is regulations. U.S department of justice sent a letter to Carlyle asking information on club deals because the company was making good deals and their earnings are so big. Also the other issue is their huge portfolio caught the interest of the Federal Trade Commission. They made some constraints about their buyouts.
The other red flag is easy access to capitals because easy access to capital now can set up big trouble for later on. If interest rates rise, opportunities to refinance dept will disappear, cash flows will shrivel and bankruptcies will occur. So, Carlyle made faster its buyouts and selling issues. For example, they bought the Hertz for $15 billion, just after 6 months, they earned $1billion dividend. Then they promptly took it to public again.
3. What steps has Carlyl taken to implement a participative approach to strategic decision making?
After they decided to make radical change in company, they first started to change their image on public eye. They asked binladen family to take back their money. Also they wanted George H. W Bush and J. Mayer to leave the company. They hired new and publicly regarded people to underscore Carlyle's commitment to portfolio diversification and upright corporate citizenship. Carlyle also pared back its defense holdings.
In next stage they redefine the very nature of private equity. Carlyle has spread its money among no fewer than 48 funds around the world and launched a mind boggling 11 in 2005 and 11 in 2006. Also they diversed their expertise about buyouts and deals in a broad swath of alternative assets such as venture capital, real estate, collateralized debt organizations. Also they expect to increase the percentage of those other alternative assets.
The other thing is, they avoid risks. According to them the more diverse the assets mean the better risk-adjusted returns.
Strategic Management Plan
1 Describe your chosen business for this project in a one-page summary.
I want to mention about Tesco PLC. Tesco PLC is a United Kingdom-based international supermarket chain. It is the largest British retailer, both by global sales and by domestic market share, and the fourth largest retailer in the world behind Wal-Mart of the United States, Carrefour of France, and The Home Depot of the United States. Tesco has a market value of about £29.090 billion. Tesco has become quite a successful hypermarket today; expanding to countries like Hungary, Taiwan, Thailand, Turkey, South Korea and Malaysia and many more other countries. Its success is shown not only in its physical expansion, but in its internal control as well. Tesco is one of largest food retailers in the world, operating around 2,318 stores and employing over 326,000 people (tescoplc.com)
Originally specializing in food, it has diversified into areas such as clothes, consumer electronics, consumer financial services, selling and renting DVDs, compact discs and music downloads, internet service consumer telecoms and most recently budget software. Also in recent years they expanded their product range to organic foods, healthy living/light choices, world foods, wholefoods, bakeryâ€¦ etc.
Tesco practices the systematic delegation of the power within the organization; there are different roles and responsibilities assign among the executive committee, nomination committee, remuneration committee and audit committee to run the business efficiently and in an orderly manner.
Their mission statement is "creating value for customers to earn their lifetime loyalty. I can willingly say that this mission statement definitely shows Tesco's approach to their customer. As I worked at one of Tesco's branch for 6 months as the supplier to Tesco, they choose all the products for the stores meticulously. Their aim is to bring healthy, safe but cheap products into the stores. So their customers know that in spite of their cheap prices, their products are safe and healthy and they can buy and use them without hesitating. They create such an atmosphere and this pursuit carries them among top retail stores.
2 What form of communication about the strategic management process would be helpful to the employees in your organization prior to beginning the process?
In my opinion, the determination of mission statements, and acceptance and implementation of them would be helpful to the employees in my organization at the beginning of the strategic management process because the mission statement defines the purpose of a company or organization.
In clear terms it is guide the actions of the organization, spell out its overall goal, provide a sense of direction, and guide decision-making. Mission statements contains of the purpose and aim of the organization, the organization's primary stakeholders: clients, stockholders, congregation, etc., responsibilities of the organization toward these stakeholders, and products and services offered. Mission of the company communicates the firmÂ´s core ideology and visionary goals. It should contain the companyÂ´s core values, core purpose and visionary goals. While the visionary goals are selected the core values and purpose of the firms should be discovered. Values and purpose are in the company already, the mission just describes them. So, every strategic management process starts with the understanding of the actions and goals by the employees. Actually, the mission statement does not only deal with employees. Every single person in the organization should know the mission of the organization and behave accordingly.
In my organization the mission statement of Tesco is "Creating value for customers, to earn their lifetime loyalty". In spite of their cheap retail price pursuit, they never give up from the design quality and safety of the products. When the Tesco buyer's trying to put trendy styles to the stores, they also seek the safe and healthy products for costumers. So it means that the customer can buy the high quality and trendy products by paying very little money. This policy overlaps with the mission statement. The customers are happy with their purchase, they would come again and thus Tesco would earn their lifetime loyalty.
So, that mission statement creates a force on employees that they should create such products to earn their lifetime loyalty. Every person in the organization pursue towards that goal. Whatever their duty is in the organization, their goal is the same so they are locked to achieve it.