Strategic Management: Theory and Case Study By Tunchalong Rungwitoo May 2012 ii Table of Content Table of Content .ii Table of Table iii Table of Figure iv Table of Example .v Introduction Part I: Strategy Formulation Organization Mission Competitive Situations 2.1 External Environment Analysis .7 2.2 Internal Environment Analysis 16 2.3 SWOT Analysis 19 Developing Strategy 20 3.1 Corporate Level Strategy .21 3.2 Business Level Strategy .33 3.3 Functional Level Strategy 35 Part II: Strategy Implementation 38 Strategy Implementation 38 4.1 Organizational Alignment 38 4.2 Leadership and Motivation 41 Part III: Controlling and Evaluation .44 Controlling and Evaluation 44 5.1 The Controlling Process .44 5.2 Key Performance Indicators 45 Power Point Hand Out 48 References .83 iii Table of Table Table Starbucks Mission and Components .6 Table Missha SWOT Analysis 20 iv Table of Figure Figure Strategic Management Process Figure Strategic Formulation Process .3 Figure the Components of External Environment Figure Thailand Competitiveness 11 Figure Thai Automotive Competitiveness 12 Figure Porter’s Five Forces 13 Figure Korean Cosmetic Attractiveness 14 Figure The Value Chain 17 Figure Air Asia Value Chain 17 Figure 10 SWOT Analysis Model .19 Figure 11 Hierarchy of Strategy, Goals and Plans 21 Figure 12 Corporate Level Strategy Chart .22 Figure 13 Three Concentration Growth Strategies 23 Figure 14 Integration Strategy 24 Figure 15 Adidas Corporate Strategies 26 Figure 16 BCG Growth - Share Matrix .29 Figure 17 Product Life Cycle Curve 30 Figure 18 a relationship between BCG Growth-Share Matrix and Product Life Cycle 31 Figure 19 Corporate Strategy suggested by GE Cell 32 Figure 20 Industry Attractiveness Evaluation 32 Figure 21 Business Strength Evaluation 33 Figure 22 Example of GE Cell Analysis .33 Figure 23 Porter's Generic Strategies .34 Figure 24 Functional Level Strategy 36 Figure 25 Three primary activities for effective strategic implementation .38 Figure 26 Organizatinal Alignment 40 Figure 27 Major Source of Leader Power and Likely Subordinate Reactions 41 Figure 28 Maslow Hierachy of Needs .42 Figure 29 Hersey and Blanchard's Situational Leadership 43 Figure 30 The Controlling Process 44 Figure 31 Balance Scorecard .45 Figure 32 The Linkage of Four Perspectives 47 v Table of Example Example Mission Statement .5 Example Macro Environment Analysis Example Thailand National Competitiveness .11 Example Industry Attractiveness Analysis .14 Example Value Chain Analysis 17 Example SWOT Analysis .20 Example Adidas Corporate Strategy .25 Introduction General Management which is the process of achieving organizational goals by engaging in the four major functions of planning, organizing, leading and controlling1 nowadays may not sufficient and supportive for the organization succeed in the world of complex environments It concerns about the process to manage the company internally but does not concentrate more on creating competitiveness regarding environments affecting the organization Even companies adopt general management to sustain profitability by reducing the defects or costs, and improving operations process in order to increase productivity, they may not succeed in the competition because they perform only similar activities better than competitors but not create the distinctive competitiveness Additionally, they perform only operational effectiveness but not strategy2 Operational effectiveness and strategy are both essential to superior performance but they work in very different ways Strategy is about competitive position that the company performs different activities from rivals’ or performing similar activities in different ways.3 To learn how the companies create strategies and put them into action, the executives or strategists should examine carefully an aspect of Strategic Management Strategic Management is a process regarding primary activities; Strategy Formulation, Strategy Implementation, and Controlling and Evaluation4 Figure Strategic Management Process This paper will be divided into parts regarding the strategic management process which is shown on Figure and given examples related to Asian stories The first part is strategy formulation consisting of components; Organization Mission, Competitive Situations, and Strategy Development The second part will express how to implement the strategies It engages the organization alignment that should be considered for changing the organization to support the operations based on the formulated strategies Finally, Controlling and Evaluation is a key factor to monitor the organization strategic operations by considering perspectives: financial perspective, customer perspective, internal process perspective, and learning and growth perspective Part I: Strategy Formulation Strategy formulation is the first activity that company should perform to create unique competitive advantage by setting the organization mission, analysing the competitive situations both external perspective and internal perspective, and then developing the strategies that fits in the environments Figure Strategic Formulation Process Firstly, the organization has to establish its reasons to exist and the scope of operations by setting its mission statement Then it should consider the competitive situations that effect firm operations and competitions There are perspectives for analyzing the situations First perspective is external situations A strategist should understand macro environment, national competitiveness, and industry attractiveness whether those factors support or depress the organization Second perspective is internal factors An executive should examine correlations among the organization activities and business functions, and also explore the core competencies of the organization As a consequence, a company will create a competitive advantage from crafting a set of strategies that gain supportive environments and prevent obstructive factors A strategist should classify the environments into groups which are strengths, weaknesses, opportunities and threats; SWOT Analysis This classification is very helpful for developing the strategies via bringing its strengths and opportunities up to create competitive advantage and explore the possible alternatives to improve its weaknesses and prevent or avoid the threats Additionally, this competitive situation arrangement suggests the organization’s competitive position in the industry and supports conducting the firm’s strategies There are levels of the strategies Grand strategy or corporate strategy is the highest level It is very essential for setting the organizational direction whether firm wants to grow, stable or exit Business strategy is the second that the company should describe the company’s characteristics making competitiveness among the competitors whether it wants to differentiate by offering the superior values for customers, offering the affordable price by gaining the low cost advantage, or creating distinctive values for its concentrated customer5 Consequently, the company will contribute its grand strategy and business strategy to each business functions in order to craft functional strategies Marketing department will conduct marketing plan related to corporate and business strategies, as well as production and operation plan, human resources plan, and financial plan Organization Mission The organization should set its mission as the organization’s purpose or fundamental reason for existence Its organization mission is called as mission statement It is a broad declaration of the basic, unique purpose and scope of operations that distinguish the organization from other of it type There are components to formulate mission statement as following: 1) Customers Who are the organization’s customers? 2) Products or services What are the organization’s major products or services? 3) Location Where does the organization compete? 4) Technology What is the firm’s basic technology? 5) Concern for survival What is the organization’s commitment to economic objectives? 6) Philosophy What are the basic belief, values, aspirations, and philosophical priorities of the organization? 7) Self-concept What are the organization’s major strengths and competitive advantages? 8) Concern for public image What are the organization’s public responsibilities, and what image is desired? 9) Concern for employees What is the organization’s attitude toward its employees? Example Mission Statement Starbucks set its mission as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles as we grow The following six guiding principles will help Starbucks measure the appropriateness decisions; • Provide a great work environment and treat each other with respect and dignity • Embrace diversity as an essential component in the way we business • Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee • Develop enthusiastically satisfied customers all of the time • Contribute positively to our communities and our environment • Recognize that profitability is essential to our future success From the above mission statement, Starbucks’ missions contain all of nine components which are shown in table 73 74 75 76 77 78 79 80 81 82 83 References Bartol, Kathryn M 2006, Management: A Pacific Rim Focus, McGraw-Hill/Irwin Porter, Michael E 1996 What is Strategy? Harvard Business Review NovemberDecember 1996 Ibid Suksriwong, Sakorn 2007, Management : From the Executive’s Viewpoint, Bangkok Porter, Michael E 1980, Competitive Strategy: Techniques for Analyzing Industries and Competitors, Free Press, New York Bartol, Kathryn M 2006, Management: A Pacific Rim Focus, McGraw-Hill/Irwin http://www.starbucks.co.th Thomson, Jr., Arthur A., Stickland III, A.J., and Gamble, John E 2008, Crafting and Executing Strategy: The Quest for Competitive Advantage: Concepts and Cases, 16th edition, New York: McGraw-Hill/Irwin Business Monitor International 2008, Company News Alert – C.P All Seeks Vietnamese 7-Eleven Franchise, 30 Jan 2008 10 Ministry of Planning and Investment, Foreign Investment Agency 2008, Attraction objectives & Orientations, viewed March 2008 11 Ibid 12 Ibid 13 World Trade Organisation 2006, Working Part on the accession of Vietnam, 27 October, 2006 14 Ibid 15 Euromonitor International 2005, Consumer Lifestyles-Vietnam, 10 June 2005 84 16 Central Intelligence Agency 2008, The World Fact Book-Vietnam, view March 2008 17 Porter, Michael E 1998, The Competitive Advantage of Nations, London: Macmilland 18 Porter, Michael E 2003, Thailand Competitiveness: Creating the Foundations For Higher Productivity, Harvard Business School, May 2003 19 Christian H.M Ketels 2003, Thailand Competitiveness: Key Issues in Five Clusters, Harvard Business School, may 2003 20 Porter, Michael E 2008, “The Five Competitive Forces That Shape Strategy”, Harvard Business Review, January 2008 21 Porter, Michael E 1985, How Information Gives You Competitive Advantage, Free Press, New York 22 Bartol, Kathryn M 2006, Management: A Pacific Rim Focus, McGraw-Hill/Irwin 23 Ibid 24 Ibid 25 Ibid 26 Ibid 27 Ansoff, I 1957, “Strategies for Diversification”, Harvard Business Review, September – October 1957 28 Ibid 29 Raphael Amit and Joshua Livnat 1998, “A Concept of Conglomerate Diversificaion,” Journal of Management, vol.14 30 Kotler, P 2006, Marketing Management, Prentice Hall 31 Bartol, Kathryn M 2006, Management: A Pacific Rim Focus, McGraw-Hill/Irwin 85 32 Ibid 33 Ibid 34 Arthur A Thompson, Jr., and A.J Strickland III 1992, Strategic Management: Concepts and Cases, 6th ed., BPI/Irwin, Homewood,III 35 Gamble John E 2007, “adidas: Will Restructuring Its Business Lineup Allow It to Catch Nike?” University of South Alabama 36 Bartol, Kathryn M 2006, Management: A Pacific Rim Focus, McGraw-Hill/Irwin 37 Porter, Michael E 1980, Competitive Strategy: Techniques for Analyzing Industries and Competitors, Free Press, New York 38 Ibid 39 Ibid 40 Ibid 41 Suksriwong, Sakorn 2007, “Strategy Change and Implementation: a Framework for Executives”, Chulalongkorn Review, October – December 2007 (Thai Version) 42 Ansoff, I 1965, Corporate Strategy, McGraw-Hill, London 43 Boyle, S (2007) "Impact of Changes in Organisational Structure on Selected Key Performance Indicators for Cultural Organisations", International Journal of Cultural Policy, Vol 13 44 Lynch, R 2005, Corporate Strategy, 4th edition, Prentice Hall, UK 45 Martins, E and Terblanche, F 2003, "Building Organisational Culture that Stimulates Creativity and Innovation", European Journal of Innovation Management, Vol 46 Pascale, R and Athos, A 1981, The Art of Japanese Management, London: Penguin Books 86 47 Suksriwong, Sakorn 2007, “Strategy Change and Implementation: a Framework for Executives”, Chulalongkorn Review, October – December 2007 (Thai Version) 48 Martins, E and Terblanche, F 2003, "Building Organisational Culture that Stimulates Creativity and Innovation", European Journal of Innovation Management, Vol 49 Bartol, Kathryn M 2006, Management: A Pacific Rim Focus, McGraw-Hill/Irwin 50 Suksriwong, Sakorn 2007, “Strategy Change and Implementation: a Framework for Executives”, Chulalongkorn Review, October – December 2007 (Thai Version) 51 Raven, V, 1993, “The Bases of Power: Origins and Recent Development”, Journal of Social Issues, vol.9 52 Bartol, Kathryn M 2006, Management: A Pacific Rim Focus, McGraw-Hill/Irwin 53 Suksriwong, Sakorn 2007, “Strategy Change and Implementation: a Framework for Executives”, Chulalongkorn Review, October – December 2007 (Thai Version) 54 Bartol, Kathryn M 2006, Management: A Pacific Rim Focus, McGraw-Hill/Irwin 55 Maslow, A 1954, Motivation and Personality, Harper & Row, New York 56 Hersey, P & Blanchard, K 1988, Management of Organizational Behaviour: Utilizing Human Resources, 5th ed., Prentice-Hall, Englewood Cliffs, New Jersey 57 Bartol, Kathryn M 2006, Management: A Pacific Rim Focus, McGraw-Hill/Irwin 58 Kaplan, R & Norton, D 1992, “The Balanced Scorecard: Measures That Drive Performance”, Harvard Business Review, January – February 1992 59 Kaplan, R & Norton, D 1996, “Using the Balanced Scorecard as a Strategic Management System”, Harvard Business Review, January – February 1996 60 Ibid 61 Kaplan, R & Norton, D 1996, Balance Scorecard, Harvard Business Press 87 62 Ibid 63 Ibid 64 Decharin Pasu 2003, From Strategy to Action with Balanced Scorecard and Key Performance Indicators, Chulanlongkorn University Printing House: Bangkok (Thai Version) ... Implementation, and Controlling and Evaluation4 Figure Strategic Management Process This paper will be divided into parts regarding the strategic management process which is shown on Figure and given... how the companies create strategies and put them into action, the executives or strategists should examine carefully an aspect of Strategic Management Strategic Management is a process regarding... strategy, productions and operations strategy, human resource strategy, and financial strategy Strategic Goals//Plans Top Management Corporate Strategy Tactical Goals/Plans Middle Management Business