THE STRATEGIC MANAGEMENT PROCESS: AN OVERVIEW
BY PROFESSOR CLEMENT CHINYANGA
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STRATEGIC MANAGEMENT OVERVIEW
TOPICS TO BE COVERED
WHY STRATEGIC MANAGEMENT? BRIEF HISTORY OF STRATEGIC PLANNING THE COMPANYS BUSINESS MODEL MOST TRUSTWORTHY SIGNS OF GOOD MANAGEMENT FIVE TASKS OF STRATEGIC MANAGEMENT DEVELOPING A STRATEGIC VISION
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Topics contd
SETTING OBJECTIVES CRAFTING A STRATEGY IMPLEMENTING AND EXECUTING THE STRATEGY WHY STRATEGIC MANAGEMENT IS ONGOING PROCESS WHO PERFORMS THE FIVE TASKS? THE ROLE OF BOARD OF DIRECTORS BENEFITS OF STRATEGIC MANAGEMENT APPROACH
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Why is Strategic Management Important?
It gives a role to everyone in an organization to manage strategically. It helps the organization perform well. It helps the organization to effectively cope with the uncertainties in the external and internal environment. It helps to coordinate various functions and activities
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Definition of Strategy
Goal-directed decisions and actions in which its capabilities and resources are matched with the opportunities and threats in its environment
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SOME DEFINITION
STRATEGIC MANAGEMENT: THE PROCESS OF SPECIFYING:
AN ORGANIZATION'S OBJECTIVES, DEVELOPING POLICIES AND PLANS TO ACHIEVE THESE OBJECTIVES, AND ALLOCATING RESOURCES SO AS TO IMPLEMENT THE PLANS.
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Stragetic Management
IT IS THE HIGHEST LEVEL OF MANAGERIAL ACTIVITY, USUALLY PERFORMED BY:
THE COMPANY'S CHIEF EXECUTIVE OFFICER (CEO) AND EXECUTIVE TEAM. IT PROVIDES OVERALL DIRECTION TO THE WHOLE ENTERPRISE. AN ORGANIZATIONS STRATEGY MUST BE APPROPRIATE FOR ITS RESOURCES, CIRCUMSTANCES, AND OBJECTIVES.
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anagement
IT IS THE HIGHEST LEVEL OF MANAGERIAL ACTIVITY, USUALLY PERFORMED BY:
THE COMPANY'S CHIEF EXECUTIVE OFFICER (CEO) AND EXECUTIVE TEAM. IT PROVIDES OVERALL DIRECTION TO THE WHOLE ENTERPRISE. AN ORGANIZATIONS STRATEGY MUST BE APPROPRIATE FOR ITS RESOURCES, CIRCUMSTANCES, AND OBJECTIVES.
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Figure 1.1
Basic Activities of Strategic Management
Situation Analysis
Strategy Formulation
Strategy Evaluation
Strategy Implementati on
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Characteristics of Strategic Management
Four Aspects that set strategic Management
Interdisciplina ry External focus Internal focus Future direction
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ASSESSING CAPACITY OR READINIESS OF AN ORGANIZATION TO UNDERTAKE STRATEGIC PLANNING
EXPLORE EACH OF THE FOLLOWING THRU INTERVIEWS, FOCUS GROUPS OR USE OF TAILORED QUESTIONNAIRES
COMMENT BELOW ON ANY SIGNIFICANT STRENGTHS, WEAKNESSES, OPPORTUNITIES OR THREATS ON AREAS OF: 1. MISSION AND VISION 2.FISCAL AND HR 3.COMMUNICATION 4. LEADERSHIP, MANAGEMENT AND ORGANIZATION
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Readiness contd
5. BARRIERS TO STRATEGIC PLANNING STATING EACH BARRIER AND WAYS THEY CAN BE ADDRESSED 6. EXPECTED COSTS OF STRATEGIC PLANNING: LISTING COSTS (DIRECT OR INDIRECT) AND WAYS TO MANAE EACH. 7. EXPECTED BENEFITS LISTING EACH BENEFIT AND WAYS TO ENHANCE BENEFITS REVIEW YOUR ANSWERS TO 1-7 ABOVE AND THEN DECIDE WHETHER TO PROCEED WITH STRATEGIC PLANNING OR NOT.
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STRATEGY FORMULATION AND IMPLEMENTATION
STRATEGIC MANAGEMENT CAN BE SEEN AS A COMBINATION OF:
STRATEGY FORMULATION AND STRATEGY IMPLEMENTATION.
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STRATEGY FORMULATION
STRATEGY FORMULATION INVOLVES:
DOING A SITUATION ANALYSIS: BOTH INTERNAL AND EXTERNAL; BOTH MICROENVIRONMENTAL AND MACRO-ENVIRONMENTAL. CONCURRENT WITH THIS ASSESSMENT, OBJECTIVES ARE SET. THIS INVOLVES CRAFTING VISION STATEMENTS (LONG TERM VIEW OF A POSSIBLE FUTURE), MISSION STATEMENTS (THE ROLE THAT THE ORGANIZATION GIVES ITSELF IN SOCIETY), OVERALL CORPORATE OBJECTIVES (BOTH FINANCIAL AND STRATEGIC), STRATEGIC BUSINESS UNIT OBJECTIVES (BOTH FINANCIAL AND STRATEGIC), AND TACTICAL OBJECTIVES. .
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Strategic Formulation
THESE OBJECTIVES SHOULD, IN THE LIGHT OF THE SITUATION ANALYSIS, SUGGEST A STRATEGIC PLAN. THE PLAN PROVIDES THE DETAILS OF HOW TO ACHIEVE THESE OBJECTIVES. THIS THREE-STEP STRATEGY FORMATION PROCESS IS SOMETIMES REFERRED TO AS DETERMINING WHERE YOU ARE NOW, DETERMINING WHERE YOU WANT TO GO, AND THEN DETERMINING HOW TO GET THERE. THESE THREE QUESTIONS ARE THE ESSENCE OF STRATEGIC PLANNING
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STRATEGY IMPLEMENTATION
STRATEGY IMPLEMENTATION INVOLVES:
ALLOCATION OF SUFFICIENT RESOURCES (FINANCIAL, PERSONNEL, TIME, COMPUTER SYSTEM SUPPORT) ESTABLISHING A CHAIN OF COMMAND OR SOME ALTERNATIVE STRUCTURE (SUCH AS CROSS FUNCTIONAL TEAMS) ASSIGNING RESPONSIBILITY OF SPECIFIC TASKS OR PROCESSES TO SPECIFIC INDIVIDUALS OR GROUPS IT ALSO INVOLVES MANAGING THE PROCESS: MONITORING RESULTS, COMPARING TO BENCHMARKS AND BEST PRACTICES,
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Implementing contd
EVALUATING THE EFFICACY AND EFFICIENCY OF THE PROCESS, CONTROLLING FOR VARIANCES, AND MAKING ADJUSTMENTS TO THE PROCESS AS NECESSARY. WHEN IMPLEMENTING SPECIFIC PROGRAMS, THIS INVOLVES ACQUIRING THE REQUISITE RESOURCES, DEVELOPING THE PROCESS, TRAINING, PROCESS TESTING, DOCUMENTATION, AND INTEGRATION WITH (AND/OR CONVERSION FROM) LEGACY PROCESSES. STRATEGY FORMATION AND IMPLEMENTATION IS AN ON-GOING, NEVER-ENDING, INTEGRATED PROCESS REQUIRING CONTINUOUS REASSESSMENT AND REFORMATION.
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DIFFERENT TIME SCALES
STRATEGIC MANAGEMENT OPERATES ON SEVERAL TIME SCALES:
SHORT TERM STRATEGIES INVOLVE PLANNING AND MANAGING FOR THE PRESENT. LONG TERM STRATEGIES INVOLVE PREPARING FOR AND PREEMPTING THE FUTURE
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THE STRATEGY HIERARCHY
IN MOST (LARGE) CORPORATIONS THERE ARE SEVERAL LEVELS OF STRATEGY. STRATEGIC MANAGEMENT IS THE HIGHEST IN THE SENSE THAT IT IS THE BROADEST,
APPLYING TO ALL PARTS OF THE FIRM.
IT GIVES DIRECTION TO CORPORATE VALUES, CORPORATE CULTURE, CORPORATE GOALS, AND CORPORATE MISSIONS.
CREATE THAT BUDGET.
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Strategic Hierarchy
UNDER THIS BROAD CORPORATE STRATEGY THERE ARE OFTEN:
FUNCTIONAL OR BUSINESS UNIT STRATEGIES. THE LOWEST LEVEL OF STRATEGY:
OPERATIONAL STRATEGY.
IT IS VERY NARROW IN FOCUS AND DEALS WITH DAY-TO-DAY OPERATIONAL ACTIVITIES SUCH AS SCHEDULING CRITERIA. IT MUST OPERATE WITHIN A BUDGET BUT IS NOT AT LIBERTY TO ADJUST OR
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HISTORICAL DEVELOPMENT OF STRATEGIC MANAGEMENT
IMPORTANT HISTORICAL NAMES:
Peter Drucker (1950S)
his theory of management by objectives (MBO). rise of what he called the knowledge worker
Philip Selznick (1957)
Idea of matching the organization's internal factors with external environmental circumstances. This core idea was developed into what we now call SWOT analysis by Learned, Andrews, and others at the Harvard Business School General Management Group.
Alfred Chandler
Strategy and Structure (1962)
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Historical Development contd
Igor Ansoff
In his classic Corporate strategy (1965) he developed the gap analysis
E. Chaffee (1985)
summarized what he thought were the main elements of strategic management theory by the 1970s
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Basic Models of Strategic Management
Figure 1 the four elements Figure 2 Formulation Process Figure 3 Implementation Process Figure 4 Complete Model
Macmillan (2001)
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Figure 1 The Four Elements of Strategic Management
Strategy Content
CONTEXT
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Figure 2 - The Strategy Formulation Process
Strategic Assessment Strategic Intent
Strategic Choice
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Figure 3 - The Strategy Implementation Process
Programme & Project Management
Change Leadership
Culture Change Structure Change Process Change Transformed Enterprise
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Figure 4 - Our complete model
Strategy Content
CONTEXT
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COMPANYS BUSINESS MODEL
DEALS WITH:
WHETHER THE REVENUE COST PROFIT ECONOMIES OF ITS STRATEGY DEMONSTRATE THE VIABILITY OF THE ENTERPRISE AS A WHOLE
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THE MOST TRUSTYWORTHY SIGNS OF GOOD MANAGEMENT
THE BEST TEST OF MANAGERIAL EXCELLENCE
EXELLENT EXECUTION OF EXELLENT STRATEGY AND THE MOST RELIABLE RECIPE FOR ORGANISATIONAL SUCCESS
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THE FIVE TASKS OF STRATEGIC MANAGEMENT
THE TERM STRATEGIC MANAGEMENT REFERS TO THE MANAGERIAL PROCESS OF:
FORMING A STRATEGIC VISION SETTING OBJECTIVES CRAFTING A STRATEGY IMPLEMENTING AND EXECUTING THE STRATEGY AND THEN OVER TIME, INITIATING WHATEVER CORRECTIVE ADJUSTMENTS IN THE VISION, OBJECTIVES, STRATEGY, ARE DEEMED APPROPRIATE
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STRATEGIC VISION
A ROADMAP OF AN ORGANISATIONS FUTURE PROVIDING SPECIFICS ABOUT TECHNOLOGY AND CUSTOMER FOCUS, THE GEOGRAPHIC AND PRODUCT MARKETS TO BE PURSUED
THE CAPABILITIES IT PLANS TO DEVELOP AND THE KIND OF ORGANISATION THAT MANAGEMENT IS TRYING TO CREATE
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MISSION STATEMENT
TYPICALLY FOCUSSED ON ITS PRESENT BUSINESS SCOPE WHO WE ARE AND WHAT WE DO MISSION STATEMENTS BROADLY DESCRIBE:
AN ORGANISATIONS PRESENT CAPABILITIES CUSTOMER FOCUS ACTIVITIES AND BUSINESS MAKEUPS
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SETTING OBJECTIVES
OBJECTIVES ARE;
A ORGANISATIONS PERFORMANCE TARGETS:
THE RESULTS AND OUTCOMES IT WANTS TO ACHIEVE THEY FUNCTION AS YARDSTICKS FOR TRACKING AN ORGANISATIONS PERFORMANCE AND PROGRESS
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STRATEGIC AND FINANCIAL OBJECTIVES
STRATEGIC OBJECTIVES
RELATE TO OUTCOMES THAT STRENGTHEN AN ORGANISATIONS OVERRAL BUSINESS POSITION AND COMPETITIVE VIABILITY
FINANCIAL OBJECTIVES
RELATE TO FINANCIAL PERFORMANCE TARGETS MANAGEMENT HAS ESTABLISHED FOR THE ORGANISATION TO ACHIEVE STRATEGIES ARE PARTLY VISIBLE AND PARTLY HIDDEN TO OUTSIDE VIEW
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CRAFTING A STRATEGY
AN ORGANISATIONAL STRATEGY CONSISTS OF:
THE COMPETITIVE EFFORTS AND BUSINESS APPROACHES
THAT MANAGEMENT EMPLOY TO: PLEASE CUSTOMERS COMPETE SUCCESSFULLY AND ACHIEVE ORGANISATIONAL OBJECTIVES
STRATEGY IS BOTH PROACTIVE (INTENDED AND DELIBERATE) AND REACTIVE (ADAPTIVE)
STRATEGIC MANAGEMENT OVERVIEW
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THE NATURE OF STRATEGY
STRATEGY MAKING:
FUNDAMENTALLY A MARKET DRIVEN ENTREPRENEURAL ACTIVITY THE ESSENTIAL QUALITIES ARE A TALENT OF CAPITALISING ON EMERGING MARKET OPPORTUNITIES AND EVOLVING CUSTOMER NEEDS A BIAS FOR INNOVATION AND CREATIVITY AN APPETITE FOR PRUDENT RISK TAKING AND A STRONG SENSE OF WHAT NEEDS TO BE DONE TO GROW AND STRENGTHEN THE BUSINESS
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WHAT DOES A COMPANY STRATEGY CONSIST OF?
WHAT TO LOOK FOR: CONCERNS HOW TO:
MOVES TO REACT AND RESPOND TO EXTERNAL ENVIRONMENT ACTIONS TO ALTER GEOGRAPHIC COVERAGE ACTIONS TO MERGE WITH OR ACQUIRE ANOTHER COMPANY ACTIONS TO FORM STRATEGIC ALLIANCES / PARTNERSHIPS ACTIONS TO CAPITALISE ON NEW OPPORTUNITIES OR DEFEND AGAINST THREATS
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WHAT DOES A COMPANY STRATEGY CONSIST OF? CONTD
APPROACHES DEFINING HOW COMPANY MANAGES KEY FUNCTIONAL AREAS ACTIONS TO STRENGTHEN COMPANY RESOURCE BASE AND COMPETITIVE CAPABILITIES ACTIONS TO DIVERSIFY REVENUE BASE AND ENTER ALTOGETHER NEW INDUSTRIES OR BUSINESSES ACTIONS AND INITIATIVES TO OUTCOMPETE RIVALS
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WHY COMPANY STRATEGIES EVOLVE
THE MARCH OF EXTERNAL AND INTERNAL DEVELOPMENTS DICTATE THAT A COMPANYS STRATEGY CHANGES AND EVOLVE OVER TIME A CONDITION THAT MAKES STRATEGY MAKING AN ON GOING PROCESS
NOT A ONE TIME EVENT
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A STRATEGIC PLAN
CONSISTS OF:
AN ORGANISATIONS MISSION AND VISION NEAR TERM AND LONG TERM PERFORMANCE TARGETS AND STRATEGY
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REVISING STRATEGIC PLAN
THE FASTER A COMPANYS EXTERNAL AND INTERNAL ENVIRONMENT CHANGES, THE MORE FREQUENTLY ITS SHORTRUN AND LONG RUN STRATEGIC PLANS HAVE TO BE REVISED AND UPDATED ANNUAL CHANGES MAY NOT BE ADEQUATE IN TODAYS WORLD, STRATEGY LIFE CYCLES ARE GROWING SHORTER, NOT LONGER.
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MANAGING AND IMPLEMENTING STRATEGY EXECUTION PROCESS
STRATEGIC IMPLEMENTATION
CONCERNS MANAGERIAL EXERCISE OF PUTTING A FRESHLY CHOSEN STRATEGY INTO PLACE
STRATEGIC EXECUTION
DEALS WITH SUPERVISING THE ONGOING PURSUIT OF STRATEGY:
MAKING IT WORK IMPROVING THE COMPETENCE WITH WHICH IT IS EXECUTED AND SHOWING MEASURABLE PROGRESS IN ACHIEVING THE TARGETED RESULTS
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MANAGING STRATEGY EXECUTION
INCLUDES THE FOLLOWING PRINCIPAL ASPECTS: BUILDING AN ORGANISATION CAPABLE OF CARRYING OUT THE STRATEGY SUCCESSFULLY ALLOCATING COMPANY RESOURCES ESTABLISHING STRATEGY-SUPPORTIVE POLICIES AND PROCEDURES PUTTING FRESHLY CHOSEN STRUCTURE INTO ACTION MOTIVATING PEOPLE
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Strategy Execution contd
TYING REWARD STRUCTURE TO ACHIEVEMENT OF RESULTS COMMUNICATING EFFECTIVELY CREATING CONDUSIVE COMPANY STRUCTURE AND CULTURE INSTITUTING BEST PRACTICES AND PROGRAMS EXERTING INTERNAL LEADERSHIP NEEDED TO DRIVE IMPLEMENTATION
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WHO PERFORMS THE FIVE TASKS OF STRATEGIC MANAGEMENT?
EVERY COMPANY MANAGER HAS A STRATEGYMAKING/IMPLEMENTING ROLE IT IS FLAWED THINKING TO VIEW STRATEGIC MANAGEMENT S SOLELY THE PROVINCE OF SENIOR EXECUTIVES FOUR DISTINCT LEVELS OF STRATEGY MANAGERS:
CEO AND SENIOR MANAGERS MANAGERS RESPONSIBLE FOR SPECIFIC FUNCTIONS OR DEPARTMENTS MANAGERS OF MAJOR OPERATING UNITS
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HOW STRATEGIES GET CRAFTED
TEND TO TAKE ONE OF THE FOLLOWING FOUR FORMS:
CHIEF ARCHITECT APPROACH
E.G DELL AND MICROSOFT
DELEGATION APPROACH COLLABORATIVE OR TEAM APPROACH
HELPS WIN PARTICIPANTS WHOLE HEARTEDLY
CORPORATE OR INTRAPRENEUR APPROACH
RELIES UPON MIDDLE AND LOWER MANAGERS AND TEAMS TO SPOT NEW BUSINESS OPPORTUNITIES
EACH OF THE FOUR STRATEGY-MAKIN G APPROACHES HAS ADVANTAGES AND DISADVANTAGES AND EACH IS WORKABLE IN THE RIGHT SITUATION
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MONITORING THE IMPLEMENTATION
STRATEGIC VISION, OBJECTIVES, STRATEGY AND APPROACH TO IMPLEMENTATION ARE NEVER FINAL
EVALUATING PERFORMANCE REVIEWING CHANGES IN THE SURROUNDING ENVIRONMENT AND MAKING ADJUSTMENTS ARE NORMAL AND NECESSARY PARTS OF STRATEGIC MANAGEMENT PROCESS
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CHARACTERISTICS OF THE FIVE-TASK PROCESS
STRATEGIC MANAGEMENT IS A TIGHTLY-KNIT PROCESS THE BOUNDARIES BETWEEN THE FIVE TASKS ARE CONCEPTUAL NOT FENCES THAT PREVENT SOME OR ALL OF THEM BEING DONE TOGETHER
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THE ROLE OF BOARD OF DIRECTORS
CENTRAL ROLE OF BOARD OF DIRECTORS IN STRATEGIC MANAGEMENT PROCESS:
CRITICALLY APPRAISE AND ULTIMATELY APPROVE STRATEGIC ACTION PLANS AND EVALUATE THE STRATEGIC LEADERSHIP SKILLS OF CEO AND OTHERS IN LINE TO SUCCEED THE INCUMBENT CEO.
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Figure 1.4
Board Involvement in the Strategic Management Process
INITIATING ROLE (Highest level of board involvement)
APPROVING ROLE
(Lowest level of board involvement)
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BENEFITS OF STRATEGIC APPROACH TO MANAGING
ADVANTAGES INCLUJDE:
PROVIDING BETTER GUIDANCE TO ENTIRE ORGANISATION MAKING MANAGERS AND ALL EMPLOYEES MORE ALERT TO NEW OPPORTUNITIES AND THREATS HELP TO UNIFY THE ORGANISATION CREATING A MORE PROACTIVE POSTURE PROMOTING THE DEVELOPMENT OF CONSTANTLY EVOLVING BUSINESS MODEL TO MAKE IT SUSTAINABLE PROVIDE MANAGERS WITH RATIONALE FOR EVALUATING COMPETING BUDGET REQUESTS
THE BEST WAY TO PREDICT THE FUTURE IS TO CAUSE IT PETER DRUCKER
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EXERCISES
1. Examine the slide: How Strategies get crafted . Which option do you prefer and why? 2. Is every organization always in a state to produce a strategic plan? Explain. Hint: Carry out a readiness assessment. 3. What exactly is the role of the Board of Directors in producing strategic plans? 4. Some organizations meet annually to do strategic plans, usually in expensive exclusive secluded venues. Is this justified? 5. What do we mean by the business model of an organization?
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