STRATEGIC MANAGEMENT AND OPERATION (MGB4033)

This course introduces students to the concepts and principles of strategic management and operation. Students will finish this course being able to evaluate businesses from a strategic perspective and apply contemporary operations management techniques. 

The course is to provide an understanding of the importance of good management and operation. The focus will be on how and when to use different types of strategy which depends on the organization itself and how to provide analytical concepts for the decision making process.
Hope this blog will help us to understand the subject easily… Enjoy your reading!!! 😁😁😁

Operation Management

 

In this article, we will introduce you to a historical background and the current concept of operation management, its guiding principles, and the everyday activities that are the responsibility of an operation manager. We will also give you an outlook on some of the recent trends that have an impact on this discipline.

WHAT IS OPERATIONS MANAGEMENT?

Operations management involves planning, organizing, and supervising processes, and make necessary improvements for higher profitability. The adjustments in the everyday operations have to support the company’s strategic goals, so they are preceded by deep analysis and measurement of the current processes.

Required skills

The skills required to perform such work are as diverse as the function itself. The most important skills are:

• Organizational abilities. Organizing processes in an organization requires a set of skills from planning and prioritizing through execution to monitoring. These abilities together help the manager achieve productivity and efficiency.
• Analytic capabilities/understanding of process. The capability to understand processes in your area often includes a broad understanding of other functions, too. An attention to detail is often helpful to go deeper in the analysis.
• Coordination of processes. Once processes are analyzed and understood, they can be optimized for maximum efficiency. Quick decision-making is a real advantage here, as well as a clear focus problem-solving.
• People skills. Flaws in the interactions with employees or member of senior management can seriously harm productivity, so an operation manager has to have people skills to properly navigate the fine lines with their colleagues. Furthermore, clear communication of the tasks and goals serves as great motivation and to give a purpose for everyone.
• Creativity. Again, problem-solving skills are essential for a creative approach if things don’t go in the right direction. When they do, creativity helps find new ways to improve corporate performance.
• Tech-savviness. In order to understand and design processes in a time when operations are getting increasingly technology-dependent, affinity for technology is a skill that can’t be underestimated. Operations managers have to be familiar with the most common technologies used in their industries, and have an even deeper understanding of the specific operation technology at their organizations.

The ten principles of OM by Randall Schaeffer

Randall Schaeffer is an experienced manufacturing and operations management professional, an industrial philosopher, and regular speaker at conferences organized by APICS, the leading US association of supply chain and operations management. He presented his list of 10 principles of operations management at an APICS conference in 2007, saying the violation of these principles had caused the struggle US manufacturing companies were experiencing.

• Reality. Operations management should focus on the problem, instead of the techniques, because no tool in itself would present a universal solution.
• Organization. Processes in manufacturing are interconnected. All elements have to be predictable and consistent, in order to achieve a similar outcome in profits.
• Fundamentals. The Pareto rule is also applicable to operations: 80% of success comes from a strict adherence to precisely maintaining records and disciplines, and only 20% comes from applying new techniques to the processes.
• Accountability. Managers are expected to set the rules and the metrics, and define responsibilities of their subordinates, as well as regularly check if the goals are met. Only this way would the workers put in the necessary efforts.
• Variance. Variance of processes has to be encouraged, because if managed well, they can be sources of creativity.
• Causality. Problems are symptoms: effects of underlying causes. Unless the causes are attacked, the same problems will appear again.
• Managed passion. The passion of employees can be a major driver of company growth, and it can be instilled by the managers if not coming naturally.
• Humility. Instead of a costly trial and error process, managers should acknowledge their limitations, “get help, and move on.”
• Success. What is considered success will change over time, but always consider the interest of the customer. In order to keep them, all the other principles have to be revised occasionally.
• Change. There will always be new theories and solutions, so you should not stick to one or the other, but embrace the change, and manage for stability in the long term.

Strategic Implementation

What Is Strategic Implementation?

Strategic implementation put simply is the process that puts plans and strategies into action to reach goals. A strategic plan is a written document that lays out the plans of the business to reach goals, but will sit forgotten without strategic implementation. The implementation makes the company’s plans happen.

Facts

Strategic implementation is critical to a company’s success, addressing the who, where, when, and how of reaching the desired goals and objectives. It focuses on the entire organization. Implementation occurs after environmental scans, SWOT analyses, and identifying strategic issues and goals. Implementation involves assigning individuals to tasks and timelines that will help an organization reach its goals.

Features

A successful implementation plan will have a very visible leader, such as the CEO, as he communicates the vision, excitement and behaviors necessary for achievement. Everyone in the organization should be engaged in the plan. Performance measurement tools are helpful to provide motivation and allow for followup. Implementation often includes a strategic map, which identifies and maps the key ingredients that will direct performance. Such ingredients include finances, market, work environment, operations, people and partners.

Common Mistakes

A very common mistake in strategic implementation is not developing ownership in the process. Also, a lack of communication and a plan that involves too much are common pitfalls. Often a strategic implementation is too fluffy, with little concrete meaning and potential, or it is offered with no way of tracking its progress. Companies will often only address the implementation annually, allowing management and employees to become caught up in the day-to-day operations and neglecting the long-term goals. Another pitfall is not making employees accountable for various aspects of the plan or powerful enough to authoritatively make changes.

Needs

To successfully implement your strategy, several items must be in place. The right people must be ready to assist you with their unique skills and abilities. You need to have the resources, which include time and money, to successfully implement the strategy. The structure of management must be communicative and open, with scheduled meetings for updates. Management and technology systems must be in place to track the implementation, and the environment in the workplace must be such that everyone feels comfortable and motivated.

The Plan

My Strategic Plan website offers a step-by-step plan for implementation. It includes finalizing the strategic plan with all necessary personnel, aligning the budget and producing various versions of the plan for individual groups. Next you will establish a system for tracking the plan and managing the system with rewards. The entire implementation plan is then presented to the entire organization, rolling it into annual company plans. Finally, you will schedule monthly meetings to keep everyone on track and annual review dates for reporting progress, and adding new assessments.

Strategic Management in Islamic Perspective

 

BCG Matrix

Definition

 BCG matrix (or growth-share matrix) is a corporate planning tool, which is used to portray firm’s brand portfolio or SBUs on a quadrant along relative market share axis (horizontal axis) and speed of market growth (vertical axis) axis.

Growth-share matrix is a business tool, which uses relative market share and industry growth rate factors to evaluate the potential of business brand portfolio and suggest further investment strategies.

Understanding the tool

 

BCG matrix is a framework created by Boston Consulting Group to evaluate the strategic position of the business brand portfolio and its potential. It classifies business portfolio into four categories based on industry attractiveness (growth rate of that industry) and competitive position (relative market share). These two dimensions reveal likely profitability of the business portfolio in terms of cash needed to support that unit and cash generated by it. The general purpose of the analysis is to help understand, which brands the firm should invest in and which ones should be divested.

Relative market share. One of the dimensions used to evaluate business portfolio is relative market share. Higher corporate’s market share results in higher cash returns. This is because a firm that produces more, benefits from higher economies of scale and experience curve, which results in higher profits. Nonetheless, it is worth to note that some firms may experience the same benefits with lower production outputs and lower market share.

Market growth rate. High market growth rate means higher earnings and sometimes profits but it also consumes lots of cash, which is used as investment to stimulate further growth. Therefore, business units that operate in rapid growth industries are cash users and are worth investing in only when they are expected to grow or maintain market share in the future.

There are four quadrants into which firms brands are classified:

Dogs. Dogs hold low market share compared to competitors and operate in a slowly growing market. In general, they are not worth investing in because they generate low or negative cash returns. But this is not always the truth. Some dogs may be profitable for long period of time, they may provide synergies for other brands or SBUs or simple act as a defense to counter competitors moves. Therefore, it is always important to perform deeper analysis of each brand or SBU to make sure they are not worth investing in or have to be divested.
Strategic choices: Retrenchment, divestiture, liquidation.

Cash cows. Cash cows are the most profitable brands and should be “milked” to provide as much cash as possible. The cash gained from “cows” should be invested into stars to support their further growth. According to growth-share matrix, corporates should not invest into cash cows to induce growth but only to support them so they can maintain their current market share. Again, this is not always the truth. Cash cows are usually large corporations or SBUs that are capable of innovating new products or processes, which may become new stars. If there would be no support for cash cows, they would not be capable of such innovations.
Strategic choices: Product development, diversification, divestiture, retrenchment.

Stars. Stars operate in high growth industries and maintain high market share. Stars are both cash generators and cash users. They are the primary units in which the company should invest its money, because stars are expected to become cash cows and generate positive cash flows. Yet, not all stars become cash flows. This is especially true in rapidly changing industries, where new innovative products can soon be outcompeted by new technological advancements, so a star instead of becoming a cash cow, becomes a dog.
Strategic choices: Vertical integration, horizontal integration, market penetration, market development, product development.

Question marks. Question marks are the brands that require much closer consideration. They hold low market share in fast growing markets consuming large amount of cash and incurring losses. It has potential to gain market share and become a star, which would later become cash cow. Question marks do not always succeed and even after large amount of investments they struggle to gain market share and eventually become dogs. Therefore, they require very close consideration to decide if they are worth investing in or not.
Strategic choices: Market penetration, market development, product development, divestiture.

 

The Business and Functional Levels

Business Level Strategies

• Refer to strategies that firms use to build competitive advantage.
• Focus on improving the competitive position of a company’s product or services within the specific industry or market segment that the company services.

Figure 1.0: The three generic business level strategies (Porter, 1985)

Cost Leadership Strategy

• It refers to the organization’s ability to produce a product or service at a cost below what competitors can achieve.
• Companies which utilize a cost leadership strategy would concentrate on providing a basic and standardize product or service that can be produced at a relatively low cost and made available to a broad target market.
• Firms that adopt this strategy do not customize their products or services to an individual customer’s tastes, needs or desires.
• Successful implementation of the cost leadership strategy requires a consistent focus on driving costs relatively lower to competitors’ costs.

Differentiation Strategy

• Differentiation strategy consists of creating differences in the firm’s products or services by offering something that is perceived industry wide as unique and valued by customers.
• Firms that use this strategy would emphasize brand image, unique styling, technology, features, a dealer network, customer service or innovative design.
• This strategy is based on the assumption that customers are willing to pay a higher price for a product or service that is distinct or perceived to be unique from that of its rivals.
• Differentiation strategy creates customer loyalty to a firm’s products because customers perceive these products to be unique and as a result, are willing to pay more for a firm’s products or services.

Functional Level Strategies

• Functional level strategies are actions taken at the functional or operational level and they must be in line or contribute towards the overall strategy of the corporation.
• The functional strategies address problems commonly faced by lower-level managers, and handle activities considered relevant to achieve the business level and corporate level strategies.
• The functional level of an organization is the level of operating divisions and department.
• The main strategic issue at the functional level is very much related to the supply chain and the corresponding value chain if they are in manufacturing.
• The value chain or the value chain analysis (VCA) is a systematic approach to examine the development of competitive advantage.
• It consists of a series of activities that create value and cost in a specific business.

The Value Chain

The value chain activities can be classified into two main categories, primary activities and support activities.

• The primary activities are the activities involved in bringing materials into the business, operating on them, sending them out, marketing them, and servicing them.
• The support activities are the activities that improve the effectiveness or efficiency of the primary activities and other support activities in helping the organization achieve its competitive advantage.

The Value Chain: Primary Activities

There are five primary activities in the value chain which include:

1. Inbound logistics
2. Operations
3. Outbound logistics
4. Marketing and sales
5. Service

Corporate Level Strategy

What is Strategy?

Strategy is the direction and scope of an organization in a changing business environment through the configuration of its resources and competence with a view to meeting stakeholder expectation.

Characteristics of Strategy

• Long term in nature: The plan can be made in a short time, but the effect or impact it has on the organization is in the long term or in the forseeable future.
• Strategy contains elements of uncertainty
• It is directed towards the goals of the organization
• Dynamic in nature
• Strategy are normally complex
• Strategy affects the whole organization

There are basically three different levels where strategy can be formulated, they are:

• Corporate level strategy
• Business level strategy
• Functional level strategy

Today, we would be analyzing the corporate level strategies, with the other levels of strategy to come in subsequent posts. I hope you enjoy.

Corporate level Strategy: we can simply say that corporate level strategies are concerned with questions about what business to compete in. Corporate Strategy involves the careful analysis of the selection of businesses the company can successful compete in. Corporate level strategies affect the entire organization and are considered delicate in the strategic planning process.

Characteristics of Corporate Strategy

• Corporate level strategies are formulated by the top management with inputs from middle level management and lower level management in the formulation process and designing of sub strategies
• Decisions are complex and affects the entire organization
• It is concerned with the efficient allocation and utilization of scarce resources for the benefit of the organization
• Corporate level strategies are mapped out around the goal and objectives of an organization. They seek to translate these goals and objectives to reality
• Typical examples of decisions made are decisions on products and markets

 

Types of corporate Strategy:

The three main types of corporate strategies are Growth strategies, stability strategies and retrenchment.

Growth Strategy

Like the name implies, corporate strategies are those corporate level strategies designed to achieve growth in key metrics such as sales / revenue, total assets, profits etc.  A growth strategy could be implemented by expanding operations both globally and locally; this is a growth strategy based on internal factors which can be achieved through internal economies of scale. Aside from the illustration of internal growth strategies above, an organization can also grow externally through mergers, acquisitions and strategic alliances.

The two basic growth strategies are concentration strategies and diversification strategies.

Concentration strategy:  This is mostly utilized for company’s producing product lines with real growth potentials. The company concentrates more resources on the product line to increase its participation in the value chain of the product. The two main types of concentration strategies are vertical growth strategy and horizontal growth strategy.

Vertical growth strategy:  As mentioned above, by utilizing this strategy, the company participates in the value chain of the product by either taking up the job of the supplier or distributor. If the company assumes the function or the role previously taken up by a supplier, we call it backward integration, while it is called forward integration if a company assumes the function previously provided by a distributor.

Horizontal growth strategy: Horizontal growth is achieved by expanding operations into other geographical locations or by expanding the range of products or services offered in the existing market. Horizontal growth results into horizontal integration which can be defined as the degree in which a company increases production of goods or services at the same point on an industry’s value chain.

 

Diversification Strategy

Richard Rummelt, a strategy guru at UCLA Anderson School of Management, is of the opinion that companies think about diversification strategies when growth has reached its peak and there is no opportunity for further growth in the original business of the company. What then is this diversification strategy we speak of? A company is diversified when it is in two or more lines of business operating in distinct and diverse market environments.

Two basic types of diversification strategies are concentric and conglomerate.

Concentric Diversification: This is also called related diversification. It involves the diversification of a company into a related industry. This strategy is particularly useful to companies in leadership position as the firm attempts to secure strategic fit in a new industry where the firm’s product knowledge, manufacturing capability and marketing skills it used so effectively in the original industry can be used just as well in the new industry it is diversifying into.

Conglomerate Diversification: This is also called unrelated diversification; it involves the diversification of a company into an industry unrelated to its current industry. This type of diversification strategy is often utilized by companies in saturated industries believed to be unattractive, and without the knowledge or skill it could transfer to related products or services in other industries.

Stability Strategy

Stability strategies are mostly utilized by successful organizations operating in a reasonably predictable environment. It involves maintaining the current strategy that brought it success with little or no change. There are three basic types of stability strategies, they are:

• No change Strategy: When a company adopts this strategy, it indicates that the company is very much happy with the current operations, and would like to continue with the present strategy. This strategy is utilized by companies who are “comfortable” with their competitive position in its industry, and sees little or no growth opportunities within the said industry.

 

• Profit Strategy: In using this strategy, the company tries to sustain its profitability through artificial means which may include aggressive cost cutting and raising sales prices, selling of investments or assets, and removing non-core businesses. The profit strategy is useful in two instances:

1. To help a company through tough times or temporary difficulty; and
2. To artificially boost the value of a company in the case of an Initial Public Offering (IPO)

 

• Pause/ Proceed with caution Strategy: This strategy is used to test the waters before continuing with a full fledged strategy. It could be an intermediate strategy before proceeding with a growth strategy or retrenchment strategy. The pause or proceed with caution strategy is seen as a temporary strategy to be used until the environment becomes more hospitable or consolidate resources after prolonged rapid growth.

Retrenchment Strategies

Retrenchment strategies are pursued when a company’s product lines are performing poorly as a result of finding itself in a weak competitive position or a general decline in industry or markets. The strategy seeks to improve the performance of the company by eliminating the weakness pulling the company back. Examples of retrenchment strategies are:

• Turnaround Strategy: This strategy is adopted for the purpose of reversing the process of decline. This strategy emphasizes operational efficiency and is most appropriate at the beginning of the decline rather than the critical stage of the decline.

 

• Divestment Strategy: Divestment also known as divestiture is the selling off of assets for the different goals a company seeks to attain. This strategy involves the cutting off of loss making units, divisions or Strategic Business Units (“SBU”).

 

• Liquidation Strategy: Liquidation strategy is considered a last resort strategy, it is adopted by company’s when all their efforts to bringing the company to profitability is futile. The company chooses to abandon all activities totally, sell off its assets and see to the final close and winding up of the business.
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WEEK 4 – Strategic Planning Process: The Internal Environmental Analysis

Internal environmental analysis is the analysis of information (computation, measurements and illustrations) obtained from within company. It consists of calculations of operational costs, fixed costs and management, training costs, research and the position of the company compared to its competitors.

Management

5 basic functions of management:

1. planning
2. organizing
3. motivating
4. staffing
5. controlling

Marketing

The main purpose of marketing is to define, anticipate, create and fulfill customers’ needs and wants for products and services. According to David(2013), there are seven basic functions of marketing:

1. customer analysis
2. selling products/services
3. product and service planning
4. pricing
5. distribution
6. marketing research
7. opportunity analysis

Operation/Production

The definition of operation includes the process of transforming input/resources into products/outputs that are of higher value to the user.

According to Zainal Abidin(2007), several internal aspects considered in an operation analysis are as follows:

• Operational cost analysis
• Break-even point analysis
• Inventory analysis
• Efficiency and productivity analysis
• Usage of equipment nd machinery analysis

Week 3 – Strategic Planning Process: The External Environmental Analysis

What is Environmental Analysis?

Environmental analysis is a strategic tool. It is a process to identify all the external and internal elements, which can affect the organization’s performance. The analysis entails assessing the level of threat or opportunity the factors might present. These evaluations are later translated into the decision-making process. The analysis helps align strategies with the firm’s environment.

Our market is facing changes every day. Many new things develop over time and the whole scenario can alter in only a few seconds. There are some factors that are beyond your control. But, you can control a lot of these things.

Businesses are greatly influenced by their environment. All the situational factors which determine day to day circumstances impact firms. So, businesses must constantly analyze the trade environment and the market.

There are many strategic analysis tools that a firm can use, but some are more common. The most used detailed analysis of the environment is the PESTLE analysis. This is a bird’s eye view of the business conduct. Managers and strategy builders use this analysis to find where their market currently.  It also helps foresee where the organization will be in the future.

PESTLE analysis consists of various factors that affect the business environment. Each letter in the acronym signifies a set of factors. These factors can affect every industry directly or indirectly.

P for Political factors

 

The political factors take the country’s current political situation. It also reads the global political condition’s effect on the country and business. When conducting this step, ask questions like “What kind of government leadership is impacting decisions of the firm?”

E for Economic factors

Economic factors involve all the determinants of the economy and its state. These are factors that can conclude the direction in which the economy might move. So, businesses analyze this factor based on the environment. It helps to set up strategies in line with changes.

S for Social factors

Countries vary from each other. Every country has a distinctive mindset. These attitudes have an impact on the businesses. The social factors might ultimately affect the sales of products and services.

T for Technological factors

Technology is advancing continuously. The advancement is greatly influencing businesses. Performing environmental analysis on these factors will help you stay up to date with the changes. Technology alters every minute. This is why companies must stay connected all the time. Firms should integrate when needed. Technological factors will help you know how the consumers react to various trends.

L for Legal factors

Legislative changes take place from time to time. Many of these changes affect the business environment. If a regulatory body sets up a regulation for industries, for example, that law would impact industries and business in that economy. So, businesses should also analyze the legal developments in respective environments.

E for Environmental factors

The location influences business trades. Changes in climatic changes can affect the trade. The consumer reactions to particular offering can also be an issue. This most often affects agribusinesses.

Week 2- Elements of Strategic Management

Key Terms In Strategic Management

Strategic management, like many other subjects, has developed terminology to identify important concepts. Each of the following definitions is amplified and supplemented with additional examples in subsequent chapters.

Purpose

The organization’s purpose outlines why the organization exists; it includes a description of its current and future business (Leslie W. Rue, and Loyd L. Byars) The purpose of an organization is its primary role in society, a broadly defined aim (such as manufacturing electronic equipment) that it may share with many other organizations of its type.

Mission

The mission of an organization is the unique reason for its existence that sets it apart from all others (A. James, F. Stoner, and Charles Wankel) The organization’s mission describes why the organization exists and guides what it should be doing. Often, the organization’s mission is defined in a formal, written mission statement. Decisions on mission are the most important strategic decisions, because the mission is meant to guide the entire organization. Although the terms “purpose” and “mission” are often used interchangeably, to distinguish between them may help in understanding organizational goals.

Goals

A goal is a desired future state that the organization attempts to realize (Amitai Etzioni).

Objectives

The term objective is often used interchangeably with goal but usually refers to specific targets for which measurable results can be obtained. Organizational objectives are the end points of an organization’s mission. Objectives refer to the specific kinds of results the organizations seek to achieve through its existence and operations (William F. Glueck, and Lawrence R. Jauch) Objective define what it is the organization hopes to accomplish, both over the long and short term.

In this paper the terms “goals” and “objectives” are used interchangeably. Specifically, where other works are being referred to and those authors have used the term goal as opposed to objective, their terminology is retained.

Strategy

Strategies are the means by which long-term objectives will be achieved. “A strategy is a unified, comprehensive, and integrated plan that relates the strategic advantages of the firm to the challenges of the environment. It is designed to ensure that the basic objectives of the enterprise are achieved through proper execution by the organization” (William F. Glueck, and Lawrence R. Jauch). The role of strategy is to identify the general approaches that the organization utilize to achieve its organizational objectives. Therefore, the choice of strategy is so central to the study and understanding of strategic management.

What is a SWOT analysis?

S.W.O.T. is an acronym that stands for Strengths, Weaknesses, Opportunities, and Threats. A SWOT analysis is an organized list of your business’s greatest strengths, weaknesses, opportunities, and threats.

Strengths and weaknesses are internal to the company (think: reputation, patents, location). You can change them over time but not without some work. Opportunities and threats are external (think: suppliers, competitors, prices)—they are out there in the market, happening whether you like it or not. You can’t change them.

Overall for Introduction of Strategic Management Process

Enjoy this video guys,,, Hope this video ease of our understanding… 🤗🤗🤗