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Strategic Management

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Strategic Management ­ MGT603
VU
Lesson 13
FUNCTIONS OF MANAGEMENT:
Objectives:
This lecture provides all the information regarding what are the core functions of management in a business
firm.
Functions of management
Functions of Management
Strategy Formulation
Planning
Strategy Implementation
Organizing
Strategy Implementation
Motivating
Strategy Implementation
Staffing
Strategy Evaluation
Controlling
Planning:
Planning is the:
Start of the process
Bridge between present and future
Increases likelihood of achieving desired results
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Strategic Management ­ MGT603
VU
Planning
Forecasting
Establishing objectives
Planning
Devising strategies
Developing policies
Setting goals
The only thing certain about the future of any organization is change, and planning is the essential bridge
between the present and the future that increases the likelihood of achieving desired results. Planning is the
process by which one determines whether to attempt a task, works out the most effective way of reaching
desired objectives, and prepares to overcome unexpected difficulties with adequate resources. Planning is
the start of the process by which an individual or business may turn empty dreams into achievements.
Planning enables one to avoid the trap of working extremely hard but achieving little.
Planning is an up-front investment in success. Planning helps a firm achieve maximum effect from a given
effort. Planning enables a firm to take into account relevant factors and focus on the critical ones. Planning
helps ensure that the firm can be prepared for all reasonable eventualities and for all changes that will be
needed. Planning enables a firm to gather the resources needed and carry out tasks in the most efficient way
possible. Planning enables a firm to conserve its own resources, avoid wasting ecological resources, make a
fair profit, and be seen as an effective, useful firm. Planning enables a firm to identify precisely what is to be
achieved and to detail precisely the who, what, when, where, and why needed to achieve desired objectives.
Planning enables a firm to assess whether the effort, costs and implications associated with achieving
desired objectives are warranted. Planning is the cornerstone of effective strategy formulation. But even
though it is considered the foundation of management, it is commonly the task that managers neglect most.
Planning is essential for successful strategy implementation and strategy evaluation, largely because
organizing, motivating, staffing, and controlling activities depend upon good planning.
The process of planning must involve managers and employees throughout an organization. The time
horizon for planning decreases from two to five years for top-level to less than six months for lower-level
managers. The important point is that all managers do planning and should involve subordinates in the
process to facilitate employee understanding and commitment.
Planning can have a positive impact on organizational and individual performance. Planning allows an
organization to identify and take advantage of external opportunities and minimize the impact of external
threats. Planning is more than extrapolating from the past and present into the future. It also includes
developing a mission, forecasting future events and trends, establishing objectives, and choosing strategies
to pursue.
An organization can develop synergy through planning. Synergy exists when everyone pulls together as a
team that knows what it wants to achieve; synergy is the 2 1 2 5 5 effect. By establishing and communicating
clear objectives, employees and managers can work together toward desired results. Synergy can result in
powerful competitive advantages. The strategic-management process itself is aimed at creating synergy in an
organization.
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Strategic Management ­ MGT603
VU
Planning allows a firm to adapt to changing markets and thus shape its own destiny. Strategic management
can be viewed as a formal planning process that allows an organization to pursue proactive rather than
reactive strategies. Successful organizations strive to control their own futures rather than merely react to
external forces and events as they occur. Historically, organisms and organizations that have not adapted to
changing conditions have become extinct. Swift adaptation is needed today more than ever before because
changes in markets, economies, and competitors worldwide are accelerating.
Organizing:
Achieve coordinated effort
Defining task and authority relationships
Departmentalization
Delegation of authority
Organizing
Organizational design
Organizational design
Organizational design
JJob specialization
ob specialization
Job specialization
Job descriptions
Job descriptions
Job descriptions
JJob specifications
ob specifications
Job specifications
Span of control
Span of control
Span of control
Organizing
Organizing
Organizing
Unity of ccommand
Unity of command
Unity of ommand
Coordination
Coordination
Coordination
Job design
Job design
Job design
Job analysis
Job analysis
Job analysis
The purpose of organizing is to achieve coordinated effort by defining task and authority relationships.
Organizing means determining who does what and who reports to whom. There are countless examples in
history of well-organized enterprises successfully competing against, and in some cases defeating, much
stronger but less-organized firms. A well-organized firm generally has motivated managers and employees
who are committed to seeing the organization succeed. Resources are allocated more effectively and used
more efficiently in a well-organized firm than in a disorganized firm.
The organizing function of management can be viewed as consisting of three sequential activities: breaking
tasks down into jobs (work specialization), combining jobs to form departments (departmentalization), and
delegating authority. Breaking tasks down into jobs requires development of job descriptions and job
specifications. These tools clarify for both managers and employees what particular jobs entail.
Combining jobs to form departments' results in an organizational structure, span of control, and a chain of
command. Changes in strategy often require changes in structure because new positions may be created,
deleted, or merged. Organizational structure dictates how resources are allocated and how objectives are
established in a firm. Allocating resources and establishing objectives geographically, for example, is much
different from doing so by product or customer.
The most common forms of departmentalization are functional, divisional, strategic business unit, and
matrix.
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Strategic Management ­ MGT603
VU
Delegating authority is an important organizing activity, as evidenced in the old saying "You can tell how
good a manager is by observing how his or her department functions when he or she isn't there."
Employees today are more educated and more capable of participating in organizational decision making
than ever before. In most cases, they expect to be delegated authority and responsibility, and to be held
accountable for results. Delegation of authority is embedded in the strategic-management process.
Motivating
Influencing people to accomplish specific objectives
Communication is a major component
Motivating can be defined as the process of influencing people to accomplish specific objectives. Motivation
explains why some people work hard and others do not. Objectives, strategies, and policies have little
chance of succeeding if employees and managers are not motivated to implement strategies once they are
formulated. The motivating function of management includes at least four major components: leadership,
group dynamics, communication, and organizational change.
Motivating
Leadership
Communication
Work groups
Job enrichment
Motivating
Job satisfaction
Needs fulfillment
Organizational
change
Morale
When managers and employees of a firm strive to achieve high levels of productivity, this indicates that the
firm's strategists are good leaders. Good leaders establish rapport with subordinates, empathize with their
needs and concerns, set a good example, and are trustworthy and fair. Leadership includes developing a
vision of the firm's future and inspiring people to work hard to achieve that vision. Kirkpatrick and Locke
reported that certain traits also characterize effective leaders: knowledge of the business, cognitive ability,
self-confidence, honesty, integrity, and drive.
Research suggests that democratic behavior on the part of leader's results in more positive attitudes toward
change and higher productivity than does autocratic behavior.
Group dynamics play a major role in employee morale and satisfaction. Informal groups or coalitions form
in every organization. The norms of coalitions can range from being very positive to very negative toward
management. It is important, therefore, that strategists identify the composition and nature of informal
groups in an organization to facilitate strategy formulation, implementation, and evaluation. Leaders of
informal groups are especially important in formulating and implementing strategy changes.
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Strategic Management ­ MGT603
VU
Communication, perhaps the most important word in management, is a major component in motivation. An
organization's system of communication determines whether strategies can be implemented successfully.
Good two-way communication is vital for gaining support for departmental and divisional objectives and
policies. Top-down communication can encourage bottom-up communication. The strategic-management
process becomes a lot easier when subordinates are encouraged to discuss their concerns, reveal their
problems, provide recommendations, and give suggestions. A primary reason for instituting strategic
management is to build and support effective communication networks throughout the firm.
Staffing
Personnel management
Human resources management
The management function of staffing, also called personnel management or human resource management, includes
activities such as recruiting, interviewing, testing, selecting, orienting, training, developing, caring for,
evaluating, rewarding, disciplining, promoting, transferring, demoting, and dismissing employees, and
managing union relations.
Staffing
Management
Wage & salary admin
Employee benefits
Interviewing
Hiring
Firing
Training
Staffing
Management development
Safety
Affirmative action
EEO
Labor relations
Career development
Discipline procedures
Staffing activities play a major role in strategy-implementation efforts, and for this reason human resource
managers are becoming more actively involved in the strategic-management process. Strengths and
weaknesses in the staffing area are important to identify.
The complexity and importance of human resource activities have increased to such a degree that all but the
smallest organizations now need a full-time human resource manager. Numerous court cases that directly
affect staffing activities are decided each day. Organizations and individuals can be penalized severely for
not following federal, state, and local laws and guidelines related to staffing. Line managers simply cannot
stay abreast of all the legal developments and requirements regarding staffing. The human resources
department coordinates staffing decisions in the firm so that an organization as a whole meets legal
requirements. This department also provides needed consistency in administering company rules, wages,
and policies.
Human resources management is particularly challenging for international companies. For example, the
inability of spouses and children to adapt to new surroundings has become a major staffing problem in
overseas transfers. The problems include premature returns, job performance slumps, resignations,
discharges, low morale, marital discord, and general discontent.
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Strategic Management ­ MGT603
VU
Strategists are becoming increasingly aware of how important human resources are to effective strategic
management. Human resource managers are becoming more involved and more proactive in formulating
and implementing strategies. They provide leadership for organizations that are restructuring or allowing
employees to work at home.
Controlling
Ensure actual operations conform to planned operations
Controlling
Management
Quality control
Financial control
Sales control
Controlling
Inventory control
Expense control
Analysis of variances
Rewards
Sanctions
The controlling function of management includes all those activities undertaken to ensure that actual
operations conform to planned operations. All managers in an organization have controlling responsibilities,
such as conducting performance evaluations and taking necessary action to minimize inefficiencies. The
controlling function of management is particularly important for effective strategy evaluation. Controlling
consists of four basic steps:
1. Establishing performance standards
2. Measuring individual and organizational performance
3. Comparing actual performance to planned performance standards
4. Taking corrective actions
Measuring individual performance is often conducted ineffectively or not at all in organizations. Some
reasons for this shortcoming are that evaluation can create confrontations that most managers prefer to
avoid, can take more time than most managers are willing to give, and can require skills that many managers
lack. No single approach to measuring individual performance is without limitations. For this reason, an
organization should examine various methods, such as the graphic rating scale, the behaviorally anchored
rating scale, and the critical incident method, and then develop or select a performance appraisal approach
that best suits the firm's needs.
Management Audit Checklist of Questions
The checklists of questions provided below can help determine specific strengths and weaknesses in the
functional area of business. An answer of no to any question could indicate a potential weakness, although
the strategic significance and implications of negative answers, of course, will vary by organization, industry,
and severity of the weakness. Positive or yes answers to the checklist questions suggest potential areas of
strength.
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Strategic Management ­ MGT603
VU
1. Does the firm use strategic-management concepts?
2. Are company objectives and goals measurable and well communicated?
3. Do managers at all hierarchical levels plan effectively?
4. Do managers delegate authority well?
5. Is the organization's structure appropriate?
6. Are job descriptions and job specifications clear?
7. Is employee morale high?
8. Are employee turnover and absenteeism low?
9. Are organizational reward and control mechanisms effective?
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Table of Contents:
  1. NATURE OF STRATEGIC MANAGEMENT:Interpretation, Strategy evaluation
  2. KEY TERMS IN STRATEGIC MANAGEMENT:Adapting to change, Mission Statements
  3. INTERNAL FACTORS & LONG TERM GOALS:Strategies, Annual Objectives
  4. BENEFITS OF STRATEGIC MANAGEMENT:Non- financial Benefits, Nature of global competition
  5. COMPREHENSIVE STRATEGIC MODEL:Mission statement, Narrow Mission:
  6. CHARACTERISTICS OF A MISSION STATEMENT:A Declaration of Attitude
  7. EXTERNAL ASSESSMENT:The Nature of an External Audit, Economic Forces
  8. KEY EXTERNAL FACTORS:Economic Forces, Trends for the 2000ís USA
  9. EXTERNAL ASSESSMENT (KEY EXTERNAL FACTORS):Political, Governmental, and Legal Forces
  10. TECHNOLOGICAL FORCES:Technology-based issues
  11. INDUSTRY ANALYSIS:Global challenge, The Competitive Profile Matrix (CPM)
  12. IFE MATRIX:The Internal Factor Evaluation (IFE) Matrix, Internal Audit
  13. FUNCTIONS OF MANAGEMENT:Planning, Organizing, Motivating, Staffing
  14. FUNCTIONS OF MANAGEMENT:Customer Analysis, Product and Service Planning, Pricing
  15. INTERNAL ASSESSMENT (FINANCE/ACCOUNTING):Basic Types of Financial Ratios
  16. ANALYTICAL TOOLS:Research and Development, The functional support role
  17. THE INTERNAL FACTOR EVALUATION (IFE) MATRIX:Explanation
  18. TYPES OF STRATEGIES:The Nature of Long-Term Objectives, Integration Strategies
  19. TYPES OF STRATEGIES:Horizontal Integration, Michael Porterís Generic Strategies
  20. TYPES OF STRATEGIES:Intensive Strategies, Market Development, Product Development
  21. TYPES OF STRATEGIES:Diversification Strategies, Conglomerate Diversification
  22. TYPES OF STRATEGIES:Guidelines for Divestiture, Guidelines for Liquidation
  23. STRATEGY-FORMULATION FRAMEWORK:A Comprehensive Strategy-Formulation Framework
  24. THREATS-OPPORTUNITIES-WEAKNESSES-STRENGTHS (TOWS) MATRIX:WT Strategies
  25. THE STRATEGIC POSITION AND ACTION EVALUATION (SPACE) MATRIX
  26. THE STRATEGIC POSITION AND ACTION EVALUATION (SPACE) MATRIX
  27. BOSTON CONSULTING GROUP (BCG) MATRIX:Cash cows, Question marks
  28. BOSTON CONSULTING GROUP (BCG) MATRIX:Steps for the development of IE matrix
  29. GRAND STRATEGY MATRIX:RAPID MARKET GROWTH, SLOW MARKET GROWTH
  30. GRAND STRATEGY MATRIX:Preparation of matrix, Key External Factors
  31. THE NATURE OF STRATEGY IMPLEMENTATION:Management Perspectives, The SMART criteria
  32. RESOURCE ALLOCATION
  33. ORGANIZATIONAL STRUCTURE:Divisional Structure, The Matrix Structure
  34. RESTRUCTURING:Characteristics, Results, Reengineering
  35. PRODUCTION/OPERATIONS CONCERNS WHEN IMPLEMENTING STRATEGIES:Philosophy
  36. MARKET SEGMENTATION:Demographic Segmentation, Behavioralistic Segmentation
  37. MARKET SEGMENTATION:Product Decisions, Distribution (Place) Decisions, Product Positioning
  38. FINANCE/ACCOUNTING ISSUES:DEBIT, USES OF PRO FORMA STATEMENTS
  39. RESEARCH AND DEVELOPMENT ISSUES
  40. STRATEGY REVIEW, EVALUATION AND CONTROL:Evaluation, The threat of new entrants
  41. PORTER SUPPLY CHAIN MODEL:The activities of the Value Chain, Support activities
  42. STRATEGY EVALUATION:Consistency, The process of evaluating Strategies
  43. REVIEWING BASES OF STRATEGY:Measuring Organizational Performance
  44. MEASURING ORGANIZATIONAL PERFORMANCE
  45. CHARACTERISTICS OF AN EFFECTIVE EVALUATION SYSTEM:Contingency Planning