STRATEGIC MANAGEMENT THE SERVICE-LEARNING PAPER (Learning Experiences in Communities) Winnie M. Constantino AGSB AGENDA I. Session Objective II. The LEC/Service-Learning Project: An Overview III. A Review of the Strategic Management Process IV. The Service-Learning Paper: Outline and Contents V. The Conduct of Research and Planning Process VI. Milestones and Timetable OBJECTIVE OF THIS SESSION To discuss the LEC and Service-Learning Project and Paper in the context of Strategic Management: • Review the strategic planning process and discuss its application in the formulation of the Service-Learning plan • Agree on the outline and expected contents of the Service-Learning paper THE LEC/SERVICE-LEARNING PROJECT: AN OVERVIEW A REVIEW OF THE STRATEGIC MANAGEMENT PROCESS STRATEGIC MANAGEMENT DEFINITION “The art and science of formulating, implementing, and evaluating strategies that enable an organization to achieve its objectives.” STRATEGIC MANAGEMENT DEFINITION A company’s strategy is the “game plan” management has for achieving the organization’s goals and objectives and for attaining good performance. STRATEGIC MANAGEMENT / STRATEGIC PLANNING PROCESS Strategy Formulation Strategy Implementation Strategy Monitoring/Control THE STRATEGIC MANAGEMENT PROCESS STRATEGY FORMULATION IMPLEMENTATION MONITORING External Analysis Dev’t of Vision/ Mission Statement Establish Long-term Objectives Internal Analysis Generate Evaluate, And Select Strategies Implement Strategies: Set & execute action plans by functional units Measure and Evaluate Performance Note that there is an iteration process involved, thus the arrows can go back to the opposite direction. TYPES OF ORGANIZATION Business (For Profit) Multinational companies Domestic Companies Multi-business; Single-business Small, medium, large Various industry sectors Public; Family-owned Start-up, Mature Non-Profit Government NGO’s Cooperatives Schools/Universities Foundations THE SERVICE-LEARNING PAPER: OUTLINE AND CONTENTS OUTLINE Part A: BACKGROUND AND ANALYSIS I. II. III. IV. V. Background on the Partner-Organization Research Methodology Community Assessment (External Analysis) Organizational Assessment (Internal Analysis) Analysis of Issues and Generation of Alternative Strategies/Programs Part B: STRATEGIC PLAN/PROJECT PLAN I. II. III. IV. V. VI. VII. VIII. Strategic Thrust and Overall Objectives Strategies and Major Programs Scope of Proposed Program and Justification Specific Objectives for 2010-2011 Action Plan Other Organizational Support Needed Financial Requirements/Fund Sources Monitoring System: Performance Measures and Targets OUTLINE: I. Background on the Partner Organization Basic information: Name, when established, location and area of operation Mission/Vision/Objectives Example: To improve the well-being of the poor families in the municipality of San Jose Major programs and Projects Examples: Livelihood Program, Credit Program, Feeding Project, Education and Training Number of People Funding sources Examples: Internally-generated revenues, UN, USAID, Corporate and Individual donors, Local government Other relevant information OUTLINE: II. Research Methodology An explanation of the research methods or design used Examples: Interviews (Identify) Focused Group Discussions (FGD) Survey Data gathered from public data Past studies Data sources Examples: NSO, NEDA, Municipal government, NGO data Limitations, if any OUTLINE: III. Community Assessment (External Analysis) 1. Geographic area (description) 2. Profile of Potential/Target beneficiaries Population size: number of poor families Incomes/Sources or means of livelihood Housing conditions Health and nutrition status Educational attainment OUTLINE: III. Community Assessment (External Analysis) 3. Relevant External Factors Income or employment opportunities (e.g., Agriculture/farming, manufacturing, services) Availability of government services (e.g., public schools, health clinics, etc.) Cost of living (i.e., prices of food, transport, etc.) Environmental and sanitation conditions (e.g., availability of potable water, toilets) Cultural beliefs and practices Political factors (LGU and Barangay participation, institutions/structure, decision-making process) External stakeholders (e.g., cooperatives, local government, church group, local associations) OUTLINE: III. Community Assessment (External Analysis) 4. Opportunities and Threats Opportunities or Favorable factors Presence of public schools and health clinics On-going construction of some houses by GK Current mayor supportive of anti-poverty programs Some private companies are carrying our some Corporate Social Responsibility (CSR) projects Threats or Unfavorable factors Lack of access to potable water Poor roads and lack of transport facilities High prices of basic commodities OUTLINE: IV. Organizational Assessment (Internal Analysis) 1. Historical performance (based on success measures); Program accomplishments 2. Factors affecting performance Leadership/Management Funding/Financial resources Organizational structures Manpower (size, skills, attitudes and motivation Systems, policies and procedures (e.g., project approval, release of funding, monitoring system) 3. Strengths and Weaknesses OUTLINE: V. Analysis of Issues and Generation of Alternative Strategies/Programs A. Analysis of Issues (Problems/root causes) An analysis of the causes of why some people are poor in San Jose, based on the analysis of external factors. A summary of the organizational factors that need to be addressed to improve the organization’s effectiveness in achieving its objectives. B. Generation and evaluation of strategy choices and possible programs that can address the issues: • SWOT Analysis • Decision-making analysis (Decision-tree) SWOT ANALYSIS Strengths 1. 2. ... Weaknesses 1. 2. ... Opportunities 1. 2. 3. ... SO Strategies: WO Strategies: Threats 1. 2. 3. ... ST Strategies: WT Strategies: Use a firm’s strengths to take advantage of opportunities Use a firm’s strengths to avoid or reduce the impact of threats. Improve weaknesses by taking advantage of opportunities Defensive strategies directed at eliminating weaknesses and avoiding threats Evaluating Alternative Strategies/Programs Criteria: Acceptability Suitability Feasibility STRATEGY FORMULATION Strategies are the management decisions and programs needed in order to: 1. 2. 3. 4. Take advantage of the opportunities and counter the threats in the business environment Address the entity’s weaknesses and protect its strengths Resolve the strategic issues facing the entity/organization Achieve the entity’s strategic objectives OUTLINE: Part B: STRATEGIC PLAN/PROJECT PLAN I. Strategic Thrust and Overall Objectives II. Strategies and Major Programs III. Proposed Project IV. Specific Objectives for 2011-2012 V. Action Plan VI. Other Organizational Support needed VII. Financial Requirements/Fund Sources VIII. Monitoring System: Performance Measures and Targets Note: Hierarchy of Strategies/Objectives Vision/Mission Long-term Objectives Strategic Objectives/Strategic Thrust Strategies and Programs Sub-strategies/Projects Action Plans (Activities) ACTION PLAN (Do this for each program or project) Activities Milestones/ Expected Output Timetable Person(s) Resource ResponRequiresible ments VI. Other Organizational Support Needed Examples: • • • • • Resource allocation Training Equipment Manpower Changes in policies and procedures VII. Financial Requirements • Estimate how much is needed to carry out the plan or the project VIII. Monitoring System • Performance Measures/ Success Indicators • Monitoring mechanism Guidelines on Grouping and Scope of Project Big Group can work on Common Chapters of the Analysis and Planning for the whole Partner Organization Small Groups to work on Different Projects Guidelines on the Process 1. Community Assessment Discuss with partner organization Talk to potential/target beneficiaries Proper handling of family and community meetings Gather data Do field work 2. Internal Assessment Do this in collaboration with partner organization Conduct surveys, interviews or focused group discussions Use strategies for collaboration learned in other modules Facilitating and listening skills Giving feedback 3. Strategy Formulation/Action Planning Participative planning Involve people in the organization Milestones/Timetable Meeting with Partner Org/ Fieldwork Submission of Draft Reports Consultation w/Advisers (Indicative Dates) Nov. 17, 2009 Dec. 8 – Background and Community Assessment Dec. 10, 2009 Dec. 15, 2009 Jan. 5 – Organizational Analysis Jan. 7, 2009 Jan. 12, 2010 Jan. 26 - Analysis of Jan. 28, 2010 Issues and Generation of Alternative Strategies Feb. – Mar 2010 Mar. 16 - Strategies; Action Plans; Other concerns Mar. 18, 2010 May 3, 2010 – Submission of Final ServiceLearning Paper May 9-15, 2010 – Oral Defense COURSE OUTLINE & PROGRAM PART I: Sem I YL 7 (One whole-day Session) Introduction and Overview: Strategic Management Strategy Formulation PART II: Sem II YL7 Consultations Research/ Field Work Submission of LEC paper and Oral Defense PART III: Sem I YL 8 (Six sessions of 4-hrs each) Recap: Strategic Management Process Strategy Formulation & Strategy Choices: Business Setting Strategy Implementation Strategy Monitoring & Control GRADING SYSTEM Class Activities ◦ ◦ ◦ ◦ ◦ 80% Group Projects Individual Assignment Class Participation Midterms Final Exam Strategy (LEC) Paper ◦ Written Document ◦ Oral Defense 20% Note: Evaluation of group projects/reports to incorporate “peer grading” Winnie M. Constantino AGSB END OF SESSION EXTERNAL ANALYSIS Assessment of the external factors that impact on your organization’s performance. OPPORTUNITIES - created by favorable events, trends or possibilities for action that promise to: Enable you to achieve your organization’s objectives Expand the size of your customer base Give new avenues for customer access Increase the appeal of your product/service Gain better access to resources Reduce your costs Improve your cost efficiencies and productivity Improve your profitability/financial position THREATS – unfavorable events that have the opposite impact. STRATEGIC ISSUES What decisions facing a business are strategic and therefore deserve strategic management attention? 1. Strategic issues require top management decisions and involvement - they involve several areas of a firm’s operations 2. Strategic issues require large amounts of the firm’s resources - they require substantial allocation of people, physical assets or financial resources that must be obtained - they need to commit the firm to actions over an extended period 3. Strategic issues affect the firm’s long-term prosperity - Pearce and Robinson Strategic Management, 9th Ed. 2005 GROUP DISCUSSION: EXTERNAL ANALYSIS INTERNAL ANALYSIS THE STRATEGIC MANAGEMENT PROCESS STRATEGY FORMULATION IMPLEMENTATION MONITORING External Analysis Dev’t of Vision/ Mission Statement Establish Long-term Objectives Internal Analysis Generate Evaluate, And Select Strategies Implement Strategies: Mgt. Issues Implement Strategies: Functional Units Measure and Evaluate Performance Note that there is an iteration process involved, thus the arrows can go back to the opposite direction. INTERNAL ANALYSIS AND ORGANIZATIONAL SCANNING A comprehensive and thoughtful examination of the current state of an organization which defines its capacity for succeeding in its environment. Identification of the organization’s strengths and weaknesses. INTERNAL ANALYSIS AND ORGANIZATIONAL SCANNING THIS INVOLVES: An assessment of the organization’s business performance A closer analysis (probing) of the reasons behind the organization’s favorable or unfavorable performance An analysis of the various elements of the organization that affect its performance Analysis should focus on the organizational elements that are directly or indirectly related to the critical success factors of the business or industry INTERNAL SITUATION ANALYSIS To assess how well is the company’s present strategy working, review the company’s performance based on its defined success measures. Examples: Revenue/Sales growth in the past few years Market Share and how the company’s growth compares with that of the industry and other players Company’s costs and cost structure Company’s operating efficiencies Company’s net profit margins and rate of return on assets or equity investment For non-profit oriented enterprises, evaluate the company’s performance vis-à-vis its mandate. INTERNAL ANALYSIS AND ORGANIZATIONAL SCANNING IDENTIFICATION OF CRITICAL SUCCESS FACTORS The internal factors and capabilities that an entity needs to have in order to succeed in its industry Examples: Company reputation and image Price competitiveness Management capability Cost efficiency Quality of products and services Range of product and service offerings Skilled workers (availability of good doctors) Strategic location Capacity; Facilities and equipment Marketing efforts R & D capability Financial resources/strength INTERNAL SITUATION ANALYSIS The enterprise can be assessed in the various elements of organizational effectiveness. From this assessment, the important strengths and weaknesses can be identified. The following frameworks may be used for a systematic analysis: McKinsey’s 7-S Weissboard Model David’s Functional Audit DAVID’S INTERNAL AUDIT CHECKLIST (FUNCTIONAL UNITS) Management Marketing Finance Human Resource Management Production/Operation Research & Development Information Systems Note that the functional units can vary from one entity to another depending on how it is organized and depending on its business. MCKINSEY’S 7-S FRAMEWORK FOR ASSESSING THE ORGANIZATION STRUCTURE SYSTEMS STRATEGY SHARED VALUES SKILLS STYLE STAFF THE WEISBOARD MODEL FOR ASSESSING THE ORGANIZATION VISION STRUCTURE RELATIONSHIPS LEADERSHIP HELPING MECHANISMS - culture / mindsets - resources - skills - technology REWARDS / MOTIVATION - intrinsic - extrinsic VISION AND STRATEGY Clarity Responsiveness Alignment • Mission, Goals, Objectives and Targets • Strategies, Thrusts and Directions Guide Questions: 1. Is the organization’s set of mission, vision, objectives and strategies clear to all the employees in the organization? 2. Are these appropriate given current situation? LEADERSHIP/STYLE Leadership Styles Competence • Top Management • Middle-Management • First-Line Supervisors Guide Questions: 1. How would you describe the leadership style in the organization? 2. How effective is this in steering the organization towards its goals? 3. What can you say about the level of competence of the leaders ( i.e. top, middle and first line ) in managing the organization? 4. What are the most important areas for improvement and strengths? STRUCTURE/SKILLS Clarity • • • • Appropriateness Tasks and Work processes Skills Technology Organization Structure Effectiveness • Job Design • Work Distribution and Load • Physical Structures and Facilities Guide Questions: 1. 2. 3. 4. Is the current organization structure aligned to the requirements of the environment? If not why? What features of the structure are helpful and which ones interfere with efficient functioning? What are the work flow processes that are most critical to organizational functioning? Pinpoint strengths and weaknesses. Does the organization have the needed technical and managerial skills? Identify the areas where skills and competencies are inadequate. Are the physical structures and facilities appropriate for the effective functioning of the organization? REWARDS AND MOTIVATION Fairness Competitiveness Adequacy • Intrinsic Rewards • Extrinsic Rewards ( Pay, Benefits, Incentives ) • Recognition Programs Guide Questions: 1. What are the intrinsic rewards, if any, to working in the organization? 2. What can you say about the pay, benefits and incentives in terms of fairness, competitiveness and responsiveness to employee needs? 3. What non-financial motivation programs does the organization undertake? How responsive are these? HELPING MECHANISMS/SYSTEMS AND SHARED VALUES Presence Adequacy • Management Systems • Information Systems Competitiveness • Culture ( Values and Norms ) • Policies and Rules • Procedures and Guidelines Guide Questions: 1. How clearly are the organization’s values and norms enunciated and practiced in the entire organization? 2. What can you say about the effectiveness of the company’s management and information systems, such as : planning system, performance management system, decision-making process, Finance, HR and Administrative systems, in terms of driving and supporting business performance? 3. Are policies, rules and procedures clear, adequate, consistently applied and supportive of organization’s goals? RELATIONSHIPS Communication Channels • Subordinate-Superior • Superior-Subordinate Relationships • Peers • Inter-Department Guide Questions: 1. Does the organization have the appropriate level of coordination or team-work to accomplish the task? Within each department? Among departments? 2. What can you say about the communication channels between subordinates and superiors? Among peers? 3. Identify the most important areas for improvement and strengths. INTERNAL SITUATION ANALYSIS: SUMMARY 1. Review the company’s performance in terms of key performance measures Examples: Revenue/Sales growth in the past few years What products/services/market segments are growing fast, and which are growing slowly Company’s costs and cost structure Company’s operating efficiencies Company’s net profit margins and rate of return on assets or equity investment For non-profit oriented enterprises, review performance vis-à vis its mandate. INTERNAL SITUATION ANALYSIS: SUMMARY 2. 3. Look for favorable and unfavorable trends and analyze possible reasons for these by identifying strengths and weaknesses (use any of the organizational analysis frameworks) Identify the major strategic issues that the company must address GROUP DISCUSSION: INTERNAL ANALYSIS DIRECTION-SETTING AND STRATEGY FORMULATION THREE BASIC COMPONENTS OF STRATEGY DEVELOPMENT* Developing strategic VISION and business MISSION “Effective strategy-making begins with a concept of what a company should and should not do and a vision of where the organization needs to be headed.” Setting performance OBJECTIVES “Objectives represent a managerial commitment to achieving specific performance targets within a specific time frame.” Crafting STRATEGIES to produce the desired results “A strategy deals with the game plan for moving the company into an attractive business position and building a sustainable competitive advantage.” *Thompson and Strickland MISSION A MISSION states an enterprise’s fundamental reason for being and its primary commitments to its stakeholders. It guides an organization in terms of how it must do business. It usually states an enterprise’s: Primary purpose Commitments to its stakeholders Basic philosophy Core values MISSION VS. VISION A mission statement answers the question: What is our business? A vision statement answers the question: What do we want to become? VISION A VISION is a shared image of what the people in an enterprise aspire for it to be or to become. It conveys a desired future state. A good vision must be: Inspiring and worthy of one’s commitment Clear and compelling; must serve as a unifying focal point of effort Something vivid that the people can picture in their minds Aspirational yet something that the people can believe to be realistically possible OBJECTIVE-SETTING OBJECTIVE-SETTING Establishing Financial and Strategic Objectives: The second direction-setting task Setting objectives converts the strategic vision and directional course into specific performance targets. Objectives represent managerial commitment to achieving specific outcomes and results. The General Electric/Mckinsey Industry Attractiveness Business Strength Matrix Industry Attractiveness High High Business Strengths Medium Low Medium Low Investment & Growth Selective Growth Selectivity Selective Growth Selectivity Harvest Divest Selectivity Harvest Divest Harvest Divest OBJECTIVE-SETTING Arriving at a clearer definition of where we want to go and what we want to achieve in a given planning horizon. Long-term objectives represent the results expected from pursuing certain strategies -- Fred David OBJECTIVE-SETTING Arriving at a clearer definition of where we want to go and what we want to achieve in a given planning horizon. An Objective must be: • Specific • Measurable • Achievable • Realistic • Time-bound It must also be: • Challenging • Hierarchical • Understandable OBJECTIVE-SETTING TYPES OF OBJECTIVES: STRATEGIC & FINANCIAL Every company needs both strategic objectives and financial objectives STRATEGIC INTENT FINANCIAL OBJECTIVES • Better product/service quality • Lower costs relative to competitors • Broader or more attractive product/service line • Superior customer service • Wider geographic coverage • • • • Growth in revenues Growth in earnings Wider profit margins Higher returns on invested capital • Bigger cash flows OBJECTIVE-SETTING HOW MUCH STRETCH SHOULD OBJECTIVES ENTAIL? • Objectives should be high enough to produce outcomes at least incrementally better than current or past performance • Ideally, objectives ought to serve as a managerial tool for truly stretching an organization to reach its full potential; this means setting them high enough to be challenging - to energize the organization and its strategy. STRATEGY FORMULATION “Crafting strategy is an analysis-driven exercise. . . Judgments about what strategy to pursue need to flow directly from solid analysis of a company’s external environment and internal situation.” - THOMPSON AND STRICKLAND STRATEGY FORMULATION Strategies are the management decisions and programs needed in order to: 1. 2. 3. 4. 5. Take advantage of the opportunities and counter the threats in the business environment Address the entity’s weaknesses and protect its strengths Develop and sustain a competitive advantage Resolve the strategic issues facing the entity/organization Achieve the entity’s strategic objectives THE SWOT MATRIX OPPORTUNITIES O THREATS - T STRENGTHS - S WEAKNESSES - W SO STRATEGIES Use strengths to take advantage of opportunities WO STRATEGIES Overcome weaknesses by taking advantage of opportunities ST STRATEGIES Use strengths to avoid threats WT STRATEGIES Minimize weaknesses and avoid threats - Fred David STRATEGY FORMULATION GENERIC STRATEGIES: A long-term strategy should derive from a firm’s attempt to seek competitive advantage based on one of three generic strategies: 1. 2. 3. Striving for overall low-cost leadership in the industry. Striving to create and market unique products for varied customer groups through differentiation. Striving to have special appeal to one or more groups of customer or industrial buyers, focusing on their cost or differentiation concerns. STRATEGY FORMULATION GENERIC STRATEGIES: Required skills and resources for low cost leadership: 1. 2. 3. 4. 5. 6. Sustained capital investment and access to capital Process reengineering skills Intense supervision of labor Products designed for ease of manufacture Low cost distribution system Tight cost control. STRATEGY FORMULATION GENERIC STRATEGIES: Required skills and resources for differentiation: 1. 2. 3. 4. 5. Strong marketing abilities Product engineering Creative flare Strong R & D Reputation for quality or technological leadership. STRATEGY FORMULATION GENERIC STRATEGIES: Focus Strategy: Attempts to attend to the needs of a particular market segment. **Can be based on either low cost or differentiation strategy. STRATEGY FORMULATION VALUE DISCIPLINES: Strategies must deliver superior customer value through one of three value disciplines: 1. 2. 3. Operational excellence – strategies focus on lean and efficient operations. Customer intimacy – strategies focus on tailoring and shaping of products and services to fit an increasingly refined definition of the customer. Needs detailed customer knowledge and operational flexibility. Product leadership – strategies aim to produce a continuous stream of state of the art products and services. Requires: creativity, innovation, continuous improvement. STRATEGY FORMULATION GRAND STRATEGIES: Strategies that provide basic direction for strategic actions. 1. 2. 3. Market Penetration – strategies aim at increasing use of present products in present markets Market Development – strategies aim at selling present products in new markets. Product development – strategies aim at developing new products for the present market. STRATEGY FORMULATION OTHER GRAND STRATEGIES: Strategies that provide basic direction for strategic actions. 1. 2. 3. 4. Forward/Backward/Horizontal integration Related/Unrelated diversification Turn-around/Cost reduction/Retrenchment Divestiture/Liquidation STRATEGY EVALUATION TESTS OF A WINNING STRATEGY: 1. 2. 3. Goodness of fit test – A good strategy is tailored to fit the company’s external and internal situation. The competitive advantage test – A good strategy leads to sustainable competitive advantage. The performance test – A good strategy boosts company performance. EXAMPLE FINANCIAL OBJECTIVE: To grow revenues from P100 m in 2010 to P200 m by 2012. STRATEGIC INTENT: To develop/tap new markets through a wider range of product and service offerings. STRATEGIES: Provide products and services that will serve the market for medical tourism. Upgrade facilities to bring them to world-class standards. Enhance the skills and service level of the medical staff through the conduct of appropriate training programs. Build the company’s image in the Asia-Pacific region through advertising and promotional campaigns. EXAMPLE FINANCIAL OBJECTIVE: To improve profit margin from 3% of sales in 2007 to at least 10% of sales by 2012. STRATEGIC INTENT: To improve cost efficiencies and productivity and focus on high margin products and services. STRATEGIES: Eliminate/Phase out low-margin product and services. Review staffing and organization structure to make it more “lean and mean”. Improve operational procedures for manufacturing. Outsource non-core services (examples: repairs and maintenance, cleaning/janitorial, laundry) to low-cost providers. Re-engineer information systems and business processes. A STRATEGIC PLAN FOR A COMMUNITY PROJECT (LEC PAPER) OBJECTIVES: To apply some of the concepts learned in STRAMA To integrate learnings in Public Health, Management, & Clinical Medicine; through: The development of a strategic plan for a Community Project that will be along the partner-organization’s mission/vision Learning Activities: Research and field work, consultation with partnerorganization and professor-advisers Deadline for LEC paper submission: > Project Proposal: ?? > Draft Report: Middle of 2nd Sem > Final Report: End of 2nd Sem Oral Defense: within 30 days after report submission