strategic management module 1

Strategic management (module#1) Professor Chanhi Park ( 박찬희 , 중앙대학교 경영대 학 ) Only for class discussion Never circulate without permission Key issues in ‘Strategic Management’ 1. Strategic Planning 2. Business Strategy 3. Corporate Strategy 4. Interactive reasoning 5. Strategic Decision Making 6. Strategy Evaluation & Control 7. External Relations This course will cover… • Strategic Planning – What is strategy : implication – Strategic planning process – Financial management as ‘resource planning’ – Scenario analysis and risk management – General manager’s challenge • Corporate Strategy – Logic of corporate operation – Identification of corporate advantage on the valuation chart – Corporate resource allocation • Business Strategy – Logic of business strategy and competitive reactions – Generic strategies : role of financial information – General manager’s challenge • Strategic Decision Making – Why do good managers choose poor strategies? – Significance and limitation of ‘system and process’ – General manager’s challenge • Interactive Reasoning – Lessons from ‘applied game theory’ – Real world solutions – Further reflections • Strategy Evaluation and Control – Why is control something more than numbers? – General manager’s challenge – Role of managerial discretion and judgment • External Relations – How to deal with the challenges from ‘external environments’? – PR / GR / IR – General manager’s challenge – Implication for working-level managers Strategic Planning Strategy – why is it important? • Concept of ‘strategy’ – Big & important decision : commitment-intensive, irreversible – Affecting the fate of the institution • Strategy process – Strategic ideas are initiated, reviewed, and implemented… – Firms with strong and valid process have better survival value – 참고 : “ 트집과 소통의 차이” ( 박찬희 매경 컬럼 ) • Essential tools – Strategic planning toolkits – Capital budgeting – Risk management Board Executive Committee Risk Committee Audit Committee Management Internal Audit Operations Corporate decision making process • Source: KPMG Internal Control Guide (Appendix) Strategic Management - academic discussions Strategic management = general management • Strategy – what it is… – Think a lot in advance and prepare… – Planning and execution • Designing the future – vision, mission, forecasting, prediction… • Making things done through people – essentially political… • Strategy – what it is not… – More than ‘functional’ or ‘divisional’ domain  Integration – More than ‘operation’ – Also called ‘General Management’ • Roles and responsibilities of general managers – Not only for ‘top management’, but also for ‘staff’ (in/out) – So called ‘Strategist’ – Necessary qualities required for the ‘strategists’… Strategy: what to do vs. how to do • General manager’s challenge – Strategy : What to do – Structure & Process : How to do – Making things done through people • Relative importance of ‘industry choice’? – Between-industry difference vs. within-industry difference – Firm heterogeneity and role of management – Competence, resource, strength… (all the same) – Critical problems of ‘industry importance’ arguments… • Only the living species are counted • Fit with own skills and resources… • Strategy from within vs.strategy from outside-in? – Discussions on ‘competitive advantage’ or ‘resource – No more than academic masturbation!!! [...]... increasing commitment – Careful review of credit portfolio + Built-in system of hedging and early warning Strategic planning, scenario analysis and risk management • Essentially no difference at all… – Strategic decision making process / Scenario analysis / Risk management – As is always the case in management studies, the conceptual classification is an outcome of academic system of division • Working... threat with strength Avoid this situation However, definition of strength and opportunity is dependent on strategic option’ SWOT is not an idea generation tool, but a reporting tool Strategic planning, internal control, and risk management Board Risk Committee Executive Committee Audit Committee Management Internal Audit Operations Source: KPMG Internal Control Guide Ready-made toolkits (2): scenario... sources – Raw information is hard to eat, but clean – Attention to small facts and gossips strengthens your odd-guessing • Regularly update your database and refresh your network Strategic Decision Making Strategic Management • General Management = Strategy + Structure • Structure = Form + Process • Manager’s Roles and Responsibilities – Vision, Entrepreneurial Initiative – Building and Running the System... your own business plan – What are the key decision points? – What kind of challenges? – What are the implementation issues? • Food for thoughts: ‘ 손경제 MBA’ lecture notes Ready-made toolkits (1) : strategic planning Strategic Planning: Beyond the Textbook Lessons • Managerial Problem Solving (textbook version) – Situation Analysis & Problem Definition – Planning-Implementation-Control – Differentiation... Competitive threats – Regulatory threats – Political economic threats • Value of ‘foundation’… Risk Management 와 연결해서 생각해 보면 • Risk Management – – – – • Estimation of maximum possible impact Identification of ‘risk factors’ & ‘tolerable risk level’ ‘Watch Dog’ role of risk management function Significance of intelligence activities FRM Tools? – Risk 에 대한 quantitative evaluation (Value at Risk) – Financial... problem solving • Initiative  definition  impetus  implementation • Narrowing down the solution domain – Strategic planning consumes much more time and energy than appears in the textbooks • Resource allocation process • Organizational dynamics • Internal tournament process • SWOT as a reporting tool Strategic Planning as a Loop Market potential Biz Idea development Actual product development Financing... Risk Management Risk factors in the uncertain world • The better you know about the world… – The better you capture the changes around you… – The better you identify the threat factors – The firmer grip you’ll have on the key decision variables • What are the threat factors? How to manage them? – Competitive threats – Regulatory threats – Political economic threats • Value of ‘foundation’… Risk Management. .. Irreversibility • Impact of the Move • Organization-wide’ – War, job decision, marriage, love affairs – Concepts of Mao Tsedung, Suntzu, Klauzewitz Elusive words, but critical in execution • Pros and cons of strategic planning • General manager’s challenges – Balancing + Constructive Ambiguity – Managed involvement – Intentional Overextension • Working Manager’s Challenges Strategy vs structure • People dimension... tournament mechanism • Procedural justice device  boundary control – Scenario analysis • Identification of key variables and decision criteria • Decision making with ‘simplified’ multiple choice set – Risk management • Identification of risk factors and tolerable risk level • Integration with corporate resource allocation process Keep in mind • ‘Manageability’ – No pain, no gain – Watch dog role & calculated... risk estimation – Critical issues • Divergence of Interest • Asymmetric incentive structure • Control systems relying only on numbers (inc EVA) often generate misleading signals • It is definitely a top management responsibility Intelligence activities - principles • Benchmark intelligence warfare guidelines – – – – – • Developing and running intelligence network Careful use of brokers and agents Securing . Strategic management (module#1) Professor Chanhi Park ( 박찬희 , 중앙대학교 경영대 학 ) Only for class discussion Never circulate without permission Key issues in Strategic Management 1. Strategic. process • Source: KPMG Internal Control Guide (Appendix) Strategic Management - academic discussions Strategic management = general management • Strategy – what it is… – Think a lot in advance and. management Board Executive Committee Risk Committee Audit Committee Management Internal Audit Operations Corporate decision making process • Source: KPMG Internal Control Guide (Appendix) Strategic