Strategy and Governance - Strategic Process Overview

Question 1

Explain what strategic management is and the five-cycle

Answer 1

It’s continuous processing assessing the organization, mission, vision formulating & implementing strategy organization performance.
- Achieve the overall objective of the values

Five cycles: 1. Overall objective (or mandate) - 2. Mission, vision, and values. 3 Strategy Formulation - 4. Strategy Implementation - 5. Performance management

Question 2

What is the purpose of the overall objective, mission, vision, and values statement

Answer 2

The overall objective - to provide sustainable value to stakeholders
Profit-oriented - maximize owner wealth
Non-profit - Maximize value to users/ clients
Diagram - Sustainable value

Mission statement - Declaration of an organization’s strategic direction
Value statement - declaration of a company’s core beliefs, principles, culture, and philosophies
- How it’s going to get there
Vision statement - is a vivid description of where an organization is going - Ideal future state

Question 3

How is a strategy formed?

Answer 3

• It consists of identifying the target (customer) & understanding the value proposition (why the customer purchases your product)
  Target - The ideal customer
  Customer value proposition - Expression of why the customer should purchase the product

Can involve decisions for production, customer services, policies, hiring & training employee compensation
It can be time-consuming and complex

Question 4

What are the three levels of strategy formulation?

Answer 4

1. Corporate - What business should we be in? What organizational structure fits our needs?
   - Vision, mission, and value are made at the corporate level
   - Business with business - sole practitioner may have control of all decisions and centralized decision-making. Large businesses are more decentralized
2. Business level - What is our value proposition? Innovate, service & features that attract customers.
   What do customers value - ease of use, safety, timely delivery, brand name, personal service
   Strategy - low cost, differentiation (product leadership, customer intimacy), Focus/ niche
3. Functional level - How can we support the business and corporate strategy?
   - Strategy is more granular at a functional level
   Key success factor - An important element that must occur for the strategic goals at KSF
   External - what the organization needs to do
   KPI - Financial or non-financial, internal Ex. Employee turnover, gross profit margin, market shares.

Question 5

Why is strategy implementation an important factor?

Answer 5

• Have important factors to succeed. The right resources and activities
• It is to ensure resources and activities are aligned to achieve the intended strategy
• Coordinate with corporate, business, and functional level
  Ex. Capital budgeting, forecasting, effectiveness, organizational structure, financing alternatives. Use information more efficiently

Question 6

What is needed for performance management to succeed?

Answer 6

The entity needs feedback and communication. All activities that help align with the efforts of employees, department and process goals
- Align corporate, business, and functional level
Ex. Budget, Variance analysis, ROI, ROA, BSC, Residual income
- Not all performance measures are KPI