STRATEGIC MANAGEMENT

Dr. Santosh Kumar, PGDHM, MPhil, PhD.

Associate Professor
IIHMR, Jaipur

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COURSE OBJECTIVES
 What is the strategy?
 What is strategic management?

 Why strategic management?

 Who does strategic management?

 What is Strategic Planning

 How to do the strategic management ?

STRATEGIC MANAGEMENT
 Before we discuss the strategic management, just
think about your self when you passed your
MBBS/MD.
 What other degree(s) and training(s) did your
acquire after your MBBS /MD ?
 Why did you acquire these degrees ?

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STRATEGIC MANAGEMENT
“ Somehow there are organizations that effectively
manage change, continuously adapting their
bureaucracies, strategies, systems, products,
services and cultures to survive the shocks and
prosper from the forces that decimate others . . .
they are the masters of what I call renewal. ”
-Robert H. Waterman, Jr.
The Renewal Factor

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 STRATEGY?

What Does Strategy Mean?

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 WHAT DOES STRATEGY MEAN?

Greek Word “STRATEGO” meaning “to plan the

destruction of ones enemies through effective use
of resources”

Hence, a lot of term commonly used in relation

to strategy - objectives, mission, strengths,
weaknesses - were developed by the military.
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WHAT DOES STRATEGY MEAN?

Goal

Measures

Resources

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 WHAT DOES STRATEGY MEAN?

•It is a means to reach or achieve the vision, the

goal
•It is the means by which organizations
differentiate itself with others
•It is the means by which organizations can
positions itself between its external and internal
environments
•Strategy is to the organization what personality
is to the person 8
 Hospital without a strategy is like a ship
without rudder going around in circles.
 A firm without a strategy like Columbus
like when he went to search for America.
When he left Europe he did not know
where he is going, when he reached
America he did not know where he was
and when he returned he could not tell
where he went. A hospital manager must
know where it is leading and why it is
going?
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 A job of manger is to ..
WHAT DOES A “STRATEGY” LOOK
LIKE?
 It differentiates the hospital from others and /or
gives distinct competitive advantage.
 Operational efficiency: Cost efficiency,

 Innovations (in product, delivery, packaging etc.)

 Reverse Innovation

 Focus on Prevention of care

 Focus of on Primary healthcare

 WHO’s focus on elderly and patient safety

 Day Care Surgery

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WHAT DOES A “STRATEGY” LOOK
LIKE?
 The San Jose Museum of Modern Art is a
relatively new institution. They chose an
innovative acquisition strategy in pursuit of their
mission to in— crease opportunities to experience
world—class art for their community: they chose
to rent a collection, rather than buy one. Rather
than slowly accumulate a collection, the
traditional strategy for art museums, San Jose
negotiated with the Museum of Modern Art in
New York (which is only able to display some 10
percent of its collection at anyone time) to borrow
a museum full of art on a rotating basis, drawing 11
on the best collection in the world.
WHAT DOES A “STRATEGY” LOOK
LIKE?
 The mission of the NAMES Project Foundation, sponsor of
the AIDS Memorial Quilt, is to help bring an end to the
AIDS epidemic. In addition to memorializing the victims of
AIDS and drawing public attention to the AIDS epidemic,
the Quilt displays are designed to carry prevention
messages as well. Early on, the NAMES Project organized
public displays of the Quilt allover the country. In the past
few years however, the organization was able to adapt its
delivery strategy in order to reach more people. Rather
than producing all community displays each year through
its own network, the organization now also recruits
collaborative hosts in high schools, corporations,
communities of faith, and elsewhere which allow NAMES
to display the Quilt in three to four times as many locations
each year. 12
WHAT DOES A “STRATEGY” LOOK
LIKE?
 One local Humane Society provided a wide range
of services, including shelter and new homes for
stray pets, a spay and neuter clinic, and
euthenasia for unwanted animals. After many
years spent caring for neglected animals, the
society shifted its strategy toward prevention. To
implement the strategy all programs were
instructed to develop and implement an
education component to their service, and the
staff increased their efforts to pass legislation
designed to prevent unwanted pets and animal
abuse. 13
STRATEGY VS. TACTICS
 Strategies are forward-looking and long term.
They provide the guidelines for growth. With
strategies, you are in reality, speaking of future
performance gaps and how you are going to
overcome them.
 Tactics is short term

 Example: By definition Strategy means to

destroy enemy, tactics is how to attack enemy? do
we do frontal attack, or sidewise attack or do we
withdraw?

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 STRATEGIC MANAGEMENT

Strategic management is

a positioning of an organization between external

(?) environment and internal (?) situation

a future-oriented plan that provides decision-

making guidelines

In organization by practicing strategic management,

managers understand the present, think about the 15

future, and recognize the signals that suggest change

 STRATEGIC MANAGEMENT

•Chartering the long term direction of the hospital

•Setting the realistic goals and objectives of the
hospital
•Analyzing both the internal and external environment
•Formulating and executing the strategies
•Creating a long-term value for stakeholders

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WHY STRATEGIC MANAGEMENT?

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 WHY STRATEGIC MANAGEMENT?

- Demographic Shifts
- Population mobility
- Increasing Costs of sophisticated computer based
technologies
- Complicated network of cares
- Increasing Competition
- Shortage of resources
- Changing role for public health

.
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STRATEGIC MANAGEMENT IN THE
HEALTH CARE INDUSTRY
 Strategic management concepts have been
employed within health care organizations only
in the past 25 to 30 years.
 Prior to this time, individual health care
organizations had few incentives to employ
strategic management because typically they
were independent, freestanding, not - for - profit
institutions, and health services reimbursement
was on a cost - plus basis.

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 WHAT ARE THESE?
1950s 1960s 1970
• Theory Y • Managerial Grid • Zero-Based Budgets
• Management by • T-Groups • Participative Mgt
Objectives • Matrix Management • Portfolio Mgt
• Quantitative Mgt • Conglomeration • Quantitative MBAs
• Diversification •Centralization/Decentrali
zations

1980s 1990s 2000s

• Theory Z • Customer Focus • Six Sigma
• One-Minute • Quality Improvement • Balanced Score Card
Managing • Reengineering • Transformational
• Organization Culture • Benchmarking • Leadership
• Intrapreneuring • Resource-Based View • Self-Managed Teams
• Downsizing • Dynamic Capabilities
• MBWA (Mgt by • Virtual Organizations
Wandering Around) • Blue Oceans 20
• TQM/CQI
WHEN STRATEGY NOT NEEDED?
 When we have a tons of money to throw away
 When no competition/No challenge

 Monopoly situations

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STRATEGIC PLANNING
 Although Strategic Planning is sometimes used
interchangeably with strategic management, the
term strategic planning is actual process of
creating the strategy.
 The development of strategic management begins
with long term planning called strategic
planning.
 Long - range planning developed in the 1950s in
many organizations because operating budgets
were difficult to prepare without some idea of
future sales and the flow of funds.
 Post - WWII economies were growing and the
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demand for many products and services was

STRATEGIC PLANNING
 Long - range forecasts of demand enabled
managers to develop detailed marketing and
distribution, production, human resources, and
financial plans for their growing organizations.
 The objective of long - range planning is to
predict for some specified time in the future the
size of demand for an organization ’ s products
and services and to determine where demand will
occur.
 Many organizations have used long - range
planning to determine facilities expansion, hiring
forecasts, capital needs, and so on. 23
STRATEGIC PLANNING
 As industries became more volatile, long - range
planning was replaced by strategic planning
because the assumption underlying long - range
planning is that the organization will continue to
produce its present products and services –thus,
matching production capacity to demand is the
critical issue.

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STRATEGIC PLANNING
 However, the assumption underlying strategic
planning is that there is so much economic,
social, political, technological, and competitive
change taking place that the leadership of the
organization must periodically evaluate whether
it should even be offering its present products
and services, whether it should start offering
different products and services, or whether it
should be operating and marketing in a
fundamentally different way.

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WHAT STRATEGIC PLANNING IS NOT
 Strategic planning is not forecasting
 Strategic planning is not the simple application
of quantitative techniques to business planning.
 Strategic planning is concerned with making
decisions today that will affect the organization
(product line) and it’s future.
 Strategic planning does not eliminate risk, it
helps managers access the risks they must take
by gaining a better understanding of the
parameters involved in their decisions.
SIMPLIFIED PROCESS OF STRATEGIC
PLANNING
The process of strategic planning is a step-by-step
approach three key questions that lie at the heart
of any business strategy:
 What are you going to sell?

 Who are your target customers?

 How can you beat or avoid your competition?

If you can answer these three questions well, you

have a strategy.
SIMPLIFIED PROCESS OF STRATEGIC
PLANNING (CONT.)
 There’s no denying that a simplified process
involves complex issues.
 The process involves digesting a lot of
information and requires some fairly difficult
analysis.
 Good strategic planning should be simplified not
simplistic.
 Good intentions alone does not get the job done.
SIMPLIFIED PROCESS OF STRATEGIC
PLANNING (CONT.)

 You need to see it big at first. Start at a high level.

 Sift through all of the noise to get to the important
details
 The next step is do the things that matter very
well.
 Occasionally, go back up to the high level to make
sure everything is still on course.
SIMPLIFIED PROCESS OF STRATEGIC
PLANNING- START BY STUDYING THE WAY IT
IS NOW
 You need to gather basic information and facts
without making any judgments.
 Based on this information you build some
assumptions, again without making judgments.
 This process is the central part of the planning
process and needs to be reviewed in detail
because this information is the foundation for all
further strategy discussions and decisions.
 Data Ideas
1. External Situation 4. Assumptions
2. Internal Situation
3. Capabilities and
competencies

Analysis

5. Strategic assessment
Strategic Issues

Direction
6. Strategies

Commitment
7. Mission Statement
Goals
Objectives

Implementation
8. Action Plans
9. Budgets
10. Schedules
SIMPLIFIED PROCESS OF STRATEGIC
PLANNING- HOW IT WORKS

Planning
Monitor Developments
•Gather Information
•Assess Capabilities and
•Make Assumptions Progress
•Make Strategic Assessments
•Formulate Strategy
•Establish Goals and Objectives
•Formulate Tentative Action Plans
•Finalize Action Plans

Execution
 TOTAL ORGANIZATIONAL PLANNING

Strategic Planning Marketing Information

Long Term Business Plan

Market Plan
Shorter Term Business Plan

Sales Plan

Key Target Maintenance Why Bother

Account Strategy Account Strategy Account Strategy Account Strategy

Strategic

Territory Plans Action Plans Tactical

Key and Target Account Plans Control & Evaluation

START BY STUDYING THE WAY IT IS NOW
The course to your vision, like all navigation, starts
with a known position.
 What markets should you pursue
 Who are your competitors
 Where is your competitive advantage
 What are your strengths
 What are your weaknesses
Figuring out point A is the first essential step to
charting a course to get to point B. So get your
bearings! Where are you today?
P Which segments /
customers will we
CUSTOMER
TARGETS
O concentrate on ?

S
I
T Whom will we COMPETITOR
I challenge for these
customers?
TARGETS

O
N
I
N What incentives will we
provide to get them to buy
CORE
STRATEGY
G from us… rather than from
competitors?
 DEFINING AND SELECTING KEY/TARGET
ACCOUNTS
Strong Weak
High
Selectively
Invest / Grow Invest
ACCOUNT
ATTRACTIVENESS Manage for
Maintain Cash /
• Size Withdraw
Low
• Growth
BUSINESS STRENGTHS
• Profitability
• Location
• Purchasing criteria and • Product range
processes • Product efficacy (the power to produce an effec
• Current suppliers )
• Status of customer • Service quality (inc. distribution)
(prestige) • Price
• Associated services (e.g. Tech advice)
• Reputation/image
• Past experience
• Quality of sales staff
 ACCOUNT PORTFOLIO ANALYSIS
Strong Strength of Position Weak

High KEY TARGET

Attractiveness:
Accounts are very attractive since they offer
high opportunity and sales organization has
strong position.
Attractiveness:
Accounts are potentially attractive since
they offer high opportunity, but sales
organization currently has weak position
with accounts.

Sales call strategy: Sales call strategy:

Accounts should receive a high level of sales Selected accounts should receive a high
calls since they are the sales organization’s level of sales calls to strengthen the sales
most attractive accounts. organizations position.

Account
Opportunity MAINTENANCE WHY BOTHER
Attractiveness: Attractiveness:
Accounts are somewhat attractive since sales Accounts are very unattractive since they
organization has strong position, but future offer low opportunity and sales organization
opportunity is limited. has weak position.

Sales call strategy: Sales call strategy:

Accounts should receive a moderate level of Accounts should receive no field sales calls
sales calls to maintain the current strength of and a minimum of inside sales resources.
the sales organization’s position. And, efforts
should be made to replace field sales calls
with telephone sales.
Low
 ACCOUNT SEGMENTATION AND PRIORITIZATION
High KEY ACCOUNTS
• 10-20% of your account base
ACCOUNT ATTRACTIVENESS
• 80% of your GP$
• Receives less than 50% of your
resources
MAINTENANCE ACCOUNTS
• 40-45% of your account base
• 10-15% of your GP$
• Receives 30-40% of your
resources
Low
Strong YOUR STRENGTH OF POSITION
TARGET ACCOUNTS
(Your competition’s Key Accounts)
• Gets very little attention
WHY BOTHER? ACCOUNTS
• 30-40% of your account base
• Less than 5% of your GP$
• Receives 20-30% of your
resources
• Creates 90% of your
“headaches”
Weak
Sales Team and Selling Effort

Strong
Sales Channel:
Major Account
PROGRAMS KEY TARGET
Selling Effort:
Heavy by Specialist Sales Channel: Direct Marketing,
Teleselling, and Field
Selling
Sales Channel: Field Selling and
OPPORTUNITY

Inside Sales Selling Effort: Heavy (best prospects)

ACCOUNT

Low (other prospects)

Selling Effort: Heavy

MAINTENANCE WHY BOTHER

Sales Channel: Inside Sales Sales Channel: Teleselling,

Field Selling and Direct Marketing,
Teleselling and Some Inside

Selling Effort: Moderate Selling Effort: Low

Weak

Strong COMPETITIVE POSITION Weak

 Changing Business
Environment The
Leads to Selling
Changing Selling
Ballgame
Environment

Resulting in
* Better Understanding of
Harder to Get and Hold Customer’s Needs
Customers and It Costs
* Better Selectivity
More!
* Better Selling Strategies

Implications * Better Time & Territory

Management
PROCESS OF STRATEGIC MANAGEMENT

Mission/ Objectives Situational

Vision Analysis

Competitive Formulate
Advantage Strategies

Implement
Strategies
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SITUATIONAL ANALYSIS
-External Environment
-Internal Environment
Which one should be done first?

-Developing

Mission (?)
Vision (?)
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 EXTERNAL ENVIRONMENTS ANALYSIS

Opportunity: favorable environment for the organization

which it can take advantage of but is not in the control of
the organization

Threat: situation potentially damaging to the organization

and is not under the control of the organization
 INTERNAL ENVIRONMENT ANALYSIS

Strength: Resources, capacity and capability for attainment

of goals

Weakness: limitation, fault and defect in the organization

which obstructs effective use of resources
 WHAT IS VISION?

•“Type of organization aimed for tomorrow”

•“Dream to come true”
•“Visual and persuasive outline of the
organization goal that promotes the synergic
use of resources and capabilities”

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VISION
“Years ago, a modest entrepreneur had a “fried dough” traveling
shop on a crowded avenue. With his great creativity, he decided to
install a luminous sign advertising and sell big and good quality
fried doughs. This, together with his personal friendliness made a
successful business. He was even able to send his kid to the
University.
When his son finished College and came back home, he told his
father: don't you realize the crisis ahead? control tightly your costs
daddy!.
His father thought about it: “My son has studied a lot and knows a
lot. Perhaps he is right”. He started selling smaller doughs, to act
concerned; he even removed the light advertisement from the shop
in order to save light. He slowly run out of business until he ended
up closing the shop.
On his way back home, he still was thinking: “My son was right!, 47 a
big crisis was indeed approaching my business!”
His Vision determined his behaviour and decisions.
VISION
Often the vision we have from our Organization
determines our decisions and the actions we take
on a daily basis.
This tends to happen mostly in a unconscious way.
Decisions like spend versus save, taking versus
avoiding risks, sharing versus preserving, and
many more, are affected by the type of vision of
our Organization. The “port of destination” tends to
be more relevant than we think and impacts on the
“way we travel”.

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WHAT IS THE MISSION?
 Foundation (reason for being) of a
organization.
 Strategic statement that helps an
organization know what it is doing right
 What is the purpose of our organization?

 What do we do, or will we do?

 For which reasons?

 For whom do we provide our service?

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VALUES
 What are the values?
 Which ways of working do we consider
constructive and effective in our
organization?
 “Rules and procedures that describe the
general attitude and professional
relations in our organization” (EFQM*)
 What are we known for? What does final
customer value or appreciate from our
organization?
* EFQM: European Foundation for Quality Management 50
VALUES
Example:
 Open to changes in the sector
 Focused on our customer
 Open workplace, diverse and of mutual support
 Service quality/professional service
In a certain large chain of department stores, the value of
customer satisfaction is so relevant for their image and
business that, when hiring new personnel (even for
temporary o seasonal positions) the training sessions start
and are focused on value of customer service, before even
dealing with the specific training of the department or area
for which the new employee is hired.
“This value and this way of working and communicating with 51
customers has been the key to the success of the company”
NATIONAL HEALTH SYSTEM - MEXICO
 Vision: The National Health Program pursues the
creation of a universal health system, fair, based on
solidarity, plural, efficient, with high quality, preventive,
decentralized, participatory and focused on development.
 Mission: To contribute to a fair human development,
inclusive and sustainable, through the promotion of health
as a shared social goal and through the universal access to
integral high quality services that satisfy the needs and
fulfill the expectations of the population, as well as bring
professional opportunities to health care providers, in a
framework of a fair resource financing and usage,
transparent and efficient, with a wide citizen involvement.
 Values: Fairness, person self-governing and shared
social responsibility
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 GROUP WORK

Please develop Mission Statement for

your Hospital
1. External Environment (Opportunity and Threats)
2. Internal Environment (Strengths and weaknesses)

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 ENVISIONING

Nine Dots Problem Game

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 GROUP WORK

Please do the situational analysis for your

hospital
1. External Environment (Opportunity and Threats)
2. Internal Environment (Strengths and weaknesses)

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 Keeping in view the impact of the points/ issues
identified in each category on your project, please
rank all the issues (in each category separately) on the
scale of 1-10 where 1is lowest and 10 is highest.

Issues Impact on the Possibility of

Org/Programme continuing to next 3-5 years
(1-10) (1-10)

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 SWOT ANALYSIS

Internal Strength Internal Weakness

1. 1.
2. 2.
External opportunity Strategy 1 (Invest) Strategy 2( Defend) Areas of
1. Clear matches of threat matched by areas of strength
2. strengths and indicate a need to mobilize
opportunities lead to resources either alone or with
comparative advantage. others.

External Threat Strategy 3 (Decide): Strategy 4 (Damage

1.
Areas of opportunity Control): Areas of threat
2.
matched by areas of matched by areas of weakness
weakness require a indicate need for damage
judgment call: invest or control.
divest; collaborate. 57
 Feasibility Analysis

•Apply a list of criteria to all alternative

strategies

•Identify one which satisfies most of the

criteria

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 Feasibility Criteria

Criteria of feasibility Question Status of strategy (high, medium or low)

S1 S2 S3 S4
Technological Is the technology developed enough?

Resource Are the necessary resources available?

Political Will there be strong opposition?

Ethical Is it consistent with prevailing values?

Administrative Can it be administered effectively?

Coast effectiveness Is it Cost effective?

Congruence Is it consistent with project objectives?

Speed/pace Will it achieve the desired outcome more rapidly

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STEPS FOR TRANSLATING STRATEGY INTO
ACTION

 Tasks to be Completed
 Time-frame

 Person Responsible

 Resource Needed

 Costs

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