Strategic Management

Chapter

What

is strategy

Derive from Greek word strategia means office of general, command

Large Scale future oriented plans for interacting with the competitive environment to achieve co; objectives. Simply a game plan. Like Cricket Plan or Education Plan I.e: SSC to M.COM.

A strategy is a plan of action designed to achieve a specific goal. Strategy is all about gaining a position of advantage over competitors by best exploiting emerging possibilities. As there is always an element of uncertainty about future, strategy is more about a set of options ("strategic choices") than a fixed plan.

What is The Purpose of developing Strategy?

To exploit and create new and different opportunities for tomorrow

Managers job not only to manage internal activities but also to meet the external environment challenges/factors. External Factors? Explained as following:-

Competitors How to win and compete with our competitors in terms of technology, human & financial resources etc.

Suppliers the suppliers who supply the same product as our org; supply compete them by advancing technologies and producing goods in cost effective manner..

Scare Resources Loans from different financial Institutes. Commercial Banks, IDBP, ADB, Financial Intermediaries, Portfolios cost benefit analysis.

Government Agencies.

Regulations.

Customers.

Economic & Social Conditions. Seasonal Business What the society likes. Political Priorities different political parties favor different businesses/industries. Technological Development

Difference between Plan & Strategy. Already define on slide#3. Plan does not precisely detail all future deployment (people,financial,material etc)

A Strategy is bigger than Plan. A plan is very concrete in nature and doesnt allow for deviation. If Plan A doesnt work, you dont alter Plan A and try again. Rather, you move to Plan B;

A strategy is very flexible and open for adaptation and change when needed. Plan is short term arrangement for something we do. strategy is long term set of plans.
Plan- the way you are going to do one thing. Strategy- the overall way you will do multiple things. there are many plans that fall under a strategy

Basic Framework

Internal External
External Environment

The firm Goals & Values Resources & Capabilities Structures & Systems Strategy

Competitors
Customers Suppliers

etc

Definition:"The set of managerial decisions and actions that determines the long-run performance of a corporation"

Art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve its objectives

3 Stages of the Strategic Management Process

Strategy Strategy Strategy

formulation implementation evaluation

Strategy Formulation
Vision & Mission External Opportunities & Threats Internal Strengths & Weaknesses Long-Term Objectives Alternative Strategies

Strategy Selection

Issues in Strategy Formulation

Businesses to enter Businesses to abandon Allocation of resources Expansion or diversification International markets Mergers or joint ventures Avoidance of hostile takeover

Strategy Implementation

Annual Objectives Policies Employee Motivation Resource Allocation

Strategy Implementation Steps

Developing a strategy-supportive culture Creating an effective organizational structure Redirecting marketing efforts Preparing budgets Developing and utilizing information systems Linking employee compensation to organizational performance

Issues in Strategy Implementation

Action Stage of Strategic Management

Mobilization of employees & managers

Most difficult stage

Interpersonal skills critical

Strategy Evaluation

Internal Review External Review Performance Measurement Corrective Action

NINE CRITICAL TASKS OF STRATEGIC

1:- MANAGEMENT mission ; Formulate the company philosophy, goals etc. 7:- Development set of long term objectives that are compatible with short term objectives and strategies.

2:- Conduct Analysis what are the capabilities and situation or condition of Co; 8:- Implement the strategic choice with best match of all kind of 3:- Assess External Environment resources.
4:- Analyze those options in terms of its available resources and external environment.

9:- Evaluate the success of strategic choice

5:- Identify most desirable options with resources and Co; mission.
6:- select a set of long term objectives and grand strategies.

Dimensions of Strategic Decisions

Decision making is a managerial process. It is the function of choosing a particular course of action out of several alternative courses for the purpose of accomplishment of the organizational goals. Decisions may relate to general day to day operations. They may be major or minor. They may be strategic, tactical or operational in nature.

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Major dimensions of strategic decisions The major dimensions of strategic decisions are as follows:

1. Strategic issues require top-management decisions:

Strategic issues involve thinking in totality of the organization's objectives in which a considerable amount of risk is involved. Hence, problems calling for strategic decisions require to be considered by the top management.

2. Strategic issues involve the allocation of large amounts of company resources:

It may require either a huge financial investment to venture into a new area of business or the organization may require a huge amount of manpower with new skill sets.
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3. Strategic issues are likely to have a significant impact on the long term prosperity of the firm:
Generally the results of strategic implementation are seen on a long term basis and not on immediate terms.

4. Strategic issues are future oriented:

Strategic thinking involves predicting the future environmental conditions and how to orient for the changed conditions.

5. Strategic issues usually have major multifunctional or multi- business consequences:

As they involve organization in totality they affect different sections of the organization with varying degree.
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6. Strategic issues necessitate consideration of factors in the firm's external environment:

Strategic focus in an organization involves orienting its internal environment to the changes of external environment.

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Three Levels of Strategy

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A) Corporate Level B) Business Level

C) Functional Level

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Corporate Level:A) They include BOD, CEOs, and Administrative

Officers

B) They are responsible for the firm financial performance and for achieving nonfinancial goals, such as enhancing firm image and to fulfill CSR. C) Any activity/step/decision at the Corporate Level have great influence on stock and stake holders (society). D)They formulate company mission and long term goals and make the strategies to achieve them.
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Business Level
A) B)

Include Business Managers Their main responsibility is to translate the directions, plans, strategies into concrete objectives for individual business division which has generated by corporate level. They determine how the firm will compete in the selected product-market area(piece of total market).
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C)

Functional Level
A)

Include Managers of Product, or of an particular functional area such as HR, Finance, Procurement, Production, R&D, Marketing, Quality Assurance etc.

B)

They develop objectives and strategies for their particular area.

Their principle responsibility is to implement or execute the firms strategic plans.

C)

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Characteristics of Strategic Management Decisions.

Decisions at Corporate level are more value oriented, and more conceptual than decisions at business and functional level. Similarly decisions at corporate level are of greater risk, cost, profit potential, have greater flexibility in it and longer time horizons. The decisions include choice of business, dividend policies, and source of financing.

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Functional level decisions include to implement the strategy formulated at corporate and business level. They involve action-oriented operational issues and are relatively short range and low risk.

Their activities are mostly ongoing and can be implemented with minimum cooperation and cost because its based on available resources.

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Formality in Strategic Management

Formality refers to the degree to which participants, responsibilities, authority, and discretion in decision making are specified. The formality play vital role in the strategic management decision. Usually greater formality positively correlated.

The number of forces determined how much formality is needed in strategic management.
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In particular formality is associated with the size of firm and its stage of development. In general the organizational predominant management styles, environment and its complexity, process of production, its problems all play a part in determining the appropriate degree of formality.

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Modes of formality
Entrepreneurial Mode
Adaptive Planning

Mode Mode

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