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BUSINESS STRATEGY

Companies today face increasingly turbulent,


complex and threatening environments.

The strategic management perspective


highlights the significance of devoting more
attention to analyzing environments and
formulating strategies that relate directly to
environment changes.

The ultimate purpose is to help the


organization increase its performance through
improved effectiveness, efficiency and flexibility
 A strategy is a way of doing something. It
usually includes the formulation of goal and
set of action plans for accomplishment of the
goal.

 Strategic management is “that set of


managerial decisions and actions that
determine the long term performance of a
corporation. It involves environmental
scanning, strategy formulation, strategy
implementation, evaluation and control”.
 The best way to predict future is to create it.

 A strategic plan is the first step in bringing


out a new product.

 A well-crafted strategic plan gives one


control over the vagaries of the marketplace.

 Strategic management can be defined as the


set of decisions and actions resulting in
formulation and implementation of strategies
designed to achieve the objectives of the
organization.
 Strategic management is a comprehensive
procedure and starts with a strategic
diagnosis.

 It continues with a series of additional steps,


culminating in new products, markets,
technologies and capabilities.

 The strategist’s work is to challenge the


prevailing setup with a single question:
“why?” , and to ask the same question as
many times necessary to make the future as
clear as the present for managers at all
levels.
 The word Strategy comes from the Greek
word Strategia , which means a General or
Military Commander.

 The systematic study of strategic


management was pioneered by Ansoff.

 There is no universal success formula for all


firms.

 The level of turbulence in the environment


determines the strategy required for the
success of a firm.
 The aggressiveness of the strategy should be
aligned with the turbulence in the
environment to optimize the firm’s success.

 The management capabilities should be


aligned with the environment to optimize the
firm’s success.

 Internal capability variables i.e., cognitive,


psychological, political, anthropological and
sociological variables, all jointly determine
the firm’s success.
COMPONENTS OF STRATEGIC
MANAGEMENT
 VISION:
It is a description of what the organization
is trying to do and to become.
Gives a view of an organization’s future
direction and course of business activity.
A powerful motivator and keeps an
organization moving forward in an intended
direction.
Communicated through the mission
statement.
 COMPANY MISSION:
Sets a part one company from other
companies in the same area of business.

Identifies the scope of the companies


operation, describes the companies product,
market and technological areas of thrust
and reflects the values and priorities of its
strategic decision makers.

Looks to an endless future as if the firm was


immortal.
 COMPANY PROFILE:
Depicts the quantity and quality of the
company’s financial, human and physical
resources.

Assesses the strengths and weaknesses of


the company’s management and
organizational structure.

Analyses the companies past successes


and traditional concerns in the context of
the companies current capabilities to
identify its future capabilities.
 EXTERNAL ENVIRONMENT:
Consists of all the conditions and forces
that affect an organizations strategic
options and define its competitive
situations.

Consists of three interactive segments


namely operating environment, the
industry environment and the remote
environment.
 STRATEGIC ANALYSIS AND CHOICE:
Enables a firm to identify a range of
possible attractive investment
opportunities, desired opportunities to
strategic choices.

Entire process of strategic choice is to


combine long-term objectives and generic
and grand strategies for achievement of
the company machine. Ex: core
competencies, maximization of share
holder value.
 ANNUAL OBJECTIVES:
Objectives that the firm seeks to achieve in
one year.

Short term objectives- more specific-based


on long term objectives. Ex: cutting
manufacturing costs by 20%- 4 years- 5%
each year.
 LONG-TERM OBJECTIVES:
Refers to those results that an organization
seeks to achieve over a number of years.
Ex: profitability, ROI, competitive position,
technological leadership, productivity,
employee relations, public responsibility
and employee development
 GRAND STRATEGY:
A statement of means that indicates the
methods to be used to achieve the
company’s objectives.

A unique package of long-term strategies.

Provides the frame work for the entire


business of the firm.

Focuses on market development, product


development, innovation, horizontal
integration, vertical integration, joint
ventures etc
 FUNCTIONAL OR OPERATIONAL
STRATEGIES:
The grand strategy is split into strategies
for each business division or function.

Specific to the needs of each functional


area and prescribe an integrated action
plan for every function.

Provides the means for achieving annual


objectives
 POLICIES:
Directives or guidelines given to managers
and their subordinates as the frame work
to guide their thoughts, decisions and
actions while implementing the
organization’s strategy.

Help to make the operating processes


(standard operating procedures). Ex: HO to
authorize every purchase activity, annual
performance review of an employee.
 INSTITUTIONALIZING THE STRATEGY:
Translation of long-term objectives into
short-term goals will make the strategy
operational.

Implementation of strategy must become


part of day-to-day activities of the
company (institutionalization).

Structure, leadership and culture help


institutionalize a firm’s strategy.
 CONTROL AND EVALUATION:
After a strategy is implemented, it should
be monitored to determine the extent of
success.

Strategic managers should employ early


monitoring and control methods-
modifications.

Ultimate test of the strategy is its ability to


achieve the ends. Ex: annual objectives,
long-term objectives an company’s
mission.
Strategic management involves four steps:
Step No.1 : Analyze the opportunities and
threats or constraints that exist in the
external environment.

Step No.2 : Formulate strategies that will


match the organization’s strengths and
weaknesses with the environment’s threats
and opportunities.

Step No.3 : Implement the strategies.

Step No.4 : Evaluate and control activities to


ensure that, the organization's objectives
are achieved.
IMPORTANCE OF STRATEGIC
MANAGEMENT
 Strategy comprises the most fundamental
ends and means of an organization.

 Allows for identification, prioritization and


exploitation of opportunities.

 Provides an objective view of management


problems.

 Represents a frame work for improved


coordination and control activities.
 Strategy refers to the plans made and actions
taken to enable an organization fulfill its
intended objectives.

 Minimizes the effects of adverse conditions


and changes.

 Allows major decisions to better support,


established objectives.

 Allows more effective allocation of time and


resources to identified opportunities.
 Allows fewer resources and less time to be
devoted to correcting erroneous or adhoc
decisions.

 Creates a framework for internal


communication among personnel.

 Helps to integrate the behaviors of individuals


into a total effort.

 Provides s basis for the clarification of


individual responsibilities.
 Gives encouragement to forward thinking.

 Provides a cooperative ,integrated and


enthusiastic approach to tackling problems
and opportunities.

 Encourages a favorable attitude towards


change.

 Gives a degree of discipline and formality to


the management of a business.
STRATEGIC MANAGEMENT PROCESS
 ENVIRONMENTAL SCANNING:
Environment need to be scanned in order to
determine the trends and projections of
factors that will affect fortune of the
organizations.

 STRATEGY FORMULATION( 3 levels):

 Corporate Level Strategy: This is


formulated by the top management to
oversee the interests and operations of an
organization made up of more than one
line business.
Business Unit Level Strategy: A single
company that operates within one industry
is considered as a business unit. For
instance, an independent company that
builds and sells swimming pools is
considered as a business unit.

Functional Level Strategy: Functional


strategies identify the basic courses of
action that each of the department must
pursue in order to help the business unit to
attain its goals.