Strategic Management

STRATEGIC MANAGEMENT

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Introduction

·       Strategic is the

o   Unified

o   Comprehensive

o   & integrated plan that is related to the strategic advantages of the firm to the challenges of the environment

·       It is designated to ensure that the basic objectives of the enterprise are achieved

·       Strategic Management is an art and science of

o   Formulating

o   Implementing

o   & evaluating cross functional decisions that enables an organization to achieve its objectives

 

Process of Strategic Management

·      

·       Strategic Intent

o   Vision

§  It is the statement that expresses organization’s ultimate long-run objectives.

§  It is what the firm ultimately like to become

§  It is closely related with strategic intent and is a forward thinking process

§  Example:- Microsoft – “A computer software on every desk and in every home”

o   Mission

§  It tells

·       Who we are? 

·       What we do?

·       What we would like to become?

§  Mission of a business is the fundamental purpose that sets it apart from other firms of its kind

§  It identifies the scope of its operations in product and market term

§  Example:- Microsoft – “Empower every person and every organization on the planet to achieve more”

o   Objectives

§  These are the end results of planned activity that

·       What is to be accomplished by when and should be quantified

·       Their achievement should result in the fulfilment of the organization’s mission

§  It states specifically how the goals shall be achieved

§  Examples of the areas for setting objectives are

·       Profit objective

·       Marketing objective

·       Production objective etc.

·       Strategy Formulation

o   It refers to the process of choosing the most appropriate course of action for the realization of organizational goals, objectives & vision

o   To choose the most appropriate course of action we need to do

§  Environmental Appraisal

·       Environment of any organization is the aggregate of all

o   Conditions

o   Events

o   And influences that surrounds and effect it

·       It is dynamic in nature and consist of

o   Internal environment (factors within the organization)

o   External environment (factors outside the organization)

·       External factors provide opportunities or threats

·       Internal factors impart strengths or weaknesses

§  Organizational Appraisal

·       It is the process of observing an organizational internal environment to identify the strengths and weaknesses that may influence the organization’s ability to achieve goals

·       The analysis of organization capabilities & weaknesses becomes a pre-requisite for the successful formulation and reformulation of organization strategies

·       This analysis can be done on various levels like functional, divisional and corporate

·       Strategy Implementation

o   It is the action stage of strategic management

o   It refers to the decisions that are made to install new strategy or reinforce existing strategy

§  Designing structure, process & system

·       It includes the making of decisions with regards to the

o   Organizational structure

o   Developing budgets

o   Programs & procedures to accomplish certain activities

§  Functional Implementation

·       It is carried out through functional plan and policies in 5 different areas

o   Marketing

o   Finance

o   Operations

o   Personnel

o   & Information management

§  Behavioral Implementation

·       It denotes mobilizing employees and managers to put and formulate strategies into action and require

o   Personal discipline

o   Commitment

o   & Sacrifice

·       It depends upon the managers ability to motivate employees

§  Operation’s Strategy

·       It includes establishing annual

o   Objectives

o   Devising policies

o   & Allocating resources

·       Strategy Evaluation & Control

o   Evaluation

§  It is the primary means to know when and why particular strategies are not working well

§  It is the process in which corporate activities and performance results are monitored so that the actual performance can be compared with the desired performance

§  It include external & internal factors that are the basis for current strategies

o   Control

§  In control the organizations determine

·       What to control?

·       Which objective the organization hopes to accomplish?

·       Set control standards

·       Measure of performance

·       Compare the actual with standard

§  In last take corrective actions & review the policies and activities if needed

 

Concerns, Scope, Levels and Benefits of Strategic Management

·       Concerns

o   Purpose & mission

o   Corporate objectives

o   Choice of business

o   Course of activities

·       Scope

o   Serves as a route map

o   Framework for systematic handling of corporate decisions

o   Lays down the growth objectives & strategies

o   Ensures the firm remains prepared

o   Ensures best utilization of resources

o   Serves as a hedge against uncertainty

o   Helps to understand trends in advance

o   Helps to avoid hazard response

o   Gives the best possible fit

o   Helps to build competitive advantage and core competencies

o   Prepares the firm to not only face the future, but even shape the future in its favour

o   Seeks to influence the firm’s mega environs in its favour

·       Levels

o   Corporate level

o   Business level

o   Functional level

·       Benefits

o   Financial benefits

o   Non financial benefits

 

Fear factors of Firms to Not to do Strategic Planning

·     Poor reward structures

·     Waste of time & expensive

·     Laziness & content with success

·     Fear of failure

·     Over confidence

·     Prior bad experience

·     Self interest & suspicion

 

Models of Strategic Management

·       Environmental Scanning

o   It is the monitoring, evaluating and disseminating of information from the external & internal environments to keep people within the corporation

o   It is a tool that a corporation uses to avoid strategic surprise and to ensure long term health

§  Scanning of external environmental variables

·       Economic forces

·       Technological forces

·       Political-legal forces

·       Socio-cultural forces

§  Threat of new entrants

·       Economies of scale

·       Product differentiation

·       Capital requirements

·       Switching costs

·       Access to distribution channels

·       Cost disadvantages independent of size

·       Government policy

§  Rivalry among existing firms

·       It is the amount of direct competition in an industry

·       In most industries corporations are mutually dependent

·       A competitive move by one firm can be expected to have a noticeable effect on its competitors and thus make us retaliation or counter efforts

·       Rivalry is related to the presence of the following factors

o   Number of competitors

o   Rate of industry growth

o   Product characteristics

o   Amount of fixed costs

o   Capacity

o   Height of exit barriers

o   Diversity of rivals

·       Strategy Formulation

o   Corporate strategy

§  It is primarily about the choice of direction for the firm as a whole

§  It is about managing various product lines and business units for the maximum value

o   Directional strategy

§  Every product or business unit must follow a business strategy to improve its competitive position

§  It orients toward growth by asking the following 3 questions

·       Should we expand, cut back, or continue our operations unchanged?

·       Should we concentrate our activities within our current industry or should we diversify into other industries?

·       If we want to grow and expand, should we do so through internal development or through external acquisition, mergers, or joint ventures?

o   Growth strategy

§  Designed to achieve growth in

·       Sales

·       Assets

·       Profit

·       Or some combination of these

·       Strategy Implementation

o   Implementing strategy

o   Developing programs, budgets and procedures

o   Programs

o   Budgets

o   Procedures

o   Synergy achievement

o   Organizational life cycle (Birth, Growth, Maturity, Decline & Death)

·       Evaluation and Control

o   Determine what to measure

o   Establish standards of performance

o   Measure actual performance

o   Compare actual performance with the standard

o   Take corrective action

Video Description

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