Transcript
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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management
CONTENTS
01. Importance and Relevance
02. Characteristics of Strategic Management
03. The Strategic Management Process
04. Relationship between Corporate Strategy and Business Model
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STRATEGIC MANAGEMENT
1. Importance and Relevance
DEFINITION:
Strategy
- is a blueprint indicating an organization’s courses of action to
achieve the desired objectives.
- a plan for achieving a major goal, planning & directing the whole
operation of an event.
- an integrated approach to reach a goal.
- top management’s long term plans to attain outcomes consistent
with the organization’s mission and goals.
Meaning and Nature of Strategic Management
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STRATEGIC MANAGEMENT
1. Importance and Relevance
DEFINITION:
Strategic Management (managing or competing for future)
is also known as Business Policy or Corporate Strategy or
Corporate Planning. It refers to those set of management
measures taken with a view to ensuring the survival and success
of an enterprise in a competitive environment.
It is that set of decisions and actions which leads to the
development of an effective strategy or strategies to help
achieve corporate objectives. It is designed to ensure that the
basic objectives of the enterprise are achieved.
Meaning and Nature of Strategic Management
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1. Importance and Relevance
Strategic Management (managing or competing for future)
Determination of the basic long-term goals and objectives of an
enterprise and adoption of course of action and allocation of
resources necessary to carry out these goals.
It is a continuous process of determining the mission and goals
of an organization within the context of its external environment
and it’s internal strengths and weaknesses, formulating and
implementing strategies, and exerting strategic control to
ensure that the organization’s strategies are successful in
attaining its goals.
Meaning and Nature of Strategic Management
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STRATEGIC MANAGEMENT
1. Importance and Relevance
Strategic Management (managing or competing for future)
is a continuous, iterative, and cross-functional process of
matching an organization’s goals and resources with the
opportunities presented by its environment to gain competitive
advantage.
Since it involves long term, future-oriented, complex decision
making, and requires considerable resources, top management’s
active participation is absolutely essential.
Meaning and Nature of Strategic Management
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1. Importance and Relevance
Level of Management Management Function Nature of Function
Top broad and creative
Middle somewhat detailed
Supervisor specific,
detailed
Meaning and Nature of Strategic Management
Strategic
Operational
somewhat creative
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STRATEGIC MANAGEMENT
1. Importance and Relevance
Strategic Management (managing or competing for future)
Strategic Management involves effective decision-making and
activities in an organization that:
(1) have wide ramifications,
(2) have a long time perspective, and
(3) use critical resources towards perceived opportunities
or threats in a changing environment.
Meaning and Nature of Strategic Management
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1. Importance and Relevance
• As the environment changes, companies may change their
vision and objectives, structure, portfolio of business, markets
and competitive strategies. The economic liberalization and the
simultaneous wide opening up of business opportunities and
increase in competition have made SM a buzz word in the Indian
corporate world.
• The task of Strategic Management is to identify new and
different businesses, technologies and markets which the
company should try to create in the long term.
Meaning and Nature of Strategic Management
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1. Importance and Relevance
• Without competitors, there would be no need for strategy, for
the sole purpose of strategic planning is to enable the company
to gain, as efficiently as possible, a sustainable edge over its
competitors.
• Changes in one stage of the strategic management process will
inevitably affect other. After a planned strategy is implemented,
it could require modification as environmental or organizational
conditions change, or as top management’s ability to interpret
these changes improve. Hence, these steps are interrelated;
they should be treated as an integrated, ongoing process.
Meaning and Nature of Strategic Management
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STRATEGIC MANAGEMENT
1. Importance and Relevance
• SM provides clear objectives and direction for employees.
• It helps systemize business decision and improves
communication, coordination, and allocation of resources and
helps managers to have complete understanding of the
organization and to have a holistic approach to business
problems/issues.
• SM allows organizations to anticipate changing environmental
conditions.
• Businesses that perform SM are found to be more effective.
Meaning and Nature of Strategic Management
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STRATEGIC MANAGEMENT
1. Importance and Relevance
Intended Strategy
Un-realized Strategy
Divergent Strategy
Emergent Strategy
Realized Strategy
Meaning and Nature of Strategic Management
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STRATEGIC MANAGEMENT
1. Importance and Relevance
Benefits and Relevance of SM
1. Strategic management helps to envision an organization’s
future, formulate mission and make objectives clear. This is
clear from the fact that determination of mission and objectives
is the first step in the strategic management process.
2. It may be noted that the new growth and competitive
environment created by liberalization prompted many Indian
companies to evaluate and modify their mission and objectives
or to ponder over a mission for the company where one did not
exist.
Meaning and Nature of Strategic Management
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STRATEGIC MANAGEMENT
1. Importance and Relevance
Benefits and Relevance of SM
3. The articulation of the mission and objectives and the
formulation of a strategy for their accomplishment help people
in the organization understand what the organization stands for,
what is the development path charted out, what are the planned
results over a period of time, etc.
4. It makes people realize what are they working for, what is
expected of each SBU, division, functional department and
the employees.
Meaning and Nature of Strategic Management
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STRATEGIC MANAGEMENT
1. Importance and Relevance
Benefits and Relevance of SM
5. Strategic Management facilitates better delegation, co-
ordination, monitoring, performance evaluation, and control.
6. The identification of the strengths and weaknesses may help an
organization to take measures to overcome/minimize the
weaknesses and reinforce the strengths.
7. The SWOT analysis, which is a part of the strategic
management, helps a company to adopt suitable strategies for
exploiting opportunities and combating threats. It also helps
the company to drop those businesses where it would not be
successful or which do not meet the objectives.
Meaning and Nature of Strategic Management
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1. Importance and Relevance
Benefits and Relevance of SM
8. It constantly monitors the environment and makes modifications
of the strategy as and when required so that the plans are made
more realistic and effective.
9. It enables a company to be proactive rather than reactive in order
to meet its competition more effectively and efficiently.
10. It makes the management dynamic, appropriate to the
environment and result- and future-oriented.
11. Studies show that companies with SM are effective than
others, generally.
Meaning and Nature of Strategic Management
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1. Importance and Relevance
Benefits and Relevance of SM
12. It enhances problem-preventing capabilities as it promotes
interaction between at all levels.
13. It leads to increased employee productivity, reduced resistance
to change, and a clear understanding of performance-reward
relationship.
14. It allows for identification, prioritization, and exploitation of
opportunities.
Meaning and Nature of Strategic Management
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1. Importance and Relevance
Risks of SM
1. Conditions may vary so fast that managers are unable to do any
planning, especially long term planning.
2. The time spent by managers on the SM process may have a
negative impact on their operational responsibilities.
3. If the formulators of strategy are not involved in its
implementation, they may shirk their responsibility for the
decisions reached.
4. Strategic managers must be trained to anticipate and respond to
the disappointment of participating subordinates over unattained
expectations.
Meaning and Nature of Strategic Management
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STRATEGIC MANAGEMENT
1. Importance and Relevance
Challenges of SM
1. Technological Advances and Obsolescence
2. Product/Service Innovation and Development
3. Global Issues (due to economic liberation/expansion/contraction)
4. Quality Issues (TQM)
5. Social Issues
Meaning and Nature of Strategic Management
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STRATEGIC MANAGEMENT
1. Importance and Relevance
Meaning and Nature of Strategic Management
Hierarchy of Objectives
Mission
Corporate
Objectives
SBU Objectives
Departmental
ObjectivesDivisional Objectives
Individual Objectives
Promoters’ Vision and Value
Stock Holders’
Expectations
Environmental
Factors
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1. Importance and Relevance
Meaning and Nature of Strategic Management
Corporate Strategy
SBU 1
Strategy
SBU 1
Strategy
SBU 1
Strategy
Operation
Strategies
Marketing
Strategies
Financial
Strategies
Personnel
Strategies
Corporate, Business, and Functional Level Strategies
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STRATEGIC MANAGEMENT
1. Importance and Relevance
Meaning and Nature of Strategic Management
Corporate Strategy
Operation
Strategies
Marketing
Strategies
Financial
Strategies
Personnel
Strategies
Corporate and Functional Level Strategies in a single business
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Corporate-level Strategy
- framed by BoD, CxOs
- responsible for the firm’s financial performance, enhancing brand
image, and fulfilling of CSRs
- develops strategies for the entire organization
- enhances the organization’s image and fulfills its overall social
responsibilities
- defines the vision, mission, and goals of the organization;
determines what business it should be in; allocates resources
among different businesses; and promotes leadership for the
organization.
- provides a link between strategic managers and share holders.
Meaning and Nature of Strategic Management
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Corporate-level Strategy (contd…)
- exploits the firm’s distinctive competencies by adopting a
portfolio approach to the management of its business.
- are more value oriented, more conceptual, and less concrete
than decisions at business/functional levels.
- characterized by greater risk, cost, and profit potential; greater
need for flexibility; and longer time horizons.
Examples: choice of businesses, dividend policies, sources of LT
financing, priorities for growth, etc.
Meaning and Nature of Strategic Management
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Business-level Strategy
- framed by business and corporate managers
- translates the directions generated at the corporate level into
concrete objectives and strategies for the SBU or individual
business divisions
- determines how the organization will compete in the selected
product-market arena; and, identifies and secures the most
promising market segment within that arena
Meaning and Nature of Strategic Management
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Business-level Strategy (contd…)
- bridges decisions at the corporate and functional levels
- less costly, risky, and profitable than corporate-level decisions
but are more costly, risky, and profitable than functional-level
decisions
Examples: plant location decisions, market segmentation,
geographic coverage, distribution channels, etc.
Meaning and Nature of Strategic Management
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Functional-level Strategy
- framed by finance, production, HR, product development, etc.
- directed at improving the effectiveness of operations within the
organization
- develops annual objectives and ST strategies in related functions
- implements and executes the organization’s strategic plans
- addresses issues such as the efficiency and effectiveness of
production, product development, manufacturing, HR, marketing
systems, quality of customer service, etc.
Meaning and Nature of Strategic Management
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Functional-level Strategy (contd…)
- ensures the success of products and services in increasing the
organization’s market share and share holders’ wealth
- implements the overall strategy of the organization taken at the
corporate and business levels
- involve action-oriented operational issues and are relatively
short term and low risk
- incur moderate costs (being dependent on available resources),
are adaptable to ongoing activities, and can be implemented
with minimal cooperation
Meaning and Nature of Strategic Management
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Functional-level Strategy (contd…)
- decisions are relatively concrete and quantifiable; therefore,
they receive critical attention and analysis even though their
comparative profit potential is low
Examples: decisions on generic vs brand name labelling, basic vs
applied R&D, high vs low inventory levels, close or open or loose
supervision
Global-level Strategy: addresses how the organization can expand
its operations outside the home country to grow and prosper in a
world where competitive advantage is determined at global levels.
Meaning and Nature of Strategic Management
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1. Importance and Relevance
Dimensions of Strategic Decisions
1. Strategic issues require top management decisions.
2. Require considerable amounts of the organization’s resources.
3. Affects the organization’s LT prosperity.
4. Are future oriented
5. Usually have multi-functional or multi-business consequences.
6. Require considering the organization’s environment.
Meaning and Nature of Strategic Management
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2. Characteristics of Strategic Management
1. Formulation of the organization’s vision, mission, goals,
objectives, and targets.
2. Analysis of its internal conditions and capabilities (strengths and
weaknesses).
3. Assessment of its external environment, including competitive
and general contextual factors (opportunities and threats).
4. Analysis of its options by matching its goals and resources with
the external environment.
Meaning and Nature of Strategic Management
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2. Characteristics of Strategic Management
5. Determination of its LT objectives and grand strategies.
6. Identification of the most desirable/alternative strategies and
their evaluation in the light of the LT objectives and grand
strategy.
7. Choice of the strategy.
8. Development of annual objectives and ST strategies that are
compatible with the selected strategy.
Meaning and Nature of Strategic Management
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2. Characteristics of Strategic Management
9. Implementation of the strategic choices by means of budgeted
resource allocation.
10. Evaluation of the success of the strategic process as an input for
further decision making.
Meaning and Nature of Strategic Management
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1. Importance and Relevance
Characteristics of a Winning Strategy
1. A thorough understanding of the organization’s competitive
environment in which it competes.
2. Simple vision, mission, and goals consistent with the
organization’s strategy.
3. Complete understanding of the organization’s resources and how
they translate into strengths and weaknesses.
4. Good planning for implementing the chosen strategy with
complete specifications.
5. Proper evaluation and control of possible future changes in the
proposed strategy.
Meaning and Nature of Strategic Management
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1. Importance and Relevance
Strategic Leaders:
1. Use their knowledge, enthusiasm, and energy in proving strategic
leadership for their team members in order to develop a high-
performing organization.
2. Strategic leadership represents the ability of a manager to
articulate a strategic vision and motivate people to buy into that
vision.
Meaning and Nature of Strategic Management
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1. Importance and Relevance
Good Strategic Leaders:
1. possess vision, eloquence, and consistency
2. actively participate and are continuously committed
3. use power astutely
4. are well-informed
5. have willingness to delegate and empower
6. possess high levels of EI.
Meaning and Nature of Strategic Management
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Techniques for improving decision making
1. Devil’s Advocacy
2. Dialectic Enquiry
Meaning and Nature of Strategic Management
Generate an
Expert Plan
Devil’s Advocate
criticizesFinal Plan
Expert Plan 1
(thesis)
Expert Plan 2
(anti-thesis)
Debate
(synthesis)Final Plan
- Definitions- Recommended courses of action- Assumptions
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Developing a winning strategy requires:
1. keeping track of the latest developments in the field and
disseminating this information to the strategists.
2. supplying data inputs and analytical support needed for SM.
3. environmental analysis
4. identifying new business opportunities
5. helping to establish an efficient and effective planning system.
6. coordinating divisional plans.
7. assisting to evaluate and control strategies.
Meaning and Nature of Strategic Management
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3. The SM Process
Meaning and Nature of Strategic Management
Defining Organizational Vision, Mission, Goals, Objectives, & Targets
External Environment Analysis (OT) Internal Environment Analysis (SW)SWOT
Setting LT Objectives
Identifying Alternate Strategies
Choice of Strategy
Implementation of Strategy
Strategy Evaluation and Control
Feedback
Strategy Formulation
Strategy Implementation
and Control
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Business Model
- is the basic profit-generating idea of an organization.
- is the economic mechanism by which a business hopes to sell its
goods and services and generate profit.
- is evolved through consultations and brain storming and covers
all intricate details of the business. It is implemented by the
operational group.
- is the translation of strategies into an operational procedure to
achieve organizational goals and objectives.
- can change due to time, technology, and perceptions of the
future.
- some business models may prove successful at first but with
minor changes can become successful in future.
Meaning and Nature of Strategic Management
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4. Relationship between company’s strategy & its business model
Meaning and Nature of Strategic Management
Connect the Corporate Strategy to the Business Model
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Definitions
Competitive Advantage – The firm’s ability to enjoy strategy benefits
as compared to its competitors in the market due to a match
between its distinctive competencies and CSFs within its industry
(that enables it to outperform its competitors).
Sustained Competitive Advantage – The firm’s ability to enjoy
continuous strategic benefits over an extended period of time.
Comparative Advantage – The idea that certain products can be
produced more cheaply or at a higher quality in particular countries
due to advantages in labour costs and/or technology.
Meaning and Nature of Strategic Management
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Definitions (contd…)
Core Competence
- The firm’s key capabilities and collective learning skills that
are fundamental to its strategy, performance, and LT profitability.
- Unique and enduring strength of a firm for generating
competitive advantage; this strength cannot be easily emulated
by its competitors.
- It represents accumulated knowledge and skills that are difficult
to imitate and by which it outperforms its competitors.
- It can lead to competitive advantage only if the constituent
knowledge, skills, and technologies are creatively harmonized and
quickly reconfigured to respond to new opportunities.
Meaning and Nature of Strategic Management
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Questions
1. What are the strengths & weaknesses of formal strategic planning?
2. Discuss the accuracy of the statement: “Formal strategic planning
systems are irrelevant for firms competing in high-technology
industries where the pace of change is so rapid that plans are
routinely made obsolete by unforeseen events.”
3. What is the difference between intended strategy and realized
strategy? Why is this distinction important?
4. Does the CEO alone make strategic decisions for a firm? Explain.
5. What are the pitfalls in the strategic management process?
6. What is strategic management? Explain.
7. Explain the (six) identifiable dimensions in strategic decisions?
Meaning and Nature of Strategic Management
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Questions (contd…)
8. The decision making hierarchy of business firms typically contains
3 levels. What are they? Discuss.
9. What are the major limitations of a strategic model?
10.With the help of a strategic model, briefly explain the steps in
strategic management planning.
11.What is meant by competitive advantage?
12.Distinguish between business strategy and business model.
13.Write a note on the techniques of improving the strategic
management process.
14.How do you explain the success of a firm that does not use a
formal strategic planning process?
Meaning and Nature of Strategic Management
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Questions (contd…)
15. What are the components of a strategic management model?
16. Discuss the statement, ”Businesses that perform strategic
management are found to be more effective.”
Meaning and Nature of Strategic Management
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