INTRODUCTION AND OVERVIEW OF STRATEGIC MANAGEMENT(04.01.11)

AN INTRODUCTION AND OVERVIEW OF STRATEGIC MANAGEMENT

DEFINITIONS OF STRATEGY

1. “Strategy is the determination of basic long term goals & objectives of an enterprise & the adoption of the course of action & the allocation of resources necessary for carrying out the goals.”- Chandler (1962)

2. “Strategy is the pattern of objectives, purpose or goals and major policies & plans for achieving these goals, stated in such a way, so as to define what business the company is in or is to be & the kind of company it is or it is to be.” - Kenneth Andrews (1965)

3. “Strategy is a unified, comprehensive & integrated plan relating the strategic advantage of the firm to the challenges of the environment. It is designed to ensure that the basic objective of the enterprise are achieved” “(through proper execution by the organisation)” - Stanford Research Institute , USA& (Glueck & Jausch - 1984)

4. “Strategy is a course of action through which an organization related itself with the environment so as to achieve its objectives”

5. “Strategy is the creation of a unique and valuable position involving a different set of activities. ”

- Michael Porter (1996)6. Strategy is the “the set of consistent behaviors by which the organization establishes

for a time its place in its environment.” - Mintzberg (1998)

7. “A company’s strategy consists of the combination of competitive moves & business approaches that managers employ to please customers, compete successfully & achieve organizational objectives”

- Thompson & Strickland8. “Strategy is the direction & scope of an organization over the long term which

achieves its advantages for the organization through its configuration of resources within a challenging environment to meet the needs of market & stake holder’s expectations.”

- Johnson & Scholes

9. “Basically a strategy is a set of decision making rules for the guidance of organizational behavior.”

- Ansoff (1984)10. Strategy of an organization is its “theory of the business”.

- Peter Drucker

FEATURES

1. Strategy relates the firm to its environment2. Strategy is the right combination of factors3. Strategy is a combination of actions4. Strategy is forward looking with an orientation

towards the future5. Strategy may even involve contradictory action

DIFFERENCE BETWEEN OPERATIONAL MANAGEMENT & STRATEGIC MANAGEMENT

STRATEGIC MANGEMENT OPERATIONAL MANAGEMENTAmbiguity ComplexityNon- routine Routine

Organization- wide Fundamental Organization specific

Environment or Resource drivenExpectation driven

DIMENSIONS OF STRATEGIC DECISIONS

1. Strategic Issues require top management decisions2. Strategic Issues involve the allocation of large amounts of

company resources3. Strategic Issues are likely to have a significant impact on the

long term prosperity of the firm4. Strategic Issues are future oriented5. Strategic Issues usually have major multifunctional or multi

business consequences6. Strategic Issues necessitate considering factors in the firm’s

external environment7. Strategic Issues require readiness to make non-self-generative

decisions.

CHARACTERSTICS & FUNCTION OF STRATEGIES

STRATEGIES ARE1. Deliberate attempts by management to offset competitors actions

& thereby score over them2. Special plans to deal with competitors3. Over all plans to implement plans & policies4. To direct plan activities in most appropriate manner5. Involve related decisions for implementation of company

objectives & policies6. Devices to reduce business risk7. Determined in advance to enable timely decisions to accomplish

policies & objectives8. Established on foundations of uncertainty9. Act as guides to subordinates to control organizational behavior

DIFFERENT LEVEL OF STARTEGY

LEVELS

CORPORATE OFFICE

SBUA

SBUC

SBUB

FINANCE MKTG PRODN PERS INFO

CORPORATE

FUNCTIONAL - LEVEL

STRATECYSTRUCTURE

CORPORATE - LEVEL

SBU BUSINESS - LEVEL

FUNCTIONAL

CORPORATE STRATEGY

BUSINESS STRATEGIES

FUNCTIONAL STRATEGIES

Corporate Level Strategy is an overarching plan of action covering the various functions performed by different SBUs. The corporate plan while addressing the corporate goals would deal with the objectives of the company, allocation of resources between SBUs & co ordination of SBUs for optimal performance of the organization as a whole.

SBU- Level Strategy is a comprehensive plan providing specific objectives as laid down by the corporate level for the SBU, allocation of resources made available to the SBU among different functional areas & cooperation between them for making an optimal contribution to the corporate objectives.

DEFINATIONS OF STRATEGIC MANAGEMENT“A stream of decisions & actions which leads to the development of an effective

strategy or strategies to help achieve corporate objectives.”- GLUECK(1984)

“The process which deals with the fundamental organizational renewal & growth with the development of strategies, structures , & systems necessary to achieve such renewal & growth, & with the organizational systems needed to effectively manage the strategy formulation & implementation processes.”

- HOFER & OTHERS(1984)

“A systematic approach to a major & increasingly important responsibility of general management to position & relate the firm to its environment in a way that will assure its continued success & make it secure from surprises.”

- ANSOFF(1984)

“ The formulation & implementation of plans & carrying out of activities relating to the matters which are of vital, pervasive or continuing importance to the organization.”

- SHARPLIN(1985)

According to Arthur Thompson,“The term strategic management refers to the management

process of forming a strategic vision, setting objectives, crafting of a strategy, implementing, executing & then over time initiating whatever corrective adjustments in the vision, objectives, strategy & execution are deemed appropriate.”

According to Michael Porter,“ The core of general management is strategy which consists of

the following tasks:• Developing & communicating the company’s unique position• Making trade- off between incompatible activities, & • Creating a link between different activities to ensure they

relate to each other.”

ELEMENTS IN STRATEGIC MANAGEMENT PROCESS

1. ESTABLISHING HIERARCHY OF STRATEGIC INTENTa) creating & communicating a vision;b) designing a mission statement;c) defining the business;d) setting objectives;

2. FORMULATION OF STRATEGIESe) performing environment appraisal;f) doing organizational appraisal;g) considering corporate - level strategies;h) considering business - level strategies;i) undertaking strategic analysis;j) exercising strategic choice;k) formulating strategies;l) Preparing a strategic plan;

3. IMPLEMENTING STRATEGIESm) activating strategies;n) designing structures & systems;o) managing behavioral implementation;p) managing functional implementation;q) operationalising strategies;

4. PERFORMING STRATEGIC EVALUATION & CONTROLr) performing strategic evaluation;s) exercising strategic control; andt) reformulating strategies

COMPREHENSIVE MODEL OF SM PROCESSESTAB STRATEGIC INTENTVision, mission, business definition & objectives

FORMULATION OF STRATEGIESEnvironmental Organization Appraisal Appraisal

SWOT Analysis Corporate level strategiesBusiness level strategiesStrategic choiceStrategic plan

STRATEGY IMPLEMENTATION Project Procedural Resource allocation Structural Behavioral Functional & operational

STRATEGIC EVALUATION

STRATEGIC

CONTROL

WORKING MODEL OF STRATEGIC MANAGEMENT PROCESS

STRATEGIC INTENT

STRATEGYANALYSIS& CHOICE

STRATEGIC EVALUA-

TION

STRATEGICIMPLEME--NTATION

STRATEGICALTERNA-

-TIVES

SWOT ANALYSIS

STRATEGIC CONTROL

INDIVIDUALS / GROUPS INVOLVED IN SM

1. Board of Directors2. CEO3. Entrepreneurs4. Senior Management5. SBU- Level executives6. Corporate planning staff7. Consultants8. Middle – level managers9. Executive Assistant

ROLE OF A STRATEGIST

Roles performed by a Strategist

Forecaster

Sculptor Diplomat Guru

Jail Buster

STRUCTURE

STRATEGY

SHAREDVALUES

SKILLS

STAFF

STYLE

SYSTEMS

Mc KINSEY’s 7s

Advantages and Disadvantages of Strategic Management

A Costly Exercise

Sense of frustration among employees

Evading Responsibility

ADVANTAGES DISADVANTAGES

STRATEGIC MANAGEMENT

Financial Benefits

Problem Prevention

Increased Interactivity

Better employee Incentive

Reduced Gaps & over laps in Activities

Lesser reluctance

5 TYPES OF COGNITIVE BIASES

1. PRIOR HYPOTHESIS BIAS2. REPRESENTATIVENESS3. REASONING BY ANALOGY4. ESCALATING COMMITMENT5. ILLUSION OF CONTROL

DECISION MAKING PROCESSES TO COUNTER GROUPTHINK

DEVIL’S ADVOCACY DIALECTIC INQUIRY

EXPERT PLAN

DEVIL’S ADVOCATECRITICISES

FINAL PLAN

EXPERT PLAN #2 (COUNTER

THESIS)

EXPERT PLAN #1 (THESIS)

DEBATE (SYNTHESIS)

FINAL PLAN

12 Guidelines for Implementation of Strategy1. The Key tasks of the kinds of decisions required must be identified.

2. Responsibility for accomplishing key tasks must be clearly assigned to individuals or groups. The division of labour must permit / facilitate efficient performance of subtasks under some hierarchical allocation of authority to insure achievement.

3. Formal provisions for coordination of activities are made in different ways, e.g., through a hierarchy of supervision, project and committee organizations, task forces, and other ad hoc units, but without precluding spontaneous voluntary coordination.

4. Information systems adequate for coordinating divided functions must be designed and installed.

5. A special staff unit attached to the President’s (Chairman) office should be entrusted with arranging the tasks to be performed in a time sequence. While long – range plans may be in relatively general terms, shorter - range plans will often take the form of detailed budgets to meet the need to establish standards against which future performance can be judged.

6. Actual performance, as quantitatively reported in information system and qualitatively estimated through observation by supervisors and the judgement of customers, should be compared to budgeted performance and to standards in order to test achievement, budgeting process, and the adequacy of standards themselves.

7. Individuals and groups of individuals must be recruited and assigned to essential tasks in accordance with their specialist or supervisory skills. All the same, the assignment of task may be adjusted according to the available skills.

8. Individuals performance evaluated both quantitatively and qualitatively should be subjected to influences (constituting a pattern of incentives) which will help to make it effective in accomplishing organizational objectives.

9. Apart from universally appealing incentives such as adequate compensation and favorable organizational climate, special forms of recognition, financial and non- financial, should be designed to fit individual needs and unusual achievement.

10. In addition to financial and non – financial incentives / rewards to motivate voluntary individuals achievement, controls, both formal and informal, and penalties must be devised to contain non - functional activity and to enforce standards.

11. Provision for the continuing development of technical and managerial skills through on-the-job development supplemented by intermittent formal training is a high priority requirement.

12. Dynamic personal leadership is necessary for continued growth and improved achievement in any organization. The leadership style must be natural and also consistent with the requirement of strategy and membership.