Meaning of Strategic Management & Its Levels

Meaning of Strategic Management & Its

Levels

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M-4103 Pooja

M-4160 NitinM-4151 Sanket

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WHAT IS STRATEGY?According to Lloyd L. Byars,

“Strategy includes the determination and evaluation of alternative paths to achieve an organization’s objectives and mission, and eventually, a choice of the alternative that is to be adopted.”

According to Alfred D. Chandler, “Strategy is the determination of the basic long-

term goals and objectives of an enterprise and the adoption of the course of action and the allocation of resources necessary for carrying out these goals.”

FORMULATIONDoing a situation analysisConcurrent with this assessment, objectives are setThe light of the situation analysisThree-step strategy formation process

IMPLEMENTATIONAllocation of sufficient resourcesEstablishing a chain of command Assigning responsibility of specific tasks managing the processimplementing specific programs

STRATEGIC MANAGEMENT

According to Jauch and Glueck, “Strategic management is a stream of decisions and

actions which leads to the development of an effective strategy or strategies to help achieve corporate objectives. The strategic management process is the way in which strategists determine objectives and make strategic decisions.”

According to H.L.Ansoff, “Strategic management is systematic approach to a major

and increasingly important responsibility of general management to position and relate the firm to its environment in a way which will assure its continued success and make it secure from surprises.”

BIRTH OF STRATEGIC MANAGEMENT

A discipline originated in the 1950s and 60sImportance of coordinating the various aspectsInteractions between functions or between departmentsLooking long term perspectiveStrategy also follows from structureCompared marketCorporate strategy (1965) he developed the "gap analysis"

FEATURESSystematic Process

Involves Multiple Decisions Continuous Process

Focus on Objectives

Longer Time Horizon

Universal Applicability

NEED AND IMPORTANCE

Aids decision making.

SWOT Analysis.

Aids in planning.

OBJECTIVESMission statement: Assessing the landscape within which the company will operate, & formulating how the company sees its role within that landscape.Vision statement: Establishing objectives to taking both a long & short-term view of what the company can offer.Stipulating the goals: The company has for itself, both in terms of financial &strategic objectives.

PROCESSMission, goals and strategiesExternal AnalysisInternal AnalysisFormulate StrategiesImplement StrategiesEvaluate the Results

WHAT IS SWOT ANALYSIS ?

SWOT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture.

It involves specifying the objective of the business venture or project and identifying the internal and external factors.

A SWOT analysis may be incorporated into the strategic planning model.

1. Strengths: attributes of the person or company that are helpful to achieving the objective(s).

2. Weaknesses: attributes of the person or company that are harmful to achieving the objective(s).

3. Opportunities: external conditions that are helpful to achieving the objective(s).

4. Threats: external conditions which could do damage to the objective(s).

CONCEPTSA SWOT analysis is a structured evaluation of external and internal marketplace conditions. These are the key elements behind the SWOT analysis concept.

1. Internal factors – The strengths and weaknesses internal to the organization.

2. External factors – The opportunities and threats presented by the external environment to the organization.

SWOT ANALYSIS involve four concepts:

1. Strength Concept

2. Weakness Concept

3. Opportunities Concept

4. Threats Concept

STRATEGIC ANALYSIS

PEST AnalysisScenario PlanningFive Forces AnalysisMarket SegmentationDirectional Policy MatrixCompetitor AnalysisCritical Success Factor AnalysisSWOT Analysis

THREE LEVELSLevel one (strategic capability requiring facility)

Level Two (the attainment of strategic perspective)

Level Three (the acquisition of reflective skills)

Functional

BusinessCorporate

Implementation

LEVELS OF STRATEGY

FUNCTIONAL LEVEL STRATEGY

The functional level of organization is the level of the operating divisions & departments. The strategic issues at the functional level are related to functional business & value chain. Functional units of organization are involved in higher level strategies by providing input into the business unit level & corporate level strategy.The emphasis is on short & medium term plans.

BUSINESS UNIT LEVEL STRATEGY

Cost leadership: continuous efforts to lower

costs relative to competitors are necessary in order to successfully be a cost leader. This can include:

• Building state of art efficient facilities

• Maintain tight control over production and overhead costs

• Minimize cost of sales, R&D, and service.

Differentiation

Focused low cost

Focused differentiation

Focused strategies

CORPORATE STRATEGYHow can corporate strategy be used in your organization?

Provides a plan Establishes a pattern of action In corporate perspective

What are the benefits of corporate strategic planning?

Provides framework for a action Evaluate your competitors & adjust to current

events Motivate and encourage managers

How can corporate strategy be used in your organization?

Provides a plan Establishes a pattern of action In corporate perspective

What are the benefits of corporate strategic planning?

Provides framework for a action Evaluate your competitors & adjust to

current events Motivate & encourage managers

IMPLEMENTATION STRATEGY

Action planning

Organizational structure

Human resource factor

Annual business

Monitoring & control

Linkage

EXAMPLE In October, 1998, Citicorp and Travelers Group completed their $70 billion merger, joining these two companies‘ i.e. banking, brokerage and insurance services.

Citicorp, the second largest commercial bank.Travelers Group, a financial conglomerate that offered insurance and investment banking services.

The merger between the two created ContiGroup.

This merger marked the beginning of a strategic transformation within the financial services industry in US.

The plans were first discouraged by regulatory authorities as well as lobby groups (including performers) in the USA.

In general there are other stakeholders too who have influence such as financial institutions, the workforce, buyers and suppliers etc.

CASE STUDYMr.Malu Nair started a toy-making factory at Cochin.

The success of Mr. Nair was mainly due to his business interests and good managerial skills, with special reference to innovation and cost-cutting exercises.

Mr. Nair entered in the business of readymade garments and plastic furniture.

The new business ventures did not make my profit for the past 2 years, and Malu Nair thought of closing them down.

QUESTION:What could be the possible reasons of Mr. Nair’s difficulty in delegating authority?

What would you have done, if you were in the position of Mr. Nair? And why?