Strategic management

Strategic Management

The Process of making decisions about their

future in its complex & changing environment is called strategic management.

Involves in making decisions that defines the organizaton’s mission & objectives.

Determines the organization’s most effective utilization of its resources & seek to assure the effectiveness of the organization within its environment.

Strategic Management

Strategy Formulation Strategy Implementation

Two Phases

Concerned with making decisions with regards

to: Defining the org. philosophy & mission Establishing long & short range objectives to

achieve the org.’s mission Selecting the strategy to be used in achieving

the organization’s objectives.

Strategy Formulation

Concerned with aligning the organizational structure ,

systems & processes with the chosen strategy. Strategies exist @ different levels in an org The hierarchy of strategies 1.Mission- 2.Objectives-Long term & Short term 3.Corporate Strategies-established @the highest level

of mgt & involve a long range time horizon 4.Business Unit Strategies- Narrower in scope than

before 5.Functional Strategies- more narrower.

Strategy Implementation

Stable growth strategy Growth strategy Concentration on a Single product or service Concentric diversification Vertical diversification Horizontal diversification Conglomerate diversification Endgame strategies Retrenchment strategies Trunaround strategy Disinvestment strategy Liquidation strategy Combination strategy Simultaneous strategy Sequential strategy

Corporate Strategies

Change the management personnel both at the top &

bottom levels. Cut down on Capital expenditure Centralize decision- making in an attempt to control

costs. Reduce recruitment Reduce advertising & promotion expenditures Fire employees if required Sell off some assets. Tighten inventory ctrl Improve the collection of accounts receivable.

The turnaround strategy aims to cut costs

by using the following measures:

The disinvestment strategy involves selling off

a major part of the business which can be a strategic business unit, a product line, or a division.

Liquidation strategy involves terminating an organization’s existence either by selling off its assets or by shutting down the entire operation.

Cont……

Overall cost leadership strategy-aims to produce & deliver

the product or service with specified quality, at a low cost relative to its competitors.

Differentiation Strategy- aims to create a new product or service which is unique in that industry.

The uniqueness may be achieved through design or brand image, technology, customer services or dealer network. This strategy will enable the organi.to fix a higher price for its product or service.

Focus Strategy- aims to concentrate on a particular group of customers, geographic mkt or pdt line segment in order to serve a well defined but narrow mkt better than its competitors who serve a broader mkt.

Generic competitive(or Business Unit) Strategy

Marketing Strategies Financial Strategies Personnel Strategies Production/Manufacturing Strategies

Functional Strategies

Aims to provide product/services to its customers

by using a combination of the following strategies to fill mkt gap.

1. timely delivery of products/services. 2. flexibility in meeting customer’s demand in

terms of change in product design or change in production volume.

3. quality of products/services to meet customer’s specifications.

4. cost effectiveness in terms of low price for its products/services relative to that of its competitors.

Production /Manufacturing Strategies

Some of the specific operations objectives are as follows: 1. achieving highest efficiency @ all operational subsystem. 2. gearing up the operations subsystems to meet delivery

commitments 3. flexibility in meeting customer’s demand in terms of change

in product design 4. flexibility in production volume to meet changing customers

demand 5. satisfying customers’ demand with world class product

quality 6. to be effective in labour relation & manpower cost ctrl 7. efficient material utilization and its cost ctrl. 8. efficient facility utilization and its cost ctrl.

Cont……

To increase the rate of rate of return on

investment To increase sales turnover To maximize profit To improve the economy of the nation To improve earning per share To improve employment To attain substantial market share.

In general , Organizations would be interested in improving their productivity by formulating proper corporate

strategies. The objectives of such corporate strategies are(Sahay,Prem Vrat & Jain, 1996):