STRATEGIC Management by RADHEY06

8/10/2019 STRATEGIC Management by RADHEY06

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Prof. DEBASISH DUTTA

BUSINESS PLANNING

ANDSTRATEGICManagement


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Planning is the most basic of all managerialfunctions. It involves selecting mission andobjectives and the actions to achieve them.

Plans provide a rational approach to achievingpreselected objectives.

Planning


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Corporate Planning gives the high-level, long-horizon plan that identifies financialopportunities and links them directly and

tactically to key value-driven businessstrategies.

It links those financial KPIs with pragmaticoperational cause and effect indicators andhelp tie those opportunities to plan andoptimize at a high level over the long term.

Corporate Planning


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BUSINESS POLICY


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BUSINESS POLICYDefinition

Business policy is the study of the functions andresponsibilities of senior management, the crucialproblem that affect the success in the totalenterprise, and the decision that determine thedirection of the organisation and shape its future.The problems of policy in business, like those ofpolicy in public affairs, have to do with the choiceof purposes, the moulding of orgaisational identityand character, the continuous definition of what

needs to be done, and the mobilisation ofresources for the attainment of goals in the faceof competition or adverse circumstances.

Christensen and others


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The definition covers

1.It is considered as the study and of the functionsand responsibilities of the senior management.

2.It relates to those organisational problem that

affect the success of the total enterprises.3.It determines the future course of action that anorganisation has to adopt.

4.It involves choosing the purpose.5.It defines what needs to be done in order to

mould the character and identity of organisation.6.It is concerned with mobilisation of resources,

which help the organisation to achieve its goals.


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Characteristics of Business Policy

Definite and clear policies help to preventdeviations from accepted course and helps inachieving desired goal and therefore thecharacteristics are:

SimplicityClarityFlexibilityCertainty

ConsistencyComprehensiveRelevant

Stability


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Traditional PlanningVs.

Strategic Planning


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Traditional Planning Vs. Strategic Planning

Traditional Planning Strategic Planning

1. It is concerned with goalderived from establishedobjectives

2. It is concerned withindividual objectives

3. May be carried out lowermanagement

4. It is more functional orunit wise or departmentalwise approach.

5. It deals with goals that isvalidated through pastexperiences

1. It is concerned with newobjectives and strategies.

2. It combines activities thatform an unique value chain

3. It is performed by topmanagement

4. It is integrated and havecorporate level and businesslevel approach

5. It has less procedures andmay trade in uncharteredpath


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Strategic Management


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In the descriptive and prescriptivemanagement texts, strategic managementappears as a cycle in which several activitiesfollow and feed upon one another.

The strategic management process is typicallybroken down into five steps

Strategic Management


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Model of Strategic Management

VISION AND

MISSIONSTATEMENT

SCANNINGENVIRONMENT

DEVELOPINGSTRATEGIC

CHOICES

IMPLEMENTATION

EVALUATION

Step 1

Step 2

Step 3

Step 4

Step 5


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The first step in the strategic management modelbegins with senior managers evaluating theirposition in relation to the organizations currentmission and goals .

The mission describes the organizations valuesand aspirations; it indicates the direction in whichsenior management is going.

Goals are the desired ends sought through theactual operating procedures of the organizationand typically describe short-term measurableoutcomes.

Vision and Mission Statement


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Environmental analysis looks at the internalorganizational strengths and weak-nesses andthe external environment for opportunities andthreats.

The factors that are most important to theorganizations future are referred to as

strategic factors and can be summarized bythe acronym SWOT S trengths, W eaknesses,O pportunities and Threats.

Scanning Environment


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Strategic formulation or developing strategicchoices involves senior managers evaluatingthe interaction between strategic factors and

making strategic choices that guide managersto meet the organizations goals.

Some strategies are formulated at thecorporate, business and specific functionallevels. The term strategic choice raises thequestion of who makes decisions and why theyare made.

Developing Strategic Choices


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Strategy implementation is an area of activitythat focuses on the techniques used bymanagers to implement their strategies.

In particular, it refers to activities that dealwith leadership style, the structure of theorganization, the information and controlsystems, and the management of humanresources.

Leadership is the most important and difficultpart of the strategic implementation process.

Implementation


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Strategy evaluation is an activity thatdetermines to what extent the actual changeand performance match the desired changeand performance.

Evaluation


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The strategic management model depicts thefive major activities as forming a rationaland linear process. It is, however, important

to note that it is a normative model, that is,it shows how strategic management shouldbe done rather than describing what isactually done by senior managers.

The strategic decision-making implies apotential gap between the theoretical modeland reality.

Conclusion


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Levels of Strategy

1.Corporate Level Strategies

2.Business Level Strategies

3.Functional Level Strategies


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Corporate Level Strategies

Corporate level strategies are basically aboutdecisions related to allocating resourcesamong the different businesses of a firm,transferring resources from one set ofbusiness to others and managing andnurturing a portfolio of business in such a waythat the overall corporate objectives areachieved. An analysis based on business

definition provides a set of strategicalternatives that an organisation can consider.


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Business Level Strategies

Business Level Strategies are the courses ofaction adopted by a firm for each of itsbusinesses separately to serve identifiedcustomer groups and provide value tocustomer by satisfaction of their needs

In the process the firm uses its competenciesto gain, sustain, and enhance its strategic orcompetitive advantage.


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Functional Level Strategies

Functional Level Strategies deals with arelatively restricted plan which provides theobjectives for a specific function, for theallocation of resources among different

operations within that functional area and forenabling a coordination between them for anoptimal contribution to the achievement of thebusiness and corporate level objectives.

Functional strategies are implemented throughfunctional and operational implementation.


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STRATEGIC ANALYSISAND

CHOICE


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Strategic Choice

Process of strategic choice consists of followingfour steps:

1.Focusing on alternatives2.Considering the selection factors3.Evaluation of strategic alternatives4.Making the strategic choice


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Focusing on alternatives

The aim of focusing on alternative is to narrowdown the choice to a manageable number offeasible strategies.

A decision maker would, in practice, limit thechoice to a few alternatives, rather focuses onreasonable number of alternatives.


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Evaluation of strategic alternatives

It basically involves bringing together theresults of the analysis carried out on the basisof the objective and subjective factors.

There is no set procedure and strategists mayuse any approach which suits thecircumstances. Both objective and subjectivefactors have to be considered together.


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Making the strategic choice

This leads to a clear assessment of whichalternative is the most suitable under theexisting conditions. One or more strategies hasto be chosen for implementation.

A blueprint that will describe the strategies andthe conditions under which they would operatehas to be made.


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Strategic Analysis

-- Establishing long-term objectives-- Generating alternative strategies-- Selecting strategies to pursue-- Best alternative - achieve mission & objectives

Nature of Strategy Analysis


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Strategic Analysis

Corporate Level

The analysis focuses on the question of whatshould a corporate entity do regarding theseveral business that are there in its portfolio.

It can be done through corporate portfolioanalysis and various techniques like BCG

matrix etc.


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Strategic Analysis

Business Level

It refers to industry and competition analysis.The industry and competition are vital forconsideration in making strategic choice.

Porters five forces model, experience curveanalysis, SWOT analysis etc. help in business

level analysis.


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SWOT ANALYSIS


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SWOT Matrix

Strengths-Opportunities (SO)

Weaknesses-Opportunities (WO)

Strengths-Threats (ST)

Weaknesses-Threats (WT)

Four Types of Strategies


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SO Strategies

Use a firms internal strengthsto take advantage

of externalopportunities

SO Strategies

StrengthsWeaknesses

OpportunitiesThreats

SWOT


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WO Strategies

Improving internalweaknesses by

taking advantageof external

opportunitiesWO

Strategies

StrengthsWeaknesses


SWOT


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ST Strategies

Use a firms strengths

to avoid orreduce the impactof external

threats

STStrategies

StrengthsWeaknesses


SWOT


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WT Strategies

Defensive tacticsaimed at reducing

internal

weaknesses &avoidingenvironmental

threats

WT Strategies

StrengthsWeaknesses


SWOT


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SWOT Matrix

Leave BlankStrengths S

List Strengths

Weaknesses W

List Weaknesses

Opportunities

O

List Opportunities

SO Strategies

Use s t rengths to takeadvantage ofoppor tuni t ies

WO Strategies

Overcomin g weaknessesby taking advantage of

oppor tuni t ies

Threats T

List Threats

ST Strategies

Use s t rengths to avoidthreats

WT Strategies

Minimize weaknesses andavoid th reats


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GE Nine-Cell Matrix


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GE Nine-Cell Matrix

This is based on the pioneering efforts of theGeneral Electric (GE) company of the US and

supported by the consulting firm McKinsey &Company of the US.

It is a typical 9 cell Matrix.


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GE Nine-Cell Matrix

The vertical axis represents industryattractiveness, which is a weightedcomposite rating based on eight differentfactors.These factors are:

1.Market size and growth rate2. Industry profit margin3.Competitive intensity4.Seasonality

5.Cyclicality6.Economics of scale7.Technology and social environment8.Legal and human aspects


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GE Nine-Cell Matrix

The horizontal axis represents businessstrength competitive position which aweighted composite rating based on sevenfactors.These seven factors are:

1.Relative market share2.Profit margins3.Ability to compete on price & quality4.Knowledge of customer and market5.Competitive strength and weaknesses6.Technological capability7.Calibre management


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GE Nine-Cell Matrix

The two composite values for industryattractiveness and business

strength/competitive position are plotted foreach business in a companys portfolio. Thepie chart circles denote the proportional sizeof the industry and the dark segment

represent the companys market share.


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GE Nine-Cell Matrix

The 9 cell matrix are grouped on the basis oflow to high industry attractiveness, andweak to strong business strength. The zonesof three cells each are made, denotingdifferent combinations represented by green,yellow, and red colours.The green zone indicates expansionstrategies, yellow zone suggests stability and

consolidation and red zone suggestsretrenchment, liquidation, or turnaround.


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GE Nine-Cell Matrix

Low

High

Medium

AverageStrong Weak

I n d

u s

t r y

A t t r a c

t i v e n e s s

Rating Scale: 1 = Weak ; 10 = Strong

6.7

3.3

10.0

1.0

1.03.36.7

Business Strength and competitive Position


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GE Nine-Cell Matrix

Advantages over BCG Matrix:

It offers an intermediate classification of medium andaverage ratings.

It incorporates a larger variety of strategic variables likethe market share and industry size.

It is a powerful analytical tool to channel corporateresources to business that combine medium to high

industry attractiveness with an average to strongbusiness strength/competitive position.


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Prof DEBASISH DUTTA

GE Nine-Cell Matrix

Drawback of the 9 cell matrix:

It only provides a broad strategic prescriptionrather than specifics of business strategy.

STRATEGIC Management by RADHEY06

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