Chapter 01

Introduction to Strategic Management

Introduction to Strategic Management 2

Objectives Evolution of the Concept of Strategic

Management Importance of Strategic Management Components of Strategic Management The Three Levels of Strategy Planning Making Strategic Decisions

Introduction to Strategic Management 3

Evolution of the Concept of Strategic Management The word ‘Strategy’ originated from the Greek word

‘Strategia’, means a General or Military Commander Contribution of war on business strategy

‘Attack Strength’ strategy ‘Attack Weakness’ strategy Bringing change to failing company Concentration of forces Forging a strategic alliance Patience and time Control the choke-point Containment is good enough A combat-ready company

Introduction to Strategic Management 4

Ansoff’s Strategic Success Paradigm Igor Ansoff pioneered the concept of strategy The strategic success paradigm identifies the conditions that

optimize profitability Key elements of paradigm

No universal success formula Level of turbulence in the environment determines the strategy

required for the success Aggressiveness of strategy should be aligned with the turbulence

in the environment to optimize the firm’s success Management’s capabilities should be aligned with the

environment to optimize the firm’s success Internal capability variables jointly determine the firm’s success

Cognitive, Psychological, Political, Anthropological and Sociological

Introduction to Strategic Management 5

Ansoff’s Strategic Success Paradigm Known as ‘Strategic Readiness Diagnosis’ He introduced

Gap Analysis Where you are today and where you want to be

Concept of Synergy The whole is greater than the mere sum of the parts,

and it requires an examination of how opportunities fit the core capabilities of the organization

Introduction to Strategic Management 6

Mintzberg: Strategy as Craft Manager’s personal side affects the strategic

management Intuitive view of strategic management Crafting Strategy

More human approach to strategy formulation and implementation

Strategy formulation is a deliberate, delicate and dangerous process

Introduction to Strategic Management 7

Mintzberg: Strategy as Craft Types of ‘ideal’ organizational structures

Simple structure Machine bureaucracy Professional bureaucracy Divisionalized ‘Ad hoc’ racy

Introduction to Strategic Management 8

Peter Drucker’s Contributions Strategic management means - Taking action to make the

desired results come to pass Management by Objectives

Introduction to Strategic Management 9

Michael Porter: Strategy and Competitive Advantage

Introduced Generic Strategies - to reduce uncertainty

Introduction to Strategic Management 10

Michael Porter: Strategy and Competitive Advantage

Five force model

Introduction to Strategic Management 11

Michael Porter: Strategy and Competitive Advantage Value chain

Porter’s work can be summarized as ‘Vigorous Domestic Rivalry’

Introduction to Strategic Management 12

Importance of Strategic Management Strategy

The plans made and actions taken to enable an organization fulfill its intended objectives

Intended strategy Realized strategy

The hierarchy of strategic intent Purpose of an organization strives to achieve Strategic ends

Generic Focused

Introduction to Strategic Management 13

Components of Strategic Management Vision Company Mission Company Profile External Environment Strategic analysis and

choice Long-term objectives

Annual objectives Grand Strategy Functional and

Operational Strategies Policies Institutionalizing the

strategy Control and evaluation

Introduction to Strategic Management 14

The Three Levels of Strategy Planning

Corporate Level

Functional Level

Business Level

Introduction to Strategic Management 15

Steps for Making Strategic Decisions

Formulate the Company’s Mission

Develop A Company Profile

Assessing the Company’s ExternalEnvironment

Analyze the Company’s Options

Identify Most Desirable Option

Select a set of Long-term Objectives andGrand Strategies

Develop Annual Objectives and Short-term Strategies

Implement

Strategies

Evaluating the Success of the Strategies

Introduction to Strategic Management 16

Characteristics of Strategic Management Decisions Integrates various functions Considers a broad range of stakeholders Entails multiple time horizons Concerned with both efficiency and effectiveness

Introduction to Strategic Management 17

Developing a Strategic Perspective Reasons for failure in developing a strategic

perspective Lack of awareness within the top management team about

the organization’s real operating situations ‘Kidding themselves’ Syndrome Vested interests of the managers Excessive involvement in everyday operational problems Getting complacent after some initial success A change in direction is often misinterpreted Failure to locate its competitive edge

Introduction to Strategic Management 18

Summary Evolution of the Concept of Strategic

Management Importance of Strategic Management Components of Strategic Management The Three Levels of Strategy Planning Making Strategic Decisions