fundamentals of strategic management

STRATEGIC MANAGEMENT-It takes into consideration various

external as well as internal factors and the environment in general as well as competitiveness and sustainability over the long-term period in the industry or sector it belongs.

Strategic ManagementStrategic management is the study of why some

firms outperform others.How to create a competitive advantage in the market

place that is unique, valuable, and difficult to copy

“Total organization” perspective, integrating across functional areas.

Two perspectives of leadership: romantic view and external control perspective.

Strategies put together an understanding of the external environment with an understanding of internal strengths and weaknesses.

Attributes of Strategic Management

Directs the organization toward overall goals and objectives.

Includes multiple stakeholders in decision making.

Needs to incorporate short-term and long-term perspectives.

Recognizes trade-offs between efficiency and effectiveness.

Mintzberg’s Views of StrategyPlan - consciously intended course of

actionPloy - maneuver to outwit opponentPattern - consistency in behaviorPosition - location in environmentPerspective - way of perceiving the

world

Prentice Hall, Inc. © 2006 1-6

Strategic Decision Making

Mintzberg’s Modes

–Entrepreneurial mode–Adaptive mode–Planning mode–Logical incrementalism

Forms of StrategyFormal versus informal - associated with

size of firm and stage of development. Mintzberg’s distinction between entrepreneurial and planning mode.

Intended versus realized - intended strategies are the plans managers develop; realized strategies are the actions that actually take place over time.

Forms of Strategy

Source:H. Mintzberg and J. A. Waters, “Of Strategies, Deliberate and Emergent,” Strategic Management Journal 6 (1985), pp. 257-72.

CHRACTERISTICS OF STRATEGY1. Traditionally meant to be a grand

plan in the light of what is was believed and adversary might do or might not do.

2. Derives its relevance given from the existence of a competition in the business

3. It is done in the presumption of the existence of a negative scenario

CHRACTERISTICS OF STRATEGY4. It also connotes general program of

action and deployment of emphasis and resources to attain comprehensive objectives

5. Strategy may, in some extreme or necessary cases, exist without a policy

STRATEGY VS. POLICY1. In may instances, business policies exist

amidst absence of business strategy and strategies may exist without the established business policies.

2. If ever they exist, business policies are generally directional in nature and strategy is more operational in context.

3. Business policies are often formal or written and strategies may be informal and not necessarily written and often confidential

STRATEGY VS. POLICY1. In may instances, business policies exist

amidst absence of business strategy and strategies may exist without the established business policies.

2. If ever they exist, business policies are generally directional in nature and strategy is more operational in context.

3. Business policies are often formal or written and strategies may be informal and not necessarily written and often confidential

STRATEGY VS. TACTICS1. As to level of conduct, strategy

developed a the highest level of management whereas tactics are employed and related to lower levels of management.

2. As to regularity, formulation of strategy is both continuous and irregular whereas tactics are determined on a periodic cycle with fixed time schedule.

STRATEGY VS. TACTICS3. As to subjective values, strategic

decision making is more heavily weighed with subjective values of managers than is tactical decision making.

4. As to the range of alternativeness, the total possible range of alternatives from which management must choose is far greater in strategic than in tactical decision-making

STRATEGY VS. TACTICS5. As to uncertainty, uncertainty is

usually much greater in both formulation and implementation of strategy than in deciding upon and knowing the results of tactical decisions

STRATEGIC TYPES1. Defenders- This type includes

companies with a limited product line that focus on improving the efficiency of the existing operations. This cost orientation makes them unlikely to innovate in a new area.

STRATEGIC TYPES2. Prospectors- This type of

companies includes firms with fairly broad product lines that focus on product innovation and market opportunities. They tend to emphasize creativity and over efficiency.

STRATEGIC TYPES4. Reactors- This type includes

companies that lack a consistent strategy-structure-culture relationship. Their responses to environmental pressures tend to be piecemeal strategic changes.

STRATEGIC TYPES3. Analyzers- This type includes

business organization that operate in at least two different product market areas, one stable and one variable. In stable areas, efficiency is emphasized. In variable areas, innovation is emphasized.

BASES OF POLICIES AND STRATEGIES

1.Legal Mandate2.Vision and Mission

statement3.Specific Objectives4.Programs and Policies

STRATEGY FOUR GENERIC APPROACHES

1.CLASSICAL APPROACH2.EVOLUTIONARY3.PROCESSUAL4.SYSTEMATIC

STRATEGY FOUR GENERIC APPROACHES

1.CLASSICAL APPROACHThis approach follows a pattern of analyzing, planning and directing. Profitability is the supreme goal and rational planning is the means to achieve it.

STRATEGY FOUR GENERIC APPROACHES

2. EVOLUTIONARY-This approach is conscious in keeping cost or expenses low with open options.

STRATEGY FOUR GENERIC APPROACHES

3. PROCESSUALThis approach is more adaptive to situation by playing the local rules.

STRATEGY FOUR GENERIC APPROACHES

4. SYSTEMATIC- This approach is relativistic, regarding the ends and means of the strategy and inescapably linked to the cultures and powers of the local social systems in which it takes place.

Hierarchy of Goals

Coherence in Strategic DirectionCompany visionMassively inspiringOverarchingLong-termDriven by and evokes

passionFundamental statement of

the organization’sValuesAspirationGoals

Company visionCompany vision

Hierarchy of Goals

Company visionCompany vision

Coherence in Strategic DirectionMission statementsPurpose of the

companyBasis of competition

and competitive advantages

More specific than vision

Focused on the means by which the firm will compete

Mission statementsMission statements

Hierarchy of Goals

Company visionCompany vision

Mission statementsMission statements

Coherence in Strategic DirectionStrategic objectivesOperationalize the

mission statementMeasurable, specific,

appropriate, realistic, timely, challenging, resolve conflicts that arise, and yardstick for rewards and incentives

Strategic objectivesStrategic objectives