strategic management

STRATEGIC MANAGEMENT

Strategy is derived from the greek word strategos.

Strategy refers to the ‘plan or course of action’ framed or formulated to achieve a specified objective or goal.

A comprehensive way to try to pursue certain ends.

INTRODUCTION

The famous Chinese Philosopher Sun Tzu’s “The Art of War” written in the 6th century B.C.

The famous Indian Guru Chanakya’s “Arthasastra” written in the 4th century B.C.

The notorious Italian Niccolo Machiavelli’s “The Prince” “The Discourses” & “The Art of War” written in the 16th century A.D.

EARLY TEXTS ON STRATEGY

To meet the objectives of organization.

Blend of internal and external factors.

Solve certain problems.

Future oriented.

Efficient adoption in organization.

Guide enterprise thinking and action.

Nature of strategy

Long term objective.

Competitive advantage.

Vector.

Synergy.

Essence of strategy

Levels of operation-corporate level,

business level, functional level.

2 categories of companies-different

directions or product groups known as profit

centres or sbu’s, single product companies.

SBU was introduced by general electric

company. Best example is relaince

company.

Levels of strategy

Strategies are formulated according to organizations.

Value oriented, conceptual and less concrete.

These are characterized by greater risk, cost and profit potential as

well as flexibility.

Occupy highest level of strategic decision making and cover the

actions dealing with the objectives of the organization.

Decisions are made by top management.

Examples: acquisitions decisions, diversification, structural

diversifications etc.

Directors and chief executive officer are the primary members.

Corporate level strategy

Make use of business resources.

Allocation of resources among functional areas

and coordination between them for achievement

of corporate level objectives.

Operate within overall organization.

Has impact on business strategy.

Business level strategy

Relates to single functional operation.

Decisions taken are described as tactical.

The strategies are concerned with how different

functions of the enterprise like marketing, finance

manufacturing etc.

Sometimes a 4th level exists known as the operating

level which comes from the functional level strategy.

Example marketing function which is spilt into

market research, sales promotion etc.

Functional level strategy

To take decisions.

Deal with new trend.

Financial benefits in the form of increased profits.

Clarity in direction for achieving objective.

Organizational effectiveness.

Satisfaction to the personnel.

Habit of thinking and proactive.

Achievement of goals.

Improves corporate communication. Coordination and

allocation of resources.

Importance of strategy

There are two dimensions of every action. They are substantive and

procedural.

The process of strategy is cyclical in nature.

Elements interact among themselves.

There are 4 phases-identification phase, development phase,

implementation phase and monitoring phase.(initially)

C.k.prahalad-strategic intent, environmental analysis, evaluation of

strategic alternatives and choices, strategy implementation,

strategy evaluation and control.

PROCESS OF STRATEGY

Purpose of the organization.

It could be in the form of vision and mission.

An obsession of having ambitions that may be

even out of proportion to their resources and

capabilities.

Strategic intent

Articulates the position of the firm.

A vision should be

◦ An organisation charter of core values and principles.

◦ The ultimate source of our priorities, plans and goals.

◦ A puller into the future.

◦ A determination and publication of what makes us unique.

◦ A declaration of independence.

Vision

Well-conceived vision

Core ideology

Core values and core purpose

Envisioned future

Long term audacious goal vivid description

of achievement

Mission is what an organization is and why it exists.

Characteristics of mission

◦ It should be feasible.

◦ It should be precise.

◦ It should be clear.

◦ It should be motivating.

◦ It should be distinctive.

◦ It should indicate the major components of strategy.

◦ It should indicate how objectives are accomplishments.

Mission

Values of a company state how managers and

employees should conduct themselves.

How they should do business.

What kind of organization they should build a

company.

They depend on organizational culture.

Values

A goal is a precise and measurable desired future

state that a company attempts to realize.

Goal is to attain mission and vision.

It should address crucial issue.

They should be challenging but realistic.

It should be achieved within a limited time period.

Goals

Analysis of the organization’s external operating

environment.

Identify strategic opportunities and threats.

It should consider national environment, wider

socioeconomic or macro environment.

Impact of globalization on competition within industry.

Examination of macroeconomic, social, government,

legal, international and technological factors is essential.

External analysis

Focuses on reviewing the resources,

capabilities and competencies of company.

Goal is to identify strength and weakness of

the company.

Internal analysis

Functional level strategies.

Business level strategies.

Global strategies.

Corporate level strategies.

SWOT analysis and the business model

Increase performance.

Execute strategy plan.

Best organization structure.

Culture and control systems can be improved.

Maximize profit towards growth.

Strategy implementation

After implementation, monitoring is

essential.

To what extent the objectives and goals

fixed is effective has to be analyzed.

It is too optimistic then conservative goal

has to be fixed.

The feedback loop

General◦ Socio-economic◦ Technological◦ Governmental

Industry◦ Customers◦ Suppliers◦ Competition

International

ENVIRONMENTAL ANALYSIS

The economy

Business cycle.

Inflationary and deflationary trend.

Monetary policies.

Fiscal policies.

Balance of payments.

Unemployment rates.

Climatic factors

Social and cultural factors

Demographic factors

Socio-economic sector