CONCEPT OF STARTEGIC
MANAGEMENT,CORPORATE GOALS &
DECISION MAKINGBy: RAKHI AGARWAL
Strategic Management Strategic management analyzes the
major initiatives taken by a company's top management, usually involving resources and performance in external environments. The process entails:
Specifying the organization's mission, vision and objectives.
Developing policies and plans, often in terms of programs that are designed to achieve these objectives
Allocating resources to implement the policies and plans
.
"Strategic management assesses its competitors and sets goals and strategies to meet all existing and potential competitors. It then reassesses each strategy regularly to determine whether it has succeeded or needs replacement by a new strategy. "
Involves two major processes: formulation of strategy. implementation of strategy.
Formulation Formulation of strategy involves: analyzing the environment in which
the organization operates,making a series of strategic decisions
about how the organization will compete,
ends with a series of goals or objectives and measures for the organization to pursue.
Implementation It involves – decisions regarding how the organization's
resources (i.e., people, process and IT systems) will be aligned and mobilized towards the objectives.
It results – in how the organization's resources are
structured, leadership arrangements, communication, incentives, and monitoring mechanisms to track progress towards objectives, among others.
Concept of strategic management
Portfolio theoryExperience curveIndustry structure and profitabilityCompetitive advantageValue chain
Portfolio theory Harry Markowitz “hole in the middle” problem. (1980)It refers to decisions regarding the
business or industry in which the organization competes, or which products and services should be offered.
Experience CurveIt is a hypothesis dating from the late 1960's that direct
per unit costs decline by 20-30% every time cumulative production doubles.
Costs decline due to a variety of factors, such as the substitution of labour for capital (automation), and technological sophistication.
Firms could achieve a competitive advantage through lower cost per unit and higher market share.
The experience curve was very influential in portfolio theory; businesses with higher market share moved along the experience curve faster than their competition, giving them a cost and profitability advantage.
Industry structure and profitability
Porter identified the forces that shape the industry structure or environment. The framework involves the bargaining power of buyers and suppliers, the threat of new entrants, the availability of substitute products, and the competitive rivalry of firms in the industry. These forces affect the organization's ability to raise its prices as well as the costs of inputs (such as raw materials) for its processes.
The framework helps describe how a firm can use these forces to obtain a sustainable competitive advantage. Companies can maximize their profitability by competing in industries with favourable structure and by selecting the right generic competitive strategy. Competitors can take steps to grow the overall profitability of the industry, or to take profit away from other parts of the industry structure. Porter modified Chandler's dictum about structure following strategy by introducing a second level of structure: while organizational structure follows strategy, it in turn follows industry structure.
Competitive advantagePorter discussed the concepts of competitive
advantage and the value chain in a 1985 book. Competitive advantage refers to the attributes that allow an organization to outperform its competition.
These attributes may be market position, superior skills, or superior resources. In Porter's view, strategic management should be concerned with building and sustaining competitive advantage
Decision making: The process of examining your possibilities
options, comparing them, and choosing a course of action.
It can be regarded as the cognitive process resulting in the selection of a belief or a course of action among several alternative possibilities.
Every decision-making process produces a final choice that may or may not prompt action.
Problem analysis v/s decision-making
PROBLEM ANALYSIS:-Analyze performance, what should the results
be against what they actually are.!Problems are merely deviations from
performance standardsProblem must be precisely identified and
describedProblems are caused by a change from a
distinctive feature
Decision-makingObjectives must first be establishedObjectives must be classified and
placed in order of importanceAlternative actions must be
developedThe alternative must be evaluated
against all the objectives
The alternative that is able to achieve all the objectives is the tentative decision.
The decisive actions are taken, and additional actions are taken to prevent any adverse consequences from becoming problems and starting both systems (problem analysis and decision-making) all over again
Group decision-making techniques
Consensus decision-making: tries to avoid "winners" and "losers". requires that a majority approve a given
course of action, but that the minority agree to go along with the course of action.
if minority is not satisfied then amendments are made accordingly.
Voting-based methods:Range voting: lets each member score one or more of the available options. The option with the highest average is chosen.
Majority: requires support from more than 50% of the members of the group.
Individual decision-making techniquesPros and cons: listing the advantages and disadvantages
of each option.Contrast the costs and benefits of all
alternatives. Also called "rational decision-making".
Simple prioritization: choosing the alternative with the highest
probability-weighted utility for each alternative.
Satisficing: examining alternatives only until an acceptable one is found.
Corporate GoalsGoals or objectives are the targets which
must be achieved in order to fulfil the corporate
aims.Corporate objectives are the goals that the whole organization is trying to achieve.
Maximising the amount of profit earned by the organization.
Maximising shareholder’s wealth (share prices)
Growth in the size of the firmDiversification to spread risk to counter
seasonal decline in the sales of the product.
Focus on core capabilitiesIncreasing market standing
Corporate strategyCorporate strategy is the organization’s
plan of action which, when implemented, will lead to the achievement of the corporate objectives.
Strategy cannot be considered before the firm’s goals are clearly established.
THANK YOU
