management policy and strategy session - i

Prof. Sushil\IITD\Session - I 1

MANAGEMENT POLICY AND STRATEGYSESSION - I

Strategic Management Introduction

Prof. SushilDepartment of Management StudiesIndian Institute of Technology, Delhi

INDIAEmail: [email protected]


What is Strategy?

Large-scale, future-oriented plan for interacting with competitive environment to achieve objectives

Company’s “game plan”

Framework for managerial decisions


STRATEGY

• Direction and scope of an organisation over the long term.

• Matches its resources to its changing environment.

• In particular its markets, customers or clients.

• So as to meet stakeholders’ expectations.


STRATEGIC DECISIONS

• Modernization• Divestment• Product Launch• Acquisition/Merger• Collaboration/Alliance• Overseas Expansion• Turnaround• Technology Transfer• Entry into New Markets• Restructuring• Reengineering


Dimensions of Strategic Decisions

• Strategic issues . . .• Require top-management decisions• Require large amounts of firm’s resources• Affect firm’s long-term prosperity• Are future oriented• Usually have multifunctional or multibusiness

consequences• Require consideration of firm’s external

environment


STRATEGY DEVELOPMENT ROUTES

OpportunisticStrategy

ImposedStrategy

EmergentStrategy

PlannedIntendedStrategy

RealizedStrategy

UnrealizedStrategy


STRATEGY

Derived from Greek `strategies• a general set of maneuvers carried out to overcome an enemy

STRATEGIC MANAGEMENT

A way of regenerating an organization, Through continuous attention to a vision of what the people,

who make up the organization, wish to do. A proactive process of seeking to change the organization,

its stakeholders and the content or environment within which it seeks to

attain its aspirations It is particularly about stretching the organization to gain

leverage from its distinctive competencies and ability to change them.


STRATEGIC MANAGEMENTContd...

It involves creating and moulding the future,

along with making sense of the past

rather than predicting and responding to some predetermined future reality

It is about developing the capability for long term flexibility and strategic opportunism

rather than making and sticking to long term plans.


What is Strategic Management?

The set of decisions and The set of decisions and actions that result in the actions that result in the formulation and formulation and implementation of plans implementation of plans designed to achieve a designed to achieve a company’s objectives.company’s objectives.


Critical Tasks of Strategic Management

11 Formulate the company’s missionFormulate the company’s mission

22Develop company profile, reflecting its internal conditionsDevelop company profile, reflecting its internal conditions

33 Assess company’s external environmentAssess company’s external environment

44 Analyze company’s optionsAnalyze company’s options

55 Identify most desirable optionsIdentify most desirable options

66 Select long-term objectives and grand strategiesSelect long-term objectives and grand strategies

77Develop annual objectives and short-term strategiesDevelop annual objectives and short-term strategies

88 Implement the strategic choicesImplement the strategic choices

99 Evaluate success of the strategic processEvaluate success of the strategic process


LANDMARK CONTRIBUTIONS TO THE DEVELOPMENT OF STRATEGIC

MANAGEMENT

Stanford Research Institute

Structured thinking about planning systems

Igor Ansoff Analytical approach to corporate strategy

Igor Ansoff

James QuinnKenichi Ohmae

Thomas Peters and Robert Waterman

Strategic management concept Logical incrementalizm

Strategic thinking

1965

1972

1980

1982

1982

1963-70

In search of excellence


LANDMARK CONTRIBUTIONS TO THE DEVELOPMENT OF STRATEGIC

MANAGEMENT

CONTD….

Henry Mintzberg

Ignor Ansoff

Noel Tichy and Mary Devanna

Michael Porter

Gary Hamel and

C.K. Prahalad

Deliberate and emergent strategies

Contingency approach (environmental turbulence)

Transformational leadership

From competitive advantage to corporate strategy

Reshaping industries (competing for the future)

1985

1986

1987

1994

1985


Single-Business Firms

Corporate/business level


POM/R&D strategie

s

POM/R&D strategie

s

Marketing

strategies

Marketing

strategies

Human relations strategie

s

Human relations strategie

s

Financial/ accounti

ng strategie

s

Financial/ accounti

ng strategie

s


Multiple Business Firms



Business 1Business 1 Business 2Business 2 Business 3Business 3

POM/R&D strategiesPOM/R&D strategies

Marketing strategiesMarketing strategies

Human relations

strategies

Human relations

strategies

Financial/ accountin

g strategies

Financial/ accountin

g strategies


Board of Directors

Corporate Managers

Strategic Decision Makers

Business Managers

Functional Managers

Mission, including goals & philosophy

Ends(What is to be achieved?)

Means(How is it to be achieved?)

Long-term objectives

Grand strategy

Annual objectives

Short-term strategies & policies

Note: indicates a principal responsibility; indicates a secondary responsibility

Hierarchy of Objectives and Strategies


Characteristics of Strategic Management Decisions

Greater risk, cost, and profit potential

Greater need for flexibility

Longer time horizons

Corporate -level

decisions involve



Bridge decisions at corporate and functional

levels

Are less costly, risky, and potentially profitable than corporate-level

decisions

Are more costly, risky, and potentially profitable

than functional-level decisions

Business -level

decisions


Involve action-oriented operational

issues

Are relatively short range and low risk

Incur only modest costs

Functional- level

decisions

Implement overall strategy



Benefits of Strategic Management

Enhances firm’s ability to prevent problemsEnhances firm’s ability to prevent problems

Emphasizes group-based strategic decisions likely to be based on best available alternatives

Emphasizes group-based strategic decisions likely to be based on best available alternatives

Improves understanding of employees of productivity-reward relationship Improves understanding of employees of productivity-reward relationship

Reduces gaps/overlaps in activities among employees as their participation clarifies differences in roles

Reduces gaps/overlaps in activities among employees as their participation clarifies differences in roles

Reduces resistance to changeReduces resistance to change


Risks of Strategic Management

Time involved may negatively impact operational responsibilities of managersTime involved may negatively impact operational responsibilities of managers

Lack of involvement of strategy makers in strategy implementation may result in shirking of responsibility for strategic decisions

Lack of involvement of strategy makers in strategy implementation may result in shirking of responsibility for strategic decisions

Potential disappointment of employees over unattained expectations requires managerial time and training

Potential disappointment of employees over unattained expectations requires managerial time and training


PATTERNS OF STRATEGY DEVELOPMENT

• Continuity

• Incremental

• Flux

• Transformational


STRATEGY DEVELOPMENT

• Natural Selection View• Planning View• Logical Incremental View• Cultural View• Political View• Visionary View• Integrative View


STGRATEGIC MANAGEMENT AS A PROCESS

Managing power and politics Procedural rationality and justice Role of group processes in socially

negotiating strategy Power of emotional and cognitive

commitment in delivery strategy Conflict and cooperation Pascal - `present is determined by the

future not the past’.


SCHOOLS OF THOUGHT

Interpretive frameworkPolitical Cultural Cognitive (The management (Shared beliefs (Mental processes)of means) and traditions)

Learning / Planning / Design

Political Strategy formulation as a political process where strategic aspirations are disputed, conflict exists managers compete for scarce resources the internal political dynamic the dynamic between the organization and its stake holders conflict and consensus co-exist process of negotiating action is central.


CULTURAL

The strategy is ultimately expressed through the culture of an organization

Cultural web• control systems• rituals and routines• symbols• stories• organizational structure• power structure

shared beliefs developed into organizational recipes reinforced by tradition, habit, stories, ideology

central focus for change- strategy is about changing culture.


Bounded rationality The challenge is that of creating a

mental framework for strategic action

COGNITIVE


LEARNING, PLANNING AND DESIGN SCHOOLS

Learning Strategy formulation and enacting are concurrent Concrete experiences are the basis for observation and

reflection, which enable the formation of abstracts concepts Strategy making and its realization together create a

sequence of platforms for strategic change and organizational achievement

Planning Developing explicit plans which are decomposed into sub-

strategies and programs It favours seeing organizations as bureaucracies where

central players are planners.


LEARNING, PLANNING AND DESIGN SCHOOLS

Contd...

Design

Seeking strategic fit through an external and internal appraisal which is central to a sequence of steps:• classification of organizational mandates, of

organizational mission,• situational strategic analysis• identification of strategic issues• strategy formulation• implementation


STRATEGIC MANAGEMENT PROCESS

Strategic Learning and UnlearningStrategic Learning and Unlearning

Strategic IntentStrategic Intent

Strategy EvolutionStrategy Evolution

Strategic ResonanceStrategic Resonance



Strategic AnalysisStrategic Analysis

Strategic ChoiceStrategic Choice

Strategy ImplementationStrategy Implementation



Strategic Situation AnalysisStrategic Situation Analysis

Strategic Capability AnalysisStrategic Capability Analysis

Strategic Process EvolutionStrategic Process Evolution

Strategy Implementation and ImpactStrategy Implementation and Impact



Environmental Analysis Internal External Establishing Organizational Direction

- Vision- Mission- Objectives

Strategy Formulation Strategy Implementation Strategic Control


Strategic Management ModelCompany

mission & social responsibility

Long-term objectives

Generic & grand strategies

Short-term objectives;

reward systemFunctional

tacticsPolicies that

empower action

Restructuring, reengineering & refocusing the organization

Strategic control & continuous improvement

External Environment

Internal analysis

Strategic analysis & choice

Legend

Major impact

Minor impact

Feed

back

Feed

back

Possible?

Desired?


Components of the Strategic Management Model

Mission• Specifies unique purpose of company• Identifies scope of operations• Describes product, market, and technological areas of

emphasis• Reflects values and priorities of decision makers• Expresses approach to social responsibility efforts

Internal Analysis• Depicts quantity and quality of company’s financial,

human, and physical resources• Assesses company’s strengths and weaknesses• Contrasts past successes and concerns with current

capabilities to identify future capabilities


External Environment• Consists of all conditions and forces affecting firm’s

strategic options, typically beyond its control• Includes three interactive segments - operating,

industry, and remote environments Strategic Analysis and Choice

• Involves simultaneous assessment of external environment and internal analysis to identify range of attractive options

• Incorporates screening process based on mission to generate possible and desired opportunities

• Results in selection of options from which a strategic choice is made



Long-term Objectives• Profitability• Return on investment• Competitive position• Technological leadership• Productivity• Employee relations• Public responsibility

Generic and Grand Strategies• Low cost• Differentiation• Focus



Short-term Objectives and Action Plans • Translate generic and grand strategies into “action”Translate generic and grand strategies into “action”

– Identify specific functional tactics to be taken in the Identify specific functional tactics to be taken in the near termnear term

– Establish a clear time frame for completionEstablish a clear time frame for completion– Create accountabilityCreate accountability– Specify one or more immediate objectives as Specify one or more immediate objectives as

outcomes of the actionoutcomes of the action Functional Tactics

• Involve identifying activities unique to the function to Involve identifying activities unique to the function to help build competitive advantagehelp build competitive advantage

• Specify detailed statements of “means” to be used to Specify detailed statements of “means” to be used to achieve short-term objectivesachieve short-term objectives



Policies that Empower Action• Include broad, precedent-setting decisions that

substitute for repetitive or time-sensitive decision making

• Often increase managerial effectiveness by empowering discretion of subordinates in implementing strategies

Restructuring, Reengineering, and Refocusing the Organization• Involves an internal focus - getting work done

efficiently and effectively to make the strategy work

– Organizational structure– Leadership– Culture– Reward systems



Strategic Control and Continuous Improvement

• Control

– Tracks a strategy during implementation

– Detects problems

– Involves making necessary adjustments

• Continuous improvement

– Provides another approach to strategic control

– Allows an organization to respond more proactively and timely to rapid developments



Implications of the Strategic Management Process

Changes in any one component will affect other components

Changes in any one component will affect other components

Recognition of the sequential nature of strategy formulation and implementation

Recognition of the sequential nature of strategy formulation and implementation

Necessity of feedback from institutionalization, review, and evaluation to early stages of process

Necessity of feedback from institutionalization, review, and evaluation to early stages of process

Must be viewed as dynamic, involving constant changes in interdependent strategic activities

Must be viewed as dynamic, involving constant changes in interdependent strategic activities

management policy and strategy session - i

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