STRATEGIC MANAGEMENT

By :- Tejas Atyam5th sem Production Engg

WHAT IS STRATEGY?

Strategos Leading an army

WHAT IS STRATEGY?So , Strategic thinking has its roots in military strategy

“The branch of military science dealing with military command and the planning and conduct of a war.”

And has evolved to focus on business “An elaborate and systematic plan of action from long-

term perspective.”

IMPORTANCE OF STRATEGY (PLAN)

A true Story - Hungarian soldiers lost in Alps

Moral – Sense of purpose, direction

LEVELS OF STRATEGY-MAKING

A HIERARCHY OF GOALS

STRATEGIC VISION VS. MISSION

A strategic vision concerns a firm’s future business path - “wherewe are going” Markets to be

pursued Future

product/market/customer/technology focus

The mission statement of a firm focuses on its present business purpose - “who we are and what we do” Current product and

service offerings Customer needs

being served

2-7

VISION STATEMENTS

Kraft Foods sample vision statements Our Vision...

Helping People Around the World Eat and Live Better

Honda sample vision statements

1970: We will destroy Yamaha Current: To Be a Company that Our Shareholders,

Customers and Society Want

Ford sample vision statements

Early 1900s: Democratize the automobile Current: To become the world's leading Consumer

Company for automotive products and services.

Caterpillar sample vision statements Be the global leader in customer value.

MISSION STATEMENTS OF SOME GREAT COMPANIES Amazon.com : Our vision is to be earth's most

customer centric company; to build a place where people can come to find and discover anything they might want to buy online.

Dell: Dell listens to customers and delivers innovative technology and services they trust and value.

Google: Google's mission is to organize the world's information and make it universally accessible and useful

McDonald’s: Tο bе ουr customers’ favorite рƖасе аnd way tο eat.

HOW STRATEGY IS MADE

MCDONALD’S STRATEGY

Key initiatives of McDonald’s “Plan to Win” Strategy

Improved restaurant operationsAffordable pricingWide menu variety and beverage choicesConvenience and expansion of dining

opportunitiesOngoing restaurant reinvestment

THE CONCEPT OF STRATEGY:- Derived from Greek word “STRATEGIA” Which

means Command, generalship.

In 1920s, Sears, Roebuck and Co. was giant mail-order house whose president, General Robert E. Wood, Recognized the concept and importance of Strategy.

THE CONCEPT OF STRATEGY:-

In 1962, Business historian Alfred D. Chandler proposed that Strategy be defined as, “the determination basic long term goals and objective of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying on these goals”

Chandler focused on main three elements which are:-

1. Courses of action for attaining objectives2. The process of seeking key ideas3. How strategy is formulated and not just what

strategy turns out to be

STRATEGY:-

Henry Mintzberg differentiate intended and emergent strategy.

In which Intended strategies refer to the plans that managers develop.

While emergent strategies are actions that actually take place over a period of time

STRATEGY:-

Refers to three main aspects which are:

1. Determination of basic long term goals & objectives.

2. Adoption of courses of action to achieve these objectives.

3. Allocation of resources necessary for adopting the courses of action.

FEATURES OF STRATEGY:-

Is a relative combination of actions aimed at to meet a

particular condition to achieve desirable end.

Is a major course of action through which an organization tries to relate itself with environment.

It helps in achieving the pre decided objectives.

It is a forward looking and it has orientation towards future.

Strategic action is required in a new situation.

ROLES OF DIFFERENT STRATEGIES:

Overall Company Strategy This strategy is designed for long term business

perspective and most deals with overall strength of the company. If the strategy is correct it is the most productive strategy.

Example:- A two wheeler manufacturing company will have strategy of mass production and aggressive marketing.

Growth Strategy Growth means increase in turnover, expansion or

diversion of business. This strategy means selecting product having fast growth, acquisition of business of other firms and opening new markets. It has direct positive impact on the profitability.

Product Strategy This Strategy means choice of product which can

result in family of product. For new marketers product strategy must be innovated, for eg. A home appliance like t.v, fridge etc.

Market Strategy This strategy deals with product distribution , services,

pricing policy, advertising, packing etc.

STRATEGIC FORMULATION

Mission

Competition

Socio-Economic Purposes

Strength And

Weakness

Formulation of Business Strategy

Environment

Strategic planning involves process and methodology. It starts with deciding social responsibility and then preceding towards business mission and goals with strategies to achieve them. This must be communicated to all concerns of the organization.

After deciding the mission or aim the next task is to set the goals in specific and quantitative term. The goals are the reference for the top management in planning and business activities. The next step is to set objectives for the organization. The objective should be measurable and monitored.

The success in achieving the mission is dependent on the business strategy of the management. The recourses must be deployed efficiency to achieve the objectives as well as to face the competition.

The business strategy also depends on the environment factors like technology, market, lifestyle, government policies etc. A sound business strategy may be developed to make the organization stable against various forces and to make it strong. Therefore, formulating strategy is an unstructured and complex task also it deals with uncertainty. Figure shows the formulation of business strategy.

Development of strategy is a difficult task and it is an exercise multidisciplinary fields. Formulation of business strategy reflects attitude and philosophy. Strategies are formulated within policy frame.

LEVELS OF STRATEGY:-

LEVELS OF STRATEGY:- Strategies exist at a number of level in an

organization.

Still it is possible to distinguish three different level of strategy which are as :-

1. Strategic level - corporate level strategy.

2. Operational level -business level strategy.

3. Tactical Level -functional level strategy.

CORPORATE LEVEL STRATEGY:-

Concerned with overall scope of an organization.

Includes issues like diversity of products, business units etc.

Strategy formulated by top management to oversee the interests & operations of multi line corporations.

Determines what business a company is in, should be in, or wants to be in, what it wants to do with these business.

One of the best example is this context be that of PepsiCo.

CORPORATE LEVEL STRATEGY:-

Corporate level strategy Is the highest level of strategic decision-making and covers actions dealing with :

The objective of the firm, Acquisition and allocation of resources Coordination of strategies of various SBUs for

optimal performance. There main three type of corporate strategyA. Growth B. StabilityC. Renewal

CORPORATE-LEVEL STRATEGIES

FirmStatus

Valuablestrengths

Criticalweaknesses

Environmental StatusAbundant

environmentalopportunities

Criticalenvironmental

threats

Corporategrowth

strategies

Concentric Diversification(Economies of Scope)

ConglomerateDiversification(Risk Mgt.)

Corporateretrenchment

strategiesCan still go for business-level growth (economies of scale)

Corporatestability

strategies

BUSINESS LEVEL STRATEGY:-

Business-level strategy is applicable in those organizations, which have different businesses-and each business Is treated as strategic business unit (SBU).

The fundamental concept In SBU Is to identify the discrete independent product/market segments served by an organization.

Since each product/market segment has a distinct environment, a SBU is created for each such segment.

For example, Reliance Industries United operates In textile fabrics, yams, fibers, and a variety of petrochemical products.

For each product group, the nature of market in terms of customers, competition, and marketing channel differs.

THE MULTI-BUSINESS ORGANISATION

A SIMPLE ORGANIZATION CHART(SINGLE PRODUCT BUSINESS)

Business

Research andDevelopmentManufacturing Marketing

HumanResources

Finance

FunctionalLevelStrategy

BusinessLevelStrategy

A SIMPLE ORGANIZATION CHART(DOMINANT OR RELATED PRODUCT BUSINESS)

MultibusinessCorporation

Corporate Level

Business 1(Related)

Business 2(Related)

Business 3(Related)

BusinessLevel

Research andDevelopment

ManufacturingMarketingHuman

ResourcesFinance

FunctionalLevel

FUNCTIONAL LEVEL STRATEGY:-

Strategy involves decision making with respect to specific functional areas say production, marketing etc.

Decision at the functional level and are often described as tactical decisions.

Emphasize on doing things correctly but these decisions are guided by overall strategic considerations.

It is the approach taken by functional area to achieve corporate & business objectives & maximizing resource productivity.

FUNCTIONAL LEVEL STRATEGY:-

For example, marketing strategy, a functional strategy, can be subdivided Into promotion, sales, distribution, pricing strategies with each sub function strategy contributing to functional strategy.

Reliance Company’s main strategy Is called Corporate Level Strategy.

Reliance’s different Businesses like Textile, Fabric, Energy as individual unit have different kind of Business Level Strategy.

In each Units of Reliance, they have different departments like Marketing, Finance, Production. These departments have Functional strategy.

STRATEGIC MANAGEMENT

The art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives

Strategic management is used synonymously with the term strategic planning.

Sometimes the term strategic management is used to refer to strategy formulation, implementation, and evaluation, with strategic planning referring only to strategy formulation.

A strategic plan is a company’s game plan.

A strategic plan results from tough managerial choices among numerous good alternatives, and it signals commitment to specific markets, policies, procedures, and operations.

STAGES OF STRATEGIC MANAGEMENT

Strategy formulati

on

Strategy implementa

tion

Strategy evaluatio

n

IMPORTANCE OF STRATEGIC MANAGEMENT It can make a difference in how well an organization

performs.

Generally observed that organizations that use strategic management do have higher levels of performance.

Using this branch the managers examine the relevant factors in deciding what actions to take.

Strategic management helps out them to better cope with the given complicate situations.

ADVANTAGES OF STRATEGIC MGT:- Main advantages of strategic management are as

follows: 1. Clarity in objective & direction.

2. Improvement in financial benefits of organization.

3. Offsetting environment uncertainty.

4. Organizational effectiveness.

5. Improved Quality of decisions.

6. Motivation & satisfaction.

MANAGEMENT BY OBJECTIVES

Management by Objectives (MBO) is a process of agreeing upon objectives within an organization so that management and employees agree to the objectives and understand what they are in the organization.

The term "management by objectives" was first popularized by Peter Drucker in his 1954 book 'The Practice of Management'

DEFINITION:-

Management by objectives (MBO) is a systematic and organized approach that allows management to focus on achievable goals and to attain the best possible results from available resources.

It aims to increase organizational performance by aligning goals and subordinate objectives throughout the organization.

Ideally, employees get strong input to identify their objectives, time lines for completion, etc. MBO includes ongoing tracking and feedback in the process to reach objectives.

MAIN CONCEPT:-

The principle behind Management by Objectives (MBO) is to make sure that everybody within the organization has a clear understanding of the aims, or objectives, of that organization, as well as awareness of their own roles and responsibilities in achieving those aims.

The complete MBO system is to get managers and empowered employees acting to implement and achieve their plans, which automatically achieve those of the organization.

MANAGEMENT BY OBJECTIVES PRINCIPLES

Cascading of organizational vision, goals and objectives

Specific objectives for each member

Participative decision making

Explicit time period

Performance evaluation and feedback

MBO STRATEGY: THREE BASIC PARTS

All individuals within an organization are assigned a special set of objectives that they try to reach during a normal operating period. These objectives are mutually set and agreed upon by individuals and their managers.

Performance reviews are conducted periodically to determine how close individuals are to attaining their objectives.

Rewards are given to individuals on the basis of how close they come to reaching their goals.

THE MBO PROCESS

Define Organizational Goals

Define Employee Objectives

Continuous Monitoring Of Employee Performance

And Progress

Performance Evaluation/Reviews

Providing Feedback

Performance Appraisals

FEATURES AND ADVANTAGES OF MBO

Motivation – Involving employees in the whole process of goal setting. Increasing employee empowerment increases employee job satisfaction and commitment.

Better communication and Coordination – Frequent reviews and interactions between superiors and subordinates helps to maintain harmonious relationships within the enterprise and also solves many problems faced during the period.

The Smart Method

WHERE TO USE MBO

The MBO style is appropriate for knowledge-based enterprises when your staff is competent. It is appropriate in situations where you wish to build employees' management and self-leadership skills and tap their creativity and initiative.

Management by Objectives (MBO) is also used by chief executives of multinational corporations (MNCs) for their country managers abroad.

THE SMART METHOD

Clarity of goals – With MBO, came the

concept of SMART goals i.e. goals that are:

Specific Measurable Achievable Relevant, and Time bound.

THE SMART METHOD

The goals thus set are clear, motivating and there is a linkage between organizational goals and performance targets of the employees.

The focus is on future rather than on past. Goals and standards are set for the performance for the future with periodic reviews and feedback.

MANAGERIAL FOCUS

MBO managers focus on the result, not the activity.

They delegate tasks by "negotiating a contract of goals" with their subordinates without dictating a detailed roadmap for implementation.

Management by Objectives (MBO) is about setting yourself objectives and then breaking these down into more specific goals or key results.

MBO AT MICROSOFTBY BILL GATES

Eliminate politics, by giving everybody the same message.

Keep a flat organization in which all issues are discussed openly.

Insist on clear and direct communication. Prevent competing missions or objectives Eliminate rivalry between different parts of the

organization Empower teams to do their own things

MBO: KEY ADVANTAGES AND DISADVANTAGES

Advantages MBO programs continually emphasize what should

be done in an organization to achieve organizational goals.

MBO process secures employee commitment to attaining organizational goals.

Disadvantages The development of objectives can be time

consuming, leaving both managers and employees less time in which to do their actual work.

 OPERATIONAL PLANNING:-

DEFINATION:- Operational Planning Refers To The Process

Of Deciding The Most Effective Use of The Resources Already Allocated And To Develop A Control Mechanism To Assure Effective Implementation Of The Action So That Organizational Objectives Are achieved.

OPERATIONAL PLANNING:-

Operational Planning Thus Include Adjustment Of Production , Marketing And Financial Capacity Of The Organization To The Expected Level Of Operations, Increasing The Efficiency Of Operating, Budgeting Future Costs, Developing Control Over Costs And Efficiency Etc.

Supervisors Implement Operational Plans That Are Short Term And Deal With The Day – To – Day Work Of Their Team.

COMPARISON OF STRATEGIC PLANNING AND OPERATIONAL PLANNING :-

Strategic Planning Guides The Choice Among The Broad Directions In The Organization And The General Allocations Of Its Managerial, Financial And Physical Resources Over Future Specified Period.

Planning Precedes The Operational Planning As The Latter Is Primarily Implementation Of The Of The Former.

COMPARISON OF STRATEGIC PLANNING AND OPERATIONAL PLANNING :-

Strategic planning is usually conducted at the top level management and other specified planning staff in an organization . whereas operational planning is usually spread over a wide range within the organization an is generally performed by operating managers with help of the subordinate staff.

DIFFERENT BETWEEN STRATEGIC AND OPERATIONAL PLANNING:-

POINT STRATEGIC PLANNING OPERATIONAL PLANNING

o TIME HORIZON

  

o SCOPE      

Typically More Than 3 Years. 

 It Focuses At Its Wider Scope And Looks After The Entire Organization 

Usually Focused On Within 1 Year In The Future 

 Rarely Broader Than A Strategic Business. It Has Comparatively Narrow Scope.

 

POINT STRATEGIC PLANNING OPERATIONAL PLANNING

o COMPLEXITY   

o IMPACT      

 Planning At Strategic Level Is Most Complicate As It Varies For Each Type Of Industry. It Has Potential To Drastically Impact, Both The Ways- Positive And Negative , The Fortunes And Survival Of The Organization .

Up To Certain Extent It Is Complex But At The Same Time It Is Specific As It Focuses On Limited Domain Of Application. It Can Affect Specific Business But Generally Not The Fortunes And Survivability Of The Entire Organization.

STRATEGIC PLANNING :-

Strategic planning refers to the process of deciding on objectives of the organization , on the changes in these objectives , on the resources used to attain these objectives and on the policies that are to govern the acquisition, and disposition of these resourcces. It is said that leaders make changes instead of reacting to change.

CHARACTERISICS OF STRATEGIC PLANNING

Strategic planning is a top management activity i . E. Top managers are actively involved in it /

Top management gains commitment from other levels of managers to implement strategic planning , while the top management is committed to it .

It is a long range activity . Strategic planning should clearly define

where does the company stand and where it should go.

ESSENTIALS FOR STRATEGIC PLANNING:-

o MARKET FORCES o TECHNOLOGICAL CHANGE o COMPLEX DIVERSITY OF BUSINESSo COMPETITION o ENVIRONMENT