1. Strategy

8/8/2019 1. Strategy

1/22

STRATEGYSTRATEGY


2/22

1. Introduction1. Introduction The word strategy comes from the Greek wordThe word strategy comes from the Greek word

Strategos which mean general. In militaryStrategos which mean general. In militaryscience, strategy means the art and science ofscience, strategy means the art and science ofdirecting military forces in a war or battle.directing military forces in a war or battle.

In the modern term, strategy is used inIn the modern term, strategy is used inbusiness to describe how an organization isbusiness to describe how an organization isgoing to achieve its overall objectives. Also,going to achieve its overall objectives. Also,most organizations have several alternatives formost organizations have several alternatives for

achieving its objectives.achieving its objectives. Thus, strategy is concerned with decidingThus, strategy is concerned with deciding

which alternative is to be adopted towhich alternative is to be adopted toaccomplish the overall objectives of theaccomplish the overall objectives of the

organization.organization.


3/22

2. Definition2. Definition

A strategy is a unified, comprehensive andA strategy is a unified, comprehensive andintegrated plan that relates the strategicintegrated plan that relates the strategicadvantages of the firm to the challenges of theadvantages of the firm to the challenges of theenvironment. It is designed to ensure that theenvironment. It is designed to ensure that the

basic objectives of the enterprise are achievedbasic objectives of the enterprise are achievedthrough proper execution by the organization.through proper execution by the organization.

Strategy is a plan of action or policy designedStrategy is a plan of action or policy designed

to achieve a major or overall aim.to achieve a major or overall aim. Strategy is a broad long term plan designed toStrategy is a broad long term plan designed to

achieve the overall objectives of the firm.achieve the overall objectives of the firm.


4/22

2. Definition2. Definition Strategy is the directionStrategy is the direction and scope of anand scope of an

organization over the long termorganization over the long term,, whichwhich

achieves advantage in a changingachieves advantage in a changing

environment through its configuration ofenvironment through its configuration ofresources and competences with the aim ofresources and competences with the aim of

fulfilling stakeholder expectations.fulfilling stakeholder expectations.


5/22

3. Strategic decisions


6/22

3. Nature of Strategies3. Nature of Strategies Strategy includes the determination andStrategy includes the determination and

evaluation of alternative paths to achieve anevaluation of alternative paths to achieve anorganizations objectives & mission andorganizations objectives & mission andeventually a choice of the alternative that is toeventually a choice of the alternative that is tobe adopted.be adopted.

The nature and characteristics of strategies canThe nature and characteristics of strategies canbe listed out as follows:be listed out as follows: ---- Objectives Oriented.Objectives Oriented.

-- Future Oriented.Future Oriented.-- Comprehensive and Integrated.Comprehensive and Integrated.-- Strategy Alternatives.Strategy Alternatives.-- Related to environment (Micro & Macro)Related to environment (Micro & Macro)

-- Allocation of Resources.Allocation of Resources.


7/22

4. Importance of Strategy4. Importance of Strategy Strategy provides a framework within which theStrategy provides a framework within which the

members of the organization takes necessarymembers of the organization takes necessarydecision. Also, they are useful guidelines fordecision. Also, they are useful guidelines forday to day activities. In general, strategiesday to day activities. In general, strategiesprovide following benefits to the organizationprovide following benefits to the organizationand they are as follows:and they are as follows: ---- Aids (helps) in decision making.Aids (helps) in decision making.-- Aids (helps) in communication.Aids (helps) in communication.

-- Ensures better coEnsures better co ordination.ordination.-- Facilitates utilization of resources.Facilitates utilization of resources.-- Facilitates planning.Facilitates planning.-- Facilitates Control.Facilitates Control.

-- Enhances corporate image.Enhances corporate image.


8/22

5. Five Ps of Strategy5. Five Ps of StrategyA strategy is a plan or course of action or a setA strategy is a plan or course of action or a set

of decision/rules making a pattern or creating aof decision/rules making a pattern or creating acommon thread.common thread.

There are five Ps of strategy and they are asThere are five Ps of strategy and they are as

follows:follows: ---- Strategy is a PLAN.Strategy is a PLAN.-- Strategy is a PLOY.Strategy is a PLOY.

-- Strategy is a PATTERN.Strategy is a PATTERN.-- Strategy is a POSITION.Strategy is a POSITION.-- Strategy is a PERSPECTIVE.Strategy is a PERSPECTIVE.


9/22

6. Strategic Management6. Strategic Management Strategic management consists of the analysis,Strategic management consists of the analysis,

decisions, and actions an organization undertakes indecisions, and actions an organization undertakes inorder to create and sustain competitive advantages.order to create and sustain competitive advantages.

Key Attributes of Strategic Management:Key Attributes of Strategic Management:

Directs the organization toward overall goals andDirects the organization toward overall goals and

objectives.objectives.

Involves the inclusion of multiple stakeholders inInvolves the inclusion of multiple stakeholders indecision making.decision making.

Needs to incorporate shortNeeds to incorporate short--term and longterm and long--termtermperspectives.perspectives.

Recognizes tradeoffs between efficiency andRecognizes tradeoffs between efficiency andeffectiveness.effectiveness.


10/22

6. Strategic Management6. Strategic ManagementA continuous, iterative process aimed atA continuous, iterative process aimed at

keeping an organization as a wholekeeping an organization as a wholeappropriately matched to its environmentappropriately matched to its environment(Certo and Peter)(Certo and Peter)

Keeping the business in tune with managementKeeping the business in tune with managementand marketing forces both outside and insideand marketing forces both outside and insidethe firmthe firm


11/22

. ene s o s ra eg c. ene s o s ra eg cmanagementmanagement

Establish the missionEstablish the mission

Formulate philosophyFormulate philosophy

Establish policiesEstablish policies

Setting objectivesSetting objectives

Developing strategyDeveloping strategy

Plan the OrganizationalPlan the Organizational

structurestructure Provide personnelProvide personnel

Establish proceduresEstablish procedures

Provide facilitiesProvide facilities

Provide capitalProvide capital

Set standardsSet standards

Establish programsEstablish programs

and plansand plans Control informationControl information

Activate peopleActivate people


12/22

8. Elements of strategic management


13/22

A)Strategic PositionA)Strategic Position

The Organization's EnvironmentThe Organization's Environment Political Economic Social TechnologicalPolitical Economic Social Technological

Environmental LegalEnvironmental Legal

Sources of CompetitionSources of Competition

Opportunities and ThreatsOpportunities and Threats

Strategic Capability of the OrganizationStrategic Capability of the Organization

Resources and CompetencesResources and Competences

Strengths and WeaknessesStrengths and Weaknesses


14/22

Expectations and PurposesExpectations and Purposes Corporate Governance, Stakeholders, Ethics andCorporate Governance, Stakeholders, Ethics and

CultureCulture

Sources of Power and InfluenceSources of Power and Influence

Communication of Purpose: Mission and ObjectivesCommunication of Purpose: Mission and Objectives

A)Strategic PositionA)Strategic Position


15/22

Bases of competitive advantage at business

Bases of competitive advantage at businesslevellevel

Scope of activities at corporate levelScope of activities at corporate level

PortfolioPortfolio

Market spread, e.g. internationalMarket spread, e.g. international

Value added by corporate parent (parenting)Value added by corporate parent (parenting)

Directions and methods of developmentDirections and methods of development

Directions: Product/MarketDirections: Product/Market

Methods: Internal/organic, M&A, strategic alliancesMethods: Internal/organic, M&A, strategic alliances

B)Strategic ChoicesB)Strategic Choices


16/22

Structuring the organizationStructuring the organization

Marshalling resources (people, information,Marshalling resources (people, information,finance, technology)finance, technology)

Managing changeManaging change

C)Strategy into ActionC)Strategy into Action


17/22

9. Steps to strategic management9. Steps to strategic management

Environmental analysisEnvironmental analysis

Establish organizational directionEstablish organizational direction

Strategy formulationStrategy formulation Strategy implementationStrategy implementation

Strategic controlStrategic control


18/22

A)Environmental AnalysisA)Environmental Analysis

Process of examining the organizationsProcess of examining the organizationsenvironment to determine:environment to determine:

StrengthsStrengths

WeaknessesWeaknesses

OpportunitiesOpportunities

ThreatsThreats


19/22

B)Environmental structureB)Environmental structure

General environmentGeneral environment Social, economic, political, legal, technicalSocial, economic, political, legal, technical

Operating environmentOperating environment International, supplier, labor, competition,International, supplier, labor, competition,

customercustomer

Internal environmentInternal environment Organizational, marketing, financial,Organizational, marketing, financial,

personnel, productionpersonnel, production


20/22

C) Methods of EnvironmentalC) Methods of EnvironmentalForecastingForecasting

Expert opinionExpert opinion

Trend extrapolationTrend extrapolation

Trend correlationTrend correlation

Dynamic modelingDynamic modeling

CrossCross--impact analysisimpact analysis

Multiple scenariosMultiple scenarios

Demand/hazardDemand/hazard

forecastingforecasting


21/22

D)Establish Organizational DirectionD)Establish Organizational Direction

Establishing an organizational direction forEstablishing an organizational direction forthe company involves determining twothe company involves determining two

indicators:indicators: Organizational missionOrganizational mission the reason why thethe reason why the

organization existsorganization exists

ObjectivesObjectives measurable targets to track themeasurable targets to track thegrowth of the businessgrowth of the business


22/22

10. Role of Strategies in Business10. Role of Strategies in Business

Strategies like policies play an important role inStrategies like policies play an important role inbusiness. The importance of strategies can bebusiness. The importance of strategies can bebriefly stated as follows:briefly stated as follows: --

Helps to attain objectives.Helps to attain objectives.

Helps to maximize risks.Helps to maximize risks.

Aids Decision making.Aids Decision making.

Facilitates short term planning.Facilitates short term planning.

Facilitates Organizing, Directing & Control.Facilitates Organizing, Directing & Control.

Facilitates Optimum use of Resources.Facilitates Optimum use of Resources.

Documents

1. Strategy