Done_1_Strategic Management Unit 1

8/6/2019 Done_1_Strategic Management Unit 1

1/26

Strategic Management

Unit 1

Nature of Strategic Management


2/26

Concept of Strategy

The term Strategy derived from Greek

wordstrategos, means generalship theactual direction of the military force.

eg.Rasna decides to diversify, decides to

enter fast food business TOI, dt.19/04/2008 How diff cos. react to env., adopt a appropriate course of action.

Diversification, expansion, stability or divesting


3/26


4/26

A unified, comprehensive and integrated plan

designed to assure that the basic objectives of theenterprise are achieved. -William F. Glueck

Unified: the plan joins all the parts of the enterprise together.

Comprehensive: covers all the major aspects of the enterprise.

Integrated: all the parts of the plan are compatible with each other

Basically a strategy is a set of decision making rules for guidance of

organisational behaviour. - Ansoff

A plan or course of action which is vital, pervasive, or continuingimportance to the organisation as a whole. - Arthur Sharplin


5/26

Combining the definitions, strategy is:

1. A plan or course of action or a set of decision making

rules making a pattern or creating a common thread.

2. The pattern or common thread related to org.s activities

which are derived from the policies, objectives and goals

3. Concerned with pursuing those activities which move

the org. from its current position to the desired future

state.

4. Concerned with resources necessary for implementing a

plan or following a course of action.


6/26

MINTZBERG, H, Five Ps for Strategy

Strategy is presented in five ways - as aplan,ploy,pattern,

position andperspective.

Various relationships exist among the different definitions,

and none of them takes precedence over the others. In

some ways, the definitions compete but, in other possiblymore important ways, they complement one another


7/26

Strategy as aplan deals with how leaders

attempt to establish direction fororganisations and set them on pre-

determined courses of action.By this definition, strategies have two essential characteristics: they are developed

consciously and purposefully.

In the specific sense, strategy as a plan can

also be aploy or manoeuver intended to

outwit rivals in a competitive or bargaining

situation.


8/26

When encompassing the resulting behaviour,strategy can also be thought of as apattern in astream of actions - a consistency of behaviour,whether intended or not. . Thus, strategy is also apattern - specifically, a

pattern in a stream ofactions. By this definition, strategy is consistent in behaviour, whether or notintended. The outcome of strategy does not derive from the design, or plan, but from the action thatis taken as a result

Strategy asposition refers to looking at anorganisation in context, that is, locating it within

its external environment, with a view to creatingsituations for economic gains.In management terms: a "domain"consisting of a particular combination of services, clients and markets. Position is often definedcompetitively

While position is outwardly focused,perspectivelooks inwardinto the firm; even into the heads ofthe strategists themselves. . Some firms are aggressive pacesetters; others buildprotective shells around themselves. Almost every profession has about it unique perspectives, that indelibly flavorthe strategies that firms practicing those professions craft for themselves.A law firm's view of their business isfundamentally different to that of an accounting firm, and engineering firm or a graphic design studio, yet all are

staffed by professionals.


9/26

Theplanprovides the roadmap by which the firm intends to

achieve it's goals.Ploys add a dimension of feint and

maneuver, where one firm's gain is another's loss and

competitive advantage is critical.Pattern emphasizes that

strategy is not a once-off event but a constant stream of

decisions and resultant actions that drive the firm forward,over time, towards its goal.Position adds that different

firms have different mixes of markets, clients and services

that they provide to those clients. Finallyperspective

provides an insight onto how the firm and its strategists

are informed by their own professions, their perceptions

of business, and the unique characteristics of each firms

own "world."


10/26

Limitations of Strategy

Future oriented: uncertainity

Business cycles, Govt rules, competitor/srole: frequent changes

Success requires joint effort & coop.

Conflict b/w mgrs goal & cos goal

Reluctance to drop/ remodify

Trouble in communicating

May not offer solutions in difficultsitutations


11/26

Conventional Decision making

vs Strategic decision making

Determine the objectives

Identify alternative ways of achieving them Evaluate alternatives

Choose the best alternative

End result: decision / set of decisions


12/26

Strategic decision making Top Mgmt.

Consequential: Involve allocation of large amt. ofcos resources & demand great deal ofcomittment

Significant impact on long term prosperity of thefirm

Future oriented

Multifunctional/ multi business consequences Necessiate considering factors in external env.

Rare: unusual and no precedent


13/26

3 Benefits of Strategic Management

Clearer sense of strategic vision for the

firm Sharper focus on what is strategically

important

Improved understanding of rapidly

changing environment


14/26

Approaches to St Dec Making

Entrepreneurial mode:

Adaptive mode Planning mode

Logical incrementalism


15/26

Entrepreneurial mode

Strategy made by one powerful individual

Focus is on opportunities

Strategy guided by ents own vision ofdirection and exemplified by large, bolddecisions

Dominant goal is growth of theorganisation

e.g. Satyam Computers


16/26

Adaptive mode Muddling through

Reactive solutions to the existing problems, rather

than proactive search for the new opportunities Debate / bargaining concerning priorities or

objectives

Strategy is fragmented, moves the corporation

forward incrementally.

e.g. govt. agencies, Univ., large Hospitals, no. oflarge corporations (*Encyclopedia Britannica)


17/26

Planning mode

Systematic gathering of appropriateinformation for situational analysis

Generation of feasible alternative strategies

Rational selection of most appropriatestrategy

Proactive search for new opportunities Reactive solution to existing problems

e.g. HP


18/26

Logical Incrementalism

Synthesis of planning and adaptive (primarily), andentrepreneurial (to a lesser extent). Proposed by Quinn.

Top management has a clear idea of corporations missionand objectives

Dev. of strategies: interactive process, probes the future,

experiments and learns from a series of partial(incremental) commitments rather than through globalformulation of total strategies

Strategy emerges out of debate, discussion, andexperimentation

Useful when environment is changing fast, important tobuild consensus, need to develop resources beforecommitting the entire corporation to a specific strategy,e.g. Infosys


19/26

Beginning of Strategic Management

(Informal Questions)

Where is the organisation now?

If no changes are made, where will the org.be in 1 yr? 2 years? 5 years?10 years? Arethe answers acceptable?

If answers are not acceptable, what specific

actions should management undertake?What are the risks and payoffs involved?


20/26

Process of Strategic Management

Formulation of StrategiesEnv.Appraisal Org. Appraisal

SWOTAnalysis

Corporate level Strategies

Business Level StrategiesStrategic Choice

Strategic Plan

Establishing Strategic IntentVision Mission, Business Definition, Goals and

Objectives

Strategy Implementation-Project

-Procedural-ResourceAllocation

-Structural

-Behavioural

-Functional & Operational

Strategic Evaluation


21/26

Strategic Intent Vision states what an organisation wishes to achieve in

the long run.

The mission relates the organisation to the society. Business definition explains the business of the org. in

terms of customer needs, customer groups and the

alternative technologies.

Objectives state what is to be achieved in the given timeperiod, later on they serve as a yardstick / benchmarks for

measuring the org. performance.


22/26

Environmental &

Organisational Appraisal

Helps to find opportunities and threats

operating in the env. And the strengths and

weaknesses of the org. in order to create a

match between them

Avail the opportunities, neutralise the

impact of threats, capitalise on org.

strengths and minimise the weakness.


23/26

Strategic Alternatives and

Choices

Evolving alternative strategies out of manypossible options and choosing the most

appropriate one, (while taking into accountthe env opp. & threats and corporatestrengths & weaknesses).

Process: Strategic analysis and choice End result: Strategic Plan which can be

implemented


24/26

Strategy ImplementationPut the strategic plan to action

Project Implementation

Procedural Implementation Resource Allocation

Structural Implementation

Behavioural Implementation Functional and Operational Implementation


25/26

Strategic Evaluation

Appraise the implementation of strategies

Measure org. performance Feedback from Strategic Evaluation is used

to exercise control over strategic

management process.


26/26

Strategists and their role in

Strategic ManagementStrategists are the individual or groups who are primarily involved in formulation,

implementation, and evaluation of strategy.

Board of Directors

CEO

Entrepreneur

Senior Management

SBU level executive

Corporate planning staff

Consultants

Middle level managers

ExecutiveAssistants

Documents

Done_1_Strategic Management Unit 1