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Strategic Management

Strategic Choice

Vision, Mission& Goals/objts

The External Env)

(Oppr & Threats

Comptitive Adv

Strngths/Wknss

Functional LevelStrategy

Business LevelStrategy

Global Strategies

Corporate LevelStrategy

Designing OrglStructure

ImplementingStrategy

Designing StratgicControl Systems

Matching Strcture& Cntrl to Strategy

Feedback

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What is Strategy?

Strategy being a derivative of the Greek word Strategia which means generalship,_ the actual direction of militaryforce , means literally the art of the general.

This word entered the English vocabulary in 1688 asstrategie.According to James, 1810 Military Dictionary, it differs from

tactics of an enemy.Strategy concerns something done out of sight of an

enemy. Its origin can be traced back to Sun Tzus The Art of War

from 500 BC.

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The oldest military treatise in the world is the Art of War

written by Sun Tzu, a Chinese military writer, around 500- BC. This treatise illustrates that Strategy, Planning, Leadership &

the effective mgt of people were all basic areas of interest toearly military leaders. Commenting on two of these areas, SunTzu wrote:

On Planning:The General who wins a battle makes many calculations in his

temple were the battle is fought. The General who loses abattle makes few calculations beforehand. It is by attention tothis point that I can see who is likely to win or lose (ThomasP Philips, 1955).

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On Directing: If the words of command are not clear and distinct, if

orders are not thoroughly understood, the general is

to blame. But if his orders are clear, and the soldiersnevertheless disobey, then it is the fault of theirofficers (Thomas P Philips, 1955).

These basic guidelines are of value to military leaderseven today when to strategise the things.

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Igor Ansof Prof of Strategic Mgnt , US International

University, San Diego, published a book in 1965,on Corporate Strategy which represented acrescendo in the development of Strategic PlanningTheory rather propelled consideration of strategy into anew dimension.

The end product of Strategic decision is deceptivelysimple; a combination of products and markets isselected for the firm. This combination is arrived at byaddition of new product-markets, divestment from someold ones, & expansion of the present position. writesAnsof

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Before Ansof the key to unlocking strategy was inGap Analysis ( the gap between where you are &where u want to be).

The book also got Synergy to a wide audience &the word is overused today which he summed upas 2+2= 5 or it could be 2+2=3. (Dysergy)

He further refined his definition of synergy to anyeffect which can produce a combined return on thefirms resources greater than the sum of its parts.

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Ansoffs Strategic Success Paradigm

The following is the Strategic SP formulated by Ansoffspecifying 5 conditions which optimises a firms profitability:

1. There is no universal success formula for all firms.2. The driving variable which dictates the strategy required for

success of a firm is the level of turbulence in its environment.3. A firms success cannot be optimized unless the aggressivenessof its strategy is aligned with the turbulence in theenvironment.

4. A firms success cannot be optimized unless management

capability is also aligned with the environment.5. The key internal capability variables which jointly determine afirms success.

.

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In ascertaining SSP, it took him 11yrs & was tested toover 500 firms in the US, Japan, Indonesia, Algeria,Abu Dhabi, Australia & Ethiopia. Statistical results

were strongly favourable to the paradigm. His contribution includes:a) Corporate Strategy, McGraw Hill, NY, 1965

b) Strategic Management, Macmillan, London, 1979c) Implanting Strategic Management, (2 nd Edn)

Prentice Hall, London, 1990.

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Paralysis by Analysis Ansoff argued vehemently, that effective analysis does not

guarantee effective, or even appropriate, implementation. IBM had all the data about its markets, yet reached the wrong

conclusions.

Harold Macmillan, British PM, was once asked what was themost difficult thing about his job. Events, my dear boyEvents,

So, analysis for all its usefulness, does not dictate events. Thismay add up but they dont necessarily work. So, Ansoffhimself labeled paralysis by analysis, i.e. repeatedly makingstrategic plans which remained unimplemented.

This was later on dealt with by Henry Mintzberg by doingaway with the dogma strategy is concerned with makingpredictions based on analysis.

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Research by the American Planning Forumfound that a mere 25% of companies considertheir planning process to be effective.

The skeptics argue that it is all well & good tocome up with a brilliantly formulated strategy,but quite another to implement it. By the timeimplementation begins, the business environis liable to have changed & be in the processof changing even further.

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Henry Mintzberg

Mintzberg in his book, The Rise & Fall of Strat-egic Planning, takes on the full might ofconventional planning orthodoxy. Too muchanalysis gets in our way. The failure of strateg-ic planning is the failure of formalization, saysMintzberg, identifying formalization as thefatal flaw of modern management.

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Mintzberg argues the case for what he labelsstrategic programming

His view is that strategy has for too long beenhoused in ivory towers built from corporatedata and analysis. It has become distant fromreality, which otherwise needs to be complet-ely immersed in reality.

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Mintzberg has famously coined the term craftingstrategywhereby strategy is created deliberately,delicately & dangerously as a potter making the

pot. To Mintzberg Strategy is more likely to emerge,

than be produced by a group of strategists sittinground a table believing they can predict the

future. He argues that strategy is not the consequence

of planning but the unforeseen consequences,.

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The Traditional ApproachThe planning theme remains important component of most

management definitions of strategy as is reflective from theHarvards Alfred Chandler definition of strategy

the determination of the basic long -term goals andobjectives of an enterprise, & the adoption of courses ofaction & the allocation of resources necessary for carryingout these goals.

Implicit in Chandlers definition is the idea that strategy involvesrational planning .

The scenario based planning is designed to educate general managersabout the complex & dynamic nature of the companysenvironment . E.g. during early 1980s Shells oil price crashanticipation subsequently occurred in 1986 & remained profitableafter the oil prices crashed & the rivals operated under illusion.

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Criticism evoked against Planning-based Strategy

Modern Approach: Henry Mintzberg of McGill University has

pointed out against Planning-based strategy,the planning approach incorrectly assumes that anorganizations strategy is always the outcome ofrational planning.

According to Mintzberg, definitions of strategy thatstress the role of planning ignore the fact thatstrategies can emerge from within an organizationwithout any formal plan.

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Mintzberg meant to say that even in the absence ofintent, strategies can emerge from the grassroots of anorganization. Indeed, strategies are often the emergentresponse to unforeseen circumstances.

Mintzbergs point is that strategy is more than what acompany intends or plans to do, it is also what it actuallydoes.

His argument is that emergent strategies are often successful

& may be more appropriate than intended strategies. RichardPascale presents the case of Honda Motor Co, when intendedto focus on selling 250/350 cc machines instead of 50ccHondacubs while entering into the US motor cycle market in 1959.

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Emergent and Deliberate Strategies

Source :Strategy Formation in an Adhocracy. by HenryMintzberg & Alexandera McHugh

Deliberate strategy

Unrealized Emergent

Strategy Strategy

Intended

Strategy

Realized

Strategy

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James B Quinn of Dartmouth College hasdefined strategy as the pattern or plan that integrates anorgnisations major goals, policies, & actionsequences into a cohesive whole.

Along the same lines, William F Glueck definedstrategy as a unified, comprehensive, & integrated plan

designed to ensure that the basic objectives of theenterprise are achieved.

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SM Defined: Glueck (1984) defines strategic management as a stream

of decisions and actions which lead to the development ofan effective strategy or strategies to help achieve corporateobjectives. The end result of strategic management is astrategy or a set of strategies for the organization.

Hofer and others (1984) consider strategic management asthe process which deals with the fundamentalorganization renewal and growth with the developmentand with the organizational systems needed to efficientlymanage the strategy formulation and implementation

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Ansoff (1984) states that strategicmanagement is a systematic approach to amajor and increasingly importantresponsibility of general management toposition and relate the firm to its environmentin a way that will assure its continued success

and make it secure from the surprises.

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Sharplin (1985) defines strategic management as theformulation and implementation of plans and carryingout of activities relating to the matters which are a vitalpervasive or continuing importance to total

organization. Harrison and St. John (1998) define strategicmanagement as the process through whichorganizations analyse and learn from there internal andexternal environments establish strategic directions,create strategies that are intended to help achieveestablished goals, and execute these strategies, all inan effort to satisfy key organizational stake- holders

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Kenichi Ohmac, world renowned mgnt expert& author observes in his well known The mindof the Strategist

what business strategy is all about - whatdistinguishes it from all other kinds ofbusiness planning- is in a word, sustainable

competitive advantage as withoutcompetitors there would be no need forstrategy.

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Gaining competitive advantage:

According to Porter, the crux of strategy is choosingto perform activities differently than rivals do.

In Competitive Advantage (1985) Michael

Porter contends that there are three ways togain CA:I) Becoming lowest cost leader in a given mrket

II) By being the producer of differential productIII) By being focused producerAs per Alex Miller CA is= Cost leadership,

Product differential and Quick Response.

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Four Strategic Approaches forachieving sustainable competitive Adv.

A Co attains sustainable Competitive advantage when anattractive number of buyers prefer its products orservices over the offerings of competitors/rivals & whenthe basis for this preference is durable.

Four approaches of SCA are: Being the industrys low-cost provider . ( Wal-Mart, &

Southwest Airlines) Outcompeting rivals based on such differentiating

features as high quality, wider product selection, added performance, better service, more attractive styling,technological superiority or usually good value for themoney. (Johnson & Johnson in baby products, Mercedes

& BMW engineering design & performance).

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Focusing on a narrow market niche ( by servingspecial needs & tastes of niche buyers) like,McAfee in virus protection software, Starbucks in

premium coffees & coffee drinks , Krispy Kreme indoughnuts.

Developing expertise & resources strengths that

give the Co competitive capabilities that rivalscant easily imitate or trump with capabilities oftheir own. ( For example, like Canon, McDonald).

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Five Indian firms among world's mostinnovative

Washington, Sep 7 (IANS) Five Indian companiesincluding Larsen & Toubro, Hindustan Unileverand Infosys are ranked on Forbes magazine's listof "The World's Most Innovative Companies"topped by four US companies.

Larsen & Toubro with an annual sales growth of19 percent is ranked ninth in the world followed

by Hindustan Unilever (12) with 11.4 percent.Infosys (19) comes third with 12.7 percent growththanks to what the US business magazine called alower "innovation premium."

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This measures the difference between thevalue of the company's existing businessesand its expected future innovations.

Companies must also have $10 billion inmarket capitalization and spend at least onepercent of their asset base on research anddevelopment.

Tata Consultancy Services (29) with 19.5percent was fourth among Indian companieswith Sun Pharmaceutical Industries (38) with a

14.6 growth bringing up the rear.

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Four US companies- Cloud computing kingSalesforce.com, drug major AlexionPharmaceuticals, internet retail giantAmazon.com and open source software leaderRed Hat took the top four places.

Forbes analysis show at least three key thingsthat the innovative companies do to create andsustain an innovation premium. These were: How

well companies leverage people, process, andphilosophies, differentiates the best in classfrom the next in class when it comes to keepinginnovation alive and delivering an innovationpremium year after year.

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Forbes also featured S.D. Shibulal, cofounderand CEO of Infosys calling him " both observerand experimenter. " In his 30 years at Infosys

Shibulal says "there is nothing that I have notdone." He was the first sales person, has done

account management, launched its internetconsulting practice, is a network expert,helped design and launch its first ecommerceapplication, and has been the head of both

delivery and sales, the magazine noted.

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To get a new perspective, Shibulal took a five yearsabbatical to work for another firm, Sun Microsystems,Forbes said. He's also known as an experimenter and"gadget freak" and revered as a "gizmo guru."

Forbes said it had found that successful leaders personally

understand how innovation happens and they try toimprint their behaviours as processes and philosophieswithin their organization.

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Why to have a Strategy? a good strategy is the commercial logic of a business,

that defines why a firm can have a competitiveadvantage & a place in the sun. To be complete, astrategy must include a definition of the domain- thelines of business, types of customers, geographicalreach- in which the firm competes.

It must also include a definition of the firms distinctivecompetencies & the competitive advantage that gives

the firm a special hold on the chosen business domain. Strategy also means what a co does, how it actually

positions itself commercially & conducts thecompetitive battle not what it says or what its strategy

documents propound.

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Strategic Management

Strategic Management is defined as:

the set of decisions & actionsthat result in the formulation &implementation of plansdesigned to achieve a companysobjectives

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Strategy Management

Strategic Management involves around Formulation of strategic intent. Conducting analysis into the cos internal

conditions & capabilities. Assessment into the cos external environmnt. Finding an appropriate strategic fit.

Developing annual objectives & short termstrategies that are compatible with the selectedset of long term objectives & grand strategies.

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Fred RD, defined Strategic Management as:the art & science of formulating , implement -ing & evaluating cross-functional decisionsthat enables an organisation to achieve itsobjectives.

Most Cos dont themselves prepare for future

competitive advantage because they are run bymanagers not by leaders. By maintenance engineersnot by architects. Hamel & Prahlad

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Strategic Management is indeed Managing forFuture or Competing for Future. As Peter Druckerwarns, mgnt has no choice but to anticipate thefuture, to attempt to mould it, and to balanceshort-range & long range goals.

It requires decision-now, It imposes risk now It requires action now, It demands allocation of resources now It requires work now.

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Drucker further argues that the real task of SM includesthe following:

Identifying the new & different businesses, Technologies & Markets.He further argues that the work starts with the question,

like: What is our present business? Which of our present businesses should we abandon? Which should we play down? Which should we push & supply new resources to?

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What purpose does a Strategy serve?

Without a strategy, an organisation

is like a ship without a rudder, goingaround in circles. It is like a tramp; ithas no place to go.

Joel Ross & Michael Kamy

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What is Peculiar in SM? SM Integrates various functions- central to

capitalizing on functional expertise. It is oriented towards achieving organization-

wide- to avert achieving a local maximumwhile missing the global optimum.

It considers a broad range of Stakeholders It concerns with efficiency & effectiveness. Competitive Advantage being its focal point.

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Time horizon is a big consideration. It seeks an appropriate strategic fit It is no longer a planning but beyond that. It is comprehensive, integrated & unified. It more believes in synergistic effect. It enables firm to out-form the rivals through CA. It provides a clearer sense of strategic vision for

the firm.

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It sharpens focus on what is strategicallyimportant.

It improves understanding of a rapidly changing

environment. It serves as a road map for the firms future

direction by embarking upon:i) Where we are?ii) Where we want to go?iii) How to get there?

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Researches Reflected:

Orgs that engage in SM generally outperformthose that do not.

(T.I. Anderson:2000) The attainment of an appropriate fit or match

between an orgnisations environment & itsstrategy, structure & processes has +V effectson the performance of organization.

(EJ. Zojac, 2000)

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Different Levels of Strategy

Corporate Level Strategy. (Policy formulation at theapex body of the organization as a whole)

Business Level Strategy . (strategies to variousbusiness processes/units respectively)

Functional Level Strategy (Strategies regardingvarious functional areas like marketing, finance,

personnel etc) Global Level Strategies . ( Strategies regarding the

entry mode, diversification etc while entering the foreign markets).

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Strategic Planning Process Model

It includes 5 major steps:

1. Selecting the Corporate Vision, Mission and Goals.

2. Analysing the Orgns external environment in order toguage the weaknesses & strengths of theorganisation.

3. Analyzing the Orgns internal operating environmnet

to identify its strengths & weaknesses.4. Selecting strategies built on the Orgns strengths &correct its weaknesses in order to take advtg ofexternal opportunities & counter external threats.

5. Implement the strategies.

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When Strategy undergo a Change?

According to Mintzberg, strategy making is nottypically a regular, continuous process.

it is most often an irregular, discontinuous process, proceeding in fits & starts. There are periods of stability

in strategy development, but also there are periods of flux, of groping, of piecemeal change, and of globalchange.

What is that which brings about this strategic drift? Butthere are situations when mgnt believes that it requires amere fine tuning esp the orgs which have a particularstrategic orientation for about 10-20 years before makinga substantial change in its present strategies/direction.

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Reasons for Strategic Change

Triggering Events that lead to Change are: New CEO ,s mindset aiming at questioning the

very reason of organizations existence. External Intervention indifferent attitude of

financers of the project. Firms Ownership to be at stake. Strategic inflection Point coined by Andy Grove

is a substantial environmental change,introducing new technologies, a differentregulatory environment, change in customersvalue set or preferences.

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Strategic Decision-making

A strategic decision making simply allows theorgs to grow larger & more complex withmore uncertain conditions & are long-run

future of the entire org with 3 features as:Distinguishing the Strategic Decisions: Rare: Have no precedent to follow. Consequential: commits substantial resources &

demand a great deal of commitment from people atall levels.

Directive: Set precedents for lesser decisions & futureactions throughout the organization.

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Modes of Strategic Decision Making

Some decisions are the result of brilliance and power ofthe people who are independent of any resourceconstraint or counseling but some are still who developthe knack out of a series of small incremental choices .

As per Henry Mintzberg, the three most typicalapproaches or modes of SD making are :

1. Entrepreneurial Mode.2. Adaptive Mode, &

3. Planning Mode.( However, 4 th mode, was added by Quinn later as under:4. Logical Incrementalism

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Dimensions of Strategic Decisions

Typically the strategic issues have the followingdimensions: Strategic issues

Require Top-Management Decisions. Require large amounts of the Firms resources Often affect the Firms long term prosperity. Are Future Oriented. Usually have multifunctional or Multibusiness

consequences. Require Considering the Firms External

Environment.

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Strategist & Role of a Strategist