Strategic Management

• Strategic management is an ongoing process that evaluates

and controls the business and the industries in which the
company is involved; assesses its competitors and sets
goals and strategies to meet all existing and potential
competitors; and then reassesses each strategy annually or
quarterly [i.e. regularly] to determine how it has been
implemented and whether it has succeeded or needs
replacement by a new strategy to meet changed
circumstances, new technology, new competitors, a new
economic environment., or a new social, financial, or
political environment.”
(Lamb, 1984:ix)[2]
NATURE AND SCOPE OF STRATEGIC MANAGEMENT

• Business environment is changing

• Why ?
• Consequences ?
• Internationalization of business
• Ferocity of competition
• Amazing technological advancement
• Ever-growing state interference
• Fast changing socio-economic & political
environment
• Fast changing human values
• 1991 economic liberalization
• Strategic management/business planning/corporate
Strategy/corporate planning ensures survival and
long term success in a competitive environment
• Business planning and Strategic management
are used interchangeably

• Old Strategy Strategy formulation

&
Implementation

• New Strategy/Broader term

TQM/Reengineering/Structural & functional
change

• Even in absence of competition

• Strategy refers to
-either the plans made
-or the action taken
• -to help the organization fulfill its
intended purposes

• -intended strategy (plans made)

• -realized strategy (action taken)

• Organizational purpose-strategic
ends- as the Hierarchy of strategic
intent-

• Broad- Vision & mission, goals and

objectives

• Narrow
They should align
• Strategic management is the art, science and craft of
formulating, implementing and evaluating cross-
functional decisions that will enable an organization to
achieve its long-term objectives
• It is the process of specifying the organization's
mission, vision and objectives, developing policies
and plans, often in terms of projects and programs,
which are designed to achieve these objectives
VISION

• -Broad intentions
• -All inclusive
• -Forward thinking
• -Aspirations for the future
• -Without specifying the means
• -It must be communicated to all
• *Vision should be translated into
directive texts in the form of mission
statements
• *Personal selling
• -Actions speak louder than words
• MISSION

• Vision becomes more tangible when it is

expressed in the form of mission
statements
• -Verbalize the belief
• -Direction towards vision
• Mission statements usually attempts to
answer several questions
 Key Element of a Mission Statement

View of the Future

The anticipated regulatory, competitive, and economic
environment in which the company must compete .

Fundamental
Intentions
Competitive Arenas
The business and Geographic business arenas where the
company will compete.
A Statements of the
company will seeks to
adopt, a description of what
the company hopes to
accomplish , a means to
gauge future success.
Source of Competitive Advantage
The skills that company will develop/leverage to achieve its
vision, a description of how the company intends to succeed.
Benefits

1. Mission statements establish boundaries

to guide strategy formulation
2. Mission statements acknowledge
responsibilities to various stakeholders
and establish standards for organizational
performance along corresponding
dimensions.
3. Mission statements suggest standards of
individual behaviour.
GOALS

Goals are attempts to make a mission

statement more concrete.
• 1. They address financial and non-
financial issues.
• 2. They facilitate reasoned trade-offs.
• 3. They can be reached, with a stretch.
• 4. They cut across functional areas.
•
Diverse Obligations to its Various
Stakeholders

 Customers
 Employees
 Communities
 Stakeholders
 Eight Dimensions of Strategic Goals
PUBLIC RESPONSIBILITY PHYSICAL AND FINANCIAL
Company’s responsibilities to it’s RESOURCES
customers and society Capital and equipment required
to meet other strategic goals

MARKET STANDING
Desired market share and
competitive niche INNOVATION
Efforts toward development of new
methods and new products

WORKER PERFORMANCE MANAGERIAL PERFORMANCE AND

AND ATTITUDE DEVVELOPMENT
Expected rates of workers’ Rates and levels of managerial
Productivity and positive attitudes productivity and growth

PRODUCTIVITY PROFITABILITY
Aiming at specific levels of Level of profits and other
production efficiency indicators of financial performance
OBJECTIVES

-Objectives are the operational definitions

of goals
• -Precise
1. They can be measured
2. They incorporate the dimensions of time
3. They reduce conflict
TWO FORMS OF STRATEGY

• Intended Strategy (originally conceived)

-plans
-policies
• Realized Strategies
• Unrealized (that never materializes)
• Emergent strategy
Development of the concept of strategic management

• It started with Long range planning during post II

World war period.

• Forecasting trend in sales, profits, capital

requirement on annual basis

• 1950s goal setting - not concerned for

implementing the plans.

• 1960s economic planning was incorporated in

long-range planning - resource allocation- cash flow
analysis, capital budgeting, & Portfolio analysis.
Development of the concept of strategic management

contd….

• Economic planning is inward looking - No

interaction with external environment (possibility of
future development in economic and industrial fields,
technology, competition, Government policy, &
values of society were ignored

• Then came in 1970s strategic planning (limited to

defining the company's basic purpose,

• articulating the objectives and delineating the

course of action).
Development of the concept of strategic management
contd….

• But strategic planning should encompass

all activities pertaining to the
implementation of strategy, recycling and
reformulating strategy.

• Linking strategic planning to operational

decision-making.
Linking Can Be Achieved Through (Integrated Planning)

• formulation of strategic plan at corporate

level
• development of functional and action plans
• creation of suitable organization climate
and structure
• entrepreneurial drive among managers
and technical personnel at all level
(motivate subordinates)
• involvement of all
Thus Strategic Management is-

• systematic long range planning

• positions an organization within its
external environment
• integration of an organization's internal
division with external environment
The whole process of strategic
planning is-
( This is a continuous process)
• rational and systematic (integration of external & internal)
• which involves recognition and diagnosis of the problem
• setting corporate objectives and goals
• choosing strategy and executing it
• by developing suitable action plans
• and building matching organization structure
• -All this is done by matching opportunities based on
environmental analysis with corporate strength of the firm
• -The strategy so formulated is subject to continuous review
in the light of changing environmental forces.
CHARACTERISTICS OF STRATEGIC MANAGEMENT

1. Strategic management is an organized

and systematic method of managing an
organization.

Where we are going and how we intend to

go there
• Strategic Planning-Purpose, objectives and
goals, strategy
• Strategic Execution-developing functional,
organizational, and action plans
• -Monitoring, recycling and reformulating
strategies.
CHARACTERISTICS OF STRATEGIC MANAGEMENT
Cont….

2. Strategic management approach is based on

structure of plans consisting of strategic plans,
functional plans, organizational plans and operating
plans.

(i)Strategic plans,
• -spell out basic characteristics (purpose, objectives, goals)
• -deployment of resources
• -what is thrust
• -timing and sequence of major initiatives and moves
(ii) functional plan in critical areas such as
production, marketing, finance, personnel, research
and development
• -Each of these areas contain objectives, goals, policies,
and strategies
(iii)Operating plans ( Action)
• -establishing goals
• - action programmes
• - budget
(iv)organizational plans
• -structuring human resources
• * authority and responsibilty relationship
• * work flows
• * information flows
• * personnel training and development
• * wage and incentive system
CHARACTERISTICS OF STRATEGIC MANAGEMENT
Cont….

3. Strategic management concept based on the

systems approach is the overall planning of
corporate enterprise concerned with configuring
and directing the resource-conversion process.
-interests and purpose of entire enterprise take
precedence over departmental claims
Example of holding Psychology exam with the
faculty

4. Strategic management is fundamentally

concerned with futurity of present decisions.
• -future is uncertain and complex
• -change is not to be feared
CHARACTERISTICS OF STRATEGIC MANAGEMENT
Cont….

5. Strategic management is a continuous

dynamic process-generic in nature
• continuous review of the whole planning
process/dynamic process
• business world deals with three external
forces which influence company policies
• -customers
• -competitors Their role, impact &
behaviour should be accurately &
thoroughly assessed
• -government for the success and survival
of the company
CHARACTERISTICS OF STRATEGIC MANAGEMENT
Cont….

• Companies should interact with external

forces, adapt, and adjust its objectives &
strategies accordingly.
• -57 out of 100 ( 1918) companies gone out
of business or suffered in terms of their
market share
• within 50 years
• -Textile mills -sick
• Companies have to adapt the changing
conditions
• Periods of relative stability are also required
•
CHARACTERISTICS OF STRATEGIC MANAGEMENT
Cont….

6. The time span of the Strategic planning

is long -range.
• next 5 to 10 years hence
• -operating plans- not more than 3 years
Planning period should be suitable for the
business
• - size of the enterprise
• -technology
• -environmental forces (OT)
Devise a plan for a period of 5 years but its
evaluation & assessment should be
continuous.
PHASES IN STRATEGIC MANAGEMENT

• Defining business mission, purpose, and

objectives
• Formulation of strategies
• Implementation of strategies; and
• Evaluation of strategies
 Ch 1
-31

Comprehensive strategic management

Copyright 2005model
Prentice Hall

External
Audit

Implement
Vision Generate, Implement
Long-Term Strategies: Measure &
& Evaluate, Strategies:
Objectives Marketing, Evaluate
Mission Select Mgmt Issues
Fin/Acct, Performance
Strategies
R&D, CIS

Internal
Audit
END OF FIRST CHAPTER
Environmental factors Analysed

• Economic environment
• National income
• Distribution of income
• Monetary policy
• Fiscal policy
• Natural resources
• Raw materials and supplies
Political and legal environment

• Political atmosphere
• Government's approach towards business
• Laws relating to business
• Government policy towards business
Competitive and market environment

• Strength and weakness of competitors

• Threats of entry of new competitors
• Access to distribution channels
• Bargaining power of customers
• Bargaining power of suppliers
Technological environment
Technological change
Social and cultural environment
Social and cultural change
CORPORATE FACTORS ANALYZED

Marketing Factors:
• Competitive competence
• Product mix
• Product life cycle
• Marketing research
• Channels of distribution
• Sales force
• Pricing
• Promotional efforts
CORPORATE FACTORS ANALYZED contd...

Production/ Operation factors

• Allocation and use of resources
• Locational pattern of plant and office
• Production capacity and its use
• Cost structure
• Cost-volume-profit relationship
• Operation procedures
• Raw materials availability
• Inventory control system
• Research and development
• Patent rights
CORPORATE FACTORS ANALYZED
contd...

Finance and accounting factors

• Capital cost
• Capital structure
• Financial planning
• tax benefits
• Pattern of shareholding
• Relationship with share holders and
financiers
• Accounting procedures
CORPORATE FACTORS ANALYZED contd...

Personnel and management factors

• Corporate image and prestige
• Organizational climate
• Quality of management personnel
• Management practices
• Organization structure
• Industrial relations
• Organization's external relations
• STRATEGIC MANAGEMENT PROCESS

Environmental
analysis

Corpora
te Srtrategic Revie
Choice Implimen
missions alternativ w& Actio
for tation
and es Contro n
strategy
objectiv l
es

Corporate
analysis
Personal values &
aspiration
Processes involved in strategic management

• Strategy formulation
• Strategy implementation
• Strategy evaluation
Strategy formulation

• Performing a situation analysis, self-evaluation and competitor analysis:

both internal and external; both micro-environmental and macro-
environmental.
• Concurrent with this assessment, objectives are set. These objectives
should be parallel to a timeline; some are in the short-term and others on
the long-term. This involves crafting vision statements (long term view of
a possible future), mission statements (the role that the organization gives
itself in society), overall corporate objectives (both financial and strategic),
strategic business unit objectives (both financial and strategic), and tactical
objectives.
• These objectives should, in the light of the situation analysis, suggest a
strategic plan. The plan provides the details of how to achieve these
objectives.
• This three-step strategy formulation process is sometimes referred to as
determining where you are now, determining where you want to go, and
then determining how to get there. These three questions are the essence of
strategic planning. I/O Economics for the external factors and RBV for the
internal factors.
Strategy implementation

• Allocation and management of sufficient resources (financial,

personnel, time, technology support)
• Establishing a chain of command or some alternative structure
(such as cross functional teams)
• Assigning responsibility of specific tasks or processes to specific
individuals or groups
• It also involves managing the process. This includes monitoring
results, comparing to benchmarks and best practices, evaluating
the efficacy and efficiency of the process, controlling for
variances, and making adjustments to the process as necessary.
• When implementing specific programs, this involves acquiring
the requisite resources, developing the process, training, process
testing, documentation, and integration with (and/or conversion
from) legacy processes
Strategy evaluation

• Measuring the effectiveness of the organizational strategy.

It's extremely important to conduct a SWOT analysis to
figure out the strengths, weaknesses, opportunities and
threats (both internal and external) of the entity in
question. This may require to take certain precautionary
measures or even to change the entire strategy.
• In corporate strategy, Johnson and Scholes present a model
in which strategic options are evaluated against three key
success criteria:
• Suitability (would it work?)
• Feasibility (can it be made to work?)
• Acceptability (will they work it?)
1. Suitability

Suitability deals with the overall rationale of the strategy

• Does it make economic sense?
• Would the organisation obtain economies of scale,
economies of scope or experience economy?
• Would it be suitable in terms of environment and capabilities?
• Tools that can be used to evaluate suitability include:
• Ranking strategic options
• Decision trees
• What-if analysis
2. Feasibility

Feasibility is concerned with the

resources required to implement the
strategy are available, can be developed
or obtained. Resources include funding,
people, time and information.
• Tools that can be used to evaluate
feasibility include:
• cash flow analysis and forecasting
• break-even analysis
• resource deployment analysis
3. Acceptability

• Acceptability is concerned with the expectations of the

identified stakeholders (mainly shareholders,
employees and customers) with the expected
performance outcomes, which can be return, risk and
stakeholder reactions.
• Return deals with the benefits expected by the
stakeholders (financial and non-financial).
• Risk deals with the probability and consequences of
failure of a strategy (financial and non-financial).
• Stakeholder reactions deals with anticipating the
likely reaction of stakeholders. Shareholders could
oppose the issuing of new shares, employees and
unions could oppose outsourcing for fear of losing
their jobs, customers could have concerns over a
merger with regards to quality and support.
• Tools that can be used to evaluate
acceptability include:
• what-if analysis
• stakeholder mapping
Approaches of Strategic management

The Industrial Organizational

Approach
▫based on economic theory — deals with
issues like competitive rivalry,
resource allocation, economies of scale
▫assumptions — rationality, self discipline
behaviour, profit maximization

The Sociological Approach

▫deals primarily with human interactions
• assumptions — bounded rationality,
satisfying behaviour, profit sub-optimality.
Levels of the strategic management

• Corporate strategy refers to the overarching strategy of the diversified firm. Such
a corporate strategy answers the questions of "in which businesses should we
compete?" and "how does being in these business create synergy and/or add to the
competitive advantage of the corporation as a whole?“

• Business strategy refers to the aggregated strategies of single business firm or a

straegic business unit (SBU) in a diversified corporation. According to
Michael Porter, a firm must formulate a business strategy that incorporates either
cost leadership, differentiation or focus in order to achieve a sustainable
competitive advantage and long-term success in its chosen arenas or industries

• Functional strategies include marketing strategies, new product development

strategies, human resource strategies, financial strategies, legal strategies, supply-
chain strategies, and information technology management strategies. The emphasis
is on short and medium term plans and is limited to the domain of each
department’s functional responsibility. Each functional department attempts to do
its part in meeting overall corporate objectives, and hence to some extent their
strategies are derived from broader corporate strategies.
STRATEGIC IMPLEMENTATION

STRUCTURAL ISSUES
The concept of strategic implementation
Interdependence of strategy formulation
and implementation
• Forward linkage
• Backward linkage
Factors causing unsuccessful implementation of
strategy
• Unsatisfactory coupling of actions
• Insufficient attention to the negotiation of outcomes in
the external decision situations
• Defect in the strategy formulation
• Organization structure for strategy
implementation
• Mechanism for organisational design
• What should be the different
units of the organisation ?
• What components should join
together and what components should
be kept apart ?
• What is the appropriate
placement and relationship of
different units ?
• Process approach
• Results approach
Forms of organisation structure

• Functional structure
• Divisional structure
- Basis of divisionalism
-Number of divisions
-Provisions of corporate activities
-Role of corporate management
Implication of divisional structure

• Matrix organization structure

-Design of matrix structure
-Suitability of matrix structure
-Problem in matrix structure
• Free-form organisation
 Relating structure to strategy Organisational change

• Planning for change

• Assessing change forces
• Overcoming resistance to change
• Implementing change
NON-STRUCTURAL ISSUES

• -To understand th various tols of

strategy implementaion
• -To understand how these tools
contribute in specific areas of
strategy implementaion
 NON-STRUCTURAL ISSUES
contd…..

Leadership
• Institutinalisation of strategy
• Integrating conflicting interests
• Motivation
• Setting organisational climate

Functional policies
• Role of functional policies
• Development of policies
• Marketing policies [ product, pricing, place,
promotion (ad, peronal selling, sales promotion,&
publicity) ]
NON-STRUCTURAL ISSUES
contd…..

• Financial and accounting policies ( sources,

usage, & management )
• Production/operations policies [ Production
system (capacity,location, lay-out,product or
service design, work systems, degree of
automation, extent of vertical integration
etc.),planning & control, R & D ]
• Personnel and other policies (system,
characteristics & IR ) Integration of policies
Integration of policies considerations in integration

• Need for internal consistency

• relevance to development of
organisational capacity
• Making trade-off decisions
• Determination of intensity of linkage
• Timing of implementatiom of plans and
policies
Resource allocation
• Procurement of resources ( financial,
physical, & human )
• Approaches to resource allocation
• Means of resource allocation
• -Strategic budgeting
• BCG-based
• PLC-based
• Capital
• Zero-based
• Parta system
• Factors affecting resource allocation
• Difficulties in resource allocation
• Budgets
• -Preparation of position papers
• position paper on environment
• position paper on organisational
constraints and resources
• position paper on past performance
• position paper future direction of
activities
• -preparation of budgets
Management information system
• information system design
• Top management information system