Strategic Management

Unit 1 Nature of Strategic Management

Concept of Strategy



 

The term Strategy derived from Greek word strategos, means generalship the actual 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

Defining Strategy


The determination of basic long term goals and objectives of an enterprise and the adoption of the course of action and the allocation of resources necessary for carrying out these goals - Alfred D Chandler

A unified, comprehensive and integrated plan designed to assure that the basic objectives of the enterprise 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 continuing importance to the organisation as a whole. - Arthur Sharplin

Combining the definitions, strategy is:

1.

2.

3.

4.

A plan or course of action or a set of decision making rules making a pattern or creating a common thread. The pattern or common thread related to org.s activities which are derived from the policies, objectives and goals Concerned with pursuing those activities which move the org. from its current position to the desired future state. Concerned with resources necessary for implementing a plan or following a course of action.

MINTZBERG, H, Five Ps for Strategy

Strategy is presented in five ways - as a plan, ploy, pattern, position and perspective. 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 possibly more important ways, they complement one another

Strategy as a plan deals with how leaders attempt to establish direction for organisations and set them on predetermined courses of action. In the specific sense, strategy as a plan can also be a ploy or manoeuver intended to outwit rivals in a competitive or bargaining situation.

By this definition, strategies have two essential characteristics: they are developed consciously and purposefully.

When encompassing the resulting behaviour, strategy can also be thought of as a pattern in a stream of actions - a consistency of behaviour, whether intended or not. . Thus, strategy is also a pattern - specifically, a
pattern in a stream of actions. By this definition, strategy is consistent in behaviour, whether or not intended. The outcome of strategy does not derive from the design, or plan, but from the action that is taken as a result

Strategy as position refers to looking at an organisation in context, that is, locating it within its external environment, with a view to creating situations for economic gains.In management terms: a "domain"
consisting of a particular combination of services, clients and markets. Position is often defined competitively

While position is outwardly focused, perspective looks inward into the firm; even into the heads of the strategists themselves. . Some firms are aggressive pacesetters; others build
protective shells around themselves. Almost every profession has about it unique perspectives, that indelibly flavor the strategies that firms practicing those professions craft for themselves. A law firm's view of their business is fundamentally different to that of an accounting firm, and engineering firm or a graphic design studio, yet all are staffed by professionals.

The plan provides 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. Finally perspective 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."

Limitations of Strategy
      

Future oriented: uncertainity Business cycles, Govt rules, competitor/s role: 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 difficult situtations

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


Strategic decision making

 

    

Top Mgmt. Consequential: Involve allocation of large amt. of cos resources & demand great deal of comittment Significant impact on long term prosperity of the firm Future oriented Multifunctional/ multi business consequences Necessiate considering factors in external env. Rare: unusual and no precedent

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

Approaches to St Dec Making

   

Entrepreneurial mode: Adaptive mode Planning mode Logical incrementalism

Entrepreneurial mode
  

 

Strategy made by one powerful individual Focus is on opportunities Strategy guided by ents own vision of direction and exemplified by large, bold decisions Dominant goal is growth of the organisation e.g. Satyam Computers

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. of large corporations (*Encyclopedia Britannica)

Planning mode
     

Systematic gathering of appropriate information for situational analysis Generation of feasible alternative strategies Rational selection of most appropriate strategy Proactive search for new opportunities Reactive solution to existing problems e.g. HP

Logical Incrementalism
  

 

Synthesis of planning and adaptive (primarily), and entrepreneurial (to a lesser extent). Proposed by Quinn. Top management has a clear idea of corporations mission and objectives Dev. of strategies: interactive process, probes the future, experiments and learns from a series of partial (incremental) commitments rather than through global formulation of total strategies Strategy emerges out of debate, discussion, and experimentation Useful when environment is changing fast, important to build consensus, need to develop resources before committing the entire corporation to a specific strategy, e.g. Infosys

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? Are the answers acceptable? If answers are not acceptable, what specific actions should management undertake? What are the risks and payoffs involved?

Process of Strategic Management

Establishing Strategic Intent
Vision Mission, Business Definition, Goals and Objectives

Formulation of Strategies
Env. Appraisal SWOT Analysis Corporate level Strategies Business Level Strategies Strategic Choice Strategic Plan Org. Appraisal

Strategy Implementation
-Project -Procedural -Resource Allocation -Structural -Behavioural -Functional & Operational

Strategic Evaluation

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 time period, later on they serve as a yardstick / benchmarks for measuring the org. performance.

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.

Strategic Alternatives and Choices



 

Evolving alternative strategies out of many possible options and choosing the most appropriate one, (while taking into account the env opp. & threats and corporate strengths & weaknesses). Process: Strategic analysis and choice End result: Strategic Plan which can be implemented

Strategy Implementation
Put the strategic plan to action

     

Project Implementation Procedural Implementation Resource Allocation Structural Implementation Behavioural Implementation Functional and Operational Implementation

Strategic Evaluation
  

Appraise the implementation of strategies Measure org. performance Feedback from Strategic Evaluation is used to exercise control over strategic management process.

Strategists and their role in Strategic Management

Strategists 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 Executive Assistants