Introduction to Strategic Management

What Is Strategy and Why Is It Important?

What Is Strategy?
Consists of the combination of competitive moves and business approaches used by managers to run the company Managements game plan to Attract and please customers Stake out a market position Compete successfully Grow the business Achieve targeted objectives

The Hows That Define a Firm's Strategy

How to please customers How to respond to changing market conditions How to outcompete rivals How to grow the business How to manage each functional piece of the business and develop needed organizational capabilities How to achieve strategic and financial objectives Strategy is HOW to . . .

ESSENCE OF STRATEGIC MANAGEMENT

Assess where are we now ? Identify where do we want to be? Generate options on how we might get there? Evaluate the options to identify which way is best? Ensure we reach the desired position.

Strategic Approaches to Building Competitive Advantage A Companys Strategy Is Partly Proactive and Partly Reactive

Why Do Strategies Evolve?

A companys strategy is a work in progress Changes may be necessary to react to Fresh moves of competitors Evolving customer preferences Technological breakthroughs Shifting market conditions Crisis situations

Globalisation

Market Changes

Technological Changes

Liberalisation

Changing environment of organisations: Principal Constituents

What Is a Business Model?

A business model addresses How do we make money in this business? Is the strategy capable of delivering good bottom-line results? Do the revenue-cost-profit economics of the strategy make good business sense? Look at revenue streams the strategy is expected to produce Look at associated cost structure and potential profit margins Do resulting earnings streams and ROI indicate the strategy makes sense and the company has a viable business model for making money?

Relationship Between Strategy and Business Model

Strategy - Deals with a companys competitive initiatives and business approaches Business Model Concerns whether revenues and costs flowing from the strategy demonstrate the business can be amply profitable and viable

Strategic Management and Business Policy How Strategic Management Evolves

Financial planning Forecast-based planning Strategic Planning: Externally-oriented planning Strategic management: Seeks Competitive Advantage and Consider Implementation & Control)

Benefits of Strategic Management

Long term orientation and fit between environment, strategy, structure and processes may lead to competitive advantage

Challenges: Globalization & E-Commerce

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Theories of Organization Adaptation

Theory of Population Ecology Institutional theory Strategic Choice Perspective Organization Learning Theory Learning Organizations Strategic Flexibility
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Basic Model of Strategic Management

Four Basic Elements

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1. Environmental Scanning

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2. Strategy Formulation
Mission Statement
Setting Objectives & Goals A statement of purpose (strategic intent) committing the organization to ambitious overarching (stretch) objectives. Provides a sense of direction and purpose. Drives strategic decision making and resource allocations. Forces the seeking of significant performance improvements to attain objectives Customer Orientation and Business Definition Abells Framework for Defining the business Consumer-oriented versus Product-oriented business definition

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2. Strategy Formulation
Selecting Strategy Corporate strategy (Stability, Growth, Retrenchment) Business strategy (Competitive, Cooperative) Functional strategy (Technological Leadership, Technological Followership) Defining Policies
Guidelines for decision making that links formulation to implementation
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3. Strategy Implementation

Programs Strategy Implementation Budgets Procedures

4. Evaluation & Control

- Continuous process
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Strategic Decision Making Model

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Strategic Decision Making

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 STRATEGIC MANAGEMENT PROCESS

STRATEGIC MANAGEMENT PROCESS

ENVIRONMENTA STRATEGY L SCANNING FORMULATIO N STRATEGY IMPLEMENTATIO N EVALUATION CONTROL

External Internal

Missions Objectives Strategies policies

Programs Budgets Procedures

Performance

Feedback / Learning

ENVIRONMENTAL SCANNING
External: Societal, Technological, economic, regulatory,competitive environment- PEST analysis ETOP analysis Industry Analysis- Porters Model, Strategic groups Internal: Organisational Capabalitiy analysis- SWOT, TOWS matrix, Value Chain analysis Organisation Structure Culture (Belief, expectation, Values) Resources (Assets, skills, competencies, BACK knowledge)

STRATEGY FORMULATION
Mission Reason for existence

Objectives What results to accomplish Strategies when Plan to achieve the mission & objective

Policies Broad guidelines for decision making

STRATEGY IMPLEMENTATION
Programs Activities needed to accomplish a plan BACK Budgets Cost of the Program Procedures Sequence of steps needed to do the job

EVALUATION AND CONTROL Process to monitor performance and take corrective action Performance

STRATEGY FORMULATION Development of long range plans for effective management of environmental opportunities and threats in the light of corporate strengths and weaknesses.

DIVERSIFIED COMPANY 3 LEVELS OF STRATEGY

Corporate-Level Strategy

Growth of business as a whole Business-Level Strategy Division/business unit/product level Functional-Level Strategy support corporate & business level strategy

STRATEGIC CHOICES
Understanding the bases for future strategy at both corporate and business unit levels and the options open for developing strategy in terms of both Corporate level Highest level and is concerned with the scope of an organisations strategies and the adding of value through its relationship with the separate parts of the business and the synergies created between these parts Business level The competitive advantage that is created from the understanding of both markets and customers based on specific competences Directions and methods How an organisation develops in terms of feasibility and acceptability

STRATEGY INTO ACTION

This is where strategies are working in practice Structuring structure in terms of processes, boundaries and relations and their interactions Enabling Creation of support mechanisms in the organisation in order to support strategy implementation and development Change Creating an environment that facilitates change throughout the organisation