Ch 2.Overview of Strategic Management Process

Ch 2.Overview of Strategic Management ProcessStrategyis an action that managers take to attain one or more of the organizations goals. Strategy can also be defined as a general direction set for the company and its various components to achieve a desired state in the future. Strategy results from the detailed planning process.Strategy is a well defined roadmap of an organization. It defines the overall mission, vision and direction of an organization. The objective of a strategy is to maximize an organizations strengths and to minimize the strengths of the competitors.

Strategic Management ProcessStrategic management process means defining the organizations strategy. It is also defined as the process by which managers make a choice of a set of strategies for the organization that will enable it to achieve better performance. Strategic management is a continuous process that appraises the business and industries in which the organization is involved; appraises its competitors; and fixes goals to meet all the present and future competitors and then reassesses each strategy.It has four steps-Environmental Scanning, Strategy Formulation, Strategy Implementation, Strategy Evaluation

Strategy Formulation-Strategy formulation refers to the process of choosing the most appropriate course of action for the realization of organizational goals and objectives and thereby achieving the organizational vision.The process of strategy formulation basically involves three main steps-1. Setting Organizations objectives -The key component of any strategy statement is to set the long-term objectives of the organization.Thus, strategy is a wider term which believes in the manner of deployment of resources so as to achieve the objectives. Objectives are based on following-

Vision- Corporate vision is a short, precise, andinspiringstatement of what the organization intends to become and to achieve at some point in the future, often stated in competitive terms. Vision refers to the category of intentions that are broad, all-inclusive and forward-thinking. It is the image that a business must have of its goals before it sets out to reach them. It describes aspirations for the future, without specifying the means that will be used to achieve those desired ends.It may be a mental image of the possible and desirable future state for the organization. This image, which we call avision, may be as vague as adream or as precise as a goal or a mission statement.Eg.Khaitan-Disneyland-To be happiest place on earth, McDonalds-To be worlds best quick service restaurant b.Mission-Mission states the business reason for the organization's existence. It does not state an outcome. It contains no time limit or measurement. It provides basis for decisions on resource allocation and appropriate objectives. It defines current and future business in terms of product, score, customer, reason, and market price.Statement of business.Eg. Videocon has mission of enhancing quality of life, Infosys has mission to achieve their objectives to be fair and honest with clients,employees,vendorsand society. c. Goals-Goals are results to be achieved.It describes ideal states to be achieved at future time.It is consistent with and related directly to vision and mission.It guides everyday decisions and actions. Goal setting is the process of deciding what you want to accomplish and devising a plan to achieve the result you desire.Eg-Financial as profit,Marketing goal for sale etc.

2.Analysing internal and external environment-(SWOT)SWOT analysis also known as internal and external analysis stands for Strengths, Weaknesses, Opportunities and Threats. The SWOT analysis involves analysis of both the internal as well as external environment. SWOT analysis is especially important during strategic planning wherein the organization needs to decide thestrategywhich it has to take. The strategic decisions can be made only when the organization knows everything about itself as well as where it stands in the market.The four factors of SWOT analysis combine to give excellent information to the company such that the company can proceed to decision making once it knows its strengths, weaknesses, opportunities and threats.

1. External environment-Opportunities Informs of the opportunities available to the company to increase business and get further customersThreats Determines the major threats for the company, whether they be in internal environment or external. 2. Internal environment-Strengths Gives confidence about factors which the company got right and which it can capitalize on.Weaknesses Shows the major weaknesses within a company which the company needs to work on

3.Strategy Making-Strategy Making means involving and linking all important decisions to form strategies.Modes of strategic managementare the actual kinds of approaches taken by managers in formulating and implementing strategies. They address the issues of who has the major influence in the strategic management process and how the process is carried out.It happens in three stages- a. Entrepreneurial ModeEntrepreneurial mode is an approach in which strategy is formulated mainly by a strong visionary chief executive who actively searches for new opportunities, is heavily oriented toward growth, and is willing to make bold strategies rapidly.

The entrepreneurial searches for new mode are found in organizations that are young or small, have a strong leader who are creative thinker. b. Adaptive ModeAdaptive Mode covers long and short termstrategy linked.Stagein a firm'sdevelopmentwherelong-termstrategic decisionsare closely linked to itsshort-termstrategy.Adaptive mode is an approach to strategy formulation that emphasizes taking small incremental steps, reacting to problems rather than seeking opportunities.It aims at making strategies in business areas where organization do not want to take risk.

3. Planning ModePlanning mode is an approach to strategy formulation that involves systematic, comprehensive analysis, along with integration of various decisions and strategies.With the planning mode, executives often utilize planning specialists to help with the strategic management process. The ultimate aim of the planning mode is to understand the environment well enough to influence it. The planning mode is most likely to be used in large organizations that have enough resources to conduct comprehensive analysis.Types of Strategies-Companies use strategies as a means to grow their business. There are three types of strategies- 1. Corporate StrategyLong-term corporate strategies are often clarified in a companys mission statementCorporate strategy is often held by very large businesses and corporations.Corporate strategy is primarily about the choice of direction for the firm as a whole.In a large multi-business company, however, corporate strategy is also about managing various product lines and business units for maximum value.

Corporate headquarters play the role of organizational parent in that and deal with various product and business unit children. Even though each product line or business unit has its own competitive or cooperative strategy that it uses to obtain its own competitive advantage in the marketplace, the corporation coordinate these different business strategies so that the corporation as a whole succeeds as a family.Eg.-Tata Group has different types of business like Constancy, automobile, hotels etc.Corporate whole is greater than the some of its individual business unit parts.

Corporate Strategy are of different types as per requirements its utilisation like- a.Growth Strategy For growth and development b.Stability Strategy _Market growth c. Directional Strategy_ Guidance for different jobs d.Defensive Strategy_For restructure of business 2. Business strategyThese strategies focus on competitive positioning (where to compete and how) in order to create an advantage over competitors. Business managers should run the business in a way that is in alignment with overall corporate strategy.

The framework for building a business strategy includes developing the mission of the business, once again conducting an environmental scan and examining the key activities of the value chain. The action plan that results directs the business strategy, programs and budget.

3. Functional strategies-This kind of strategy is concerned withmaking improvements to business functions that support business and corporate strategy.Functional strategy include IT strategy, marketing strategy, human resources strategy, and other operations.

Functional-level strategy is the foundation that supports both corporate-level strategy and business strategy.At the ground level, the functional strategies of Finance, HR, IT and Marketing carry out the objectives and mission set at the corporate and business strategy levels.Analyzing and choosing the right strategies1.Strategic Analysis- is the process of conducting research on the business environment within which an organisation operates and on the organisation itself, in order to formulate strategy. It is a way of investigation of the objective factors being considered in the process of strategic choice.Certain questions like which product, which business ,how to start, where to start etc get answers from strategy analysis.In this new tools and techniques are regularly used for replacing some old techniques.Its main theme is competition is market.It is used for both corporate and business level strategies.2. choosing the right strategies- Business strategy will be the overall strategy that is used to shape and run the business. It may incorporate a number of smaller missions, goals that set out what you want to achieve with your business. These may relate to business focus, the differentiation of business from its competitors, or the other factors that will determine what makes business a success.It is the decision to select from all available alternatives strategies considered best to meet organisations objectives.It is a decision making process.It has four steps- A. Focusing on Strategic Alternatives-identification of different alternatives and best favorable will be selected.B. Considering the selection Factors-Subjective and objective bothC. Evaluavation of Strategic Alternative-Each strategy has to be evaluated on the basis of its capability to help organisation.D. Making the Strategic choice-Final step to select one or more Strategy for implementation.