AN INTRODUCTION AND OVERVIEW OF STRATEGIC MANAGEMENT
DEFINITIONS OF STRATEGY
1. “Strategy is the determination of basic long term goals & objectives of an enterprise & the adoption of the course of action & the allocation of resources necessary for carrying out the goals.”- Chandler (1962)
2. “Strategy is the pattern of objectives, purpose or goals and major policies & plans for achieving these goals, stated in such a way, so as to define what business the company is in or is to be & the kind of company it is or it is to be.” - Kenneth Andrews (1965)
3. “Strategy is a unified, comprehensive & integrated plan relating the strategic advantage of the firm to the challenges of the environment. It is designed to ensure that the basic objective of the enterprise are achieved” “(through proper execution by the organisation)” - Stanford Research Institute , USA& (Glueck & Jausch - 1984)
4. “Strategy is a course of action through which an organization related itself with the environment so as to achieve its objectives”
5. “Strategy is the creation of a unique and valuable position involving a different set of activities. ”
- Michael Porter (1996)6. Strategy is the “the set of consistent behaviors by which the organization establishes
for a time its place in its environment.” - Mintzberg (1998)
7. “A company’s strategy consists of the combination of competitive moves & business approaches that managers employ to please customers, compete successfully & achieve organizational objectives”
- Thompson & Strickland8. “Strategy is the direction & scope of an organization over the long term which
achieves its advantages for the organization through its configuration of resources within a challenging environment to meet the needs of market & stake holder’s expectations.”
- Johnson & Scholes
9. “Basically a strategy is a set of decision making rules for the guidance of organizational behavior.”
- Ansoff (1984)10. Strategy of an organization is its “theory of the business”.
- Peter Drucker
FEATURES
1. Strategy relates the firm to its environment2. Strategy is the right combination of factors3. Strategy is a combination of actions4. Strategy is forward looking with an orientation
towards the future5. Strategy may even involve contradictory action
DIFFERENCE BETWEEN OPERATIONAL MANAGEMENT & STRATEGIC MANAGEMENT
STRATEGIC MANGEMENT OPERATIONAL MANAGEMENTAmbiguity ComplexityNon- routine Routine
Organization- wide Fundamental Organization specific
Environment or Resource drivenExpectation driven
DIMENSIONS OF STRATEGIC DECISIONS
1. Strategic Issues require top management decisions2. Strategic Issues involve the allocation of large amounts of
company resources3. Strategic Issues are likely to have a significant impact on the
long term prosperity of the firm4. Strategic Issues are future oriented5. Strategic Issues usually have major multifunctional or multi
business consequences6. Strategic Issues necessitate considering factors in the firm’s
external environment7. Strategic Issues require readiness to make non-self-generative
decisions.
CHARACTERSTICS & FUNCTION OF STRATEGIES
STRATEGIES ARE1. Deliberate attempts by management to offset competitors actions
& thereby score over them2. Special plans to deal with competitors3. Over all plans to implement plans & policies4. To direct plan activities in most appropriate manner5. Involve related decisions for implementation of company
objectives & policies6. Devices to reduce business risk7. Determined in advance to enable timely decisions to accomplish
policies & objectives8. Established on foundations of uncertainty9. Act as guides to subordinates to control organizational behavior
DIFFERENT LEVEL OF STARTEGY
LEVELS
CORPORATE OFFICE
SBUA
SBUC
SBUB
FINANCE MKTG PRODN PERS INFO
CORPORATE
FUNCTIONAL - LEVEL
STRATECYSTRUCTURE
CORPORATE - LEVEL
SBU BUSINESS - LEVEL
FUNCTIONAL
CORPORATE STRATEGY
BUSINESS STRATEGIES
FUNCTIONAL STRATEGIES
Corporate Level Strategy is an overarching plan of action covering the various functions performed by different SBUs. The corporate plan while addressing the corporate goals would deal with the objectives of the company, allocation of resources between SBUs & co ordination of SBUs for optimal performance of the organization as a whole.
SBU- Level Strategy is a comprehensive plan providing specific objectives as laid down by the corporate level for the SBU, allocation of resources made available to the SBU among different functional areas & cooperation between them for making an optimal contribution to the corporate objectives.
DEFINATIONS OF STRATEGIC MANAGEMENT“A stream of decisions & actions which leads to the development of an effective
strategy or strategies to help achieve corporate objectives.”- GLUECK(1984)
“The process which deals with the fundamental organizational renewal & growth with the development of strategies, structures , & systems necessary to achieve such renewal & growth, & with the organizational systems needed to effectively manage the strategy formulation & implementation processes.”
- HOFER & OTHERS(1984)
“A systematic approach to a major & increasingly important responsibility of general management to position & relate the firm to its environment in a way that will assure its continued success & make it secure from surprises.”
- ANSOFF(1984)
“ The formulation & implementation of plans & carrying out of activities relating to the matters which are of vital, pervasive or continuing importance to the organization.”
- SHARPLIN(1985)
According to Arthur Thompson,“The term strategic management refers to the management
process of forming a strategic vision, setting objectives, crafting of a strategy, implementing, executing & then over time initiating whatever corrective adjustments in the vision, objectives, strategy & execution are deemed appropriate.”
According to Michael Porter,“ The core of general management is strategy which consists of
the following tasks:• Developing & communicating the company’s unique position• Making trade- off between incompatible activities, & • Creating a link between different activities to ensure they
relate to each other.”
ELEMENTS IN STRATEGIC MANAGEMENT PROCESS
1. ESTABLISHING HIERARCHY OF STRATEGIC INTENTa) creating & communicating a vision;b) designing a mission statement;c) defining the business;d) setting objectives;
2. FORMULATION OF STRATEGIESe) performing environment appraisal;f) doing organizational appraisal;g) considering corporate - level strategies;h) considering business - level strategies;i) undertaking strategic analysis;j) exercising strategic choice;k) formulating strategies;l) Preparing a strategic plan;
3. IMPLEMENTING STRATEGIESm) activating strategies;n) designing structures & systems;o) managing behavioral implementation;p) managing functional implementation;q) operationalising strategies;
4. PERFORMING STRATEGIC EVALUATION & CONTROLr) performing strategic evaluation;s) exercising strategic control; andt) reformulating strategies
COMPREHENSIVE MODEL OF SM PROCESSESTAB STRATEGIC INTENTVision, mission, business definition & objectives
FORMULATION OF STRATEGIESEnvironmental Organization Appraisal Appraisal
SWOT Analysis Corporate level strategiesBusiness level strategiesStrategic choiceStrategic plan
STRATEGY IMPLEMENTATION Project Procedural Resource allocation Structural Behavioral Functional & operational
STRATEGIC EVALUATION
STRATEGIC
CONTROL
WORKING MODEL OF STRATEGIC MANAGEMENT PROCESS
STRATEGIC INTENT
STRATEGYANALYSIS& CHOICE
STRATEGIC EVALUA-
TION
STRATEGICIMPLEME--NTATION
STRATEGICALTERNA-
-TIVES
SWOT ANALYSIS
STRATEGIC CONTROL
INDIVIDUALS / GROUPS INVOLVED IN SM
1. Board of Directors2. CEO3. Entrepreneurs4. Senior Management5. SBU- Level executives6. Corporate planning staff7. Consultants8. Middle – level managers9. Executive Assistant
ROLE OF A STRATEGIST
Roles performed by a Strategist
Forecaster
Sculptor Diplomat Guru
Jail Buster
STRUCTURE
STRATEGY
SHAREDVALUES
SKILLS
STAFF
STYLE
SYSTEMS
Mc KINSEY’s 7s
Advantages and Disadvantages of Strategic Management
A Costly Exercise
Sense of frustration among employees
Evading Responsibility
ADVANTAGES DISADVANTAGES
STRATEGIC MANAGEMENT
Financial Benefits
Problem Prevention
Increased Interactivity
Better employee Incentive
Reduced Gaps & over laps in Activities
Lesser reluctance
5 TYPES OF COGNITIVE BIASES
1. PRIOR HYPOTHESIS BIAS2. REPRESENTATIVENESS3. REASONING BY ANALOGY4. ESCALATING COMMITMENT5. ILLUSION OF CONTROL
DECISION MAKING PROCESSES TO COUNTER GROUPTHINK
DEVIL’S ADVOCACY DIALECTIC INQUIRY
EXPERT PLAN
DEVIL’S ADVOCATECRITICISES
FINAL PLAN
EXPERT PLAN #2 (COUNTER
THESIS)
EXPERT PLAN #1 (THESIS)
DEBATE (SYNTHESIS)
FINAL PLAN
12 Guidelines for Implementation of Strategy1. The Key tasks of the kinds of decisions required must be identified.
2. Responsibility for accomplishing key tasks must be clearly assigned to individuals or groups. The division of labour must permit / facilitate efficient performance of subtasks under some hierarchical allocation of authority to insure achievement.
3. Formal provisions for coordination of activities are made in different ways, e.g., through a hierarchy of supervision, project and committee organizations, task forces, and other ad hoc units, but without precluding spontaneous voluntary coordination.
4. Information systems adequate for coordinating divided functions must be designed and installed.
5. A special staff unit attached to the President’s (Chairman) office should be entrusted with arranging the tasks to be performed in a time sequence. While long – range plans may be in relatively general terms, shorter - range plans will often take the form of detailed budgets to meet the need to establish standards against which future performance can be judged.
6. Actual performance, as quantitatively reported in information system and qualitatively estimated through observation by supervisors and the judgement of customers, should be compared to budgeted performance and to standards in order to test achievement, budgeting process, and the adequacy of standards themselves.
7. Individuals and groups of individuals must be recruited and assigned to essential tasks in accordance with their specialist or supervisory skills. All the same, the assignment of task may be adjusted according to the available skills.
8. Individuals performance evaluated both quantitatively and qualitatively should be subjected to influences (constituting a pattern of incentives) which will help to make it effective in accomplishing organizational objectives.
9. Apart from universally appealing incentives such as adequate compensation and favorable organizational climate, special forms of recognition, financial and non- financial, should be designed to fit individual needs and unusual achievement.
10. In addition to financial and non – financial incentives / rewards to motivate voluntary individuals achievement, controls, both formal and informal, and penalties must be devised to contain non - functional activity and to enforce standards.
11. Provision for the continuing development of technical and managerial skills through on-the-job development supplemented by intermittent formal training is a high priority requirement.
12. Dynamic personal leadership is necessary for continued growth and improved achievement in any organization. The leadership style must be natural and also consistent with the requirement of strategy and membership.