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Evolution The genesis of strategic management and

business policy Evolution based on management practices Historical perspective Ad-hoc policy Planned policy formulation Strategy Paradigm Strategic Management

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The concept of strategy plan or course of action or a set of decision rules making a

pattern or creating a common thread; the pattern or common thread related to the organisation's

activities which are derived from the policies, objectives and goals;

related to pursuing those activities which move an organisation from its current position to a desired future state;

concerned with the resources necessary for implementing a plan or following a course of action; and

It is forward looking; it has orientation towards future the planned or actual coordination of the firm's major goals and

actions, in time and space that continuously co-align the firm with its environment.

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Levels at which strategy operates

Corporate Office

SBUA

SBUB

Finance Marketing Operations HRM Information

LEVELS OF MANAGEMENT LEVELS OF STRATEGY

TOP CORPORATE-LEVEL

SBU BUSINESS-LEVEL

FUNCTIONAL

SBUC

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Strategic Management defined Strategic management is defined as the dynamic

process of formulation, implementation, evaluation and control of strategies to realise the organization’s strategic intent.

Strategic Management is defined as the set of decisions and actions in formulation and implementation of strategies designed to achieve the objectives of an organization.

Features Strategic management is basically a process. The various steps of strategic management

may be formulation, environmental appraisal, organizational appraisal, implementation and evaluation.

The focus of strategic management is on relating the organization to its external environment.

Strategic management is basically top management function.

Benefits Financial Benefits Offsetting uncertainty Clarity in direction Increased Organizational

effectiveness Personnel satisfactions

Limitations Complex and Dynamic Environment (high

level of technological and social changes, wide variation and inconsistency in govt. policies towards business)

Rigidity (strategies are selected and implemented after taking various parameters and variables into consideration)

Inadequate appreciation of strategic management (managers use short-term outdated evaluation techniques)

limitations in Implementation (The internal conflicts among departments, individuals or organizational and personal values can’t be solved by SM)

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Strategic decision-making Objectives to be achieved are

determined; Alternative ways of achieving the

objectives are identified; Each alternative is evaluated in terms

of its objective-achieving ability; and The best alternative is chosen.

Strategic Planning&

Strategic Management

Strategic ManagementStrategic Management is concerned with:

• making decisions about an organization’s future direction for growth, renewal and transformation and

• implementing those policies.• The strategic management process can be

broken into two phases – strategic planning and strategy implementation.

Strategic PlanningStrategic Planning is making decisions about:• Determining the organization’s mission;

• Formulating policies to guide the organization in establishing objectives, choosing a strategy, and implementing the chosen strategy;

• Establishing long-range and short-range objectives to achieve the organization’s mission;

• Determining the strategies that are to be used in achieving the organization’s mission.

Strategic Planning Systematic determination of what to do in the future

in order to fulfill the organization’s mission and achieve its objectives.

The basic purpose of strategic planning is to protect the organization against environmental threats and hence ensure its long term survival.

Strategic Planning Process Recognition of the need to plan Analysis of the situation- (This may cover aspects such as

organization’s strengths and weaknesses, environmental constraints and resource allocations)

Determination of possible alternative courses of action Selection of the best or optimum alternative Implementation of the plan (This may involve possible

structural change, detailed allocation of tasks and resources, coordination of activities, overcoming resistance to change etc.)

Monitoring the results ( This may involve changes to the plans in case actual outcomes vary significantly from planned outcomes.)

Types of Planning Systems Formal and informal Planning

procedures Operational planning Strategic planning and Strategic

management Contingency Planning Top-down/bottom-up planning

Formal and informal Planning procedures

Formal planning establish set rules for determining plans.

It covers such areas as organization’s objectives, plans for converting objectives and combating threats, risk projections, evaluation criteria, forecasts task allocation etc.

Informal planning is flexible and user friendly. Large amount of information remains in the hands of individual executives.

Operational Planning It is concerned with managing the day to

day affairs of the organization. It is basically lower level planning and is

performed by middle level executives and supervisors.

Apart from focusing on functional plans, it is concerned with scheduling, internal coordination, budgets and recruitment.

Strategic planning & Strategic management It involves assessment and analysis of an

organization’s external environment and its internal capabilities with a view to conceiving its mission, setting objectives and framing policies, plans and procedures for implementation.

Contingency planning Organizations prepare contingency plans to cater

for extraordinary situations. These contingent situations may be caused by problems such as strike, adverse government legislation, machine breakdowns, major fires, loss of major customer or supplier etc.

Top-down/bottom-up planning Top-down planning involves strict supervision of the

entire planning process by the top management of the firm. This approach has two alternate forms. The top management may either determine and hand down the plans to lower levels without their participation or it may initially express broad guidelines or expectations and subsequently issue concrete action plans.

In bottom-up approach the departments formulate their own plans and the corporate plan is thereafter built on the basis of the recommendations of these units

Planning Techniques Gap analysis Benchmarking Performance indicators

a) Gap analysis It is a formal assessment of evaluation of

the strategy currently being implemented. The need for assessment arises when a new strategy or change to the existing strategy is proposed.

Existing Strategy

Desired outcome (ideal)

Expected outcome (anticipated)

A

B

)))))

)

b) Benchmarking The process involves the setting up of

benchmarks or standards to assess an organization’s own performance and at the same time compare it with that of its competitors.

Types: Internal, External and Functional

c) Performance indicators These are measures of an organization’s

performance and can be either result-oriented or effort-oriented.

Eg: Sales volumes and revenues Number of prospective customers

contacted

ORGANIZATION PLANAn overview of the total corporate plan. The strategic plan The functional plans Contingency plans Divisional and departmental plans Project plans Budgets Resource mobilization Targets and definite time frames for achieving each

target

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Four phases in strategic management

Formulation of strategies

Implementation of strategies

Strategic evaluation

Strategic control

Establishment of strategic intent

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Comprehensive model of strategic management

Strategy Formulation

Environmental Organisational Appraisal Appraisal

SWOT AnalysisCorporate-level StrategiesBusiness-level Strategies

Strategic analysis and choiceStrategic plan

Strategic Intent

VisionMission

Business definitionBusiness model

Objectives

Strategy Implementation

ProjectProcedural

Resource allocationStructural

BehaviouralFunctional & Operational

Strategic control

Strategic Evaluation

FINANCIAL PERFORMANCE

CONTROL

SOCIAL PERFORMANCE

CONTROL