overview of str.mgmt. unit-1

8/3/2019 Overview of Str.mgmt. Unit-1

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Course Instructor : B. G. BhattacharyaCh 1 - 1

Chapter 1Overview of Strategic Management

Kantipur Valley College

Lalitpur

Purbanchal UniversityNepal

STRATEGICMANAGEMENT

Course 703EMBA: 3 credit hours


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Strategic Management: Concept

Strategic management is a field that dealswith the major intended and emergentinitiatives taken by general managers onbehalf of owners, involving utilization ofresources, to enhance the performance of

firms in their external environments.


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Strategic Management: Concept

Strategic management entails specifyingthe organization's mission, vision andobjectives, developing policies and plans,often in terms of projects and programs,which are designed to achieve theseobjectives, and then allocating resources to

implement the policies and plans, projectsand programs.


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Art & science offormulating,

implementing, andevaluating,cross-functional decisions that

enable an organization to achieve its

objectives

Strategic Management Defined


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Strategic Management

In essence, the strategic planis acompanys game plan


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Strategic Management Characteristics

Strategic management focuses on building a solidunderlying structure to your business that willsubsequently be fleshed out through the combinedefforts of every individual you employ.

Strategic management hinges upon answering three keyquestions:

1. What are my businesss objectives?

2. What are the best ways to achieve those objectives?

3. What resources are required to make that happen?


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Answering the first question requires serious

thought about what your ultimate aims are forthe business.

What are you trying to make happen?

What are you attempting to facilitate or enable?

What is the best possible outcome your companycan aspire to?

The first key question:What are our business goals?


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Drilling down to uncover a companys core objectives

can have several phases:

Assessing the landscape within which the company willoperate, and formulating how the company sees its role withinthat landscape. This is commonly known as a missionstatement.

Establishing objectives to answer some of the unmet needs,taking both a long- and short-term view of what the companycan offer. This is commonly known as a vision statement.

Stipulating the goals the company has for itself, both in termsof financial and strategic objectives.


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The second key question:How best can we reach our goals?

Phase two of successful strategic management is formulating aplan by which the company can accomplish what it sets out to do.

Within this phase, a chain of command should be put in place,pairing individuals with the right skills, knowledge, and experiencewith the businesss needs and objectives.

Responsibilities for processes and tasks should be distributedacross the full chain of command, delegating work to teams andindividuals so that the companys goals can be attained through

the combined efforts of all employees.


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The third key question:How do we allocate our resources?

Finally, strategic management entails allocating the right

amount of resources to the different parts of your businessso that those assigned to particular goals have what theyneed to meet their objectives.

This ranges from providing your workers with the right

supplies to enacting systems by which employees receivethe necessary training, all work processes are tested, and allinformation and data generated is documented.


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Mission-driven pursuit of specified resultsmore than one year out

Key Terms associated with StrategicManagement

Long-term Objectives


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Short-term milestones that firms must achieveto attain long-term objectives


Annual Objectives


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Means by which annual objectives will be

achieved


Policies


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Means by which long-term objectives areachieved


Strategies


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Key Terms

Geographic expansion

Diversification

Acquisition

Market penetration

Retrenchment

Liquidation

Joint venture

Strategies: Some examples


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Largely beyond the control of a singleorganization


Opportunities and Threats (External)


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Controllable activities performed especiallywell or poorly


Strengths & Weaknesses (Internal)


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Strategic Management achieves a firms

success through integration:

Management

MIS

Production/OperationsFinance/Accounting

Marketing

Research & Development


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Strategic Management Process

Components of Strategic Management Process


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Information Collection

Environment Scanning

Information Scrutinization

Analyzing internal /external factors

Provide strategical information

Continuous Surrounding Evaluation

Plan and policy improvement


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EnvironmentScanning

The initial step in St. Mgmt.

Process of collecting,scrutinizing and providinginformation for strategic

purposes It analyzes the internal and

external factors influencingan organization

Management evaluates theenvironment analysis on acontinuous basis


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Issues in StrategyFormulation

New business opportunities

Businesses to abandon

Allocation of resources

Expansion or diversification

International markets

Mergers or joint ventures

Avoidance of hostile takeover


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Strategy Formulation


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Strategy Implementation

Annual Objectives

Policies

Employee Motivation

Resource Allocation


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StrategyImplementation

Action Stage of StrategicManagement

Most difficult stage

Mobilization of employeesand managers

Interpersonal skills critical

Consensus on goal pursuit


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Strategy Evaluation

Internal Review

External Review

Performance Metrics

Corrective Actions


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StrategyEvaluation

Final Stage of StrategicManagement

Subject to future modification

Todays success no guaranteeof future success

New & different problems

Complacency leads to demise


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Dynamic & Continuous

More formal in larger organizations


The process by which managers make a choiceof a set of strategies for the organization that willenable it to achieve better performance.


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Internal analysis - It's always important to analyzeorganization's internal operational process to identify strengthsand weaknesses. There is no way to success without knowinginternal sources.

Strategic formulation - Select the ways or strategies to buildon the organization's strengths and correct the weaknesses inorder to take advantage of external opportunities and counterexternal threats.

Result analysis and strategy control - The last point is toimplement those selected ways and strategies to reach yourmission and goals. At the same time, to control the processwhat the organization has implemented and analyze the result.


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Peter Drucker: --Think through the

overall mission of a business. Askthe key question: What is ourBusiness?

Prime Task of Strategic Management


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The strategic management processattempts to organize quantitative andqualitative information under conditions ofuncertainty

Integrating INTUITIONand ANALYSIS


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Intuition is based on: Past experiences Judgment Feelings

Intuition is useful for decision making in: Conditions of great uncertainty

Conditions with little precedent

Integrating INTUITIONand ANALYSIS


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Involve Management at all levels

Intuition & Judgment

Influence all Analyses

Integrating Intuition& Analysis


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Analytical Thinking

Integrating Intuition& Analysis

Intuitive Thinking


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Organizations must monitorevents:

On-going process

Internal and external events

Timely changes

Adapting to Change


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Anything that a firm does especially

well compared to rival firms

Strategic Management is Gaining andMaintaining Competitive Advantage


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Course Instructor : B. G. Bhattacharya

Ch 1 - 40

1. Adapting to change in external trends,

internal capabilities and resources

Achieving Sustained CompetitiveAdvantage

2. Effectively formulating, implementing &evaluating strategies


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Ch 1 - 41

Rate & magnitude of changeincreasing dramatically

Adapting to Change

E-commerce

Demographics

Technology


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Ch 1 - 42

Effective Adaptation

Adapting to Change

Requires long-term focus


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Ch 1 - 43

What kind of business shouldwe become?

Are we in the right fields Are there new competitors? What strategies should we

pursue?

How are our customerschanging?

Adapting to Change Key StrategicManagement Questions


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Ch 1 - 44

Benefits of Strategic Management

Proactive in shaping firms future

Initiate and influence firms activities Formulate better strategies (plans/ policies)

Systematic, logical, rational


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Ch 1 - 45


Financial Benefits

Improvement in sales

Improvement in profitability

Productivity improvement


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Ch 1 - 46


Non-Financial Benefits

Improved understanding of competitors strategies

Enhanced awareness of threats

Reduced resistance to change

Enhanced problem-prevention capabilities


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Ch 1 - 47

Benefits of Strategic Management(Greenley)

1. Identification of Opportunities

2. Objective view of management problems

3. Improved coordination & control

4. Minimizes adverse conditions & changes

5. Decisions that better support objectives


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Ch 1 - 48


6. Effective allocation of time & resources

7. Internal communication among personnel

8. Integration of individual behaviors

9. Clarify individual responsibilities

10. Encourage forward thinking


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Copyright 2007 Prentice Hall

Ch 1 -49


11. Encourages favorable attitude towardchange

12. Provides discipline and formality to themanagement of the business


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Ch 1 - 50

Why Some Firms Do No StrategicPlanning (Risks involved)

Poor reward structures

Fire-fighting

Waste of time

Too expensive

LazinessContent with success


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Ch 1 - 51

Why Some Firms Do No StrategicPlanning (Risks involved)

Fear of failure

Overconfidence

Prior bad experience

Self-interest

Fear of the unknownSuspicion


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Ch 1 - 52

Deliberate, emergent, imposed, andrealized strategies


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Ch 1 - 53


Deliberate strategy

A strategy conceived by senior managers as aplanned response to the challenges confrontingan organization. Often the result of asystematic analysis of the organizations

environment and resources.


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Ch 1 - 54


Emergent strategy

A strategy that emerges from lower down the

organization without direct seniormanagement intervention.


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Ch 1 - 55


Imposed strategy

A strategy that an organizations managers

would not otherwise have chosen, but isforced on them.


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Ch 1 - 56


Realized strategy

The strategy the organization actually endsup implementing. It may be deliberate,emergent or imposed.


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Ch 1 - 57

Key Strategic Actions

Balanced Scorecard Framework used to verify that the firm has

established both strategic and financial controlsto assess its performance

Prevents overemphasis of financial controls atthe expense of strategic controls

Four perspectives of balanced scorecard

Financial Customer

Internal business processes

Learning and growth


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Ch 1 - 58


Customer

Financial Cash flow

Return on equity Return on assets

Assessment of ability to anticipatecustomer needs

Effectiveness of customer service needs Percentage of repeat business Quality of communications with customers

BalancedScorecard


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Ch 1 - 59


Learning

andGrowth

Improvements in innovation ability

Number of new products compared tocompetitors Increases in employees skills

Internal

BusinessProcesses

Asset utilization improvements

Improvements in employee morale Changes in turnover rates

BalancedScorecard

Comprehensive Strategic Mgmt Model


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Ch 1 -60

Comprehensive Strategic Mgmt. Model

ExternalAudit

InternalAudit

Long-TermObjectives

Generate,

Evaluate,SelectStrategies

ImplementStrategies:Mgmt Issues

Implement

Strategies:Marketing,Fin/Acct,R&D, CIS

Measure &EvaluatePerformance

Vision&

Mission


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Ch 1 - 61

Key Persons

Various Job Titles:

Chief Executive Officer (CEO)Chief Strategy Officer (CSO)President

OwnerBoard ChairExecutive Director

Strategists Firms success/failure


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Ch 1 - 62

Key Persons

Strategists Characteristics expected

Tolerance for ambiguity

Commitment to the firm and its desiredstrategic outcomes

Interpersonal skills

Aspiration level

Degree of self-confidence


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Ch 1 - 63

Top Management Teams

Composed of the key managers who areresponsible for selecting and implementing

the firms strategies.

A heterogeneous top management team:

Has varied expertise and knowledge

Can draw on multiple perspectives

Will evaluate alternative strategies

Builds consensus


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Course Instructor : B. G. Bhattacharya Ch 1 - 64

CEO and Top Management Team

Higher performance is achieved when boardof directors are more directly involved inshaping strategic direction.

A powerful CEO may:Appoint sympathetic outside board members

Have inside board members who report to the CEO

Have significant control over the boards actionsMay also hold the position of chairman of the board

(CEO duality)


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CEO and Top Management Team

Duality often relates to poor performanceand slow response to change

CEOs of long tenure can also wield substantial

power CEOs can gain so much power that they are virtually

independent of oversight by the board of directors

The most effective forms of governanceshare power and influence among the CEOand board of directors


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Managerial Labor Market

Organizations select managers and strategicleaders from two types of managerial labormarkets:

Internal managerial labor market: advancementopportunities related to managerial positions within afirm

External managerial labor market: career

opportunities for managers in organizations otherthan the one for which they currently work


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Advantages of internal managerial labormarket include:

Experience with the firm and industryenvironment

Familiarity with company products, markets,technologies, and operating procedures

Produces lower turnover among existingpersonnel


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Advantages of the external manageriallabor market include:

Long tenured insiders may be stale in the

saddle

Outsiders may bring fresh perspectives



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Effects of CEO Succession and Top

Management Team Composition on Strategy

Exercise of Effective Strategic Leadership


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Exercise of Effective Strategic Leadership

Three levels of strategy


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Corporate Level Strategy

Corporate strategy refers to the overarchingstrategy of the diversified firm. Such a corporate

strategy answers the questions of "whichbusinesses should we be in?" and "how does beingin these businesses create synergy and/or add tothe competitive advantage of the corporation as a

whole?"



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Business Level Strategy

Business strategy refers to the aggregatedstrategies of single business firm or a strategic

business unit in a diversified corporation. A firmmust formulate a business strategy thatincorporates either cost leadership, differentiation,or focus to achieve a sustainable competitive

advantage and long-term success.



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Functional Level Strategy

Functional strategies include marketingstrategies, new product development strategies,

human resource strategies, financial strategies,legal strategies, supply-chain strategies, andinformation technology management strategies.The emphasis is on short and medium term plans

and is limited to the domain of each departmentsfunctional responsibility.

Limitations of Strategic Mgmt


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Limitations of Strategic Mgmt.

1) Time consuming

2) Ignorance of other managerialfunctions

3) Unsatisfaction in employees

4) Depression due to failure intarget

5) Protest of employees

6) Demand for more rewardsand facilities

7) Dependability

8) Non-practical planning

9) Changes in technical factors

10) It gives only a guidance

11) Changes in the attitude ofemployees

12) Adverse attitude of tradeunions

13) Political pressure


Thirteen drawbacks of Strategic Management


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ThankYou

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