Evolution of strategic management I.pptx

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1. Concept of Strategic Management The origin of business policy can be retraced to 1911, when Harvard Business School introduced an integrative course in management aimed at the creation of general management capability. Business policy as defined by Christensen and others, is the study of the function and responsibilities of senior management, the crucial problems that affect success in the total enterprise and the decisions that determine tha direction of the organization and shape its future.

2. Concept of strategy A plan or course of action or a set of decision rules making a pattern or creating a common thread: A pattern or common threat related to the organization’s activities which are derived from the policies objectives and goals. Concerned with the resources necessary for implementing a plan or following a course of action;

3. Strategic management Strategic management is defined as the dynamic process of formulation , implementation, evaluation, and control of strategies to realize the organization’s strategic intent. It is not one time, static, or mechanistic process but it is the dynamic process. Being dynamic process strategic management is a continual, evolving, iterative process.

4. Evolution of strategic management Policy stage Strategic` planning stage Strategic management stage Global strategic mgmt stage

5. Characteristics of strategic decisions Strategic decisions are long-term decisions . These are considered where The future planning is concerned . Strategic decisions are taken in Accordance with organizational mission and vision . These are related to overall Counter planning of all Organization . These deal with organizational Growth.

6. Approaches to Strategic Decision Everything you need to know about the different approaches to strategic decision making. Strategic decision making is the core of strategic management. Therefore, it is desirable to understand the nature of strategic decision making. Strategic decision is a major choice of an action concerning committing of resources with a view to achieve organizational objectives. Strategic decision-making process is so strategic that each firm has its own approaches to these strategic decision-making. There were many alternative approaches have come into practice because each firm is unique or strategic.

7. Rational-Analytical Approach: Rational-analytical approach assumes that the decision maker is a ‘unique actor who behaves intelligently and rationally’. He is fully aware of all available feasible alternatives and considers all the alternatives as well as the consequences and chooses the alternative that secures the maximum gain. Most managers like to think of themselves as rational decision-makers. And indeed, many experts argue that managers should try to be as rational as possible in making decisions. It rests on the assumption that managers are logical and rational and they make decisions that are in the best interests of the organization.

8. (a) Decision makers have complete information about the decision situation and possible alternatives. (b) They can effectively eliminate uncertainty to achieve a decision condition of certainty. (c) They evaluate all aspects of the decision situation logically and rationally. This approach helps keep the decision maker focused on facts and logic and help guard against inappropriate assumptions and pitfalls. Though this approach prescribes a rational, conscious, systematic, and analytical way, yet decisions are often made with little consideration for logic and rationality.

9. The decision maker is often not a unique actor but part of a multiparty decision situation. Decision makers are not rational enough or informed enough to consider all alternatives or know all the consequences. And information is costly. They make decisions with more than a maximization of objectives but tend to “satisfice” i.e. make a decision expected to yield a satisfactory, as opposed to “optimal” outcome. Besides, the objectives may change.

10. Relational approach to decision making follows the following steps: ( i ) Recognize the need for a decision; (ii) Establish, rank and weight criteria; (iii) Gather available information and data; (iv) Identify possible alternatives; (v) Evaluate each alternative with respect to all the criteria; and (vi) Select the best alternative.

11. Intuitive-Emotional Intuition is an innate belief about something without conscious consideration. Intuitive- emotional approach is opposed to rational decision-making. Managers sometimes decide to do something because it feels “right”. This feeling is not arbitrary but based on habit or experience, gut feeling, reflective thinking, and instinct, using the unconscious mental processes. An inner sense or emotion may help managers make an occasional decision without going through a full- blown rational-sequence of steps. Intuitive decision maker considers a number of alternatives and options.

12. Proponents of this approach point out that, in many cases, judgment may lead to “better” decisions than “optimizing” techniques. In fact, the timing of when to implement a decision based on the analysis may require an intuitive feel for what the data are telling you. In many cases, judgment might be preferable to relying on the analysis. Of course, all managers but most especially inexperienced, should be careful not to rely too heavily on intuition.

13. Political-Behavioral Approach This approach suggests that real decision makers must consider a variety of pressures from other people who are affected by their decisions. An organization interacts with different stakeholders in interdependent exchange relationships. A stakeholder is any group or individual who can affect or is affected by the achievement of an organization’s purpose. Unions exchange labour for decent wages and job security. Customers exchange money for products and services. Owners exchange capital for expressed returns on investment. Suppliers exchange inputs for money and on-going business. Governments exchange protection and economic security for taxes.

14. Therefore , decision makers try their best to meet the demands of the various stakeholders. This mode of decision-making suggests that the organization in which decision maker works limits the choices available. Decisions are made when the coalitions involved in the process agree to find a solution by mutual adjustment and negotiation in the way decisions have been made in the past. The decision maker must consider the political implementation of the decision outcome.

15. A Satisfying Approach There are limits to human rationality. Therefore, an individual must take decisions based on limited and incomplete knowledge. In view of this, the individual decision-maker cannot optimize but only satisfy. Optimizing means choosing the best possible alternative. Satisfy means choosing the first alternative that meets the decision-makers minimum standard of satisfaction. In the rational-analytical approach, the decision-maker is intelligent and rational. If the decision-maker is satisfied that an acceptable alternative has been found, it is selected otherwise, and the decision-maker searches for an additional alternative.

16. “Satisficing” suggests that rather than conducting an exhaustive search for the best possible alternative, decision makers tend to search only until they identify an alternative that meets some minimum standard of sufficiency. A manager looking for a site for a new plant, for example, may select the first site he find that meets basic requirements for transportation, utilities, and price, even though further search might yield a better location. People may satisfice for a variety of reasons. Managers may simply be unwilling to ignore their own motives and therefore may not be able to continue searching after a minimally acceptable alternative is identified. The decision maker may be unable to weigh and evaluate large number of alternatives and criteria. Also subjective and personal considerations often interfere with decision situations.

17. Because of the inherent imperfection of information, bounded rationality, and satisficing, the decisions made by a manager may or may not actually be in the best interests of the organization. The above approaches have their own significance, yet the human being is a mix of the rational and the emotional. The environment is a mixture of the analysable and of chaotic change and pressures. Strategic management decisions are, therefore, made in a typically human way i.e. using the rational, conscious analysis and intuitive, unconscious “gut” in light of political realities.

18. Components of strategic management Strategic` planning Strategic implementation Strategic control feed back

19. Strategic planning: Environmental scanning Strategy formulation Corporate level strategy Business level strategy Functional level strategy Strategic implementation Structure design Resource planning Management system Strategic control feedback

20. Strategic management process Establishment of strategic intent Strategic evaluation Formulation of strategies Implementation of strategies Strategic control

21. Elements of strategic management process Establishing the hierarchy of the strategic intent Creating and communicating a vision Designing a mission statement Defining the business Adopting the business model Setting objectives Formulation of strategies Performing environmental appraisal Doing organizational appraisal Formulating corporate-level strategies Formulating business level strategies

22. Undertaking strategic analysis Exercising strategic choice Preparing strategic plan Implementation of strategies Activating strategies Designing the structure systems and processes Managing functional implementation Operationalizing strategies Performing strategic evaluation and control Performing strategic evaluation Exercising strategic control Reformulating strategies

23. Strategic plan Azher Kazmi , “strategic planning results in actions designed to implement a strategy” Characteristic of strategic planning Future oriented Environment Opportunities Core competencies Portfolio Integration Strategic decisions output

24. Process of strategic plan Define organization’s : Vision :where? Mission: what? Objectives: why? Strategies : how? SWOT analysis Analysis of external environment Analysis of internal environment Match strength with opportunities Finalize strategy

25. Strategic planning option Mission: fred david , ‘a mission statement reveals the long-term vision of an organization in terms of what it wants to be and whom it wants to serve’ Objectives: ‘objectives are the ends which the organization seeks to achieve through the existence and operation’. Jauch and glueek Build on strength Exploit opportunities Minimize weaknesses Avoid threats

26. Importance of strategic management Competitive strength Focus long term objectives Maintain strategic fit Identify strategic advantages Resource management Grab business opportunity Face future uncertainty Diversify risk Change management Effective control

27. Strategic intent Vision: Vision is a description of something (an organization, a corporate culture , a business, a technology, an activity) in the future. Kottler Vision is the statement that presents a form’s strategic intent designed to focus the energies and resources of the company on achieving a desirable future. Miller and Dess . Features of vision Foundation Directional Flexible Focused Desirable Feasible Unique idea Easy communicative

28. Mission An organization’s mission is the purpose or reason for the organizations existence Wheelen et. Al. Mission statements are enduring statements of purpose that distinguish one business from other similar firms. David and David Features of mission Feasible Precise Clear Motivating Distinctive Indicate strategy Achievable Accomplish objectives

29. objectives Characteristics of objectives Specific Measurable Acceptable Realistic Time-bound

30. Paradigm shift in strategic management Change in industry boundary Shift in mindset Change in national boundaries Hyper competition Enlarged opportunities Product design, quality and service Heavy risk of globalization Laws and regulations Technology innovation Social obligation.

31. Role of CEO in Strategic Management Role in strategy formulation Show strategic direction Resource planning Decision making Promote acceptable strategy Role in strategy implementation Organizing activities Resource management Sharing information Managing conflict Sustaining ethical value Managing change

32. Cont.. Role in strategy evaluation and control Monitoring activities Evaluation of performance Strategic control

33. Levels of strategy: Corporate level strategy: vision, mission and strategy Business level strategy: objectives for each business units Functional level strategy: targets of each functional level or objectives of functional level Individual level: individual level objectives