Introduction to Strategic Management - Part 1.pptx

Introduction to Strategic Management

1. Introduction to Strategic Managment

2. Introduction – Strategy Strategy refers to the intentional means through which one seeks to achieve a set of objectives, guided by a particular vision and direction. Strategy can be defined in five ways – as a plan, ploy pattern, position and perspective and considers some of their inter-relationships (Mintzberg, 1987) These definitions given by Mintzberg are popularly referred to as the 5 Ps of Strategy.

3. Strategy as a Plan Strategy is a plan, some sort of consciously intended course of action, a guideline (or a set of guidelines) to deal with a situation. By this definition strategy has two essential characteristics They are made in advance to the actions to which they apply They are developed consciously and purposefully These points may be explicitly stated in documents called as plans, although this is not a necessary condition for ‘strategy as a plan ’

4. Strategy as a Ploy As plans strategies may be general or specific. The purpose/intention behind the plan is something that is required to be carefully analyzed. Hence, strategy can be a ploy too – a specific plan devised to outwit an opponent or a competitor. This definition is extremely dynamic in nature For example a company may expand to prevent the other from expanding. The intention is to prevent competition. Thus, any strategy devised for this purpose becomes a ploy.

5. Strategy as a Pattern Strategy as a pattern talks about resultant actions over a period of time. A pattern is a stream of actions. For example, a company that regularly markets very expensive products is using a “high end” strategy However, labelling strategies as plans or patterns will still seek one question – ‘Strategies about What?’. It can be answered by the following graphic

6. Strategy as a Position Strategy as a position talks about locating an organization in a particular environment For example, it reflects decisions to offer particular products or services in particular markets. This definition can be compatible with any of the other previous definitions.

7. Strategy as a Perspective Strategy as a perspective includes vision and direction It is used most commonly in the corporate A fifth definition suggests that Strategy is a concept, i.e. it exists in the mind of the concerned party/person and those who pursue it are influenced it

8. Evolution of Strategy The word “strategy” first came into use in discussions of military affairs in Europe during the 1770s. And prior to World War I, the term had a specifically military character. In the 1950s, when the response to environmental discontinuities became important, the concept of strategy entered into the business vocabulary. In the early days, the meaning of strategy was not clear. The dictionaries did not help, since following military usage they still defined strategy as ‘the science and the art of deploying forces for battle.’ (Ansoff et. al, 2018)

9. Evolution of Strategy At first, many managers and some academics questioned the usefulness f the new concept. Having witnessed half a century of miraculous performance by American industry without the benefit of strategy, they asked why it had suddenly become necessary, and what it could do for the firm (Ibid)

10. Characteristics of Strategy The process of strategy formulation results in no immediate action. Rather it sets the general directions in which the firm’s position will grow and develop. Therefore, strategy must next be used to generate strategic projects through a search process . The role of strategy in search is first to focus on areas defined by the strategy, and second, to filter out and uncover possibilities that are consistent/inconsistent with the strategy Thus, strategy becomes unnecessary whenever the historical dynamics of an organization will take it where it wants to go. This to say, when the search process is already focused on the preferred areas.

11. Characteristics of Strategy At the time of strategy formulation, it is not possible to enumerate all the project possibilities that will be uncovered. Therefore, strategy formulation must be based on highly aggregated, incomplete, and uncertain information about the various classes of alternatives. When search uncovers specific alternatives, the more precise, less aggregated information that becomes available may cast doubts on the wisdom of the original strategy choice. Thus, successful use of strategy requires strategic feedback

12. Characteristics of Strategy Since both strategy and objectives are used to filter projects, they appear similar. Yet they are distinct. Objectives are a set of higher-level decision rules and represent the ends that the firm is seeking to attain, while the strategy is the means to these ends. A strategy that is valid only under one set of objectives may lose its validity when the objectives of the organization are changed. Strategy and objectives are interchangeable; both at different points in time and at different levels of organization. Thus, some attributes of performance (such as market share) can be an objective of the firm at one time and its strategy at another. Further, as objectives and strategy are elaborated throughout an organization, a typical hierarchical relationship results: elements of strategy at a higher managerial level become objectives at a lower one.

13. Characteristics of Strategy Thus, strategy is an elusive and a somewhat abstract concept. Its formulation typically produces no immediate productive action in the firm. Above all, it is an expensive process both in terms of money and managerial time and effort. (Ibid)

14. Strategy – Levels Strategy can be formulated at three levels, namely, The corporate level, The business level and The functional level. In a single business scenario, the corporate and business level responsibilities are clubbed together and undertaken by a single group, that is, the top management, whereas in a multi business scenario, there are three fully operative levels

15. Strategy – Levels : Corporate Level At the corporate level, strategy is formulated for your organization as a whole. Corporate strategy deals with decisions related to various business areas in which the firm operates and competes. It deals with aligning the resource deployments across a diverse set of business areas, related or unrelated. Strategy formulation at this level involves integrating and managing the diverse businesses and realizing synergy at the corporate level. The top management team is responsible for formulating the corporate strategy.

16. Strategy – Levels : Corporate Level The corporate strategy reflects the path toward attaining the vision of your organization. For example, if a firm has four distinct lines of business operations, then the corporate level strategy will outline whether the organization should compete in or withdraw from each of these lines of businesses, and in which business unit, investments should be increased, in line with the vision of the firm

17. Strategy – Levels : Business Level At the business unit level, strategy is formulated to convert the corporate vision into reality. Business level strategies are formulated for specific strategic business units and relate to a distinct product-market area. It involves defining the competitive position of a strategic business unit. The business level strategy formulation is based upon the generic strategies of overall cost leadership, differentiation, and focus.

18. Strategy – Levels : Business Level The business level strategies are decided upon by the heads of strategic business units and their teams in light of the specific nature of the industry in which they operate. Continuing with the previous example the firm may choose overall cost leadership as a strategy to be pursued in its one business, differentiation in its second business, and focus in its third business.

19. Strategy – Levels : Functional Level At the functional level, strategy is formulated to realize the business unit level goals and objectives using the strengths and capabilities of your organization. Functional level strategies relate to the different functional areas which a strategic business unit has, such as marketing, production and operations, finance, and human resources. These strategies are formulated by the functional heads along with their teams and are aligned with the business level strategies. The strategies at the functional level involve setting up short-term functional objectives, the attainment of which will lead to the realization of the business level strategy.

20. Strategy – Levels : Functional Level The realization of the functional strategies in the form of quantifiable and measurable objectives will result in the achievement of business level strategies as well.

21. Role of Strategies in Decision Making

22. Role of Strategies in Decision Making Strategies are in line with marketing decisions Ther e is immense risk involved in strategic decisions They involve a lot of other considerations and contingencies It has implementation timelines It has to be modified to the competitors response It raises customer expectations

23. Role of Strategies in Decision Making Types of thinking 1. Mechanical Thinking It is based on the application of rational and logical procedures that are generated by the theory and verified by the practice. It applies scientifically developed analytical and analytical-synthetic procedures that managers engage in analytical processes. Using them, teams of professionals can develop credible and comprehensive solutions. However, the decision-making process is generally time consuming, tedious, therefore inflexible and not innovative.

24. Role of Strategies in Decision Making 2. Intuitive Thinking It is based on creativity and innovation but it relies more on the intuitive skills of manager. In the intuitive solving and decision-making, managers are not performing analyzes, or synthetic-analytical procedures, but their solutions appearing very mysteriously, in the way they emerge from their heads. Intuitive thinking is based on knowledge, experience, but also on innate features and capabilities of managers.

25. Role of Strategies in Decision Making 2. Intuitive Thinking Given that intuitive thinking does not require making analysis or application of time-consuming analysis and analytic-synthetic method, it is very fast and gives the flexibility to respond to emerging opportunities and threats. On the other hand, it does not focus on a comprehensive solution to the problem, but rather only on the center of gravity of the solution, and gives the opportunity to receive even unconventional and yet unapplied solutions.

26. Role of Strategies in Decision Making 3. Strategic Thinking This is the third type of thinking, which in principle differs from the two previous ones. But it takes over positive aspects from the prior types of thinking. Comparing the mechanic thinking, they have in common procedure that is based on the analysis and application of analytical and synthetic procedures. So the outcome of decision-making can be examined, reviewed and critically assessed. From intuitive thinking on the other hand, it takes a creative approach to creating solutions. This type of thinking is trying to reduce the weakness of mechanical thinking, the conservative approach and disregard for the changes occurring in the environment.

27. Role of Strategies in Decision Making 3. Strategic Thinking Strategic thinking is primarily thinking about the future. Mechanical thinking is also trying to predict the future, yet based only on the information from the past and present. Strategic thinking is looking forward, trying to predict the future and find in it the specificities how the future will be different from past and present.

28. Role of Strategies in Decision Making

29. Role of Strategies in Decision Making

30. Strategy - Scope Assessing Internal and External Environment Defining Goals and Objectives Formalizing and Executing Action Plans Monitoring and Adjusting the Plans

31. Strategy - Importance Planning Strengths and Weaknesses Skills and Knowledge Resource Allocation Environmental Scan

32. Introduction – Strategic Management Strategic management activity is concerned with establishing objectives and goals for the organization, and with maintaining a set of relationships between the organization and the environment which (a) enable it to pursue its objectives, (b) are consistent with the organizational capabilities, and (c) continue to be responsive to environmental demands. (Ibid)

33. Introduction – Strategic Management One end product of strategic management is a potential for future fulfillment of the organization’s objectives. Within the business firm, this consists of (a) the input to the firm: availability of financing, manpower, information, and ‘raw’ materials (b) at the output end: developed products and/or services, tested for their potential profitability; and (c) a set of social behavior rules that permit the organization to continue to meet its objectives. (Ibid)

34. Introduction – Strategic Management In addition to the future performance potential, another end product of strategic management is an internal structure and dynamics capable of continued responsiveness to changes in the external environment. In the business firm, this requires A managerial capability to sense and interpret environmental changes, coupled to a capability to conceive and guide strategic response and L ogistic capability to conceive, develop, test, and introduce new products and services. (Ibid)

35. Introduction – Strategic Management These respective capabilities are determined in part by the organizational architecture : Physical facilities, their capacities, and capabilities, and technology. Information processing and communication capacities and capabilities. Organizational tasks assigned to individuals and groups of individuals. Rewards and punishments for the performance of assigned tasks. Power structure and dynamics. Systems and procedures. Organizational culture, norms, values, and models of reality that guide organizational behavior . (Ibid)

36. Introduction – Strategic Management In part, the strategic capabilities of the organization are determined by the characteristics of the individuals within it and their Attitudes toward change. Risk-taking propensity. Cognitive problem-solving skills appropriate to strategic activities. Social problem-solving skills appropriate to bringing about organizational change. Work skills (e.g., product design and development, pilot manufacturing, and test marketing). Motivation to engage in strategic activities. (Ibid)

37. Introduction – Strategic Management The concerns of the strategic manager are the following To determine and bring about strategic change in the organization. To build an organizational architecture conducive to strategic change. To select and develop individuals (both workers and managers) motivated and capable of creating strategic change. (Ibid)

38. Strategic Management - Phases 1. Basic Financial Planning In the first phase the target is to meet the annual budget, operational functions like production, marketing, finance and human resources and emphasizing on the operational control. 2. Forecast-Based Planning During this phase, the primary concern is mainly on effective plans, environmental scanning, plan for the future and allocation of resources

39. Strategic Management - Phases 3. Externally-Oriented Planning In this phase notable developments include increasing response to markets and competition, complete situational analysis and assessment of competitive strength, evaluation of strategic alternatives and allocation of resources based on changing needs from time to time. 4. S trategic Management The focus shifts over time from meeting the budget to planning for the future, to thinking abstractly, to working to create desired future.

40. Strategic Management - Objectives To exploit and create new and different opportunities for tomorrow To provide the conceptual frameworks that will help a manager understand the key relationships among actions, context, and performance. To put an organisation into a competitive position. To sustain and improve that position by the deployment and acquisition of appropriate resources and by monitoring and responding to environmental changes. To monitor and respond to the demands of key stakeholders. To find, attract, and keep customers.

41. Strategic Management - Objectives To ensure that the company is meeting the needs and wants of its customers, which is a cornerstone in providing the quality product or service that customers really want. To sustain a competitive position. To utilize the company’s strengths and take full advantage of its competitor’s weaknesses. To understand the various concepts involved like strategy, policies, plans and programmes . To have knowledge about environment—how it affects the functioning of an organisation .

42. Strategic Management - Objectives To determine the mission, objectives and strategies of a firm and to visualize how the implementation of strategies can take place. To find the solutions of problems in real-life business. To develop analytical ability to identify threats and opportunities present in the environment. To develop the skills of strategic decision making. To develop a creative and innovative attitude and to think strategically

43. Strategic Management – Characteristics Top management involvement Requirement of large amounts of resources Affect the firms long-term prosperity Future-oriented Multi-functional or multi-business consequences Non-self-generative decisions

44. Strategic Management – Need It helps the firm to be more proactive than reactive. It provides the roadmap for the firm. It allows the firm to anticipate change and be prepared to manage it. It helps the firm to respond to environmental changes in a better way. It minimizes the chances of mistakes and unpleasant surprises. It provides clear objectives and direction for employees.

45. Strategic Management – Advantages 1. Financial Benefits Research indicates that organisations that engage in strategic management are more profitable and successful than those that do not. Businesses that followed strategic management concepts have shown significant improvements in sales, profitability and productivity compared to firms without systematic planning activities.

46. Strategic Management – Advantages 2. Non-Financial Benefits Enhanced awareness of external threats Improved understanding of competitors’ strategies Reduced resistance to change A clearer understanding of the performance-reward relationship Enhanced problem-prevention capabilities of an organisation Increased interaction among managers at all divisional and functional levels Increased order and discipline

47. Strategic Management – Limitations Limitation of Assumption Problem in Analyzing Environment Unrealistic Mission and Objectives Problem of Setting Target Lack of Commitment of Lower Level Problem of Resistance More theoretical in nature Problem of Internal Politics Problem of Traditional Management

48. References Mintzberg, H. (1987). The strategy concept I: Five Ps for strategy. California management review , 30 (1), 11-24. Ansoff, H. I., Kipley , D., Lewis, A. O., Helm-Stevens, R., & Ansoff, R. (2018). Implanting strategic management . Springer