Strategic Management

Strategic Management as a part of business.

1. Strategic Management Amit Bhatta Joseph Schoo l of Busimess studies (SHUATS)

2. Strategic Management “Without a strategy the organization is like a ship without a rudder, going around in circles.” - Joel Ross and Michael Kami 2

3. Learning Outcomes Meaning & definition Dimensions of Strategic Decisions Level of Strategy Characteristics of Strategic Management Decision Formality in Strategic Management Value of Strategic Management Role of chief executive in Strategic Management

4. STRATEGIC MANAGEMENT Strategy: It is a plan or pattern of action set to achieve long term objective of organizations Action occur in a sequence It is about future action based on forecasts, guesses and anticipated change both in the environment and it also actively considers what the competitors will do, or have done. It is a plan of action, about change, doing a co-ordinated set of things differently expecting that it will ensure competitive advantage and organizational success.

5. Strategy ... Strategies are the means by which long term objectives will be achieved. David Consists of competitive moves & business approaches to produce successful performance Management’s “game plan” for Running the business Strengthening firm’s competitive position Satisfying customers Achieving performance targets

6. Definition According to David (2005): ‘Strategies are the means by which long-term objectives will be achieved.’ According to Wheelen & hunger (202): ‘A strategy of a corporation forms a comprehensive master plan stating how the corporation will achieve its mission and objectives. It maximises competitive advantage and minimizes competitive disadvantage.’

7. Importance of Strategy To defeat new entrant To maximize earning To minimize suppliers pressure To counter substitute products through quality or product differentiation To acquire a strategic position

8. Strategic Thinking Three Important Strategic Questions 1. Where are we now? 2. Where do we want to go? 3. How will we get there?

9. Characteristic of strategy Long term Action plan Competitive advantages Stakeholders’ expectation Strategic Fit Based on strategic Decision

10. Strategic Management It is about identification and description of the strategies Analysis of environment It is predictable planning It is applicable in both small & large organization It is a process of: Formulating strategy Implementing strategy Evaluating strategy

11. Strategic Management... It refers to the managerial process of forming a vision, setting objectives, crafting a strategy, implementing the strategy & evaluation of the same for corrective action/adjustments for achieving corporate/business objectives Art & science of formulating , implementing , and evaluating , cross-functional decisions that enable an organization to achieve its objectives.

12. Definition of Strategic Management According to David (2005)- ‘Strategic Management can be defined as the art and science of formulating, implementing and evaluating cross-functional decisions that enable an organization to achieve its objectives.’ According to Wheelen and hunger (2002) ‘Strategic Management is a set of managerial decisions and actions that determines the long-term performance of a corporation.’

13. Process of strategic management Formulation Strategic formulation refers to the process of choosing the most appropriate course of action the realization of organizational goals and objectives and thereby achieving the organizational vision. Implementation Implementation is the process that turns strategies and plans into actions in order to accomplish strategic objective and goals. Evaluation It is final phase of strategic management. The purpose of strategic evaluation is to evaluate the effectiveness of strategy in achieving organizational objectives.

14. Strategic Management Model Strategic Management Model Strategy Formulation Strategy Implementation Evaluation and Control Mission Objectives Strategies Policies Feedback/Learning Environmental Scanning Societal Environment General Forces Task Environment Industry Analysis Structure Chain of Command Resources Assets, Skills Competencies, Knowledge Culture Beliefs, Expectations, Values Reason for existence What results to accomplish by when Plan to achieve the mission & objectives Broad guidelines for decision making Programs Activities needed to accomplish a plan Budgets Cost of the programs Procedures Sequence of steps needed to do the job Process to monitor performance and take corrective action Performance External Internal

15. Strategy Formulation Strategy Selection Vision & Mission Internal Strengths & Weaknesses Long-Term Objectives Alternative Strategies External Opportunities & Threats

16. Strategy Implementation Annual Objectives Policies Resource Allocation Employee Motivation

17. Strategy Evaluation Internal Review External Review Corrective Actions Performance Metrics

18. The Five Tasks of Strategic Management Develop strategic vision & mission Setting objectives Crafting strategies to achieve objective Implementing the strategies Evaluating & correcting the strategies

19. Dimensions of Strategic Decisions 1 . Strategic issues require top-management decisions Strategic decisions overarch several areas of a firm’s operations Usually only top management has the perspective needed to understand their broad implications Usually only top managers have the power to authorize necessary resource allocations

20. Dimensions of Strategic Decisions 2. Strategic issues require large amounts of the firm’s resources They involve substantial allocations of people, physical assets, and money Strategic decisions commit the firm to actions over an extended period In highly competitive firms, achieving and maintaining customer satisfaction frequently involves commitment from every facet of the firm

21. Dimensions of Strategic Decisions 3. Strategic issues often affect the firm’s long-term prosperity Strategic decisions commit the firm for a long time, typically 5 years; however the impact lasts much longer Once a firm has committed itself to a strategy, its image and competitive advantages are usually tied to that strategy Firms become known for what they do and where they compete. Shifting away from that can jeopardize their previous gains.

22. Dimensions of Strategic Decisions 4. Strategic issues are future-oriented They are based on what managers forecast, rather than what they know Emphasis is on the development of solid projections that will enable a firm to seek the most promising strategic options A firm will succeed only if it takes a proactive (anticipatory) stance toward change

23. Dimensions of Strategic Decisions 5. Strategic issues usually have multifunctional or multi-business consequences. Strategic decisions have complex implications for most areas of the firm Decisions about customer mix, competitive emphasis, or organizational structure involve a number of the firm’s SBUs, divisions, or program units

24. Dimensions of Strategic Decisions 6. Strategic issues require considering the firm’s external environment All businesses exist in an open system. They affect and are affected by external conditions that are largely beyond their control Successful positioning requires that strategic managers look beyond operations and consider what are the other relevant areas likely to impact its strategic moves.

25. Dimension of Strategic Decision 1. Strategic issues require top management decisions 2. Strategic issues require allocation of large amounts of company resources 3. Strategic issues often affect the firm’s long term prosperity 4. Strategic issue are future oriented 5. Strategic issue usually have multifunctional or multi-business consequences 6. Strategic issues require considering the firm’s external environment

26. Level of Strategy Corporate level Growth/Expansion Strategy Stability strategy Retrenchment Strategy Combination Strategy Business Level Cost Leadership Strategy Differentiation Strategy Focus Strategy Functional Level R & D Strategy Operations strategy Financial strategy Marketing Strategy Human Resource strategy

27. Level of Strategy Single Business Firms Corporate/ Business Level Functional Level Corporate/Business Level R & D Strategies Financial Accounting Strategies Marketing Strategies Human Resource Strategies

28. Level of Strategy Multiple Business Firms Corporate Level Business Level Functional Level Corporate Strategies Business 1 Business 2 Business 3 R & D Strategies Financial, Accounting Strategies Marketing Strategies Human Resource Strategies

29. Corporate level strategy Corporate Strategies, also known as grand or root strategies, are fundamentally concerned with selection of businesses in which organization should be in and with the development & coordination of the portfolio of businesses. It focus on Growth/Expansion Strategy Selection of business Stability strategy Retrenchment Strategy Combination Strategy

30. Business Level strategy Formulated to meet the objectives of a business unit for developing and sustaining competitive advantage of a business or set of business units. It depends on the industry structure and the forces that shape competition in that industry and positioning of the organization in that industry. It focus on Cost Leadership Strategy Differentiation Strategy Focus Strategy

31. Functional/Operational Level Strategy It is primarily concerned with successfully implementing the strategic decisions made at Corporate and business unit level through optimal utilization of resources and competencies of the business unit. It focus on R & D Strategy Financial strategy Marketing Strategy Human Resource strategy

32. Characteristic of strategy Long term Action plan Competitive advantages Stakeholders’ expectation Strategic Fit Based on strategic Decision

33. Strategic Decision Selecting the best alternative among different alternative is known as strategic decision. Strategic decisions deal with the long run future of an organizations and are rare , consequential and directive. Strategic decisions are means to achieve ends these decisions encompass the definition of the business, products and market to be served, functions to be performed and major policies needed for the organization ionto execute decisions to achieve objectives.

34. Importance of strategic Decision Organizational effectiveness Improvement in operational capability Competitive advantages Resource Management Stakeholders Interest Strategic Control

35. Characteristics of strategic management decisions Long-term directions Trying to achieve competitive advantages for the firm Scope of the Firm Strategic fit Building on or stretching the firm’s resources and competencies Requires major changes in the organization of resources and products Affect operational decisions Affected by values and expectations of top stakeholders Complex and uncertain

36. Formality in strategic management Formality refers to the degree to which participants, responsibilities, authority, and discretion in decision making are specified. It varies widely among the companies. It is an important consideration in the study of strategic management, because greater formality is usually positively correlated with the cost, comprehensiveness, accuracy, and success of planning.

37. Three Modes of Formality Entrepreneurial Mode – most small firms Planning Mode – most large firms Adaptive Mode – most medium size firms

38. Forces Determining Formality Organizational Size Predominant Management Styles Complexity of Environment Production Process Purpose of the Planning System Stage of Firm’s Development

39. Value of strategic management A strategy is made on rational and logical manner, thus its success are ensured. Strategy is a planned procedure so it reduce frustration and achieve the target easily It brings growth in the organization because it seeks opportunities Strategic management not only implement the strategy but it evaluate and revise the weakness which helps to remain the companies strength in future. Strategic management looks on PESTEL & SWOT analysis and it helps on naturalise the threats in such a way that they become an opportunity for their success. Strategic management focuses on proactive approach which enables organization to grasp every opportunity that is available in the market

40. Benefits of Strategic Management Financial benefits Improvement in sales Improvement in profitability Improvement in productivity 40

41. Non-Financial benefits Enhanced awareness of external threats Improved understanding of competitors’ strategies Increased employee productivity Reduced resistance to change Understanding of performance-reward relationships Enhances problem-prevention capabilities Benefits of Strategic Management 41

42. Identification of opportunities Objective view of management problems Improved coordination and control Minimizes adverse conditions and changes Decisions to better support objectives Effective allocation of time and resources Internal communication among personnel Benefits of Strategic Management 42

43. Role of chief executive in Strategic Management Roles in formulating strategy Define and provide long-term direction to the firm Work as a bridge in between the board of directors and business managers Allow managers from all levels to participate in decision making

44. Role of chief executive in strategic management... 2. Roles in implementing strategy Provide guidelines to the entire organizations Make managers and organizational members more responsive to environmental changes Help to unify the organization Create a more proactive management posture Promote development of business models to enhance bottom line success for the firm Provide managers with a rationale for evaluating competing budget requests

45. Strategy Makers: The CEO As a figurehead (organization head) Leadership Role Interpersonal Role Decision Role As an entrepreneur As a disturbance handler As a resource allocator As a negotiator Information Role Monitor Disseminator Spokesperson 45

46. THANK YOU VERY MUCH