strategic management

strategic management ppt.prepared by.vishnulal v(lead college of management)

3. The concept of strategy
 Strategyisthegreatworkoforganisation.InsituationsoflifeordeathitistheTao
ofsurvivalorextinction.
 Itsstudycannotbeneglected.----SUNTZU,TheArtofWar.500B.C
 Strategyisaboutwinning.
 Strategyisnotadetailedplanorprogramofinstructions,itisaunifyingthemethat
givescoherenceanddirectiontotheactionsanddecisionsofanindividualoran
organisation.

4. Origin of the word
 Strategiameans generalshipin Greek.Stratosmeans “ army “. Ag
means “ to lead” .
 The concept of strategy was first given in the ART OF WAR by
SUN TZU in China 500 BC
 There are 13 chapters in the book.
 Laying plans
 On waging war
 The sheathed sword
 Tactics
 Energy
 Weak points and strong points
 Maneuvering
 Variations of tactics (cont..)

5. The army on the march
Terrain
The nine situations
Attack by fire
The use of spies.
•It is the identification of the purpose of the organisationand the plans and actionss
to achieve that purpose
•Art and science of formulating ,implementing and evaluating cross functional
decisions that enable an organisationto achieve its objectives
•Strategic management achieves a firm’s success through FUNCTIONAL
INTEGRATION
•Management+ Finance/Accounting +Research & Development + Marketing/HR
+Production/Operations +MIS

6. Evolution of SM
•Evolved hand in hand with evolution of industrial system
•First three decades of 20
th
century constituted mass production Era
•1930s witnessed intense changes

Variety

Market segmentation

Promotion

Change in orientation etc.,

7. Environmental Changes
•Changes in technology
•Faster commercialization
•Business boundaries getting blurred
•Socio-political changes
•Governments becoming bargainers in the conduct of business
•Emergence of Global firms
•Emergence of Global markets
•Emergence of Global brands
•Change in tastes and preferences of consumers

8. New Demands on the Firm
•To be strategically alert
•To be future oriented
•To be able to take risk in tapping opportunities
•To be insulated against environmental threats
•To develop the competence for assimilating changes faster.
•To respond effectively and more economically
•To grow big
•To be able to generate large resources
•To gain expertise in technology, marketing and decision
support systems.

9. SM deals with . . .
•Purposes and missions
•Corporate objectives
•Choice of businesses
•Course of activities for achieving the
objectives

10. Nature and Scope
•Serves as a route map
•Lends a frame work for systematic handling of
corporate decisions
•Lays down growth objectives and strategies
•Ensures the firm remains prepared
•Ensures best utilization of recourses
•Serves as a hedge against uncertainty
•Helps to understand trends in advance

11. Nature and Scope
•Helps to avoid hazard response
•Provides the best possible fit
•Helps build competitive advantage and core
competencies
•Draws from both intuition and logic
•Prepares the firm to not only face the future, but
even shape the future in its favour
•Seeks to influence the firm’s mega environs in its
favour

12. Concerns of Strategic Planning
•Future
•Growth
•Environment
•Portfolios of businesses
•Strategy
•Integration
•Creating core competencies/ competitive advantage
•In a nutshell, corporate strategy is its concern.

13. 13
Should we
import?
Will GATT
affect our firm?
Should we
export?
Should we
have a foreign
associate
Global Considerations Impact Virtually All
Strategic Decisions
Strategy –influencing factors

14. 14
Should we
outsource MIS?
Should we
increase
Electronic
advertisement
Should we
Automate our
process
Should we set
up a Web site?
Information Technology Has Become A Vital
Strategic Management Tool
Strategy –influencing factors

15. 15
Should we
recycle?
Will government
pass tougher
laws?
Should we
Change our
process?
Is our firm
environmentally
friendly?
Preserving the Natural Environment is an
Important Strategic Issue
Strategy –influencing factors

16. 16
Economic
Social
Cultural
Demographic Environmental
Political
Legal
Governmental
Technological
Competitive
Strategy –External factors

17. 17
Management
Marketing
Distribution
Production/
Operations
Research &
Development
Purchasing
Manufacturing
Strategy –internal factors

18. 18
Finance/Accounting
Packaging
Computer
Information Systems
Vendor Relations
Promotion
Human Resource
Management
Employee/ Manager
Relations
Strategy –internal factors

19. 19
Strategic management process
STRATEGY
EVALUATION

20. Strategic management process

21. 21
Stages Activities
Strategy
formulation
Strategy
evaluation
Strategy
implementation
Conduct
research
Establish
annual
objectives
Review internal
and external
factors
Integrate
intuition with
analysis
Devise
policies
Measure
performance
Make
decisions
Allocate
resources
Take
corrective
action
Strategic management process

22. Strategic analysis
PEST Analysis-a technique for understanding the "environment" in which a
business operates
Scenario Planning-a technique that builds various plausible views of possible
futures for a business
Five Forces Analysis-a technique for identifying the forces which affect the
level of competition in an industry
Market Segmentation-a technique which seeks to identify similarities and
differences between groups of customers or users
Directional Policy Matrix-a technique which summarises the competitive
strength of a businesses operations in specific markets
Competitor Analysis-a wide range of techniques and analysis that seeks to
summarise a businesses' overall competitive position
Critical Success Factor Analysis-a technique to identify those areas in
which a business must outperform the competition in order to succeed
SWOT Analysis-a useful summary technique for summarisingthe key issues
arising from an assessment of a businesses "internal" position and "external"
environmental influences.

23. Strategies
•Means by which long term objectives are achieved
•Eg: geographic expansion
•Diversification
•Acquisition
•Market penetration
•Retrenchment
•Liquidation
•Joint venture

24. Levels of Strategy
•Corporate level
•Business level
•Functional level
MBC
Strategic business
unit1
Strategic business
unit1
Strategic business
unit1
R&D Manufacturing MKTNG HR FIN

25. Benefits of SM
•Financial benefits
•Non financial benefits
•WHY SOME FIRMS DO NO STRATEGIC PLANNING
Poor reward structures
Fire fighting
Waste of time
Too expensive
Laziness
Content with success
•WHY STAY BACK FROM STRATEGIC MANAGEMENT
Fear of failure
Over confidence
Prior bad experience
Self interest
Fear of the unknown
Suspiscion

26. Comprehensive Strategic Management Model
Vision
&
Mission
Statements
External
Audit
Internal
Audit
Long-Term
Objectives
Generate,
Evaluate,
Select
Strategies
Implement
Strategies:
Mgmt Issues
Implement
Strategies:
Marketing,
Fin/Acct,
R&D,
Measure &
Evaluate
Performance

27. “…the determination of the basic long-term goals and objectives of an
enterprise, and the adoption of courses of action and the allocation of
resources necessary for carrying out these goals.”
Alfred Chandler, Strategy & Structure, 1962
“… the patterns of objectives, purposes or goals, and the major policies or
plans for achieving these goals, stated in such a way as to define what
business the company is in or should be in and the kind of company it is or
should be.”
Kenneth Andrews, The Concept of Corporate Strategy, 1971
Defining strategy ……..2

28. “Strategic management is that set of managerial decisions and
actions that determines the long-run performance of a
corporation.”
“Strategy is a process of adapting the firm to its environment”
‘Strategy is how the firm achieves its objectives by applying its
resources to cope with its environment”
Defining strategy ……..3

29. Strategic decision
•Done by top management and strategist
Issues
1.Criteria for DM
a.Maximization concept
b.Satisfying concept
c.Incrementalism
d.Objective setting
2.Rationality in DM
3.Creativity
4.Variability
5.Person related factors
6.Individual Vs Group DM

30. The process of SDM
•1. Problem awareness
•2. Problem diagnosis
•3. Development of solutions
•4. Selection of a solution
•5. Implementation of the solution

31. Approaches to DM
•The intuitive-emotional approach
•The Rational-analytical approach
a.Recognize the need for a decision
b.Establish rank and weight criteria
c.Gather data
d.Identity possible alternatives
e.Evaluate each alternatives
f.Select the best alternative
•A satisfying approach
•Political-Behavioral approach

32. SM Process
SM
process
Organisati
on
mission
Internal
analysis
Strategic
objectives
Environm
ental
analysis
Identification strategy
Selection strategy
Implementation strategy
Evaluation and control
Feedback

33. Strategic planning
•An orderly process by which top management
determines organizational objectives.
•strategies needed to reach these objectives
and short range of top level action necessary
to implement the strategy properly

34. Tactical Planning
•Refers to a short range of planning tactics
oriented towards operations and is concerned
with specific and short range details
•Operational planning :-the process of deciding
the most effective use of the resources already
allocated and to develop a control mechanism to
assure effective implementation of the actions so
that organizational objectives are achieved

35. •Programme strategies:-Used to achieve
organizational goals.
•Contingency strategies :-planned in advance
to deal with sudden changes in future

36. Approaches to SM
•Formal structured Approach
•Entrepreneurial Approach
•Incremental Approach
•Intuitive –Anticipatory Approach
•Adaptive Approach

37. Purpose of an Organization
•Vision
•Mission
•Business definition
•Goals
•Objectives

38. Vision and Mission
•Many organisationsdevelop both vision and
mission statements
•Vision and mission are necessary to effectively
motivate a work force
•Shared vision creates a commonality of
interests

39. Vision
•“ what do we want to become?”
•Clear vision
•Provides foundation for comprehensive
mission statement
•Vision statement developed first
•Short-preferably one sentence
•Broad management involvement

40. Mission
•“What is our business?”
•Reveal what an organisationwants to be and whom it wants to serve
•It is the continuing statement of purpose
•Distinguishes one organization from another in same industry
•Declaration of an organisation’s“reason for being”
•Basis for allocating resources
•Establish organisationalclimate
•Focal point for direction
•Helps to fix up objectives
•Cost,timeand performance parameters assessed and controlled

41. Components of mission
•Customers :-who are the firm’s customers?
•Products or services :-what are the firms major products or services?
•Markets :-Geographically,wheredoes the firm compete?
•Technology :-Is the firm technologically current?
•Concern for survival,growthand profitability:-Is the firm committed to growth and financial
soundness?
•Philosophy :-what are the basic beliefs,values,aspirations and ethical priorities of the firm?
•Competitive advantage :-what is the firm’s distinctive competence or major competitive
advantage?
•Concern for public image:-is the firm responsive to social ,community and environmental
concerns?
•Concern for employees:-Are employees a valuable asset to the firm?

42. Industry Analysis
•Industry FeaturesIndustry Boundaries
•Overall size breadth of market
•Market growth rate product and services
•Geographic boundaries of market geographic distribution
•No Of competitors Level of vertical integration
•Pace of technological change
•Product innovation
•Industry analysis
•Internal analysis
•External analysis
•SWOT analysis
•Competitive analysis
•Value chain analysis

43. •Industry environmentstructure of Industry
Fragmented industry concentration
Consolidated Industry Economies of scale
•Industry life cycle product differentiation
Embryonic industry Barriers to Entry
Growing industry
Mature industry IndustryAttractiveness
Decline industry profit potential
•Industry Performance growth prospects
Production competition
Sales
Profitability
Technological advancement

44. Internal Analysis
•Marketing Financial Performance
1.Product and services Ability to raise long term capital: debt, equity
2.Market share Cost of capital relative to industry and competitors
3.Channels of distribution Tax considerations
4.Brand value Relations with owners, investors and stock holders
5.Customer concentration Presence of financial planning and budgeting practices
6.Sales force team performance Production/Operations/Technical
7.Dealers relationship Raw material cost and availability
8.Pricing strategy Inventory control system
9.CRM Location of facilities
10.Advertisement and promotion effectLay out and utilization of facilities
Efficiency of Equipment
Effective operation control procedures, design
scheduling purchasing
R&D technology,Innovation
Quality control

45. •Human Resources
Management personnel
Employee skill and morale
Labor relations/costs relative to industry and competitors
Efficient and effective personnel policies
Effective use of incentives to motivate performance
Ability to level peaks and valleys of employement
Employee turnover and absenteeism
Specialized skills
Experience

46. Organization/General Management
•Organizational structure
•Firm’s image and prestige
•Firm’s record for achieving objectives
•Organization of communication system
•Overall organizational control system
•Organizational climate

47. External Environment

51. Objectives
Objectives are plans
Convert strategic vision and mission into specific performance
Yardsticks for tracing performances and progress
Why objectives?
•It state direction
•Aid in evaluation
•Create synergy
•Helps to set priorities
•Focused coordination
•Help for resource allocation
•Benchmarking tool
•Provide motivation

52. Characteristics of objectives
•Specific
•Measurable
•Achievable
•Realistic
•Timely
•Clear
•Quantifiable
•Consistent
•Reasonable
•Challenging
•communicated

53. Types of Objectives
•Financial ObjectivesStrategic Objectives
•increase in annual revenues winning an increase in market share
•Increase in annual profits achieving lower overall costs than rivals
•Annual increase in dividends achieving technological leadership
•Strong bond and credit ratings strengthening the company’s brand name
•Increased share holder value strong distribution network
•Techniques for setting objectives
Top –Down Approach
Bottom –Up approach
MBO
Joint setting of goals
Focus on Key result areas

55. Factors Influencing Formulating
Objectives
•Internal Environment
•External environment
•Value system
•Past experiences

56. Goals
•Goals are short term objectives whose accomplishment is sought to be
achieved within a specific period of time.
•Objectives Goals
No time frame time phased
Stated in broad, general terms much more specific
Focus to external environment focus on internal environment
Measurement will be in relative terms absolute terms

57. SM Tools
•Core competency
•Benchmarking
•TQM
•GAP Analysis
•SWOT