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Management

1. Prepared by: Shiwani Sinha Department of Management B.N College, Patna University

2. Topic Includes Definition n Evolution Of strategic management Intent of Strategic Management( Vision,Mission,Goals n Objectives) Process of Strategic Management Questions can be Asked From These Topics Explain the concept of Objectives.Also ditinguish between Objectives n Goals. What is the process of strategic Management? Explain Mission n Vision Statement. Differentiate between them

3. Strategic Management – Evolution In the initial days, typically in early 1920s till the 1930s, managers used to do day-to-day planning methods. However, after that, managers have tried to anticipate the future. They have tools like preparation of the budgets and by using control systems like capital budgeting and management by objectives, and various other tools. However, as these techniques and tools were unable to emphasize the role of the future adequately. The next step was to try and use long-range planning, which was soon replaced by strategic planning, and later by strategic management, a term that is currently being used to describe the process of strategic decision-making. The first phase , which can be traced back to the mid-1930s mainly due to the nature of the business of that period, the way planning was done was on the premise of ad hoc policy making. The need for policy making arose as many of the businesses had just about started operations and were mostly in a single product line. Shiwani Sinha

4. The ranges of operations were in a limited area. Most of them were catering to a small and identifiable set of customers. As companies grew, they expanded their products, catered to more customers and also increased their geographical coverage. The method of using informal control and coordination was not enough and became somewhat irrelevant as these companies expanded. This expansion brought in complexity and a lot of changes in the external environment. Thus, there was then a need to integrate functional areas. This integration was brought about by framing policies to guide managerial action. Policies helped to have predefined set of actions, which helped people to make the decisions. Policy-making became the way owners managed their business and it was considered their prime responsibility. Shiwani Sinha

5. They later assumed the role of senior management. Thus, with the increasing environment changes in the 1930s and 1940s, planned policy formulation replaced ad hoc policy making, which shifted the emphasis to the integration of functional areas in a rapidly changing environment. As the years progressed, there was more complexity and significant changes in the environment, especially after the Second World War. This made the management lead through planned policy, as a way of management, increasingly difficult. Businesses had grown much larger and were targeting larger markets geographically, serving more number and types of customers and also were manufacturing and selling more types of products. Competition had also increased with many companies entering the markets. Policy making and functional area integration only did not fulfill for the complex needs of a business. By the 1960s, there was a demand for a critical look at the basic concept of business, due to increasing competition. Shiwani Sinha

6. The environment had a crucial role on the business. The effect and relationship of the business with the environment led to the concept of strategy. This helped the management of managing both the business and the environment, thus leading to the third phase , based on a strategy paradigm, in the early sixties. In the earlier eighties, the patterns again changed, with many companies going global and also facing competition from rivals across the world. Japanese companies unleashed a force across the world along with other Asian companies and posed threats for the US and European companies. This led to the current thinking, which emerged in the eighties. It is on the premise of strategic management. Shiwani Sinha

7. Strategic Management – Definition Strategic management can be defined as the formal process for defining company vision & mission, assess internal & external environment, formulate strategies under resource constraints, implement strategies, and evaluate the strategies. Strategic management is the art and science of formulating, implementing and evaluating cross function decision that enable the business to achieve its objectives. Lamb Robert (1984) – Strategic management is an on-going process that evaluates and controls the business and the industries in which the company is involved; assesses its competitors and sets goals and strategies to meet all existing and potential competitors; and then reassesses each strategy annually or quarterly [i.e., regularly] to determine how it has been implemented and whether it has succeeded or needs replacement by a new strategy to meet changed circumstances, new technology, new competitors, a new economic environment, or a new social, financial, or political environment. Shiwani Sinha

8. Learned (1965) – It is the study of the functions and responsibilities of general management and the problems which affect the character and success of the total enterprise. Schendel and Hofer (1979) – Strategic management is a process that deals with the entrepreneurial work of the organisation , with organisational renewal and growth, and, more particularly, with developing and utilizing the strategy which is to guide the organisation’s operations. Bracker (1980) – Strategic management entails the analysis of internal and external environments of firms to maximize the utilization of resources in relation to objectives. Jemison (1981) – Strategic management is the process by which general managers of complex organisations develop and use a strategy to co-align their organisation’s competence and the opportunities and constraints in the environment. Shiwani Sinha

9. Van Cauwenbergh and Cool (1982) – Strategic management deals with the formulation aspects (policy) and the implementation aspects ( organisation ) of calculated behaviour in new situations and is the basis for future administration when repetition of circumstances occurs. Schendel and Cool (1988) – Strategic management is essentially work associated with the term entrepreneur and his function of starting (and given the infinite life of corporations) renewing organisations . Fredrickson (1990) – Strategic management is concerned with those issues faced by managers who run entire organisations , or their multifunctional units. Teece (1990) – Strategic management can be defined as the formulation, implementation, and evaluation of managerial actions that enhance the value of a business enterprise. Shiwani Sinha

10. Rumelt , Schendel , and Teece (1994) – Strategic management is about the direction of organisations , most often, business firms. It includes those subjects of primary concern to senior management, or to anyone seeking reasons for success and failure among organisations . Bowman, Singh, and Thomas (2002) – The strategic management field can be conceptualized as one centred on problems relating to the creation and sustainability of competitive advantage, or the pursuit of rents . Shiwani Sinha

11. Objectives Of Strategic Management 1. To exploit and create new and different opportunities for tomorrow. 2. To provide the conceptual frameworks that will help a manager understand the key relationships among actions, context, and performance. 3. To put an organisation into a competitive position. 4. To sustain and improve that position by the deployment and acquisition of appropriate resources and by monitoring and responding to environmental changes. 5. To monitor and respond to the demands of key stakeholders. 6. To find, attract, and keep customers. 7. 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. 8. To sustain a competitive position. Shiwani Sinha

12. 9. To utilize the company’s strengths and take full advantage of its competitor’s weaknesses. 10. To understand the various concepts involved like strategy, policies, plans and programmes . 11. To have knowledge about environment—how it affects the functioning of an organisation . 12. To determine the mission, objectives and strategies of a firm and to visualize how the implementation of strategies can take place. 13. To find the solutions of problems in real-life business. 14. To develop analytical ability to identify threats and opportunities present in the environment. 15. To develop the skills of strategic decision making. 16. To develop a creative and innovative attitude and to think strategically. Shiwani Sinha

13. Process of Strategic Management 1. Stage One – (Planning and Analysis) Where are we Now? (Beginning): This is the starting point of strategic planning. It consists of doing a situational analysis of the firm in the environmental context. At this stage, the firm finds out its relative market position, corporate image, its strength and weakness and also environmental threats and opportunities. This is also known as SWOT analysis. 2. Stage Two – (Strategy Formulation) where do we want to be? (Ends): This is a process of goal setting for the organization after it has finalized its vision and mission. 3. Stage Three – (Alternative Selection) How Might we Get There? (Means): Here the organization deals with the various strategic alternatives it has. Shiwani Sinha

14. 4. Stage Four – (Evaluation) Which Way is the Best? Out of all the alternatives generated in the earlier stage, the organization selects the best suitable alternative in line with its SWOT analysis. 5. Stage Five – (Implementation and Control) How Can we Ensure Arrival? This is an implementation and control stage of a suitable strategy. Here again the organization continuously does situational analysis and repeats the stages as required. Shiwani Sinha

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18. Strategic Management Process Step # 1. Developing Vision, Mission and Objectives: Strategic management process begins with the development of corporate vision, mission and objectives. Every organisation has a vision, mission and objectives, even if they are not consciously developed, written or communicated. If the firm’s existing vision, mission and objectives are not relevant to its business, they need to be rewritten. A corporate vision delineates management’s aspirations for the business, providing a panoramic view of “where we are going” and convincing rationale for why this makes good business sense for the organisation . Shiwani Sinha

19. A mission statement defines the core purpose of the organisation — why it exists. Effective missions are inspiring, long-term in nature and easily understood and communicated. Objective is a desired future state or goal that a company attempts to realise . The goals or objectives for an organisation are based on vision and mission. Objective must be specific, realistic and must be measurable. Shiwani Sinha

20. Step # 2. Analysis of Company’s External Environment: The second phase of strategic management process is analysis of organisation’s external operating environment. The prime purpose of analysing external operating environment is to identify ( organisation’s ) strategic opportunities and threats for the organisation , in which organisation pursues its vision, mission and goals. The key environmental factors that affect an organisation are political and legal, economic, technological, socio-cultural and societal factors. All these factors may be grouped into three categories, they are – ( i ) industry environment, (ii) national environment, and (iii) macro environment. Shiwani Sinha

21. Step # 3. Analysis of Company’s Internal Environment: It is the third phase of strategic management process. The essential purpose of the internal analysis is to identify strengths and weaknesses of the organisation . The internal environment of organisation consists of variables that are within the organisation itself. They are the structure, culture and resources. A business becomes strong when it has all these three in balance. The absence of all these or any of them makes the firm weak. Step # 4. Strategy Formulation: Strategy formulation is the development of long-range plans for the effective management of environmental opportunities and threats. In this step, managers develop a series of strategic alternatives to pursue. The alternative strategies may be at global level, corporate level, business level, and functional level. Managers develop a firm specific model, which will align, fit or match the company’s resources and capabilities. Strategies should help build competitive advantage. Shiwani Sinha

22. Step # 5. Strategy Implementation: After developing alternative strategies and selecting a specific strategy to achieve competitive advantage, strategy developers must ask managers to put it into action. Sometimes, the existing culture, structure and policies may not support the strategy implementation. In such cases, there is a need to change them or modify them according to the requirement. Managers should not pursue a strategy that does not suit the existing culture, structure and policies. Generally, strategy implementation is done by middle and operating level managers and the same is reviewed by top level managers. Shiwani Sinha

23. Step # 6. Strategy Evaluation and Control: Strategy Evaluation and Control go side by side strategy implementation. Just strategy formulation and implementation may not help in achieving corporate objectives. Good control is critical for corporate success. Strategic evaluation and control is the process in which corporate activities and performance results are measured and monitored with a view to compare actual result with the predetermined target performance. If the corporate objectives are not achieved, then managers need to take corrective action. Evaluation and control helps in identifying weakness in implementing strategies. Shiwani Sinha

24. Strategic intent Strategic intent refers to the process of “what the company want to do” and “why the company want do” what the company wants to do shows the end result and it is known as strategic intent. Strategic intent is defined as an obsession with an organisation : an obsession by having ambitions that may even be out of proportion to their resources and capabilities; this obsession is to win at all levels of the organisation while sustaining that obsession in the quest for global leadership. Hierarchy of strategic intent is as follows 1. Vision 2. Mission 3. Goals 4. Objectives 5. Plans Shiwani Sinha

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27. Meaning of Vision Vision implies the blueprint of the company’s future position. It describes where the organization wants to land. It is the dream of the business and inspiration, base for the planning process. It depicts the company’s aspirations for the business and provides a peep of what the organization would like to become in future. Every single component of the organization is required to follow its vision. Usually, most organizations describe their vision or purpose in one or two sentences in the form of a statement – called a vision statement . A vision statement is used to refer to an understanding of why the organization exists. It provides direction for the organization. Shiwani Sinha

28. According to Bennis and Nanus To choose a direction, a leader must first have developed a mental image of a possible and desirable future state of the organization. This image which we call a vision may be as vague as a dream or as precise as a goal or mission statement. The critical point is that a vision articulates a view of a realistic, credible, attractive future for the organization, a condition that is better in some important ways than what now exists. It provides a company the sense of ‘where it is headed’ or where we are going. It describes management’s aspirations for the future – a destination for the organization. Shiwani Sinha

29. Name of the Organization Vision Statements Microsoft To help people and businesses throughout the world realize their full potential. Google To organize the world’s information and make it universally accessible and useful. Tesla to create the most compelling car company of the 21st century by driving the world’s transition to electric vehicles IBM To lead in the creation, development, and manufacture of the industry’s most advanced information technologies, including computer systems, software, networking systems, storage devices, and microelectronics. And our worldwide network of IBM solutions and services professionals translates these advanced technologies into business value for our customers. We translate these advanced technologies into value for our customers through our professional solutions, services and consulting businesses worldwide. Amazon Our vision is to be earth’s most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online. Huawei Huawei’s vision is to bring digital to every person, home and organization for a fully connected, intelligent world. Alibaba We aim to build the future infrastructure of commerce. We envision that our customers will meet, work and live at Alibaba , and that we will be a company that lasts at least 102 years Tata Power To be the most admired and responsible Integrated Power Company with international footprint, delivering sustainable value to all stakeholders. Etihad Airways The goal and overall ambition of Etihad Airways is to be the best airline in the world. JPMorgan Chase To be the best financial services company in the world. Examples of Vision Statements of Various Organizations Shiwani Sinha

30. An effective vision should have the following characteristics Graphic: The vision should draw a picture that can reveal where the company is heading and can also indicate clearly the market position. Directional: It is able to provide clear direction to the managers and employees as well as describe a forward-looking picture of the company. Focused: It can specifically guide managers in decision making and allocating resources of the company. Flexible: It must be flexible enough so that with changes in the products or technology or market, the vision itself can also be changed to keep pace with the changing situations. Shiwani Sinha

31. Feasible: It should portray an expectation for the future that is achievable – not just spelling out an expectation for the sake of telling about an expectation. Desirable: It should be able to indicate; ‘why the chosen path makes good business sense’. Easy to communicate: The vision must be worded in such a way that it can be communicated easily to the stakeholders, especially the shareholders, employees, and customers. Shiwani Sinha

32. Importance of Vision in an Organization 1.It provides a clear direction about where the company is heading. 2.It has a strategy-making value in the sense that it indicates the type of strategy the company should follow to reach the dreamed destination. 3.Ithelps managers to think strategically about such issues as the advent of new technology, changes in the customer expectations and needs, available marketing opportunities and other environmental factors. 4. managers get an insight into drawing reasoned conclusions concerning winds of change and then selecting appropriate paths to deal with the change. Shiwani Sinha

33. Necessity of Vision It provides a clear direction about where the organization is heading. It has a strategy-making value in the sense that it indicates the type of strategy the organization should follow to reach the dreamed destination. It helps managers to think strategically about such issues as the advent of new technology, changes in the customer expectations and needs available marketing opportunities and other environmental factors. Managers get an insight into drawing reasoned conclusions concerning winds of change and then selecting the appropriate paths to deal with the change. Shiwani Sinha

34. Mission : Mission delineates the firm’s business, its goals and ways to reach the goals. It explains the reason for the existence of the business. It is designed to help potential shareholders and investors understand the purpose of the company. A mission statement helps to identify, ‘what business the company undertakes.’ It defines the present capabilities, activities, customer focus and business makeup. Mission statement is also called a creed statement, a statement of purpose, a statement of philosophy etc. It reveals what an organisation wants to be and whom it wants to serve. It describes an organisation’s purpose, customers, products, markets, philosophy and basic technology. In combination, these components of a mission statement answer a key question about the enterprise: “What is our business?” “What is our organization's purpose? “ “Why does our organization exist? “   Shiwani Sinha

35. Definition of Mission Thompson defines mission as “The essential purpose of the organisation , concerning particularly why it is in existence, the nature of the business it is in, and the customers it seeks to serve and satisfy”. Hunger and Wheelen simply call the mission as the “purpose or reason for the organisation’s existence”. Shiwani Sinha

36. Examples of Mission Statement Reliance Industries: To become a major player in the global chemicals business and simultaneously grow in other growth industries like infrastructure. Microsoft corporation: to empower every person and every organisation on the planet to achieve more. (It is a customer-oriented mission statement). McDonald: To offer the customer fast food prepared in the same high quality worldwide, tasty and reasonably priced, delivered in a consistent low-key décor and friendly manner. Hindustan Lever: Our purpose is to meet every day needs of people everywhere – to anticipate the aspirations of our consumers and customers, and to respond creatively and competitively with branded products and services which raise the quality of life. Shiwani Sinha

37. Characteristics of mission statement In order to be effective, a mission statement should posses the following characteristics.   ( i )      A mission statement should be realistic and achievable . Impossible statements do not motivate people. Aims should be developed in such a way so that may become feasible. (ii)     It should neither be too broad not be too narrow. If it is broad, it will become meaningless. A narrower mission statement restricts the activities of organization. The mission statement should be precise. (iii)     A mission statement should not be ambiguous. It must be clear for action . Highly philosophical statements do not give clarity. (iv)    A mission statement should be distinct. If it is not distinct , it will not have any impact. Copied mission statements do not create any impression. Shiwani Sinha

38. (v)     It should have societal linkage . Linking the organization to society will build long term perspective in a better way. (vi)    It should not be static. To cope up with ever changing environment, dynamic aspects be looked into. (vii)    It should be motivating for members of the organization and of society. The employees of the organization may enthuse themselves with mission statement. (viii)   The mission statement should indicate the process of accomplishing objectives. The clues to achieve the mission will be guiding force. Shiwani Sinha

39. NEED FOR A MISSION To ensure unanimity of purpose within the organisation . To provide a basis for motivation. To establish an organisation climate. To serve as a focal point. To facilitate the translation of objectives and goals into work structure. It implies the image which the firm seeks to project. Shiwani Sinha

40. Business Definition : It seeks to explain the business undertaken by the firm, with respect to customer needs, target audience, and alternative technologies. With the help of business definition, one can ascertain the strategic business choices. The corporate restructuring also depends upon the business definition. For example : Some organisations like Reliance Industries Limited, Tata Group, and Birla Group have wide scope, but some other organisations like Infosys, Wipro, etc., have limited scope. Business Model : Business model, as the name implies is a strategy for the effective operation of the business, ascertaining sources of income, desired customer base, and financing details. Rival firms, operating in the same industry relies on the different business model due to their strategic choice. Shiwani Sinha

41. Goals : Organisational goals refer to the ideal situations to be achieved in undefined time-duration in future. These goals direct the daily activities and decisions. However, goals do not essentially lead to the quantifiable outcomes. These statements are related to the vision and mission statements. Goals can be followed for day-to-day operational activities and decisions, not essentially tied up with quantifiable results. Organisational goals provide the standards to measure the performances for achieving the wide-ranging objectives. These are the targets that convert the vision and mission into reality. Goals help in portraying a positive image of the organisation in the industry. It plays an important role in maintaining public relations and encourages support from various groups.  Shiwani Sinha

42. Features of Goals 1) Specific :  The goals should clearly specify targets to be achieved and the tasks to be fulfilled. This would help the managers in evaluating the performance at regular intervals. An ideal goal should address major issues that are critical for success of the organisation . 2) Realistic and Challenging :   An organisational goal should be realistic as well as challenging. If the goal is unrealistic, the employees may find it unachievable and may get demotivated . But, the goal should also not be too easy. It should be challenging enough so that it can encourage the employees to improve their performances by searching new and creative ways of carrying-out the organisational activities. 3) Commitment :   The members of the organisation should be committed for the achievement of set goals Shiwani Sinha

43. 4) Measurable :  The goals should be quantifiable. It implies that the goals should be measurable so that the outcome could be evaluated and the progress can be estimated. Measurable goals act as a yardstick for the managers and their team members to evaluate their performance. 5) Level-Oriented Goals :  A goal should be set to address important issues only. The top and middle level managers are accountable for such long-term goals. On the other hand, the short-term goals should be addressed by lower-level managers. 6) Time Constraint :   Another important characteristic of an organisational goal is that there should be a time-period associated within which it has to be completed. It provides a deadline to the employees and managers so that they are motivated to improve performance for achieving success within the time constraint.. Shiwani Sinha

44. Types of Goals : 1) Official Goals :   Official goals are the common objectives of the organisation . These goals validate the activities of the organisation and stabilise the organisation in its environment. These goals are mentioned in the documents published in the organisation periodically, such memorandum of association, annual performance report, etc. The top level management addresses these goals in their public statement. 2) Operative Goals :   Operative goals indicate the actual targets that an organisation wishes to achieve. These can be considered as the operating policies. These goals help the managers in reducing the possibilities of uncertainty while remaining attentive. The operating goals help in selecting the alternative designs for organisation . 3) Operational Goals :  These goals are set by the middle level managers for supervising or controlling the subordinates. These goals help in measuring the performance of the employees. Shiwani Sinha

45. Objectives : Objectives are states or outcomes of behavior that are desired. An organisation may desire either to obtain something that it does not currently have or to retain something it already has. Hence, objectives may be either acquisitive or retentive. Strategic objectives are those aims that are formulated to bring major changes in response to the changes, competition, and issues in the environment. These objectives are formulated to address various internal and external issues such as target customers, target markets, product, and changes in technology, etc.  The objectives identify the activities of the organisation . While formulating strategies, objectives help in decision-making by assisting the managers in various perspectives. The objectives also provide measures for evaluating the final performance of employees. Shiwani Sinha

46. Effective objectives have following features- These are not single for an organization, but multiple . Objectives should be both short-term as well as long-term . Objectives must respond and react to changes in environment, i.e., they must be flexible . These must be feasible, realistic and operational . Shiwani Sinha