STRATEGIC MGMT
Definition of Strategy
Itis defined as a unified,
comprehensive integrated plan
that relates to the strategy
advantages of a firm to the
challenges of the environment. It
is designed to ensure that the
basic objectives of the enterprise
are achieved through proper
executor by the organisation.
Accto James Brain the term
strategy is “The pattern of plan
that integrates an
organisations major goals,
policies and action sequences
into a cohensive whole.”
Need for Strategy
Need for Strategy
1. To have rules to guide for new
opportunities both inside & outside the firm
2. To have an assurance that the firm’s overall
resources allocation pattern is efficient
3. To have and develop internal ability to
anticipate change
4. To take high quality project decisions
5. To save time, money & executive talent
6. To identify, develop & exploit potential
opportunities.
7. To utilise the delay principle that is, delay
the commitment until an opportunity is on
hand
8. To develop measures to judge whether a
particular opportunity is a rare one or
whether much better ones are likely to
develop in the future
Key areas in developing a
strategy
Key areas in developing a strategy
1. The type of goods/ services that the firms
produce & sell.
2. The mode of producing goods and
rendering services
3. Who are will be the firms customers
4. The methods of financing the various
operations of the firm
5. The amount of risk that the firm will take
6. The method of implementing the strategy.
Why Co.s Craft a Strategy
Crafting a Strategy
HOW to out compete rivals and win a
competitive advantage.
HOW to respond to changing industry and
competitive conditions
HOW to defend against threats to the
company’s well-being
HOW to pursue attractive opportunities
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Who are Strategy Makers
Strategy Makers: The CEO
A firm’s CEO plays a dominant
role in strategic planning
The CEO’s principal duty is giving
long-term direction to the firm
The CEO bears ultimate
responsibility for the firm’s
success and strategic success
CEOs are typically strong-willed,
company-oriented individuals
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Strategy Makers
Ideal strategic team includes decision
makers from all three levels
Top managers must give final
approval
Strategic decisions coincide with
managers’ responsibilities
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Why is a Company’s Strategy Constantly Evolving?
Changing market conditions·
Moves of competitors·
New technologies and production
capabilities·
Evolving buyer needs and
preferences·
Political and regulatory factors·
New windows of opportunity·
Fresh ideas to improve the
current strategy·
A crisis situation 14
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Strategic Management
It is a stream of instructions, guidance,
directions for decisions & actions with view to
develop effective long term & short term
planning of the organization. Strategic mgmt
decisions help for accomplishment of goals&
objectives of the business.
SM includes strategic analysis, strategic
formulation, strategic implementation,
strategy controlling & monitoring of all events
of the organisation.
In simple, it is the set of decisions &
action resulting in formulation,
implementation of strategies designed to
achieve the objectives goals of the
organisation.
Samuel & Paul Peter defines SM is a
continious, interactive, cross- functional
process aimed at keeping an
ogranisation as a whole appropriately
matched to its environment
Bozeman defines SM as a continuous
process of effectively relating the
organisation objectives & resources to
the opportunities in the environment
Need for strategic mgmt
Need for strategic mgmt
1. Due to change
2. To provide guidelines
3. Systematic business decisions
4. Improves communication
5. Improves Co-ordination
6. Improves allocation of resources
7. For better performance
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
• 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
Benefit of SM
1. Helps an organisation in shaping its future
2. Helps orgn to achieve understanding &
commitment from all managers &
employees
3. It encourages orgn to decentralise the mgmt
Importance & relevance of Strategic Management
Managers at all levels interact in planning and
implementing strategy.
Similar to participative decision making.
Assessing strategy formulation requires looking at
nonfinancial evaluations as well as financial ones.
Promoting positive behavioral consequences
enables achievement of financial goals
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Characteristic of SM
It coordinates & integrates business activities
IT strengthens the competitive position
SM satisfies customer
It works towards achieving performance
targets
Sm is adaptive
STRATEGIC MANAGEMENT PROCESS
The term “Strategic Management Process’ refers
to the steps by which management converts a
firm’s mission, objectives and goals into a
workable strategy”
In a dynamic environment each firm needs to
tailor its SMP in ways best suits its own
capabilities & situational requirements.
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Strategic Management –Business Model
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Types of STRATEGY
• Corporate Level Strategy
– Diversification
– Acquisition
– New Market
- Global Strategy
- New Ventures and Market Exits (Disinvestment)
• Business Unit Level Strategy
– Competitive Strategy for same Industry
– Cost Leadership
– Product Differentiation
– Vertical Integration
• Function Level Strategy
– Execution
– Operational Excellence
Types/Three Levels of Strategic mgmt
Corporate level: board of directors,
CEO & administration [Highest]
Business level: business and
corporate managers [Middle]
Functional level: Product,
geographic, and functional area
managers [Lowest]
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Three levels of Strategic Management Structures
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Strategic Management Decisions: Corporate
Corporate level strategy is formulated by
the top level BOD’s CEO, and Chiefs of
functional areas.
“ Corporate level strategic
management is the management of
the activities which define the overall
character and mission of the
organization.
The product /service segments it will
enter and leave, and the allocation
of resources and management of
synergy among its SBU.”
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LEVELS OF STRATEGIC PLANNING – CORPORATE LEVEL
It addresses fundamental questions such as what is the
purpose of enterprise.
What type of business to be choosen & how resources to
be allocated.
Strategy – developed by (BOD,CEO etc., ) Decisions are
broad based carry greater risk, cost, and profit potential.
EX: Diversification & M&A’s.
Include decisions : Choice of businesses, dividend policies,
sources of long-term financing, and priorities for growth
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Levels of Strategic Planning: Business level
Process concerned primarily how to manage the
interests and operations of a particular unit within
the organisaion(SBU).
The heads of respective Business units develop
strategies with the approval of top management.
Decisions include allocation of resources within the
unit and co-ordinating functional level strategies
developed by functional managers.
Help bridge decisions at the corporate and functional
levels.
Less costly, risky, and potentially profitable than
corporate-level decisions.
Include decisions on plant location, marketing
segmentation, and distribution
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Levels of Strategic Planning: Functional level
Implement the overall strategy formulated at
the corporate and business levels.
Functional Managers: Marketing, Finance,
Production, Personnel(HR) etc., are reviewed by
business heads.
Involve action-oriented and operational issues.
Relatively short range and low risk.
Modest costs: depend upon available resources.
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Microsoft’s Business Model
Employ
Employ aa cadre
cadre of
of highly
highly skilled
skilled programmers
programmers to
to
develop
develop proprietary
proprietary code;
code; keep
keep source
source code
code hidden
hidden
from
from users
users
Sell
Sell resulting
resulting operating
operating system
system andand software
software
packages
packages to to PC
PC makers
makers and
and users
users atat relatively
relatively
attractive
attractive prices
prices and
and achieve
achieve large
large unit
unit sales
sales
Most
Most costs
costs arise
arise in
in developing
developing the
the software;
software; variable
variable
costs
costs are
are small—once
small—once breakeven
breakeven volume
volume is
is reached,
reached,
revenues
revenues from
from additional
additional sales
sales are
are almost
almost pure
pure profit.
profit.
Provide
Provide technical
technical support
support to
to users
users at
at no
no cost
cost