Strategic ManagementManagement

UNIT – 1UNIT – 1 Strategic mgt – Definition, Strategic mgt – Definition,

need, benefitsneed, benefits StrategyStrategy VisionVision MissionMission Goals & ObjectivesGoals & Objectives Strategic Mgt processStrategic Mgt process Levels of strategyLevels of strategy Concept of SBUConcept of SBU Role of LeadersRole of Leaders Competitive advantage of Competitive advantage of

nationsnations

FIRM & ITS ENVIRONMENTFIRM & ITS ENVIRONMENT

COMPETITORS

OWNERS

INTERNAL ENVT

TOP MANAGERS

EMPLOYEES

FIRM

IMMEDIATE EXTERNAL ENVT

SUPPLIERS

GOVT. AGENCIES

CUSTOMERS

REMOTE EXTERNAL ENVT

SOCIAL

CHANGE

POLITICAL FACTORS

TECHNOLOGY

DEVELOPMENT

Strategic Management - Strategic Management - DefinitionDefinition

Set of decisions and actions resulting in formulation and Set of decisions and actions resulting in formulation and implementation of strategies designed to achieve the implementation of strategies designed to achieve the objectives of an organisation.objectives of an organisation.

It involvesIt involves1.1. PlanningPlanning2.2. DirectingDirecting3.3. OrganisingOrganising4.4. ControllingControlling

NEED FOR STRATEGIC MGTNEED FOR STRATEGIC MGT

Complexity and sophistication of business Complexity and sophistication of business decision makingdecision making

Unstable environmentUnstable environment Increasing competitionIncreasing competition

9 CRITICAL AREAS OF ST.MGT9 CRITICAL AREAS OF ST.MGT Determining mission of the companyDetermining mission of the company

Developing company profileDeveloping company profile

Assessment of co’s external envtAssessment of co’s external envt

Matching co profile with external envtMatching co profile with external envt

Choice of long - term objectivesChoice of long - term objectives

Grand strategies neededGrand strategies needed

Development of annual objectives and short term strategiesDevelopment of annual objectives and short term strategies

Implementing the decisionsImplementing the decisions

Review and evaluationReview and evaluation

STRATEGY - DEFINITIONSTRATEGY - DEFINITION

Large scale future oriented plans for interacting Large scale future oriented plans for interacting with the competitive envt to optimise with the competitive envt to optimise achievement of organizational objectives.achievement of organizational objectives.

DIMENSIONS OF STRATEGIC DIMENSIONS OF STRATEGIC DECISIONSDECISIONS

Require top mgt decisionsRequire top mgt decisions

Involve allocation of large amount of company resourcesInvolve allocation of large amount of company resources

Have significant impact on the long – term prosperity of the Have significant impact on the long – term prosperity of the firmfirm

Future – orientedFuture – oriented

Usually have major multi – functional or multi – business Usually have major multi – functional or multi – business consequencesconsequences

Necessiate considering factors in the firm’s external envtNecessiate considering factors in the firm’s external envt

BENEFITS OF STRATEGIC BENEFITS OF STRATEGIC

MANAGEMENTMANAGEMENT

Enhances problem prevention capabilities of the Enhances problem prevention capabilities of the firmfirm

Group based strategic decisionsGroup based strategic decisions

Employee motivationEmployee motivation

Provides understanding of sub – group Provides understanding of sub – group responsibilitiesresponsibilities

Resistance to change reducedResistance to change reduced

How does St. Mgt help the firm?How does St. Mgt help the firm? Provides the direction to the firm and serves as a road mapProvides the direction to the firm and serves as a road map

Prepares the firm to face the futurePrepares the firm to face the future

Brings forth the strategic decisions concerning the firmBrings forth the strategic decisions concerning the firm

Helps acquire competitive advantageHelps acquire competitive advantage

Ensures optimum utilisation of resourcesEnsures optimum utilisation of resources

Provides the best possible fit btw the firm and the envtProvides the best possible fit btw the firm and the envt

Ensures the firm’s business, products and markets are Ensures the firm’s business, products and markets are wisely chosenwisely chosen

HIERARCHY OF STRATEGIC INTENTHIERARCHY OF STRATEGIC INTENT

VISION

MISSION

GOALS

OBJECTIVES

PLANS

Most Integrative

Most specific

Fewest in number

Greatest in number

VISIONVISION

Vision represents what the organization would be Vision represents what the organization would be in futurein future

Create projections about where it should go in Create projections about where it should go in futurefuture

Definition:Definition:

‘‘A realistic, credible and attractive future for an A realistic, credible and attractive future for an organization’organization’

EXAMPLES OF VISION STATEMENTSEXAMPLES OF VISION STATEMENTS

"McDonald's vision is to be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile."

'to become the world's leading consumer company for automotive products and services'.

FEATURES OF A GOOD VISIONFEATURES OF A GOOD VISION

Should be realistic and idealisticShould be realistic and idealistic

Clarifies direction for the organizationClarifies direction for the organization

Inspires organization members and encourages Inspires organization members and encourages commitmentcommitment

Reflects the uniqueness of the organization, its distinctive Reflects the uniqueness of the organization, its distinctive competencecompetence

Appropriate for the organization, consistent with its values Appropriate for the organization, consistent with its values and cultureand culture

Well articulated and easily understoodWell articulated and easily understood

MISSIONMISSION

Defined as the fundamental, unique purpose that sets a Defined as the fundamental, unique purpose that sets a business apart from other firms of its type and identifies the business apart from other firms of its type and identifies the scope of its operations in product and market termsscope of its operations in product and market terms

It is a statement of attitude, outlook and orientationIt is a statement of attitude, outlook and orientation

It communicates what the firm wants to beIt communicates what the firm wants to be

It indicates the businesses the firm will pursue and the It indicates the businesses the firm will pursue and the customer needs it will seek to satisfycustomer needs it will seek to satisfy

Shaped by the vision of the corporation’s leadersShaped by the vision of the corporation’s leaders

EXAMPLES OF MISSION STATEMENTSEXAMPLES OF MISSION STATEMENTS

‘‘Our mission is to make every Indian a Britannia consumer’Our mission is to make every Indian a Britannia consumer’

‘‘to meet the everyday needs of people everywhere in India. We to meet the everyday needs of people everywhere in India. We stand committed to continuously improving the quality of life of stand committed to continuously improving the quality of life of each and every Indian. Because ultimately, our future is closely each and every Indian. Because ultimately, our future is closely linked to the future of every Indian home and the housewives who linked to the future of every Indian home and the housewives who run them’run them’

NEED FOR A MISSIONNEED FOR A MISSION

To ensure unanimity of purpose within the organizationTo ensure unanimity of purpose within the organization

To provide a basis for motivationTo provide a basis for motivation

To establish an organization climateTo establish an organization climate

To serve as a focal pointTo serve as a focal point

To facilitate the translation of objectives and goals into To facilitate the translation of objectives and goals into work structurework structure

It implies the image which the firm seeks to projectIt implies the image which the firm seeks to project

FEATURES OF A GOOD MISSIONFEATURES OF A GOOD MISSION

Should be clearShould be clear Should be feasibleShould be feasible Precise but explanatoryPrecise but explanatory DistinctiveDistinctive

DIFFERENCE BTW VISION AND MISSIONDIFFERENCE BTW VISION AND MISSION

VISIONVISION

Forward lookingForward looking

Emphasis on long term Emphasis on long term conceptconcept

MISSIONMISSION

States what the States what the organization is and why it organization is and why it existsexists

How the orgn will interact How the orgn will interact with its stakeholders, with its stakeholders, products or services it products or services it offers, way it is offered.offers, way it is offered.

STRATEGIC MGT PROCESSSTRATEGIC MGT PROCESS

COMPANY MISSION

COMPANY PROFILE EXTERNAL ENVT

STRATEGIC ANALYSIS AND CHOICE

GRAND STRATEGYLONG TERMOBJECTIVES

ANNUALOBJECTIVES

OPERATING STRATEGIES POLICIES

INSTITUTIONALIZING OF STRATEGY

CONTROL AND EVALUATION

Feedback

Feedback

LEVELS OF STRATEGYLEVELS OF STRATEGY

CORPORATESTRATEGY

SBU 1 SBU 2 SBU 3

R & DSTRATEGIES

FINANCIALSTRATEGIES

MARKETINGSTRATEGIES

HRSTRATEGIES

CORPORATE LEVEL

BUSINESS LEVEL

FUNCTIONAL LEVEL

SBU – Strategic Business Unit

THE CONCEPT OF SBUTHE CONCEPT OF SBU

A systematic grouping of the businesses of a multi – A systematic grouping of the businesses of a multi – business corporationbusiness corporation

Each SBU is treated as a separate businessEach SBU is treated as a separate business

Products within an SBU receive same strategic planning Products within an SBU receive same strategic planning treatmenttreatment

Facilitate effective planningFacilitate effective planning

ILLUSTRATION ON SBUILLUSTRATION ON SBU

5 SBUs5 SBUs

1.1. Titan WatchesTitan Watches2.2. Sonata WatchesSonata Watches3.3. Jewellery businessJewellery business4.4. Personal accessoriesPersonal accessories5.5. Precision engineeringPrecision engineering

ROLE OF BOARD OF DIRECTORSROLE OF BOARD OF DIRECTORS

TrusteeshipTrusteeship

Determination of basic objectives and policiesDetermination of basic objectives and policies

Selection of top executives Selection of top executives

Determination of organization structureDetermination of organization structure

Approval of financial mattersApproval of financial matters

Checks and controlsChecks and controls

Legal functionsLegal functions

ROLE OF CHIEF EXECUTIVEROLE OF CHIEF EXECUTIVE

Formulation of Long – term plansFormulation of Long – term plans

Guidance and DirectionGuidance and Direction

IntegrationIntegration

StaffingStaffing

Review and ControlReview and Control

External RelationsExternal Relations

ROLE OF OTHER MANAGERSROLE OF OTHER MANAGERS

Heads of SBU / functional managersHeads of SBU / functional managers

Some managers act as directors on board usually on rotation basisSome managers act as directors on board usually on rotation basis

Eg: HULEg: HUL

Implementation of strategyImplementation of strategy

ROLE OF CONSULTANTSROLE OF CONSULTANTS Professional service performed by specially trained and experienced

persons

Advice and assist managers and administrators

Specific, time – bound assignments

Consultancy fee quite high sometimesEg: SAIL paid Rs. 8 crore to McKinsey & Company to advise on its business restructuring.

Examples of Indian Consultancy firms

A.F. Ferguson

ABC Consultants

Billimoria Consultants

Examples of Foreign Consultancy firmsMc Kinsey & CompanyArthur AndersonErnst & YoungBoston Consulting GroupKPMG

COMPETITIVE ADVANTAGE OF COMPETITIVE ADVANTAGE OF NATIONSNATIONS

What do you understand from this picture?

COMPETITIVE ADVANTAGE OF COMPETITIVE ADVANTAGE OF NATIONSNATIONS

Competitive advantage is the advantage gained over the other Competitive advantage is the advantage gained over the other competitors in terms of its offering – product, quality, price, competitors in terms of its offering – product, quality, price, technology etc.technology etc.

Porter defined the competitive advantage of a nation as its Porter defined the competitive advantage of a nation as its capacity to entice firms (both local and foreign) to use the country capacity to entice firms (both local and foreign) to use the country as a platform from which to conduct business. as a platform from which to conduct business.

Competitive advantage can be created or, at the very least, raised Competitive advantage can be created or, at the very least, raised significantly. significantly.

““National prosperity is created, not inherited.” - Michael Porter National prosperity is created, not inherited.” - Michael Porter

In a world of increasingly liberalized trade, strategy must In a world of increasingly liberalized trade, strategy must concentrate on generating and maintaining competitive concentrate on generating and maintaining competitive advantage. advantage.

Porter’s diamond of national Porter’s diamond of national ADVANTAGEADVANTAGE

Firm strategy,structure &

rivalry

FactorConditions(resources)

Demandconditions

Related andSupportingindustries