STRATEGIC MANAGEMENT

By Devansh MehtaM.PHARM.(PHARMACOLOGY)

M.B.A.(Pharmaceutical Marketing and Hospital Administration)B.Pharmacy

Contact No.:+91-8171552727

Definition

Strategic management involves the formulation and implementation of the major goals and initiatives taken by a company's top management

on behalf of owners, based on consideration of resources and an assessment of the internal and external environments in which the

organization competes

• The systematic analysis of the factors associated with customers and competitors (the external environment) and the organization itself (the internal environment) to provide the basis for maintaining optimum management practices.

• The objective of strategic management is to achieve better alignment of corporate policies and strategic priorities.

What is Strategic Planning?

• Strategic planning is an organizational management activity that is used to set priorities, focus energy and resources, strengthen operations, ensure that employees and other stakeholders are working toward common goals, establish agreement around intended outcomes/results, and assess and adjust the organization's direction in response to a changing environment. It is a disciplined effort that produces fundamental decisions and actions that shape and guide what an organization is, who it serves, what it does, and why it does it, with a focus on the future. Effective strategic planning articulates not only where an organization is going and the actions needed to make progress, but also how it will know if it is successful.

Strategic planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy

Strategic planning became prominent in corporations during the 1960s and remains an important aspect of strategic management.

Strategy has many definitions, but generally involves setting goals, determining actions to achieve the goals, and mobilizing resources to execute the actions. A strategy describes how the ends (goals) will be achieved by the

means(resources). The senior leadership of an organization is generally tasked with determining strategy. Strategy can be planned (intended) or can be observed as a pattern of activity (emergent) as the organization

adapts to its environment or competes.

Strategy includes processes of formulation and implementation; strategic planning helps coordinate both. However, strategic planning is analytical in nature (i.e., it involves "finding the dots"); strategy formation itself

involves synthesis (i.e., "connecting the dots") via strategic thinking. As such, strategic planning occurs around the strategy formation activity

Michael Porter wrote in 1980 that formulation of competitive strategy includes consideration of four key elements:

1.Company strengths and weaknesses;2.Personal values of the key implementers (i.e., management and the board);

3. Industry opportunities and threats; and4.Broader societal expectations.

What is a Strategic Plan?

A strategic plan is a document used to communicate with the organization the organizations goals, the actions needed to achieve

those goals and all of the other critical elements developed during the planning exercise.

Strategic Planning

The word "strategy" comes from the Greek strategos, referring to a military general and combining stratos (the army) and ago (to lead). The primary tasks of strategic management are to understand the environment, define organizational goals, identify options, make and implement decisions, and evaluate actual performance. Thus, strategic planning aims to exploit the new and different opportunities of tomorrow, in contrast to long-range planning, which tries to optimize for tomorrow the trends of today (Drucker 1980, p. 61).Most colleges and universities currently engage in long-range planning, but they can fruitfully augment that work by using the concepts of strategic planning and thereby enhance their ability to steer a course in a changing external environment. This section briefly describes the traditional models for long-range planning and environmental scanning and then shows how these two models can be merged to provide the basis of a strategic planning process.

Traditionally Strategy was Focused on Following

Planning consists of at least four key steps--monitoring, forecasting, goal setting, and implementing--which are intended to answer these questions: (1) Where is the organization now? (2) Where is it going? (3) Where does it want to go? and (4) What does it have to do to change where it is going to get to where it wants to go?

Performing these activities is a continuing process that, for example, produces a one-year operating plan and a five- or ten-year long-range plan every year. The long-range planning cycle begins by monitoring selected trends of interest to the organization, forecasting the expected future of those trends (usually based upon extrapolation

from historical data using regression analysis or a similar technique), defining the desired future by setting organizational goals in the context of the expected future, developing and implementing specific policies and actions designed to reduce the difference between the expected future and the desired future,

and monitoring the effects of these actions and policies on the selected trends.

The environmental scanning model begins with scanning the external environment for emerging issues that pose threats or opportunities to the organization. As part of this step, trends are specified that describe the issues and can be used to measure changes in their nature or significance. Each potential issue or trend is then analyzed (evaluation/ranking) as to the likelihood that it will emerge and the nature and degree of its impact on the organization if it should actually materialize. This stage produces a rank ordering of the issues and trends according to their importance to current or planned operations. The next stage, forecasting, focuses on developing an understanding of the expected future for the most important issues and trends. In this stage, any of the modern forecasting techniques may be used. Once the forecasts are made, each issue and trend is then monitored to track its continued relevance and to detect any major departures from the forecasts made in the preceding stage. Monitoring, in effect, identifies areas for additional and continued scanning. For example, subsequent monitoring may begin to suggest that an original forecast of the employee turnover rate is no longer credible, which would imply the need for more focused scanning, forecasting, and analysis to develop a more credible projection (see Renfro and Morrison 1984).

The Strategic Planning Process Involved amalgamation of both thinking Process

Forecasting

Monitoring

Scanning

Evaluation/ Ranking

Goal Setting

Implementing

Monitoring

Forecasting

The interrelated model, the strategic planning process, consists of six identifiable stages: environmental scanning, evaluation of issues, forecasting, goal setting, implementation, and monitoring

The merged model, then, allows information from the external environment in the form of emerging developments to enter the traditionally inwardly focused planning system, thereby enhancing the overall effectiveness of an institution's planning. More specifically, it allows the identification of issues and trends that must be used to modify the internal issues derived during monitoring.

The argument for combining these two models becomes apparent when the future that happens to the institution and the future that happens for the institution are contrasted. In the future that happens to the institution (the typical "planned" future), new developments are not anticipated before they force their way to the top of the agenda, demanding crisis management and the latest fire-fighting techniques. In this future, issues are usually defined by others whose interests do not necessarily include those of the institution or its purpose. Not only are threats from the external environment not anticipated as early as possible; key opportunities will be missed or diminished in value.In the future that happens for the institution, in contrast (the "strategic" future), administrative leadership is focused more on fire prevention and less on fire fighting. Hence, it is able to exercise more careful judgment in the orderly and efficient allocation of resources. Certainly management will still have to deal with unforeseen developments, but they will probably be fewer and less traumatic. Thus, institutions will be able to pursue their mission with greater confidence and consistency because they will be interrupted by fewer and smaller fire-fighting exercises.

What is Strategic Management?  What is Strategy Execution?

• Strategic management is the comprehensive collection of ongoing activities and processes that organizations use to systematically coordinate and align resources and actions with mission, vision and strategy throughout an organization. Strategic management activities transform the static plan into a system that provides strategic performance feedback to decision making and enables the plan to evolve and grow as requirements and other circumstances change. Strategy Execution is basically synonymous with Strategy Management and amounts to the systematic implementation of a strategy.

What Are the Steps in Strategic Planning & Management?

There are many different frameworks and methodologies for strategic planning and management. While there are no absolute rules regarding the right framework, most follow a similar pattern and have common attributes.Many frameworks cycle through some variation on some very basic phases:

1) analysis or assessment, where an understanding of the current internal and external environments is developed, 2) strategy formulation, where high level strategy is developed and a basic organization level strategic plan is documented 3) strategy execution, where the high level plan is translated into more operational planning and action items, and 4) evaluation or sustainment / management phase, where ongoing refinement and evaluation of performance, culture, communications, data reporting, and other strategic management issues occurs.

Concept of Planning

• Business planning is important for businesses, but few take the time to plan using sound business concepts.

• Effective business planning requires a focus on the organization's mission, vision and values, along with careful consideration of the impacts on the organization from both internal and external forces

• Based on data gathered through a thorough situation analysis, a business then establishes goals and objectives that they will plan to meet through effective strategies and tactics.

Situation Analysis

• A situation analysis is a concept of business planning that involves a thorough review of the internal and external environment to provide a foundation for businesses to determine their goals and objectives. Situation analysis encompasses considerations about existing and desired customers, existing and impending competitors, as well as industry and environmental issues that could impact the business. The collection of this data is used as an input into a SWOT analysis--the consideration of the strengths, weaknesses, opportunities and threats that the business faces.

Mission, Vision and Value Alignment

• Alignment is a critical concept of business planning. Whether or not a business has a stated mission and vision, its owners certainly have an idea of why the business exists, what it offers and who it serves. Values provide an indication of the company's beliefs in terms of how it operates. In business planning, goals and objectives should be aligned with the mission, vision and values of an organization. A not-for-profit health care organization, for instance, will not plan to build a for-profit health club before investing in needed upgrades to hospital facilities.

Clear Goals and Objectives

• Clear goals and objectives in business planning ensure that everyone involved in implementing the plan know what they are attempting to achieve. In addition, clear goals and objectives provide an indication of the resources that will be necessary for success. The resources required to sell $1 million in products will be significantly more than what would be required to sell $100,000 in products, for instance. Measurable goals and objectives provide the basis for implementation of the plan and measurement of plan progress.

Focused Strategies and Tactics

• Your strategies and tactics should be designed to achieve the goals and objectives you established. Strategies are broad and are designed to either capitalize on your strengths and weaknesses or overcome your weaknesses and threats. For instance, a strategy might be: "Leverage high customer satisfaction scores to attract new business." Tactics are more specific and indicate specific operational tasks that must be accomplised to achieve strategies. An example of a tactic might be: "Tweet about customer service satisfaction scores."

Concept of Planning

Planning is a process by which an Individual or Organization decides in advance on some future course of actions

Planning is process of determining on how the organization can get there where it wants to go.

The Nature of Planning

• The essential nature of planning, • Deciding the Contribution to purpose and objectives• Primacy of planning• Pervasiveness of Planning• Efficiency of plan

Deciding the Contribution to purpose and objectives

• The purpose of every plan and all derivative plans is to facilitate the accomplishment of enterprise purpose and objectives.

• Planning alone cannot alone make enterprise successful, What is Required is Course of Actions

• Actions speak louder than words.

Primacy of Planning

• Planning is the primary function of the management.• Its basis lies in Organizing, influencing, staffing, leading and

controlling functions of Managers.

Plans Objectives &

How to achieve them

What Kind of OrganizationStructure ??

What Kind of People We need & When ??

How Effectively you canLead or direct People ?

By furnishing standards of

Control

Planning is unique in that, IT establishes the objectives necessary for all group efforts

Planning is Function of All Managers

• It varies with the hierarchy and position of the managers along with nature of policies and guidelines, for each respective managers.

• If planning is not there it raise doubt, and Hoch Poch is the system as well as outside the system.

Planning (also called forethought) is the process of thinking about and organizing the activities required to achieve a desired goal

 Psychological aspects that require conceptual skills

Planning Process

• Identify the Goals, Objective, Purpose to be achieved.

• Formulate strategies to achieve them.

• Arranging the plans and due course of actions which needs to be Done.

• Implement, directs, and Monitor all steps in their Proper sequence

Patrick Montana and Bruce Charnov outline a three-step result-oriented process for planning

• Choosing a destination

• Evaluating alternative routes, and

• Deciding the specific course of your plan.

Advantages of Planning

• Planning increases the efficiency of an organization. • It reduces the risks involved in modern business activities. • It facilitates pring the available time and resources. • The concept of planning is to identify what the organization wants to

do by using the four questions which are • where are we today in terms of our business or strategy planning?• Where are we going? • Where do we want to go? • How are we going to get there?...

Efficiency of Plan

• The efficiency of Plan is measured by the amount it contributes to purpose and objectives offset by the costs and other unsought consequences required to formulate and operate it.

The Importance of Planning

• There are four major Goals of Planning

• To offset Uncertainty and change.• To focus attention of Objectives.• To Gain economic Operations• To facilitate Control

To resist Uncertainty and Change

• It has Two functions• To be Protective : Minimize the Risk

• To be Affirmative: Increase the degree of Organizational success.

To focus attention on Objectives

• Every single aspect of Planning Shall be Towards achieving Organization Goals and Objectives

• The Over all plan of Each business subunit should Justify the Main organizational Plans or Objectives

• Focus shall be on Mission and Vision of the Organization

• Let none purpose left to achieve these Goals or Objectives

To Gain Economical Actions

• Planning Minimizes cost, as it focuses on increasing the efficiency and effectiveness of the Goals and targets the Organization needs to achieve

• Every single aspect of Planning focuses on the minute details of the organization functions, leading to strategic development of guidelines to ensure that Organizational Missions and Visions are set in together to achieve One Major Goal of Organization, i.e., To Succeed, Come what may in front of the Organization.

The Benefits and

Importance of Planning

It Helps in establishment of Organizational DirectionIt helps angers to be future Oriented

It enhances Decision MakingIt Helps in establishment of Organizational Direction

It Emphasizes on the organizational objectives

It Pushes managers to coordinate their Decisions

It helps in measurement of Organizational Accomplishments

Typical Structure of Business Plan

• Executive Summary of Business To Do !• Mission Statement• Business Description• Business Environment Analysis• SWOT analysis• Industry Background• Competitor analysis• Market Analysis

Typical Structure of Business Plan

• Market Analysis : Thorough and complete detail analysis• Marketing Plans• Operations plans• Management Summary• Financial Plan• Attachments and Milestones

Typical Questions for Doing A Business

• What Problems does company’s product or service solve ?• What is Companies solution to the problem ?• Who are the Companies customers ?• How will the company market and sell its products ?• What is the size of the market for this solution ?• What is the Business Model for the Company ?• How will the company earn money ?

Typical Questions for Doing the Business

• Who are the Competitors ?• How will the Company, take advantage and have competitive edge over its

competitors ?• How will company manage its operations ?• How will company manage its Growth ?• Who will run the company ? What qualifications do they have to do the role

in the company ?• What are the threats and Risks for doing the Business?• What are companies, resources plan? How will it manage Capital?• What are companies historical and projected financial statements ?

Models of Strategic Planning

• P.E.S.T. ANALYSIS

• SCENARIO PLANNING

• PORTERS FIVE FORCES MODEL

• SWOT ANALYSIS

• BCG MATRIX

Industry rivalry

Bargaining Power of Suppliers

Threat of Substitutes

Bargaining power of

Buyers

Threats of New Entrants

Scenario planning, also called scenario thinking or scenario analysis, is a strategic planning method that some organizations use to make flexible long-term plans. It is in large part an adaptation and generalization of classic methods used by military intelligence.

How Scenario Planning IS DONE ?????• Decide on the key question to be answered by the analysis. By doing this, it is possible to assess whether scenario

planning is preferred over the other methods. If the question is based on small changes or a very small number of elements, other more formalized methods may be more useful.

• Set the time and scope of the analysis. Take into consideration how quickly changes have happened in the past, and try to assess to what degree it is possible to predict common trends in demographics, product life cycles. A usual timeframe can be five to 10 years.

• Identify major stakeholders. Decide who will be affected and have an interest in the possible outcomes. Identify their current interests, whether and why these interests have changed over time in the past.

• Map basic trends and driving forces. This includes industry, economic, political, technological, legal, and societal trends. Assess to what degree these trends will affect your research question. Describe each trend, how and why it will affect the organisation. In this step of the process, brainstorming is commonly used, where all trends that can be thought of are presented before they are assessed, to capture possible group thinking and tunnel vision.

• Find key uncertainties. Map the driving forces on two axes, assessing each force on an uncertain/(relatively) predictable and important/unimportant scale. All driving forces that are considered unimportant are discarded. Important driving forces that are relatively predictable (ex. demographics) can be included in any scenario, so the scenarios should not be based on these. This leaves you with a number of important and unpredictable driving forces. At this point, it is also useful to assess whether any linkages between driving forces exist, and rule out any "impossible" scenarios (ex. full employment and zero inflation).

How Scenario Planning is Done ?????• Check for the possibility to group the linked forces and if possible, reduce the forces to the two most important. (To allow

the scenarios to be presented in a neat xy-diagram)• Identify the extremes of the possible outcomes of the two driving forces and check the dimensions for consistency and

plausibility. Three key points should be assessed:• Time frame: are the trends compatible within the time frame in question?• Internal consistency: do the forces describe uncertainties that can construct probable scenarios.• Vs the stakeholders: are any stakeholders currently in disequilibrium compared to their preferred situation, and will this evolve the

scenario? Is it possible to create probable scenarios when considering the stakeholders? This is most important when creating macro-scenarios where governments, large organisations et al. will try to influence the outcome.

• Define the scenarios, plotting them on a grid if possible. Usually, two to four scenarios are constructed. The current situation does not need to be in the middle of the diagram (inflation may already be low), and possible scenarios may keep one (or more) of the forces relatively constant, especially if using three or more driving forces. One approach can be to create all positive elements into one scenario and all negative elements (relative to the current situation) in another scenario, then refining these. In the end, try to avoid pure best-case and worst-case scenarios.

• Write out the scenarios. Narrate what has happened and what the reasons can be for the proposed situation. Try to include good reasons why the changes have occurred as this helps the further analysis. Finally, give each scenario a descriptive (and catchy) name to ease later reference.

• Assess the scenarios. Are they relevant for the goal? Are they internally consistent? Are they archetypical? Do they represent relatively stable outcome situations?

How Scenario Planning is Done????

• Identify research needs. Based on the scenarios, assess where more information is needed. Where needed, obtain more information on the motivations of stakeholders, possible innovations that may occur in the industry and so on.

• Develop quantitative methods. If possible, develop models to help quantify consequences of the various scenarios, such as growth rate, cash flow etc. This step does of course require a significant amount of work compared to the others, and may be left out in back-of-the-envelope-analyses.

• Converge towards decision scenarios. Retrace the steps above in an iterative process until you reach scenarios which address the fundamental issues facing the organization. Try to assess upsides and downsides of the possible scenarios.