STRATEGIC MANAGEMENT

STRATEGY

• Strategies are the means by which long term objectives will be achieved.

Business strategies may include geographical expansion, diversification,

product development, joint ventures.

• A unified, Comprehensive & integrated plan to achieve organizational

objective is known as Strategy.

STRATEGIC MANAGEMENT

Strategic management is defined as the set of decisions and actions in

formulation and implementation of strategies designed to achieve the

objectives of an organization.

CHARACTERISTICS

• Strategic issues warrant Top management decisions.

• Strategic issues involve the allocation of large amounts and resources.

• Strategic issues are likely to have impact on long term prosperity.

• Strategic issues have consequences of multi business.

• Strategic issues are future oriented.

• Strategic issues give top importance to the external environment.

• Strategic management as a process.

• Strategic management stress both Efficiency and Effectiveness.

• To Makes discipline.

• To make control.

Need of Strategic Management

• Due to change

• To provide guide lines

• Research and development

• Probability for business performance

• Systemized decision

• Improves Communication

• Allocation of resource

Improves Coordination

HIERARCHY IN STRATEGIC MANAGEMENT

1. MULTIPLE BUSINESS FIRMS :

(1)CORPORATE LEVEL

(2)BUSINESS LEVEL

(3)FUNCTIONAL LEVEL

2. SINGLE BUSINESS FIRMS :

(1)CORPORATE LEVEL/BUSINESS LEVEL

(2)FUNCTIONAL LEVEL

1. MULTIPLE BUSINESS FIRMS :-

CORPORATE LEVEL CORPORATE STRATEGIES

BUSINESS LEVEL SBU A SBU B SBU C

(Strategic Business Unit)

FUNCTIONAL LEVEL Finance Marketing Operation H.R I.T

2. SINGLE BUSINESS FIRMS :-

CORPORATE LEVEL CORPORATE LEVEL/BUSINESS LEVEL

FUNCTIONAL LEVEL Finance Marketing Operation H.R I.T

CORPORATE LEVEL STRATEGIES

Consisting of mainly members of board of directors and CEOs. It is an

overarching plan of action performed by different SBUs. The plan deals with

objectives of the company, allocation of resources and coordination of the SBUs

for the optimal performance.

Business level

SBU level strategy is a comprehensive plan providing objectives of SBUs,

allocation of resources among functional areas and coordination between them for

making an optimal contribution to the achievement of corporate level objectives

Functional level strategies

It deals with a relatively restricted plan providing objectives for a specific

function, allocation of resources among different operations within that functional

area and coordination between them for optimal contribution to the achievement

of SBU and corporate level objectives.

BENEFITS OF STRATEGIC MANAGEMENT

With the help of SM the problems can be prevented in the organization.

Group based strategic decisions are most likely to reflect the best available

alternatives.

Motivation to the employees.

Gaps can be reduced among the employees.

• Resistance to the change can be reduced.

• It allows more effective allocation of time and resources to identified

opportunities.

• It helps to integrate the behavior of individuals into a total effort.

• It provides a cooperative, integrated and enthusiastic approach to tackling

problems and opportunities.

• It gives a degree of discipline and formality to the management of a

business.

WHY SOME FIRMS AVOID STRATEGIC PLANNING?

1. Waste of time.

2. Too expensive.

3. Laziness .

4. Overconfidence .

5. Prior bad experience.

6. Content with success.

LIMITATIONS

• Using strategic planning to gain control over decisions and resources.

• Doing strategic planning only for regulatory requirements.

• Failing to communicate the plans to the employees.

• Top managers not actively supporting the strategic planning process.

• Being so formal that flexibility and creativity are stifled.

STRATEGIC MANAGEMENT PROCESS

For all types business

1. Strategic Intent

2. SWOT Analysis

3. Strategic Alternatives

4. Strategic Analysis &choice Strategic Control

5. Strategy Implementation

6. Strategic Evaluation

1. Strategic intent

• Formulating mission and mission statement.

• Business definition in terms of customer, product and technology.

• Formulating long term objectives.

2. SWOT/ Environment Analysis

Analysis of general environment.

Preparation of environmental threat and opportunity profile.

3. Strategic alternatives

1. Growth strategy

2. Diversification strategy

3. Merger & acquisition strategy

4. Joint Venture strategy

5. Business restructuring strategy

4. Strategic analysis and choice

1. Focusing on strategic alternatives

2. Evaluating strategic alternatives

3. Considering decision factors

4. Strategic choice

5. Strategy implementation

1. Institutionalization of strategy

2. Structural implementation

3. Functional implementation

(Prescribing policies & strategies in Production, Marketing, Finance, HR)

• Organizational change and innovation

(Implementing change & innovation, managing organizational innovation,

Creating learning organization.)

6. Strategy evaluation and control

Designing evaluation & control system.

Setting criteria for evaluation & control

ORGANIZATIONAL MISSION AND OBJECTIVES

Vision has been defined in several ways.

o Kotter defines it as a “description of something(an organization ,corporate

culture , a business , a technology , an activity) in future”.

o EI-Namaki considers it as a “mental perception of the kind of environment

an individual, or an organization, aspires to create within a broad time horizon

and the underlying conditions for the actualisation of this perception”

o Miller and Dess view it simply as the “category of intentions that are broad ,

all inclusive and forward thinking.”

o The common stand of though evident in these definitions relates vision

being future aspirations that lead to an inspiration to be best in one’s field of

activity.

The benefits of having a Vision

• Good visions are inspiring.

• Visions represent a discontinuity, a step function and a jump ahead so that

the company knows what it is to be.

• Good visions help in the creation of common identity.

• Good visions are competitive, original and unique.

• Good visions foster (promote) long term thinking.

• Good vision foster (promote) risk taking and experimentation.

• Good vision represents integrity and can be used for the benefit of people.

MISSION

THOMPSON defines mission as the “essential purpose of the organization,

concerning particularly why it is an existence , the nature of business it is in, and

the customers it seeks to serve and satisfy.

Hunger and Wheelen says that mission is the “purpose or reason for the

organization’s existence.”

Difference between mission statement & vision statement

A mission statement answers three key questions:

What do we do?

For whom do we do it?

What is the benefit?

A vision statement, on the other hand, describes how the future will look if the

organization achieves its mission. A mission statement gives the overall purpose

of an organization, while a vision statement describes a picture of the "preferred

future.”

Characteristics of Mission Statement

1. It should be feasible.

2. It should be precise.

3. It should be clear.

4. It should be motivating.

5. It should be distinctive.

6. It should indicate major components of strategy.

7. It should indicate how objectives are to be accomplished

Need for Mission

1. To ensure unity of purpose within the organization.

2. To provide a basis for motivation.

3. To develop a basis , or standard, for allocating organization’s resources.

4. To specify organizational purposes and the translation of these purposes into

goals in such a way that cost , time and performance parameters can be

evaluate and control.

5. To facilitate the translation of objectives and goals into a work structure.

Components of Mission Statement

1. Customers – who are the firm’s customers?

2. Products or Services- what are the firm’s major products or services.

3. Markets- Geographically, where does the firm compete.

4. Technology- Is the firm technologically current?

5. Concern for survival , growth & profitability- is the firm committed to

growth and financial soundness ?

6. Philosophy- What are the basic beliefs ,values , aspirations and ethical

priorities of the firm ?

7. Self concept- what is the firm’s distinctive competence or major competitive

advantage ?

8. Concern for public image- is the firm responsive to social , community , and

environmental concern ?

9. Concern for employees-are the employees a valuable asset of the firm ?

Business definition

A business (also known as enterprise or firm) is an organization designed to

provide goods, services, or both to consumers..Like strategy , business could

either be defined at corporate or SBU levels. A single business firm is active in

just in one area so its business definition is simple. A multi business firm would

have a separate business definition for each of its businesses.

Dimensions of Business Definition

Three Dimensions for Defining a Business

Customer Function. (What is being satisfied?)

Customer Groups Alternative technologies

(Who is being satisfied) (How the need is being satisfied)

GOALS AND OBJECTIVES

Goals denote what an organization hopes to accomplished in a future period of

time.

Objectives are the ends that states that specifically how the goals shall be achieved

. In this way objectives make the goals operational.

Role of objectives

Objectives define the organization’s relationship with its environment.

Objectives help an organization to pursue its vision and mission.

Objectives provide the basis for strategic decision making.

Objectives provide the standards for performance appraisal.

Characteristics of Objective

• Objectives should be understandable.

• Objectives should be concrete and specific.

• Objectives should be related to a time frame.

• Objectives should be measurable and controllable.

• Objectives should be challenging.

• Different Objectives should correlate with each other.

• Objectives should be set within constraints.

What objectives are set

1. Profit.

2. Marketing.

3. Growth.

4. Employee’s welfare.

5. Social responsibility

How objectives are formulated

1. The forces in the environment.

2. Realities of an enterprise’s resources and internal power relationships.

3. The value system of top executives.

4. Awareness by management of the past objectives of the firm.

Environment Appraisal

The environment of any organization is “the aggregate of all conditions , events &

influences that surround and affect it.

Characteristics of environment

1. Environment is complex.

2. Environment is dynamic.

3. Environment is multi-faceted.

4. Environment has a far-reaching impact.

Environmental factors

1. Economic environment.

2. Political environment.

3. Technological environment.

4. Socio- cultural environment.

5. International environment.(Economic factors ,Tax factors , Political legal

factors , Human Resource factors , Geographic and Competitive factors ,

Socio – Culture factors.)

Role of Environmental Analysis

Role of environment analysis in strategy can be studied with the concept of

SWOT

S- STRENGTHS

W-WEAKNESS

O-OPPORTUNITY

T-THREAT

With all of above factors we can make the strategies to improve our organisation.

Environmental scanning

The process by which organisation monitor their relevant environment to identify

opportunities and threats affecting their business is known as environmental

scanning.

Approaches to environmental scanning

Systematic Approach - under this approach information for environmental

scanning is collected systematically. Information related to markets and

customers, the changes in legislation and regulations , governmental policies

and so on, is collected continuously to monitor changes .

• Ad hoc approach- In this the organisation may conduct special surveys to

deal with specific environment issues from time to time. e.g. special

projects, evaluate existing strategies .

• Processed –form approach - In this the organisation uses information in a

processed form, available from different sources both inside and outside the

organisation (various Govt. agencies ).

7. TYPES OF STRATEGIES

GENERIC STRATEGIES

• COST LEADERSHIP STRATEGY(That allows the firm to excel

competitors by least cost)

• DIFFERENTIAL STRATEGY(that is making products & services more

valuable than competitors)

FOCUS STRATEGY(it is selecting of one or two segments in the total

market to meet the requirement of target group of customers)

Vertical Integration Strategies

• Forward integration

• Backward integration

• Horizontal integration

o Forward integration

• Gaining ownership or increased control over distributors or retailers

o Guidelines for Forward Integration

1. Present distributors are expensive, unreliable, or incapable of meeting

firm’s needs

2. Availability of quality distributors is limited.

3. When firm competes in an industry that is expected to grow markedly.

4. Present distributor have high profit margins.

Backward integration

• Seeking ownership or increased control of a firm’s suppliers

When present suppliers are expensive, unreliable, or incapable of

meeting needs

Number of suppliers is small and number of competitors large

High growth in industry sector

Firm has both capital and human resources to manage new business

Advantages of stable prices are important

Horizontal Integration:-

Seeking ownership or increased control over competitors

Guidelines for Horizontal Integration

Firm can gain monopolistic characteristics without being challenged by

federal government

Guidelines for Backward Integration

Competes in growing industry

Increased economies of scale provide major competitive advantages

Faltering due to lack of managerial expertise or need for particular

resources

8. Intensive Strategies

• Market penetration

• Market development

• Product development

Market penetration (Seeking increased market share for present

products or services in present markets through greater marketing

efforts)

GUIDELINES

Current markets not saturated.

Usage rate of present customers can be increased significantly.

Market shares of competitors declining while total industry sales

increasing.

Market Development

(Introducing present products or services into new geographic area)

GUIDELINES:

New channels of distribution that are reliable, inexpensive, and of

good quality.

Firm is very successful at what it does.

Untapped or unsaturated markets.

Capital and human resources necessary to manage expanded

operations.

Excess production capacity.

• Product Development ( Seeking increased sales by improving present

products or services or developing new ones)

• GUIDELINES:

Products in maturity stage of life cycle

Major competitors offer better-quality products at comparable prices

Compete in high-growth industry

Strong research and development capabilities.

Diversification Strategies

Concentric diversification

Conglomerate diversification

Horizontal diversification

Concentric Diversification ( Adding new, but related, products or

services) .Guidelines:

o Competes in no- or slow-growth industry

o Adding new & related products increases sales of current products

o New & related products offered at competitive prices

o Current products are in decline stage of the product life cycle

o Strong management team

Conglomerate Diversification

(Adding new, unrelated products or services)

GUIDELINES:

o Declining annual sales and profits

o Capital and managerial talent to compete successfully in a new

industry

o Exiting markets for present products are saturated.

Horizontal Diversification:- ( Adding new, unrelated products or services

for present customers)

Guidelines

o Revenues from current products/services would increase significantly

by adding the new unrelated products

o Highly competitive

o Present distribution channels can be used to market new products to

current customers

Defensive Strategies

1. Joint venture

2. Retrenchment

3. Divestiture

4. Liquidation

1. Joint Venture ( Two or more sponsoring firms forming a separate

organization for cooperative purposes)

a. Domestic forms joint venture with foreign firm, can obtain local

management to reduce certain risks

b. Overwhelming resources and risks where project is potentially

very profitable

c. Two or more smaller firms have trouble competing with larger

firm

d. A need exists to introduce a new technology quickly

2. Retrenchment ( Regrouping through cost and asset reduction to reverse

declining sales and profit .

a. Firm has failed to meet its objectives and goals consistently over

time

b. Firm is one of the weaker competitors

c. Inefficiency, low profitability, poor employee morale, and pressure

from stockholders to improve performance.

d. When an organization’s strategic managers have failed

3. Divestiture ( Selling a division or part of an organization)

a. When firm has pursued retrenchment but failed to attain needed

improvements

b. When a division needs more resources than the firm can provide

c. When a division is responsible for the firm’s overall poor

performance

d. When a large amount of cash is needed and cannot be obtained

from other sources.

4. Liquidation ( Selling all of a company’s assets, in parts, for their tangible

worth)

a. When both retrenchment and divestiture have been pursued

unsuccessfully

b. If the only alternative is bankruptcy, liquidation is an orderly

alternative

c. When stockholders can minimize their losses by selling the firm’s

assets

Environmental Threat & Opportunity Profile (ETOP)

• Environmental diagnosis is the assessment of environmental factors in terms

of opportunity or threat & the importance of their impact.

• Preparation of ETOP

1. Identification of different components of relevant environment.

2. Assessing Significance of environmental factors.

3. Assessing impact factors.

4. Combining significance & impact factors.

Organizational Capability Profile (OCP)

OCP is a summarized statement which provides an overview of strength &

weakness in key result areas likely to affect future of the organization. Information

may be in qualitative and quantitative. In qualitative terms, strengths & weaknesses

are described in the form of narration & in quantitative terms in the form of various

point scales (from 1 to 5 etc.)

Strategic Advantage Profile (SAP)

IT is the process by which strategists examine a firm’s resources &

capabilities in the key functional areas to determine where the firm has

significant strengths & weakness so that it can exploit the opportunities &

meet the threats in the environment.

The essential purpose of each analysis is to take advantage of the distinctive

competencies of the firm by way of :

A. developing different strategies & following a course of action different

from those of rival firms.

B. making it difficult for other firms to duplicate the strategies.

• Analysis of the following factors is must

1. marketing

2. finance

3. production

4. Personnel and labour relations

5. R& D

6. Management

CORPORATE PORTFOLIO ANALYSIS

• CPA is a set of techniques that help strategists in taking strategic decisions

with regard to individual product in a firm portfolio. The most common

technique in this is the Boston Consulting Group Matrix (BCG).

Competitive Analysis: Porter’s Five Forces

Rivalry among Competing firms

The central point lays the stress on rivalry of the competing firm. This

relates to the intensity of the rivalry.

How the firms compete with each other and to what extent? That should be

taken into account very carefully.

Potential entry of new competitors

Potential entry for new competitors shows a balance between

different firms competing in a market. It also refers whenever a new partner

enter into a market he may become threat for one and opportunity for other

competing partners. As all the new entries and existing firms are competing

with each other so the new entry will definitely make an effect on every one

transacting in the market.

Potential development of substitute products

A potential development of substitute products also develops an

environment of competition in the market among the competing partners. As

all firms want to compete in term of quality and substitute will lasts for

longer in the market if the quality of the substitute will be greater than the

existing alternate.

Collective bargaining power of suppliers and consumers

if vendors are less in the market and the organizations that have to

purchase from those vendors are more then the demand for those suppliers

will be more as the firms have to purchase from that less suppliers. The

reverse is the case if suppliers are more and buyers are less. Then the demand

for those suppliers will be less. Such circumstances create difficulties in

bargaining.

Mc Kinsey’s 7s Framework

The model is based on the theory that, for an organization to

perform well, these seven elements need to be aligned and mutually

reinforcing. So, the model can be used to help identify what needs to be

realigned to improve performance, or to maintain performance during other

types of change. Whatever the type of change – restructuring, new

processes, organizational merger, new systems, change of leadership, and so

on – the model can be used to understand how the organizational elements

are interrelated.

• Strategy: the plan devised to maintain and build competitive advantage over

the competition.

• Structure: the way the organization is structured and who reports to whom.

• Systems: the daily activities and procedures that staff members engage in to

get the job done.

• Shared Values:

• What is the corporate/team culture?

• How strong are the values?

What are the fundamental values that the company/team was built on?

• Style: the style of leadership adopted.

• Staff: the employees and their general capabilities.

• Skills: the actual skills and competencies of the employees working for the

company.

• Placing Shared Values in the middle of the model emphasizes that these

values are central to the development of all the other critical elements. The

company's structure, strategy, systems, style, staff and skills all stem from

why the organization was originally created, and what it stands for. The

original vision of the company was formed from the values of the creators.

As the values change, so do all the other elements

GAPS MODEL

Customer Gap

This is the focus of the model and in many respects the gap most

providers should address first. It represents the difference between 'expected

service' and 'perceived service‘. To close this gap, providers need to consider

closing the following four gaps.

GAP 1

It is that the service provider does not accurately know, understand or

appreciate what their customer expects. All service employees should be

charged with closing the resultant gap by changing or influencing service

policies and procedures. The gap can exist because there is insufficient or no

dialogue between providers and users. It can also exist because the

organization is unwilling to investigate expectations of the customer.

GAP 2

It is the difference between a service providers' perception of clients / users

expectations and the subsequent development of customer-driven designs

and standards. It is not enough to simply understand clients / users

perceptions, that knowledge must translate itself to meaningful service

offerings at an appropriate level or to an appropriate standard. The gap may

exist because the personnel responsible for determining and setting standards

are of the opinion that clients / users expectations are unrealistic or

unreasonable.

GAP 3

This is the gap between the service designs and standards and actual service

delivery. In other words having guidelines, manuals and well-communicated

standards is not enough to guarantee excellent service. Resources in the form

of people, systems and appropriate technology also need to be in place and

adequately monitored. Contact personnel must be properly trained,

motivated, measured and compensated according to service delivery

standards.

• Thus, successful implementation of service standards that adequately reflect

clients users expectations is meaningless if the quality of delivery falls

short. Ensuring that adequate resources are available is the only way the gap

can be narrowed.

GAP 4

The final gap exists when there is a difference between actual service

delivery and the external communications and promises made by the

provider. These can be in the form of leaflets, web pages, presentations and

any other promotional media.

Strategy implementation

• “The implementation of policies & strategies is concerned with the design

and management of systems to achieve the best integration of people,

structure, processes and resources, in reaching organizational purposes.”

• “strategy implementation may be said to consists of securing resources,

organizing these resources and directing the use of these resources within

and outside the organization.”

Issues in strategies implementation

1. Project implementation

2. Procedural implementation

3. Resource allocation

4. Structural implementation

5. Behavioural implementation

6. Functional & operational implementation

1. Project implementation

Phases of a project

1. Conception phase (idea generation)

2. Definition phase (priority arrangement of ideas)

3. Planning & organizing phase(creation of project team, arrangement of funds,

infrastructure)

4. Implementation phase

5. Clean phase (disbanding of project infrastructure & project is handed over to

those who run it.)

Use of PERT/CPM in Project Implementation

• It contributes in project implementation in the following ways:

1. It forces the managers to plan because it is impossible to make a time event

analysis without planning.

2. It focuses attention on critical activities because a delay in their performance

will delay the whole projects.

The process in preparation of PERT/CPM

1. Identification of activities.

2. Sequential arrangements of activities.

3. Time estimates of activities

4. Network construction

5. Critical path (where critical activities are determined)

2. Procedural implementation

Any organization which is planning to implement strategies must be aware

of the procedural framework within which the plans, programmes & projects

have to be approved by the government at the central, state & local levels.

The regulatory elements to be reviewed are as follows

1. Formation of company.

2. Licensing procedures.

3. SEBI requirements.

4. Monopolies & Restrictive Trade Practices (MRTP) requirements.

5. FEMA requirements.

6. Import & export requirements.

7. Patenting and trademarks requirements.

8. Labour legislation requirements.

9. Environmental protection & pollution control requirements.

10.Consumer protection requirements.

11.Incentives & facilities benefits.

Strategy formulation and implementation can be contrasted in the

following ways

1. Strategy formulation is positioning forces before the action.

2. Strategy implementation is managing forces during the action.

3. Strategy formulation focuses on effectiveness.

4. Strategy implementation focuses on efficiency.

5. Strategy formulation is primarily an intellectual process.

6. Strategy implementation is primarily an operational process

7. Strategy formulation requires good intuitive and analytical skills.

8. Strategy implementation requires special motivation and leadership skills.

9. Strategy formulation requires coordination among a few individuals.

10.Strategy implementation requires coordination among many persons.

3. RESOURCE ALLOCATION

• In strategic planning, a resource-allocation decision is a plan for using

available resources, especially human resources especially in the near term,

to achieve goals for the future. It is the process of allocating resources

among the various projects or business units.

Procurement of resources

1. Financial resources.

2. Physical resources.

3. Human resources.

4. Technological resources

Approaches to Resource Allocation

• Top down approach (top to operational level)

• Bottom up approach (starting from operational level)

• Mix of two above

Means of Resource Allocation

Strategic budgeting :

In this the Position papers on different aspects such as

environment , marketing , past performance and so on are prepared and presented

to the top management which uses them to formulate corporate policy guidelines

and stating long & short term goals.

The operating management meanwhile prepares operational plans and sets

targets which are coordinated with corporate objectives . Based on resources and

corporate guidelines, the strategic budget is prepared and presented to top

management for approval and then communicated down the line & task of

implementation taken up.

• BCG –based budgeting.

• PLC based budgeting.

• Zero based budgeting(in this the strategist justify resource allocation demand

, not on the basis of the previous years’ budget, but on “ ground zero”, which

is based on fresh calculation of costs each time a plan is to be implemented.)

Factors affecting Resource Allocation

• Preference of dominant strategists.

• Internal policies.

• External influences. (Government policies.)

Difficulties in Resource Allocation

• Resources are limited.

• There are competing organizational units with each trying to get more.

• Organization’s past commitments.

4. Structural implementation

• An organization structure is the way in which the tasks and subtasks

required to implement a strategy are arranged. the various structures :

• 1.Entrepreneurial structure.

• 2.Functional structure.

• 3. Divisional structure.

• 4. Strategic business unit.

• 5. Matrix structure.

Entrepreneurial Structure

• Organization that is owned & manage by one person. E.g SSI. These

organisations are, product or service based firms single-business that serve

local markets. The owner looks after all decisions , whether they are day to

day operational matters or strategic in nature.

Owner - Manager

Employees

Advantages

• Quick decision making.

• Timely response.

• Informal and simple organisation.

DISADVANTAGES:

• Excessive reliance on owner – manager.

• Inadequate for future requirements if volume of business expands.

Functional Structure

As the volume of business expands , the entrepreneurial structure outlives its

usefulness. The need arises for specialized skills & delegation of authority to

managers who can look after different functional areas.

General manager

Prod mgr. Mkt mgr. Fin mgr. Personnel mgr.

Advantages :

• Efficient distribution of work.

• Delegation of day to day operational function.

• Time for top mgt. to look for strategic decisions.

Disadvantages:

• Misuse of authority.

• Creates difficulty in coordination.

• Complicated

• No unity or command.

Divisional Structure

In this work is divided on the basis of product lines, types of

customers served, geographical area covered, and then separate divisions or groups

are created and placed under the divisional level management. The functional

structure still operates under divisional structures.

Advantages

• Generates quick response to environmental changes.

• Enables top mgt. to focus on strategic matters.

• The efficiency level is at its peak.

Disadvantages :

• Costly.

• Problem in allocation of resources.

• Problems of coordination.

• Competition between divisions.

Strategic business units

SBU has been defined by Sharplin as “any part of a business

organization which is treated separately for strategic management purposes.”

When the organization faces difficulty in managing divisional operations

due to an increasing size & number of divisions, it becomes difficult for the

top mgt. to exercise strategic control. Then the concept of SBU is

helpful .SBU is considers as a headquarter to control the divisions coming

under it.

CEO

GROUP HEAD SBU 1 GROUP HEAD SBU 2 GROUP HEAD SBU 3

Divisions Divisions Divisions

A , B, C D, E, F G, H, I

ADVANTAGES

• Better coordination .

• Better control.

• Assured accountability.

Disadvantages:

• Costly.

• Gap between divisions and head officies.

• Politics.

Matrix Structure

The result is matrix structure requirement. This type of structure is created

by assigning In large organisations, there is often need to work on major

projects., each of which is strategically significant functional specialists to

work on a special project. For the duration of the project, the specialists from

different areas form a group or team and report to a team leader. They may

also work in their respective parent departments.

Advantages :

• Enhance creativity because of various talents.

• Provides good exposure to specialists in general management.

• Participative management

Disadvantages :

• Dual accountability creates confusion and difficulty for individual team

members.

• Shared authority may create communication problems.

Behavioral Implementation

Those aspects of strategy implementation that have an impact on the

behaviour of strategists in implementing the chosen strategies. The major

issues are:

Leadership & styles.

Corporate culture.

Corporate politics and power.

Personal Values

Business ethics.

Leadership & styles

• Leadership plays an important role in implementing the strategies in the

organisation. The leader can easily communicate the various policies to the

workers. The leaders should always be ready to take risks. He should take

work as team from the employees.

Corporate culture

The culture of organisation also put impact on the implementation of the strategies.

In a well mannered & well organised organisation it is easier to implement the

strategies. E.g A participative type of organisation.

Corporate politics and power

Politics and power affect the way a strategy is formulated and implemented. A

manager cannot effectively formulate and implement strategy without being

perceptive about company politics and the managers have to use his powers.

Personal Values & Business Ethics

Personal Values & Business Ethics seek to prevent an indiscriminate use of

power & politics within organisation. The personal values of the employees should

not get hurt by the organisation. And with the help of ethics the strategies can be

implemented in the organisations

Strategic Evaluation and Control

Nature of Strategic Evaluation

• Evaluate effectiveness of organisational strategy in achieving organisational

objectives

• Perform the task of keeping organisation on track

Importance of Strategic Evaluation

• The need for feedback

• Appraisal and reward

• Check on the validity of strategic choice

• comparison between decisions and intended strategy

• Successful end of the strategic management process

• Creating inputs for new strategic planning

• Ability to coordinate the tasks performed

Barriers in Evaluation

• Limits of Controls

• Difficulties in measurement

• Resistance to evaluation

• Short-termism

• Relying on efficiency versus effectiveness

• (efficiency is “doing the things rightly” & effectiveness is “ doing the right

things.”)

Requirements of Effective Evaluation

• Control should involve only the minimum amount of information

• Control should monitor only managerial activities and results

• Control should be timely

• Long term and short term control should be used

• Control should aim at problem-solving exceptions

• Rewards for meeting or exceeding standards should be emphasized

Participants in Strategic Evaluation

• The BODs

• The CEOs

• The SBUs head

• Financial controllers, external & internal auditors.

• Middle level managers.

• The shareholders.

Strategic Control

Four Types of Strategic Controls :

• Premise Control

• Implementation Control

• Strategic Surveillance

• Special alert control

Premise Control

Every strategy is based on certain assumptions about

environment & organisational factors. Premises control is necessary to

identify the key assumptions and its implementation. Premises control serves

the purpose of continually testing the assumptions to find out whether they

are still valid or not. This enables the strategists to take corrective action at

the right time rather than continuing with a strategy which is based on wrong

assumptions.

Implementation Control

Implementation control is aimed at evaluating whether the plans,

programmes, and projects are actually guiding the organization towards its

predetermined objectives or not.

Strategic Surveillance

Strategic surveillance aimed at a more generalized and overarching control

“designed to monitor a broad range of events inside and outside the

company that are likely to threaten the course of a firm’s strategy”.

Special Alert Control

Special alert control, which is based on a trigger mechanism for rapid

response and immediate reassessment of strategy in the light of sudden and

unexpected events. E.g. sudden fall in government at central or state level, or

a natural disasters.

Operational Control

Aimed at the allocation and use of organisational resources Concerned with

action or performance

How do Strategic Control and Operational Control Differ

Process of Evaluation

• Setting standards of performance

• Measurement of performance

• Analyzing variances

• Taking corrective action

Techniques of Strategic Evaluation and Control

• Evaluation Techniques for Strategic Control

• Evaluation Techniques for Operational Control

Evaluation Techniques for Strategic Control

• Techniques for strategic control could be classified into two groups on the

basis of the type of environment faced by the organisation. The organisation

that operate in a relative stable environment may use strategic momentum

control, while those which face a relatively turbulent environment may find

strategic leap control more appropriate.

Strategic momentum control

• These are to ensure that the assumptions on whose basis strategies were

formulated are still valid and finding out what needs to be done in order to

allow the organisation to maintain its existing strategic momentum.

Strategic leap control

• Strategic leap control assist organisations by helping to define the new

strategic requirements and to cope with emerging environment realities.

Evaluation Techniques for Operational Control

Operational control is aimed at the allocation and use of organisational

resources

The evaluation techniques are classified into three parts:

Internal analysis(strengths & weakness of firm).

Comparative analysis(compares the performance of firm with its own past

performance or with other firms) .

Comprehensive analysis(this analysis adopts a total approach rather than

focusing on one area of activity, or a function or department).

Role of Organisation System in Evaluation

• Information system.

• Control system.

• Appraisal system.

• Motivation system.

• Development system.

• Planning system.