Strategic Management

An Introduction

What is Strategic Management?

 Strategy refers to the plans made and action taken to enable an organization to fulfill its identified objectives  Strategy is managements game plan for strengthening the organizations position, pleasing customers, and achieving performance targets  A continuous, iterative process aimed at keeping an organization as a whole approporiately matched to its environment  Keeping the business in tune with management and marketing forces both outside and inside the firm

 Without a strategy, managers have:

 No thought-out course to follow  No roadmap to manage by  No action program to produce the intended result

Components of Strategic Management

 Vision, Mission, and Company Profile  Recognizing and evaluating external and internal environment  Strategic Analysis and Choice  Strategy Formulation  Strategy Implementation  Evaluation of performance

What does a companys strategy consist of?

 How to respond to changing industry and market conditions  How best to capitalize on new opportunities  How to manage each functional piece of the business  How to achieve strategic and financial objectives  How to satisfy customers
 Broad or narrow product line?  Amount of customer service provided?

 How to grow the business

 Concentrate on a single business strategy?  Diversify into related or unrelated industries?  Expand globally?

Benefits of strategic management

 Establish the mission  Formulate philosophy  Establish policies  Setting objectives  Developing strategy  Plan the organizational structure  Provide personnel  It helps in answering questions:
 Where is the Organization now?  Where will be the organization in a certain timeframe?  What are the risks and payoffs?  What could be possible changes in organizations internal & external environment?

 Establish procedures  Provide facilities  Provide capital  Set standards  Establish programs and plans  Control information  Activate people

Phases of strategic management

 Phase I: Basic Financial Planning  Phase II: Forecast based planning  Phase III: Externally oriented planning  Phase IV: Strategic Management

Basic Model of strategic management

Environmental Scanning

Strategy Formulation

Strategy Evaluation & Implementation Control

Internal External

Mission Objectives Strategies Policies

Programs Budgets Procedures

Actual vs Desired performance

Environmental Scanning
Environmental scanning is the monitoring, evaluating, and dissemination of information from the external and internal environments to key people within the organization Internal Environment External Environment Tools for scanning

Environmental Variables
Societal Environment Sociocultural forces Economic forces Task Environment Governments Shareholders Suppliers Trade Associations Creditors Internal Environment Structure Culture Resources

Special Interest Groups Competitors Political Legal Forces Customers

Employees/ Labor Unions

Technological Forces

Strategy Formulation
Strategy Formulation is the development of long-range plans for the effective management of environmental opportunities and threats, in light of the organizations weaknesses and strengths Vision & Mission Objectives: end results of planned activity (it can be in terms of profitability, efficiency, growth, shareholder wealth, market leadership etc.) Levels of Strategies: Corporate, Business and Functional Policies: a broad guideline for decision making that links the formulation of strategy with its implementation ITC Vision: Sustain ITC's position as one of India's most valuable corporations through world class performance, creating growing value for the Indian economy and the Companys stakeholders ITC Mission: To enhance the wealth generating capability of the enterprise in a globalising environment, delivering superior and sustainable stakeholder value

Strategy Implementation
Strategy Implementation is the process by which strategies and policies are put into action through the development of programs, budgets and procedures Programs Budgets Procedures

Evaluation and Control

Evaluation and control is the process in which corporate activities and performance results are monitored so that actual performance can be compared with desired performance. Performance is the end result of activities

Initiation of Strategy
Henry Mintzberg: It is most often an irregular, discontinuous process, proceeding in fits and starts. There are periods of stability in strategy development, but also there are periods of flux, of groping, of piecemeal change and of global change. New CEO External Intervention Threat of a change in ownership Performance Gap Strategic Inflection Point: introduction of new technologies, different regulatory environment, change in customers values or preferences

Strategic Decision Making

What makes decision strategic? Rare: unusual with few precedents Consequential requiring: commit substantial resources and demand a great level of commitment Directive: set precedents for lesser decisions and actions throughout the organization Modes of Strategic Decision Making (Mintzberg) Entrepreneurial Adaptive Planning Logical Incrementalism: Mix of above three