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Definition. Classes of Decisions. Levels of Decisions. Strategy. Role of different Strategists. Relevance of Strategic Management. Benefits. Strategic Management in India.
Business Policy - Definition
As defined by Christensen: “Business Policy is the study of the function and responsibilities of Senior Management, the crucial problems that affect success in the total enterprise, and the decisions that determine the directions of the organisation and shape of its future. The problems of policy in the business, like those of policy in public affairs, have to do with choice of purposes, the moulding of organisational identity and character, the continuous definition of what needs to be done, and the mobilisation of resources for the attainment of organisational Goals in the face of competition or adverse circumstance
Concept of Strategy – new Paradigm
1940- 1960: Planned policy became irrelevant due to increasingly complex and accelerating changes. Firms had to anticipate environmental changes. A strategy needed to be formed with critical look at basic concept of Business and its relationship to the existing environment then.
Strategic Management – new Focus 1980 & onwards: The focus of Strategic Management is on the strategic process of business firms and responsibilities of general management. Peter Drucker. The world is substantially compressed and managing the environment becomes crucial function. which one to quit and how to get internally stronger and resourceful are the new stakes. 4 25/07/2012 . What to produce. where to market. Strategic Planning is required to be done to endow the enterprise with certain fundamental competencies / distinctive strengths which could take care of eventualities resulting from unexpected environmental changes. This phenomenon is called as “Discontinuity” by Mr. Everything outside the four walls is changing rapidly. which new business to enter. Past experiences are no guarantee as science and technology is moving faster. The future is no more extension of the past or the present.
But Strategic Management is a very important tool for and way of thinking to resolve strategic issues. the evolution of this phase is still continuing and is yet not formed into a theory of how to manage an enterprise.Strategic Management – new Focus However. 25/07/2012 5 .
a strategy is a set of decisions-making rules for the guidance of organisational behaviour” Kenneth Andrews(1965) : “The pattern of objectives. and the major policies and plans for achieving these goals stated in such a way so as to define what business the company is in or is to be and the kind of company it is or to be 6 25/07/2012 .Strategy – Definitions -1 Defining Strategy and Concept of Strategic Management Alfred D Chandler(1962) : “The determination of basic long-term goals and the adoption of courses of the courses of action and the allocation of resources necessary for carrying out these goals” Alfred D Chandler(1984) : “Basically. goals. purpose.
goals. purposes.Strategy – Definitions -2 ”Kenneth Andrews (1965) : “Business Strategy is a method of describing the future position of the company. comprehensive and integrated plan designed to assure that the basic objectives of the enterprise are achieved” Henry Mintzberg(1987) : “A pattern in a stream of decisions and actions” Michael E Porter(1996) : “…developing and communicating the company’s unique position. its objectives. policies. Igor Ansoff(1965) : “The common thread among the organisation’s activities and product-markets…that defines the essential nature of business that the organisation was or planned to be in future” William F Gleueck(1972) : “A unified. making trade-offs. and forging fit among activities” 7 25/07/2012 . and plans that may be required for guiding the company from its existing position to where it desires to be”.
Strategy – Summing up all Definitions 25/07/2012 A plan or course of action or a set of decisions rules forming pattern or creating a common thread. 8 . and creating a fit among these activities. The pattern or common thread related to the organisation’s activities which move an organisation from its current position to a desired to a desired future stage Related to pursuing those activities which move an organisation from its current position to a desired future state. making trade-offs between its different activities. Concerned with the resources necessary for implementing a plan or following a course of action and. Connected to the strategic positioning of a firm.
The Strategy Hierarchy In most (large) corporations there are several levels of strategy. and corporate missions. applying to all parts of the firm. Strategic management is the highest in the sense that it is the broadest. Under this broad corporate strategy there are often functional or business unit strategies 9 25/07/2012 . It gives direction to corporate values. corporate culture. corporate goals.
A SBU .B SBU .Different Levels of Strategy Levels Corporate Structure Corporate Office Strategy Corporate Level SBU SBU .C Business level Functional Finance Marketing Operations Functional Level Personnel Information 25/07/2012 10 .
supply-chain strategies. The emphasis is on short and medium term plans and is limited to the domain of each department’s functional responsibility. Each functional department attempts to do its part in meeting overall corporate objectives. human resource strategies. new product development strategies. financial strategies. and information technology management strategies. and hence to some extent their strategies are derived from broader corporate strategies.Functional Strategies Functional strategies include marketing strategies. legal strategies. 11 25/07/2012 .
Each SBU is responsible for developing its business strategies. hiring decisions. An SBU is treated as an internal profit centre by corporate headquarters. new product decisions. It is usually responsible for its own budgeting. and price setting. strategies that must be in tune with broader corporate strategies 12 25/07/2012 .Strategic Business Units Many companies feel that a functional organizational structure is not an efficient way to organize activities so they have reengineered according to processes or strategic business units (called SBUs). A strategic business unit is a semi-autonomous unit within an organization.
are informed by corporate level strategies. It is very narrow in focus and deals with day-to-day operational activities such as scheduling criteria. intional turn. Operational level strategy was encouraged by Peter Drucker in his theory of management by objectives (MBO). Operational level strategies are informed by business level strategies which.Operational Strategy The “lowest” level of strategy is operational strategy. It must operate within a budget but is not at liberty to adjust or create that budget. 13 25/07/2012 .
then. refers to the overarching strategy of the diversified firm. Corporate strategy. which refers to the aggregated operational strategies of single business firm or that of an SBU in a diversified corporation refers to the way in which a firm competes in its chosen arenas.Business & Corporate Strategy Business strategy. Such corporate strategy answers the questions of "in which businesses should we compete?" and "how does being in one business add to the competitive advantage of another portfolio firm. as well as the competitive advantage of the corporation as a whole 14 25/07/2012 .
This is being driven by information technology. Most recently. This work builds on that of Brown and Eisenhart as well as Christensen and portrays firm strategy. It is felt that knowledge management systems should be used to share information and create common goals.Dynamic Strategy Since the turn of the millennium. 15 25/07/2012 . as necessarily embracing ongoing strategic change. Such change and implementation are usually built into the strategy through the staging and pacing facets. Strategic divisions are thought to hamper this process. popularized by the strategic management textbook authored by Carpenter and Sanders. there has been a tendency in some firms to revert to a simpler strategic structure. and the seamless integration of strategy formulation and implementation. this notion of strategy has been captured under the rubric of dynamic strategy. both business and corporate.
and evaluation of Strategy. 25/07/2012 .Board is an ultimate legal authority of an organisation. share holders. government.Strategists . business and organisational implications. Board is requires to direct and is involved in reviewing and screening executive decisions in light of their environmental. implementation. They get elected and appointed by holding or parent company. In a limited sense. Board of Directors:. all managers are Strategists.Their Roles & Levels . Board is responsible to owners. controlling agencies.1 Strategists are individuals or groups who are primarily involved in the formulation. But we may have outside agencies involved in various aspects of Strategic Management. who are also Strategists. 16 1. financial institutes.
Organisationally they come together in the form of committees. 4.Their Roles & Levels .is the person who starts a new business.2 2. think tanks and play a very important role in Strategic management. 17 25/07/2012 . CEO plays a pivotal role in setting mission. He formulates and implements strategy and ensures that organisation does not deviate from a predetermined path. Board is involved in setting strategic direction. Entrepreneur:. and appointing senior executives. objectives and goals. is a venture capitalist. Senior management:. establishing objectives & strategy. He has to play a proactive role to provide sense of direction. monitoring and reviewing achievement. reviewing and evaluating organisational performance. 3. work groups. CEO is primarily responsible for strategic management of the organisation. set objectives and formulate strategies.Strategists . They are responsible for implementing the strategies and plans and for a periodic evaluation of their performance.consists of higher management level starting from CEO to functional managers and profit centre or SBU heads. Chief Executive Officer:. task forces. He is different from formal system and plays all strategic roles simultaneously.is responsible for all aspects of strategic management from the formulation to evaluation of strategy. Role of Board of Directors is to guide the senior management in setting and accomplishing objectives.
Besides providing corporate strategy and strategic planning. KPMG. They do not from strategy and do not initiate a process on their own. provides administrative support and plays a measurement and controlling role. SBU level Executives:. PWC. 25/07/2012 . knowledgeable.Strategists . They are CEOs for their SBUs and hence SBU level strategy formulation and implementation is their main role.g. Billimoria. Consultants:. they are specialist. AF Ferguson. Corporate Planning:. E. 7. unbiased and provide objective evaluation.Their Roles & Levels . outsider.It assists management in all aspects of strategy formulation. Mckinsey etc. implementation and evaluation.3 5. They are responsible for preparation and communication of strategic plans.SBUs are formed with each business having a clearly defined product – market segment and a unique strategy. 18 6.in absence of a Corporate planning many organisation take an outside help in the form of a consultants or consulting companies.
goals and objective statements of the organisation. proposals. They are implementers. followers of guide lines. Generally.They relate to operational matters and are seldom play active role in Strategic Management. He helps in public relations and liaison functions. He is a corporate planner for CEO. He prepares brief for various plans.Strategists . suggesting alternatives. They form departmental / functional plan in light of broad objectives and goals of organisation provided in vision. 9.4 Middle Level Managers:. projects.Their Roles & Levels . receivers of communication about strategic plans. Executive Assistant:.An executive assistant is a person who assists the chief executive in the performance of his duties like data collection and analysis. He coordinates activities with the internal staff and outsiders. 25/07/2012 19 . They are basically involved in in the implementation of functional strategies. mission. he orients from finance background ensuring and opining on ROI and strategic positioning of the organisation.
25/07/2012 20 . formulating..By Lloyd L Byras. Definition – “Strategic Management is concerned with making decisions about an organisation‟s future direction and implementing those decisions”. and arriving at strategic choices through critical evaluation of alternatives and implementing them to meet the set objectives of the organisation”.Strategic Management – Definitions Definition – “Strategic management is the process of systematically analysing various opportunities and threats „vis-a vis‟ organisational strengths and weaknesses.
often in terms of projects and programs. It is the process of specifying the organization's mission. Strategic management seeks to coordinate and integrate the activities of the various functional areas of a business in order to achieve organizational objectives. science and craft of formulating. and then allocating resources to implement the policies and plans. A balanced scorecard is often used to evaluate the overall performance of the business and its progress towards objectives. implementing and evaluating cross-functional decisions that will enable an organization to achieve its objectives. projects and programs. vision and objectives. 21 25/07/2012 .Strategic Management Strategic management is the art. which are designed to achieve these objectives. developing policies and plans.
high diversification. 22 25/07/2012 . and weak technology.competitive scales. Entwining enterprise objectives into the national Planning framework. Secretive & one man Strategic Management Process. Grabbing opportunities.Evaluation of Strategic Management in India Evolution of Strategic Management in India is divided in three periods. non. Till 1980 : Pre-liberalisation Stage: Strategic management on Government fringes.
Strategy of focus on rationalisation and operations improvement. Portfolio rationalisation. Post Liberalisation Stage: 2000-2010 ‘Global maverick’ mindset. Mobilise resources and ensure adequate growth through existing business.Evaluation of Strategic Management in India Till 2000: Liberalisation Stage: ‘Foreign Complex’ governed strategy. Development of Technology capabilities Decentralise organisations. entry into emerging sectors. Acquire professional skills in Strategic Management and synergise entrepreneurial flair. internationalisation and product market expansion. De-merge businesses as independent companies and improve market capabilities. Strategy of growth through acquisitions. Employing international consulting firms in Strategic Management. develop institutionalised control mechanism 23 25/07/2012 .
content) and also strategy implementation (it is called. Strategic management is fluid and complex. Change creates novel combinations of circumstances requiring unstructured non-repetitive responses. Strategic management involves both strategy formation (it is called. process). Strategic management affects the entire organization by providing direction. Strategic management is partially planned and partially unplanned. Strategic management involves both conceptual and analytical thought processes 24 25/07/2012 .Elements of Strategic Management Strategic management involves adapting the organization to its business environment. Strategic management is done at several levels: overall corporate strategy. and individual business strategies.
Critical study of external environmental factors. Installation of a continuous review system. Evolving short term objectives. allocating resources. creating a control mechanism and Data generation for selecting future course of action. defining corresponding strategies in tune with Mission and Vision Statements. 25 25/07/2012 . based on budgets. strengths and capabilities. Implementing chosen strategies in planned way. Company Profile. outlining action plan and tasks. its internal culture. purposes and Philosophy of organisation as reflected in vision statement. Finding out way and deciding the desirable course of actions for accomplishing the Mission statement. threats and opportunities.Aspects of Strategic Management Vision Statement Mission Statement indicating methodology for achieving the objectives. Selecting long term objectives and deciding corresponding strategies.
and organisational structure. Strategic Planning provides a hedge against uncertainty.Characteristics & Benefits of Strategic Management -1 Strategic Planning provides the route map for the enterprise. It lends a framework which can ensure that decisions concerning future are taken in a systematic and purposeful way. Strategic Planning helps in understanding trends in a better way and generates a reference frame for investment decisions. against totally unexpected developments. investments. markets. decisions on business. manufacturing facilities. products. Strategic Planning provides the frame work for all major business decisions. It is a path finder for business opportunities and it is also a defence mechanism to avoid costly mistakes in choice of product market or investments. 26 25/07/2012 .
2 The more intense the environmental uncertainty. insight. more critical is the need for strategic planning. Considerable thought and effort must go in vision. knowledge and vision of top people in Management.Characteristics & Benefits of Strategic Management . As a management tool. quality of judgement and the perfection of methods and measures. Strategic Planning is a management task concerned with growth and future of the business enterprise. Strategic Planning utilises both intuition and logic. The success of the efforts and activities of the enterprise depends heavily on the quality of strategic planning. 27 25/07/2012 . experience. Logic is through Planning and information process and intuition is through experience.
creation of core competency and competitiveness and finally integration. starting from corporate mission. Thus Strategic Planning is Corporate Strategy. philosophy and core values. involved in Strategic Planning. pinpoints the gaps. basket of businesses of the firm for additions and deletions. formulate steps to bridge them. corporation understands where its core competencies are. down to choice of businesses and strategies. 28 25/07/2012 . Through analytical process aspect.Characteristics & Benefits of Strategic Management . It views the organisation / business in its totality and not a particular function. Main aspects of Strategic Planning are Future.3 All vital aspects of corporate governance are perfected through strategic planning. Growth. Strategy and not day to day routine matters. identifies the competitive advantages. Environment.
B) Product Market scope. development or diversification. Strategic Planning provides objective – strategy design: A) Growth Objective –Performance levels. its penetration. Profitability target. D) Competitive Advantages.Characteristics & Benefits of Strategic Management .4 Strategic Planning differs from other operative and administrative functions of management. E) Synergy. 29 25/07/2012 . strength obtained from new product-market selections. C) Growth Vector – Product Market posture.
Clarifying the business mission. Preparing a Plan. Defining the business. Implementing the Corporate strategies.Strategic Management Process . Defining the Mission. Formulating the Corporate objectives Formulating the Corporate strategies. purpose & broad Objectives and Goals. SWOT Analysis Internal Appraisal of the firm Setting Corporate objectives. Evaluating & Monitoring the strategies 25/07/2012 30 . Environment Survey.an Overview Defining the Vision.
Service. Economic. Transport of goods 31 25/07/2012 . Goals. Cultural Corrective Action Visions Missions. Technological. Socio. Systems Structures Targets Feedback Input 5 Ms Processes Planning Manufacturing Inspection Packing Outputs Sales. Objectives.Environment & Organisation Environment: Political. legal.
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