BBM(IB),IPM-Session 2.

The word strategy derives from the Greek (strategia), "office of general, command, generalship", in turn from (strategos), "leader or commander of an army, general", a compound of (stratos), "army, host" + (agos), "leader, chief", in turn from " (ago), "to lead.

A companys strategy consists of the combination of competitive moves and business approaches, that Managers employ to please/satisfy customers, compete successfully and achieve organizational objectives. Definition by William F.Glueck: A unified, comprehensive and integrated plan, designed to assure that the basic objectives of the Enterprise are achieved.

Definition, by A.D.Chandler: The determination of the basic long-term Goals, while adopting a course of action along with the allocation of Resources It means: Planning and preparing an action plan, to achieve desired long term Goals/Objectives. How to compete and position the company, so that it achieves sustainable above average profits in the long run.

Johnson and Scholes define strategy as follows: "Strategy is the direction and scope of an organization over the long-term: which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations". In other words, strategy is about: * Where is the business trying to get to in the long-term (direction) * Which markets should a business compete in and what kind of activities are involved in such markets? (markets; scope)

* How can the business perform better than the competition in those markets? (advantage)? * What resources (skills, assets, finance, relationships, technical competence, facilities) are required in order to be able to compete? (resources)? * What external, environmental factors affect the businesses' ability to compete? (environment)? * What are the values and expectations of those who have power in and around the business? (stakeholders)

Strategies exist at several levels in any organization - ranging from the overall business (or group of businesses) through to individuals working in it. Corporate Strategy - is concerned with the overall purpose and scope of the business to meet stakeholder expectations. This is a crucial level since it is heavily influenced by investors in the business and acts to guide strategic decision-making throughout the business. Corporate strategy is often stated explicitly in a "mission statement". Business Unit Strategy - is concerned more with how a business competes successfully in a particular market. It concerns strategic decisions about choice of products, meeting needs of customers, gaining advantage over competitors, exploiting or creating new opportunities etc. Operational Strategy - is concerned with how each part of the business is organized to deliver the corporate and business-unit level strategic direction. Operational strategy therefore focuses on issues of resources, processes, people etc.

Long term/range Action oriented Multipronged and integrated Flexible and can be modified, based on the needs Dynamic in nature, to cope with uncertainties Formulated by the top management team and flows down

Strategy is Significant because it is not possible to foresee the future. Without a perfect foresight, the firms must be ready to deal with the uncertain events which constitute the business environment. Strategy deals with long term developments rather than routine operations, i.e. it deals with probability of innovations or new products, new methods of productions, or new markets to be developed in future. Strategy is created to take into account the probable behavior of customers and competitors. Strategies dealing with employees will predict the employee behavior. Strategy is a well defined roadmap of an organization. It defines the overall mission, vision and direction of an organization. The objective of a strategy is to maximize an organizations strengths and to minimize the strengths of the competitors. Strategy, in short, bridges the gap between where we are and where we want to be.

The term Strategic Management refers to the Managerial Process of: Forming a strategic Mission and Vision Setting corporate goals and objectives Crafting/creating a strategy Implementing and executing the strategy And making corrective adjustments in the VM/O,strategies and execution, as deemed appropriate

Thus strategic management is the Art & Science of structurally and systematically developing strategic options/alternatives,evaluating,formulating and implementing critical descisions,such as: Specifying roles and objectives Developing long term policies and plans Allocation of resources for successful implementation/execution Creation of long term value and distributing the same to customers and all other stakeholders.

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.

Strategic management is the conduct of drafting, implementing and evaluating crossfunctional decisions that will enable an organization to achieve its long-term objectives. It is an organization-wide task involving both the development and implementation of strategy. It demands the ability to steer the organization as a whole through strategic change under conditions of complexity and uncertainty.

Strategic management consists of the analysis, decisions, and actions an organization undertakes in order to create and sustain competitive advantages. This definition captures two main elements that go to the heart of the field of strategic management. First, the strategic management of an organization entails three ongoing processes: analysis, decisions,

and actions. That is, strategic management is concerned with the analysis of strategic goals (vision,
mission, and strategic objectives) along with the analysis of the internal and external environment of the organization.

Next, leaders must make strategic decisions. These decisions, broadly speaking, address

two basic questions: What industries should we compete in?

How should we compete in those industries? Why some firms outperform others?

How should we compete in order to create competitive advantages in the marketplace?

1. Environmental Scanning- Environmental scanning refers to a process of collecting, scrutinizing and providing information for strategic purposes. It helps in analyzing the internal and external factors influencing an organization. After executing the environmental analysis process, management should evaluate it on a continuous basis and strive to improve it. 2. Strategy Formulation- Strategy formulation is the process of deciding best course of action for accomplishing organizational objectives and hence achieving organizational purpose. After conducting environment scanning, managers formulate corporate, business and functional strategies.

3. Strategy Implementation- Strategy implementation implies making the strategy work as intended or putting the organizations chosen strategy into action. Strategy implementation includes designing the organizations structure, distributing resources, developing decision making process, and managing human resources. 4. Strategy Evaluation- Strategy evaluation is the final step of strategy management process. The key strategy evaluation activities are: appraising internal and external factors that are the root of present strategies, measuring performance, and taking remedial / corrective actions. Evaluation makes sure that the organizational strategy as well as its implementation meets the organizational objectives.

This is all about the analyzing the strength of businesses' position and understanding the important external factors that may influence that position. The process of Strategic Analysis can be assisted by a number of tools, including: PEST Analysis - a technique for understanding the "environment" in which a business operates Scenario Planning - a technique that builds various plausible views of possible futures for a business Five Forces Analysis - a technique for identifying the forces which affect the level of competition in an industry Market Segmentation - a technique which seeks to identify similarities and differences between groups of customers or users

Directional Policy Matrix - a technique which

summarizes the competitive strength of a businesses operations in specific markets Competitor Analysis - a wide range of techniques and analysis that seeks to summarize a businesses' overall competitive position Critical Success Factor Analysis - a technique to identify those areas in which a business must outperform the competition in order to succeed SWOT Analysis - a useful summary technique for summarizing the key issues arising from an assessment of a businesses "internal" position and "external" environmental influences.

1. 2. 3.

4.

Diversification: To expand business activities thru Diversification.(ADITYA BIRLA) Vertical integration: To expand business activities by producing its own RM.(RIL) Consolidation: Divest non-profitable units/products and concentrate on core profitable activities. Expansion strategy: Expanding markets thru exports.

5.Change management: Adapting new strategies or modifying existing plans/strategies, to suit the environmental changes in economy,policy,technolgy etc. 6.Employee skills upgradation:Strtegy to continuously upgrade employee skills to match/lead the environmental changes.(IT, Automation) 7.Rewrite/tweak the agenda: Review the existing strategy/plan continuously and change/modify, whenever necessary. 8.Mergers & Acqusitions:To expand thru buying other related/non-related businesses.

1.Corporate Vision,Mission,Goals

2.Strategic Analysis(PESTLE,SWOT)

3.Strategic choices/Alternatives

4.Strategy implementation

 Environmental analysis(PESTLE/SWOT) Internal analysis

Develope CORPORATE PLANS,POLICIES

B

Allocate resources

Expand,stabilize,Retrench/Exit, React/Panic
C D

Implement strategy-Diversification, Vertical integration,M&A,Export

Strategic planning is intended to accomplish three important tasks: to clarify the outcomes that an organization wishes to achieve; to select the broad strategies that will enable the organization to achieve those outcomes; to identify ways to measure progress

The mission statement describes the company's business vision, including the unchanging values and purpose of the firm and forward-looking visionary goals that guide the pursuit of future opportunities. Guided by the business vision, the firm's leaders can define measurable financial and strategic objectives. Financial objectives involve measures such as sales targets and earnings growth. Strategic objectives are related to the firm's business position, and may include measures such as market share and reputation.

The environmental scan includes the following components: Internal analysis of the firm Analysis of the firm's industry (task environment) External macro environment (PEST analysis) The internal analysis can identify the firm's strengths and weaknesses and the external analysis reveals opportunities and threats. A profile of the strengths, weaknesses, opportunities, and threats is generated by means of a SWOT analysis An industry analysis can be performed using a framework developed by Michael Porter known as Porter's five forces. This framework evaluates entry barriers, suppliers, customers, substitute products, and industry rivalry.

Given the information from the environmental scan, the firm should match its strengths to the opportunities that it has identified, while addressing its weaknesses and external threats. To attain superior profitability, the firm seeks to develop a competitive advantage over its rivals. A competitive advantage can be based on cost or differentiation. Michael Porter identified three industry-independent generic strategies from which the firm can choose.

The selected strategy is implemented by means of programs, budgets, and procedures. Implementation involves organization of the firm's resources and motivation of the staff to achieve objectives. The way in which the strategy is implemented can have a significant impact on whether it will be successful. In a large company, those who implement the strategy likely will be different people from those who formulated it. For this reason, care must be taken to communicate the strategy and the reasoning behind it. Otherwise, the implementation might not succeed if the strategy is misunderstood or if lower-level managers resist its implementation because they do not understand why the particular strategy was selected.

The implementation of the strategy must be monitored and adjustments made as needed. Evaluation and control consists of the following steps: Define parameters to be measured Define target values for those parameters Perform measurements Compare measured results to the pre-defined standard Make necessary changes

Management tool/roadmap to: Set priorities Focus on energy/resources Teamwork towards common goals, with clear expectations/responsibilities/accountabilities Adjust according to the changes in external/internal environment Integrated, focused action plan, to shape/guide organizational activities (who,why,how,what),with an eye on future.