\ Inredeton Stati Management (Module 1) " INTRODUCTION TO STRATEGIC MANAGEMENT ich 4 1.1.1. Concept of Strategy ‘The word “strategy” is derived from a Greek word “strategia”, which means “gencralship”. The term strategy centered the business world from military services where it was originally used. Strategy works as a blueprint of an organisation that defines its vision, mission, and also helps in determining the future course of action. Strategy helps an organisation to minimise the strengths of competitors by maximising its own strengths Strategy is formulated to achieve current goals of an enterprise by optimum allocation and utilisation of internal resources and by collaborating different organisational pursuits. Strategy tries to achieve synergy and balance between objectives, resources and concepts to maximise the possibility of success and fruitful results. In wider terms, strategy refers to determining the fundamental long erm organisational goals and at the same time developing plans, acquiring, allocating and deploying resources in order to achieve those goals. The purpose of formulating strategy is to bring consistency and alignment in the activities of an organisation, which can be accomplished by various endeavours, methods and resources. ‘According to George A. Steiner, “Strategy means deciding the basic mission of a company, the ebjectives which it seeks to achieve and the policies governing the use of resources at the disposal of the firm to achieve its objectives”. ‘According to Alfred D. Chandler, “Sirategy is the determination of the basic long-term purpose and objectives of an enterprise and the adoption of courses of action and aliocation of resources necessary for carrying out these goals”. ‘According to William F. Glueck, “Strategy isa unified, comprehensive and integrated plan designed to assure that the basic objectives of the enterprise are achieved”. ‘According to Igor Ansoff, “Strategy is the common thread among the organisation's activites and product ‘markets that defines the essential nature of business that the organisation was or planned to be in future” Strategy isnot as simple asi seems to be. However, logical understanding of its theory helps to grasp it and ‘ork with more ease. Theories help in understanding various concepts related to strategy such as definitions, terms, assumptions and their explanations, propositions and related hypotheses, and the techniques used to test and modify them, 1.1.2. Nature of Strategy ‘The nature of strategy can be understood by following points: 1). Provides Structure: Strategy sirives to establish and communicate the image of the organisation vith the help of its various goals and oi Strategy develops a fundamental roadmap for providing guidance to the enterprise for making rational decisions and achieving organisational goals. 2) Integrated Approach: A good strategy follows an integrative approach for allocating internal resources and using them for the benefit of the entire organisation. It directs and supports the enterprise in taking necessary decisions for maximising the strengths and facing the environmental threats with confidence.TZ Ali t n MMS Thcd Semester (Strategic Managemen) YBjy +) Relates an Organisation with the Environment: With the help of strategy an organisation can interacts, ‘with the factors of external environment so that the management can take necessary steps to achieve the organisational goals, Hence, formulating strategy is an important activity by which the enterprise can relate to its environment 4) Set of Actions: Strategy is un arrangement of different actions that are taken in varying situations to achieve certain objectives, or to solve some problems. 5) Future Oriented: Strategies are formulated to solve problems that are new and have not been previously handled by the organisation, Hence, it can be said that it is future-oriented. 6) Combination of Internat and External Factors: Strategy tries to match the internal strengths to meet external opportunities and threats. Therefore it is a combination of internal and extemal factors of the environment, 7) System-Oriented: To work efficiently, suategy operates under a certain system that consists of rules and standards, followed in the organisation, 8) Involves Contradictory Action: certain decisions taken on the simultaneously or consecutively. # As strategic actions are influenced by environmental factors, at times sis of the strategy may be contradictory in nature. These actions may occur 1.1.3. Strategy Formation Process The process of strategy formulation includes following components: 1) Organisational Mission and Objectives: The first and foremost elements required for strategy formulation are ‘organisational mission and objective... Mission denotes the unique purpose (reason for existence) whereas objective is what an organisation tries to accomplish. A clear mission should be developed which illustrates the basic concept behind the formation of the organisation. Generally, itis understeod ther a Stratesy is '& way of accomplishing organisational objectives. Objectives denote the position of the Greanisauon where it wants to reach, whereas strategy describes the method and procedure to reach there, Strategy decides the organisational objectives as well as the method to be used to achieve those pre- determined objectives. Therefore, strategy is a comprehensive concept which explores the method of Utilising the resources so as to attain the objectives. Both these elements (mission and objectives) together Provide necessary guidance for other essentials ofthe strategy. 2) Environmental Analysis: The next important element of strategy formulation is environmental analysis. Since, strategy acts as a connecting channel between organisation and its environment, the strategists ‘must analyse the concemed environment. The competitive standing of the organisation is also analysed in this stage. An assessment of the competitive standing ofthe firm is necessary both in terms of quality and Quantity of the firm’s current product line. The niain aim of such an assessment is to ensure that all the clements crucial to attain success over the competition in the marketplace can be identified Environmental anaiysis process comprises of gathering appropriate information from the external environment and analysing this information so as to determine the positive as well as negative points (opportunities and threats) attached to the environment which are crucial for the organisation, Forecasting, spying, interviewing individuals or groups and studying different publications may assist in collecting environment related informaticn. Continuous observation of the environment results in better environmental analysis. 3) Corporate Analysis: Alongwith environmental analysis, corporate analysis is also an important element of the strategy formulation, While en ronmental analysis explores the factors present outside the organisation, Corporate analysis focuses on exploring internal oaes, Both these analyses ate jointly known as SWOT analysis, i.e, determining the strengths, weaknesses, opportunities and. threats concerning the organ sing environmental opportunities and threats is not the end, but exploring organi mal strengths and weaknesses is also crucial in order to exploit available opportunities and Femove threats. It also highlights the pdfential business areas for the organisation. Thus, corporate analysis is a sequential process which first identifies crucial factors for the current as well as future business of the freanisation and ther determines whether they affect it positively or negatively. In case they affect the ness positively they are denoted as strengths otherwise called as weaknesses.tosresoction to Suategic Managemert (Mose 1) 4) Mentification of Strategy Alternatives: Both corporate and environmental, f eovnbined together can provide several alternatives for a strategy. Generally huge number of alternatives are offered through this practice, As soon as the internal as well as ‘external aspects of an organisation are defined, it focuses on determining the strategic alternatives that can be utilised, Stabilising, expanding, retreaching or even combining the different organisational operations (concerning its markets, functions or products) are the common stuutegy alternatives to choose 5) Selection of Best Alternative: Selection of best alternatives depends on varios meters. The essential parameters hat are analysed to select the best allerative inelude structure of organisational objectives, ETOP (Environmental threat and opportunity profile), strategy itself and strategie advantage profile 6) Choice of Strategy: The final component of any strategy formulation process is to select the best strategy ‘After evaluating strategy alternatives in the previous step in accordance with organisational ns, threats, opportunities as well as organisational fong-term objectives, the best strategy is chosen. This choice of strategy is affected by variety of factors like nature of internal ‘and external associations, earlier strategies adopted, power lobbying, risk handling attitude of managers, cic. The decision-maker selects the strategy as per his/her attitude, beliefs and personal values. 1.1.4. Approaches to Strategy Making Various approaches to frame the strategy are as fellows: 1) Autoeratie Approach: In this approach, a leader has the complete authority to formulate the stratezy and making de eader has the responsibility to define the objectives, formulate the Strategies, and select the-alternative course of action as well. This approach is centralised in nature, as the ‘command is in the hands of top level management, 2) Transformational Approach: In transformational approach, the suategic leader inspite achieve the organisational goals using motivating vision and mission staieinents. He enevurages the Sceanisational members so that they take interest in achieving the common goal with the hel of various Siuations and metaphors. Creation of shared objectives and encouraging vision sttement aligns the corporate activities. 3) Rationat Approach: The rational approach of strategy’ making emphasises on of every alternative strategy and then selecting the best alternative. 4) Learning Approach: The learning approach focuses on adapiability and flexibility of the o processes. Since the business environment is highly dynamic, the learning approach pars ereat emphasis on Continuous learning and synchronising it with market demands. to +s the employ analysmg dhe pois ad cons nisational rmulate the strategies based on the ideas of 5) Political Approach: In this approach, the strategic leaders fo selection of new products and the techniques are adopted on the basis of employees’ preferences. The crretegy is done by analysing the interaction between the intemal environment and the politica ensinynment of the organisation, The self-regulating behaviour of employees decides the way in which the Sratesy has to be implemented. 1.1.5. Importance of Strategy Following points highlight the importance of strategy: 1) Provides Direction: Strategies direct an organisation to acl in absence of proper guiding strategit 2) Facilitates Decision-Making: Strategy facilitates decist as point of reference for any action. 3) Ensures Proper Allocation of Resources: A gov strategy helps the enganisation nn alo veatficient manner. While formulating a strategy, the strategists have wo Keep in wil the snformation Una they have access to, and appraise all possible outcomes before sel hhieve its goals. Organisations tose their purpose ng a particular alte Iso be benefited by developing a muster stategy that 4) Synchronises Activities: Organisations can aniston in synchronising, encompasses the entire organisation. This comprelcnsive strategy helps the ore ferent level the strategic initiatives t