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 INTRODUCTION PLANNING ORGANIZING LEADING CONTROLLING

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1. Management &

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Organizations
Management 10. Basic

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History Organizational

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2. Understanding Designs
7. Managers as
Management’s Decision 11. Adaptive 15. Managers
Context Maker organizational and 18.

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3. Managing in a Design Communication Introduction to
8. Foundations
Global of Planning 12. Managing 16. Motivating Controlling
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Environment Human Employees 19. Managing
Planning Tools Resources
4. Managing & Techniques 17. Managers Operations
Diversity 13. Managing as Leaders
9. Strategic Teams
5. Managing Social Management
Responsibility and 14. Individual
Ethics Behavior
6. Managing
Change &
Innovation
 Strategic Management
That set managerial decisions and actions that determines the

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long run performance of an organization

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Strategies - the plans for

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how the organization will do what it’s in business to do,
how it will compete successfully, and

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how it will attract and satisfy its customers in order to achieve its
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goals
Importance of Strategic Management
1. It results in higher organizational performance (+ve

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relationship between planning & performance)

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2. It requires that managers examine and adapt to business

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environment changes

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3. It coordinates diverse organizational units, helping them

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focus on organizational goals
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4. Involvement in decision making

 Strategic Management Process

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External
Analysis

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Identify the PEST+OT

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organization’s
current Formulate Implement Evaluate
Strategies Strategies Results

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mission,
goals, and
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strategies Internal
Analysis
SW
 Strategic Management Process
• Step 1: Identifying the organization’s current

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mission, goals, and strategies

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– Mission: a statement of the purpose of an organization

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• The scope of its products and services
– Goals: the foundation for further planning

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• Measurable performance targets
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 Components of Mission Statement
• Customers: Who are the firm’s customers?

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• Markets: Where does the firm compete geographically?

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• Concern for survival, growth, and profitability: Is the firm committed

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to growth and financial stability?

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• Philosophy: What are the firm’s basic beliefs, values, and ethical
priorities?

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• Concern for public image: How responsive is the firm to societal and
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environmental concerns?
• Products or services: What are the firm’s major products or services?
• Technology: Is the firm technologically current?
• Self-concept: What are the firm’s major competitive advantage and
core competencies?
• Concern for employees: Are employees a valuable asset of the firm?
Strategic Management Process (cont.)
• Step 2: Doing an external analysis

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– The environmental scanning of specific and general
environments

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• Focuses on identifying opportunities and threats
• Focuses on PESTEL forces in external environment

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 Political

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Legal Economical

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PESTEL

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Analysis

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Environmental Social

Technological
Strategic Management Process (cont.)
• Step 3: Doing an internal analysis

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– Analyzing financial and physical assets is fairly easy, but
assessing intangible assets (employee skills, culture, corporate

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reputation, etc.) isn’t as simple

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– Assessing organizational resources, capabilities, and activities:

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• Strengths create value for the customer and strengthen the
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competitive position of the firm

Core competencies - the organization’s major value-creating
capabilities that determine its competitive weapons
• Weaknesses can place the firm at a competitive
disadvantage
 SWOT Analysis

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Strengths Weaknesses

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•Any activities the •Activities the organization

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organization does well or any does not do well or resources
unique resources that it has it needs but does not posses

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Opportunities Threats

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•Negative trends in
•Positive trends in external external environmental
environmental factors factors
Opportunity Strength Leverage

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Opportunity Weakness Constraint

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Threat Strength Vulnerability
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Threat Weakness Problem

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External Factors

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Internal Factors

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External Factors
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External Factors
Strategic Management Process (cont.)
• Step 4: Formulating strategies

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– Develop and evaluate strategic alternatives

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– Select appropriate strategies for all levels in the organization

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that provide relative advantage over competitors
– Match organizational strengths to environmental opportunities

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– Correct weaknesses and guard against threats
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Strategic Management Process (cont.)
• Step 5: Implementing strategies

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– Implementation - effectively fitting organizational
structure and activities to the environment

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– The environment dictates the chosen strategy; effective
strategy implementation requires an organizational

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structure matched to its requirements
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• Step 6: Evaluating results

– How effective have strategies been?
– What adjustments, if any, are necessary?
 Level of
Organizational
Strategy

Corporate Business Level Functional

Level Strategy Strategy Level Strategy

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Porter’s Generic
Portfolio Adaption Product Life
Grand Strategy Competitive Marketing
Strategy Model Strategies Cycle

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Cost
Growth Stability Retrenchment BCG Growth
Defender Leadership Finance
Strategy Strategy Strategy Share matrix

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Strategy

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GE Business Differentiation
Concentration Turnaround Prospector Operations
Screen Strategy

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Vertical Human
Harvest Analyzer Focus Strategy
Integration Resources
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Horizontal Research &

Divestiture Rector
Integration Development

Diversification Bankruptcy

Other Growth
Strategies Liquidation
 Corporate-Level Strategy
The level of strategy that guides the organization’s overall direction,

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defines the business in which a company competes, and specifies how

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resources are allocated

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1. Grand Strategy: A comprehensive general strategy formulated to
direct the major actions that will help the organization achieve

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long term goals
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2. Portfolio Strategy: An approach to corporate-level strategy that

involves analyzing the relationships and positions of an
organization’s SBUs to create the mix that will best support
organizational goals
 Types of Grand Strategy

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I. Growth Strategy: A grand strategy involving expanding the

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organization along one or more dimension

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II. Stability Strategy: A grand strategy that involves maintaining the
status quo by continuing to offer the same goods or services and

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continuing to serve the same markets
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III. Retrenchment Strategy: A grand strategy that involves reducing

organizational operations
 Types of Growth Strategy
1) Concentration: A growth strategy that involves focusing

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organizational resources on the growth of one product or on a

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small group of related products

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2) Vertical Integration: A growth strategy that involves the

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acquisition of one or more organizations that are suppliers,
distributors, or customers of the firm’s product

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3) Horizontal Integration: A growth strategy that involves the
acquisition of one or more competitors
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4) Diversification: A growth strategy that involves the acquisition of

organization in other industries or in other lines of business
5) Other Growth Strategies: Mergers & Joint ventures
 Types of Retrenchment Strategy
1) Turnaround: A retrenchment strategy intended to reverse a

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negative trend & regain profitability

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2) Harvest: A retrenchment strategy that involves minimizing

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investment & maximizing short-term profits while planning to sell

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or liquidate in the long term
3) Divestiture: A retrenchment strategy that involves selling all or

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part of an organization
4) Bankruptcy: A retrenchment strategy in which an organization
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unable to meet its obligations seeks court protection to gain time

& opportunity to attempt a turnaround
5) Liquidation: A retrenchment strategy that involves dissolving or
selling an entire organization
 Types of Portfolio Strategy

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I. BCG Growth-Share Matrix: A four cell matrix that categorizes

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SBUs in the organizational portfolio according to market growth

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and market share

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Market Growth: The annual rate of growth within the SBUs market

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Market Share: The relevant market share held by the SBU when its
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sale are compared with the largest competitor
 BCG Growth-Share Matrix

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Star Question Mark
High

Modest Large
Market Growth

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+ or – Negative

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(Cash Use)

Cash flow Cash flow

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Cash Cow Dog
Large Modest
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Low

Positive + or –
Cash flow Cash flow

High Low

Market Share
(Cash Generation)
 Types of Portfolio Strategy cont.
II. GE Business Screen: A nine cell matrix that classifies SBUs

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according to industry attractiveness and business strength

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Size Size

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Growth Market growth pricing
Share
Position
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Competitive structure

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Business Strength

Business Attractiveness
Profitability Industry profitability
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Margins Technical role
Technological position Social
Strength / Environmental
Weaknesses Legal
Image Human
Pollution
People
 The GE Business Screen
Industry

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Attractiveness

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High Medium Low

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High

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Medium
Business
Strength

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 Business-Level Strategy
The level of strategy that determines how a company will compete in

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each of its business units

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• Strategic Business Unit (SBU)

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A separate business, with its own set of managers, products, resources,

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customers, and competitors, that is managed independently of a
company’s other organizational units

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1. Miles & Snow’s Adaption Model: A strategy analysis tool based on
the relationship of business level strategy to the internal and
external environment
2. Porter’s Generic Competitive Strategies: Three business level
strategies that help organizations to attain competitive advantage
 The Adaption Model
Strategy Approach to Environment
Defender In a stable environment, defender
selects a limited domain to
penetrate and defend. Relies on
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strict controls to ensure efficiency.
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Prospector In a dynamic environment,
prospector seeks out and exploits
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new product and market
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opportunities. Remains flexible and
responsive to environmental
changes.
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Analyzer In an environment with both stable
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and changeable characteristics,
analyzer pursues innovation while
protecting current customer base.
Requires a balance of flexibility and
stability.
Reactor In any type of environment, reactor
acts without a consistent strategy.
Reactor responds inappropriately
and in an ad hoc fashion.
Risk
Defender may be unable to respond to
major shifts in the environment or to
quickly switch technologies, products, or
markets.
Prospector may yield low profitability due
to costs of overextension of the resources
needed to innovate in a changing
environment. Prospector also faces risk of
inefficiencies due to the multiplicity of
technology in use.
Analyzer risks both inefficiency and
ineffectiveness because of inability to
respond fully either to total stability or to a
major environmental shift.
Reactor risks poor performance because of
inability to react appropriately or
consistently to any environmental situation.
Porter’s Five Forces Model
New

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Entrants

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Intensity of
Rivalry Among

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Suppliers Buyers
Current
Competitors
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Substitutes
 Porter’s Generic Competitive Strategies
Strategy Commonly Required Skills and Common Organizational Requirements
Resources
Cost Leadership Sustained capital investment and Tight cost control
access to capital Frequent, detailed control reports

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Process engineering skills Structured organization and

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Intense supervision of labor responsibilities
Product designed for ease in Incentive based on meeting strict

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manufacture quantitative targets

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Low cost distribution system
Differentiation Strong market abilities Strong coordination among functions in
Product engineering R&D, product development, and

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Creative flair marketing
Strong capability in basic research Subjective measurement and incentives
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Corporate reputation for quality instead of quantitative measures

Long tradition in the industry or Amenities to attract highly skilled labor,
unique combination of skills drawn scientists, or creative people
from other businesses
Strong cooperation from channels
Focus Combination of the other two Combination of the other two policies
policies directed at the particular directed at the particular strategic target
strategic target
 The Product Life Cycle
Sales &

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Profits

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Profits
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Time
Product Introduction Growth Maturity Decline
Development
Stage
 Functional-Level Strategy
• The level of strategy that determines how activities in each of the

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organization’s functional areas will support business-level strategy

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1. Marketing

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2. Finance
3. Operations

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4. Human Resources
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5. Research & Development

6. Information Resources