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organisation over the long-term: which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations".
Strategic management is a set of managerial decisions and actions that determines the long run performance of a corporation which includes external and internal environmental scanning, strategy formulation, strategy implementation and evaluation and control
what is strategy?
1. Strategy is a large scale, future oriented plans for interacting with the competitive environment to achieve company objectives. 2. Strategy is a) determination of long term goals and objective b)Determination of courses of action c)Allocation of resources for carrying actions.
UNDERSTANDING CONCEPT OF STRATEGY The term strategy has been derived from a Greek word strategos which means Generalship is actual direction of military force, as distinct from policy of government. A strategy could be A plan or course of action or a set of decision rules making a pattern or creating a common threat. A pattern to the organization activities which are derived from the policies , objectives and goals. Which makes organization to move towards desired future status.
Definition of strategy
A definition of strategy Goal-directed decisions and actions in which capabilities and resources are matched with the opportunities and threats in the environment. An integrated and coordinated set of commitments and actions designed to exploit core competencies and gain competitive advantage. Strategic Management is A stream of decisions and actions, which leads to the development of an effective strategy or strategies to help achieve corporate objectives Glueck.
1. Alfred D. Chandler - coordinating the various aspects of management under one all encompassing strategy.
2. Philip Selznick introduced the idea of matching the organization's internal factors with external environmental circumstances. (SWOT analysis)
3. Peter Drucker emphasized importance of objectives (MBO) setting objectives and monitoring the progress towards the entire organization, top to bottom.
Examples
a) LG Electronics India ltd., (LGEIL) signed a MoU with Maharashtra Government to expand manufacturing facility at Pune for Rs.900 crores. b) The worlds largest steel manufacturers Mittal Steel company is to become the second largest stakeholders in a Chinese steel firm in Hunan province in China c) BHEL is planning to expand its range to 1200 MW supercritical power projects d) Lenovo (cpu) acquired IBM (logo)
Important Definitions
Competitive Advantage
When a firm implements a strategy that its competitors are unable to duplicate or find too costly to try to imitate. eg.Gilitte Blades (TURBO,MACH 3) BHEL, SONY etc. Stakeholders - Individuals and groups who can affect, and are affected by, the strategic outcomes achieved and who have enforceable claims on a firms performance.(Customers, shareholders, suppliers).
3.Tactics It is related to strategy an efficient utilization of various organizational resources 4.SBU strategic Business unit means multi product companies organized as different divisions or product groups or profit centres.eg. Reliance, TVS motors, HUL etc.
single product co. Gillette India ltd, Ashok Leyland etc.(corporate strategy Functional strategy)
4. STARTEGIC MANAGEMENT
THREE LEVELS OF STRATEGY 1. corporate strategy (CEO, BOD, administrative officers financial performance and objectives are framed for the co.) 2. Business level strategy ( Directions are shown, how the firm should compete in selected product market arena) 3. Functional strategy (developing annual objectives, short term strategies in areas such as production, marketing, operations , research and development and human resources management).
4.Operational strategies - HUL & Tata group of companies , conglomerate of 120 companies with combined turnover of 200 cr.(GEO &BRCs) meeting in thrice a year with BOD.
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1. Environmental Scanning
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2. Strategy Formulation
Mission Statement
Setting Objectives & Goals A statement of purpose (strategic intent) committing the organization to ambitious overarching (stretch) objectives. Provides a sense of direction and purpose. Drives strategic decision making and resource allocations. Forces the seeking of significant performance improvements to attain objectives
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2. Strategy Formulation
Selecting Strategy Corporate strategy (Stability, Growth, Retrenchment) Business strategy (Competitive, Cooperative) Functional strategy (Technological Leadership, Technological Followership) Defining Policies Guidelines for decision making that links formulation to implementation
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3. Strategy Implementation
Budgets
Procedures
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Strategy Implementation Project ,Procedural, Resource allocation, structural, Behavioural and Functional Implementation
Strategic Evaluation
STRATEGIC INTENT creating and communicating a vision Designing a mission statement Defining the business Setting objectives
makes it clear what an organization stands for, purpose of serving, what to be achieved in long run.
Effective vision statements are: Developed by a host of people from across the organization. Clearly tied to external and internal environmental conditions. Consistent with strategic leaders decisions and actions.
Mission
(what is our business? What will it be after 5 years? Why are we in business?) purpose of business, role played by organization in the society., philosophies of business.
Definition of Mission Thompson defines mission as the essential purpose of the organization, concerning particularly why it is existence, the nature of the business it is in, and the customers it seeks to serve and satisfy
The mission statement should guide the actions of the organization, spell out its overall goal, provide a sense of direction, and guide decision-making. It provides "the framework or context within which the company's strategies are formulated
Examples of mission statements that clearly include the 3 essential components: McDonalds - "To provide the fast food customer food prepared in the same high-quality manner world-wide that is tasty, reasonably-priced & delivered consistently in a low-key dcor and friendly atmosphere.
Key Market: The fast food customer world-wide Contribution: tasty and reasonably-priced food prepared in a high-quality manner - Distinction: delivered consistently (world-wide) in a low-key dcor and friendly atmosphere
CHARACTERSTICS OF MISSION STATEMNET It should be feasible should be realistic and achievable It should be precise not too narrow or broad It should be clear
It should be motivating employees should be inspired and customer satisfaction is important It should be Distinctive indicates major components of strategy and unique. Eg. HCL It should both goals and objectives.
customer groups
Alternate technologies
BOARD OF DIRECTORS CEO ENTREPRENEURS SENIOR MANAGEMENT S B U LEVEL EXECUTIVES CORPORATE PLANNING STAFF ROLE OF CONSULTANT ROLE OF MIDDLE LEVEL MANAGERS ROLE OF EXECUTIVE ASSISTANT
STRATEGIC PLANNING Strategic Gap The strategic gap is the difference between the firm's current position and its desired positions. desired position
task concerned with growth and future of a business enterprise. It ensures that the organization keeps moving in the right direction
Strategic planning offers a methodology by which, firm could anticipate and project the future, and be internally equipped to face it.
STEPS IN STRATEGIC PLANNING Assessing the current position Identifying the desired positions Evaluating strategic gaps Formulating strategies & actions
1. Assessment of the company's current position what business is the company currently in? how well is the company doing in this business? appraisal of the firm's operating and financial performance Evaluation of the internal environment and external environment SWOT analysis is a good tool to determine current market place opportunities
2. DESIRED POSITION
Desired position by mapping the firm's strategic vision of itself against the opportunities, threats, and risks that shape its business Environment. The company desired position sets objectives in the following Areas:
industry/marketplace position revenue size and growth rate products and services produced financial performance technological objectives organization structure and culture
Plan
Within 7-10 years becoming a leading manufacturer and distributor of a highquality full line of salted snack foods
Actual
Among the top 3 leading regional manufacturers and distributors of a limited line of mixedquality salted snack foods
Critical Issues
Significant level of geographical, product line, and people growth required
Strategy
Become the lowest-cost salted snack food manufacturer Grow geographically via acquisitions
Medium-cost range manufacturer of salted snacks Two minor acquisitions in past ten years
Significant level of capital investment and technological know-how required Limited acquisition experience
The firm requires to formulate the specific actions that will be carried out to implement each strategy. The action steps are: specific strategy time frame for action individual responsible resources required