STRATEGIC MANAGEMENT

Unit 1 Choice of Strategy

The following points will be covered

Strategy Strategic management Levels of Strategy Concept of Choice of Strategy Choice process Factors affecting choice of Strategy Time Dimension and Contingency Strategy

Strategy is the : Determination of long term goals and objectives Adopting course of action to achieve the goals and objectives Allocation of resources Strategic Management is basically formulating, Implementing and evaluating cross functional decisions to achieve organizational objectives.

Levels of Strategy
1) Corporate level strategy : At this level the issues pertaining to business ethics , integrity, and social commitments are dealt . Major financial policy decisions involving acquisitions, diversification and structural designing etc belong to the category of corporate level strategy.

2) Business level strategy : Business or divisional level strategy usually occurs at business unit or product level and it emphasizes improvement of the competitive position of a companys product or services in the specific industry or market segment served by that business unit.
3) Functional level strategy : It involves decision making with respect to specific functional areas say production , marketing , personnel , finance. These are described as tactical decisions.

Choice of Strategy
Strategic choice is the selection of a strategy or set of strategies that helps in achieving organizational goals, in the light of environment -al opportunities, threats, organizational strengths and weakness. Strategic choice is made from among ranked alternatives and finally the best choice is made.

Approach for Strategic choice

Planned approach : formal appraisal of strategic options. Enforced choice approach : dominating stakeholders. Experienced based approach: Managers are Involved. Command Approach: On the command of Top Management.

Choice Process
Focusing on Strategic Alternatives

Analyzing the Strategic Alternatives

Evaluating the Strategic Alternatives Choosing from among the Strategic Alternatives

Focusing on Strategic Alternatives

Focusing on reasonable number of alternatives taking into consideration the future state and working backwards through Gap Analysis. Analyzing difference between projected and desired performance , a gap could be formed. At corporate level strategic alternatives are expansion, stability, retrenchment and combination. At business level there are alternative ways of competing. Positioning business as low cost, focused or differentiated .

Analyzing the Strategic Alternatives

Objective and Subjective factors Objective factors a) Strategic Intent b) SWOT Analysis Strategic intent is basically starting point of strategy formulation( what to do , why to do) It includes vision, mission , goals and objectives. Strategic alternatives can be grouped on the basis of key variables (potential market growth) and (firms competitive position).

Approaches under various alternatives

Low market growth/Weak competitive position.[ Defensive] High market growth/Weak competitive position .[ Mixed] Low market growth/ Strong competitive position .[ Neutral] High market growth/Strong competitive position. [Growth]

Subjective factors
Behavioral factors: 1) Organizational past strategies 2) Personal factors 3) Attitude towards risk 4) Internal political consideration 5) Time consideration 6) Personal aspirations and preferences 7) Value system of Top management

Evaluating the Strategic Alternatives

Three approaches may be adopted: 1) Portfolio Analysis ( corporate , business or product portfolio analysis) is based on SWOT analysis and evaluates which businesses will be desirable/undesirable in the long run. 2) Corporate Parenting Analysis: It tries to evaluate the degree of fit between corporate level requirements and characteristics of different businesses.

3) Profit Impact of market strategy :It is used to evaluate the extent to which market share of a particular product should be increased.

Prominent Portfolio Analysis Techniques

BCG Growth share Matrix GE Nine cell planning grid Product/Market Evolution Matrix Directional policy Matrix Strategic position and Action Evaluation (SPACE) Detailed explanation of all these techniques is required.

Factors affecting choice of Strategy

Role of past strategy Degree of firms external dependence Attitude towards risk Internal political consideration and the CEO Timing aspect Competitive reaction Value system of Top management

Time Dimension: Time element influences strategic choice . It affects the way managers try to match short term and long term perspectives.
Contingency approach: It implies that the suitability of a strategic action is contingent on various factors particularly environmental factors. Strategy is formulated for each possible scenario.

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