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Strategic Management

S M A R T
Be thoughtful and Pick a goal that is Set yourself up for Be realistic when Be aggressive and
specific about what measurable so you success by choosing choosing your goal. realistic when setting
you want to focus on. can continually monitor something that is Think about how it your end time or
your progress. achievable. will affect your date. Knowing there’s
day-to-day life. an end in sight will help
you focus and push
yourself.
Introduction to Strategic Management.
Introduction to Strategic Management.

Business Policy traditionally associated with Strategic Management.

• In smaller firms and earlier business it was short term goals which found focus as it
was matter of survival in present
• Systems and manuals were prepared for decisions to be repeated.
• Prepared Budgets, anticipate future fund flows and sales
Strategic Management
• Long term focus on forecasting the future using economic and technological tools.
• First Generation planning: most probable appraisal and diagnosis of future
environment and its own strength and weaknesses.
• Second Generation planning: Analysis and preparation of several scenarios in future
contingency strategy are prepared for likely scenarios in future.
Definition
1. 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.
The strategic management process is the way in which strategists determine objectives
and make strategic decisions.
2. Strategic decisions are means to achieve ends. These decisions encompass the definition
of the business, products and markets to be served, functions to be performed and major
policies needed for organization to execute these decisions to achieve objectives.
3. Plans and policies are guides to action. They indicate how resources are to be allocated
and how tasks assigned to the organization might be accomplished so that functional-
level managers executed the strategy properly.
4. A strategic business unit (SBU) is an operating division of a firm which serves a distinct
product-market segment or a well-defined set of customers or a geographic area. The
SBU is given the authority to make its own strategic decisions within the corporate
guidelines as long as it meets the corporate objectives.
Three levels of Strategy

CORPORATE BUSINESS LEVEL FUNCTIONAL

LEVEL LEVEL
CORPORATE LEVEL
WHO?
• BOARD OF DIRECTORS CEO ADMININSTRATIVE EXECUTIVES
WHAT?
• FINANCIAL PERFORMANCE
• NON FINANCIAL PERFORMANCES
• IMAGE SOCIAL RESPONSIBILITY
• STOCKHOLDERS
• SPAN AND ACTIVITIES OF FUNCTIONAL AREAS
• PORTFOLIO APPROACH
BUSINESS LEVEL
WHO?
BUSINESS AND CORPORATE MANAGERS
WHAT?
TRANSLATE DIRECTION AND INTENT OF COPORATE LEVEL
CONCRETE OBJECTIVES AND STRATEGIES FOR INDIVIDUAL
BUSINESS DECISIONS OR SBU’s
HOW TO COMPETE IN SLECTED PRODUCT MARKET AREAS
STRIVE TO IDENTIFY AND SECURE THE MOST PROMISING
SEGEMENT IN THE AREA.
FUNCTIONAL LEVEL
WHO?
MANAGERS OF PRODUCT / GEOGRAPHIC / FUNCTIONAL AREAS
WHAT?
ANNUAL OBJECTIVE
SHORT TERM STRTEGIES (TACTICS)
EXECUTE THE FIRMS STRATEGIC PLANS
FIRST TWO LEVELS – DOING RIGHT THINGS
– THIS LEVEL DOING THINGS RIGHT
Strategy and Structure: Role of Structure .
 Strategy is implemented through organizational design.
 A structure is the division of tasks for efficiency and clarity of
purpose and coordination between the interdependent parts of the
organization to ensure organizational effectiveness
 Structure brings balance between need for specialization and need
for integration.
 Structures provide means to centralise and decentralised the
authority and responsibility according to organizational and control
needs of the strategy.
Strategy and Structure: Role of Structure .

 A well laid structure Enables managers to coordinate the activities

of employees in different functions and divisions.

 The structure serves as a means for managers to exploit the skills

and capabilities of companies employees.

 Structure is the means for implementing strategy.

Strategy and Structure: Role of Structure .
 The structure is used as a
 reward system
 planning procedures
 and information and budgetary system

 To improve
 Efficiency
 Quality
 Innovation
 and customer responsiveness .
Strategy and Structure: Role of Structure .

 Each function should develop specific competency in value creating

activity.

 A good structure helps to develop specific competencies in all

functions.

 Coordination is the key to the success of the role of the structure.

Managing Strategic Change: Reengineering, Restructuring, Innovation.
.

 Building new competencies through change in

 strategies
 structure
 and control system
 Reengineering.
 Reengineering involves the critical analysis and radical redesign of existing
business process to achieve breakthrough improvements in measured
performance.
 Reengineering involves
 developing and prioritising objectives
 defining process structure and assumptions
 optimising trade-offs between processing
 zeroing on new products and market opportunities
 and developing a strong human resource strategy.
Managing Strategic Change: Reengineering, Restructuring, Innovation.
.

 Reengineering he is about radical redesign and drastic improvement

 Moving away from old rules and fundamental assumptions.
 It involves technology used by people.
 Principles of re engineering are:
 Organising around outcomes not task
 Making those who use output of process part of process creation
 Treating geographically dispersed resources as though they were centralised
 Linking parallel activities instead of integrating their result
 Locating the point of decision making at the point where the work is performed and
building control into process
 Capturing information once at the source
Managing Strategic Change: Reengineering, Restructuring, Innovation.
.

 Steps in successful re engineering

 Identify the process to be redesigned
 Understand and measure the processes that are followed currently
 Select IT levers
 Create a prototype of new process
 Restructuring
 Restructuring is a process in which business firms engage in broad
range of activities that change the structure of the form this could
include
 Expanding operations
 Shrinking the asset base by selling of unproductive assets
 and Changing the ownership structure say from private to public
Managing Strategic Change: Reengineering, Restructuring, Innovation.
.

 Innovation
 New idea or method
 First mover advantage
 Economies of scale
 Strategic advantage
 Even incremental improvement can add significant value
 Collective enterprise and expertise of employees
 Complacency with past success is an obstacle to innovation
 Short term mentality and expert syndrome blocks innovation
Managing Strategic Change: Reengineering, Restructuring, Innovation.
.

 Convergent thinking of vertical thinking moves step by step by

taking the right step like lateral thinking

 Creativity and risk taking are important prerequisites for innovation

 Innovation is a result of creative action

 Coordination productivity requirement and control system may also

undermine creativity to encourage in workplace effort must be made
Successful Change of Strategy.
 Rapidly changing marketplace requires change or update in strategy
 The need for change in strategy arises due to various reasons like
 Downturn in performance
 Competitor's decision to increase its market share
 New person in top management
 New management development program
 Need to increase capital
 Takeover of the company
 Radical changes are not always desirable
 At the same time strategy cannot be everlasting
 A balanced view becomes important
Successful Change of Strategy.
 Momentum Judging the Extent of Change Required
 Clarity about the extent of change required becomes important
 After judging either a drastic solution or a less drastic one can be
prescribed ask the need of the hour.
 A strategist should consider the ground rules set in the mission statement.
 Attention to rules is important as they govern the firm behaviour.
 Mission statement helps the strategies to understand organizational
beliefs and values and its products or services.
 Mission statement also indicates the market hey the marketplace
technological preference attitude to growth and financing long term goals
Successful Change of Strategy.
Force Field Analysis
 Clarity in idea about
 Industry structure
 Competitive position
 Internal resources
 Organizational culture
 Changes keeps the organization combat ready.
 Changes in structure and control system must complement the strategy in
use
 Skill and strategy help organization in navigating uncertain business
environment.
Managing Strategic Change
Culture Style
and Values

Culture Style
and Value

? Strategy

Structure
and System

Present Situation
Skills and Future Situation
Resources
Successful Change of Strategy.
Force Field Analysis.

 According to force field analysis there are certain forces that help
organization to reach its vision. (PUSHING FORCES)

 Against these there are opposing forces that obstruct the march to the
right direction. (RESISTING FORCES)

 Improved quality is the intended strategy change.

 Successful Change Force Field Analysis.

of Strategy. • Pushing forces are

Force Field Analysis • Pressures from customers
• Good training programs
• A new production department head
• Modern machinery
Pushing forces

• and motivated supervision

Resisting forces

• The resisting forces are

• Poor warehousing
• Inadequate documentation
• Poor shop floor attitudes
• Poor relation between production and
inspection
• and Negative reputation

PRESENT
SITUATION FUTURE
VISION
Force Field Analysis

The following must be kept in mind while designing a strategic

change
1. Clear vision to where the change will lead
2. Concentrate on things that demand immediate attention
3. Final responsibility for action on single individual
4. Intention relating to strategic change will result in actual strategic
change only when intention is followed by visible management
action
5. Involvement of employees in designing change is a powerful
motivator
6. Management and control systems complement the new strategy
 Force Field Analysis
Force Field Analysis: Improving Quality

Pressure from Poor Warehousing

Customer
Good Training Inadequate documentation
Program
New Production Shopfloor attitude
Director
Modern Poor relationship between
Machinery production and inspection

Motivated Low quality Reputation

Supervision

PREENT SITUATION IMPROVED QUALITY

Dealing with Momentum
o Momentum is continuity or strength derived from initial effort
o There is a tendency for continuing along the same lines
o It tends to use tried and tested procedures and forms of operation
o Change is required even when momentum for continuity has been built up
o The fit ensures strategies to structure system skill culture are in harmony
o There are various types of organizational configurations that are viable young organization
start at
o ADHOCRACY
o DIVISIONALIZED FORM
o PROFESSIONAL BUREAUCRACY
o MACHINE BUREAUCRACY
o SIMPLE STRUCTURE
FIVE CONFIGURATION
• SIMPLE STRUCTURE
• NEW / SMALL / CRISIS / ENTREPRENEURIAL ORGANAIZATION
• MACHINE BEAUROCARCY
• SOPHISTICATION / AUTOMATION / TECHNICAL SYSTEM
• PROFESSONAL BEAUROCRACY
• DYNAMISM / EXPRIMENTATION
• DIVISIONALIZED FORM
• ENVORONMENTAL DISPARITY / COMPLEXITY & DYNAMISM / DIVISIONAL
INTERDEPENDECE
• ADHOCRACY
• RESEARCH BASED
ESTABLISHING STRATEGIC CONTROL SYSTEM
 Monitoring and evaluating strategic management process.
 Tracking the strategy when it is implemented.
 strategic control answered questions such as
 Organizations internal strengths still holding good?
 Internal weakness still present?
 Has is organization added other internal strengths ?
 Does it have other weaknesses?
 Are there new opportunities?
 Do the threats of the organization still exist are there new threats ?
 Are the decisions consistent with organizational policy?
 Are the goals and targets being met ?
 Are the organizational vision mission and objectives appropriate to the changing
environment?
FOUR TYPES OF STRATEGIC CONTROL

STRATEGIC SURVEILLANCE

PREMISE CONTROL
SPECIAL ALERT CONTROL
IMPLEMENTATION
CONTROL
STRATEGY
STRATEGY
IMPLEMENTATION
FORMULATION
TIME 1 TIME 2 TIME 3
PREMISE CONTROL
 Assumption every strategy is based on assumption
 premise control helps to check this assumption
 systematically and continuously
 if an assumption is no longer valid strategy is changed
 premises are primarily concerned with 2 types of factors
 Environmental factors
 Inflation technology interest rate government regulation demographic social change
 Industry factors
 Suppliers substitutes barriers to entrance
 Tracking every premise is expensive and time consuming
 Only those which are likely to change or are changing are monitored eski
premises .
Implementation control
 Action PHASE are a series of steps programs and moves undertaken
over a period of time to implement the strategy
 managers undertake programs add people and mobilize resources
 actions act as goals for specific units and individuals to implement
strategy
 the strategic control undertaken is implementation control
 monitoring strategic thrust
 milestone reviews
STRATEGIC SURVEILLANCE
 Strategic surveillance is designed to monitor broad range of events inside
and outside the company
 The specific intent of strategic surveillance is to uncover important yet
unanticipated information
 Surveillance must be kept on focused as much as possible and should be
designed to lose environmental scanning
 Trade magazine trade conferences intended unintended observations are
sources for strategic surveillance
 Ongoing vigilance of daily operations to uncover information that may
prove relevant to farms strategy
SPECIAL ALERT CONTROL
o Special alert control reflects the need to thoroughly reconsider forms
basic strategy due to sudden unexpected event
o Triggered by immediate and intense reassessment
o Unforeseen occurrences have an immediate effect on firms strategy
companies develop contingency plans which are put in effort by crisis
team
o Steering the companies future direction
Operational Control System:

 Operational controls are action control

 Post action evaluation and control

 Four steps for operational control

1. Set standard of performance

2. Measure actual performance.

3. Identity deviations from standard

4. Initiate corrective action or adjustments.

Operational Control System:

BUDGETS

 Resource allocation plan

 Used for control.

 3 types
 REVENUE – daily management / sales forecast / deviation means readjustment

 CAPITAL – Plant equipment machinery expenditure / cash budget / balance sheet budgets

 EXPENDITURE – Allocation for each department / functional unit / sub functional activities

 Effect could be Positive or Negative depending on rigidity

Operational Control System:
Schedules
 Allocation of time and constrained resources
 Sequence of interdependent activities
 Commence and conclude – systematic flow of work
Key Success Factors
– Focus areas and these are:
1. High employee morale
2. Improved product service quality
3. Increased earnings per share
4. Growth in market share
5. Completion of new facilities
Operational Control System:
– Reward Systems
 Evaluation and control system is dependent on human resources
 Rewarding good performances is key to success
 Both positive and negative reinforcements’ are critical.
 Mechanism includes
 Compensation
  Recongnition and praise
Raises
 Criticism
 Bonuses
 More (or less) responsibility
 Stock options  Performance appraisal
 Incentives  Tension and fear
 Promotion / demotion
Operational Control System:

– Crisis Management: Steps for Managing Crisis

o Risk and uncertainties that arise over time.

o Types of risk
o Accidental eg fire, computer failure

o Delibrate eg. Poisoning scare, contamination of food

o Plans to mitigate such eventualities’

o Strategic change can lead to crisis of confidence (rumors of takeover)

Operational Control System:

– 3 important decisions to ensuring crisis management is effective

1. Decision what can go wrong and probability of it happening

2. Decision about investing in preventive meaures

3. Decision on mechanism for contingency management

Operational Control System:

– Steps in crisis management

1. Identification of risk areas

2. Establishing policies and procedure to avoid risks (Coca cola accident free
days)
3. Trained crisis management team
4. Identify stake holder effected and how
5. Clear communication strategy, ethical issues involved hence open honest
and consistent.
Operational Control System:
– Matching Structure and Control to Strategy:
Change in corporate strategy followed by change in structure
Manufacturing
 Efficiency , quality and responsiveness to customers
 Tight control over activities
 Behavior and output control
 Operating budgets
Research and Development
• Distinctive competency in innovation
• Product that fits customers needs
• Motivate R & D employees
Sales
• Flat structures
• Output controls linked to bonus rewards
• Behavioural controls