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Ch-I BPSM
Ch-I BPSM
STRATEGIC MANAGEMENT
BY
Involves determining the required actions to achieve a desired vision considering the
present state of an organization
• A strategic plan:
Is a road map to lead an organization from its present state to its desired medium or long
term future state
• Specifies the mission, vision, goals, strategies and objectives.
• A Good Strategic Plan should;
Create the right balance between what the organization is capable of doing vs. what the
organization would like to do
4. Determining strategies using the outcomes of SWOT analysis and specified goals
• Policy is a type of plan which involves a set of specific rules or guidelines which directs the decision making of the
organization. It is usually formal or written.
• In short, a policy is a set of guiding principles, an acceptable practice, or a rule intended to influence organization
decision-making.
• In generally;
Policy restricts the freedom of action and it is generally expressed in qualitative, conditional and general way.
• Types of policy
• Policies should express and embody society’s needs and values. The function of
managers (executives) is leadership and guidance of an organization. In order to lead and
guide the organization efficiently, managers have to set up policies for all levels, from the
highest to the lowest.
1. General policies: General policies are statements of principles that guide the
organization. They are broad and comprehensive; and basic to the direction of the
company. They decide questions involving geographical locations, product lines,
product distribution, diversification, decentralization.
2. Specific policies: As each unit or department has its own objectives, the executive must
formulate policy keeping these in mind. Hiring or discharging employees, vacations,
extension of credit to customers, restrictions on inventories, and insurance would all
come under minor policies.
• FEATURES OF POLICY:
e) Simple: A policy should be simple and easily understood by all in the organization.
Related to Organizational moves and decisions for the Organizational rules for the activities which are
situations which have not been encountered repetitive in nature.
previously.
Describes Methodology target What should be done and what should not be
done.
• STRATEGIC DECISION
• A strategic decision refers to the identification, evaluation and selection of the
best strategy that increases the likelihood of achieving organizational goals.
a. Entrepreneurial approach
b. Adaptive approach
c. Planning approach
1. Entrepreneurial approach
• Entrepreneurial approach is an approach in which strategy is formulated mainly by a strong visionary chief executive
who actively searches for new opportunities, is heavily oriented toward growth, and is willing to make bold strategies
rapidly. Strategy is made by one powerful individual who has entrepreneurial competencies like innovation and risk
taking.
• The entrepreneurial searches for new mode are most likely to be found in organizations that are young or small, have a
strong leader, or are in such serious trouble that bold are their only hope.
2. Adaptive approach
• Adaptive approach is an approach to strategy formulation that emphasizes taking small incremental steps,
reacting to problems rather than seeking opportunities, and attempting to satisfy a number of organizational
power groups.
• It is more appropriate for dealing with complex and changing environments. The adaptive mode is most
likely to be used by managers in established organizations that face a rapidly changing environment and yet
have several coalitions, or power blocks, that make it difficult to obtain agreement on clear strategic goals
and associated long-term plans.
• The adaptive mode is where managers create reactive solutions to existing problems, rather than a proactive
search for new opportunities. Simply wait on issues to arise.
• It is a fragmented approach to strategic decision making. Because of the lack of directed focused
development, there is generally a lack of clarity and consensus on strategic goals.
3. Planning approach
• The planning approach of strategic decision making is characterized by the systematic gathering of
relevant information for situation analysis, the generation of feasible alternative strategies, and the
rational selection of the most appropriate strategy.
• With the planning approach, executives often utilize planning specialists to help with the strategic
management process. The ultimate aim of the planning approach is to understand the environment
well enough to influence it. The planning approach is most likely to be used in large organizations
that have enough resources to conduct comprehensive analysis, have an internal situation in which
agreement is possible on major goals, and face an environment that has enough stability to enable
the formulation and implementation of carefully conceived strategies.
• In summary, it is a proactive search for new opportunities and the reactive solution of existing
problems.
LEVELS OF STRATEGIES
• In a multi-business enterprise, there would be three levels of strategy, viz., – corporate strategy, business strategy and
functional strategy.
a. Corporate Strategy: Corporate strategy is the long-term strategy encompassing the entire organization. Corporate
strategy addresses fundamental questions such as what is the purpose of the enterprise, what business/businesses it
wants to be in (portfolio strategy) and how to expand/get into such business/businesses (for example– by establishing
greenfield enterprises or by M&A’s). Corporate strategy is formulated by the top level corporate management (board of
directors, CEO, and chiefs of functional areas).
b. Business Strategy: sometimes called Competitive Strategy, is concerned with decisions pertaining to the product mix,
market segments and directional competitive advantages for the SBU. While corporate strategy decides the business
portfolio (i.e., the types of business), the competitive strategy decides the strategy/strategies to succeed in the chosen
business/businesses. SBU strategy has to conform, obviously, to the corporate philosophy and strategy. In short, “the
SBU-level strategic management is the management of an SBU’s effort to compete effectively in a particular line of
business and to contribute to overall organizational purposes.
c. Functional Strategy: Functional-level strategies are strategies for different functional
areas like production, finance, personnel, marketing, etc. In other words, “functional- level
strategic management is the management of relatively narrow areas of activity, which are of
vital, pervasive, or continuing importance to the total organization.” Functional-level
strategy is the responsibility of functional area heads.
THE STRATEGIC MANAGEMENT PROCESS
• The strategic management process means defining the organization’s strategy. It is also
defined as the process by which managers make a choice of a set of strategies for the
organization that will enable it to achieve better performance.
• Strategic management is a continuous process that appraises the business and industries in
which the organization is involved; appraises its competitors; and fixes goals to meet the
entire present and future competitor’s and then reassesses each strategy.
• Strategic management process has following four steps:
2. Strategy Formulation- Strategy formulation is the process of deciding best course of action for
accomplishing organizational objectives and hence achieving organizational purpose. After
conducting environment scanning, managers formulate corporate, business and functional
strategies.
3. Strategy Implementation- Strategy implementation implies making the strategy work as
intended or putting the organization’s chosen strategy into action. Strategy implementation
includes designing the organization’s structure, distributing resources, developing decision
making process, and managing human resources.
4. Strategy Evaluation and control- Strategy evaluation is the final step of strategy
management process. The key strategy evaluation activities are: appraising internal and
external factors that are the root of present strategies, measuring performance, and taking
remedial / corrective actions. Evaluation makes sure that the organizational strategy as well
as its implementation meets the organizational objectives.
The Business Vision, Mission, Goals and Objectives
• An organization without mission, vision and objectives is not an organization; it is simply a collection of individuals/
resources.”
1. What is Vision?
Vision defines the desired or intended future state of an organization or enterprise in terms of its fundamental objective
and/or strategic direction.
It outlines what the organization wants to be, or how it wants the world in which it operates to be.
Whether for all or part of an organization, the vision statement answers the question, “Where do we want to go?” Vision
statement also answers the question “What do we want to become?”
While a vision statement doesn’t tell you how you’re going to get there, it does set the direction for your business
planning.
Unlike the mission statement, a vision statement is for you and the other members of your company, not for your
customers or clients.
A vision usually precedes the mission statement.
It is usually short, concise and preferably limited to one sentence.
• In short, vision statement;
Clearly articulated vision can provide energy, momentum and strengths to individuals.
It inspires stakeholders.
It is life-blood of an organization.
It provides bases for partnership and incentive to work through internal conflict.
• It binds an organization together in times of crises.
Features of an effective vision statement include:
Realistic aspirations
• Mission is a very broad and general statement about the basic purpose of the
organization.
The guiding principle that drives the processes of goal and action plan formulation, “a
pervasive, although general, expression of the philosophical objectives of the enterprise.”
Should focus on “long – range economic potentials, attitudes toward customers, product and
service quality, employee relations, and attitudes toward owners.”
• In order to be effective, a mission statement should possess the following seven characteristics.
Feasible: a mission should always aim high but it should not be an impossible statement. In addition it
should be realistic and achievable. Its followers must find it to be credible. But feasibility depends on the
resources available to work towards a mission.
Precise: should not be so narrow to restrict the organization’s activities nor should it be too broad to make
itself meaningless.
Clear: should be clear enough to lead to action and should not be a high sounding set platitudes meant for
publicity purposes.
Motivating: should be motivating for members of the organization or being its customers.
Distinctive: the indiscriminate one (random, arbitrary) is likely to have little impact. If all defined
their mission in a similar fashion, there would not be much of a difference among them. If defined
as providing value for money, for years it created an important distinction in the public mind.
Indicate major components of strategy: along with the organizational purpose should indicate the
major components of the strategy to be adopted.
Indicate how objectives are to be accomplished: Besides indicating the broad strategies to be
adopted, it should also provide clues regarding the manner in which the objectives are to be
accomplished.
COMPONENTS OF A MISSION STATEMENT
Customer: Who are the firm’s customers?
Concern for survival, growth, and profitability: Is the firm committed to growth and financial soundness?
Philosophy: What are the basic beliefs, values, aspirations, and ethical priorities of the firm?
Concern for public image: Is the firm responsive to social, community, and environmental concerns?
• The terms “goals and objectives” are used in a variety of ways, sometimes in a conflicting
sense. The term “goal” is often used interchangeably with the term “Objective”. But some
authors prefer to differentiate the two terms.
• They represent a future state or outcome of the effort put in now. “Objectives” are the
ends that state specifically how the goals shall be achieved. In this sense, objectives make
the goals operational.
• Objectives are concrete and specific in contrast to goals which are generalized. While
goals may be qualitative, objectives tend to be mainly quantitative, measurable and
comparable.
Difference between Goals and Objectives
Following are some distinctions among these terms:
Goals Objectives
General Specific
• The process of strategic management is a comprehensive collection of different types of continuous activities
and also the processes which are used in the organization. The strategic management is a way to transform
the existing static plan in a proper systematic process. The strategic management can have some immediate
changes in the organization.
a. Making better future: There is always a difference between the reactive and proactive actions. When a
company practices the strategic management the company will always be on the defensive side and not
on the offensive end. You need to come out victorious in the competitive situation and not be a victim of
the situation. It is not possible to foresee each and every situation but if you know that there are chances
of certain situations then it is always better to keep your weapons ready to fight the situation.
b. Identifying the directions: The strategic management essentially and clearly defines the
goals and mission of the company. The main purpose of this management is to define realistic
objectives and goals this has to be in line with the vision of the company. The strategic
management provides a base for the organization on the basis of which progress can be
measured and on the basis of the same, the employees can be compensated.
c. Better business decisions: It is important to understand the difference between a great idea
and a good idea. If you do have a proper and clear vision of your company then having a
mission and methods to achieve the mission always seems to be a very good idea. It turns into a
great idea when you decide what is the type of project that you want to invest your money; how
do you plan to invest your time and also utilize the time of your employees. Once you are clear
with your ideas about the project and the time each of your employee and yourself will have to
allocate, you will need to focus your attention on the financial and human resources.
d. Longevity of the business: The times are changing fast and there are dynamic changes happening every
day. The industries worldwide are changing at a fast pace and hence survival is difficult for those
companies which do not have a strong and perfect base in the industry. The strategic management ensures
that the company has a thorough stand in the related industry and the experts also make sure that the
company is not just surviving on luck and better chances or opportunity. When you look at various studies
you would know that the industries which are not following the strategic management will survive for not
more than five years. This suggests that the companies should have a powerful focus on the longevity of
the business. This suggests that without strategic management, it is not possible for a company to survive
in the long run.
e. Increasing market share and profitability: With the help of strategic management it is possible to
increase the market share and also the profitability of the company in the market. If you have very focused
plan and strategic thinking then it is possible for all the industries to explore better customer segments,
products and services and also to understand the market conditions of the industry which you are
• The Disadvantages of Strategic Management
b. It is expensive: In the not-for-profit sector, there are many organizations that cannot afford to
employ an external consultant to help them build up their strategy. Currently, there are many
volunteers that help smaller organizations and also funding agencies that will support the cost of
employing external consultants in forming a strategy.
c. Long-term benefits rather than immediate results: It is designed for providing long-term benefits
rather than short-term results. Most of the time, it focuses on long-term goals. If you are looking at
the strategic management process to discuss an immediate crisis within your organization, it won’t. It
always makes sense to discuss the immediate crises prior to allocating resources to the strategic
management process.
d. Complex process: The strategic management involves various types of continuous process which
checks all types of important critical elements. This consists of the internal and external
environments, long-term and short-term objectives, strategic control of the company’s resources, and
last but not least, it also has to look at the organizational structure. This is a long process because a
single variation in one element can affect all the factors.