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Model - Organisational Learning, and the Experience Curve. Unit - III Strategy Formulation Classes: 10 Strategy Formulation : Formulation of strategy at corporate, business and functional levels. strategic planning institute matrix, Arthur D Little company‘s matrix, Hofer‘s Product/market evolution matrix, Shell‘s directional policy Matrix, The PIMS Model, International Portfolio analysis (GD Harrel and RO Keifer, Multinational strategic Market Portfolios), Parenting Fit Matrix (Campbell Corporate parenting). Unit - IV Strategic Analysis – Choice; Tools and Techniques Classes: 10 Strategy Implementation : Types of Strategies : Stability Strategy, Growth Strategy, Retrenchment Strategy, and Combination Strategy, Offensive strategy, Defensive strategy, vertical integration, horizontal strategy; Tailoring strategy to fit specific industry and company situations, Strategy and Leadership, Resource Allocation as a vital part of strategy – Planning systems for implementation – BPRE – Executive succession – Downsizing – TQM – MBO. Unit - V Strategic Evaluation and Control Classes: 10 Strategy Evaluation and control – Establishing strategic controls - Role of the strategist - benchmarking to evaluate performance - strategic information systems – Guidelines for proper control- Strategic surveillance - strategic audit - Strategy and Corporate Evaluation and feedback in the Indian and international context. References:
Strategic Management is a field of study that involves the process through which firms define their missions, visions, goals, and objectives, as well as craft and execute strategies at various levels of the firms’ hierarchies to create and sustain a competitive advantage. Strategy is a high level plan to achieve one or more goals under conditions of uncertainty. Here are some definitions of strategy. Chandler(1962)Strategy is the determination of the basic long-term goals of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals; Mintzberg (1979) Strategy is a mediating force between the organization and its environment: consistent patterns in streams of organizational decisions to deal with the environment. Prahlad (1993) Strategy is more then just fit and allocation of resources. It is stretch and leveraging of resources Porter (1996) Strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value Mintzberg has identified the 5 P’s of strategy: Strategy could be a plan, a pattern, a position, a ploy, or a perspective.
A typical business firm should consider three types of strategies, which form a hierarchy as shown in Figure 2.2 Corporate strategy – Which describes a company’s overall direction towards growth by managing business and product lines? These include stability, growth and retrenchment. For example, Coco cola, Inc., has followed the growth strategy by acquisition. It has acquired local bottling units to emerge as the market leader Business strategy - Usually occurs at business unit or product level emphasizing the improvement of competitive position of a firm’s products or services in an industry or market segment served by that business unit. Business strategy falls in the in the realm of corporate strategy. For example, Apple Computers uses a differentiation competitive strategy that emphasizes innovative product with creative design. In contrast, ANZ Grindlays merged with Standard Chartered Bank to emerge competitively. Functional strategy – It is the approach taken by a functional area to achieve corporate and business unit objectives and strategies by maximizing resource productivity. It is concerned with developing and nurturing a distinctive competence to provide the firm with a competitive advantage. For example, Procter and Gamble spends huge amounts on advertising to create customer demand. Operating strategy - These are concerned with how the component parts of an organization deliver effectively the corporate, business and functional - level strategies in terms of resources, processes and people. They are at departmental level and set periodic short-term targets for accomplishment.
Participative management style of functioning, it is a group or team exercise involving key personnel and all functional executives in the organization. STRATEGIC MANAGEMENT DEFINITION AND MEANING Strategic Management is all about identification and description of the strategies that managers can carry so as to achieve better performance and a competitive advantage for their organization. An organization is said to have competitive advantage if its profitability is higher than the average profitability for all companies in its industry. Strategic management can also be defined as a bundle of decisions and acts which a manager undertakes and which decides the result of the firm’s performance. The manager must have a thorough knowledge and analysis of the general and competitive organizational environment so as to take right decisions. They should conduct a SWOT Analysis (Strengths, Weaknesses, Opportunities, and Threats), i.e., they should make best possible utilization of strengths, minimize the organizational weaknesses, make use of arising opportunities from the business environment and shouldn’t ignore the threats. Strategic management is nothing but planning for both predictable as well as unfeasible contingencies. It is applicable to both small as well as large organizations as even the smallest organization face competition and, by formulating and implementing appropriate strategies, they can attain sustainable competitive advantage. It is a way in which strategists set the objectives and proceed about attaining them. It deals with making and implementing decisions about future direction of an organization. It helps us to identify the direction in which an organization is moving. Strategic management is a continuous process that evaluates and controls the business and the industries in which an organization is involved; evaluates its competitors and sets goals and strategies to meet all existing and potential competitors; and then reevaluates strategies on a regular basis to determine how it has been implemented and whether it was successful or does it needs replacement.
bargaining power of suppliers, threat of new entrants, threat of substitutes, and competition within the industry – that can impact a business. Strategic objectives might include expanding market share, changing market position or under-cutting a competitor's costs. Financial Objectives Managers use financial objectives to measure strategic performance. For example, if the firm's strategic objective is to increase efficiency, the financial objective could be to increase return on assets or return on capital. Financial objectives, derived from management accounting, are more concrete. Short-run Objectives Financial and strategic objectives can either be short-run or long-run objectives. Short-run objectives deal with the immediate future. They typically focus on tangible goals that management can realize in a short time. An example of a short-run objective might be to increase monthly sales. Long-run Objectives Long-run objectives target the firm's long-term position. While short-run objectives focus on a firm's annual or monthly performance, long-run objectives concern themselves with the firm's development over several years. Examples of long-term objectives might be to become the market leader or to attain sustainable growth. STRATEGIC MANAGEMENT PROCESS VISION, MISSION, OBJECTIVES, POLICIES A Mission Statement defines the company's business, its objectives and its approach to reach those objectives. A Vision Statement describes the desired future position of the company. Elements of Mission and Vision Statements are often combined to provide a statement of the company's purposes, goals and values.
Role played by mission, vision: What is an objective? Definition and meaning In business, an objective refers to the specific steps a company will take to achieve a desired result. The result is the goal. Hence the term ‘goals and objectives.’ In other words, my goal is what I want to become, while my objective is how I plan to get there. A business’ goal is more general and may not specify when things will happen. Objectives, on the other hand, are specific and tell you what the company will do to reach its goal. A business’ primary aim is to add value, which in the private sector involves making a profit. Strategic objectives or aims may include brand building, market leadership, expansion, or gaining a specific share of the market. Objectives, if a company is losing money, may include laying off staff and closing some branches. An objective is ‘SMART’ A company’s business objective is a detailed picture of a step its senior management plans. Specifically, they are steps it plans to take to reach a specific goal. According to businesscasestudies.co.uk , these must be SMART so that the company can gauge and monitor its progress SMART refers to the first letter of each of the five words listed below. They describe what an objective must be:
The rate of technological change varies considerably from one industry to another. In electronics, for example change is rapid and constant, but in furniture manufacturing, change is slower and more gradual. Changing technology can offer major opportunities for improving goal achievements or threaten the existence of the firm. Therefore, "the key concerns in the technological environment involve building the organizational capability to (1) forecast and identify relevant developments - both within and beyond the industry, (2) assess the impact of these developments on existing operations, and (3) define opportunities" (Mark C. Baetz and Paul W. Beamish). These capabilities should result in the creation of a technological strategy. Technological strategy deals with "choices in technology, product design and development, sources of technology and R&D management and funding" (R. Burgeleman and M. Maidique). The effect that changing technology can have upon the competition in an industry is also dealt with other chapters. Technological forecasting can help protect and improve the profitability of firms in growing industries. Social Forces Social forces include traditions, values, societal trends, consumer psychology, and a society's expectations of business. The following are some of the key concerns in the social environment:ecology (e.g., global warming, pollution); demographics (e.g., population growth rates, aging work force in industrialized countries, high educational requirements); quality of life (e.g., education, safety, health care, standard of living); and noneconomic activities (e.g., charities). Moreover, social issues can quickly become political and even legal issues. Social forces are often most important because of their effect on people's behaviour. For an organization to survive, the product or service must be wanted, thus consumer behaviour is considered as a separate environmental behaviour. Behaviour factors also affect organisations internally, that is, the employees and management. A society's expectations of business present other opportunities and constraints. These expectations emanate from diverse groups referred to as stakeholders. Stakeholders include a firm's owners (stockholders), members of the board of directors, managers and operating employees, suppliers, creditors, distributors, customers, and other interest groups - at the broadest level, stakeholders include the general public. Determining the exact impact of social forces on an organization is difficult at best. However, assessing the changing values, attitudes, and demographic characteristics of an organization's customers is an essential element in establishing organizational objectives. CONCEPT OF CORE COMPETENCE IN STRATEGIC MANAGEMENT Core competencies are the most significance value of creating skills within your corporation and key areas of expertise which are distinctive to your company and critical to the company's long term growth Your company's core competencies are the things that you do better than your competitors in the critical, central areas
Identifying the core competence:
e.g. Citicorp Adopting The Operating System. Infuse resources throughout business units to outpace rivals in new businessdevelopment e.g. 3M,Honda won races of brand dominance Forge strategic alliances NEC’s collaboration with partners like Honeywell Losses in core competence: Cost-cutting moves sometimes destroy the ability to build core competencies Outsourcing prevents the firm from developing core competencies in those tasks since it no longer consolidates the know-how that is spread throughout the company Failure to recognize core competencies may lead to decisions that result in their loss e.g. Motorola divested itself of its semiconductor DRAM business at 256Kblevel, and then was unable to enter the 1Mb market on its own. CRAFTING A STRATEGY FOR COMPETITIVE ADVANTAGE: There Are Basically Four Approaches to Crafting a Strategy
1. The Chief Architect approach A single person – the owner or CEO – assumes the role of chief strategist and chief entrepreneur, single handedly shaping most or all of the major pieces of strategy. This does not mean that one person is the originator of all the ideas underlying the resulting strategy or does all the background data gathering and analysis: there may be much brainstorming with subordinates and considerable analysis by specific departments. The chief architect approach to strategy formation is characteristic of companies that have been founded by the company’s present CEO. Michael Dell at Dell Computer, Steve Case at America Online, Bill Gates at Microsoft, and Howard Schultz at Starbucks are prominent examples of corporate CEOs who exert a heavy hand in shaping their company’s strategy. 2. The Delegation Approach: Here the manager in charge delegates big chunks of the strategy- making task to trusted subordinates, down-the-line managers in charge of key business units and departments, a high-level task force of knowledgeable and talented people from many parts of the company, self-directed work teams with authority over a particular process or function, or, more rarely, a team of consultants brought in specifically to help develop new strategic initiatives. 3. The Collaborative or Team Approach: This is a middle approach when by a manager with strategy-making responsibility enlists the assistance and advice of key peers and subordinates in hammering out a consensus strategy. Strategy teams often include line and staff managers from different disciplines and departmental units, a few handpicked junior staffers known for their ability to think creatively, and near-retirement veterans noted for being keen observers, telling it like it is, and giving sage advice. 4. The Corporate Intrapreneur Approach: In the corporate intrapreneur approach, top management encourages individuals and teams to develop and champion proposals for new product lines and new business ventures. The idea is to unleash the talents and energies of promising corporate intrapreneurs, letting them try out business ideas and pursue new strategic initiatives. Executives serve as judges of which proposals merit support, give company intrapreneurs the needed organizational and budgetary support, and let them run with the ball.
Strategic analysis refers to the process of conducting research on a company and its operating environment to formulate a strategy. The definition of strategic analysis may differ from an academic or business perspective, but the process involves several common factors:
our strategy failing or succeeding? Will we meet our stated goals? Does our strategy align with our vision, mission, and values?
3. Formulate plans If the answer to the questions posed in the assessment stage is “No” or “Unsure,” we undergo a planning stage where the company proposes strategic alternatives. Strategists may propose ways to keep costs low and operations leaner. Potential strategic alternatives include changes in capital structure, changes in supply chain management, or any other alternative to a business process. 4. Recommend and implement the most viable strategy Lastly, after assessing strategies and proposing alternatives, we reach the recommendation. After assessing all possible strategic alternatives, we choose to implement the most viable and quantitatively profitable strategy. After producing a recommendation, we iteratively repeat the entire process. Strategies must be implemented, assessed, and re-assessed. They must change because business environments are not static. The McKinsey 7S Framework is a management model developed by well-known business consultants Robert H. Waterman, Jr. and Tom Peters in the 1980s. This was a strategic vision for groups, to include businesses, business units, and teams. The 7 Ss are structure, strategy, systems, skills, style, staff and shared values. To help you better understand this model, it is divided into two categories – hard elements, and soft elements. Three of the factors are categorized on the hard elements side, with four on the soft elements side. Let’s take a look at each of these separately to better understand how the McKinsey 7-S Model can influence your organization. The Hard Elements The three factors which are considered as ‘hard’ elements under this model are strategy, structure, and systems. For most managers, these are going to be the elements that are easier to understand and quantify. In fact, these are probably the areas that you are currently spending most of your time, even if you don’t think about them as such.
