UNIT-5

Challenges in Strategic Management: Introduction, Strategic Management as an Organisational

Force, Dealing with Strategic Management in Various Situations, Strategic Management
Implications and Challenges
Recent Trends in Strategic Management: Introduction, Strategic Thinking, Organisational
Culture and its Significance, Organisational Development and Change, Change Management,
Models of Leadership Styles and its Roles, Strategic management in a new globalised economy.

---------------------------------------------------------------------------------------------------------------------------------------
This Study material is mainly for Revision & overall understanding of the chapter & it shouldn’t be an
alternative or replacement of reading the actual books.
---------------------------------------------------------------------------------------------------------------------------------------

Challenges in Strategic Management

Strategic Management as an Organisational Force

In a marketplace where workplaces are continually being disrupted through technological innovation, strategic
management can be the key to delivering a solid bottom line.

Developing a strategic vision requires an understanding of global trends, the competitive landscape and stakeholder
expectations. Once a firm knows what its mission is, the right resources can be allocated to achieve that plan. Through
strategic decision-making and commitment to strategic planning, organisations can strengthen their long-term
competitive position.

This is largely accomplished by three mechanisms:

Planning framework

Planning process

Corporate value system

Planning Framework

1. Product/market planning—The lowest level at which strategic planning takes place is the product/market unit, where
typically product, price, sales, and service are planned, and competitors identified. Product/market planners often have
no control over different sets of manufacturing facilities and so must accept a predetermined set of business economics.

2. Business-unit planning—The bulk of the planning effort in most diversified make-and-sell companies is done at a level
where largely self-contained businesses control their own market position and cost structure. These individual business-
unit plans become the building blocks of the corporate strategic plan.

3. Shared resource planning—To achieve economies of scale or to avoid the problem of sub-critical mass (e.g., in R&D
facilities), resources are shared. In some cases, the assignment of resource priorities to different business units or the
development of a plan to manage a corporate resource as a whole is strategically important. In resource-based or
process-oriented industries, strategies for shared resource units often determine or constrain business-unit strategy.
4. Shared concern planning—In some large companies, a distinct level of planning responsibility is required to devise
strategies that meet the unique needs of certain industry or geographic customer groups or to plan for technologies
(e.g., microprocessors, fiber optics) used by a number of business units.

5. Corporate-level planning—Identifying worldwide technical and market trends not picked up by business-unit planners,
setting corporate objectives, and marshaling the financial and human resources to meet those objectives are finally the
responsibility of corporate headquarters.

Planning process
Stressing competitiveness—The requirement for thorough understanding of competitors’ strategies recently has been
the planning keynote of a U.S. electrical products company well known for its commitment to planning. Top
management comes to the planning meetings prepared by its staff to bore in on a few key issues or events. “If, as you
say, our competitors are only three years away from introducing microprocessors in their control units, why are they
already talking about it in their annual reports?” the president might ask. “What cost savings could our customers
achieve with microprocessor-controlled equipment?” or “Who are our competitors’ leading engineers?” It takes only
one such grilling session to make division managers aware of gaps in their competitive information.

Focusing on a theme—Several major companies periodically reinvigorate their planning processes by asking their
managers to key annual plans to a specified theme. International business, new manufacturing process technology, the
value of our products to customers, and alternative channels of distribution have all been used successfully. This
approach has obvious limitations: it doesn’t work with business units in trouble, and it should be avoided until the value
of formal planning is well established.

Negotiating objectives—Several companies are trying to negotiate strategically consistent objectives between corporate
headquarters and business-unit general management. “We want two years and $35 million in additional investment to
prove to you we can make this into a 35% gross margin business,” said the new general manager of a division in trouble.
“During that time we will make zero profit, but we’ll strengthen our market share by three points and reduce material
waste at our Atlanta plant from 10% to 3%. Alternatively, you can have $4 million per year at the bottom line next year
and $6 million the year after that. No investment, and only minimal share loss. But be prepared to sell out the whole
division, because after that it’s all downhill.” Faced with clear options, corporate management could suggest ideas and
concessions that would promise them most of their share growth and some profitability for much less cash commitment
up front.

Demanding strategic insights—Avoiding competition by an indirect approach is the essence of creative and innovative
strategy: a reformulation of a product’s function, the development of new manufacturing methods or distribution
channels, or the discovery of dimensions of competition to which traditional competitors are blind. One way to generate
this kind of thinking is to ask each business manager to describe the specific business advantage he or she intends to
achieve. Top management reviews each business plan skeptically. As one CEO tells division heads: “If you can’t tell me
something about your business I don’t already know, you probably aren’t going to surprise our competitors either.” This
technique relies heavily on the corporate planning staff, who are charged with demonstrating to uncreative business-
unit planners that there are new ways of looking at old businesses.

Recent Trends in Strategic Management

Strategic Thinking
Strategic thinking is simply an intentional and rational thought process that focuses on the analysis of critical factors and
variables that will influence the long-term success of a business, a team, or an individual.

Strategic thinking includes careful and deliberate anticipation of threats and vulnerabilities to guard against and
opportunities to pursue. Ultimately strategic thinking and analysis lead to a clear set of goals, plans, and new ideas
required to survive and thrive in a competitive, changing environment. This sort of thinking must account for economic
realities, market forces, and available resources.

Strategic thinking requires research, analytical thinking, innovation, problem-solving skills, communication and
leadership skills, and decisiveness.

Characteristics of Strategic Thinkers

• Strategic foresight: Strategic thinkers have the ability to think ahead and anticipate potential
problems. They know having a backup plan (or several) can help them pivot quickly when things
don’t go as planned.
• An inquisitive mind: Strategic thinkers aren’t afraid to question or challenge conventional
thinking. They know asking the right question is as important as finding the right solution.
• A flexible attitude: Good strategists have the ability to pivot when a course of action isn’t
providing the intended results. They’re also flexible when it comes to reassessing their own ideas
and assumptions as new information comes to light.
• An ability to connect the dots: Strategists have a knack for identifying patterns and making
meaning out of overarching trends.
• An ability to contextualize information: Thinking strategically requires seeing information
through the lens of the past, present, and future to address both short-term and long-term goals.

Organisational Culture

Organizational culture, also known as corporate culture, refers to the values, attitudes, beliefs and behaviors that
characterize and contribute to organization's unique social and emotional work environment. Organizational culture
is unique for every organization and one of the hardest things to change and consists of written and unwritten rules
that have been developed over time.

A great organizational culture is the key to developing the traits necessary for business success. Companies with
healthy cultures are 1.5 times more likely to experience revenue growth of 15 percent or more over three years and
2.5 times more likely to experience significant stock growth over the same period

When an organization has a strong culture, three things happen: Employees know how top management wants them
to respond to any situation, employees believe that the expected response is the proper one, and employees know
that they will be rewarded for demonstrating the organization's values.

Significance of Organisational Culture

Increased employee engagement: A work environment that possesses organizational culture is driven by purpose and
clear expectations. This motivates and inspires employees to be more engaged in their work duties and interactions
with others. It also leads to high levels of workforce engagement, which drives productivity. Having a strong
connection to an organization and its people creates an atmosphere of positivity that is hard to ignore.
Decreased turnover: People who feel valued and respected at a company are less likely to leave it. That's why it's
essential for brands to foster a winning organizational culture that supports their core values and mission statement.
Happy employees mean less turnover, which saves companies time and money in the hiring process. Companies that
achieve a strong culture must take steps to maintain and improve it.

Elevated productivity: When employees have the resources and tools they need to succeed, it helps increase
productivity and performance levels overall. Organizational culture impacts the structure of a workplace in ways that
bring people of the same skill set together. Those who share similar backgrounds and skills may work more quickly
together when tackling company projects.

Strong brand identity: A company's organizational culture represents its public image and reputation. People make
assumptions about businesses based on their interactions within and outside of the company. If it lacks organizational
culture or has a weak image, customers may hesitate to do business with anyone who is associated with the brand.
Businesses with a strong brand identity tend to attract more business and job candidates with similar values who
support their mission.

Transformational power: Not all businesses have the power to transform ordinary employees into total brand
advocates, but those with a strong organizational culture do. Companies that recognize their employees' efforts and
celebrate team successes are more likely to notice a change in employees as they experience a sense of
accomplishment.

Top performers: Companies that promote community in the workplace are more likely to retain their best employees.
People who are great at their jobs and know the value of their skills commonly leave negative work environments
where they feel undermined and unappreciated. Organizational culture builds a high-performance culture that
strengthens the work of people within the company, resulting in a positive employee experience overall.

Effective onboarding: More and more, businesses with an organizational culture are relying on effective onboarding
practices to train new hires. Onboarding practices that include orientation, training and performance management
programs help new employees access the right resources and better transition into their roles. This promotes
employee longevity and loyalty and reduces the amount of frustration some employees experience when they don't
have the information needed to do their job well. Onboarding is a great way for companies to ensure new hires
understand the core values of their business.

Healthy team environment: Organizational culture helps improve workflows and guides the decision-making process.
It also helps teams overcome barriers of ambiguity. Team members who are informed and knowledgeable about
certain processes are often more motivated to finish projects. Having a clear culture that unifies employees and
promotes organized work structures helps people work together with purpose.

Organisational Development

Organizational development can be defined as an objective-based methodology used to initiate a change of systems
in an entity. It differs from everyday operations and workflow improvements in that it follows a specific protocol that
management communicates clearly to all employees.

The Process of Organizational Development

Identifying an area of improvement. Organizational change begins with identifying a need that aligns with business
goals. Companies often know that need right away, but they may consider a data-driven approach to identify
problems through formal surveys and feedback. This approach allows for a more thorough understanding of the area
for improvement. Companies should ask themselves what they want to change, and why that change is necessary.

Investigating the problem. Once the area for improvement is identified, companies conduct an investigation to learn
why the problem exists, what the barriers to improvement are, and what solutions have previously been attempted.
This step can also include surveys or focus groups and individual consultations.

Creating an action plan. The company then creates a plan with allocated resources and clearly defined employee
roles. This plan will include specific support for individuals involved and identify a measurable goal. During this step,
companies should think about how they’ll communicate changes to staff and manage feedback.

Creating motivation and a vision. Once the company has clearly defined and communicated a plan, its leaders must
motivate their employees to share in a vision. This step involves leaders acting as enthusiastic role models while
helping employees understand the plan’s big-picture goals and desired impact.

Implementing. While stability is necessary during implementation, supporting employees during the transition with
mentoring, training, and coaching is equally important. When thinking about such support, management should
consider what new skills employees will need and what delivery methods will be most effective. Ongoing feedback
and communication can help make the change process easier.

Evaluating initial results. Once the company has implemented a plan, its leaders may create space for shared
reflection, asking themselves and their employees if the change effectively met the business goals. They’ll also
evaluate the change management process and consider what could be done differently. This step can’t be overlooked;
if the company doesn’t evaluate the changes, it won’t know whether interventions have been effective.

Adapting or continuing. Depending on the evaluation of the initial results, the company may choose to adapt its plan.
If the results show success, it may continue with the current plan to keep improving.

Organisational Change

Organizational Change is a process in which a large company or organization changes its working methods or aims, for
example in order to develop and deal with new situations or markets: Sometimes deep organizational change is
necessary in order to maintain a competitive edge.

Organizational change is both the process in which an organization changes its structure, strategies, operational
methods, technologies, or organizational culture to affect change within the organization and the effects of these
changes on the organization. Organizational change can be continuous or occur for distinct periods of time.

Organizational Change looks both at the process in which a company or any organization changes its operational
methods, technologies, organizational structure, whole structure, or strategies, as well as what effects these changes
have on it. Organizational change usually happens in response to – or as a result of – external or internal pressures.

Types of Organizational Change

Organization-Wide Change: Organization-wide change is a large-scale transformation that affects the whole company.
This could include restructuring the leadership, adding a new policy, or introducing enterprise technology. Such a
large-scale change will be felt by every single employee. Sometimes change is required to see how a long-held policy
has become outdated or that the company outgrew its shell. Enterprise-wide change is quite extensive and needs to
be planned with precision to protect all of those affected.
Remedial Change: Leaders implement remedial changes when they identify a need to address deficiencies or poor
company performance. Although remedial change efforts must be tailored to the specific problem on hand, they still
require effective organizational change strategies to be successful.

Personnel Change: Personnel change is when a company implements mass hiring or layoffs. Each of these types of
organizational change can cause a significant shift in employee morale and engagement, for better or worse. The
threat of layoffs evokes fear and anxiety among staff members. It is important to display genuine compassion and
motivate employees to continue to work hard through the difficult time. While mass hiring has better implications for
a company, it is not without difficulty. Mass hiring is a sign of major growth, during which a company is susceptible to
cultural changes and disorganization.

Unplanned Change: Unplanned change is typically defined as necessary action following unexpected events. Although
the circumstances that lead to unplanned change may be chaotic, it’s important for organizations to be resilient and
adaptable. Companies can also benefit from setting basic organizational change strategies in place to minimize chaos
and disruption.

Change Management

Change management is a systematic approach to dealing with the transition or transformation of an organization's
goals, processes or technologies. The purpose of change management is to implement strategies for effecting change,
controlling change and helping people to adapt to change.

Principles of change management

Unfreeze the current state. Change agents need to identify what precisely they want to change. At this stage, they
need to formulate a "why" that other participants are likely to buy into. In essence, they need to reverse-engineer the
future state and translate this benefit to other possible participants. Then, they need to enroll people who can
participate in the new idea.

Change the system. At this stage, change agents and any collaborators can begin to put the change into practice. The
change agents need to work with collaborators to communicate the idea and bring other participants on board. It is
important to pay attention to any pushback and find areas of shared understanding to either help move the change
forward or shift its implementation in response to feedback. Tensions might be high as everyone gets used to the new
system. It's important to be respectful of their feelings and ideas.

Refreeze. Eventually, people get used to the new system, or they revert back to what was working before. At this
stage, it is important to declare that the change is over -- whether the change was accepted or rejected. Even if the
change was rejected, declaring it over gives everyone a chance to relax. It is also helpful at this stage to document
what happened for future reference.

Models of Leadership Styles

In 1939, a group of researchers led by psychologist Kurt Lewin set out to identify different styles of leadership.

Authoritarian Leadership (Autocratic)

Authoritarian leaders, also known as autocratic leaders, provide clear expectations for what needs to be done, when
it should be done, and how it should be done. This style of leadership is strongly focused on both command by the
leader and control of the followers. There is also a clear division between the leader and the members. Authoritarian
leaders make decisions independently, with little or no input from the rest of the group. Researchers found that
decision-making was less creative under authoritarian leadership.

Authoritarian leadership is best applied to situations where there is little time for group decision-making or where the
leader is the most knowledgeable member of the group. The autocratic approach can be a good one when the
situation calls for rapid decisions and decisive actions. However, it tends to create dysfunctional and even hostile
environments, often putting followers against the domineering leader.

Participative Leadership (Democratic)

Lewin’s study found that participative leadership, also known as democratic leadership, is typically the most effective
leadership style. Democratic leaders offer guidance to group members, but they also participate in the group and
allow input from other group members. In Lewin’s study, children in this group were less productive than the
members of the authoritarian group, but their contributions were of a higher quality.

Participative leaders encourage group members to participate, but retain the final say in the decision-making process.
Group members feel engaged in the process and are more motivated and creative. Democratic leaders tend to make
followers feel like they are an important part of the team, which helps foster commitment to the goals of the group.

Delegative Leadership (Laissez-Faire)

Lewin found that children under delegative leadership, also known as laissez-faire leadership, were the least
productive of all three groups. The children in this group also made more demands on the leader, showed little
cooperation, and were unable to work independently.

Delegative leaders offer little or no guidance to group members and leave the decision-making up to group members.
While this style can be useful in situations involving highly qualified experts, it often leads to poorly defined roles and
a lack of motivation.

Lewin noted that laissez-faire leadership tended to result in groups that lacked direction and members who blamed
each other for mistakes, refused to accept personal responsibility, made less progress, and produced less work

Transformational Leadership

Transformational Leadership is often identified as the single most effective style. This style was first described during
the late 1970s and later expanded upon by researcher Bernard M. Bass. Transformational leaders are able to motivate
and inspire followers and to direct positive changes in groups.

These leaders tend to be emotionally intelligent, energetic, and passionate. They are not only committed to helping
the organization achieve its goals, but also to helping group members fulfill their potential.

Research shows that this style of leadership results in higher performance and more improved group satisfaction than
other leadership styles. One study also found that transformational leadership led to improved well-being among
group members.

Transactional Leadership

The transactional leadership style views the leader-follower relationship as a transaction. By accepting a position as a
member of the group, the individual has agreed to obey the leader. In most situations, this involves the employer-
employee relationship, and the transaction focuses on the follower completing required tasks in exchange for
monetary compensation.
One of the main advantages of this leadership style is that it creates clearly defined roles. People know what they are
required to do and what they will be receiving in exchange. This style allows leaders to offer a great deal of
supervision and direction, if needed.

Group members may also be motivated to perform well to receive rewards. One of the biggest downsides is that the
transactional style tends to stifle creativity and out-of-the-box thinking

Situational Leadership

Situational theories of leadership stress the significant influence of the environment and the situation on leadership.
Hersey and Blanchard's leadership styles is one of the best-known situational theories. First published in 1969, this
model describes eight styles of leadership, including:

1. Telling: Telling people what to do

2. Selling: Convincing followers to buy into their ideas and messages

3. Participating: Allowing group members to take a more active role in the decision-making process

4. Delegating: Taking a hands-off approach to leadership and allowing group members to make the majority of
decisions

5. Directing: Giving orders and expecting obedience, but offering little guidance and assistance

6. Coaching: Giving lots of orders, but also lots of support

7. Supporting: Offering plenty of help, but very little direction

8. Observating: Offering little direction or support