Strategic Management

Brief Contents

1. Basic Concepts of Strategic 6. Strategy Formulation: Corporate

Management Strategy
2. Social Responsibility and Ethics in 7. Strategy Formulation: Functional
Strategic Management Strategy and Strategic Choice
3. Environmental Scanning and Industry 8. Strategy Implementation: Organizing
Analysis and Structure
4. Organizational Analysis and 9. Strategy Implementation: Staffing and
Competitive Advantage Directing
5. Strategy Formulation: Business 10. Evaluation and Control
Strategy
 You
India’s Select Few Frontline Team Members
Doing Things
to
“Make the Difference”
Reference Book
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 Chapter 1

Basic Concepts of Strategic Management

Learning Objectives (1 of 2)

1.1 Discuss the benefits of strategic management

1.2 Explain how globalization, innovation, and environmental sustainability
influence strategic management
1.3 Discuss the differences between the theories of organizations
1.4 Discuss the activities where learning organizations excel
Learning Objectives (2 of 2)

1.5 Describe the basic model of strategic management and its components
1.6 Identify some common triggering events that act as stimuli for strategic
change
1.7 Explain strategic decision-making modes
1.8 Use the strategic audit as a method of analyzing corporate functions
and activities
• What do you understand by the term Strategic
Management ?
• What comes to your mind when someone mentions -
“Strategy”?
Competition
Difficult

TOP Management
Strategy – Origin of

➔ Used by military
➔ From Greek – strategia – art & science of directing the
military
➔ Thus competition / rivalry are key to making a strategy
➔ Is formulated in anticipation of the moves, actions &
reactions of rivals
Strategy
➔ The most misused word in business
➔ Ask 10 people, get 10 definitions
➔ Commonly confused with business planning
➔ Designed to be complex and lengthy
Strategy--What it is not!

➔ It’s not sales

➔ It’s not marketing
➔ It’s not operation
➔ These are all components (or tactics) of a strategy
What is a Strategy?
➔ A strategy is a way to pursue a vision by leveraging tools and tactics
that will produce the desired outcome.
➔ A valid strategic plan is one that contains the basic elements of
motion; a destination (where), a road map (how), and the means of
getting there (what).
➔ It is a decision
The Study of Strategic Management (1 of 2)

➔ Strategic Management
➔ a set of managerial decisions and actions that determines the long-run
performance of a corporation
The Study of Strategic Management (2 of 2)

Strategic management includes:

• Internal and external environmental scanning
• Strategy formulation
• Strategy implementation
• Evaluation and control
Why Strategic Management
Strategic Management

➔ Strategic management addresses two questions:

➔ What is the organization’s main activity at a particular time?
➔ What are its primary goals and how will these be achieved?
Three Types of Decisions

• Operational Decisions
• Structural / Administrative Decisions
• Strategic Decisions
Operating Decisions
• Operating decisions refer to decisions for “doing the job”: getting the
orders, making and shipping the product, budgeting, scheduling,
controlling, purchasing.
• Are the day to day decisions made in the business. Frequent, straight
forward, low consequence, easily made and self-forcing.
Structural / Administrative Decisions
• Structural decisions refer to decisions regarding how business
is to be organized: work flows, procedures, reporting
relationships.
• Are the periodic decisions made which provide limited
guideline for daily activities. Intermittent, somewhat complex,
moderate consequence, relatively easily made and self-
forcing.
Strategic Decisions

• Strategic decisions refer to decisions regarding what the business is

all about and its basic courses of action. They have to do with
competition.
• Are the fundamental decisions which determine what the company
is about. Infrequent, extremely complex, severe consequences,
difficult to make and not self-forcing.
Characteristics of Strategic Decisions
➔ Future & long term in perspective
➔ Affected by values / ethics of company / owner
➔ May lead to redefining the scope of the organization
➔ Is the mean to achieve the end – mission & goals
➔ Leads to resource allocation & commitment
➔ They are difficult to make
➔ Creates a fit between the emerging opportunity & company’s strengths
➔ Try to increase the gap between firm & its competitors over time – increase in sustainable
competitive adv.
➔ Complex & difficult to make – encompass mission, direction, goals
➔ Uncertainty & Risk – due to insufficient knowledge of future
➔ Normally comprehensive & integrated in nature
➔ They are the Basis for making Structural & Operating Decisions
Strategic Planning
➔ Strategic Planning is the managerial process of creating and
maintaining a fit between the organization’s objectives and resources
and the evolving market opportunities.

➔ Also called Strategic Management Process

➔ All organizations have this
➔ Can be Formal or Informal
Strategic & Tactical Planning
➔ Strategic Planning
➔ Top / High level
➔ Focused on long term
➔ Objective is quantum change / increase

➔ Tactical Planning
➔ Oriented towards operations
➔ Is short to medium term oriented
➔ Is very specific and action is oriented
➔ Outcome is easier to predict
➔ Used by low to middle management
Phases of Strategic Management

As managers attempt to better deal with their changing world, a firm

generally evolves through the following four phases of strategic
management:
➔ Phase 1: Basic financial planning
➔ Phase 2: Forecast-based planning
➔ Phase 3: Externally oriented strategic planning
➔ Phase 4: Strategic management
Phases of Strategic Management

Phase 1: Basic financial planning

➔ Most info compiled from within the organization
➔ Little in-depth analysis is done
➔ Environmental/competitive info by sales team
➔ Done for shorter period – 1 year
➔ Time consuming, no ownership
Phases of Strategic Management

Phase 2: Forecast-based planning

➔ Management believes mid/long term view needed
➔ Internal data collected & extrapolated
➔ External data in an ad-hoc manner collected
➔ Known competitive scenario is considered
➔ Ad-hoc functional budget reconciliation
➔ Some consensus is arrived at
➔ Control & evaluation left to individual functions
➔ Generally, 3-5 years plan, limited ownership
Phases of Strategic Management

Phase 3: Externally oriented strategic planning

➔ Top management initiates the planning process
➔ Improve its responsiveness to changing markets and competition by thinking and
acting strategically
➔ Planning taskforce or department owns the mantle
➔ Systematic info collection and application of tools and technique to arrive at
inferences
➔ Functional heads owns above/down line responsibilities
➔ Way to take this forward is agreed upon
➔ Lower level team not involved, thus difficult to digest
Phases of Strategic Management

Phase 4: Strategic Management

➔ Top management forms planning group consisting of different levels, cross-
functional
➔ Entrusted with internal, external and competitive analysis, deriving competitive
advantage, how to reach, for that what needs to be done
➔ Functional/SBU heads will oversee, refine and present
➔ Top management aligns it with vision & mission
➔ Final plan with KRA/KPI is passed down
➔ Evaluation and control mechanism put in place
Benefits of Strategic Management - (1 of 2)

• The attainment of an appropriate match, or “fit,” between an

organization’s environment and its strategy, structure, and processes has
positive effects on the organization’s performance.
• Strategic planning becomes increasingly important as the environment
becomes more unstable.
Benefits of Strategic Management - (2 of 2)

• Clearer sense of strategic vision for the firm

• Sharper focus on what is strategically important
• Improved understanding of a rapidly changing environment

• BOMBAY DYEING <-> CENTURY MILL

 LET’S REWIND

35
Let’s Rewind – Session 1

• Strategic management includes?

• • Internal and external environmental scanning
• • Strategy formulation
• • Strategy implementation
• • Evaluation and control
Let’s Rewind – Session 1
• Four phases of strategic management?
• • Phase 1: Basic financial planning
• • Phase 2: Forecast-based planning
• • Phase 3: Externally oriented strategic planning
• • Phase 4: Strategic management
Impact of Globalization
• Globalization
– From mere Export Div to making organization global
– the integrated internationalization of markets and
corporations
– various aspects are linked with globalization – for
local companies and new entrant
– has changed the way modern corporations do
business
Impact of Innovation

• Innovation
– describes new products, services, methods, and organizational
approaches that allow the business to achieve extraordinary returns

• It is the implementation of potential innovations that truly drives

businesses to be remarkable.
Impact of Sustainability (1 of 2)

• Sustainability
– refers to the use of business practices to manage the triple bottom line
Impact of Sustainability (2 of 2)
The triple bottom line involves:
1. the management of traditional profit/loss
2. the management of the company’s social responsibility
3. the management of its environmental responsibility
4. LEED Certification (Leadership in Energy and
Environmental Design certification
Theories of Organizational Adaptation (1 of 3)

• Population ecology • Institution theory

– Once an organization is
successfully established
in a particular
environmental niche, it is
unable to adapt to
changing conditions.
– Organizations can and do
adapt to changing conditions by
imitating other successful
organizations.
Theories of Organizational Adaptation (2 of 3)

• Strategic choice perspective

– not only do organizations adapt to a changing environment, but also
have the opportunity and power to reshape their environment
Theories of Organizational Adaptation (3 of 3)

• Organizational learning theory

– an organization adjusts defensively to changing environment and uses
knowledge offensively to improve fit between itself and its environment
– remain viable and have competitive advantage is the only way forward
– Be more flexible rather than bureaucratic
– Strategic flexibility - the ability to shift from one dominant strategy to
another
Creating a Learning Organization (1 of 3)

• Strategic flexibility
– the ability to shift from one dominant strategy to another
– demands long-term commitment to development and nurturing of critical
resources
– also demands that the company become a learning organization
Creating a Learning Organization (2 of 3)

• Learning organization
– an organization skilled at creating, acquiring, and transferring
knowledge and at modifying its behavior to reflect new knowledge and
insights
• Organizational learning is a critical component of competitiveness in a
dynamic environment.
Creating a Learning Organization (3 of 3)

Learning organizations are skilled at four main activities:

1. Solving problems systematically
2. Experimenting with new approaches
3. Learning from the organization’s own experiences and past
history as well as from the experiences of others
Creating a Learning Organization (3 of 3)
Learning organizations are skilled at four main activities:
4. Transferring knowledge quickly and efficiently throughout the organization
5. Strategic management is essential for learning organizations to avoid
stagnation through continuous self-examination and experimentation
 LET’S REWIND

49
Let’s Rewind – Session 1

The impact of sustainability includes the concept of the triple bottom line. TBL involves:
1. the management of traditional profit/loss
2. the management of the company’s social responsibility
3. the management of its environmental responsibility
Let’s Rewind – Session 1

• Theories of organization adaptations?

o Population ecology,
o Institution theory,
o Strategic choice perspective
Strategic Management