Nepal College Of Mgmt.

KU

VII

th Sem

Introduction to Strategic Management

Unit-1 : GEM 490

BBA IV

Year

COURSE INSTRUCTOR : B. G. BHATTACHARYA

Concept of Strategic Management

What is Strategy?
Large-scale, future-oriented plan for interacting with the competitive environment to achieve objectives Companys game plan Framework for managerial decisions
The Mind Game

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Concept of Strategic Management

Strategy provides a way to deal with changes and their accompanying uncertainty both inside and outside the organization. Strategy deals with a companys competitive initiatives and business approaches.

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Concept of Strategic Management

Why is Strategy Important?
A compelling need exists for managers to proactively shape how a firms business will be conducted. A strategy-focused firm is more likely to be a strong bottom-line performer than one that views strategy as secondary.
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Concept of Strategic Management

Why is Strategy Important?
Strategy expresses the intention of management about the way to achieve the objectives of the organizations. Strategy implies the commitment of resources in a given direction. Strategic plans aim at achieving institutional goals.
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Concept of Strategic Management

Domain of Strategy
Strategic competitiveness and above normal returns. Concerns managerial decisions and actions which materially affect the success and survival of business enterprises. Involves the judgment necessary to strategically position a business and its resources so as to maximize long-term profits in the face of irreducible uncertainty and aggressive competition. Strategy is the linkage between a business and its current and future environment.
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Concept of Strategic Management

Business Strategies: Some examples
Geographic expansion Diversification Acquisition Market penetration Retrenchment Liquidation Joint venture
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Concept of Strategic Management

Strategic management is a field that deals with the major intended and emergent initiatives taken by general managers on behalf of owners, involving utilization of resources, to enhance the performance of firms in their external environments.

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Concept of Strategic Management

Strategic management entails specifying the organization's mission, vision and objectives, developing policies and plans, often in terms of projects and programs, which are designed to achieve these objectives, and then allocating resources to implement the policies and plans, projects and programs.
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Concept of Strategic Management

Strategic Management Defined
Art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve its objectives.
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Concept of Strategic Management

Strategic Management Characteristics
Strategic management focuses on building a solid underlying structure to your business that will subsequently be fleshed out through the combined efforts of every individual you employ.

Strategic management focus to answer three key questions:

1. What are my businesss objectives? 2. What are the best ways to achieve those objectives?

3. What resources are required to make that happen?

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Concept of Strategic Management

The first key question: What are our business goals? Answering the first question requires serious thought about what your ultimate aims are for the business. What are you trying to make happen? What are you attempting to facilitate or enable?

What is the best possible outcome your company can aspire to?
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Concept of Strategic Management

The second key question:

How best can we reach our goals?

Phase two of successful strategic management is formulating a plan by which the company can accomplish what it sets out to do. Within this phase, a chain of command should be put in place, pairing individuals with the right skills, knowledge, and experience with the businesss needs and objectives. Responsibilities for processes and tasks should be distributed across the full chain of command, delegating work to teams and individuals so that the companys goals can be attained through the combined efforts of all employees.
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Concept of Strategic Management

The third key question:
How do we allocate our resources?
Finally, strategic management entails allocating the right amount of resources to the different parts of your business so that those assigned to particular goals have what they need to meet their objectives. This ranges from providing your workers with the right supplies to enacting systems by which employees receive the necessary training, all work processes are tested, and all information and data generated is documented.
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Concept of Strategic Management

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Concept of Strategic Management

Benefits of Strategic Management
Proactive in shaping firms future
Initiate and influence firms activities Formulate better strategies (plans/ policies)
Systematic, logical, rational
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Concept of Strategic Management

Financial Benefits

Improvement in sales Improvement in profitability

Productivity improvement

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Concept of Strategic Management

Non-Financial Benefits
Improved understanding of competitors strategies

Enhanced awareness of threats

Reduced resistance to change Enhanced problem-prevention capabilities
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Concept of Strategic Management

Benefits of Strategic Management (Greenley)
1. Identification of Opportunities 2. Objective view of management problems 3. Improved coordination & control

4. Minimizes adverse conditions & changes

5. Decisions that better support objectives
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Concept of Strategic Management

Benefits of Strategic Management (Greenley)
6. Effective allocation of time & resources 7. Internal communication among personnel 8. Integration of individual behaviors 9. Clarify individual responsibilities 10. Encourage forward thinking
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Concept of Strategic Management

Benefits of Strategic Management (Greenley)
11. Encourages

favorable attitude toward

change
12. Provides

discipline and formality to the management of the business

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Concept of Strategic Management

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Concept of Strategic Management

Why Some Firms Do No Strategic Planning (Risks involved)
Poor reward structures Fire-fighting Waste of time Too expensive Laziness

Content with success

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Concept of Strategic Management

Why Some Firms Do No Strategic Planning (Risks involved)
Fear of failure Overconfidence Prior bad experience Self-interest Fear of the unknown

Suspicion
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Concept of Strategic Management

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Comprehensive Strategic Mgmt. Model

External Audit

Vision & Mission

Long-Term Objectives

Generate, Evaluate, Select Strategies

Implement Strategies: Mgmt Issues

Implement Strategies: Marketing, Fin/Acct, R&D, CIS

Measure & Evaluate Performance

Internal Audit

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Strategic Decisions
Dimensions of Strategic Decisions
Strategic issues
Require top-management decisions Require large amounts of the firms resources Often affect the firms long-term prosperity Are future oriented Usually have multifunctional /multibusiness consequences Require considering the firms external environment
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Strategic Decisions
Characteristics of Strategic Decisions
Long-term direction of an organisation

Achieving advantage
Scope of an organisations activities Matching the activities of an organisation to the environment

Building on or stretching resources and competences

Major resource changes Affect operational decisions Affected by the values and expectations of those in power
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Elements of Strategic Mgmt.

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Elements of Strategic Mgmt.

Components of Strategic Management Process

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Elements of Strategic Mgmt.

Environment Scanning
Information Collection

Information Scrutinization
Analyzing internal /external factors Provide strategical information
Continuous Surrounding Evaluation

Plan and policy improvement

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Elements of Strategic Mgmt.

Environment Scanning
The initial step in Strat. Mgmt. Process of collecting, scrutinizing and providing information for strategic purposes. It analyzes the internal and external factors influencing an organization. Management evaluates the environment analysis on a continuous basis.
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Elements of Strategic Mgmt.

Strategy Formulation
Vision & Mission

External Opportunities & Threats

Internal Strengths & Weaknesses Long-Term Objectives Alternative Strategies Strategy Selection
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Elements of Strategic Mgmt.

Issues in Strategy Formulation

New business opportunities Businesses to abandon

Allocation of resources
Expansion or diversification International markets Mergers or joint ventures Avoidance of hostile takeover

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Elements of Strategic Mgmt.

Strategy Implementation

Annual Objectives Policies Employee Motivation Resource Allocation

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Elements of Strategic Mgmt.

Strategy Implementation
Action Stage of Strategic Management Most difficult stage Mobilization of employees and managers Interpersonal skills critical Consensus on goal pursuit

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Elements of Strategic Mgmt.

Strategy Evaluation

Internal Review External Review Performance Metrics Corrective Actions

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Elements of Strategic Mgmt.

Strategy Evaluation
Final Stage of Strategic Management
Subject to future modification Todays success no guarantee of future success New & different problems Complacency leads to demise

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Strategic Decision Making Process

1.
2. 3.

Formulate the companys mission

Conduct internal analysis Assess the companys external environment

4.
5. 6.

Analyze companys options

Identify most desirable options Select long-term objectives and grand strategies

7.
8. 9.

Develop annual objectives and short-term strategies

Implement the strategic choices Evaluate success of the strategic process
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Strategic Decision Making Process

Scan External Environment National Global Identify Strategic Factors Opportunities Threats Implementing Strategy via Changes in: Structure Human resources Information & control systems

Evaluate Current: Mission Goals

Grand Strategy SWOT

Define New: Mission Goals Grand Strategy

Identify Strategy: Corporate Business Functional

Scan Internal Environment Core Competence Synergy Value Creation

Identify Strategic Factors Strengths Weaknesses

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Strategic Decision Making Process

The different phases in a Strategic Decision Making Process

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BoDs Role in Strategic Mgmt

To quote Kenneth Andrews, "A responsible and effective board should require of its management a unique and durable corporate strategy, review it periodically for its validity, use it as the reference point for all other board decisions.
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BoDs Role in Strategic Mgmt

Board of directors plays an important role in the strategic management process. A strategy committee commonly audits various components of an organization's strategic management process in order to make it more effective and efficient. For example, the board can demand reexamination of the company's mission, its long-term goals, its corporate strategy, and its approach to the competition.

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BoDs Role in Strategic Mgmt

The board of directors is ultimately responsible for the companys business affairs and governance as stated in its governing documents, including the articles of incorporation, the by laws, and shareholder agreements. Many state laws require a corporation to form a board of directors to represent shareholders and make decisions on their behalf. The success of the board of directors depends on the composition, structure, resources, diligence, and authority of the entire board, as well as their working relationships with other participants of corporate governance, including management, external auditors, internal auditors, legal counsel, professional advisors, regulators, standard-setting bodies, and investors.
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BoDs Role in Strategic Mgmt

In any company, the role of board of directors in strategic management decisions would be:
1. To evaluate the key performance indicators

2. To evaluate the current strategic choices

3. To evaluate the industry environment as well as general business environment 4. To adjust the strategies to suit the current opportunities and threats 5. To revise the key performance indicators 6. To evaluate / assess the current resources and needed resources 7. To set directions the path of the organization
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BoDs Role in Strategic Mgmt

Accountability The BoD becomes fiscally accountable. It sets the amount of dividends paid to the shareholders and how much fund is reinvested into the company. Furthermore, BoD members need to ensure that the financial disclosures are accurate and truly represent the state of the company. Responsibilities The BOD reviews the programs selected by the CEO that are most likely to achieve the financial objectives set for the company. This scrutiny includes the investment decisions made by the company's executive team, and the expenditures required to support the efforts.
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BoDs Role in Strategic Mgmt

Legal Duties A Board member is trusted with fiduciary responsibilities which encompass three legal duties: care, loyalty and obedience. He must act in good faith and for the interest of the shareholders and the organization. He must also keep the good of the organization in mind and not base the decision on personal interests, and finally, he must obey the policies stated in the governing documents of the corporation (bylaws) and the regulation of the industry. Risk Management In light of the accountability to the shareholders, the BoD frequently weighs company's risks of missing the corporate objectives and the consequences that this would have on dividend distribution, or financial return to the company.

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BoDs Role in Strategic Mgmt

Qualifications A seat on the BoD welcomes an elected 18 year or older individual and cannot be bestowed upon a business entity. The annual elections typically align persons with the leadership know-how or an expert in the industry space of the company. Investors with large ownership into the company may be elected on the board as they would most be keen to defend the interests of the shareholders.

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Role of Top Management

The term "top management" refers to a relatively small group of people include president, chief executive officer, vice president, and few executive committee members. Because the insights of these executives play such a critical role, a number of writers have stressed the importance of matching the characteristics of these executives with the firm's strategies.

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Role of Top Management

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Role of Top Management

The responsibility of Top Management in an organization can be broadly categorized into three types: 1. 2. Fulfilling Basic Key Roles Providing Corporate Leadership

3.

Managing Strategic Planning

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Role of Top Management

Fulfilling Key Roles

Interpersonal Roles
Figurehead
Leader Liason

Decisional Roles
Innovator / Entrepreneur (Planner) Disturbance Handler (Crisis Manager) Resource Allocator (Slicing-the-pie) Negotiator (Bargainer)

Informational Roles
Monitor Disseminator Spokes person
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Role of Top Management

Provides Corp. Leadership

Articulates a transcendent goal for the firm

Provides a vision of the future Sees the firm not as it isbut as it can become

Communicates high performance standards

Shows confidence in subordinates

Presents a role for others to identify with

Sets an example in behavior & dress Communicates values clearly in words & deeds

Provide autonomy goal & mentoring

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Role of Top Management

Manages Strategic Plan

Initiates/ Manages Strategic Planning Process

Seeks Information

Long Range Planning Staff

Creation of potential team with individual expertness in handling planning and decision making in the process of strategy implementation

Divisional (SBU) Managers Functional & Departmental Managers Top Management Team

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End of Learning Unit-1 . . .

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