Strategic man

UNIT- I STRATEGY AND PROCESS

Conceptual framework for strategic management, the Concept of Strategy and the Strategy Formation
Process Stakeholders in business Vision, Mission and Purpose Business definition, Objectives and
Goals - Corporate Governance and Social responsibility-case study.


Strategic management is not a box of tricks or a bundle of techniques. It is analytical thinking and commitment of
resources to action.
Peter Drucker


Definition:

The on-going process of formulating, implementing and controlling broad plans guide the
organizational in achieving the strategic goods given its internal and external environment.

Alfred D Chandler (1962)
, Chandler defined strategy as: The determination of the basic long-term goals and objectives of an enterprise
and the adoption of the courses of action and the allocation of resources necessary for carrying out these
goals. Note that Chandler refers to three aspects

Features of strategic Management

1. On-going process:
Strategic management is a on-going process which is in existence through out the life of organization.

2. Shaping broad plans:
First, it is an on-going process in which broad plans are firstly formulated than implementing and finally
controlled.

3. Strategic goals:
Strategic goals are those which are set by top management. The broad plans are made in achieving the goals.

Evolution of strategic management
From his extensive work in the field, Bruce Henderson of the Boston Consulting Group concluded that
intuitive strategies cannot be continued successfully if
(1) the corporation becomes large,
(2) the layers of management increase, or






(3) the environment changes substantially.

Phase 1 - Basic financial planning: Seek better operational control by trying to meet budgets.

Phase 2 - Fore-cast based planning: Seeking more effective planning for growth by trying to predict the future
beyond next year.

Phase 3. Externally oriented planning (strategic planning): Seeking increasing responsiveness to markets and
competition by trying to think strategically.

Phase 4. Strategic management: Seeking a competitive advantage and a successful future by managing all
resources.

Phase 4 in the evolution of the strategic management includes a consideration of strategy implementation and
evaluation and control, in addition to the emphasis on the strategic planning in Phase 3.
General Electric, one of the pioneers of the strategic planning, led the transition from the strategic planning to
strategic management during the 1980s. By the 1990s, most corporations around the world had also begun the
conversion to strategic management.

In general, a corporate strategy has the following characteristics:

It is generally long-range in nature, though it is valid for short-range situations also and has short-range
implications.

It is action oriented and is more specific than objectives.

It is multipronged and integrated

It is flexible and dynamic.

It is formulated at the top management level, though middle and lower level managers are associated in their
formulation and in designing sub-strategies.

It is generally meant to cope with a competitive and complex setting.

It flows out of the goals and objectives of the enterprise and is meant to translate them into realities.

It is concerned with perceiving opportunities and threats and seizing initiatives to cope with them. It is also
concerned with deployment of limited organizational resources in the best possible manner.

It gives importance to combination, sequence, timing, direction and depth of various moves and action
initiatives taken by managers to handle environmental uncertainties and complexities.







It provides unified criteria for managers in function of decision making.


Framework

The basic framework of strategic process can be described in a sequence of five stages as shown in the figure

- Framework of strategic management:

The five stages are as follows:

Stage one: This is the starting point of strategic planning and consists of doing a situational analysis of the
firm in the environmental context. Here the firm must find out its relative market position, corporate image,
its strength and weakness and also environmental threats and opportunities. This is also known as SWOT
(Strength, Weakness, Opportunity, Threat) analysis. You may refer third chapter for a detailed discussion on
SWOT analysis.


Stage two: This is a process of goal setting for the organization after it has finalised its vision and mission. A
strategic vision is a roadmap of the companys future providing specifics about technology and customer
focus, the geographic and product markets to be pursued, the capabilities it plans to develop, and the kind of
company that management is trying to create. An organizations Mission states what customers it serves, what
need it satisfies, and what type of product it offers.

Stage three: Here the organization deals with the various strategic alternatives it has.

Stage four: Out of all the alternatives generated in the earlier stage the organization selects the best suitable
alternative in line with its SWOT analysis.

Stage five: This is a implementation and control stage of a suitable strategy. Here again the organization
continuously does situational analysis and repeats the stages again.




6.2 Importance of Strategic Management

Strategic management provides the framework for all the major business decisions of an enterprise such as
decisions on businesses, products and markets, manufacturing facilities, investments and organizational
structure.

In a successful corporation, strategic planning works as the pathfinder to various business opportunities;
simultaneously, it also serves as a corporate defence mechanism, helping the firm avoid costly mistakes in






product market choices or investments. S
trategic management has the ultimate burden of providing a business organization with certain core
competencies and competitive advantages in its fight for survival and growth.

It seeks to prepare the corporation to face the future and even shape the future in its favour. Its ultimate
burden is influencing the environmental forces in its favour, working into the environs and shaping it, instead
of getting carried away by its turbulence or uncertainties.

THE TASK OF STRATEGIC MANAGEMENT

The strategy-making/strategy-implementing process consists of five interrelated managerial tasks. These are

Setting vision and mission: Forming a strategic vision of where the organization is headed, so as to provide
long-term direction, delineate what kind of enterprise the company is trying to become and infuse the
organization with a sense of purposeful action.

Setting objectives: Converting the strategic vision into specific performance outcomes for the company to
achieve.

Crafting a strategy to achieve the desired outcomes.

Implementing and executing the chosen strategy efficiently and effectively.

Evaluating performance and initiating corrective adjustments in vision, long-term direction, objectives,
strategy, or execution in light of actual experience, changing conditions, new ideas, and new opportunities.


Strategy Formation Process

Simple model

Working model of strategic planning process




Step 1: Identifying the organisations
current mission, objectives, and
strategies
Mission: the firms reason for being
The scope of its products and services
Goals: the foundation for further planning
Measurable performance targets









Step 2: Conducting an external analysis
The environmental scanning of specific and general
environments
Focuses on identifying opportunities and threats

Customers: Who are the organisations customers?
Products or services: What are the organisations major products or
services?
Markets: Where does the organisation compete geographically?
Technology: How technologically current is the organisation?
Concern for survival growth, and profitability: Is the organisation
committed to growth and financial stability?
Philosophy: What are the organisations basic beliefs, values, aspirations,
and ethical priorities?
Self-concept: What is the organisations major competitive advantage and
core competencies?
Concern for public image: How responsive is the organisation to societal
and environmental concerns?
Concern for employees: Does the organisation consider employees a
valuable asset?
Source: Based on F. David, Strategic Management, 8th ed. (Upper


Step 3: Conducting an internal analysis
Assessing organisational resources, capabilities, activities,
and culture:
Strengths (core competencies) create value for the customer
and strengthen the competitive position of the firm.
Weaknesses (things done poorly or not at all) can place the
firm at a competitive disadvantage.
Steps 2 and 3 combined are called a SWOT
analysis. (Strengths, Weaknesses, Opportunities,
and Threats)



Step 4: Formulating strategies
Develop and evaluate strategic alternatives
Select appropriate strategies for all levels in the
organisation that provide relative advantage over
competitors






Match organisational strengths to environmental
opportunities
Correct weaknesses and guard against threats


Step 5: Implementing strategies
Implementation: effectively fitting organisational
structure and activities to the environment
The environment dictates the chosen strategy; effective
strategy implementation requires an organisational
structure matched to its requirements.
Step 6: Evaluating results
How effective have strategies been?
What adjustments, if any, are necessary