STRATEGIC MANAGEMENT - I

Session 1 The Concept of Strategy

STRATEGY
STRATEGY is the long-term direction and scope of an organisation to achieve advantages by using its resources in a changing environment. In general, there is no higher-level statement of an organisations objectives.
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THREE PARTS OF SM
There are three parts of STRATEGIC MANAGEMENT function: Formulation of strategy Implementation of strategy: managing the organisation Managing the implementation and formulation in a changing environment: managing strategy itself
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STRATEGIC vs. OPERATIONAL MANAGEMENT

STRATEGIC MANAGEMENT Ambiguous/ uncertain Complex Organisation-wide Fundamental Long-term implications OPERATIONAL MANAGEMENT Routinised Operationally specific Short-term implications

LONG-TERM
All decisions about the long term are STRATEGIC DECISIONS, because they address issues other than those addressed by OPERATING or TACTICAL decisions, and require different tools for taking these decisions.

DIRECTION AND SCOPE

The strategy statement gives the direction that the organisation is to pursue.
It also defines the scope of operations.

ORGANISATION
The nature of the organisation.
The values and beliefs of the people in

command/ stakeholders. The SWOT analysis The PESTEL framework analysis

ADVANTAGES
This is the Strategic intent why the organisation wants to pursue a strategy, based on the SWOT and PESTEL analyses. It could be for a specific advantage, or to ward off a disastrous threat. It could be for Survival, Profits or Growth
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RESOURCES
Matching of the resources and activities of

an organisation to the environment:

This is the STRATEGIC FIT

Building on or stretching an organisations

resources to create opportunities or to capitalise on them.

This is the RESOURCE-LED STRETCH

RESOURCES -II
ASPECT OF STRATEGY
Underlying basis

FIT
Fit between market and org.
Proper direction of resources

STRETCH
Leverage resources to improve VFM or EVA/MVA Creating competence or market need

Advantage through

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RESOURCES - III
ASPECT OF STRATEGY
Small players survival

FIT
Find and defend a niche

STRETCH
Change the rules of the game Portfolio of competences Core competences

Risk reduction by Portfolio of products/ businesses Corporate investment in Strategies of business units

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ENVIRONMENT
Ever-changing The PESTEL framework

The FIVE FORCES model

Uncertain and ambiguous Complex in nature

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BENEFITS OF THE STRATEGIC APPROACH - I

Providing better guidance to the entire

organisation about what is it that we are trying to do Making everyone more alert to new opportunities and threats

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BENEFITS OF THE STRATEGIC APPROACH - II

Unify the organisation More proactive management posture

Constantly, automatically developing

organisation Provide a basis for evaluating budget proposals

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VOCABULARY OF STRATEGY
VISION: the desired future state also

called the Strategic Intent MISSION: what the organisation will do to achieve its basic purpose GOAL: general and simple statement of aim or purpose OBJECTIVE: more precise statement of goal, quantified when possible
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VOCABULARY OF STRATEGY- II
BUSINESS UNIT STRATEGY: it is about

how to compete successfully in particular markets STRATEGIC BUSINESS UNIT: is a part of an organisation for which there is a distinct external market for goods or services that is different from another SBU

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PATTERNS OF STRATEGY - I
To outcompete rivals

Respond to external changes

To alter geographic coverage

To merge/ acquire a rival

To form strategic alliances/ collaborations To capitalise on new opportunities To defend against new threats

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PATTERNS OF STRATEGY - II
To define how the company manages R&D,

production, sales and marketing, finance, and other key functions To strengthen resource base and competitive capabilities Related/ unrelated diversification

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ELEMENTS OF STRATEGIC MANAGEMENT

Strategic intent
Strategic choices Analysis

STRATEGY! Implementation design Design of Evaluation GO! Monitor and control

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APROACHES TO STRATEGY-MAKING
Design the range of influences on an

organisations performance can be best understood by analysis Experience how an organisation performs depends mostly on what experience it has built up, even in new areas of operations Ideas order and innovation emerge from the variety and diversity in and around the organisation.
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APPROACHES TO FORMULATION
The Chief Architect approach one person takes

the full charge of the vision The Delegation approach the manager in charge delegates big parts of the work to trusted subordinates and teams The Collaborative or Team approach a strategy team is put in charge of evolving strategy The Corporate Intrapreneur approach encourage individuals and teams to come up with new initiatives and approaches
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TEST OF A GOOD STRATEGY

A good strategy must fulfill: Competitive Advantage Test: it must provide a sustainable competitive advantage Performance Test: it must boost company performance: gains in profitability, and in competitive strength Goodness of Fit Test: The best fit to the external and internal situation of a company

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