Strategic Management

Prof. Swati A. Mishra Indian Institute of Management Lucknow

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Develop a understanding of: What is strategy? Content and process of strategic management. How organizational strategies are formulated? Issues and challenges relating to the process of strategy formulation. The context in which the strategy is formulated.

Learning Objectives of the Course

The course will help develop An integrated view of all functional areas A general management orientation Analytical & conceptual skills in analysing & formulating corporate strategy

Learning Objectives of the Course

Course Structure
1. Introduction to Strategic Management: Ch 1 2. Analysis of External Environment : Chap 2 3. Analysis of Internal Environment: Chap 3 4. Business Level Strategy: Chap 4
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Introduction to Strategic Management

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What is Strategy?
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What is Strategy?
Strategy is a well defined roadmap of an organization. It defines the direction of an organization. The objective of a strategy is to maximize an organizations strengths and to minimize the strengths of the competitors. Strategy, in short, bridges the gap between where we are and where

Strategy Definition
Derived from Greek word, Strategos, or the art of the general Strategyis an action that managers take to attain one or more of the organizations goals. It is imperative for an organization to have a clear strategy: an integrated, overarching concept of how the business will achieve its objectives.

Strategy Definition
Strategy is an integrated and coordinated set of commitments and actions undertaken to gain competitive advantage through its configuration ofresourcesand core competencies within a challenging business environment, to acheive above average returns and fulfilstakeholderexpectations".

What Constitutes Strategy?

Strategy has become a catchall term used to mean whatever one wants it to mean. Actually they are pieces of strategies and cannot be decided in isolation. Strategy is an integrated set of actions but it is not a catchall for every important choice an executive faces.
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Elements of Strategy
A strategy has five elements: Arenas: Where will we be active? Vehicles: How will we get there? Differentiators: How will we win in the marketplace? Staging: What will be our speed and sequence of moves? Economic logic: How will we obtain our returns?
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Comprehensive Strategies at IKEA

A strategy is more than simple choices on these five fronts: it is an integrated, mutually reinforcing set of choices choices that form a coherent whole Example: Global furniture retailer IKEA IKEAs strategy over the past 25 years has been highly coherent, with all five elements reinforcing each

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Sound Strategy
Is it sufficient to simply make these five sets of choices. Noa business needs not just a strategy, but a sound strategy. Strategic-analysis tools are very helpful for improving the soundness of strategies: industry analysis, technology cycles, value chain analysis, and core competencies, to name a few.

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1. Does it fit with the environment?

Testing the Quality of Strategy

2. Does it exploit the key resources? 3. Are the differentiators sustainable? 4. Are the elements of strategy internally consistent? 5. Have enough resources to pursue this strategy?

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 Strategy is not primarily about planning. It is about intentional, informed and integrated choices. Strategy involves making choices on 3 dimensions: Which customers to focus on Which products to offer Which activities to perform
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Strategy is all about Choice

 In every industry there are several viable positions that companies occupy Essence of strategy is in identifying the strategic position that differs from its competitors: Who are the target customers? What are the products/ services offered to them? How can the company do this

The Heart & Soul of Strategy

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Asking the who-what-how questions Developing alternatives, and Selecting specific goals & actions As industries change, new strategic positions arise to challenge the existing positions. Thus designing a successful strategy is never-ending. Continuously revisit and challenge

The Heart & Soul of Strategy

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Strategic Management

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Strategic Management
The set of decisions and actions that result in formulation and implementation of plans designed to achieve a companys objectives. The study of why some firms outperform others How to compete in order to create competitive advantages How to create competitive advantages
Unique and valuable

Nine Critical Tasks of Strategic Management

1. Formulate the companys mission 2. Conduct an internal analysis 3. Assess the external environment 4. Analyze the companys options by matching its resources with the external environment 5. Identify the most desirable options in light of the mission

9 Critical Tasks of SM
6. Select a set of long-term objectives and grand strategies that will achieve the most desirable options 7. Develop annual objectives and short-term strategies that are compatible with long-term objectives and grand strategies 8. Implement the strategic choices 9. Evaluate the success of the

Three Levels of Strategy

Corporate level: board of directors, CEO & administration [Highest] Business level: business and corporate managers [Middle] Functional level: Product, geographic, and functional area managers [Lowest]

Alternative Strategic Management Structures

 Often carry greater risk, cost, and profit potential Greater need for flexibility Longer time horizons Choice of businesses, dividend policies, sources of long-term financing, and priorities for growth

Characteristics of Strategic Management Decisions: Corporate

Characteristics of Strategic Management Decisions: Functional Implement the overall strategy formulated at the corporate and business levels Involve action-oriented and operational issues Relatively short range and low risk Modest costs: depend upon

 Help bridge decisions at the corporate and functional levels Less costly, risky, and potentially profitable than corporate-level decisions More costly, risky, and potentially profitable than functional-level decisions Include decisions on plant

Characteristics of Strategic Management Decisions: Business

Strategy Makers
Ideal strategic team includes decision makers from all three levels Top managers must give final approval Strategic decisions coincide with managers responsibilities

 Businesses vary in formulation and other processes The basic components of the models used to analyze strategic management are similar Strategic management is a processa flow of information through interrelated stages of

Strategic Management Process

Strategic Management Process

Analysis
Strategic goals (vision, mission, strategic objectives) Internal and external environment of the firm

Formulation
What industries should we compete in? How should we compete in those industries?

Implementation
Allocate necessary resources Design the organization to bring intended strategies to reality
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