Академический Документы
Профессиональный Документы
Культура Документы
Strategic Management
Notes on
Strategic Management
THREE BASIC TACTICS FOR A FIRM TO ESTABLISH THE STRATEGIC PLAN Strategic Plan: How to pursue the organizations long-term goals with resources expected to be available.
1.
Develop a vision and mission statement for the firm (Purpose or reason for existence) Establish objectives (Measurable results) Establish direction setting task for the firm
2. 3.
Vision: A strategic vision concerns a firms future business path where we want to go
MISSION: A mission statement focuses on current business activities--(Who we are?, What we do?, Purpose? and Why we exist?)
What to do: Understand clearly what business the firm is in: (a) Customer needs (what are being satisfied?) (b) Customer groups (who are being satisfied?) (c) Product services (through what?)
Decide when and where to change the firms mission: Periodically redefining mission is both common and necessary in an era of globalization and rapid change in the environment.
Notes on
Strategic Management
Communicate the mission among every level of the management of the firm in a clear, exciting, and inspiring manner.
OBJECTIVE: After setting the vision and mission then comes the objectives. It is more specific, which is extracted from the firms mission. It is expressed both in qualitative and quantitative form. It basically deals with: (a) How much to do ? (b) What kinds of performances to do ? (c) When to do ? Example: 10% INCREASE IN PROFIT. SET OBJECTIVE OF 10% RATE OF RETURN ON INVESTMENT PORTFOLIO OF A BANK. DIRECTION SETTING TASK: (STRATEGIES) After setting objectives, the direction setting task comes. It means who should do what task and when to accomplish the objectives of the firm. It includes four types of strategy; generally deal with four different individuals/groups of people. CORE COMPETENCY: Core competency refers to a unique strength that allows a company to achieve superior efficiency, quality, innovation, or customer responsiveness. Examples: GP customer service, SCB and Honda Motor Co. STRATEGIC BUSINESS UNIT (SBU): SBUs are those departments which are created based on similar products or services like Unilever Products. A division may be organized as Strategic Business Unit around a group of similar products, such as house wares of electric turbines. Top management usually treats an SBU as a semi-autonomous unit with,
Notes on
Strategic Management
generally, the authority to develop its own strategy within corporate objectives and strategy.
Notes on
Strategic Management
These are: (Hierarchy of Strategy)
Strategies Corporate Strategy Business Strategy Functional Strategy Operating Strategy Global Strategy International Strategy Concern Individual/Group CEO Head of SBUs Functional Manager Field Level Manager Top management Local office top management
The overall guidance for each of these strategies for each of these strategies comes from the TOP MANAGEMENT of the firm. (Top-down strategic planning)
(b)
Another approach is bottom-up strategic planning, in which the strategy formulation process is initiated by strategic proposals from divisional or functional units.
(c)
Each of these strategies should be cost effective and should be according to the MAXI-MINI game. It means maximum output by minimum input. (Recall guest lecture; total cost management from every corner of an organization, e.g. process + production)
Notes on
Strategic Management
FOUR APPROACHES TO FORMULATE A FIRMS STRATEGY
(a) The Master Strategy Approach: It is a bureaucratic approach in which decision is being taken with out any consultation. (b) The Delegate it to Approach: It is like, do your job, I will do my job. You cannot go beyond your level. It is suitable for government organizations and small firms.
(c)
The Collaborative Approach: MBO (Management by Objectives) sort of management, where all levels of manager sit together and make the plan by discussion as well as implement the plan together. MBO is a comprehensive management system based on measurable and participatively set objectives.
(d)
The Championship Approach: In this approach the CEO is interested neither in crafting the detail strategy nor the implementation of it. Rather management encourages the subordinates to develop championship strategy in specific fields and formulate and implement strategy by them. In this approach he/she himself/herself will act as the judge/ evaluator of the strategy. It suitable for the big organizations like Square, Unilever etc, which has many SBUs. (Strategic Business Units)
Notes on
Strategic Management
Formulation of Generic and Grand Strategies
Generic Strategies
Cost Leadership: For achieving this as a form of generic strategy the following skills and requirements as well as the following organizational requirements are required: Skills and Requirements Sustained capital investment and access to capital Process engineering skills Close laboratory supervision Efficient production design Low cost distribution channel Organizational Requirements Tight cost control Effective organizational structure Strict quantitative targets
Differentiation: For achieving this as a form of generic strategy the following skills and requirements as well as the organizational requirements are required: Marketing Abilities R & D skills Engineering skill Reputation on quality Technological leadership Organizational Requirements Strong cooperation among the different functional areas of the organization Good organizational culture, Creative people etc.
Notes on
Strategic Management
Cost leadership does not sustain when,
Competitors imitate the product Technological change occurs Poor or no investment in HRD Fail to design the product effectively Fail to meet the quality standard
Basis of supervision become less important to the buyers Competitors imitate the product
Notes on
Strategic Management
FIGURE 7.1 Porters Generic Competitive Strategies
Competitive Advantage
Competitive Scope
Lower Cost
Differentiation
Board Target
Cost Leadership
Differentiation
Narrow Target
Cost Focus
Focused Differentiation
Notes on
Strategic Management
2. Striving to create and market unique products for varied
customer groups differentiation: (Mass Market)
In contrast to low cost strategy, creates appeal to the customers with the sensitivity of products characteristics, in terms of product quality, special features, or after-sale service. By this it builds customer loyalty, and can charge extra price for the product. (Unique) Example: Rolex watch, Mercedes-Benz automobiles.
Grand Strategies:
Working from the mission statement, top management formulates the organizations grand strategy, a general explanation of how the organizations mission is to be accomplished. Porters three generic strategies are particularly useful at this point. Example: IBMs strong emphasis on cost control and targeting of the entire computer market is a grand strategy based on Porters low cost leadership generic strategy. It should be remembered that grand strategies are not drawn from thin air. They are derived from a careful situational analysis (SWOT analysis) or the organization and its environment.
Notes on
Strategic Management
1. Concentrated Growth: The firm that directs its resources to the
profitable growth of a single product in a single market with single dominant technology. Example- Mobil.
4. Innovation: Periodic Change and improvements in the products. 5. Horizontal Integration / Acquisition and Merger: Strategy
based on the acquisition of one or more similar firms operating at the same stage of production marketing chain. Example- SCBs acquisition of AmEx.
Notes on
Strategic Management
7. Concentric Diversification: Diversification represents distinctive
departures from a firms existing base of operations, typically the acquisition of internal generation of a separate business with synergetic possibilities for counter balancing the strengths and weaknesses of the two businesses. Example:
Notes on
Strategic Management
1 3
2 4
Weak
Strong competitive position in a rapidly growing market. Weak position in a rapidly growing market. Weak position in a slow growing market. Strong position in a slow growing market.
3. 4.
Notes on
Strategic Management
Firms long-term business and performance prospects become unattractive Joining of a new CEO (Triggering Effect) New technology and product emerges Have unique opportunity to do a new business
Notes on
Strategic Management
Strategic Choices:
1. 2. 3. 4. 5. Take entrepreneurial strategy Increase technology and product quality Search new customer group Advanced design and advertisements Use price cut and increase the quality
Notes on
Strategic Management
Challenges:
1. 2. 3. 4. Head to head competition Sophisticated buyer Competition on cost and services Profitability may decreased because of the competition
Strategic Choices:
1. 2. 3. 4. 5. Extend product line Emphasize on product innovation Cost cut Vertical integration Horizontal integration
Notes on
Strategic Management
2.
3.
Vacant niche strategy: Concentrate on customers or the end-users that major firms have by-passed or neglected. (Sony Eriksson sports mobile) Specialist strategy: Try to be the specialist in specific areas. Our one is better than their one strategy: It focuses on the quality or/and performance.
2. 3.
Notes on
Strategic Management
Do not allocate resources as the competitors do. Make use of the technology and other strengths, of those products, which are not directly competing with the competitors to avoid head to head competition. Challenge accepted assumptions about the way business is done or nature of the products, or process and gain advantage by creating new success factors Innovate something new that is absolutely new to the market and promising. (Lafarge)
Notes on
Strategic Management
Identify time how long a strength or weakness will remain because competitors may start to key on the factor or time can make it obsolete.
What does the firm do particularly well ? Do these competencies count and if so, when? What does the firm do poorly? Does it matter?
Notes on
Strategic Management
Strategy Implementation
Before developing a plan/strategy, the firm has to consider whether it has the strengths to implement the strategies properly that it is going to formulate. To implement, any plan/strategy, the following 7s should be considered. There are: 1. 2. 3. 4. 5. 6. 7. Strategy itself. Structure (Organizational Structure) Staff (Human Resource) System (Organization system like reward and punishment) Style (Leadership) Skill (Technology and other skill) Stared Value (Culture)
Strategy:
It has been discussed earlier.
Notes on
Strategic Management
Structure:
It deals with the internal environment of the organization, its long-term objectives, and firms physical structure (organ gram: whether it is centralized, decentralized) ASK: Is the organizational structure compatible with the planning process, with new managerial approaches, and with the strategy itself.
Staff: (People)
It deals with the available human resources and their competencies. Are people with right skills and abilities available for key assignments, or must attention be given to recruiting, training, management development and similar programs.
System:
It deals with the overall mechanism of the organization and reward is one of the most important issues to be considered here.
Notes on
Strategic Management
There are three types of reward. These are: 1. 2. 3. Short term reward Mid term reward Long term reward
Analysis of Situation
Skill:
It deals with the technology and other requirements (technical & managerial skills) for the smooth operation of the business.
Style:
It deals with the leadership that will lead the firm to achieve it goals.
Notes on
Strategic Management
Leaders give organizations a sense of direction for where the organization should go. Moreover, they are eloquent enough to be able to communicate the vision and mission to others within the organization in terms that can energize motivate people, and they consistently articulate their vision and mission until it becomes the part of organizations culture. For achieving a good style of the firm, the leader of the firm should posses some qualities. There are: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Visionary Willingness to delegate and empower Team player Good educational background Ability to convince people Have experience Good personality Courage (Risk taker, Boldness) Integrity (Consistency, Realistic/ by winning) Strategic thinker (Crisis Anticipation) Tolerance to the ambiguity
Shared Value:
It deals with the culture of the firm. Culture is not only values. It is a kind of rules and regulations. Values cannot be changed. But it can be upgraded. Rules and regulations can be changed.
Notes on
Strategic Management
Two type of culture is very important to the firm Organizational culture Corporate culture
Organizational Culture:
Changes in key organizational factors that are necessary to implement the new strategy Many Link changed to basic mission and fundamental organizational norms. Few Synergetic focus on reinforcing culture High Reformulate strategy or prepare carefully for LT. difficult Changes. Managing around the culture Low
Notes on
Strategic Management
Corporate Culture:
Companys inner values, beliefs, rituals, operation style, political and social atmosphere etc.
Strategic Principle:
A strong culture and tight strategy-culture fit are powerful levers for influencing people to do their jobs better.
Notes on
Strategic Management
Strategic Control (Evaluation + Feedback)
It means: Taking a strategy as it is being implemented, detecting
problems of changes in its underlying premises, and making necessary adjustments.
Premise control: It is designed to check systematically and continuously whether the premises (assumptions and predictions) on which the strategy is based are still valid.
2.
Notes on
Strategic Management
Types:
Monitoring Strategic Thrust Milestone review 3. Strategic surveillance: It is designed to monitor a board range of events inside and outside the firm that are likely to affect the course of its strategy. 4. Special alert control: Reconsideration of the firms strategy because of the sudden, unexpected events.
Operation Control:
Set Standard of performance Measure actual performance Identify deviations form the standards Initiate corrective actions