O1-INTRODUCTION TO STRATEGIC MANAGEMENT

What do you mean by Strategy? Strategy is a set of related actions that managers take to increase their companys performance. The word strategy has been in use since Sun Tzu wrote the Art of War in the fourth Century B.C. The word strategy has been deri ed from !strategos in "reek# which means !art of the army general# or art of deploying army. Strategy signified the skill of planning the mo ements of armies before actual battle starts$ Strategy tells about priorities which must be followed in order to achie e the organisational goals % ob&ecti es. De !n!t!on o Strategy Strategy is a set of key decisions made to meet objectives. It refers to a complex web of thoughts, ideas, insights, experiences, goals, expertise, memories, perceptions, and expectations that provides general guidance for specific actions in pursuit of particular ends. An organization can not operate effectively without a strategy, either developed explicitly through a planning process or evolved implicitly. * What business are we in? What products and services will we offer? * o whom? * At what prices? !n what terms? * Against which competitors? * !n what basis will we compete? If the organization as"s these "ey #uestions and it has the answers, then there is a strategy in place. 'nd all plans are not strategy as strategy has a pattern which is consistent in beha ior o er a time span. (n order to help to de elop understanding of strategy )intzberg de eloped what is known as the * +s of Strategy. These are, * * * * * Strategy as +lan Strategy as (ntended +attern Strategy as +ath Strategy as +osition Strategy as +erspecti e

Strategy a" #$an )intzberg defined this as some sort of consciously intended course of action# a guideline -or set of guidelines. to deal with a situation. The e/ample of "ame Theory where Strategy is a complete plan, a plan which specifies what choices 0the player1 will make in e ery possible situation. Strategy a" #attern )intzberg defines strategy as consistency in beha ior# whether or not intended. Strategy may also emerge as patterns# which can be seen as the resulting actions. 2or e/ample when 3enry 2ord originally de eloped the )odel T# the strategy was to only offer the car in the color black# by strategy as a pattern# this was an intended strategy. 'n e/ample of an unintended strategy as pattern can be seen with how (kea began to flat pack their furniture# the original idea for this was borne of one of the companies designers trying to load a table into their car# when they realised that it wouldnt fit and they would ha e to remo e the legs of the table# they realised that customers would face the same issue when purchasing the product# and as such a ital aspect of (keas strategy emerged unintentionally. Strategy a" #ath strategy tells us to get from here to there. it pro ides us the path from our current position to our desired place. Strategy a" #o"!t!on Strategy as a position refers to the en ironment in which the organisation operates in and the mediating force between the internal and e/ternal conte/t. 4/amples of this may be an organisations strategy towards dealing with en ironmental factors such as e/treme heat# disposal of waste# use of green (T. Strategy a" #er"%e&t!'e This aspect of strategy is concerned with how the organisation itself sees the business en ironment. 2or e/ample an organisation may decide to be the pacesetters# always at the bleeding edge of technology and may sell their products based on technological ad ances. 'nother organisation may decide to be followers where they learn from the mistakes of the pace setter and only adopt pro en technologies and may be more concerned with 5uality and

reliability rather than bleeding edge technology. 4/amples of this in the automoti e industry can be seen in how 2ord ha e recently began the market the new 2ord 2ocus as the technological leader in the product category. By using 2ords economies of scale 2ord ha e been able to cheaply introduce technologies such as Self6+arking# a technology associated with premium brands rather than 2ord an auto manufacturer that traditionally targets blue6collar workers Characteristics of Strategy * 7ong term direction * 'chie e ad antage * Change scope of acti ities * Commit ma&or resources * Build or stretch resources * )a&or (mpact % outcome is e/ternal * 4ntails significant risks * )a&or effect on operational decisions * Comple/ and cross6cutting interactions * Changes alues and e/pectations 8. Strategic decisions are likely to affect the $ong-term d!re&t!on of an organisation. 9. Strategic decisions are normally about trying to a&h!e'e "ome ad'antage for the organisation. :. Strategic decisions are likely to be concerned with the "&o%e o an organ!"at!on(" a&t!'!t!e", ;oes -and should. the organisation concentrate on one area of acti ity# or does it ha e many< The issue of scope of acti ity is fundamental to strategic decisions because it concerns the way in which those responsible for managing the organisation concei e its boundaries. (t is to do with what they want the organisation to be like and to be about. =. Strategy is to do with the mat&h!ng o the a&t!'!t!e" o an organ!"at!on to the en'!ronment !n )h!&h !t o%erate"* *. Strategy can also be seen as +"tret&h!ng+ an organ!"at!on+" re"our&e" and competences to create opportunities or capitalise on them. (t is not &ust about countering en ironmental threats and taking ad antage of en ironmental opportunities> it is also about matching organisational resources to these threats and opportunities. There would be little point in trying to take ad antage of some new opportunity if the resources needed

were not a ailable or could not be made a ailable# or if the strategy was rooted in an inade5uate resource6base. ?. Strategic decisions therefore often ha e ma&or resource implications for an organisation. (n the 8@ABs a number of CD retail firms had attempted to de elop o erseas with little success and one of the ma&or reasons was that they had underestimated the e/tent to which their re"our&e &omm!tment" would rise and how the need to control them would take on 5uite different proportions. Strategies# then# need to be considered not only in terms of the e/tent to which the e/isting resource6base of the organisation is suited to the en ironmental opportunities but also in terms of the e/tent to which resources can be obtained and controlled to de elop a strategy for the future. E. Strategic decisions are therefore likely to affect o%erat!ona$ de&!"!on"# to !set off wa es of lesser decisions. A. The strategy of an organisation will be affected not only by en ironmental forces and resource a ailability# but also by the 'a$ue" and e,%e&tat!on" of those who ha e power in and around the organisation. (n some respects# strategy can be thought of as a reflection of the attitudes and beliefs of those who ha e the most influence on the organisation. Fhether a company is e/pansionist or more concerned with consolidation# and where the boundaries are drawn for a companys acti ities# may say much about the alues and attitudes of those who influence strategy 66 the stakeholders of the organisation. The beliefs and alues of these stakeholders will ha e a more or less direct influence on the organisation. G erall# if a definition of strategy is re5uired# these characteristics can pro ide a basis for one. Strategy !" the d!re&t!on and "&o%e o an organ!"at!on o'er the $ong term- )h!&h a&h!e'e" ad'antage or the organ!"at!on through !t" &on !gurat!on o re"our&e" )!th!n a &hang!ng en'!ronment- to meet the need" o mar.et" and u$ !$ "ta.eho$der e,%e&tat!on"*

Strategic decisions are# then# often comple/ in nature, it can be argued that what distinguishes strategic management from other aspects of management in an organisation is &ust this comple/ity. The comple/ity arises for at least three reasons. 2irst# strategic decisions usually in ol e a high degree of uncertainty, they may in ol e taking decisions on the basis of

iews about the future which it is impossible for managers to be sure about. Second# strategic decisions are likely to demand an integrated approach to managing the organisation. Cnlike functional problems# there is no one area of e/pertise# or one perspecti e that can define or resol e the problems. )anagers# therefore# ha e to cross functional and operational boundaries to deal with strategic problems and come to agreements with other managers who# ine itably# ha e different interests and perhaps different priorities. This problem of integration e/ists in all management tasks but is particularly problematic for strategic decisions. Third# as has been noted abo e# strategic decisions are likely to in ol e ma&or change in organisations. Hot only is it problematic to decide upon and plan those changes# it is e en more problematic actually to implement them. Strategic management is therefore distinguished by a higher order of comple/ity than operational tasks. What is Strategy in Management? * A company$s strategy consists of the set of competitive moves and business approaches that management is employing to run the company * %trategy is management$s game plan to 6'ttract % please customers 6Stake out a market position 6Conduct operations 6Compete successfully 6'chie e organisational ob&ecti es

02-Strategic Management as formal Process

Strategic Management Process he process by which managers develops a set of strategies for the enterprise to fulfill its vision.

Environmental Scanning It is the monitoring, evaluating, and disseminating of information from the external and internal environments to "ey people within the organization. Its main purpose is to identify external and internal elements that will determine the future of the corporation. he simplest way to conduct environmental scanning is through %W! Analysis. &%trengths, Wea"nesses, !pportunities and hreats' External Environment (onsists of variables that are outside the organization. hese refer to the opportunities and threats. Internal Environment (onsists of variables that are within the organization itself. hey are the strengths and wea"nesses of the corporation. hey include corporation$s structure, culture and resources. Strategy /ormu$at!on (t is the de elopment of long range plans. (t includes defining corporate mission# specifying achie able ob&ecti es# de eloping strategies and setting policy guidelines. M!""!on (t is the purpose or reason for the organizations e/istence. (t tells what the company is pro iding for the society. Ob0e&t!'e" These are end results of planned acti ity. (t tells what is to be accomplished. Strateg!e" 6 (t states how the corporation will achie e its mission and ob&ecti es. #o$!&!e" 6 (t is a broad guideline for decision making that links the formulation of a strategy with its implementation. Strategy Im%$ementat!on (s a process by which strategies and policies are put into action through the de elopment of programs# budgets and procedures. Sometimes referred to as operational planning. #rogram" (s a statement of the acti ities or steps needed to accomplish a single use plan. (t makes a strategy action oriented. 1udget" (s a statement of a corporations programs in terms of dollars. (t lists the detailed cost of each program. #ro&edure" Sometimes termed as Standard Gperating +rocedures -SG+. (t is a se5uential steps or techni5ues that describe in detail how a particular task or &ob is to be done. E'a$uat!on and Contro$

(s a process in which corporate acti ities and performance results are monitored so that actual performance can be compared with desired performance. #er orman&e (t is the end result of acti ities. (t includes the actual outcomes of the strategic management process. Tr!gger!ng E'ent" 6 (s something that acts as a stimulus for a change in strategy.

Why 2!"!on !" SO Im%ortant Because without Iision the employees of a firm fall in acti ity trap that is they lay entire emphasis on the procedures not the purpose of the acti ities. Iision tells the decision maker about the priorities# importance of arious factors and it indicates what to do % what not to do$