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Strategic Management

UNIT-1

Introduction:

The word strategy came from the Greek word ‘strategos’ means a “general”.
In olden days strategy literally meant the art and science of directing military forces
during the war.
In simple strategy means rule for making decisions
Definition:
Ohame:
“strategy can be defined as the determination of the basic long term goals and
objectives of an enterprise and the adoption of courses of action and the allocation of
resources necessary for carrying out these goals”
Strategic management is that set of managerial decisions and actions that determines
the .long run performance of a corporation.

Comparison between Policy and strategy

Policy Strategy
1. It is theoretical nature Practical in nature

2. May be short term and only long term


Long term

3. It can be delegated may not be delegated

4. Guide to action these are action plans

Role of Strategic Management

 Internal environment factors affect within the organization which


Strengths or weakness of a strategic nature.
 External environment ( it includes outside factors which provide
opportunities and threats to the organization.

Strategic Management includes

Types of strategic management

► Corporate strategy
► Business or competitive strategy
► Operational or Functional strategy
Strategic Management as a Process

Objectives of strategic management

► Formulate the company's mission.


► Conduct an analysis based on internal conditions
► Assess the company's external environment
► Identify the desirable options
► Select a set of long term objectives
► Develop annual objectives and short term strategies
► Implement the strategic choices by means of budgeted resource allocations
► Evaluate the success

Benefits of Strategic Management

► Decision making
► Achieving performance
► Growth
► High results
► Reduction of complexity
► Social responsibility
► Customer satisfaction
► Development of Human resources
► Adoptability to change
► Cost control
► Profitability
► Ability to compete

Demerits

► Strategic management process is costly exercise.


► Its gestation period is very long.
► Sometimes strategies may be failed, which leads to frustration.
► Future uncertain, and risk is very high. Strategic management mostly depends
on long term results, which uncertain and high risk oriented.
► Resistance to change by the employees

Mission

► Mission is the purpose for which organization is established. it includes both a


statement of organizational philosophy and purpose Long term view of what
the organization is striving to become in future.

► For Ex:ONGC mission statement “To stimulate, continue and accelerate


efforts to develop and maximize the contribution of the energy sector to the
economy of the country.

► BHEL mission “to achieve and maintain a leading position as suppliers of


quality equipment, systems and services to serve the national and
international markets in the field of energy. The areas of interest would be
conversion, transmission, utilization and conservation of energy for
applications in the power, industrial and transportation fields. To strive for
technological excellence and market leadership in these areas”.

Vision
 Vision statement present the values, philosophies and aspirations, that
guide organizational action. In fact it motivates and inspires the current
and future employees of the organization. it gives a better idea to
outsiders about organization.
 Ex: Motoroal (visions of quality) Dedication to quality is a way of life
at our company.
 Hero Honda: "Excellence in quality is the core value of Hero Honda's
philosophy.
 TVs Motor co. “quality is a way of life”.
 Tata steel “We aspire to be the Global Steel Industry benchmark for
Value Creation and Corporate Citizenship”
III UNIT

Define Strategic Alternatives


(Grand Strategies=Basic Strategies=Major strategies=Generic Strategies or also
called as Strategic Alternatives)
Strategy is that set of managerial decisions and actions that determines the long run
performance of a corporation it includes environmental observation strategic planning
formulation implementation evaluation and control. Development of organization
completely rests on the efficiency of the decision makers, They have to decision based
on present policies for achievement of future goals. Strategic planning always
concentrates on the anticipated aim. Future is uncertain. Hence, strategic decisions
are always incomplete and sometimes they have been based on false information.
There are four important areas of strategies these may also be called as stratyegic
alternatives or result oriented actions
Stability strategies: Any business organization should try for the stability to achieve
stability the organization should try to improve its skills. Continuing in the same
business with the same objectives can be treated as stability strategy
Steps for stability
Mgt should concentrate on consistency of policies and objectives
It should try to maintain present market share
It should aim to improve efficiency of functional areas try to maintain and develop
competitive advantages.

Growth strategies: it aims to take challenging tasks for the development


diversification of business changes in the objectives planning fro growth of business
is important aspects
Steps for growth
Diversification of products,
Diversification of area of market, increasing market share,
Increase in objectives and policies,
Applying different strategies for different types of markets.
Retrenchment strategies:- Retrenchment strategy is a strategic option which involves
reduction of any existing product or service line along with the level of objectives set
below the past achievement is known as retrenchment strategy. Unanticipated actins
by competit0rs or changes in market co ordination etc it is called short run business
policy
Analyzing performance of units
Dropping such units in case ofr poor
Examining problems existing in the market
Identifying competitors and market conditions
To improve profitability of investment etc.

Combination or Mixed strategies:- A combination strategy is one in which there is


conscious use of different strategies for different units or divisions at the same time It
is
Noting but combinations of two or more basic strategic elements.
Steps for combinations strategy
Identification and analysis of business problems
selection of different element from different strategies like stability, growth,
retrenchment, to solve business problems.
Implementation of mixed or combination strategies.
Evaluation of the implemented strategies.
How is a strategy formulation? What factors have to be considered in the choice
of a strategy?
Strategy formulation
Strategy formulation is the development of long range plans for the effective
management of environmental opportunities and threats, in light of corporate
strengths and weakness It includes defining the corporate mission, specifying
achievable objectives, developing strategies, and setting policy guidelines.

What is Mission:
Mission is the purpose for which organization is established. Mission includes both a
statement of organizations philosophy and purpose. The first step of strategic choice
is depends on well defined mission statement or organizational purpose. The mission
may be described as the scope of the operation in terms of nature of business
What are objectives
Objectives are defined as ends which the organization seeks to achieve by its
existence and operation. Objectives may be internal or external objectives internal
objectives are those which define how much is expected to be achieved with the
resources that the organization commands. It includes Goals and policies
a).Goal : Goals are specific and time based points of measurement goals are
determined by the owner In case of large scale companies CEO will determine the
goals for its firm.
b).Policies: A policy is a definition of common purposes the process of strategic
choice sometimes encompasses the formulation of important policies. Policies help to
insure that all units of an organization operate under the same ground rules they also
facilitate co ordination and communication between various organization units.
Formulation of Strategies
Strategies can be formulated after clear diagnosing the environment which includes
external or internal factors Each strategy with sub strategies and alternative strategies
should be available to top mgt thus top mgt always mentor the administration with
strategies which can be adopted for time to time.
a)Corporate Strategy; Corporate level strategy is concerned with the overall
direction and scope of an organization and how value will be added to the different
business units of th organization It includes decisions taken regarding Mergers, take
over Turnaround strategies etc
b)Business strategy:
It can be thought of as a second level strategy It is about how to compete successfully
in particular markets. The concerns are there fore about how advantage over
competitors can be achieved what new opportunities can be identified or created in
the markets which products should be developed in which market etc
c)Functional strategy
These are detailed actions plans to achieve short term objectives and establish
competitive advantage
Functional strategies identity the specific, immediate actions that must be undertaken
in functional areas such as operations, finance, marketing, HR etc
d) Global Strategy
In a global strategy a co. treats the whole world as one market and one source of
supply. This will often involve the global integration of manufacturing and one
common global brand. A global strategy is based on the assumption that customer
needs are similar worldwide. So firms following a global strategy offer standardized
products and services world wide. Competitive strategy is centralized and controlled
to a large extent by the corporate office they locate manufacturing, R&D and
marketing activities in only a few locations ex: Coke , Pepsi, ford, Hollywood movies
etc.

Strategic Choice:
Stragtegic choice is nothing but selection of best strategy The main problem before
strategist is to choose from many alternatives which will suit for the achievement of
organizational goals. Strategic choice is nothing but decision-making. Decision
making consists of setting of aim, goal and objectives. Finding differenct alternatives
for each decision and seldction of best alternative is the primary concern of strategic
choice.

The above diagram illustrates that there is inter relationship between objective factors,
subjective factors and decision factors Thus the strategist will select his choice. for ex
two options re available like A cost reduction and B improvement in advertisement if
strategy A is better than that of strategy B select strategy A otherwise select strategy
B
Def: W.F Glueck and L.R.Jauch “the decision to select from among the grand
strategies considered the strategy which will best meet the enterprises objectives. The
decision involves focusing on a few alternatives, considering the selection factors,
evaluating the alternatives against these criteria, and making the actual choice”
Steps for strategic choice:
Alternatives First step is the determination of alternatives for the problems of
organization The strategist should always try to find all possible alternatives and
select the best alternatives This can be done with the help of GAP analysis (finding
gap between present performance and desired performance).
Selection factors: Second step is to find selection factors. These will help to analyze
and examine alternatives. These factors may be objective or subjective. Objectives
factors requires analytical skills where as subjective factors are based on one’s
personal choice
Evaluation applying of these factors to evaluate alternatives is the imp. Step.
Evaluation process reduces the burden of strategic while selecting best strategy.
Making strategic choice :decision of making in accordance with the conditions of the
organization is the final step. A plan of action or blue print is make which describes
strategies to be adopted by the organization.
IV Unit

1) What is Portfolio analysis? Discuss the application of Portfolio analysis and


display matrices in the Indian Context?

(Strategic alternatives+ Corporate Portfolio analysis)

Every strategist will have several alternatives for the implementation in the
organization . These may be treated as Corporate Portfolio analysis. It is a set of
Techniques evolved during 1960s one of the most popular aids to developing
corporate strategy is Portfolio analysis.
In Portfolio analysis top management views its product lines and business Units are
a series of Investment from which it expects a profitable return. A study of the
performance of the 200 largest US Corporation found that Co,s which are actively
managed their business portfolios through acquisitions and divestitures created
substantially more share holder value.
Techniques which are used in portfolio analysis are BCG and GE nine cell matrix.

BCG Matrix ( Boastan Consulting Group):


The BCG is al leading mgt consultant group devised a matrix, which provides a
graphic representation

Vertical axis denotes growth in sales in percentage for a particular industry


Horizontal axis denotes relative market share
Stars :- This cell corresponds closely to the growth phase business units falling in
the upper left quadrant called stars (high growth). A co. generally pursues an
expansion strategy to establish a strong competitive position. It is at growth phase of
the PLC (Product life Cycle) old stars do not require cash investment young stars
require investment
Cash Cows:- These are businesses which generate large amounts of cash but their
rate of growth is slow In terms of PLC these are generally mature businesses which
are reaping the benefits of experience curve. The cash generation exceeds the
reinvestment that could profitably be made into cash cows. These businesses could
mainly adopt stability strategies, Where the long term prospects are exceptionally
bright, limited expansion could be adopted as cash cow industries lose their
attractiveness and tend towards decline a phased retrenchment strategy may be
feasible.
Question Marks:- Business with high industry growth but low market share for a co.
are question marks or problem children They require large amounts of cash to
maintain or gain market share question marks are new products they may become
stars if realistic strategies are adopted otherwise they may become dogs
Dogs:- Business units falling under the lower right quadrant of the matrix is called as
Dogs. These business are related to slow growth industries and where a company
have a low relative market share are cash. In terms of PLC the dogs are usually
products in the late maturity or declining stage.
GE Nine Cell matrix.
General electric company of the US with the help of MC Kinsey and company
prepared a corporate portfolio analysis technique named GE Nine Cell Matrix. This is
an alternative approach to BCG matrix In this matrix, vertical axis represents industry
attractiveness which is weighted composite rating base on eight different factors.
Market size and growth rate , Industry profit margins, competitive intensity,
seasonality or cyclicality, economics of scale, technology, social and environmental
legal and human aspects.
The horizontal axis represents business strength and competitive position, which
again a weighted composite rating based on seven factors
Relative market share, profit margins, ability to compete on price and quality,
knowledge of customer and market competitive strengths and weaknesses,
technological ability caliber of management.
The nine cells of GE matrix are grouped on the basis of low to high industry
attractiveness and weak to strong business strength. Three zones, of three cells each
are make denoting different combinations represented by green yellow and red
colours.

V CHAPTER : STRATEGIES IMPLEMENTATION

Strategic implementation is the process of putting organizations various strategies into


action by setting annual or short term objectives allocating resources, developing
programmes, policies, structures, functional strategies etc. Even the best strategic
plan will be useless unless it is implemented properly. The strategy implementation is
therefore the most difficult element of the strategic management process.

Formulation of strategies is required for the development of organization. The


formulated strategies are to be implemented properly. Implementation means the
execution of strategies at different levels of organization. Generally, top level
management formulates and takes action plan of strategies. The success of
organization completely rests on the success of implementation of strategies. So a
good strategy without effective implementation has a lower probability of success.
Strategy implementation involves the design and management of systems to achieve
the best integration of people, structure and resources.
Issues in implementation of strategies:
Determine key managerial tasks: Identification of key managerial tasks is the first
step for implementation of strategies.
Resource analysis: Organization should take care of resources available and for
optimum utility of existing resources available and plan for optimum utility of
existing resources.
Resource allocation: Allocation of resources to various departments is very
important for the optimum, utility of resources.
Strategic Leadership: Efficient management for implementation is required for
successful implementation.
Preparation of Information system: Management information system (MIS) is to
be prepared for taking decisions. MIS can be broadly categorized as TPS Transaction
Processing System BPS Batch Processing system, DSS Decision Support System
and Executive Support System
Evaluation and review of strategy: After implementation of strategy, they should
be evaluated and reviewed to know whether they are successfully implemented of not
feedback mechanism helps in evaluation.

Importance of Strategy Implementation


According Mc. Kinsey’s 7-S Model (developed in 1970s)importance of
implemtation It has to be understood by the complex relationships that exist between
strategy, structure, systems, staff skills and super ordinate goals.
Super-ordinate Goals
Means the ‘goals of a higher order which express the values, vision and mission that
senior management brings to the organization’.
These can be condisered as the fundamental ideas around which a business is built
Hence, they represent the main values and aspirations of an organization For ex: the
super ordinate goal of IBM has been customer service.

Structure
Structure means the organizational structure of the company. The design of
organizational structure is a critical task of top management. Organizational structure
refers to the relatively more durable organizational arrangements and relationships It
prescribes the formal relationships among various positions and activities,
communication channels, roles to b e performed by various members of an
organization.

Systems
‘Systems’ mean the procedure that make the organization work. They include the
rules, regulations and procedures, both formal and informal, that complement the
organizational structure. Systems include production planning and control systems,
cost accounting procedures, capital budgeting systems, performance evaluation
systems etc.
Style
Style means the way the company conducts its business. Top managers in
organizations can use style to bring about change, organizations differ from each
other in their styles of working. The style of an organization, according to the
Mckinsey framework, becomes evident through the patterns of actions taken by the
top management team over a period of time.
Staff
Staff refers to the pool of people who need to be developed, challenged and
encouraged. It should be ensured that the staff has the potential to contribute to the
achievement of goals.
• Selecting meritorious people for specific organizational positions.
• Developing abilities and skills in them, to take up challenging assignments.
Motivating them to give their best to achieve strategic goals.
Skills
Skills are the most crucial attributes or capabilities of an organization. Skills in
the 7s frame work can be considered as an equivalent of distinctive competencies”
for ex:IBM for its customer service.
Strategy
It is the long term direction and scope of an organization. It is the route that the
company has chosen to acheve competitive success.
Strategic Control

Strategic evaluation and control is defined as the process of determining the


effectiveness of a given strategy in achieving the organizational objectives and taking
corrective actions wherever required. According to pearce and Robinson, strategic
control is concerned with tracking a strategy required.

According to Pearce and Robinson:strategic control is concerned with tracking a


strategy as it is being implemented, detecting problems or changes in its underlying
premises, and making necessary adjustments.
Strategic evaluation is to test the effectiveness of strategy. The strategists formulate
the strategy to achieve a set of objectives and then implement the strategy. Strategic
evaluation and control could be defined as the process of determining the
effectiveness of a given strategy in achieving the organizational objectives and taking
corrective action whenever required. Strategic control is concerned with tracking the
strategy once it has been implemented, detecting any problem areas or potential areas,
and making necessary adjustment. The purpose of strategic evaluation and control is
to monitor and evaluate progress towards the organizations objectives and to guide or
correct the process or change the strategic plan to better accord with current
conditions and purposes

Strategic controls take into account the changing assumptions tht determine a strategy,
continually evaluate the strategy as it is being implemented, and take the necessary
steps to adjust the strategy to the new requirements. Strategic control is similar to the
continuous evaluation system used in academic institutions and differs from the end
of the term examination system used in traditional setups.

The four basic types of strategic control are


• Premise control,
• Implementation control,
• Strategic surveillance,
• Special alert control.

Premise control: - This is necessary to identify the key premises or assumptions and
keep track of any change in them can affect the strategy to a large extent. Premise
control is necessary to identify the key assumptions and keep track of any change in
them so as to assess their impact on strategy and its implementation. It serves the
purpose of continually testing the assumptions to find out whether they are still valid
or not.
Implementation control:- Strategies are meant to implemented by the management.
However they should be controlled and regulated implementation control is milestone
reviews, through which critical points in strategy implementation are identified in
terms of events, major resource allocation, or time. The implementation control may
be put into practice through identification and monitoring of strategic thrusts such as
an assessment of the marketing diversification.

Strategic surveillance:- This method of control is different from the above


mentioned methods. It is designed to monitor broad range of events inside and
outside the company that are likely to threaten the course of a firm’s strategy.
Strategic surveillance can be done through generalized based.

Special alert control:- Business is a dynamic process. It is always volatile. It has to


face several fluctuations. Every CEO must be alert to the changes in the present
business scenario. Hence, this type of control is necessary. Special alert control is
based on rapid response and immediate reassessment of strategy in the light of sudden
and unespected events. Special alert control can be exercised through formulation of
contingency strategies.