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Elements of Strategic Management

Elements of Strategic Management


STD :- T.Y.B.B.A. 6th Semester (Marketing)

Only Points and Definition


No

Chapter Name
Conceptual Framework for Strategic Management Environmental Analysis Industry and Competition analysis Organizational Appraisal Grand Strategies Business Level Strategies Choice of Strategy Framework for Strategy Implementation Framework for strategic evaluation and control Cases

WEIGH TAGE

1 2 3 4 5 6

20% 25% 15 % 10% 15% 15 %

Prepared By Tarun Patel

Prepared By Tarun Patel

Elements of Strategic Management

Strategy :Strategy is the determination of the long-term goals and objectives of an enterprise and the adaptation of the courses of action and the allocation of resources necessary for carrying out these goals. Policy :Policies define how the company will deal with stakeholders,employees,customers,suppliers, distributors and other important groups. Policies narrow the range of individual discretion so that employees act consistently on important issues. Tactics : Tactics is related to efficient utilization of various organizational resources committed through strategy. Strategic Management : Strategic management is defined as the set of decision and actions in formulation and implementation of strategies designed to achieve the objective of an organization. Programme :A single use set o activities that specify measure step there order and timing and the responsibility for completing each step. Procedure : Procedure prescribe the chronological sequence of performing various tasks that are required to complete an activity. Business : Business may be define as human activity directed towards producing or acquiring wealth through buying or selling goods. Difference Between Strategy and Tactics :1.Level of conduct. 5. Information needs. 2. Periodicity. 6.Type of personnel involved in formulation. 3.Time horizon. 7.Importance. 4.Uncertainty. 8.Subjective values. Benefits of Strategic Management :1. Financial benefits. 2. Offsetting uncertainty. 3. Clarity in direction. 4. Increased organizational effectiveness. 5. Personnel satisfaction. Limitations of Strategic Management :1. Complex and Dynamic environment. 2. Rigidity. 3. Inadequate appreciation of strategic management. 4. Limitations in implementation.
Prepared By Tarun Patel

Elements of Strategic Management

Strategic Management Process :1. Organizational mission and objectives

2. Environmental Analysis

3. Organizational Analysis

4.Identification of strategic alternatives

5. Choice of strategy

6. Implementation of strategy

7. Evaluation & Control Environmental Threats and Opportunity Profile (ETOP) :1. Environmental factors. 2. Assessing importance of Environmental factors. 3. Assessing impact factor. 4. Combining importance and impact factor. Organizational Capability Profile (OCP) : OCP is a summarized statement which provides an overview of strengths and weakness in key result areas likely to affect future operation of the organization. Presented in Qualitative or Quantitative form. Strategic Advantage Profile (SAP) OR (CAP) : CAP indicates that the organizations competitive position in the market place. What the organization has done or doing in comparison to its competitors to generate competitive advantage for itself. Various Stakeholders :SBU and its Levels :1.Shareholders. 6. Government. 1. Corporate Level Strategy. 2.Other financiers. 7. Society. 2. Business Level Strategy. 3.Employees. 3. Functional Level Strategy. 4.Customers. 5. Creditors and Suppliers.
Prepared By Tarun Patel

Elements of Strategic Management

Environmental Analysis :-

Environmental analysis is the process through which an organization monitors and comprehends various environmental factors and determines the opportunities & threats are provided by these factors. Role of Environmental analysis :-

Helps to develop an early warning system. Helps to narrow the range of alternatives. To define opportunities and threats.
Nature of Environment :1. Environmental Complexity. 2. Environmental Variability. Environmental Factors :1. Economic Environment. 3. Socio-cultural Environment. 2. Political Environment. 4. International Environment. Industry and Competition Analysis :Industry Attractiveness :1. Nature of demand. 3. Profit Potential. 2. Industry Potential. 4. Entry & Exit barriers.

Forces of shaping Competition :-

1. Threats of Entry :2. Bargaining power of buyers :1. Economies of scale. 1. Purchases in large volume. 2. Product differentiation. 2. Undifferentiated. 3. Capital Requirement. 3. High or less profit of buyers. 4. Access to distribution channels. 4. Quality unimportant. 5. Government Policy. 3. Bargaining power of suppliers :4. Substitute products :1. Switching costs. 5.Rivalry among competitors :2. Few organization. 3.Unique or differentiated. Experience Curve :Cost per units decline because of Limitation of Experience curve :1.Economies of scale. 1. Operational efficiency benchmarking. 2. Labour efficiency. 2. Resistance to change. 3.Improved processes and methods. 3. 4.Product redesign. 5. Product Standardization.

Prepared By Tarun Patel

Elements of Strategic Management

Organizational Appraisal : Organizational analysis is the process through which strategies and managers analyze the various factors of their organization to evaluate their relative strengths and weakness so as to meet the opportunities and threats of environment. Organizational Appraisal Role :- [ Remaining ] Organizational Appraisal Process :1. Identification of key Factors. 2. Identification of Importance of Factors. 3.Assessing strengths and weakness on key Factors. 4. Preparing Organizational Capability Profile. 5.Relating Organizational Capability to Strategy. Value Chain Approach :-

Primary Activities :1. Inbound Activities. 2. Operations. 3. Outbound Logistics. 4. Marketing & Sales.

Support Activities :1. Firm Infrastructure. 2. Human Resource Management. 3. Technology Development. 4. Procurement.

5. Service. *Functional Approach [ Remaining. ] Core Competence : Core competence is generally defined in terms of special technical or product expertise. Honda Japan in Auto engine. Sony Japan in Miniaturization. DuPont USA in Chemical processing. Distinctive Competence :Distinctive Competence is the unique capability that helps an organization in capitalizing upon a particular opportunity. Competitive Advantage :Competitive Advantage exists when there is a match between the distinctive competencies of a firm and the factors critical for success within its industry that permits the firm to outperform competitors.
Prepared By Tarun Patel

Elements of Strategic Management

Growth Strategy :-

A growth strategy is one that an enterprise pursues when its level of objectives upward in significant increment, much higher than an exploration of its past achievement level. Why and When to Pursue Growth Strategy :1. Growth is very necessary for the very survival. 2. Growth offers many economies. 3. Taken up because of managerial motivation. 4. Increased prestige of the organization and satisfaction to employees.

Retrenchment Strategy :-

A retrenchment strategy is one that an organization pursues when it decides to improve its performance in reaching its objectives by : I. Focusing on functional improvement, specially reduction in cost; II. Reducing the number of functions it performs by becoming a captive company; III. Reducing the number of the product and markets it serves up to and including liquidation of the business. Why and When to Pursue Retrenchment Strategy :1. When the organization is not doing well and perceives that it may not do better. 2. When the organization is not meeting its objectives even following other alternative. Turnaround Strategy :- [ Cutback Strategy ] hold the present business and cut the cost Why and When to Pursue Turnaround Strategy :1. Is the business worth saving or is it better to liquidate it now ? 2. What is the state of current operating health as well as strategic health ? How to purse Turnaround ? 1. Change in Top Management. 2. Designing Strategic Turnaround. 3. Designing Operating Turnaround. Divestment Strategy : Organization decides to get out of certain businesses and sells off units or divisions. Why and When to Pursue Turnaround Strategy :1. There is inadequate market share or growth. 2. There is Technological changes which require high investment beyond the capacity of org. 3.When the present business is unmanageable because of some teething troubles. Liquidation Strategy : To sell its entire business and the realization can be invested somewhere else. 1. When future is not quite certain. 2. When some organizations offer higher prices to take tax advantages. 3.When its retaining value will be lesser than its selling value.
Prepared By Tarun Patel

Elements of Strategic Management

Combination Strategy :-

Combination of different strategy stability, growth , retrenchment in various forms. 1.Stabiliaty in some businesses and growth in other businesses. 2. Stability in some businesses and retrenchment in other businesses. 3. Growth in some businesses and retrenchment in other businesses. 4.Stability,growth and retrenchment in different businesses. Why to Pursue Turnaround Strategy :1.Diffrent Products in different Product Life Cycle. 2. Business Cycle. 3. Number of Businesses. Cost Leadership Strategy : Sources of cost leader :1. Lower the cost by economy of scale. 2. High capacity utilization. 3. By going through vertical integration. 4. By standardizing its products. 5. Investment in cost saving technologies. Benefits :1. Help in developing competitive advantage. 2. More protected from the impact of downward trend. 3. Acts as an entry barrier. Risks :1.How long sustainable competitive advantage ?? 2. Becomes less market friendly. Focus Strategy : Sources of cost leader :1.Identification of gaps left by the cost leaders and differentiators in certain segments. 2. Creating superior competence to fulfill these gap existing in the segments to focus. 3. Achieving lower cost in comparison to competitors while serving the segment Benefits :1. Protected from competition. 2. Supplies in small quantity. 3. Prevent new entrants. Risks :1. Cost structure of focused firms are higher. 2. Not attracted to niche markets. 3. In growing market focus is not suitable. Differentiation Strategy :- [ Remaining ]
Prepared By Tarun Patel

Elements of Strategic Management

Strategic Choice : Strategic choice is the decision which selects from among the alternative grand strategies which will best meet the enterprise objectives. The choice involves consideration of selection factors, evaluation of the alternatives against these criteria, and the actual choice.

Choice Process :-

Objective Factor

Focusing on strategic alternatives

Evaluating Strategic alternatives

Considering decision Factors

Strategy Choice

Subjective Factor Consideration of Decision Factors :1. Objective Factor :1. Strategic Intent. 2. SWOT Analysis. 2. Subjective Factor :1. Past Strategies. 2. Personal factors. 1.Personal Preference and aspiration. 2. Value systems of Top Management. 3. Attitudes Towards Risk. 4. Internal Political Consideration.

Prepared By Tarun Patel

Elements of Strategic Management

Strategic Evaluation & Control : Evaluation of strategy is that phase of the strategic management process in which the top managers determine whether their strategic choice as implemented is meeting the objectives of the enterprise. Difference between Strategic Evaluation & Control:1. Basic Question. 5. Time Horizon. 2. Aim. 6. Exercise of control. 3. Main concern. 7. Main techniques. 4.Focus. Barriers in Strategic Evaluation & Control:-

1. Motivational Problems.
1. Psychological Barriers. 2. Lack of Direct Relation between Performance and Rewards.

2. Operational Problems.
Role of Strategic Evaluation & Control:1. Measurement of Organizational Progress. 2. Feedback for Future Action. 3. Linking Performance and Rewards. Participants in Strategic Evaluation & Control:1. Role of Board of Directors. 2. Role of Chief Executives. 3. Role of Other Managers. [ Finance Manager , SBU manager , Middle-level Managers ] Stages of Control:1. Feed Forward Control Control Process :1. Setting performance standards. 2. Measurement actual performance. 3. Analyzing variance. 4. Taking corrective actions. Evaluation and Control Criteria:1. Causal Factors. 2. Intervening Criteria Strategy Formulation Product , Customer Related Strategy Implementation Personnel Related 2. Concurrent Control 3. Feedback Control

3. End-result Criteria Rate of growth , Profitability Social Performance.


Prepared By Tarun Patel

Elements of Strategic Management 10

Benchmarking:-

Benchmarking is a process of identifying , understanding and adapting outstanding performance from within the same organization or from other business to help improve performance.
Types of Benchmarking:1. Product Benchmarking. 2. Competitive Benchmarking. 3. Process Benchmarking. 4. Strategic Benchmarking. 5. Global Benchmarking. Process of Benchmarking:1. Planning. 2. Analysis. Features of Benchmarking:1. See what others do and try to improve that. 2. Applied to all aspects. 3. Continues process.

3.Integration

4. Action.

5. Maturity

Mc Kinsey 7-S Framework :Difference Between Objectives & Goals :1.Strategy. 1. Time Horizon. 2. Structure. 2. Specificity. 3. Systems. 3. Focus. 4. Staffs 4. Measurement. 5. Skills. 6. Style. 7. Shared Value. Dimensions of business definition :Customer Groups

Customer Functions Alternative Technologies Interdependence of Strategy Formulation & Implemental Forward Formulation Implementation.

Prepared By Tarun Patel

Elements of Strategic Management 11

Backward

Prepared By Tarun Patel