Chapter 2 Strategic management process

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Aarnesh

2.1 Strategy - Basics Click to edit Master subtitle style

Chapter Overview:
Strategy Basics Meaning of 1. strategy 2. Features of 3. strategy 4. Strategic Alternatives 5. Dynamics/context 6. of Competitive Strategy 7. Levels of Management & Strategic Aspects Corporate Level Strategic Management Process Meaning Objectives Tasks Framework/Stage s Importance Features/Dimensi ons Strategic Management Model Vision & Mission Vision Meaning, Elements, Purposes Mission Meaning, Features, Need, Guidelines, Mission vs. Purpose Objectives Meaning, Features

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Q.1 Business Policy as a discipline

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Defined study: Business Policy is the study of (a) the functions and responsibilities of senior management, (b) the crucial problems that affect the success in the total enterprise and (c) the decisions that determine the direction of the organization and shape its future Organized: Business Policy emphasizes on the rational (balanced or based on reason)analytical aspect of strategic 4/13/12

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Q.2 Strategy. OR Businesses have to respond to hostile environment with Strategy. Comment
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A companys strategy is the game plan used by management to capture or acquire market position, conduct its operations, attract and please customers, compete successfully, and achieve organizational objectives Strategy is a long range blueprint (plan, drawing or design) of an organizations desired image, direction and destination
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and action (a) to achieve effectiveness, (b) to mobilize resources, (c) to direct effort and behavior, (d) to handle events and problems, (e) to perceive and utilize opportunities, and (f) to meet challenges and threats to corporate survival and success
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Strategy is associated with unified (combined) design and action for achieving major goals, gaining command over the situation with a 4/13/12 long-range perspective and securing a

Q 3 Characteristics of Corporate Strategy. OR Strategies are not perfect or flawless. They are not a substitute for sound, alert and responsible management. Discuss
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Long range: Strategy is generally longrange in nature, though it is valid for short-range situations also and may have short-range implication (suggestions) Action oriented: It is action-oriented and is more specific than objectives Integrated: It is multipronged (involves several different directions, aspects, or elements) and integrated
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Flexible: It is flexible and dynamic as it gives importance to combination, sequence, timing, direction and depth of various moves and action initiatives taken by Managers to handle environmental uncertainties and complexities Formulated at Top level: Strategy is formulated at the Top Management Level, though Middle and Operational Level Managers are associated in their 4/13/12

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Goal-oriented: It flows out of or comes from the goals and objectives of the enterprise and is meant to translate them into realities Efficiency: Strategy is concerned with efficiency, i.e. perceiving opportunities and threats and seizing (take hold of) initiatives to cope with them. It is also concerned with deployment (use or consumption) of limited organizational resources in the best possible manner 4/13/12

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Harmonized: It provides an integrated (included or incorporated or built in) and unified (combined or united) framework for Managers Allowances for uncertainties: Strategy is the art of the possible. It includes allowances for second best choices (opportunity costs), trade-offs, sudden emergencies, pervasive pressures, failures, miscalculation and unanticipated events 4/13/12

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Q.4 Different ways in which the strategic alternatives can be classified

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Stability strategy

Expansion strategy Retrenchment strategy Combination strategy Also known as Grand Strategies or Master Strategies

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Strategic thinking involves orientation (direction or course) of the Firms internal environment with the changes of the external environment. Competitive Strategy is influenced by internal & external environment factors as indicated below: Internal Environment External Environment
Factors Companys Strengths & Weaknesses Values, Ethics and Beliefs of Promoter Group, Managers, etc Competitive Strategy Factors Industry Opportunities & Threats (Economic & Technical) Expectations of various stakeholders/interest groups, viz. Employees, Lenders, Suppliers, Customers, Government, 4/13/12 Society at large, etc.

Q 5 Explain the context in which the Competitive strategy is formulated

Q.6 Various Strategic Levels in an Organization

Based on the significance of decisions taken by them, the strategic levels of Management in an organization generally consists of
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Corporate Level: CEO, Senior Executives, Board of Directors, and Corporate Staff Business Level: Divisional Managers incharge of separate areas of activity, and their staff Functional Level: Operational
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Q.7 Formulation of strategies at different managerial levels

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Strategies are formulated at (a) Corporate, (b) Divisional, and (c) Functional level Corporate strategies are formulated by the Top Managers. They include the determination of the business lines, expansion and growth, vertical and horizontal integration, diversification, takeovers and mergers, new investment and divestment areas, R&D 4/13/12 projects, etc

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Corporate-wide Strategies need to be operationalized by Divisional and Functional Strategies regarding product lines, production volumes, quality ranges, prices, product promotion, market penetration (Reliance free calling), purchasing sources, personnel development, etc

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Q.8 Corporate Level Management

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Corporate Level of Management consists of the Chief Executive Officer (CEO), other Senior executives, the Board of Directors, the Corporate Staff These individuals occupy the apex of decision-making within the organization, with the CEO as the principal General Manager
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The role of corporate level managers is to oversee (watch over or keep an eye on) the development of strategies for the whole organization in consultation with other Senior Executives This role includes defining the mission and goals of the organizations, determining what businesses it should be in, allocating resources among the different businesses, formulating and 4/13/12

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Q 9 Role of CEO

Main strategic responsibilities of CEO are: Setting overall strategic objectives Allocating resources among the different business areas Deciding whether the firm should divest itself of any of its businesses Determining whether the firm should acquire any new businesses Ensuring Shareholder Welfare
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Q.10 Business Level Managers

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The Principal General Manager at the Business Level, or the BusinessLevel Manager, is the Head of the concerned division The strategic role of these Managers is to translate the general statements of direction (strategic decisions/policies) and intent that come from the corporate level, into 4/13/12 concrete strategies for individual

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The business-level managers make sure that they are pursuing robust (forceful, powerful or strong) strategies that will contribute toward the maximization of long-run profitability and to hold them into account for their performance

NOTE: Corporate Level Managers are concerned with all the businesses, while Business Level Managers are 4/13/12 specific to strategies of particular

Q.11 Activities performed by Functional Level Managers

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Functional-Level Managers are responsible for the specific business functions/tasks/operations (e.g. Human Resources, Purchasing, Product Development, Customer Service, etc) that constitute a Company or one of its divisions They have a major strategic role, that is, to develop functional strategies in their area that help fulfill the strategic objectives set by Business-Level and 4/13/12

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3. Functional Managers provide most of the information that makes it possible for Business-Level and Corporate-Level General Managers to, formulate realistic and attainable strategies because they are closer to the customer

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Q.12 Differences between Functional and General Managers

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Functional Managers themselves may generate important ideas that subsequently may become major strategies for the Company, whereas it is not the case with the General Managers Functional Managers sphere of responsibility is generally confined to one organizational activity, whereas General Managers oversee the 4/13/12 operation of a whole Company of

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Feature
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Q.13 Compare the features of

Type

2. Measurabilit y 3. Frequency

4. Relation to present activities 5. Risk 6. Profit

Corporate Business Level Functional Level Level Conceptual Mixed Operational Value Semi Usually Judgments quantifiable quantifiable dominant Periodic or Periodic or Periodic sporadic Sporadic (irregular) Innovative Mixed Supplementar y (supporting) Moderate 4/13/12 Medium Low Small

Wide Range Large

Q.14 Strategic Management and its objectives

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Meaning: Strategic Management refers to the Managerial process ofForming strategic vision (mental picture or image) Crafting a strategy Implementing and executing the strategy Initiating whatever corrective adjustments in the vision, objectives, strategy, and execution are4/13/12 deemed

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The objectives of Strategic Management are To create Competitive Advantage so that the company can gain advantage over competitors, and dominate the market To guide the company through all challenges in the environment
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Q.15 Strategic Management Process

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Setting vision and mission: Forming a strategic vision of where the organization is headed, so as to provide long-term direction, identify what kind of enterprise the Company is trying to become, and infuse the organization with a sense of purposeful action Setting objectives: Converting the strategic vision into specific performance outcomes or goals, for the Company to achieve 4/13/12

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Crafting a strategy to achieve the desired outcomes Implementing and executing the chosen strategy efficiently and effectively Evaluating performance & initiating corrective adjustments in vision, longterm direction, objectives, strategy, or execution in light of actual experience, changing conditions, new ideas, and 4/13/12 new opportunities

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Q.16 Framework of Strategic Management

Stage 5 Implement ation How to ensure goal achievemen Stage 4 t Decision Making Which is the best way to Stage 1 Situation Analysis Where are we now? Strateg ic Manage ment

Stage 2 Goal Setting Where we want to be? Stage 3 Analysis of Alternatives How can we 4/13/12 our reach

Stages:

Stage 1 Situational Analysis/ Strategic Analysis The initial stage consists of doing a situational analysis of the Firm in the environmental context The Firm must find out its relative market position, corporate image, its strengths and weakness, and also environmental threats and opportunities This is also known as SWOT
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Stage 2 Goal Setting The process of goal setting for the organization should be done, after finalizing its vision and mission. A strategic vision is a roadmap of the Companys future providing specifics (particulars, details) about technology and customer focus, the geographic and product markets to be pursued, the capabilities it plans to develop, and the 4/13/12 kind of Company that management is

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Stage 3 Analysis of Alternatives

At this stage, various alternatives for achieving the goals are considered. The long-term and short-term effects of each alternative is evaluated

Stage 4 Decision Making

Out of all the alternatives generated in the 4/13/12 previous stage,

Stage 5 Implementation

During the implementation and control stage of the appropriate strategy, the organization should continuously perform the situational analysis (stage 1) and repeats the stages 4/13/12 again. Thus,

Q 17. Explain the importance of Strategic Management

The success of the efforts and activities of the enterprise depends heavily on the quality of Strategic Management, i.e. the vision, insight (on the way, just about to come), experience, quality of judgment and the perfection of methods and measures. 4/13/12

Importance of Strategic Management

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Decision-making: Strategic Management provides the framework for all major business decisions as to nature of products and markets, manufacturing facilities, investments and organizational structure Pathfinder: Strategic Planning works as the pathfinder to various business opportunities and also serves as a corporate defense mechanism, helping the Firm avoid costly mistakes in 4/13/12

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Core Competencies: SM provides a Firm with certain core competencies and competitive advantages in its fight for survival and growth Future Driven: SM is not mere forecasting, it is concerned with ensuring a good future of the Firm. It seeks to prepare the Firm to face the future, and even shape the future in its favor Influences and Adaptation: SM plays a vital role in influencing the4/13/12

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Q. 18 Features/major dimensions of Strategic Decision Making

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Top-Management: Problems which require strategic decisions should be considered by Top Management due to (a) coordinated/ harmonized thinking, (b) effect on various sub-systems in the organization, and (c) risk involved Resources: Strategic issues involve commitment of resources, i.e. large amounts of Companys financial investment, to venture into new area of business, employing more people with 4/13/12

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Long-Term Effect: The results of strategic implementation should be analyzed and reviewed on a long term basis, and not immediately. Strategic Decisions have an impact on long-term prosperity Future Oriented: Strategic thinking involves predicting the future environmental conditions and how to orient (adjust, familiarize) for the changed conditions 4/13/12

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Multi-functional Effects: Strategic decision making involves an organization in its totality. They affect different sections of the organization with varying degrees Environment Factors: Strategic decision-making in organization involves orienting (adjusting, familiarizing) its internal environment to the changes of external environment. Hence, external 4/13/12

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Q. 19 and Q. 25 from text

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Q.20 Strategic Vision and its elements.

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Meaning: A Strategic Vision is A roadmap of Companys future, Providing specifics about technology and customer focus, the geographic and product markets to be pursued The capabilities it plans to develop, and the kind of Company that the Management is trying to create
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Elements: The three elements of a Strategic Vision are Coming up with the Mission Statement that defines what business the Company is presently in, and conveys the essence of Who we are and where we are now Using the Mission Statement as basis for deciding on a long-term course making choices about Where we are 4/13/12 going

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Q.21 Purposes of developing a Strategic Vision

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To clearly identify the direction in which the Firm is headed To think creatively and prepare the Company for the future To identify the needs for changing directions, for survival as well as for growth To create enthusiasm in organized members to strive towards the selected course of action 4/13/12

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Q.22 Mission and its features.

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Mission is the answer to the question What is Companys business? Features: It is an expression of the growth ambition of the Firm, i.e. grand design of Firms future It satisfies Firms presence and existence, i.e. what purpose it seeks to achieve as a Business Firm
4/13/12 Corporate Vision is expressed/spelt out

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It is a Firms guiding principle, common purpose which the entire Firm shares and pursues It is the foundation from which the network of corporate aims is built It is proclamation (declaration/announcement) to insiders and outsiders as to what the organization stands for
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organization have a Mission? Or Purposes of having Mission of purpose To ensure unanimity

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(unity, union, harmony of purpose) within the organization

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To provide basis for motivating the use of the organizations resources To develop a basis, or standard, for allocating organizational resources To establish a general tone or organizational climate (behavior)
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To serve as a focal point (central, main, crucial) for those who can be identified with the organizations purpose and direction, and to deter (prevent, chuck off) those who cannot form participating further in the organizations activities To facilitate the translation of objective and goals into work structure involving the assignment of tasks to responsible elements (different 4/13/12

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Q.24 Guidelines in formulation of Mission Statement

A companys Mission Statement focuses on its present business scope Who are we and what we do?
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A Mission Statement has to give the organization its own special identity, business emphasis and path for development A companys business is defined by its goals, the nature of target customer 4/13/12 groups and the technologies

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Profit making is not the only mission of a business Mission Statements should contain elements of long-term strategy as well as desired outcomes Mission Statement should be precise, clear, feasible, distinctive and motivating and should indicate major components of strategy Mission Statements should 4/13/12 as a serve

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Q.26 Distinguish between Mission and Purpose

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Purpose Mission

It refers to a statement which defines the role that an organization plays in the society It strictly refers to the particular

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It refers to anything which is organization strives for It relates to what the organization strives to achieve in order to fulfill its 4/13/12

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Q.27 Objectives
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Objectives are an organizations performance targets, i.e. the results and outcomes it wants to achieve They function as yardstick for tracking an organizations performance and progress Business organizations translate their vision and mission into objectives Objectives are open-ended attributes that denote the future states or 4/13/12 outcomes, whereas Goals are close-

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Q.28 Characteristics of Objectives

Objectives should:
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Define the organizations relationship with its environment Facilitate achievement of mission and purpose Provide the basis for strategic decisionmaking Provide standards for performance appraisal Be understandable
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Relate to time frame Be measurable and controllable Be challenging enough to motivate people into performance Be correlated and inter-related with each other Be set within constraints
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