Introduction To Strategic Management Introduction
STRATEGIC MANAGEMENTIntroduction to Strategic ManagementIntroductionThe word Strategy comes from the Greek word ‘Strategos’ which means a general. Inmilitary science, Strategy literally means the art & science of directing military forces ina war or battle. Today, the term strategy is used in business to describe how anorganization is going to achieve its overall objectives. Most organizations have severalalternatives for achieving its objectives. Strategy is concerned with deciding whichalternative is to be adopted to accomplish the overall objectives of the organization.Strategy is a Comprehensive long term plan. It tries to answer three main questions: What is the present position of the firm?What should be the future position of the firm?What should be done to attain the future position?Definition“Strategy is a plan of action or policy designed to achieve a major overall aim”- OxfordDictionary“Strategy is the determination of the basic long-term goals & objectives of an enterprise& the adoption of the course of action and the allocation of the resources necessary forcarrying out these goals”- Alfred D Chandeler“Strategy includes the determination & evaluation of alternative paths to achieve anorganization’s objectives & mission & eventually, a choice of the alternative that is to beadopted”- Lloyd L. ByarsThe term Strategy can be defined in a Simple words as follows:“Strategy is a broad long-term plan designed to achieve the overall objectives of thefirm”pg. 1RIZVI COLLEGE OF HOTEL MANGEMENT
STRATEGIC MANAGEMENTNature & Characteristics of Strategies1. Objective OrientedStrategies are developed in order to achieve the objectives of the organization.To formulate strategies, one has to know the objectives that are to be pursued &also the policies that must be followed.2. Future OrientedStrategy is a future oriented plan. It is designed to attain future position of theorganization. Through Strategy, management studies the present position of theorganization & ttheir aims at attaining the future position of the organization. Thestrategy provides answer to certain questions relating to Profitability of the present business Continuity of the present business Entry into difference businesses in future Effectiveness of the present policies of the organization. Growth & expansion of the business in the long run.3. Unified, Comprehensive and IntegratedA Strategy is not Just plan. It is a unified, Comprehensive & integrated plan. It isunified as it unifies all the parts of sections of the organization together. It iscomprehensive as it covers all the major aspects or areas of the organization. Itis integrated as all the parts of the plan are compatible with each other and fittogether well.4. Strategy AlternativesOrganizations need to frame alternative strategies. It is not sufficient to frameone or two strategies. Small organizations survive with one or two strategies dueto fewer complexities in their business. However, large organizations need toframe alternative strategies in respect of growth & survival of the organization. Itcan be into fours broad groups: Stable Growth Strategy Growth Strategy Retrenchment Strategy Combination Strategy5. Relates to the Environmentpg. 2RIZVI COLLEGE OF HOTEL MANGEMENT
STRATEGIC MANAGEMENTThe internal and external environment affects the strategy formulation &implementation. The internal environment relates to mission& objectives of thefirm, the labor management relations, and the technology used, the physical,financial & human resources. The external environment relates Competition,Customer, Channel, intermediaries, Government policies & other social,economic & political factors.6. Allocation of ResourcesFor effective implementation of Strategy, there is a need for proper allocation ofthe resources. Proper allocation of resources is required to undertake the variousactivities so as to attain objectives. The resources can be broadly divided into 3groups: Physical resources such as plant & machine Financial resources i.e. Capital Human resources i.e. Man Power7. Universal ApplicabilityStrategy is universally applicable. It is applicable to business organization as wellas to non-business organization. This is because every organization need toframe strategies for their growth & survival. The presence of Strategies keeps theorganizations moving in the right direction.8. Periodic ReviewStrategies need to be reviewed periodically. Such review is required to revise thestrategies depending upon the changing needs of the business. Periodic reviewof strategies is required to gain competitive advantage in the market.9. Applicable to all functional areasStrategies are applicable to all functional areas. The functional areas includeproduction, marketing, finance, human resources management, etc. Strategiesaid in planning, organizing, directing & controlling activities in all functional areas.pg. 3RIZVI COLLEGE OF HOTEL MANGEMENT
STRATEGIC MANAGEMENTStrategic ManagementDefinitionIn the words of Jauch & Glueck “Strategic Management is a stream of decisions &actions which leads to the development of an effective strategy or Strategies to helpachieve corporate objectives The Strategic Management process is the way in whichstrategists determine objectives & make strategic decisions”H.L. Ansoff defines, “strategic Management is a systematic approach to a major &increasingly important responsibility of general management to position & relate the firmto its environment in a way which will assure its continued success & make it securefrom surprises.Process/ Elements of Strategic ManagementThe strategic management process can be broadly divided into three phases. Eachphase consists of a number of steps The three phases are as follows:I.II.III.Strategy formulationStrategy ImplementationStrategy EvaluationI.Strategy formulationStrategy formulation can also be referred as strategic planning. The strategyformulation involves the following steps:1) Framing Mission & ObjectivesThe first step in the formulation of a strategy is to frame mission &objectives of the firm. The mission states the philosophy & the purpose ofthe organization. The objectives are the aims or ends, which theorganization seeks to achieve. The mission & objective must be clearlydefined.pg. 4RIZVI COLLEGE OF HOTEL MANGEMENT
STRATEGIC MANAGEMENT2) Analysis of the Internal EnvironmentAfter setting the objectives or goals, the management needs to make ananalysis of the internal environment. The analysis of the internalenvironment may be done prior to setting of objectives. The internalenvironment refers to manpower, machines, methods, procedures & otherresources of the organization. A proper analysis of the internalenvironment reveals strength & weakness of the organization.3) Analysis of the External Environment.The management must conduct an analysis of the external environment.The external environment refers to government, competition, consumers,technological development & other environment factors that affect theorganization. A proper analysis of the external environment revealsopportunities & threats4) Gap analysisThe management also conducts “gap analysis”. For this purpose, themanagement must compare & analyze its present performance level & thedesired future performance level. Such a comparison would reveal theextent of gap that exists between the present performance & futureexpectations of the organization. If there is a sufficient gap, themanagement must think of suitable measures.5) Framing Alternative StrategiesAfter making a SWOT analysis & the Gap Analysis, the managementneeds to frame alternative strategies to accomplish the objectives of thefirm. There is a need to frame alternative strategies as some strategiesmay be put on hold & other strategies may be implemental.6) Choice of strategiesThe organization cannot implement all the alternative strategies. Thereforethe firm has to be selective. The organization must select the best strategydepending upon the situation. Before selecting the best strategy, theorganization needs to conduct a cost-benefit analysis of the alternativestrategies. The strategy, which gives the maximum benefits at minimumcost, would be selected.pg. 5RIZVI COLLEGE OF HOTEL MANGEMENT
STRATEGIC MANAGEMENTII.Strategy ImplementationThe strategies are formulated for each and every functional department suchas production, marketing, finance & personnel. Once the strategies areformulated, then the next stage is implementation of such strategies.The strategy implementation involves the following elements:1) Formulation of plans, programmes and projectsThere is a need to frame plans, programmes and projects. Strategy byitself does not lead to action. For instance, if expansion strategy isformulated, then various types of expansion plan need to be formulated.An expansion plan would involve expansion in production capacities ofexisting product &/or development and production of new productsPlans result in different kinds of programmes. A programme is a broadplan which includes goals, policies, procedures and oter aspects requiredto implement a plan. For instance, there can be R & D programme for thedevelopment of new product. Programmes lead to the formulation ofproject which is a specific programme for which the time schedule andcost are predetermined.2) Project ImplementationA project passes through various stages before the actual implementation.The various phases include Conception phase, where idea are generally generates for futureprojects Definition phase, where preliminary analysis of the project isundertaken. Planning & Organizing phase, where the planning and organizing ofresources required to undertake the project is decided Implementation Phase, where details of the implementation of theproduct such as awarding contracts, order placement etc. aredecided. Clean-up Phase, which deals with disbanding the projectinfrastructure & banding over the plant to the operating personnel.pg. 6RIZVI COLLEGE OF HOTEL MANGEMENT
STRATEGIC MANAGEMENT3) Procedural ImplementationThe organization needs to be aware of regulatory frame work of theregulatory (government) authorities before implementing strategies. Theregulatory elements to be reviewed are as follows: Regulation in respect of foreign technology Foreign collaboration procedures FEMA regulation Capital issue guidelines Foreign trade regulations etc.4) Resource AllocationIt deals with the arrangement & commitment of physical, financial andhuman resources to various activities so as to achieve the organizationgoals. The strategies need to allocate resources to the various division,department etc. The resources need to be allocated depending upon theimportance of activities in each of the departments or divisions. It includesallocation of manpower, machines, tools, money and other resources foreach and every activity.5) Structural ImplementationOrganization structure is the frame work through which the organizationoperates. There can be various organizational structure for theimplementation of Strategy, it can be Entrepreneurial (line) structure, which is suitable for small ownermanager organization. Functional structure, which is suitable for multi-departmentorganization. Matrix Structure, which is suitable for multi-project/productorganization.6) Functional ImplementationIt deals with the implementation of the functional plans and policies. Foreffective implementation of strategy, strategies have to provide direction tofunctional managers regarding the plans and policies to be adopted. Plansand policies need to be formulated and implemented in all the functionalareas such as production, marketing, finance and personnel.pg. 7RIZVI COLLEGE OF HOTEL MANGEMENT
STRATEGIC MANAGEMENT7) Behavioral ImplementationIt deals with those aspects of strategy implementation that have an impacton the behavior of strategists in implementing the strategies. It deals withissues of leadership, corporate culture, corporate politics and use ofpower, personal value, business ethics and social responsibility.III.Strategy EvaluationEvaluation of strategy is that phase of strategic management process inwhich managers try to assure that the strategic choice is properlyimplemented and is meeting the objectives of the enterprise. It involves thefollowing elements.1) Settling of StandardThe strategists need to establish performance targets standards andtolerance limit for the objectives, strategies and implementation plans. Thestandard can be established in terms of quantity, quality, cost and time.Standards need to be definite and they must be acceptable to employees.2) Measurement of PerformanceThe next step is to measure the actual performance. For this, the managermay ask for performance reports from the employees. The actualperformance can be measured both in quantitative as well as qualitativeways. The actual performance also needs to be measured in terms oftime and the cost factor.3) Comparison of actual performance with standardsThe actual performance needs to be compared with the standards. Theremust be objective comparison of the actual performance against thepredetermined targets or standards. Such comparison is required to findout deviation, if any.4) Finding out deviationsAfter comparison, the managers may notice the deviations. For instance, ifa particular brand’s sales targets was 1000 units for a certain period andthe actual sales are only 9000 units for that period then the deviations areto the extent of 1000 units.pg. 8RIZVI COLLEGE OF HOTEL MANGEMENT
STRATEGIC MANAGEMENT5) Analyzing deviationsThe deviation must be reported to the higher authorities. The higherauthorities analyze the causes of deviations. For this purpose, the higherauthorities may hold necessary discussions with functional staff. Forinstance, the deviation of 1000 units may be due to poor promotion, faultypricing, poor distribution and so on. The exact cause or causes ofdeviation must be identified.6) Taking corrective measuresAfter identifying the causes of deviations, the managers need to takecorrective steps to correct the deviations. At times, there may be a needfor resetting of goals and objectives or re-framing plans, policies andstandards. The corrective steps must be taken at the right time so as toaccomplish the objectives.pg. 9RIZVI COLLEGE OF HOTEL MANGEMENT
STRATEGIC MANAGEMENTLevels of StrategyThe strategy can be broadly classified into three levels: Corporate Strategy Business Strategy Functional (Operational) Strategy Corporate StrategyIt describes a company’s overall direction in terms of its general attitude towardsgrowth and the management of its various business and product lines. Thecorporate strategy typically fits within the three main categories: Stability Strategy Growth Strategy Retrenchment Strategypg. 10 Stability StrategyFirm using stability strategy try to hold on to their current position in theproduct market. The firms concentrate on the same products and in thesame markets. The stability strategy is followed by those firms which aresatisfied with their present position. This strategy is suitable in a simpleand stable environment. A stability strategy is less risky as it offers safebusiness to the organization unless there are major changes in theenvironment. Growth StrategyIt is also called as expansion strategy, when a firm aims at substantialgrowth strategy. A growth strategy is one that an enterprise pursues whenit increases its level of objectives upward in significant increment, muchhigher than an exploration of its past achievement level. The mostfrequest increase indicating a growth strategy is to raise the market shareand/ or sales.In order to achieve higher targets than before, a firm may enter into newmarkets, introduce new product lines, serve additional market segmentsand so on. This strategy involves greater effort and risk as compared tostability strategy.RIZVI COLLEGE OF HOTEL MANGEMENT
STRATEGIC MANAGEMENT Business StrategyIt usually occurs at the strategic business unit level or product level. It emphasizeimprovement of the competitive position of a firm’s products or services in aspecific industry or market segment served by that business unit. There can betwo types of business strategy- Competitive and Cooperative strategy unit or firmmay try to co-operate with another firm in production and marketing of goods orservices by forming alliances like Joint ventures. Functional StrategyIt relates to the functional areas such as production, marketing, finance,personnel, etc. The functional strategy aims at achieving functional objectiveswhich in turn would help to achieve business unit and overall organizationalobjectives.7-S FRAMEWORKIt is essential for an organization to know whether the time is right for change. In thiscontext, the 7-S framework, developed by Mc.Kinsey Company, a well known consultingfirm in the United States, in the late 70’s, can be helpful. It can provide insight into anorganization’s working and help in formulating plans for improvement.The main thrust of change is not connected only with the organizational structure. It hasto be understood by the complex relationship that exists between strategy, structure,system, style, staff, skill and super-ordinated goal. This is called the 7-S of theorganization.The 7-S framework suggests that there are several factors that influence anorganization’s ability to change. The variables involved are interconnected. Hencesignificant changes cannot be achieved without making changes in all the variables.The framework has no starting point or implied hierarchy. It is also difficult to pinpointwhich of the seven S’s could be the driving force of change in an organization at aparticular point of time.pg. 11RIZVI COLLEGE OF HOTEL MANGEMENT
STRATEGIC MANAGEMENT Strategy(As discussed earlier in this chapter) Super Ordinate GoalsThe Super- ordinate goal is alike to the organization’s purpose. It is a set ofvalues and aspirations going beyond the formal statement of corporateobjectives. They can be considered as fundamental ideas around which abusiness is built. Hence they represent the main values of the organizations.They can also provide the broad notions of future direction. StructureDesign of organization structure is a critical task for the top management. Itrefers to the more durable organizational arrangements and relationships andforms the skeleton of the edifice of organizations. It prescribes formalrelationships, communication channels roles to perform and rules & procedures.pg. 12RIZVI COLLEGE OF HOTEL MANGEMENT
STRATEGIC MANAGEMENT Reduction of external uncertainty. Forecasting research and planning helpin achieving this.Reduction in internal uncertainty due to variable, unpredictable, randomhuman behavior. Control mechanisms help in achieving this.Coordination of the activities of the organizations to enable it to have afocus. Departmentalization, specialization, division of labor and delegationof authority help in achieving this. SystemSystem refers to the rules and procedures both formal and informal systemcomplement the organizational structure. They are similar to the terminfrastructure.System include production, planning and control systems, costing, capitalbudgeting, recruitment, training & development, planning & budgeting andperformance evaluation. StyleTop managers in organization use style to bring about change. The style of anorganization becomes evident through the patterns of actions taken by the topmanagement over a period of time. These decisions are also likely to influencethe people in the lower levels of the organizations.Organizational reporting relationships convey the style. In some organizations,quality control may be embedded in the manufacturing process, in some others,it may be a separate function under the Chief Executive Officer. Someorganizations may prefer R & D to be a part of
Introduction to Strategic Management Introduction The word Strategy comes from the Greek word ‘Strategos’ which means a general. In . issues of leadership, corporate culture, corporate politics and use of power, p
PART ONE Introduction to Strategic Management and Business Policy 1 CHAPTER1 Basic Concepts of Strategic Management 2 1.1 The Study of Strategic Management 5 Phases of Strategic Management 5 Benefits of Strategic Management 6 1.2 Globalization and Environmental Sustainability: Challenges to Strategic Management 7 Impact of Globalization 8
The Strategic Management Process 15 Developing a Strategic Vision: Stage 1 of the Strategic Management Process: 17 How a Strategic Vision Differs from a Mission Statement 19 The Importance of Communicating the Strategic Vision 22 The Benefits of an Effective Strategic Vision 22 Setting Objectives: Stage 2 of the Strategic Management Process 22 xxiv
1. 4 Tools for strategic analysis 1. 4a SWOT 1. 4b TOWS 1. 4c Hambrick Model: Strategy Diamond 1. 4d BCG matrix 1. 4e General Electrics Stoplight Matrix 1. 4f Balance score card . 3 Management Strategic Management Strategic Analysis 1. 5 Summary 1.2 Introduction Strategic Management is the process of strategic decision-making that sets the long .
Caterpillar Chair in Strategic Management University of Illinois Associate Editor, Strategic Management Journal “If you use the Capstone simulation this strategic management text must be used. No other strategic management text can drive the concepts of strategic management into a real world based simulation.” Peter Wright, Ph.D.
work/products (Beading, Candles, Carving, Food Products, Soap, Weaving, etc.) ⃝I understand that if my work contains Indigenous visual representation that it is a reflection of the Indigenous culture of my native region. ⃝To the best of my knowledge, my work/products fall within Craft Council standards and expectations with respect to
The field of strategic management within the evolving science of strategic organization. Strategic Organization. Porter, Michael E. (1991). "Towards a dynamic theory of strategy," Strategic Management Journal, Winter Special Issue, pp. 95-118. Session 2: Wednesday January 28 The Dependent Variable in Strategic Management: Measuring Performance
Explain the need for integrating analysis and intuition in strategic management. 1-4. Define and give examples of key terms in strategic management. 1-5. Describe the benefits of engaging in strategic management. 1-6. Explain why some firms do not engage in strategic planning. 1-7. Describe the pitfalls in doing strategic planning. 1-8.
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