Strategic management Introduction

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Strategic management Introduction

  1. 1. Definition of Strategy• According to Glueck, "Strategy is theunified, comprehensive and integrated plan that relatesthe strategic advantage of the firm to the challenges ofthe environment and is designed to ensure that basicobjectives of the enterprise are achieved through properimplementation process.“ This definition of strategy laysstress on the following:• Unified comprehensive and integrated plan.• Strategic advantage related to challenges ofenvironment.• Proper implementation ensuring achievement of basicobjectives.
  2. 2. Definition of StrategyAnother definition of strategy is given below which alsorelates strategy to its environment.• " Strategy is organizations pattern of response to itsenvironment over a period of time to achieve its goalsand mission."This definition lays stress on the following:• It is organizations pattern of response to its environment.• The objective is to achieve its goals and mission.
  3. 3. Nature of Strategy• Strategy is a major course of action through which anorganization relates itself to its environment particularlythe external factors to facilitate all actions involved inmeeting the objectives of the organization.• Strategy is the blend of internal and external factors. Tomeet the opportunities and threats provided by theexternal factors, internal factors are matched with• Strategy is the combination of actions aimed to meet aparticular condition, to solve certain problems or toachieve a desirable end. The actions are different fordifferent situations.
  4. 4. Nature of Strategy• Due to its dependence on environmental variables, strategymay involve a contradictory action. An organization may takecontradictory actions either simultaneously or with a gap oftime. For example, a firm is engaged in closing down of someof its business and at the same time expanding some.• Strategy is future oriented. Strategic actions are required fornew situations which have not arisen before in the past.• Strategy requires some systems and norms for its efficientadoption in any organization.• Strategy provides overall framework for guiding enterprisethinking and action
  5. 5. Conclusion• The purpose of strategy is to determine andcommunicate a picture of enterprise througha system of major objectives and policies.• Strategy is concerned with a unified directionand efficient allocation of an organizationsresources.• A well made strategy guides managerial actionand thought. It provides an integratedapproach for the organization and aids inmeeting the challenges posed by environment
  6. 6. Strategy v/s PoliciesStrategy has often been used as a synonym of policy.However, both are different and should not be usedinterchangeably.Policy• Policy is the guideline for decisions and actions on thepart of subordinates.• It is a general statement of understanding made forachievement of objectives.• Policies are statements or a commonly acceptedunderstanding of decision making.• They are thought oriented.• Power is delegated to the subordinates forimplementation of policies.
  7. 7. Strategy v/s Policies• In general terms, policy is concerned with course ofaction chosen for the fulfillment of the set objectives.• It is an overall guide that governs and controlsmanagerial actions.• Policies may be general or specific, organizational orfunctional, written or implied.• They should be clear and consistent.• Policies have to be integrated so that strategy isimplemented successfully and effectively.
  8. 8. Strategy v/s Policies• For example, when the performance of two employees issimilar, the promotion policy may require the promotionof the senior employee and hence lie would be eligiblefor promotion.Strategy• Strategies on the other hand are concerned with thedirection in which human and physical resources aredeployed and applied in order to maximize the chancesof achieving organizational objectives in the face ofenvironmental variable.• Strategies are specific action suggested to achieve theobjectives.
  9. 9. Strategy v/s Policies• Strategies are action oriented and everyone in theorganization is empowered to implement them. Strategycannot be delegated downward because it may requirelast minute decisions.Strategies and polices both are the means towards theend. In other words, both are directed towards meetingorganizational objectives. Strategy is a rule for makingdecision while policy is contingent decision
  10. 10. Strategy v/s Tactics• Strategy determines the major plans to be undertaken whiletactics is the means by which previously determined plans areexecuted.• The basic goal of strategy according to military science is tobreak the will of the army, deprive the enemy of the means tofight, occupy his territory, destroy or obtain control of hisresources or make him surrender. The goal of tactics is toachieve success in a given action and this forms one part of agroup of related military action.• Tactics decisions can be delegated to all the levels of anorganization while strategic decisions cannot be delegated toolow in the organization. The authority is not delegated below thelevels than those which possess the perspective required fortaking decisions effectively.
  11. 11. Strategy v/s Tactics• Strategy is formulated in both a continuous as well as irregularmanner. The decisions are taken on the basis of opportunities, newideas etc. Tactics is determined on a periodic basis by variousorganizations. A fixed time table may be made for following tactics.• Strategy has a long term perspective and occasionally it may have ashort term duration. Thus, the time horizon in terms of strategy isflexible but in case of tactics, it is short run and definite.• The decisions taken as part of strategy formulation andimplementation have a high element of uncertainty and are takenunder the conditions of partial ignorance. In contrast tacticaldecisions are more certain as they work upon the framework set bythe strategy. So the evaluation of strategy is difficult than theevaluation of tactics.
  12. 12. Strategy v/s Tactics• Since an attempt is made in strategy to relate the organizationwith its environment, the requirement of information is morethan that required in tactics. Tactics use information availableinternally in an organization.• The formulation of strategy is affected considerably by thepersonal values of the person involved in the process but thesame is not the case in tactics implementation.• Strategies are the most important factor of organizationbecause they decide the future course of action fororganization as a whole. On the other hand tactics are of lessimportance because they are concerned with specific part ofthe organization.
  13. 13. Approaches to Strategic Decision Making• The Chief Architect approach A single person –the owner or CEO –assumes the role of chief strategistand chief entrepreneur, single handedly shaping mostor all of the major pieces of strategy. This does notmean that one person is the originator of all the ideasunderlying the resulting strategy or does all thebackground data gathering and analysis: there may bemuch brainstorming with subordinates andconsiderable analysis by specific departments.• Michael Dell at Dell Computer, Bill Gates at Microsoftetc are prominent examples of corporate CEOs whoexert a heavy hand in shaping their company’s strategy
  14. 14. Approaches to Strategic Decision Making• The Delegation Approach:Here the manager in charge delegates big chunksof the strategy-making task to trustedsubordinates, down-the-line managers in chargeof key business units and departments, a high-level task force of knowledgeable and talentedpeople from many parts of the company, self-directed work teams with authority over aparticular process or function, or, more rarely, ateam of consultants brought in specifically to helpdevelop new strategic initiatives.
  15. 15. Approaches to Strategic Decision Making• The Collaborative or Team Approach:This is a middle approach when by a managerwith strategy-making responsibility enlists theassistance and advice of key peers andsubordinates in hammering out a consensusstrategy. Strategy teams often include line andstaff managers from different disciplines anddepartmental units, a few handpicked juniorstaffers known for their ability to thinkcreatively, and near-retirement veterans notedfor being keen observers, telling it like it is, andgiving sage advice.
  16. 16. Approaches to Strategic Decision Making• The Corporate Intrapreneur Approach:In the corporate intrapreneur approach, topmanagement encourages individuals and teams todevelop and campaign proposals for new product linesand new business ventures. The idea is to unleash thetalents and energies of promising corporateintrapreneurs, letting them try out business ideas andpursue new strategic initiatives. Executives serve asjudges of which proposals merit support, give companyintrapreneurs the needed organizational and budgetarysupport, and let them run with the ball.
  17. 17. Levels of strategy• Corporate strategy –Which describes a company’s overall directiontowards growth by managing business andproduct lines? These include stability, growthand retrenchment.For example, Coco cola, Inc., has followed thegrowth strategy by acquisition. It has acquiredlocal bottling units to emerge as the marketleader.
  18. 18. Levels of strategy• Business strategy –Usually occurs at business unit or product levelemphasizing the improvement of competitive positionof a firm’s products or services in an industry or marketsegment served by that business unit. Businessstrategy falls in the in the realm of corporate strategy.For example, Apple Computers uses a differentiationcompetitive strategy that emphasizes innovativeproduct with creative design. In contrast, ANZGrindlays merged with Standard Chartered Bank toemerge competitively.
  19. 19. Levels of strategy• Functional strategy –It is the approach taken by a functional area toachieve corporate and business unit objectivesand strategies by maximizing resourceproductivity. It is concerned with developing andnurturing a distinctive competence to provide thefirm with a competitive advantage.For example, Procter and Gamble spends hugeamounts on advertising to create customerdemand.
  20. 20. Levels of strategy• Operating strategy –These are concerned with how thecomponent parts of an organization delivereffectively the corporate, business andfunctional -level strategies in terms ofresources, processes and people. They are atdepartmental level and set periodic short-term targets for accomplishment.
  21. 21. Hierarchy of strategy
  22. 22. Levels at which strategy operatesFunctionalBusinessCorporate CorporateOfficeSBU AFinance MarketingSBU BHRM

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