An Introduction to Strategic Management

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Sales Management is the process of current exchanges of goods - and thus sales management forms an integral part of Marketing Management. A significantly broader meaning is assigned to sales management as it also encompasses managing the sales functions and the sales force.

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An Introduction to Strategic Management

  1. 1. STRATEGIC MANAGEMENT
  2. 2. Chapter 1 Page 1 STRUGGLE FOR EXISTENCE AND GROWTH• RULES OF COMPETITION CHANGE• INDUSTRY BOUNDRIES ARE REDRAWN• NEW INDUSTRIES AND PRODUCTS ARE CREATED• ESTABLISHED INDUSTRIES ARE REINVENTED
  3. 3. Chapter 1 Page 1• COMPANIES MAY CHANGE THEIR VISION OBJECTIVES STRUCTURE PORTFOLIO OF BUSINESS MARKETS AND COMPETITIVE STRATEGIES
  4. 4. Chapter 1 Page 3• STRATEGIC MANAGEMENT IS A BROADER TERM THAN CORPORATE STRATEGY• STRATEGIC MANAGEMENT CONSISTS OF CORPORATE STRATEGY AND BUSINESS STRATEGY
  5. 5. Chapter 1 Page 3STRATEGIC MANAGEMENT INVOLVESDECISION - MAKING AND THE ACTIVITIES WHICH • HAVE WIDER RAMIFICATIONS • HAVE A LONG TIME PERSPECTIVE • USE CRITICAL RESOURCES TOWARDS PERCEIVED OPPORTUNITIES AND THREATSNAUMES PAINE AND
  6. 6. Chapter 1 Page 4 ESSENCE OF STRATEGYDISTINCTIVELY DIFFERENT FROM THE COMPETITORS PORTER, HAMEL, PRAHLAD
  7. 7. Chapter 1 Page 5 A COMPANY CAN CONTROL ITS OWN DESTINYIF IT UNDERSTANDS HOW TO CONTROL THE DESTINY OF ITS INDUSTRY HAMEL, PRAHLAD
  8. 8. Chapter 1 Page 5TO CREATE THE FUTURE A COMPANY MUST – CHANGE IN SOME FUNDAMENTAL WAY THE RULES OF ENGAGEMENT IN A LONG STANDING INDUSTRY – REDRAW THE BOUNDARIES BETWEEN INDUSTRIES – CREATE ENTIRELY NEW INDUSTRIES
  9. 9. Chapter 1 Page 7STRATEGIC PLANNING – TOP MANAGEMENT DETERMINES ORGANISATIONAL OBJECTIVES,STRATEGIES NEEDED TO REACH THESE OBJECTIVES – TOP LEVEL ACTIONS NECESSARY TO IMPLEMENT THE STRATEGY PROPERLYTACTICAL PLANNING – SHORT RANGE PLANNING THAT IS ORIENTED TOWARDS OPERATIONS AND IS CONCERNED WITH SPECIFIC AND SHORT RANGE DETAILS
  10. 10. Chapter 1 Page 8STRATEGIC BUSINESS UNIT ( SBU )( OPERATING DIVISION OF A FIRM )• SERVES A DISTINCT PRODUCT• SERVES A DISTINCT MARKET SEGMENT• SERVES A DISTINCT GEOGRAPHICAL AREAANDFORMULATES OWN STRATEGIC DECISIONS WITHINCORPORATE GUIDELINES
  11. 11. Chapter 1 Page 9CLASSES OF DECISIONS1. OPERATING DECISIONS TO MAXIMISE THE EFFICIENCY OF THE FIRM’S RESOURCES CONVERSION PROCESS2. STRATEGIC DECISIONS PERTAIN TO FUNDAMENTAL QUESTIONS IN WHAT BUSINESS THE FIRM SHOULD BE IN AND HOW IT SHOULD BE IN ?3. ADMINISTRATIVE DECISIONS ORGANISE AND MOBILISE FOR THE IMPLEMENTATION OF THE CORPORATE STRATEGY
  12. 12. Chapter 1 Page 11STRATEGIC DECISIONSKEY CHARACTERISTICS1. DECISIONS CENTRALISED2. PARTIAL IGNORANCE3. DECISIONS NON REPETITIVE4. DECISIONS NOT SELF REGENERATIVE
  13. 13. Chapter 1 Page 11OPERATING DECISIONSKEY CHARACTERISTICS• DECENTRALISED DECISIONS• RISK AND UNCERTAINTY• REPETITIVE DECISIONS• LARGE VOLUME DECISIONS• DECISIONS SELF REGENERATIVE
  14. 14. Chapter 1 Page 11ADMINISTRATIVEKEY CHARACTERISTICS• CONFLICT BETWEEN STRATEGY AND OPERATIONS• CONFLICT BETWEEN INDIVIDUAL AND INSTITUTIONAL OBJECTIVES• STRONG COUPLING BETWEEN ECONOMIC AND SOCIAL VARIABLES• DECISIONS TRIGGERED BY STRATEGIC AND / OR OPERATING PROBLEMS
  15. 15. Chapter 1 Page 11STRATEGIC DECISIONSKEY DECISIONS• OBJECTIVES AND GOALS• DIVERSIFICATION STRATEGY• EXPANSION STRATEGY• ADMINISTRATIVE STRATEGY• FINANCE STRATEGY• GROWTH METHOD• TIMING OF GROWTH
  16. 16. Chapter 1 Page 11ADMINISTRATIVE DECISIONSKEY DECISIONS• ORGANISATION • STRUCTURE OF INFORMATION AUTHORITY AND RESPONSIBILITY FLOWS • STRUCTURE OF RESOURCES CONVERSION, WORK FLOWS, DISTRIBUTION SYSTEMS , FACILITIES, LOCATION • RESOURCE ACQUISITION AND DEVELOPMENT FINANCING, FACILITIES AND EQUIPMENT, PERSONNEL, RAW MATERIALS
  17. 17. Chapter 1 Page 11OPERATING DECISIONSKEY DECISIONS• OPERATING OBJECTIVES AND GOALS• PRICING AND OUTPUT LEVELS• OPERATING LEVELS – PRODUCTION SCHEDULES – INVENTORY LEVELS – WAREHOUSING ETC.• MARKETING POLICIES AND STRATEGIES• R & D POLICIES AND STRATEGY CONTROL
  18. 18. Chapter 1 Page 12LEVELS OF STRATEGYHAVING SEVERAL SBU’s1. CORPORATE STRATEGY DECIDES BUSINESS PORTFOLIO2. SBU STRATEGY / BUSINESS STRATEGY / COMPETITIVE STRATEGY DECISION PERTAINING TO PRODUCT MIX3. FUNCTIONAL STRATEGY PRODUCTION, FINANCE, PERSONNEL, MARKETING, ETC
  19. 19. Chapter 1 Page 12LEVELS OF STRATEGYENTERPRISES WHICH DO NOT HAVE SBU’s1. CORPORATE STRATEGY2. FUNCTIONAL STRATEGY
  20. 20. Chapter 1 Page 15TESTS APPLIED TO IDENTIFY CORE COMPETENCIESA CORE COMPETENCE SHOULD1. PROVIDE POTENTIAL ACCESS TO A WIDE VARIETY OF MARKETS2. MAKE SIGNIFICANT CONTRIBUTION TO THE PERCEIVED CUSTOMER BENEFIT OF THE END PRODUCT3. BE DIFFICULT FOR COMPETITORS TO IMITATE
  21. 21. Chapter 1 Page 16CHARACTERISTICS OF GLOBAL LEADERS IN THEIRENVISIONING OF THE FUTUREo STRATEGY INTENTo AN OBSESSION WITH WINNINGo UNFETTERED BY THEIR RESOURCE CONSTRAINTS
  22. 22. Chapter 1 Page 17STRATEGIC INTENT IS MORE THAN SIMPLY UNFETTERED AMBITIONACTIVE MANAGEMENT : FOCUSES THE ORGANISATION’S ATTENTION ON THE ESSENCE OF WINNING MOTIVATES PEOPLE BY COMMUNICATING THE VALUE OF THE TARGET LEAVES ROOM FOR INDIVIDUAL AND TEAM CONTRIBUTION SUSTAINS ENTHUSIASM BY PROVIDING NEW OPERATIONAL DEFINITIONS AS CIRCUMSTANCES CHANGE USES INTENT CONSISTENTLY TO GUIDE RESOURCES ALLOCATIONS
  23. 23. Chapter 1 Page 18 JAPENESE COMPANIES WHICH HAD FAR LIMITED RESOURCES THAN THEEASTERN COMPANIES HAVE BECOME GLOBAL LEADERS BECAUSE OF THEIR STRATEGIC INTENT THAT STRETCHED THEIR ORGANISATION
  24. 24. Chapter 1 Page 18APPROACHES TO STRATEGY MAKINGON THE BASIS OF THE STRATEGIC MANAGEMENTPROCESS AND NATURE OF RELATIONSHIPBETWEEN THE CORE COMPONENTS OF THESTRATEGIC MANAGEMENT 1. PRESCRIPTIVE APPROACH 2. EMERGENT APPROACH
  25. 25. Chapter 1 Page 19PRESCRIPTIVE AND EMERGENT APPROACHESBOTH THE APPROACHES RECOGNISE THE CORE COMPONENTS1. STRATEGIC ANALYSIS ( CONSISTING OF SWOT ANALYSIS AND DETERMINATION OF MISSION AND OBJECTIVES )2. STRATEGY DEVELOPMENT ( EVALUATION OF STRATEGIC ALTERNATIVES AND CHOICE OF STRATEGY )3. IMPLEMENTATION
  26. 26. Chapter 1 Page 22APPROACHES TO STRATEGY MAKINGMINTZBERG HAS IDENTIFIED 3 MODES OR APPROACHES1. ENTREPRENEURIAL MODE2. ADAPTIVE MODE3. PLANNING MODE
  27. 27. Chapter 1 Page 22IN LARGE ORGANIZATIONS• BOARD OF DIRECTORS• GENERAL MANAGERS• CORPORATE PLANNING STAFF• EXTERNAL CONSULTANTSMAY PLAY A ROLE IN STRATEGIC PLANNNING
  28. 28. Chapter 1 Page 23 BOARD OF DIRECTORS THE ULTIMATE LEGAL AUTHORITY IN THE BUSINESSTHEY ARE RESPONSIBLE TO THE STOCKHOLDERS MANAGERS TAKE PRUDENT ACTIONS REGARDING CORPORATE OBJECTIVES APPROVING MAJOR FINANCIAL AND OPERATIONAL DECISIONS REPRESENTING THE COMPANY WITH OTHER ORGANISATIONS MAINTAINING , REVISING AND ENFORCING THE CORPORATE CHARTER AND BYLAWS
  29. 29. Chapter 1 Page 23 THE BOARD AS A WHOLE RESPONSIBLE TOINITIATE DISCUSSION , AGREE AND UNDERWRITE THECORPORATION’S STRATEGIC PLANSENSURE ITS IMPLEMENTATION THROUGH AGREEDOPERATIONAL PLANSINDIVIDUAL EXECUTIVE DIRECTORS ARE RESPONSIBLEAND ACCOUNTABLE TO MEET THE TARGETS FOR SPECIFICBUSINESSES UNDER THEIR CONTROL Dr. A.S GANGULY CHAIRMAN ICI INDIA LTD.
  30. 30. Chapter 1 Page 24ON ANY COMPANY’S BOARD THERE SHOULD BE SOME INDEPENDENT , PROFESSIONALLY QUALIFIED NON – EXECUTIVE DIRECTORS REGULAR RETIREMENT POLICY FOR NON - EXECUTIVE DIRECTORS( THIS IS AN ESSENTIAL PART OF CORPORATE GOVERNANCE )
  31. 31. Chapter 1 Page 25 STRATEGIC MANAGEMENT IS A GENERAL MANAGEMENT FUNCTIONGENERAL MANAGERS ARE THE TOP EXECUTIVES OFTHE ENTERPRISE & SBUS • RESPONSIBLE FOR THE SURVIVAL AND SUCCESS OF THE ENTERPRISE
  32. 32. Chapter 1 Page 25GENERAL MANAGER• ENTREPRENEUR ……………. ………. ( SETS GOALS )• STRATEGIST ………………………….. ( PLANS )• ORGANISATION BUILDER ………….. ( ORGANISES )• LEADER ……………………………… ( DIRECTS )• CHIEF IMPLEMENTER ………………. ( ONTROLS ) THE TASK IS TO LEAD THE FIRM OR SBU JAUCH AND GULECK
  33. 33. Chapter 1 Page 25“THERE CAN AND WILL BE NO EFFECTIVE FORMALSTRATEGIC PLANNING IN AN ORGANISATION INWHICH THE CHIEF EXECUTIVE DOES NOT GIVE ITFIRM SUPPORT AND MAKE SURE THAT OTHERS INTHE ORGANISATION UNDERSTAND HIS DEPTH OFCOMMITMENT” GEORGE STEINER
  34. 34. Chapter 1 Page 26STRATEGIC MANAGEMENT PROCESS HAS THREEPHASES INVOLVING A NUMBER OF SYSTEMATICSTEPS 1. STRATEGY FORMULATION 2. IMPLEMENTATION 3. EVALUATION AND CONTROL
  35. 35. Chapter 1 Page 27FORMULATION CONSIDERATION SWOTOF MISSION & OF STRATEGIC ANALYSISOBJECTIVES ALTERNATIVESEVALUATION CHOICE OF IMPLEMENTATIONAND CONTROL STRATEGY STRATEGIC MANAGEMENT PROCESS
  36. 36. Chapter 1 Page 27“THE ART AND SCIENCE OF FORMULATING ,IMPLEMENTING AND EVALUATING CROSS -FUNCTIONAL DECISIONS THAT ENABLE ANORGANISATION TO ACHIEVE ITS OBJECTIVES”. STRATEGIC MANAGEMENT
  37. 37. Chapter 1 Page 28TERM “STRATEGIC” ( IN STRATEGIC MANAGEMENT ) MEANS “PERTAINING TO THE RELATION BETWEEN THE FIRM AND ITS ENVIRONMENT”
  38. 38. Chapter 1 Page 29ASSESSING THE SUITABILITY OF THE STRATEGY1. DOES IT -- CONFORM WITH CORPORATE – PHILOSOPHY ?2. DOES IT -- ACCOMPLISH THE MISSION AND OBJECTIVES ?3. DOES IT -- EXPLOIT ORGANIZATIONAL STRENGTHS AND ENVIRONMENTAL OPPORTUNITIES ?4. DOES IT -- COMBAT ENVIRONMETAL THREATS AND OVERCOME INTERNAL WEAKNESSES ?5. IS THE STRATEGY CONSISTENT ?
  39. 39. Chapter 1 Page 31STRATEGIC MANAGEMENT FACILITATES• BETTER DELEGATION• COORDINATION• MONITORING• PERFORMANCE EVALUATION AND CONTROL
  40. 40. Chapter 1 Page 32CRITICISM AGAINST STRATEGIC MANAGEMENT1. SOMETIME MAKES THE ORGANIZATOIN OVER AMBITIOUS AND THE RESULTANT FAILURE --- CAUSE FRUSTRATION2. MAKES THE FUTURE VISION TUNNELED THAT SEVERAL OPPORTUNITIES MAY BE OVERLOOKED3. IT MAKES THE WHOLE APPROACH VERY RIGID
  41. 41. Chapter 1 Page 33EFFECTIVE IMPLEMENTATION OF STRATEGYDEMANDS1. RESOURCE ALLOCATION2. LEADERSHIP IMPLEMENTATION3. RIGHT STRUCTURE4. EFFECTIVE EVALUATION AND CONTROL
  42. 42. Chapter 1 Page 34ACCORDING TO PETER DRUCKER STRATEGICPLANNING• IT IS NEITHER A BOX OF TRICKS NOR A BUNDLE OF TECHNIQUES• IT IS NEITHER FORECASTING NOR MASTERMINDING THE FUTURE• IT DOES NOT DEAL WITH THE FUTURE DECISIONS• IT NEITHER ELIMINATES RISK NOR MAKES AN ATTEMPT TO MINIMISE RISK
  43. 43. Chapter 1 Page 34PRINCIPLES OF GOOD STRATEGY• A GOOD STRATEGY IS CONCERNED WITH THE STRUCTURAL EVOLUTION OF THE INDUSTRY, AND FIRMS OWN UNIQUE POSITION WITHIN THAT INDUSTRY.• A GOOD STRATEGY MAKES THE COMPANY DIFFERENT INVOLVING THE DELIVERY OF A PARTICULAR MIX OF VALUE.• ACOMPANY HAS GOT TO BE DIFFERENT IN WAYS THAT INVOLVE TRADE-OFFS.AND MUST BE INCONSISTENT WITH DELIVERING OTHER TYPES OF VALUES.
  44. 44. Chapter 1 Page 35ENVIRONMENTAL CHANGES THAT HAVE INCREASEDTHE RELEVANCE OF STRATEGIC MANAGEMENT ABOLITION OF PUBLIC SECTOR MONOPOLY DELICENSING HAS REMOVED BARRIER ON ENTRY AND GROWTH. SCRAPPING OF MOST OF THE MRTPA RESTRICTIONS ON ENTRY, GROWTH AND M & A s LIBERALISATION IN OTHER COUNTRIES, THE EXPANDING FOREIGN MARKETS GRANT OF MORE AUTONOMY TO THE PUBLIC SECTOR ENTERPRISE
  45. 45. Chapter 1 Page 36LIBERALIZATION ON INDUSTRIAL POLICY IMPORTS MRTPAPOSING SURGING THREATS TO MANY EXISTING BUSINESSES
  46. 46. Chapter 1 Page 37THE ESSENTIAL CHARACTERISTICS OF TQM ARE A CUSTOMER – DRIVEN DEFINITION OF QUALITY STRONG QUALITY LEADERSHIP EMPHASIS ON CONTINUOUS IMPROVEMENT RELIANCE ON FACTS, DATA , AND ANALYSIS ENCOURAGEMENT OF EMPLOYEES PARTICIPATION
  47. 47. Chapter 1 Page 38SUCCESSFUL IMPLEMENTATION OF TQM LEADS TO CUSTOMERS LOYALTY ORGANIZATION RESPONDING TO PROBLEMS , NEEDS AND OPPORTUNITIES ENCOURAGES TEAM WORK AND MAKES WORK MORE SATISFYING DEVELOPMENT OF GENERAL ETHIC OF CONTINUOUS IMPROVEMENT
  48. 48. Chapter 1 Page 39TQM FORCES TO INCLUDE INTO THE PROCESS OFFORMULATING STRATEGY CUSTOMER’S PERSPECTIVE COMPETITOR’S PERSPECTIVE SUPPLIER’S PERSPECTIVE
  49. 49. Chapter 1 Page 39CARDINAL PRINCIPLE OF TQM CUSTOMER NEEDS CUSTOMER PREFERENCES
  50. 50. Chapter 1 Page 40 A TOTAL QUALITY MANAGEMENT INITIATIVE AFFECTS EVERY STEP IN THE STRATEGIC MANAGEMENT PROCESS IT FOCUSSES1 FIRM’S ENVIRONMENTAL ANALYSIS2. ORGANISATION’S VISION AND MISSION3. KEEPING OBJECTIVES TIED SECURELY TO CUSTOMER’S NEEDS

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