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Strategic management

What is strategic management and what are the factors responsible .How does environment play role in strategic management

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Strategic management

  1. 1. STRATEGIC MANAGEMENT <br />What is Strategic Management?<br />Strategic management is the set of managerial decision and action that determines the long-run performance of a corporation. It includes environmental scanning (both external and internal), strategy formulation (strategic or long range planning), strategy implementation, and evaluation and control. The study of strategic management therefore emphasizes the monitoring and evaluating of external opportunities and threats in lights of a corporation’s strengths and weaknesses. <br />
  2. 2. Strategic management is defined as dynamic process of formulation implication and control of strategies to realize the organization strategic intent <br />Dynamic- Means changing process which is not static or mechanistic process .Strategic management is continual evolving iterative process which is repeated over the time as situation demands <br />Importance of Strategic Management:- <br />1. To the shape the Future of business2. Effective strategic idea3. Mangers and employer are innovative and creative4. Its decentralized the Management5. Its helps to increase the productivity6. To Makes discipline7. To Make control<br />
  3. 3. 4 Phases Of Strategic Management <br />S<br />T<br />R<br />A<br />T<br />E<br />G<br />I<br />C CONTROL<br />ESTABLISHMENT OF STRATEGIC INTENT <br />FORMULATION OF STRATEGY <br />IMPLIMENTATION OF STRATEGY <br />STRATEGIC EVALUATION <br />
  4. 4. I st Phase -- Establishment of strategic intent <br />Strategic intent is the hierarchy of objectives that the organisation set for itself it involves _<br /><ul><li>Vision
  5. 5. Mission
  6. 6. Objective (business objective) </li></ul>II nd Phase—Formulation of strategy <br />That means devising the strategy or few strategies .This phase is also called as strategic planning . This is also a analytical phase where plans are been analyzed .Strategy formulation is the process of deciding best course of action for accomplishing organizational objectives and hence achieving organizational purpose. After conducting environment scanning, managers formulate corporate, business and functional strategies.<br />IIIrd Phase—Implementation of strategy <br />Implementation means putting the formulated strategy in to action . Strategy implementation implies making the strategy work as intended or putting the organization’s chosen strategy into action. Strategy implementation includes designing the organization’s structure, distributing resources, developing decision making process, and managing human resources.<br />IV th Phase – Strategic evaluation <br />Strategy evaluation is the final step of strategy management process. The key strategy evaluation activities are: appraising internal and external factors that are the root of present strategies, measuring performance, and taking remedial / corrective actions. Evaluation makes sure that the organizational strategy as well as it’s implementation meets the organizational objectives.<br />
  7. 7. MODEL OF STRATEGIC MANAGEMENT PROCESS <br />Strategy Implementation<br /><ul><li>Project
  8. 8. Procedure
  9. 9. Resource allocation
  10. 10. Structural
  11. 11. Behavioral
  12. 12. Functional
  13. 13. Operational </li></ul>Strategy formulation <br /><ul><li>Environmental Appraisal
  14. 14. Environmental scanning
  15. 15. ETOP Analysis
  16. 16. PEST Analysis
  17. 17. Organizational Appraisal
  18. 18. SWOT Analysis
  19. 19. Corporate Level Strategy
  20. 20. Business Level Strategy
  21. 21. Strategic Plans</li></ul>Strategic<br />Evaluation <br />Strategic intent <br /><ul><li>Vision
  22. 22. Mission
  23. 23. Business</li></ul>Objective <br />STRATEGIC CONTROL <br />
  24. 24. STRATEGIC INTENT <br />Vision + Intent<br />Where we want <br />to get to<br />How we intend <br />to get there<br />
  25. 25. Vision- According to Kotter (1990) vision is a description of some thing (organizational corporate culture, a business , technology, An activity) in the future.El Namaki (1992) - Vision is a mental perception of a kind of environment an individual or an organization aspire to create within a broad time horizons. Miller and Dess (1996)-Category of intensions that are broad ,all inclusive and forward . <br />Mission-Essential purpose of organization ‘s existence .It should be feasible,precise,clear ,motivating ,distinctive .It should also indicate major component of strategy .It should also indicate how objectives can be drawn on these lines .<br />Business Objective-Objectives are the plans that state specifically how the goals shall be achieved .Objectives define the organizational relationship with environment. It should be concrete and specific ,should related to time frame, Objectives are measurable and controllable ,challenging <br />
  26. 26. The Pyramid of Purpose<br />The language of Strategic Intent<br />Strategic Intent<br />Vision<br />Mission<br />Aim<br />Priorities <br />Objectives<br />Decision Criteria<br />Strategic Initiatives<br />Strategies<br />
  27. 27. What is balanced scorecard and how does it work?<br />The balanced scorecard (BSC) is a strategic performance management tool .Balanced scorecard views organization from four perspectives:<br />Customer perspective,<br />Internal-business processes, <br />Learning and growth, <br />Financials<br />
  28. 28. ENVIRONMENT<br />Environment may be defined as a set of conditions – Social, Legal, Economical, Political or Institutional that are uncontrollable in nature and affects the functioning of organization. Business Environment has two components:<br />1. Internal Environment2. External Environment<br />Internal Environment: It includes 5 Ms i.e. man, material, money, machinery and management, usually within the control of business. Business can make changes in these factors according to the change in the functioning of enterprise.<br />External Environment: Those factors which are beyond the control of business enterprise are included in external environment. <br />
  30. 30. FACTORS OF EXTERNAL ENVIRONMENT <br />These factors are: Government and Legal factors, Geo-Physical Factors, Political Factors, Socio-Cultural Factors, Demo-Graphical factors etc. <br />It is of two Types:1. Micro/Operating Environment2. Macro/General Environment<br />Micro/Operating Environment: The environment which is close to business and affects its capacity to work is known as Micro or Operating Environment. It consists of Suppliers, Customers, Market Intermediaries, Competitors and Public.<br />(1) Suppliers: – They are the persons who supply raw material and required components to the company. They must be reliable and business must have multiple suppliers i.e. they should not depend upon only one supplier.<br />(2) Customers: - Customers are regarded as the king of the market. Success of every business depends upon the level of their customer’s satisfaction. Types of Customers:(i) Wholesalers(ii) Retailers(iii) Industries(iv) Government and Other Institution<br />
  31. 31. v) Foreigners<br />(3) Market Intermediaries: - They work as a link between business and final consumers. Types:-(i) Middleman(ii) Marketing Agencies(iii) Financial Intermediaries(iv) Physical Intermediaries<br />(4) Competitors: - Every move of the competitors affects the business. Business has to adjust itself according to the strategies of the Competitors.<br />(5) Public: - Any group who has actual interest in business enterprise is termed as public e.g. media and local public. They may be the users or non-users of the product<br />.<br />
  32. 32. Macro Environment: – It includes factors that create opportunities and threats to business units. Following are the elements of Macro Environment:<br />(1) Economic Environment: - It is very complex and dynamic in nature that keeps on changing with the change in policies or political situations. It has 6 elements:(i) Economic stages of the country (ii)Economic policy(iii) Economic structure (iv)Economic planning (v)Economic System (vi) Other Economic Factors: Infrastructural Facilities, Banking, Insurance companies, money markets, capital markets etc. (2) Political Environment: - It affects different business units extensively. Components:(a) Political Belief of Government(b) Political Strength of the Country(c) Relation with other countries(d) Defense and Military Policies(e) Centre State Relationship in the Country(f) Thinking Opposition Parties towards Business Unit<br />.<br />
  33. 33. (3) Socio-Cultural Environment: - Influence exercised by social and cultural factors, not within the control of business, is known as Socio-Cultural Environment. These factors include: demographic ,attitude of people to work, family system, caste system, religion, education, marriage ,education level <br />(4) Technological Environment: - A systematic application of scientific knowledge to practical task is known as technology. Everyday there has been vast changes in products, services, lifestyles and living conditions, these changes must be analyzed by every business unit and should adapt these changes.<br />(5) Market Environment: - market environment consists of the factors related to the groups and other organization that compete with and have an impact on organization's market and business .market involves following <br />Customer or client –need ,preference ,perception, attitude values bargaining power buying behavior ,customer satisfaction .<br />Product-Demand, image,features ,utility,function design , lifecycle,price,promotion ,distribution,differentiation,substitue product availability<br />Market Intermediary –level and quality of customer service,middlemen,distribution channel, logistics ,costs, delivery system <br />Competitor –Entry or exit of major competitor,Types ,Nature of competition,<br />
  34. 34. (6) International Environment: - It is particularly important for industries directly depending on import or exports. The factors that affect the business are: Globalization-its process,content,direction,<br />Global Economic Force<br />Global trade and commerce –its process and trends <br />Global financial System –source of financing and accounting <br />Geopolitical situation –strategic interest of nation,allaince , <br /> Liberalization, foreign business policies, cultural exchange Global market competition ,global demographics .Global legal system <br />(7)Regulatory environment –It consists of factors related to planning and regulation of economic activities by the government that have impact on business of an organization .Some of the important factors are as follows –<br /><ul><li>Constitutional framework
  35. 35. Policies related to licensing ,monopolies ,financing to industries foreign investment
  36. 36. Policies on distribution and pricing control
  37. 37. Policies on export -import </li></ul>(8) Supplier Environment - It consists of the factors related to the cost ,reliability, and availability of the factors of production or services .supply of raw material ,energy ,human resource used in production is very important factor. Bargaining powers of suppliers .<br />
  38. 38. Characteristics of business environment :-<br />1. Business environment is complex in nature.<br />2. Business environment is dynamic ie constantly changing process.<br />3. Business environment is multifaceted business units.<br />4. It has both long term and short term impact.<br />5. Unlimited influence of external environment factors.<br />6. It is very uncertain.<br />7. Inter-related components.<br />8. It includes both internal and external environment<br />
  39. 39. ENVIRONMENTAL SCANNING <br />Definition<br /> Environmental scanning can be defined as the process by which organization s monitor their relevant environment to identify opportunities and threats affecting their business for the purpose of taking strategic decisions. <br />Factors considered for environmental scanning -<br />Events -Important specific occurrence takes place in different environment sector <br />Trends –Course of action in response to event takes place <br /> Issues -Current concern that arise in response to event and trends <br /> Expectations -These are the demands made by interested groups in the light for their concern for issues <br />Example-Gas leakage in Bhopal in Dec 1984 was an EVENT .<br /> followed by the general TREND started on the part of regulatory . authorities to be conscious about safety measures .<br /> ISSUE is rising of the environmental concern .<br /> Now the EXPECTATION of general public from govt is of legislating . changes in the rules and regulation ,pertaining to safety measures . . Strict enforcement of regulation <br />
  40. 40. Approaches of environmental scanning <br />There are three approaches of scanning the business environment according to Kubr:<br />Systematic approach - Information related to markets and customers, changes in legislation, regulations having a direct impact on the organization's activities, government policy etc.are collected continuously by taking relevant factors into account<br />Ad-hoc approach - Conducting special surveys and studies to deal with environmental issues from time to time<br />Processed-form approach - Using information in a processed form available from different sources inside and outside the organization[<br />
  41. 41. Sources of information for environmental scanning <br />Documentary <br />Mass media<br />Internal sources <br />External agencies <br />Formal studies <br />Spying and surveillance<br />Govt publications<br />Institutional publications<br />
  42. 42. Methods of environmental scanning<br /><ul><li>Environmental factor </li></ul>PESTEL analysis<br />Laws on<br />Waste disposal<br />Energy consumption<br />Pollution monitoring etc.<br /> Legal factors<br />Unemployment law<br />Health and safety<br />Product safety<br />Advertising regulations<br />Product labeling etc.<br /> Ecology<br />affects customer's buying habits.<br />affect the firm production process.<br /> Socio-cultural<br />age distribution.<br />education levels.<br />income level.<br />consumerism.<br />diet & nutrition.<br /> Political factors<br />Taxation Policy<br />Trade regulations<br />Governmental stability<br />Unemployment Policy etc.<br />economical factors<br />Inflation rate<br />Growth in spending power<br />Rate of people in a pensionable age etc.<br />Technological factors<br />Technological changes<br />New or improved distribution channels<br />Improved communication and knowledge transfer etc.<br />
  43. 43. ETOP ANALYSIS -Environmental Treat and opportunity profile <br />ETOP(Environmental Threat and Opportunity Profile) is a technique to structure environmental issues. ETOP involves:<br />Dividing the environment into different sectors. Each sectors can be subdivided into sub sectors.<br />Analyzing the impact of each sector and subsector on the organization.<br />Describe the impact in the form of a statement.<br />Advantage of ETOP<br />It provides a clear of which sector and sub sectors have favourable impact on the organization. It helps interpret the result of environment analysis.<br />The organization can assess its competitive position.<br />Appropriate strategies can be formulated to take advantage of opportunities and counter the threat.<br />SWOT analysis (Strategic weakness, opportunities and threats.)<br />
  45. 45.
  46. 46. PEST analysis<br />