Strategies, policies, and planning premises - MANAGEMENT PROCESS


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Strategies, policies, and planning premises - MANAGEMENT PROCESS

  2. 2. Presentation by Nature . 2Strategies, policies, and planning premises - MANGEMENT PROCESS
  3. 3. Presentation by Nature THE STRATEGIC PLANNING PROCESS. 3Strategies, policies, and planning premises - MANGEMENT PROCESS Inputs: People, Capital, Managerial skills, Technical Skills, Others Goals of Stake holders: Employees Consumers Suppliers Stock holders Govt Community Others Inputs: People, Capital, Managerial skills, Technical Skills, Others Goals of Stake holders: Employees Consumers Suppliers Stock holders Govt Community Others Industry Analysis Industry Analysis Enterprise Profile Enterprise Profile Executive orientation values vision Executive orientation values vision •Mission •Major Objectives •Strategic Intent •Mission •Major Objectives •Strategic Intent Development of alternative strategies Development of alternative strategies Present & Future External Threats & Opportunities Present & Future External Threats & Opportunities •Internal weaknesses & Strengths •Internal weaknesses & Strengths Evaluation & strategic choice Evaluation & strategic choice ImplementationImplementation Medium & Short Range planning Medium & Short Range planning •Reengineering Organization structure Staffing •Reengineering Organization structure Staffing Leadership Control Leadership Control Consistency Testing Contingency Planning Consistency Testing Contingency Planning
  4. 4. Presentation by Levels of strategy Three levels for Strategic decisions: The success of the strategic management depends on the speedy and timely taking of decisions. For this the process of strategic decisions is followed as under. Corporate level strategy • This has the largest domain. • By definition, corporate level strategy concerns itself with the whole corporation as a unit and c • Corporate level strategy makers analyse the commonalities of various business units and work to add value to the whole system besides individual growth of participating business units. • Consequently, aims to answer the purpose or the mission of the organization. • In other words, corporate level strategy takes a view at the overall scope of an organization and how to enhance stakeholder value. • Issues concerning the introduction of new products or expansion into new markets or segments are all a part of this strategic level. • It is of prime importance that corporate level strategy is fully aligned with the overall vision of the organization and the values and expectations of stakeholders. • Any deviation can result in serious repercussions for the management as also the stakeholders. 4Strategies, policies, and planning premises - MANGEMENT PROCESS
  5. 5. Presentation by Levels of strategy Business unit level practical decisions • When the business activities of the company are divided on the regional market, product standards by keeping the profit in the centre, then each of this department is known as Business Unit. • e.g. Videocon Company’s Television Division, Washing Machine Division etc. Similarly B PL. Company’s Television Division, Telephone Division, Stereo Division etc. • For all these decisions one person with all the powers is appointed who is known as General Manager. • The strategic decisions taken at the corporate level are to be considered for the effective implementation of it for which the managers have to take the necessary practical decisions. • The authority for this is decided by the corporate level and it is given to all the divisional managers. • This type of unit is known as Strategic Business Unit. • The managers of all these SBUs organize the activities of their unit by considering the time period of 5 to 8 years so that they can get maximum return on their capital investment. Single Business Unit Level: • When the company is dealing in a single type of single product or dealing in only one area, then it is known as a ³Single Business Unit´. • In these circumstances, the manager of one business unit of middle level collectively takes the practical decisions along with the corporate strategy of high level. • This is possible only because there is one unit. • In these circumstances, there is no possibility of any disharmony between the practical decisions taken at corporate strategy and business unit level. 5Strategies, policies, and planning premises - MANGEMENT PROCESS
  6. 6. Presentation by Levels of strategy Multiple Business Units Level: • When the company is arranging on its business activities in context to more than one region or product, then the business activities are divided according to the geographical area, or product. • In these circumstances the various divided units are known as Different Business Units and a separate general manager is appointed for each one. • Even though all the units are working separately, the main corporate strategy decided at the top level is being followed. Functional level operating decisions: • Top managers prepare the strategic plans. • At the middle level the resources are supplied and facilities are arranged for the success of the strategies in context to the divisional units and • finally the lower level, which is known as the functional level, is implementing those strategic plans. • For this functional decisions are taken for various activities. Functional activities include various activities such as production, marketing, personnel management, financial management, office management, research and development etc. • To make all these activities effective the functional managers and their assistants are being appointed. • For the effective implementation of the strategies at the operational level, the activities must be examined properly. • For this the supervisors are being appointed to keep the control over all the functional activities. 6Strategies, policies, and planning premises - MANGEMENT PROCESS
  7. 7. Presentation by Levels of strategy BCG Matrix: Boston Consulting Group Matrix is developed by Bruce Henderson of BCG in early 1970s. • Business or products are classified as low or high performers depending upon their market growth rate and relative market share. • It is a portfolio planning method which is based on the observation that a company’s business units can be classified in to four categories. – Stars – Question marks – Cash cows – Dogs 7Strategies, policies, and planning premises - MANGEMENT PROCESS Star (high growth, high market share) >Stars use large amounts of cash. >Stars are leaders in the business. >Stars usually generate cash for the company Cash Cows (low growth, high market share) >Profits and cash generation should be high. >Low market growth does not attract new competitors >Low market growth, call for less investments
  8. 8. Presentation by Levels of strategy Limitations of BCG Matrix • It neglects the effects of synergy between business units. • High market share is not the only success factor. • Market growth is not the only indicator for attractiveness of a market. • Sometimes Dogs can earn even more cash as Cash Cows. • There is no clear definition of what constitutes a 'market'. 8Strategies, policies, and planning premises - MANGEMENT PROCESS
  9. 9. Presentation by Levels of strategy • A high market share does not necessarily lead to profitability all the time. • The model uses only two dimensions – market share and growth rate. So companies may be tempted to divest prematurely. • A business with a low market share can be profitable too. • The model neglects small competitors that have fast growing market shares. 9Strategies, policies, and planning premises - MANGEMENT PROCESS
  10. 10. Presentation by Strategic Planning Strategic planning is an organization's process of • defining its strategy, or direction, and • making decisions on allocating its resources to pursue this strategy. • In order to determine the direction of the organization, it is necessary to understand its current position and the possible avenues through which it can pursue a particular course of action. • Generally, strategic planning deals with at least one of three key questions: – "What do we do?" – "For whom do we do it?" – "How do we excel?" • The key components of 'strategic planning' include an understanding of the firm's vision, mission, values and strategies. (Often a "Vision Statement" and a "Mission Statement" may encapsulate the vision and mission). • Vision: – Outlines what the organization wants to be, or how it wants the world in which it operates to be (an "idealised" view of the world). – It is a long-term view and concentrates on the future. It can be emotive and is a source of inspiration. – For example, a charity working with the poor might have a vision statement which reads "A World without Poverty.“ 10Strategies, policies, and planning premises - MANGEMENT PROCESS
  11. 11. Presentation by Strategic Planning • Mission: – Defines the fundamental purpose of an organization or an enterprise, succinctly describing why it exists and what it does to achieve its vision. – For example, the charity above might have a mission statement as "providing jobs for the homeless and unemployed". • Values: – Beliefs that are shared among the stakeholders of an organization. – Values drive an organisation's culture and priorities and provide a framework in which decisions are made. – For example, "Knowledge and skills are the keys to success" or "give a man bread and feed him for a day, but teach him to farm and feed him for life". These example maxims may set the priorities of self-sufficiency over shelter. • Strategy: – Strategy, narrowly defined, means "the art of the general".- a combination of the ends (goals) for which the firm is striving and the means (policies) by which it is seeking to get there. – A strategy is sometimes called a roadmap - which is the path chosen to plow towards the end vision. The most important part of implementing the strategy is ensuring the company is going in the right direction which is towards the end vision. • Organizations sometimes summarize goals and objectives into a mission statement and/or a vision statement. Others begin with a vision and mission and use them to formulate goals and objectives. 11Strategies, policies, and planning premises - MANGEMENT PROCESS
  12. 12. Presentation by Strategic Planning There are many approaches to strategic planning but typically one of the following approaches is used: 12Strategies, policies, and planning premises - MANGEMENT PROCESS Situation-Target-Proposal Draw-See-Think-Plan Situation - evaluate the current situation and how it came about. Draw - what is the ideal image or the desired end state? Target - define goals and/or objectives (sometimes called ideal state) See - what is today's situation? What is the gap from ideal and why? Path / Proposal - map a possible route to the goals/objectives Think - what specific actions must be taken to close the gap between today's situation and the ideal state? Plan - what resources are required to execute the 'plan'?
  13. 13. Presentation by Strategic Planning Steps: 1. Define mission; 2. Objectives; 3. Assessment of resources, risks, and opportunities; 4. Strategy formulation; 5. Strategy implementation; 6. Monitoring and adapting plans; strategic vs. Operational planning Competitive analysis in strategy formulation: Environment assessment: Porter’s five forces model; Organizational assessment competitive advantages, SWOT analysis and the issues involved 13Strategies, policies, and planning premises - MANGEMENT PROCESS
  14. 14. Presentation by 14Strategies, policies, and planning premises - MANGEMENT PROCESS
  15. 15. Presentation by Strategic Planning Mintzerbg’s 5Ps of strategy • Henry Mintzberg, in his 1994 book, The Rise and Fall of Strategic Planning, points out that people use "Strategy" in several different ways, the most common being these five: 1. Strategy is a Plan, a "how," a means of getting from here to there. 2. A strategy can be a Ploy too; really just a specific manoeuvre intended to outwit an opponent or competitor. 3. Strategy is a Pattern in actions over time; for example, a company that regularly markets very expensive products is using a "high end" strategy. 4. Strategy is Position; that is, it reflects decisions to offer particular products or services in particular markets. 5. Strategy is Perspective, that is, vision and direction. 15Strategies, policies, and planning premises - MANGEMENT PROCESS
  16. 16. Presentation by Strategic Planning 16Strategies, policies, and planning premises - MANGEMENT PROCESS
  17. 17. Presentation by Strategic Planning MAJOR KINDS OF STRATEGIES AND POLICIES • Growth • Finance • Organisation • Personnel • Public relations • Products or services • Marketing Porter’s competitive strategies: – Overall cost leadership; – Differentiation; – Focus; – Common requirements • for successfully pursuing Porter’s competitive strategies. • In a 1996 Harvard Business Review article and in an earlier book, Porter argues that competitive strategy is "about being different." • He adds, "It means deliberately choosing a different set of activities to deliver a unique mix of value“. • In short, Porter argues that strategy is about competitive position, about differentiating yourself in the eyes of the customer, about adding value through a mix of activities different from those used by competitors. 17Strategies, policies, and planning premises - MANGEMENT PROCESS
  18. 18. Presentation by Strategic Planning Strategy implementation: Carrying out plan: – Technology, – HR, – reward system, – decision processes, and – structure needs; Maintaining strategic control: – Environment factors. – Analysis, – effect of strategic action on organization, – implementation 18Strategies, policies, and planning premises - MANGEMENT PROCESS External Environment: Political, Economical, Socio-Cultural, Technological, Environmental, Legal, Input Resources Outputs Sales, Service, Transport of goods Profits Feedback Corrective Action Visions Missions, Objectives, Goals, Systems Structures Targets Processes Planning Manufacturing Inspection Packing
  19. 19. Presentation by Strategic Planning 19Strategies, policies, and planning premises - MANGEMENT PROCESS
  20. 20. Presentation by Strategic Planning Effective implementation: – Communication; – Developing and communicating planning premises; – Appropriate fit between organizational structure and planning needs; – Action plan must contribute to and reflect major objectives and strategies; – contingency strategies and programs; – Review; – Emphasize planning and implementation; – Proper organizational climate. Planning premises: – Planning premises vs. future expectations; – Effective premising: – Selection of premises that are essential, – development premises for contingency planning – verification of contingency of premise, – communication of premises 20Strategies, policies, and planning premises - MANGEMENT PROCESS
  21. 21. Presentation by Strategic Planning Planning premises: “Planning premises are the anticipated environments in which plans are expected to operates. They include assumptions or forecasts of the future and known conditions that will affect the operations of plans”. • Systematic and logical estimate for the future factors affecting planning. • Planning premises are the assumptions providing a background against which the estimated events, affecting the planning, will take place. • A key part of planning is the establishment of clear planning premises. • To assure co-ordination among all managers who make plans in organisation, these premises should be used by all concern persons premises guides planning. Importance: • Well organised planning can be done. • Risk of uncertainty reduces. • Risk of flexibility reduces. • Co-ordination becomes effective. • Increase in profitability The process is as follows: • A panel of experts on a particualr problem area is selected, usually from both inside and outside the organization • The experts are asked to make a forecast (anonymously) in terms of discoveries and developments • The answers are compiled and fed back to the audience • Further estimates of future are made collectively • Repetitions take place if required for further additions • When a convergence of opinion begins to evolve, the results are then used as an acceptable forecast 21Strategies, policies, and planning premises - MANGEMENT PROCESS
  22. 22. Presentation by Strategic Planning 22Strategies, policies, and planning premises - MANGEMENT PROCESS Types of Planning Premises External Premises External planning premises are the important elements in plan formulation. These exist in an organization’s external environment. Various external factors are grouped into five broad categories: economic, political, legal, technological, socio-cultural and competitive. These factors either present opportunities or threat to an organization. Internal Premises Besides external factors, internal factors of the organization are also taken into consideration for plan formulation. Various internal premises are related to the occurring within the organization like organization structure, management systems, etc. factors may be lie in various functions of the organization such as production, marketing, finance and personnel and management. Tangible and Intangible Premises Various planning may be classified as tangible and intangible. Tangible premises are those, which can be expressed, in quantitative terms like monetary unit, unit of product, labor hour, machine hour, and so on. for example, sales forecast which provides premises for operative plans can be expressed in terms of rupees . Intangible premises are of qualitative nature and cannot be translated into quantity. For example, image of the company in its environment can be expressed in qualitative terms and interpretation has to be drawn from these. Controllable and Uncontrollable Premises Planning premises can be classified on the basis of their controllability. Thus, premises may be either controllable or uncontrollable. Controllable premises are those that can be controlled by organization’s actions. Such premises are mostly internal for example, organizational policies, structure, systems, procedures etc. Uncontrollable premises are mostly external and cannot be controlled by an organization’s actions, for example, rate of economic growth, population growth, taxation policy of government etc.