2. Introduction to Strategic Management
EVOLUTION OF STRATEGIC MANAGEMENT
The Genesis of Strategic Management
Almost all the disciplines passed through different stages in their
evolutionary process and reached their present stage. Strategic management
is not an exception to this.
Though the formulation of a strategy seems to be simple, it is very difficult
to accomplish it.
Many organisations develop their strategic management process over
periods of several years, adjusting and tailoring them to meet specific needs
of the organisation.
3. Introduction to Strategic Management
In the initial days, typically in early 1920s till the 1930s, managers used to
do day-to-day planning methods. However, after that, managers have tried
to anticipate the future.
They had tools like preparation of the budgets and by using control systems
like capital budgeting and management by objectives, and various other
tools. However, as these techniques and tools were unable to emphasize the
role of the future adequately.
The next step was to try and use long-range planning, which was soon
replaced by strategic planning, and later by strategic management, a term
that is currently being used to describe the process of strategic decision-
making.
4. Introduction to Strategic Management
Different phases of development of strategic management
Phase 1- Basic Financial Planning:
The first phase of the strategic development is fairly a simple routine of
basic financial planning. The main concern during this phase is simply
meeting annual budget requirement, operational functions like production,
marketing, finance and human resources and emphasizing on the
operational control.
Phase 2- Forecast-Based Planning:
During this phase, the primary concern is mainly on effective plans,
environmental scanning, plan for the future and allocation of resources.
5. Introduction to Strategic Management
Phase 3- Externally-Oriented Planning:
There is a remarkable shift during this phase. The notable developments
include: increasing response to markets and competition, complete
situational analysis and assessment of competitive strength, evaluation of
strategic alternatives and allocation of resources based on changing needs
from time to time.
Phase 4- Strategic Management:
The focus shifts over time from meeting the budget to planning for the
future, to thinking abstractly, to working to create desired future. To create
future decision-makers, orchestrate and integrate all their organisation’s
resources to gain a competitive advantage. They build flexibility into the
organisational planning process, and foster a supportive, participative
climate within the organisation.
6. Introduction to Strategic Management
Thus, developing an effective and efficient strategic management process
can be a long and difficult task. It requires sustained effort, enormous
patience and sharp political skills. Strategic management requires efficient
leadership.
STRATEGIC MANAGEMENT
Strategic Management is a stream of decisions and actions which lead to the
development of an effective strategy or strategies to help achieve corporate
objectives.
The Strategic Management process is the way in which strategists determine
objectives and make strategic decisions. Strategic Management can be
found in various types of organizations, business, service, cooperative,
government, and the like.
7. Introduction to Strategic Management
Strategic Management can be defined as “the art and science of formulating,
implementing and evaluating cross-functional decisions that enable an
organization to achieve its objectives”.
In fact, Strategic Management focuses on integrating management,
marketing, finance/accounting, production/operations, research and
development, and computer information systems to achieve organizational
success.
The term Strategic Management is used synonymously with the term
Strategic Planning. The later term is more often used in the business world,
whereas the former is often used in academia.
8. Introduction to Strategic Management
The purpose of Strategic Management is to exploit and create new and
different opportunities for tomorrow long-range planning in contrast, tries to
optimize for tomorrow the trends of today.
Strategic management is a science of management of strategies. Hence, it
deals with different types of strategies, i.e., different types of decisions.
Different situations, different challenges, different opportunities, or different
problems require different types of strategies to be formed and
implemented. So, it is just not sufficient to put all the strategies in one
category.
9. Introduction to Strategic Management
It is highly advantageous to know the classified information on different
strategies and their characteristics to make right decisions at right time.
Although the practice of decision-making is more of experience-oriented
skill; it is significant to have clear knowledge of different types of strategies
to understand the situations in which they are useful
As the strategies are always crucial, every strategy must be formed after
careful study of the situations, challenges, opportunities or problems being
encountered. Ignorance about types of strategies may lead the managers to
wrong conclusions or to wrong choice of strategies. Hence, the following
account of types of strategies has practical significance in managing the
firm well.
10. Introduction to Strategic Management
At the heart of strategic management is the question – ‘How and why do
some firms outperform others?’ Thus, the challenge to managers is to decide
on ‘strategies’ that provide advantages that can be sustained over time.
Much of strategic management is about identifying and developing the
strategies that managers can pursue to attain superior performance and a
competitive advantage for their organisations.
Strategic management is the process of assessing the firm and its
environment in order to meet the long-term objectives of the firm. It refers
to the series of decisions taken by management to determine the strategies to
achieve organisational goals.
11. Introduction to Strategic Management
Strategic management involves systematic analysis of the internal and
external environments, to evaluate a company’s current policies, strategy
and goals to build new strategic moves and plans.
Thus, strategic management is the process of planning, directing,
organising, and controlling a company’s strategy-related decisions and
actions to achieve competitive advantage and the long-run performance
goals of a company.
12. Introduction to Strategic Management
Basic Features of Strategic Management
Future Oriented
Consequences on multi business
Directing the growth of the organization
Focus is on what to achieve and how to achieve
Includes an element of uncertainty
Long term prosperity of a firm
13. Introduction to Strategic Management
Importance of Strategic Management
It ensures the long term survival of the firm
It guides the company in a specific direction
It assists the firm in becoming proactive, rather than reactive
It acts as a foundation for all the key decisions of the firm
It assist in the development of the core competencies and competitive
advantage
Prepare organization for future challenges
14. Introduction to Strategic Management
Strategic Management V/S Operational Management
Strategic management and operational management are different and
equally important aspects of the business. They’re separate, but related
processes that work in parallel to each other. In corporate management, both
processes were intended to function on a relatively equal basis in order for
the company to function well as a whole.
When each process functions well, they will highlight the roles that
managers can play in each aspect of the business and they will help leaders
to identify strategic opportunities. In this way, board directors and managers
bring both processes together with the goal of driving better competition
and improved performance.
15. Introduction to Strategic Management
Operations Management
Operational management is fairly easy to understand if you think
about all the various activities that take place in a company and the
departments that make up those activities or are a part of those
activities. Think of it as the “what” that a company does. Operations
departments typically consist of production, logistics, information
technology, finance, marketing, sales, and service.
Operations is the current chain of activities that, when completed,
leads to the delivery of business objectives. If leaders don’t give
enough time and energy to strategic management, operational
efficiency is sure to suffer.
16. Introduction to Strategic Management
Strategic Management?
If operational management is the “what” a company does, strategic
management is the “how” it does things.
Strategic management is a process that works to create a path for where the
company should be going in the future. It helps the organization find new
ways to be competitive. As a result of good strategic planning, companies
will ultimately be more competitive in the long run. Your board should
always be envisioning what the future competitive space looks like, which
will most likely look very different than it does today.
Sound strategic planning outlines specifically what a company needs to do
and how they need to do it. In this way, it helps to shape operational
planning.
18. Introduction to Strategic Management
The First phase consists of establishing a Strategic Intent for the
organization. Strategic Intent is the hierarchy of objectives that an
organization set for itself. Within this, there are vision, mission, business
definition, business model and objective .
The second phase is the formulation of strategies. It is concerned with
devising of a strategy , which is sometimes also known as strategic
planning. This is an analytical phase in which analysts think, analyze and
plan strategies.
The third phase is implementation it is the “ putting into action” phase. The
strategies that are formulated are implemented through a series of
administrative and managerial actions.
19. Introduction to Strategic Management
The four phase is of evaluation and control which involves assessing how
appropriately the strategies were formulated and how effectively they are
being implemented.
These 4 phases are considered as sequentially linked to each other and each
successive phase provides a feedback the the previous phase.
Each feedback arising from each of the successive phase is meant to revise,
reformulate, or redefine the previous phase , if necessary. Such a
representation yields a dynamic model of strategic management which takes
into account the emerging factors as the process moves on.
20. Introduction to Strategic Management
What do you mean by Strategy?
Acc to Alfred D. Chandler “ Strategy can be defined as the determination of
the long term goal and objectives of an enterprise, and the adoption of
courses of actions and the allocation of resources necessary for carrying out
these goals”
Levels of Strategy
There are basically three levels of strategy: Corporate level strategy,
Business Level Strategy, Functional Level Strategy