strategic Management overview

1. STRATEGIC
MANAGEMENT
Chapter-1
for MBA, III Semester
By
Dr. RADHA KRISHNA MURTHY
Professor (Management)
Wollega University,
Nekemte, Ethiopia

2. Unit – 1 – Business Policy and Strategic
Management
Definition of Business Policy
Features of Business Policy
Strategic Management
Features of Strategy
Difference Between Strategy and Policy
Historical Developments of Strategic
Management
Henry Mintzberg’s 5 P’s of Strategy
Corporate Level, Business Level and
Functional Level Strategy
Elements of Strategic Management
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3. Business Policy
• Policies are general statements that guide the
general/business thinking. Policies can serve as
a base for managers while taking business
decisions.
• Business polices are an implied overall guide to
setting up boundaries that supply general
limits and directions, in which the managerial
action will be taken place - Terry
• Business policies are guides to actions or
channels to thinking.
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4. Business Policy
Business Policy defines the scope or spheres within which
decisions can be taken by the subordinates in an organization.
It permits the lower level management to deal with the
problems and issues without consulting top level
management every time for decisions.
Business policies are the guidelines developed by an
organization to govern its actions. They define the limits
within which decisions must be made. Business policy also
deals with acquisition of resources with which organizational
goals can be achieved. Business policy is the study of the roles
and responsibilities of top level management, the significant
issues affecting organizational success and the decisions
affecting organization in long-run.
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5. Features of Business policy
 Specific- Policy should be specific/definite. If it is uncertain,
then the implementation will become difficult.
 Clear- Policy must be unambiguous. It should avoid use of
jargons and connotations. There should be no
misunderstandings in following the policy.
 Reliable/Uniform- Policy must be uniform enough so that it
can be efficiently followed by the subordinates.
 Appropriate- Policy should be appropriate to the present
organizational goal.
 Simple- A policy should be simple and easily understood by all
in the organization.
 Inclusive/Comprehensive- In order to have a wide scope, a
policy must be comprehensive.
 Flexible- Policy should be flexible in operation/application.
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6. Historical Developments of Strategic
Management
• The word “strategy” is derived from the Greek
word “stratagos”; stratus (meaning army) and
“ago” (meaning leading/moving).
• Strategic management as a discipline
originated in the 1950s and 60s. Although
there were numerous early contributors to the
literature, the most influential pioneers were
Alfred D. Chandler, Philip Selznick, Igor
Ansoff, and Peter Drucker.
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7. Historical Developments of Strategic
Management ………..
Alfred Chandler recognized the importance of
coordinating the various aspects of management
under one all-encompassing strategy. Prior to this
time the various functions of management were
separate with little overall coordination or strategy.
In his 1962 groundbreaking work Strategy and
Structure, Chandler showed that a long-term
coordinated strategy was necessary to give a
company structure, direction, and focus. He says it
concisely, “structure follows strategy.”
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8. Historical Developments of Strategic
Management ………..
In 1957, Philip Selznick introduced the idea of
matching the organization's internal factors with
external environmental circumstances. This core
idea was developed into what we now call SWOT
analysis by Learned, Andrews, and others at the
Harvard Business School General Management
Group. Strengths and weaknesses of the firm are
assessed in light of the opportunities and threats
from the business environment.
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9. Historical Developments of Strategic
Management ………..
Igor Ansoff developed a strategy grid that compared market
penetration strategies, product development strategies, market
development strategies and horizontal and vertical integration
and diversification strategies. He felt that management could use
these strategies to systematically prepare for future
opportunities and challenges.
In his 1965 classic Corporate Strategy, he developed the gap
analysis still used today in which we must understand the gap
between where we are currently and where we would like to be,
then develop what he called “gap reducing actions”.
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10. Historical Developments of Strategic
Management ………..
• Peter Drucker was a prolific strategy theorist, author of dozens of
management books, with a career spanning five decades.
• His contributions to strategic management were many but two are
most important.
 Firstly, he stressed the importance of objectives. An organization
without clear objectives is like a ship without a rudder. As early as 1954
he was developing a theory of management based on objectives. This
evolved into his theory of management by objectives (MBO).
 His other seminal contribution was in predicting the importance of
what today we would call intellectual capital. He predicted the rise of
what he called the “knowledge worker” and explained the
consequences of this for management. He said that knowledge work is
non-hierarchical. Work would be carried out in teams with the person
most knowledgeable in the task at hand being the temporary leader.
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11. Strategic Management
Strategy is a unified, comprehensive, integrated plan
which is intended to achieve long term goals and
objectives of an enterprise.
Strategic management is a process through which
managers formulate and implement strategies, in
given or available environmental and internal
conditions.
Strategic management is a process of formulating,
implementing and evaluating cross functional
decisions that enable the organization to achieve its
objectives. – FR.DAVID
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12. Features of Strategy
• Strategy is Significant
• Strategy deals with long term developments
rather than routine operations, i.e. it deals with
probability of innovations or new products, new
methods of productions, or new markets to be
developed in future.
• Strategy is created to take into account the
probable behavior of customers and competitors.
• Strategy is a well defined road map for the
organization
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13. Difference between Policy and
Strategy
• Policy is a blueprint of the organizational activities which are
repetitive/routine in nature. While strategy is concerned with
those organizational decisions which have not been dealt/faced
before in same form.
• Policy formulation is responsibility of top level management.
While strategy formulation is basically done by middle level
management.
• Policy deals with routine/daily activities essential for effective
and efficient running of an organization. While strategy deals
with strategic decisions.
• Policy is concerned with both thought and actions. While
strategy is concerned mostly with action.
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14. Henry Mintz berg’s 5 P’s of strategy
Understanding different ways of thinking about
strategy is the first step towards mastering the
art and science of strategic management. The
five P’s of strategy, developed from the work of
Henry Mintzberg, help to provide an over view
of the most commonly used view of definitions
of strategic management.
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15. Henry Mintz berg’s 5 P’s of strategy……
• P-Plan: A carefully crafted set of steps that a firm
intends to following order to be successful.
• P-Ploy: A specific move designed to outwit or
trick competitors.
• P-Pattern: The degree of consistency in a firm’s
strategic action.
• P-Position: A firm’s place in the industry relative
to its competitors
• P-Perspective: How executives interpret the
competitive landscape around them.
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16. Corporate level Strategy
The strategy formulated by the top management
for the overall company. It pertains to the
organization as whole and the combination of
business units and product lines that make up
the corporate entity. It addresses the overall
strategy that an organization will follow. The
process generally involves selecting a grand
strategy and using portfolio strategy approaches
to determine the types of business in which the
organization should be engaged.
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17. Business level Strategy
The strategy formulated by experts at the
business level. It focuses on Meeting
competition, protecting market share and
achieving profits at the business level. It deals
with how a business competes.
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18. Functional level Strategy
These strategies are formulated by specialists in
each area of a business, such as marketing,
finance, HR, Research and Development.
Functional strategies outline the action plans,
that must be put into practice to execute
business level strategy. Business level and
functional – specialists must coordinate their
activities, to ensure that the strategies pursued
by them are consistent and lead to achievement
of overall goals.
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19. Elements of Strategic Management
• Strategic Analysis
• Strategic Choice
• Strategy Implementation
• Strategy Evaluation
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20. Strategic Analysis
This is concerned with the strategic situation of
the organization. Here the organization looks
into issues such as changes in the
organizational environment and its impact on
the organization, assessment of its strengths
and weakness in the light of changes in
environment.
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21. Strategic Choice
Strategic Analysis provide base for Strategic Choice.
This is concerned with formulation of suitable
courses of action, their evaluation and choices
between them.
The relevant issues include deciding what new
business to enter, what business is to be
abandoned, how to allocate resources, whether
to expand, diversify or enter into international
markets, whether to merge or form joint venture
and how to avoid hostile or takeover etc.
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22. Strategy Implementation
This is action stage of strategic management. Implementation means
mobilizing the resources and employees to translate formulated
strategies into concrete action. This requires firm to
 Establish Annual Objectives
 Devise Policies
 Motivate Employees
 Allocate Resources
 Develop a Strategy to supportive culture
 Create an Effective Organizational Structure
 Channel Marketing Efforts
 Prepare Budgets
 Develop and Utilize Information Systems
 Link Employee Reward to Organizational Performance
Often, Successful Strategy Implementation hinges upon a Manager’s
ability to motivate people
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23. Strategy Evaluation
This is the final stage in strategic management.
Evaluation is required, because success today is no
guarantee of success of tomorrow. Success creates
new and complex problems. So managers need to
constantly;
 review external and internal factors that form
basis for current changes
Measure performance and
Take corrective action/steps
Ultimately all strategies are subject to change
because the environment in which they operate is
constantly changing
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