Chapter 14 management strategies in an organization

MANAGING STRATEGIES IN AN

ORGANIZATION

CHAPTER-14

AUTHORS:DR. K IRAN NERKARDR. VILAS CHOPDE

A strategy refers to a plan of actions to achieve a specifi c target. It includes steps, actions, standards, plans, and policies required to attain future goals of an organization.

The objectives of strategy are as follows: Providing direction and stability to the organization Determining long-term goals of the organization Helping the organization to prioritize the targets on the basis of

organizational resources Facilitating the planning and execution of long-term, medium-term,

short-term, and day-to-day plans Facilitating the decision-making process Allocating the resources to various departments, such as marketing,

human resource, finance, and operations, of the organization Increasing the organizational effectiveness by making judicious use of

organizational resources, such as funds, human resources, technology, and infrastructure

Defining the code of conduct that lays down various rules and policies for an organization

CONCEPT OF STRATEGY

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Adopts an eff ective approach to overcome problems and rationalizes the allocation of scarce resources among critical activities

Focuses on changing processes in an organization, such as change in the organizational setup

Helps the management to cope up with the highly complex external environment consisting of external forces, such as social, political, economic, and competitive forces

Off ers techniques to manage organizational changeEncourages the management to select the best course

of action to realize the objectivesProvides basis for measuring the performance

IMPORTANCE OF STRATEGY


Strategic Business Units (SBUs) refer to units that have their own sets of strategies, objectives, and competitors.

The two types of SBUs are:

STRATEGIC BUSINESS UNITS (SBUS) AND ITS TYPES


• Imply a single business unit that deals in a single product or one area.

Single-level SBUs

• Imply the business units of an organization that are divided according to geographical areas or products.

Multiple-level SBUs

• Includes strategies designed by the top management consisting of board of directors and the chief executive officer.

Corporate-Level Strategy

• Involves the strategies designed by the business heads of each SBU.

Business-Level Strategy

• Involves the strategies designed by functional managers to carry out day-to-day activities of an organization.

Functional-Level Strategy

LEVELS OF STRATEGY


Envisioning the future course of an organization according to industry standards

Evaluating the organization’s external opportunities and threats, as well as internal strengths and weaknesses

Focusing on critical issues in an organization to take actions accordingly

Looking for the root cause of the problems and then solving them Trying to fi nd a new area of strategic analysis and decision-

making Providing the organization with consistent direction and effi cient

allocation of resources Assisting the organization in meeting challenges posed by the

environment Working as a team to strengthen the organization’s position Undertaking gap analysis to identify what resources and skills

are missing in the organization

ROLE OF A STRATEGIST


Porter Generic StrategiesPorter’s Five forces ModelMarketing Warfare StrategyGoal Attacking StrategiesMarket Expansion StrategiesBoston Consulting Group (BCG) MatrixGE Nine Cell MatrixAnsoff ’s Product Market Growth StrategyPEST Analysis SWOT AnalysisTOWS Matrix

TYPES OF STRATEGIES


Strategic management is an ongoing process that evaluates and controls the business and the industries in which the company is involved; assesses its competitors and sets goals and strategies to meet all existing and potential competitors; and then reassesses each strategy annually or quarterly [i.e. regularly] to determine how it has been implemented and whether it has succeeded or needs replacement by a new strategy to meet changed circumstances, new technology, new competitors, a new economic environment, or a new social, fi nancial, or political environment. ---- Lamb

Strategic management is a system that links strategic planning and decision-making with day-to-day business of operational management. ---- Gluck, Kaufman, and Walleck

DEFINE STRATEGIC MANAGEMENT


•Gives a long-term view of the organization. It focuses on what an organization is trying to achieve in the long run.

Vision

•Describes the scope and purpose of an organization.

Mission

•Refer to the results that an organization seeks to achieve in the short and long run.

Objectives

•Refer to guidelines given to managers and subordinates for guiding their decisions and actions, while implementing the organization’s strategy.

Policies

•Consists of the factors that affect the organization’s activities.

External Environment

•Implies a package of different long-term strategies.

Grand Strategy

COMPONENTS OF STRATEGIC MANAGEMENT


Strategic Evaluation and ControlRefers to the process of comparing the actual results with the desired

performance.

Implementation of StrategiesImplies a process of putting formulated strategies into action.

Formulation of StrategiesRefers to the development of strategies of an organization

Establishment of Strategic IntentLays down the foundation for strategic management of the organization.

PROCESS OF STRATEGIC MANAGEMENT


SCHOOLS OF THOUGHTS IN STRATEGIC MANAGEMENT


Refers to an approach that treats strategy formation as a simple and informal process. Design School

Treats strategy formation as a formal process, where strategy is divided into sub-strategies and programs.Planning School

Perceives strategy formation as an analytical, systematic, and deliberate process.Positioning School

Treats strategy formation as a visionary process that involves experience, intuition, judgment, and insight of an entrepreneur.

Entrepreneurial School

Analyzes how people perceive information in an organization. Cognitive School

Sees strategy formation as an emergent and informal process. Learning School

Treats strategy formation as a process of negotiation. Power School

Involves a collective, ideological, constrained, and deliberated perspective for the process of strategy formation in an organization. Cultural School

Recognizes strategy formation as a reactive process. Environmental

School Identifies strategy formation as a transformation process that involves changing one type of decision-making structure of an organization into another.

Configuration School

Every organization has diff erent departments involving diff erent types of activities and every department has its own plans to achieve the end-goals of an organization.

The process of strategic management can be applied to any department of the organization.

strategic management plays a crucial role in marketing, finance, and human resource department of the organization.

ROLE OF STRATEGIC MANAGEMENT


Marketers try to possess strategic thinking and improve the value of the organization by developing eff ective marketing plans.

They achieve vision and mission of the organization with the help of the marketing strategies, such as: Enhances customer loyalty by retaining them Expands the channels of distribution of the organization Increases sales of the organization by penetrating in the

market Understands the customers and competitors; adapts to the

changing environment Aims at relationship marketing with the clients

STRATEGIC MANAGEMENT IN MARKETING


Organizations aim at achieving maximized returns on the funds invested and gain financial success through eff ective strategies.

The financial strategies relate to the following: Allocating least cost combinations of capital resources Taking investment decisions, which maximize the net

present value and shareholder wealth Identifying scarce financial resources and balancing them

effectively Raising funds for the organization through issue of shares Conducting cash, credit and risk management

STRATEGIC MANAGEMENT IN FINANCE


Human resource and top management work together for achieving business strategies.

The strategic management policies for human resource relate with the following: Developing high quality workforce by hiring and retaining

talented people Enabling employee participation for achievement of the

objectives Ensuring special motivational programs for employees Establishing performance targets for employees Measuring the performance related to targets Providing appraisal systems, training and development to

employees

STRATEGIC MANAGEMENT IN HUMAN RESOURCE


Strategic planning includes a comprehensive planning process to achieve long-term goals of the organization.

The features of strategic planning are as follows: Deals with the future decisions of an organization Aligns long-term plans with short-term plans Assists in developing strategic intent and action plans of an

organization Identifies new areas of investment for the organization Ensures rational allocation of resources

CONCEPT OF STRATEGIC PLANNING


A strategy can be defi ned as a set of decision making procedures to be followed by an organization to accomplish its goals and objectives.

It helps an organization to cope with the dynamic business environment.

Strategic management is an ongoing process of formulating, implementing, and evaluating strategies to achieve long-term organizational objectives.

The strategic management process also helps an organization to update its strategies with respect to changes taking place in the business environment.

Strategic planning is one of the most important aspects of the strategic management process.

It involves defi ning strategies and allocating resources for the implementation of those resources.

The overall success of the strategic management process depends on the eff ectiveness of strategic planning.

RECAP


Chapter 14 management strategies in an organization

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