CSM_notes

8/13/2019 CSM_notes

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O1-INTRODUCTION TO STRATEGIC MANAGEMENT

What do you mean by Strategy?

Strategy is a set of related actions that managers take to increase their

company’s performance. The word “strategy” has been in use since Sun Tzu wrote the Art of War inthe fourth Century B.C. The word strategy has been deried from !strategos’in "reek# which means !art of the army general’# or art of deploying army.Strategy signified the skill of planning the moements of armies beforeactual battle starts$Strategy tells about priorities which must be followed in order to achiee theorganisational goals % ob&ecties.

De!n!t!on o Strategy

Strategy is a set of key decisions made to meet objectives.

It refers to a complex web of thoughts, ideas, insights, experiences, goals, expertise, memories,

perceptions, and expectations that provides general guidance for specific actions in pursuit of

particular ends.

An organization can not operate effectively without a strategy, either developed explicitlythrough a planning process or evolved implicitly.

* What business are we in? What products and services will we offer?

* o whom?* At what prices? !n what terms?

* Against which competitors?

* !n what basis will we compete?If the organization as"s these "ey #uestions and it has the answers, then there is a strategy in

place.

'nd all plans are not strategy as strategy has a pattern which is consistent inbehaior oer a time span.

(n order to help to deelop understanding of strategy )intzberg deeloped

what is known as the * +s of Strategy. These are,

* Strategy as +lan

* Strategy as (ntended +attern

* Strategy as +ath

* Strategy as +osition

* Strategy as +erspectie

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Strategy a" #$an

)intzberg defined this as some sort of consciously intended course of action#

a guideline -or set of guidelines to deal with a situation. The e/ample of

"ame Theory where Strategy is a complete plan, a plan which specifies what

choices 0the player1 will make in eery possible situation.

Strategy a" #attern

)intzberg defines strategy as consistency in behaior# whether or not

intended. Strategy may also emerge as patterns# which can be seen as the

resulting actions. 2or e/ample when 3enry 2ord originally deeloped the

)odel T# the strategy was to only offer the car in the color black# by strategy

as a pattern# this was an intended strategy.

'n e/ample of an unintended strategy as pattern can be seen with how (kea

began to flat pack their furniture# the original idea for this was borne of one

of the companies designers trying to load a table into their car# when they

realised that it wouldn’t fit and they would hae to remoe the legs of the

table# they realised that customers would face the same issue when

purchasing the product# and as such a ital aspect of (kea’s strategy

emerged unintentionally.

Strategy a" #ath

strategy tells us to get from here to there. it proides us the path from our

current position to our desired place.

Strategy a" #o"!t!on

Strategy as a position refers to the enironment in which the organisation

operates in and the mediating force between the internal and e/ternal

conte/t. 4/amples of this may be an organisations strategy towards dealing

with enironmental factors such as e/treme heat# disposal of waste# use of

green (T.

Strategy a" #er"%e&t!'e

This aspect of strategy is concerned with how the organisation itself sees the

business enironment. 2or e/ample an organisation may decide to be the

pacesetters# always at the bleeding edge of technology and may sell their

products based on technological adances. 'nother organisation may decide

to be followers where they learn from the mistakes of the pace setter and

only adopt proen technologies and may be more concerned with 5uality and

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reliability rather than bleeding edge technology.

4/amples of this in the automotie industry can be seen in how 2ord hae

recently began the market the new 2ord 2ocus as the technological leader in

the product category. By using 2ord’s economies of scale 2ord hae been

able to cheaply introduce technologies such as Self6+arking# a technologyassociated with premium brands rather than 2ord an auto manufacturer that

traditionally targets blue6collar workers

Characteristics of Strategy

* 7ong term direction* 'chiee adantage* Change scope of actiities* Commit ma&or resources* Build or stretch resources* )a&or (mpact % outcome is e/ternal* 4ntails significant risks* )a&or effect on operational decisions* Comple/ and cross6cutting interactions* Changes alues and e/pectations

8. Strategic decisions are likely to affect the $ong-term d!re&t!on of an

organisation.

9. Strategic decisions are normally about trying to a&h!e'e "ome

ad'antage for the organisation.

:. Strategic decisions are likely to be concerned with the "&o%e o an

organ!"at!on(" a&t!'!t!e", ;oes -and should the organisation concentrate

on one area of actiity# or does it hae many< The issue of scope of actiity

is fundamental to strategic decisions because it concerns the way in which

those responsible for managing the organisation conceie its boundaries. (t is

to do with what they want the organisation to be like and to be about.

=. Strategy is to do with the mat&h!ng o the a&t!'!t!e" o an

organ!"at!on to the en'!ronment !n )h!&h !t o%erate"*

*. Strategy can also be seen as +"tret&h!ng+ an organ!"at!on+" re"our&e"

and competences to create opportunities or capitalise on them. (t is not &ust

about countering enironmental threats and taking adantage of

enironmental opportunities> it is also about matching organisational

resources to these threats and opportunities. There would be little point in

trying to take adantage of some new opportunity if the resources needed

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were not aailable or could not be made aailable# or if the strategy was

rooted in an inade5uate resource6base.

?. Strategic decisions therefore often hae ma&or resource implications for an

organisation. (n the 8@As a number of D retail firms had attempted to

deelop oerseas with little success and one of the ma&or reasons was thatthey had underestimated the e/tent to which their re"our&e &omm!tment"

would rise and how the need to control them would take on 5uite different

proportions. Strategies# then# need to be considered not only in terms of the

e/tent to which the e/isting resource6base of the organisation is suited to the

enironmental opportunities but also in terms of the e/tent to which

resources can be obtained and controlled to deelop a strategy for the

future.

E. Strategic decisions are therefore likely to affect o%erat!ona$ de&!"!on"#

to !set off waes of lesser decisions’.

A. The strategy of an organisation will be affected not only by enironmental

forces and resource aailability# but also by the 'a$ue" and e,%e&tat!on"

of those who hae power in and around the organisation. (n some respects#

strategy can be thought of as a reflection of the attitudes and beliefs of

those who hae the most influence on the organisation. Fhether a company

is e/pansionist or more concerned with consolidation# and where the

boundaries are drawn for a company’s actiities# may say much about the

alues and attitudes of those who influence strategy 66 the stakeholders of

the organisation. The beliefs and alues of these stakeholders will hae a

more or less direct influence on the organisation.

Gerall# if a definition of strategy is re5uired# these

characteristics can proide a basis for one. Strategy !" the d!re&t!on and

"&o%e o an organ!"at!on o'er the $ong term )h!&h a&h!e'e"

ad'antage or the organ!"at!on through !t" &on!gurat!on o

re"our&e" )!th!n a &hang!ng en'!ronment to meet the need" o

mar.et" and u$!$ "ta.eho$der e,%e&tat!on"*

Strategic decisions are# then# often comple/ in nature, it can be argued that

what distinguishes strategic management from other aspects of

management in an organisation is &ust this comple/ity. The comple/ity arises

for at least three reasons. 2irst# strategic decisions usually inole a high

degree of uncertainty, they may inole taking decisions on the basis of

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iews about the future which it is impossible for managers to be sure about.

Second# strategic decisions are likely to demand an integrated approach to

managing the organisation. nlike functional problems# there is no one area

of e/pertise# or one perspectie that can define or resole the problems.

)anagers# therefore# hae to cross functional and operational boundaries to

deal with strategic problems and come to agreements with other managers

who# ineitably# hae different interests and perhaps different priorities. This

problem of integration e/ists in all management tasks but is particularly

problematic for strategic decisions. Third# as has been noted aboe# strategic

decisions are likely to inole ma&or change in organisations. Hot only is it

problematic to decide upon and plan those changes# it is een more

problematic actually to implement them. Strategic management is therefore

distinguished by a higher order of comple/ity than operational tasks.

What is Strategy in Management?

* A company$s strategy consists of the set of competitive moves and business approaches

that management is employing to run the company* %trategy is management$s “game plan” to

6'ttract % please customers

6Stake out a market position

6Conduct operations

6Compete successfully

6'chiee organisational ob&ecties

02-Strategic Management as formal Process

Strategic Management Process

he process by which managers develops a set of strategies for the enterprise to fulfill itsvision.

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Environmental Scanning

It is the monitoring, evaluating, and disseminating of information from the external and internalenvironments to "ey people within the organization. Its main purpose is to identify external and

internal elements that will determine the future of the corporation. he simplest way to conduct

environmental scanning is through %W! Analysis. &%trengths, Wea"nesses, !pportunities andhreats'

External Environment (onsists of variables that are outside the organization. hese refer to

the opportunities and threats.

Internal Environment (onsists of variables that are within the organization itself. hey are the

strengths and wea"nesses of the corporation. hey include corporation$s structure, culture

and resources.

Strategy /ormu$at!on

(t is the deelopment of long range plans. (t includes defining corporate

mission# specifying achieable ob&ecties# deeloping strategies and settingpolicy guidelines.

M!""!on (t is the purpose or reason for the organization’s e/istence. (t tellswhat the company is proiding for the society.

Ob0e&t!'e" These are end results of planned actiity. (t tells what is to beaccomplished.

Strateg!e" 6 (t states how the corporation will achiee its mission andob&ecties.

#o$!&!e" 6 (t is a broad guideline for decision making that links theformulation of a strategy with its implementation.

Strategy Im%$ementat!on

(s a process by which strategies and policies are put into action through thedeelopment of programs# budgets and procedures. Sometimes referred toas operational planning.

#rogram" (s a statement of the actiities or steps needed to accomplish asingle use plan. (t makes a strategy action oriented.

udget" (s a statement of a corporation’s programs in terms of dollars. (tlists the detailed cost of each program.

#ro&edure" Sometimes termed as Standard Gperating +rocedures -SG+ (tis a se5uential steps or techni5ues that describe in detail how a particulartask or &ob is to be done.

E'a$uat!on and Contro$

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(s a process in which corporate actiities and performance results aremonitored so that actual performance can be compared with desiredperformance.

#erorman&e (t is the end result of actiities. (t includes the actualoutcomes of the strategic management process.

Tr!gger!ng E'ent" 6 (s something that acts as a stimulus for a change instrategy.

Why 2!"!on !" SO Im%ortant

Because without Iision the employees of a firm fall in actiity trap that is

they lay entire emphasis on the procedures not the purpose of the actiities.

Iision tells the decision maker about the priorities# importance of arious

factors and it indicates what to do % what not to do$

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