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Module : STRATEGIC MANAGEMENTBlock-6, Semester 3rd, MBA
Module Leader: Vimal Babu
Overview
of
Strategic Management
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Objectives of the session:
• Define what is meant by strategy and strategic management
• Discuss the nature of Strategy formulation, implementation, and evaluation activities.
• Understand process of strategic management• Describe the nature and role of vision and mission
statements in strategic management.• Understand how clear vision and mission statements can
benefit strategic management activities.• Explain how strategic priorities vary by level: corporate,
business and operational; and understand what distinguishes strategic management from operational management
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Art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve its objectives
Strategic Management –Defined
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Purpose of Strategic Management
To exploit and create new and different opportunities for tomorrow
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Strategic Management
In essence, the strategic plan is a company’s game plan
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3 Stages of the Strategic Management Process• Strategy formulation
• Strategy implementation
• Strategy evaluation
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Vision & Mission
Strategy Formulation
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection
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Issues in Strategy Formulation
Businesses to enter Businesses to abandonAllocation of resourcesExpansion or diversificationInternational marketsMergers or joint venturesAvoidance of hostile takeover
Businesses to enter Businesses to abandonAllocation of resourcesExpansion or diversificationInternational marketsMergers or joint venturesAvoidance of hostile takeover
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Strategy Implementation
Annual Objectives
Policies
Employee Motivation
Resource Allocation
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Strategy Implementation Steps
• Developing a strategy-supportive culture
• Creating an effective organizational structure
• Redirecting marketing efforts
• Preparing budgets
• Developing and utilizing information systems
• Linking employee compensation to organizational performance
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Issues in Strategy Implementation Action Stage of Strategic
Management
Mobilization of employees & managers
Most difficult stage
Interpersonal skills critical
Action Stage of Strategic Management
Mobilization of employees & managers
Most difficult stage
Interpersonal skills critical
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Strategy Evaluation
Internal Review
External Review
Performance Measurement
Corrective Action
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Peter Drucker: Think through the overall mission of a business. Ask the key question:
“What is our Business?”
Prime Task of Strategic Management
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The strategic management process attempts to organize quantitative and qualitative information under conditions of uncertainty
Integrating Intuition & Analysis
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Intuition is based on:– Past experiences– Judgment– Feelings
Integrating Intuition & Analysis
Intuition is useful for decision making in conditions of: Great uncertainty Little precedent Highly interrelated variables Several plausible alternatives
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Involve management at all levels
Intuition & Judgment
Influence all analyses
Integrating Intuition & Analysis
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Organizations should continually monitor internal and external events and trends so that timely changes can be made as needed
Adapting to Change
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Key Terms in Strategic Management• Competitive advantage
• Strategists
• Vision and mission statements
• External opportunities and threats
• Internal strengths and weaknesses
• Long-term objectives
• Strategies
• Annual objectives
• Policies
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Anything that a firm does especially well compared to rival firms
Strategic Management is Gaining and Maintaining Competitive Advantage
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1. Continually adapting to changes in external trends and events and internal capabilities, competencies, and resources
Achieving Sustained Competitive Advantage
2. Effectively formulating, implementing, and evaluating strategies that capitalize on those factors
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Strategists
Gather Information
Analyze Information
Organize Information
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Vision Statement –What do we want to become?
Mission Statement –What is our business?
Vision and Mission Statements
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Our VisionTo be a Premier University of Integral and Transformational Learning for Future Leaders
Our MissionA center for higher education, the University is focused on providing:
TO STUDENTS - an environment for self-development; an institution that nurtures their potential based on their aptitudes and interests.
TO FACULTY - a platform to be mentors and guides who shape the country's future leaders by imparting knowledge and skills; opportunities for research on emerging trends and industry practices.
TO THE INDUSTRY AND COMMUNITY - students with intellectual competence, reality-based knowledge and personal integrity; students who strive for excellence and aspire to become socially responsible leaders.
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The Vocabulary of StrategyApril 22, 2023
Source: (Johnson, G.,Scholes, K.,Whittington, R.(2008), Exploring Corporate Strategy, Pearson Education. pp 9.)
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Strategic Management Process
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External Opportunities and Threats
Analysis of Trends– Economic
– Social
– Cultural
– Demographic/Environmental
– Political, Legal, Governmental
– Technological
– Competitors
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Basic Principle of Strategic Management
External Opportunities and Threats
Strategy Formulation
Take advantage of External Opportunities
Take advantage of External Opportunities
Avoid/minimize impact ofExternal Threats
Avoid/minimize impact ofExternal Threats
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Controllable activities performed especially well or poorly
Determined relative to competitors
Internal Strengths and Weaknesses
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• Typically located in functional areas of the firm
– Management
– Marketing
– Finance/Accounting
– Production/Operations
– Research & Development
– Management Information Systems
Internal Strengths and Weaknesses
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Assessing the Internal Environment
Internal Strengths and Weaknesses
Internal Factors
Performance Measures
Ratios
Industry Averages
Survey Data
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Specific results that an organization seeks to achieve in pursuing its basic mission
Long-term means more than one year
Long-Term Objectives
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Long-Term Objectives• Essential for ensuring the firm’s success
– Provide direction
– Aid in evaluation
– Create synergy
– Reveal priorities
– Focus coordination
– Provide basis for planning, organizing, motivating, and controlling
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Short-term milestones that firms must achieve to reach long-term objectives
Annual Objectives
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Means by which annual objectives will be achieved
Policies
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Strategic Management
• Communication is a key to successful strategic management
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Benefits of Strategic Management
• Nonfinancial Benefits– Enhanced awareness of threats– Improved understanding of competitors’ strategies– Increased employee productivity– Reduced resistance to change– Clearer understanding of performance-reward
relationship– Enhanced problem-prevention capabilities
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Why Some Firms Do No Strategic Planning
• Lack of knowledge of strategic planning
• Poor reward structures
• Waste of time
• Too expensive
• Laziness
• Content with success
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Why Some Firms Do No Strategic Planning (continued)
• Fear of failure
• Prior bad experience
• Fear of the unknown
• Honest difference of opinion
• Suspicion
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Pitfalls in Strategic Planning
Strategic planning is an involved, tricky, and complex process that takes an organization into uncharted territory
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Comparing Business and Military Strategy• Strategic planning started in the military
• Similarity – Both business and military organizations must
adapt to change and constantly improve
• Difference – Business strategy assumes competition
– Military strategy assumes conflict
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Emergent Strategy and Deliberate Strategy
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• Based on Porter’s Five Forces, pick up any small scale company; feel free to decide its present industry and also choose to enter into a new industry seeing the opportunity.
• How would (think of ways-strategies) you like to apply the Porter’s model in formulating the strategy to do business in the new industry.
• It is a group-based classroom activity.
(You may like to use internet sources for data and information, but do remember to quote sources)
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• (a) Pick up a firm of your choice and share your views mentioning its offering and its strengths and weaknesses. (b) Compare it with the closest market competitor. (c) Analyze any 02 strategies that you observed in the growth of the company.
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• Microsoft is a dominant firm in the operating systems segment of the software industry. Read about Microsoft on the Internet and prepare a brief interactive session in the class on this firm’s product and market strategies, particularly in the last 5 years.
• Devise and sustain arguments that Microsoft is proactively managing its industry environment?
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• Jack Welch, former CEO of General Electric, is often cited as a good example of an effective strategic leader. Read about Jack Welch’s years at General Electric and make judgments by presenting your views describing what he did can be characterized as effective strategic leadership.
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• Analyze the failure (poor strategies) of Kodak and success of Intel (innovative strategies)