Understanding Strategy-7

8/7/2019 Understanding Strategy-7

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UNDERSTANDING STRATEGY


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CHARACTERISTICS OF STRATEGY

1. Strategy is concerned with directing

and guiding the initiation and

growth of organizations, and thechanges that occur as they conduct their

activities.

Strategy is about decision making and

actions, which determine whether an

enterprise excels, survives or dies.


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2. Strategy demands an integrated

approach to management, a sound

understanding of the dynamics of themarketplace, perception, inspiration,

creativity, enthusiasm, commitment,

energy, vitality, drive and rationality.


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3. Strategy involves strategic positions:Strategic competition can be thought of as the

process of perceiving new positions that woo

customers from established positions or draw new

customers into the market.Strategic position is based on customer needs,

customer accessibility, or the variety of

company`s products and services.

If there were only one ideal position, there wouldbe no need for strategy. The essence of strategic

positioning is to choose a set of activities that is

different from rivals.


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4. Strategy is choosing what not to do-

strategy involves trade-off: A strategic position

is not sustainable, over the long term, unless there

Are tradeoffs with other positions, which means

That more of one thing necessitates less of another.

Without trade-offs , there would be no need forchoice and thus no need for strategy.


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5. Strategic considerations involve deciding whata company is to be (strategic thinking) and how it is

to become what it is to be (strategic planning)?

6. Strategy is intimately concerned with the long

term success(or failure) of the firm. Strategy isabout range, scale and scope of the organization`sactivities.

7. Strategy operates in a competitive setting, and

is concerned about gaining a differential advantagevis-a vis the competition- both present and potential.It deals with the effective positioning of theorganization in the competitive environment.


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8. StrategicDecisions must have internal

consistency, external fit, resource fit,

effective communication and

implementation: One of the primeresponsibilities of top management is to lead the

organization in developing a unified hierarchy of

strategic intent that incorporates a consistent and

mutually supporting set of vision, mission, goals

and objectives.


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9. Strategy is the domain of top management:

Strategy formulation and implementation are

responsibilities of the top management.

10. Strategy determines the organization`s

scope of activities or businesses and influence

policy, procedures , plans, budgets etc. it lays down

effective boundaries for all the organizational

endeavors.


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11. Strategy affects and is affected by theexternal environment: The process of strategic

management deals with effective matching of

organizational strengths to take advantage of

environmental opportunities and minimizeweaknesses to overcome threats.

12. Proactive strategy: calls for stretching

organizational resources to make the impossible ,

possible. It builds effectively on organization`s

strengths to create competencies that outpace the

competition. (Dia.)


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13. Strategy involves behavioral, ethical and

operational considerations: strategy is

concerned with creating direction and

understanding for all involved, so that each activityis positive and effective.

14. Strategies may require a change in the

resources mix and their applications. It may also

necessitate a major change in the organization`s

culture, values, etc.


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15. Strategy acts as a guide to the operational

decisions: for successful performance , managers

have to take care that the operational level

activities are in line with the strategic direction ofthe firm. The real implementation of strategic

decisions is done at the operational level, which can

make the prospects of even the best- conceived

strategies.


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16.Strategy of an organization has to take

care of all stakeholders and at times it may be a

hostage to the history of the organization, i.e, the

past strategy , the policies, the values , the culture,the style, etc.

17. Strategic decisions are complex in nature:

The process is imperfect and is carried out in an

imperfect and changing world, by imperfect people.


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18. Strategy is deliberate and unique:

Competitive strategy is about being different. It

means deliberately choosing a different set of

activities to deliver unique mix of value.

19. Strategic decisions may entail multiplicity

of time horizons. Strategy can focus on the short,

medium, and long term.


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20. Strategic decisions have to aim at

efficiency as well as effectiveness : efficiency is

doing things right , effectiveness is doing the rightthings. The short-term view is likely to lead to

efficiency, but managers may end up doing in a

right fashion the wrong task. Strategic decisions

must emphasize to balance both the perspectives.


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21. Strategic decisions can and do involve a

high degree of uncertainty: they are concerned

with the long-term success, but always necessitatekeeping an eye on the short-term ramifications of

any action.


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STRATEGY

Strategy may be defined as-1. The long-term direction and scope of the

organization.

2. That aims at gaining a competitive advantage

for the organization,

3. in the competitive setting,

4. in the light of organization's resources and

constraints,5. In order to generate customer delight and to

meet and exceed stakeholders needs.


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TYPES OF STRATEGY

1.Intended strategy: It refers to the plans orfuture efforts of the managers. It presumes a

planned, deliberate, systematic and

thoughtful approach towards strategy. Plansare the elements that deal with the actions to

be taken to achieve the ends where as policies

are the elements that elaborate on the

boundary condition i.e. limits or constraints of

each action.


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TYPES OF STRATEGY

2. Deliberate Strategy is that part of theintended strategy that is actually

implemented.

3. Realized strategy refers to the past. An

intended strategy when implemented

successfully becomes a realized strategy. It is

very rare that an intended strategy isimplemented in its original form , hence there

is hardly any intended strategy that moves in

its original form to be a realized strategy.


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TYPES OF STRATEGY

4. Unrealized Strategy refers to that part ofintended strategy which does not see the light

of the day due to changing environment ,

managerial incompetence, etc.

5. Emergent strategy refers to the evolving

strategy in light of the environmental

realities. It may or may not be formally

developed.


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TYPES OF STRATEGY

6. Imposed strategy refers to strategyimposed upon by the powerful stakeholders in

the organization. E.g. the government by its

budgets, monetary policy, trade policy,nationalization policy, delicensing policy, etc.

may dictate strategy to the firm.


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LEVELS OF STRATEGY

There are three levels of strategy

1. Corporate level strategy

2. Business Unit Level Strategy

3. Functional Level Strategy

1. Corporate level strategy : It is the strategy

formulated by top management to oversee interests

and operations of multiline corporations. It deals with

questions such as:

a. What kinds of businesses should the company be

engaged in?

b. What are the goals and expectations of each

business?


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LEVELS OF STRATEGY

2. Business Unit Level Strategy: Business unit

strategy is concerned with managing the interests

and operations of a specific line of business. It deals

with questions such as-

How will the business compete within the market?

What products/services should it offer?

Which customers does it seek to serve?

This approach is suitable for corporations having many

businesses in diverse industries.


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LEVELS OF STRATEGY

3. Functional Level Strategy: it is the strategy

chalked out by a functional specialists, in order to

further the SBU level strategy. Functional strategies

complete the hierarchy of strategies. Operational plansflow from these strategies.


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STAKEHOLDERS IN BUSINESS

They are as follows:1.The staff:

2.The communities: in which the staff live and

works for and in the organization and who is

therefore dependent upon it for their income andspending power.

3. Social customers: e.g charities, schools and

hospitals which may approach the organization for

sopnsorship and support for social causes.4. Shareholders: the investors of maoney in an

organization in the expectation and anticipation of

returns.


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STAKEHOLDERS IN BUSINESS

5.O

ther financial interests: including backers,contributors, bankers, educational, charitable ,

other loan makers.

6. suppliers: of components and raw materials

7. the community: sectors and markets in whichthe organization offers its products and services for

sale.

8. distributors and agents

9.Government departments and agencies :with whom the organization comes into contact.

10. competitors and offers of alternative

products:


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THE HIERARCHY OF STRATEGIC INTENT

Strategic intent refers to the strategic ends theorganization strives to achieve in the future.

The various elements of a strategy must ideally

contain the next hierarchial elements.

Vision: a vividly descriptive image of what a

company wants to be or wants to be known for.

Mission: A statement of intent of what a company

wants to create, and through which lines of business.


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THE HIERARCHY OF STRATEGIC INTENT

Purpose: an articulation of the functions that acompany intends to fulfil through its businesses.

Goals: the business targets that a company's vision,

mission, and purpose are company makes.

Values: the set of cherished notions and beliefs that

guide every move that a company makes.

Strategy: the methods that a company employees

to achieve the goal that its vision provides.


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VISION

Avision refers to the category of intentionsAnd desires that are broad, all-inclusive and

Forward looking.

A vision statement is a concise word picture of theorganization at some future time which sets the

overall direction of the organization.


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VISION STATEMENT

A vision statement is something to be pursued.

It is what the organization strives to be.

An image of the desire future.

A picture of the future you seek to create.

Described in the present tense, as if it were

happening now.


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CHARACTERISTICS OF AN EFFECTIVE VISION

Imaginable: a vision conveys a picture of what the future

will look like; even if a very distant future

Desirable: It will provide a set of expectations which will

satisfy and meet the needs of those who have a stake in

the situation.

Feasible: a vision must be realistic, attainable to be

effective .

Focused: is clear enough to provide guidance in decision

making.Flexible: is general enough to allow individual initiative

and alternative responses in light of changing conditions.

Communicable: is easy to communicate ; can be

successfully explained within five minutes.


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MISSION STATEMENT

An effective mission statements describes the overallpurpose of the organization.

An effective mission statements answers the

following three questions raised by none other than

Peter Drucker-

a. What is our business?

b. What should our business be?

c. What will our business be?


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A mission statement typically describes an

organization in terms of its:

1. Purpose: Why organization exists.

2. Business: The main method or activity through

which the organization tries it fulfill this purpose.

3. Values: the principles or beliefs that guide an

organization`s members.


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UTILITYOF MISSION STATEMENT

1. It provide a guide for living by remindingorganizations of fundamental ideas about their existence

and purpose.

2. It provides the boundary for strategy formulation.

3. It formally acknowledge responsibilities towards

various stakeholders.

4. It outlines norms for individual behaviour.


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QUALITIES OF MISSION STATEMENT

1. Simple and short, easy to memorize.

2. clear, but broadly written.

3. reasonably stable, but also flexible.

4. not limited quantitatively or qualitatively

5. a statement of where you want to be, not necessarily

where you are.

6. Values you hold precious.


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WHAT IS EFFECTIVE MISSION STATEMENT?

1. format: what should it look like. 2. Length: Long enough to reach the target audience:

one sentence to one page.

3. Life: It should be long lasting and can last many

years.

4. Tone: the language selected depends on the

company, target audience and originator.

Title: it is most commonly used title, but the title

itself can help set a tone.

Key words: such as service, mission, customers,

quality, employees, shareholders, growth, values, etc.


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OBJECTIVES

Objectives are operational definition of the goals

and help managers to take specific action.

Characteristics :

1. it have the dimensions of multiplicity, clarity,

specificity, quality and periodicity.

2. they are measurable.

3. they have a time dimension.

4. they can be official and operative. 5. they should not be confused with strategies.

6. they have a social responsibilities.


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WHY OBJECTIVES ?

Objectives define the role of the organization in thelarger environment.

They set the standard for performance monitoring

remedial actions.

They act as a link between the vision, mission and

goals on one hand and policies, procedures and rules on

the other.

They reduce conflict-they coordinate decisions and

decision makers.


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E.G. OBJECTIVES OF INDIAN OIL CORPORATION

To earn a reasonable rate of return oninvestment.

To further enhance marketing infrastructure and

reseller network for providing assured service to

customers throughout the country.

To ensure maximum economy in the expenditure.

To complete all planned projects within the

schedule time and approved cost.


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ROLE OF OBJECTIVES

1. Objectives define the organization's Relationship

with its Environment.

2. Objectives help an organization pursue its

vision(defining the long-term position) and

Mission(short-term targets to be achieved).

3. Objectives provide the basis for strategic

Decision-making.

4. Objectives provide the standards for

performance Appraisal.


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CHARACTERISTICS OF OBJECTIVES

1. Objectives should be understandable.

2. It should be real and specific.

3. It should be related to a time frame.

4. It should be measurable and controllable.

5. It should be challenging which after setting

should reachable.

6. Difficult objectives should correlate with each

other e.g they should be within one area.


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ISSUES IN OBJECTIVE -SETTING

1. Specificity- objectives may be stated at differentlevels of specificity. This issue is solved by stating

objectives at different levels and prefixing terms such

as corporate, general and particular so it becomes easyfor their evaluation.

2. Multiplicity- No organization operates on the basis of

a single or a few objectives. This issue deals with

different types of objectives with respect to

organizational levels(e.g. higher or lower

levels),importance(e.g. primary or secondary),etc.


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3. Periodicity- objectives are formulated for different

time periods. It is possible to set long term , medium-

term and short-term objectives. E.g. a long-term objective

may be continual profitability. Short term objectives

which support continual profitability may be return on

investment, profit margin, etc. calculated on an yearly

basis.


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4. Quality- objectives are both may be good as well bad.

E.g. a bad objective is: to be market leader in our

industry.

To restate the same objective as: to increase market

share to a minimum level of 40 % of the total with

respect to product A, over a period of the next two years

and to maintain it thereafter is a good objective.


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5.R

eality- Organization tend to have two sets of objectives: official and operative.

Official- Those which the organisations agree to attain.

Operative- those which they seek to attain in reality.

E.g. Many organisations state one of their official

objectives as the development of human resource. But

whether it is also an operative objective depends on the

amount of resources allocated to HRD.


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6. Verifiability- each objective has to be tested on the

basis of its verifiability. E.g. a qualitative objective

stated as: to create a congenial working environment

within the factory. To make such objective verifiable,

value judgment of informal experts-both insiders and

outsiders could be used.

Few quantifiable objectives measures are accidental

rates, staff turnover, absenteeism, etc.


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FACTORS CONSIDERED WHILE OBJECTIVE-SETTING

1. The forces in the environment

2. Realities of enterprise resources and internal

power relationships

3. The value system of the top executive

4. Awareness by the management about previous

experiences of the objectives.


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GOALS

The term goal signifies a general statement ofdirection in line with the mission. It may well be

qualitative in nature.

Features:1.Goals address both financial and non-financial issues.

2.Goals facilitate reasoned trade-offs.

3.Goals call for stretching the limits.

4.Goals cut across functional areas.


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POLICIES

Policies are rules or guidelines to action.

Policies are plans in the sense that they are

general statements or understandings that guide or

channel thinking in decision making.

They help in delegation of authority and still maintain

control over subordinates.


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EXAMPLES OF POLICIES

We will not question any products returned bythe customers.

we will follow a policy of filling top vacancies by

promotional within the ranks.

We will not go for any joint ventures, apart from

those for procuring technology.

We will never go for price discounts on our

products.


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TACTICS

Means by which a strategy is carried out; planned and

ad hoc activities meant to deal with the demands of the

moment, and to move from one milestone to other inpursuit of the overall goal(s). In an organization,

strategy is decided by the board of directors, and tactics

by the department heads for implementation by the

junior officers and employees.


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Understanding Strategy-7

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