Chapter 1
What is STRATEGY?
Tactical course of action which is designed to achieve long-term objectives
Art and science of planning and marshalling resources for their most efficient and effective use in a
changing environment
What management decides about the future direction and scope
Entails managerial choice among alternative action programs, competitive moves and different business
approaches
Large-scale, future-oriented plan; game plan
Framework for managerial decisions
Levels of Strategy
1. Corporate Level – business you should be in
2. Business Level – tactics to beat the competition
3. Functional Level – operational methods to implement tactics
1. Corporate Level (Where the company wants to be?)
a. Formulation of Strategy and Strategy Implementation
b. Greater risk, cost, and profit potential
c. Value-oriented and conceptual than other levels
d. Major financial policy decision i.e. acquisition, diversification, and structural redesigning
e. Strategic decisions relate to organization-wide policies
f. Strategic decisions are taken care by top-level management (BOD)
g. Greater need of flexibility
2. Business Level
a. A unit within the whole
b. Concerned with competition in a market
c. What products or services should be developed and offered to which markets in order to meet
customer needs and organizational objectives
d. Creation of specific policies related to general directions
e. Managers translate general directions and intent to concrete functional objectives
3. Functional/Operational Level
a. Decision-making with respect to specific functional areas
b. “Doing things right”
c. Narrow areas of activity which are vital, pervasive or continuing importance to the total organization
d. How different functions contribute to other levels
e. Strategic approach for managing frontline operating units
What is MANAGEMENT?
Defined as all the activities and tasks undertaken for achieving goals by continuous activities like:
PLANNING, ORGANIZING, LEADING, and CONTROLLING
Levels of Management
1. Top or Administrative Level
Lay down the policies and objective of the organization
Strategizing the plans of the enterprise and aligning competent managers to the departments or
middle level to carry them out
Keeping the communication between the enterprise and the outside world
2. Middle or Executory Level
Carry out the plans of the organization according to policies and directives laid down by the top-
level mgmt.
Organize the division or departmental activities
Inspire and create a motivation to improve efficiency of junior managers
3. Low or Supervisory Level
Allocate task and responsibilities to the operative employees
Ensure quality and be responsible for production quantity
Communicate the goals and objective of the firm
Give instruction and guide direction to workers on their day to day jobs
Give periodic reports of workers to higher-level managers
STRATEGIC DECISION MAKERS
ENDS MEANS
Board of Corporate Business Functional
(What is to be (How to achieve?)
achieved) Directors Managers Managers Managers
Mission,
Goals, & PR PR SR
Philosophy
Long-term Grand Strategy
objectives SR PR PR
Short-term
Annual
Objectives
strategies and SR PR PR
policies
Note: PR – Principal Responsibility; SR – Secondary Responsibility
The Strategy Makers
The ideal strategic management team:
CEO Planning Staff
Obtains
Product Managers input from Lower-level management
Functional Area Head and supervisor
Role of CEO:
1. Provides long-term direction
2. Assumes ultimate responsibility for firm’s success
3. Solicits guidance from the BOD
What is STRATEGIC MANAGEMENT?
Management of an organization’s resources to achieve its goals and objectives
Setting objectives, analysing the competitive environment, analysing the internal organization, evaluating
strategies, and ensuring that management rolls out the strategies across the org.
Set of decisions and actions that result in the formulation and implementation of plans designed achieve
company objectives
9 Critical Tasks of Strategic Management
1.Formulate the company’s mission. 6.Select long-term objectives and grand strategies.
2.Conduct internal analysis. 7.Develop annual objectives and short-term
3.Assess the company’s external environment. strategies.
4.Analyze company’s options. 8.Implement the strategic choices.
5.Identify most desirable options. 9.Evaluate success of the strategic process.
Nature and Value of Strategic Management
1.Dimensions of Strategic Decisions 5.The Strategic Management Process
2.Formality in Strategic Management 6.Components of the Strategic Management Model
3.Benefits of Strategic Management 7.Strategic Management as a Process
4.Risks of Strategic Management
1. Dimensions of Strategic Decisions
Involves the entire range of decisions.
Require top-management decisions
Are future-oriented
Require large amount of the firm’s resources
Usually have multifunctional or multi-business consequences
Often affect the firm’s long-term prosperity
Require considering the firm’s external environment
2. Formality of Strategic Management – degree to which participants, responsibilities, authority, and discretion in
decision making are specified.
Size of organization
Factors affecting Predominant management styles
degree of Complexity of environment
Formality Production process
Problems
Purpose of planning system
3. Benefits of Strategic Management
Enhances the firm’s ability to prevent problems
Emphasizes group-based strategic decisions likely to be based on best available alternatives
Improves employee’s understanding of the productivity-reward relationship
Reduces gaps/overlaps in activities among employees as their participation clarifies differences in roles
Resistance to change is reduced
4. Risk of Strategic Management
Time involve may negatively impact operational responsibilities of managers
Lack of involvement of strategy makers in strategy implementation may result in shrinking of
responsibility for strategic decisions
Potential disappointment of employees over unattained expectations requires managerial time and
training
STRATEGIC MANAGEMENT FRAMEWORK
PURPOSE & VALUES
FORMULATION IMPLEMENTATION
Prescriptive Approach – outlines how strategies should be Descriptive Approach – how
developed strategies should be put into practice
2. Strategy 3. Goal 5. Control &
1. Analysis 4. Structure
Formation Setting Feedback
Diagnosis
Organizational
Remote/External Opportunities Guiding Budgets & Financial
Structure &
Environment Risk Assessment Policies Plans
Leadership
Scenarios
Objectives
Initiatives,
Corporate
Industry Environment programs & Incentives
Business
investments
Strategic Decisions Functional
Competitive Advantage
Generic Strategy
Portfolio management
Geographic scope
Market positioning Mergers,
Measures and
Internal Assessment acquisitions & Review & Evaluation
Scorecards
Value Chain Divestitures
Core Competence
2 school of thoughts of strategic management
Prescriptive Approach
Descriptive Approach
7. Strategic Management as a Process
Changes in any component will affect other components
Strategy formulation and implementation are sequential
Necessity of feedback from institutionalization, review, and evaluation to early stages of process
Need to regard it as dynamic, involving constant changes in interdependent strategic activities
8. Pitfalls of Strategic Management
1. Using strategic planning to gain control over decisions and resources
2. Doing strategic planning only to satisfy accreditation or regulatory requirements.
3. Too hastily moving form mission development to strategy formulation.
4. Failing to communicate the plan to employees, who continue working in the dark.
5. Top managers making any intuitive decisions that conflict with the formal plan.
6. Top managers not actively supporting the strategic-planning process.
7. Failing to use plans as a standard for measuring performance.
8. Delegating planning to a “planner” rather than involving all managers.
9. Failing to involve key employees in all phase of planning.
10. Failing to create a collaborative climate supportive of change.
11. Viewing planning as unnecessary or unimportant.
12. Becoming so engrossed in current problems that insufficient or no planning is done.
13. Being so formal in planning that flexibility and creative are stifled.
GUIDELINES FOR EFFECTIVE S.M
It should:
1. Be a people process rather than a paper process.
2. Be a learning process for all managers and employees.
3. Be Words supported by numbers rather than numbers supported by words.
4. Be simple and non-routine.
5. Vary assignments, team memberships, meeting formats, and even the planning calendar.
6. Challenge the assumptions underlying the current corporate strategy.
7. Welcome bad news.
8. Welcome open-mindedness and a spirit of inquiry and learning.
9. Not be a bureaucratic mechanism.
10. Not become ritualistic, stilted, or orchestrated.
11. Not be too formal, predictable, or rigid.
12. Not contain jargon or arcane planning language.
13. Not be a formal system for control.
14. Not disregard qualitative information.
15. Not be controlled by “technicians”.
16. Do not pursue too many strategies at once.
17. Continually strengthen the “good ethics is good business” policy.
CHAPTER 2
What is a Mission Statement?
a concise explanation of the organization’s existence reason for
describes the organization’s purpose and its overall intention
supports the vision and serves to communicate purpose and direction to employees, customers, vendors,
and other stakeholders
“what is our organization’s purpose?” “why does our organization exist?”
What is a Vision Statement?
Looks forward and creates a mental image of the ideal state that the organizations wishes to achieve
Inspirational and aspirational and should challenge employees
“What problem are we seeking to solve?” “Where are we headed?” “If we achieved all strategic goals,
what would we look like 10 years from now?”
CRITERIA GOALS OBJECTIVES
The direction and overall destination of
The exact actions and steps your
DEFINITION your company that helps you realize your
company must take to reach its goals
vision
SPECIFICITY General intention or direction Specific, precise
PLAN Broad in scope Narrow in scope
SIZE Large in size, the whole Small chunks, part of the whole
Acquire 28% more customers from
EXAMPLE Increase international customer base the UK, Australia, and Germany in
next 3 months.
Specific actions and measurable
ACTIONS A general outcome
steps
Difficult; goals are usually intangible and Easy; it must be measurable and
MEASUREMENT
may not be strictly measureable tangible
TIMEFRAME Long-term Medium to short-term
Goals and Objectives have to be: Specific. Measureable. Attainable. Realistic. Time-bound
10 Benefits of Having a Clear Vision & Mission
1. Achieve clarity of purpose among all managers and employees.
2. Provide a basis for all other strategic planning activities.
3. Provide direction.
4. Provide a focal point for all stakeholders of the firm.
5. Resolve divergent views among managers.
6. Promote a sense of shared expectations among all managers and employees.
7. Project a sense of worth and intent to all stakeholders.
8. Project an organized, motivated organization worthy of support.
9. Achieve higher organizational performance.
10. Achieve synergy among managers and employees.
Characteristics of a Mission Statement
1.Broad in scope
2.Less than 250 words
3.Inspiring
4.Include the 9 components
5.Reconciliatory
6.Enduring
7.Identify the utility of the firm’s product
8.Reveal that the firm is socially responsible
9.Reveal that the firm is environmentally possible
9 Essential Components of Mission Statement
1. Customers
2. Products or Services
3. Markets
4. Technology
5. Concern for survival, growth & profitability
6. Philosophy
7. Self-concept
8. Concern for public image
9. Concern for employees
