BA9110 UNIT- I

STRATEGIC MANAGEMENT STRATEGY AND PROCESS

LT P C 3003 9

Conceptual framework for strategic management, the Concept of Strategy and the Strategy Formation Process Stakeholders in business Vision, Mission and Purpose Business definition, Objectives and Goals - Corporate Governance and Social responsibility-case study. UNIT II COMPETITIVE ADVANTAGE 9

External Environment - Porters Five Forces Model-Strategic Groups Competitive Changes during Industry Evolution-Globalisation and Industry Structure - National Context and Competitive advantage ResourcesCapabilities and competenciescore competencies-Low cost and differentiation Generic Building Blocks of Competitive Advantage- Distinctive Competencies-Resources and Capabilities durability of competitive Advantage- Avoiding failures and sustaining competitive advantage-Case study. UNIT - III STRATEGIES 10

The generic strategic alternatives Stability, Expansion, Retrenchment and Combination strategies Business level strategy- Strategy in the Global Environment-Corporate Strategy-Vertical Integration-Diversification and Strategic Alliances- Building and Restructuring the corporation- Strategic analysis and choice - Environmental Threat and Opportunity Profile (ETOP) - Organizational Capability Profile - Strategic Advantage Profile - Corporate Portfolio Analysis - SWOT Analysis - GAP Analysis - Mc Kinsey's 7s Framework - GE 9 Cell Model - Distinctive competitiveness - Selection of matrix - Balance Score Card-case study. UNIT IV STRATEGY IMPLEMENTATION & EVALUATION 9

The implementation process, Resource allocation, Designing organisational structure-Designing Strategic Control Systems- Matching structure and control to strategy-Implementing Strategic change-Politics-Power and Conflict-Techniques of strategic evaluation & control-case study. UNIT V OTHER STRATEGIC ISSUES 8

Managing Technology and Innovation- Strategic issues for Non Profit organisations. New Business Models and strategies for Internet Economy-case study Total: 45 TEXT BOOKS Thomas L. Wheelen, J.David Hunger and Krish Rangarajan, Strategic Management and Business policy, Pearson Education., 2006 Charles W.L.Hill & Gareth R.Jones, Strategic Management Theory, An Integrated approach, Biztantra,

Wiley India, 2007. Azhar Kazmi, Strategic Management & Business Policy, Tata McGraw Hill, Third Edition, 2008. REFERENCES
1. 2. 3. 4. 5. 6. 7. 8.

Fred.R.David, Strategic Management and cases, PHI Learning, 2008. Upendra Hachru , Strategic Management concepts & cases , Excel Books, 2006. Adriau HAberberg and Alison Rieple, Dtrategic Management Theory & Application, Oxford University Press, 2008. Arnoldo C.Hax and Nicholas S. Majluf, The Strategy Concept and Process A Pragmatic Approach, Pearson Education, Second Edition, 2005. Harvard Business Review, Business Policy part I & II, Harvard Business School. Saloner and Shepard, Podolny, Strategic Management, John Wiley, 2001. Lawerence G. Hrebiniak, Making strategy work, Pearson, 2005. Gupta, Gollakota and Srinivasan, Business Policy and Strategic Management Concepts and Application, Prentice Hall of India, 2005.

UNIT- I

STRATEGY AND PROCESS

Conceptual framework for strategic management, the Concept of Strategy and the Strategy Formation Process Stakeholders in business Vision, Mission and Purpose Business definition, Objectives and Goals - Corporate Governance and Social responsibility-case study. Strategic management is not a box of tricks or a bundle of techniques. It is analytical thinking and commitment of resources to action. Peter Drucker

Definition: The on-going process of formulating, implementing and controlling broad plans guide the organizational in achieving the strategic goods given its internal and external environment. Alfred D Chandler (1962) , Chandler defined strategy as: The determination of the basic long-term goals and objectives of an enterprise and the adoption of the courses of action and the allocation of resources necessary for carrying out these goals. Note that Chandler refers to three aspects Features of strategic Management 1. On-going process: Strategic management is a on-going process which is in existence through out the life of organization. 2. Shaping broad plans: First, it is an on-going process in which broad plans are firstly formulated than implementing and finally controlled. 3. Strategic goals: Strategic goals are those which are set by top management. The broad plans are made in achieving the goals. Evolution of strategic management From his extensive work in the field, Bruce Henderson of the Boston Consulting Group concluded that intuitive strategies cannot be continued successfully if (1) the corporation becomes large, (2) the layers of management increase, or (3) the environment changes substantially. Phase 1 - Basic financial planning: Seek better operational control by trying to meet budgets. Phase 2 - Fore-cast based planning: Seeking more effective planning for growth by trying to predict the future beyond

next year. Phase 3. Externally oriented planning (strategic planning): Seeking increasing responsiveness to markets and competition by trying to think strategically. Phase 4. Strategic management: Seeking a competitive advantage and a successful future by managing all resources. Phase 4 in the evolution of the strategic management includes a consideration of strategy implementation and evaluation and control, in addition to the emphasis on the strategic planning in Phase 3. General Electric, one of the pioneers of the strategic planning, led the transition from the strategic planning to strategic management during the 1980s. By the 1990s, most corporations around the world had also begun the conversion to strategic management. In general, a corporate strategy has the following characteristics: It is generally long-range in nature, though it is valid for short-range situations also and has short-range implications. It is action oriented and is more specific than objectives. It is multipronged and integrated It is flexible and dynamic. It is formulated at the top management level, though middle and lower level managers are associated in their formulation and in designing sub-strategies. It is generally meant to cope with a competitive and complex setting. It flows out of the goals and objectives of the enterprise and is meant to translate them into realities. It is concerned with perceiving opportunities and threats and seizing initiatives to cope with them. It is also concerned with deployment of limited organizational resources in the best possible manner. It gives importance to combination, sequence, timing, direction and depth of various moves and action initiatives taken by managers to handle environmental uncertainties and complexities. It provides unified criteria for managers in function of decision making. Framework The basic framework of strategic process can be described in a sequence of five stages as shown in the figure - Framework of strategic management :

The five stages are as follows: Stage one: This is the starting point of strategic planning and consists of doing a situational analysis of the firm in the environmental context. Here the firm must find out its relative market position, corporate image, its strength and weakness and also environmental threats and opportunities. This is also known as SWOT (Strength, Weakness, Opportunity, Threat) analysis. You may refer third chapter for a detailed discussion on SWOT analysis. Stage two: This is a process of goal setting for the organization after it has finalised its vision and mission. A strategic vision is a roadmap of the companys future providing specifics about technology and customer focus, the geographic and product markets to be pursued, the capabilities it plans to develop, and the kind of company that management is trying to create. An organizations Mission states what customers it serves, what need it satisfies, and what type of product it offers. Stage three: Here the organization deals with the various strategic alternatives it has. Stage four: Out of all the alternatives generated in the earlier stage the organization selects the best suitable alternative in line with its SWOT analysis. Stage five: This is a implementation and control stage of a suitable strategy. Here again the organization continuously does situational analysis and repeats the stages again.

6.2 Importance of Strategic Management Strategic management provides the framework for all the major business decisions of an enterprise such as decisions on businesses, products and markets, manufacturing facilities, investments and organizational structure. In a successful corporation, strategic planning works as the pathfinder to various business opportunities; simultaneously, it also serves as a corporate defence mechanism, helping the firm avoid costly mistakes in product market choices or investments. S trategic management has the ultimate burden of providing a business organization with certain core competencies and competitive advantages in its fight for survival and growth. It seeks to prepare the corporation to face the future and even shape the future in its favour. Its ultimate burden is influencing the environmental forces in its favour, working into the environs and shaping it, instead of getting carried away by its turbulence or uncertainties. THE TASK OF STRATEGIC MANAGEMENT The strategy-making/strategy-implementing process consists of five interrelated managerial tasks. These are

 Setting vision and mission: Forming a strategic vision of where the organization is headed, so as to provide long-term direction, delineate what kind of enterprise the company is trying to become and infuse the organization with a sense of purposeful action. Setting objectives: Converting the strategic vision into specific performance outcomes for the company to achieve. Crafting a strategy to achieve the desired outcomes. Implementing and executing the chosen strategy efficiently and effectively. Evaluating performance and initiating corrective adjustments in vision, long-term direction, objectives, strategy, or execution in light of actual experience, changing conditions, new ideas, and new opportunities. Strategy Formation Process Simple model Working model of strategic planning process

Step 1: Identifying the organisations current mission, objectives, and strategies

Mission: the firms reason for being The scope of its products and services Goals: the foundation for further planning Measurable performance targets

Step 2: Conducting an external analysis

The environmental scanning of specific and general environments Focuses on identifying opportunities and threats Customers: Who are the organisations customers? Products or services: What are the organisations major products or services? Markets: Where does the organisation compete geographically? Technology: How technologically current is the organisation?

 Concern for survival growth, and profitability: Is the organisation committed to growth and financial stability? Philosophy: What are the organisations basic beliefs, values, aspirations, and ethical priorities? Self-concept: What is the organisations major competitive advantage and core competencies? Concern for public image: How responsive is the organisation to societal and environmental concerns? Concern for employees: Does the organisation consider employees a valuable asset? Source: Based on F. David, Strategic Management , 8th ed. (Upper
Step 3: Conducting an internal analysis

Assessing organisational resources, capabilities, activities, and culture: Strengths (core competencies) create value for the customer and strengthen the competitive position of the firm. Weaknesses (things done poorly or not at all) can place the firm at a competitive disadvantage.
Steps 2 and 3 comb ined are called a SWOT analysis. (Strengths, Weaknesses, Opportunities, and Threats)

Step 4: Formulating strategies

Develop and evaluate strategic alternatives Select appropriate strategies for all levels in the organisation that provide relative advantage over competitors Match organisational strengths to environmental opportunities Correct weaknesses and guard against threats
Step 5: Implementing strategies

Implementation: effectively fitting organisational structure and activities to the environment The environment dictates the chosen strategy; effective strategy implementation requires an organisational structure matched to its requirements.
Step 6: Evaluating results

How effective have strategies been? What adjustments, if any, are necessary

VISION, MISSION AND OBJECTIVES

Since organizations are deliberate and purposive creations, they have some objectives; the end results for which they strive. These end results are referred to as mission, purpose, objective, goal, target, This contextual difference among various terms is important in understanding their nature relevant for managerial actions.From planning point of view, an organization must define why it exists, how. it justifies that existence, and when it justifies the reasons for that existence. The answers of these questions lie in the organizations: 1. Mission and purpose, 2. Long-term objectives, a A Strategic vision is a road map of a companys future providing specifics about technology and customer focus, the geographic and product markets to be pursued, the capabilities it plans to develop, and the kind of company that management is trying to create The three elements of a strategic vision: 1. Coming up with a mission statement that defines what business the company is presently in and conveys the essence of Who we are and where we are now? 2. Using the mission statement as basis for deciding on a long-term course making choices about Where we are going? 3. Communicating the strategic vision in clear, exciting terms that arouse organization wide commitment. How to develop a strategic vision The entrepreneurial challenge in developing a strategic vision is to think creatively about how to prepare a company for the future. Forming a strategic vision is an exercise in intelligent entrepreneurship. Many successful organizations need to change direction not in order to survive but in order to maintain their success. A well-articulated strategic vision creates enthusiasm for the course management has charted and engages members of the organization. The best-worded vision statement clearly and crisply illuminate the direction in which organization is head Mission According to Glueck & Jauch mission is answer to the question what business are we in that is faced by

corporate-level strategist A companys Mission statement is typically focused on its present business scope who we are and what we do; mission statements broadly describe an organizations present capabilities, customer focus, activities, and business makeup.

Why organization should have mission? To ensure unanimity of purpose within the organization. To provide a basis for motivating the use of the organizations resources. To develop a basis, or standard, for allocating organizational resources. To establish a general tone or organizational climate, for example, to suggest a businesslike operation. To serve as a focal point for those who can identify with the organizations purpose and direction, and to deter those who cannot form participating further in the organizations activities. To facilitate the translation of objective and goals into a work structure involving the assignment of tasks to responsible elements within the organization. To specify organizational purposes and the translation of these purposes into goals in such a way that cost, time, and performance parameters can be assessed and controlled.

Examples of mission statement Mission of Unilever: The mission of our company, as William Hasketh Lever saw it, is to make cleanliness commonplace, to lessen work for women, to foster health, and to contribute to personal attractiveness that life may be more enjoyable for the people who use our products. Mission of Mckinsey & Co: To help business corporation and governments to be more successful. Mission of Cadbury India: To attain leadership position in the confectionary market and achieve a strong presence in the food drinks sector. Mission of Reliance Industries: To become a major player in the global chemicals business and simultaneously grow in other growth industries like infrastructure. Mission of Ranbaxy: To become a $1 billion research-based global pharmaceuticals company.

Objectives and Goals Objectives are organizations performance targets the results and outcomes it wants to achieve. They function as yardstick for tracking an organizations performance and progress. Objectives are open-ended attributes that denote the future states or outcomes. Goals are close-ended attributes which are precise and expressed in specific terms. Objectives with strategic focus relate to outcomes that strengthen an organizations overall business position and competitive vitality. Objective to be meaningful to serve the intended role must possess following characteristics: Objectives should define the organizations relationship with its environment. They should be facilitative towards achievement of mission and purpose. They should provide the basis for strategic decision-making They should provide standards for performance appraisal. Objectives should be understandable. Objectives should be concrete and specific Objectives should be related to a time frame Objectives should be measurable and controllable Objectives should be challenging Different objectives should correlate with each other Objectives should be set within constraints

10. STRATEGIC LEVELS IN ORGANISATIONS

Social responsibility
Social Responsibility towards different Interest groups: 1. Responsibility towards owners: Owners are the persons who own the business. They contribute capital and bear the business. Run the business efficiently Proper utilization of capital and other resources. Regular and fair return on capital invested. Responsibility towards Investors: Investors are those who provide finance by way of investment in shares, bonds, etc. Banks, financial institutions and investing public are all included in this category Ensuring safety of their investment Regular payment of interest. Responsibility towards employees: Business needs employees or workers to work for it. If the employees are satisfied and efficient, then the business can be successful. Timely and regular payment of wages and salaries. Opportunity for better career prospects. Proper working conditions Timely training and development Better living conditions like housing, transport, canteen and crches. Responsibility towards customers: No business can survive without the support of customers. Products and services must be able to take care of the needs of the customers. There must be regularity in supply of goods and services. Price of the goods and services should be reasonable and affordable There must be proper after sales-service Grievances of the consumers if any must be settled quickly. Responsibility towards competitors: Competitors are the other businessmen or organization involved in a similar type of business. Not to offer to customers heavy/discounts and or free products in every sale. Not to defame competitors through false advertisements.

Responsibility towards suppliers: Suppliers are businessmen who supply raw materials and other items required by manufacturers and traders. Giving regular orders for purchase of goods Availing reasonable credit period Timely payment of dues. 8. Responsibility towards Government: Business activities are governed by the rules and regulations framed by the government. Payment of fees, duties and taxes regularly as well as honestly Conforming to pollution control norms set up by government Not to indulge in restrictive trade practices. 9. Responsibility towards society: A society consists of individuals, groups, organizations, families etc. They all are the members of the society. To help the weaker and backward sections of the society. To generate employment. To protect the environment . To provide assistance in the field of research on education, medical science, technology etc. 9. Responsibility towards society: A society consists of individuals, groups, organizations, families etc. They all are the members of the society. To help the weaker and backward sections of the society. To generate employment. To protect the environment . To provide assistance in the field of research on education, medical science, technology etc Steps in strategy formation process: Strategy formulation: