Strategic Management

The word strategy is derived from Greek word

stratagia in 400 B.C . the word strategia means the art and science for guiding and directing military forces. Stratagy is not just a plan . it is comprehensive and covers all major activities of the enterprise . it is unified , vast and integrated plan that relates the strategic advantages of the firm to the challenges of the means to achieve the companys objectives.

 Lloydd.byans defines strategic management is

concerned with making decisions about an organisations future direction and implementing those decisions . Alfred D. chandler defines it as the determination of the basic long term goals and objectives of an enterprise and the adaptation of the course of action and the allocation of resources necessary for carrying out these goals.

 Keenath Andrews defined it as a method of

describing the future position of a company , is objectives, goals, policies and plan that may be required for guiding the company from its exisiting positions to where it desires to go. IGOR ANSOFF. Defined it as the common thread among the organisations activities and product markets that defines the essential nature of business that an organization was or plans to be.

 PROF. WILLIAM F.GLUECK . defines it as A

Unified , comprehensive and integrated plan designed to assure that the basic objectives of the enterprise are achieved. By and large it is clear that a strategy begins with the concepts of how to use the resources of an organization most effectively in a changing environment.

In a nutshell strategy is.. A plan or course of action or a set of decision rules forming a pattern or creating a common thread.

SCOPE & IMPORTANCE OF STRATEGIC MANAGEMENT

Can minimize the risks

Financial benefits
Improved ability to prevent problems Improved quality of strategic decisions through

group discussion & interactions Better employee relation Reduced gaps and overlaps in activities Lesser reluctance to change

Hurdles in Strategic Management

It is a costly affair Calls for expertise

Evading responsibility

Objectives of Strategic management

Framework for operational planning Clarity in direction of activities

Increase organizational effectiveness

Personnel satisfaction

Balanced Scorecard A tool for strategic management

The Balanced Scorecard is a management system that maps an organization's strategic objectives into performance metrics in four perspectives: financial, internal processes, customers, and learning and growth. These perspectives provide relevant feedback as to how well the strategic plan is executing so that adjustments can be made as necessary.

Balanced Scorecard A tool for strategic management

The Balanced Scorecard (BSC) was published in 1992 by

Robert Kaplan and David Norton. In addition to measuring current performance in financial terms, the Balanced Scorecard evaluates the firm's efforts for future improvement using process, customer, and learning and growth metrics. The term "scorecard" signifies quantified performance measures and "balanced" signifies that the system is balanced between: short-term objectives and long-term objectives financial measures and non-financial measures lagging indicators and leading indicators internal performance and external performance perspectives

Balanced Scorecard Financial Perspective

The financial perspective addresses the question of how

shareholders view the firm and which financial goals are desired from the shareholder's perspective. The specific goals depend on the company's stage in the business life cycle. For example: Growth stage - goal is growth, such as revenue growth rate Sustain stage - goal is profitability, such ROI Harvest stage - goal is cash flow and reduction in capital requirements

Balanced Scorecard Internal Process Perspective

Internal business process objectives address the

question of which processes are most critical for satisfying customers and shareholders. These are the processes in which the firm must concentrate its efforts to excel. For example,

Manufacturing excellence Increased productivity Reduced delays

Balanced Scorecard Learning and Growth Perspective

Learning and growth metrics address the question of

how the firm must learn, improve, and innovate in order to meet its objectives. Much of this perspective is employee-centered. For example,

Manufacturing learning's Product focus Time to market

Balanced Scorecard Customer Perspective

The customer perspective addresses the question of

how the firm is viewed by its customers and how well the firm is serving its targeted customers in order to meet the financial objectives. Generally, customers view the firm in terms of time, quality, performance, and cost. Most customer objectives fall into one of those four categories.

Corporate Level Strategy

Corporate level strategy has to do with the mix and

composition of the corporations business units.

Corporate level strategy fundamentally is concerned

with the selection of businesses in which the company should compete and with the development and coordination of that portfolio of businesses.

Corporate level strategy

Corporate Strategy - is concerned with the

overall purpose and scope of the business to meet stakeholder expectations.

This is a crucial level since it is heavily influenced by

investors in the business and acts to guide strategic decision-making throughout the business.
Corporate strategy is often stated explicitly in a

"mission statement".

Corporate Level Strategy

Corporate level strategy is concerned with:

Reach - defining the issues that are corporate

responsibilities; these might include identifying the overall goals of the corporation, the types of businesses in which the corporation should be involved, and the way in which businesses will be integrated and managed.
Competitive Contact - defining where in the

corporation competition is to be localized.

Corporate Level Strategy

Managing Activities and Business Interrelationships - Corporate strategy seeks to

develop synergies by sharing and coordinating staff and other resources across business units, investing financial resources across business units, and using business units to complement other corporate business activities

Corporate Level Strategy

Management Practices - Corporations decide how

business units are to be governed: through direct corporate intervention (centralization) or through more or less autonomous government (decentralization) that relies on persuasion and rewards.

Corporate Level Strategy

Corporations are responsible for creating value

through their businesses. They do so by managing their portfolio of businesses, ensuring that the businesses are successful over the long-term, developing business units, and sometimes ensuring that each business is compatible with others in the portfolio.

Corporate strategy Goal setting

Corporate strategy Positioning of an organization

Positioning has come to mean the process by which

marketers try to create an image or identity in the minds of their target market for its product, brand, or organization. Positioning is all about 'perception'. As perception differs from person to person, so do the results of the positioning. For example, what you perceive as quality, value for money, etc, is different to my perception. However, there might be similarities as well.

 Positioning can be defined as an activity of creating a brand

offer in such a manner that it occupies a distinctive place and value in the target customers mind
positioning in every 3 5 years

According to Scott Davis, a company should change its

For example

Kotak Mahindra Think investment, think Kotak Wal-Mart - Always low prices, Always. Big Bazaar - Isse sasta aur acha aur kahin nahin Tata - Improving the quality of life

Corporate strategy Handling turbulence

Analyzing the market environment and conducting a

SWOT analysis
Developing contingency plans for important aspects

of business
Financial planning Marketing Planning Human resource planning Operations planning

Corporate strategy - Strategic Investments

Strategic options for increasing sales
Market penetration Market expansion Product development Market development

Strategic options for increasing profits

Reduce cost Rationalize operations

Investment in Core strategy

Target market Competitors Competitive advantage

Business level strategy

Business-level strategy is applicable in those

organizations, which have different businesses-and each business is treated as strategic business unit (SBU).
The fundamental concept in SBU is to identify the

discrete independent product/market segments served by an organization.

Since each product/market segment has a distinct

environment, a SBU is created for each such segment.

Business level strategy

For example, Reliance Industries Limited operates in

textile fabrics, FMCG, jewellery and a variety of petrochemical products. For each product group, the nature of market in terms of customers, competition, and marketing channel differs.

Business level strategy

There-fore, it requires different strategies for its different

product groups.

Thus, where SBU concept is applied, each SBU sets its

own strategies to make the best use of its resources (its strategic advantages) given the environment it faces.

At such a level, strategy is a comprehensive plan

providing objectives for SBUs, allocation of re-sources among functional areas and coordination between them for making optimal contribution to the achievement of corporate-level objectives.

Business level strategy

Such strategies operate within the overall strategies

of the organization. The corporate strategy sets the long-term objectives of the firm and the broad constraints and policies within which a SBU operates.

The corporate level will help the SBU define its scope

of operations and also limit or enhance the SBUs operations by the resources the corporate level assigns to it. There is a difference between corporatelevel and business-level strategies.

Business level strategy

Therefore, corporate strategy usually applies to the

whole enterprise, while business strategy, less comprehensive, defines the choice of product or service and market of individual business within the firm. In other words, business strategy relates to the how and corporate strategy to the what.

Corporate strategy defines the business in which a

company will compete preferably in a way that focuses resources to convert distinctive competence into competitive advantage.

Business level strategy

Corporate strategy is not the sum total of business

strategies of the corporation but it deals with different subject matter. While the corporation is concerned with and has impact on business strategy, the former is concerned with the shape and balancing of growth and renewal rather than in market execution.

Functional level strategy

Functional strategy, as is suggested by the title,

relates to a single functional operation and the activities involved therein.

Decisions at this level within the organization are

often described as tactical. Such decisions are guided and constrained by some overall strategic considerations.

Functional level strategy

Functional strategy deals with relatively restricted

plan providing objectives for specific function, allocation of resources among different operations within that functional area and coordination between them for optimal contribution to the achievement of the SBU and corporate-level objectives.

Functional level strategy

Below the functional-level strategy, there may be

operations level strategies as each function may be dividend into several sub functions. For example, marketing strategy, a functional strategy, can be subdivided into promotion, sales, distribution, pricing strategies with each sub function strategy contributing to functional strategy.

Functional level strategy

Functional level strategies in marketing, finance,

operations, human resources, and R&D involve the development and coordination of resources through which business unit level strategies can be executed efficiently and effectively.
Functional units of an organization are involved in

crucial strategies by providing input into the business unit level and corporate level strategy, such as providing information on resources and capabilities on which the higher level strategies can be based.

 The BCG matrix is a chart that had been created by

Bruce Henderson for the Boston Consulting Group in 1968 to help corporations with analyzing their business units or product lines.
This helps the company allocate resources and is

used as an analytical tool in brand marketing, product management, strategic management, and portfolio analysis

Mckinsey 7S Model
The model is based on the theory that, for an

organization to perform well, these seven elements need to be aligned and mutually reinforcing. So, the model can be used to help identify what needs to be realigned to improve performance, or to maintain alignment (and performance) during other types of change.
processes, organizational merger, new systems, change of leadership, and so on the model can be used to understand how the organizational elements are interrelated, and so ensure that the wider impact of changes made in one area is taken into consideration.

Whatever the type of change restructuring, new

Mckinsey 7S Model
You can use the 7S model to help analyze the current

situation (Point A), a proposed future situation (Point B) and to identify gaps and inconsistencies between them. It's then a question of adjusting and tuning the elements of the 7S model to ensure that your organization works effectively and well once you reach the desired endpoint.

McKinsey Model
The McKinsey 7S model involves seven interdependent

factors which are categorized as either "hard" or "soft" elements: Hard Elements
Strategy Structure Systems

Soft Elements
Shared Values Skills Style Staff

 "Hard" elements are easier to define or identify and

management can directly influence them: These are strategy statements; organization charts and reporting lines; and formal processes and IT systems. "Soft" elements, on the other hand, can be more difficult to describe, and are less tangible and more influenced by culture. However, these soft elements are as important as the hard elements if the organization is going to be successful.

 Strategy: the plan devised to maintain and build

competitive advantage over the competition. Structure: the way the organization is structured and who reports to whom. Systems: the daily activities and procedures that staff members engage in to get the job done. Shared Values: called "superordinate goals" when the model was first developed, these are the core values of the company that are evidenced in the corporate culture and the general work ethic.

 Style: the style of leadership adopted.

Staff: the employees and their general capabilities.

Skills: the actual skills and competencies of the

employees working for the company.

7S Checklist Questions
Strategy:
How do we intend to achieve our objectives? How do we deal with competitive pressure?

How are changes in customer demands dealt with?

How is strategy adjusted for environmental issues?

7S Checklist Questions
Structure: How is the company/team divided? What is the hierarchy? How do the various departments coordinate activities? Is decision making and controlling centralized or decentralized?

7S Checklist Questions
Systems:

What are the main systems that run the

organization? Consider financial and HR systems as well as communications and document storage. Where are the controls and how are they monitored and evaluated? What internal rules and processes does the team use to keep on track?

7S Checklist Questions
Shared Values: What are the core values? What is the corporate/team culture? How strong are the values? What are the fundamental values that the company/team was built on?

7S Checklist Questions
Style: How participative is the management/leadership style? How effective is that leadership? Do employees/team members tend to be competitive or cooperative? Are there real teams functioning within the organization or are they just nominal groups?

7S Checklist Questions
Staff:

What positions or specializations are represented

within the team? What positions need to be filled? Are there gaps in required competencies?

7S Checklist Questions
Skills:

What are the strongest skills represented within the

company/team? Are there any skills gaps? What is the company/team known for doing well? Do the current employees/team members have the ability to do the job? How are skills monitored and assessed?

BCG Matrix
Boston Consulting Group Matrix
Enhances multi-divisional firm in formulating strategies
Autonomous divisions = business portfolio Divisions may compete in different industries Focus on market-share position & industry growth rate

BCG Matrix
Relative Market Share Position
Ratio of a divisions own market share in an industry to the market share held by the largest rival firm in that industry

BCG Matrix
High 1.0

Relative Market Share Position

54 Medium .50

Low 0.0

Industry Sales Growth Rate

High +20

Stars II

Question Marks I

Medium

Cash Cows III

Low -20

Dogs IV

BCG Matrix
Question Marks
Low relative market share compete in highgrowth industry
Cash needs are high

Case generation is low

BCG Matrix
Stars
High relative market share and high growth rate
Best long-run opportunities for growth & profitability

Substantial investment to maintain or strengthen dominant position

BCG Matrix
Cash Cows
High relative market share, competes in lowgrowth industry
Generate cash in excess of their needs

Milked for other purposes

Maintain strong position as long as possible

BCG Matrix
Dogs
Low relative market share & compete in slow or no market growth
Weak internal & external position

Grand Strategy Matrix

Quadrant I

Excellent strategic position Concentration on current markets/products Take risks aggressively when necessary

Grand Strategy Matrix

Quadrant II

Evaluate present approach How to improve competitiveness Rapid market growth requires intensive strategy

Grand Strategy Matrix

Quadrant III

Compete in slow-growth industries Weak competitive position Drastic changes quickly Cost & asset reduction (retrenchment)

Grand Strategy Matrix

Quadrant IV

Strong competitive position Slow-growth industry Diversification to more promising growth areas

Portfolio analysis
Portfolio analysis is a systematic way to analyze the

products and services that make up an association's business portfolio. All associations (except the simplest and the smallest) are involved in more than one business.

Each of these is one of the association's strategic

business units (SBUs). Each business consists of a portfolio of products and services. For example, an association's publishing business might include a professional journal, a lay magazine, specialized newsletters geared to different member segments, CDs, a website, social networking sites, etc.

 Portfolio analysis helps you decide which of these

products and services should be emphasized and which should be phased out, based on objective criteria. Portfolio analysis consists of subjecting each of the association's products and services through a progression of finer screens. During a time of cutbacks and scarce resources, it is essential to screen out programs and services that are not essential to most members. Those that appeal to a more limited segment can be funded by those desiring the product or service rather than by dues.

Advantages
1) It encourages management to evaluate each of the

organization's businesses individually and to set objectives and allocate resources for each.
2) It stimulates the use of externally oriented data to

supplement management's intuitive judgment.

3) It raises the issue of cash flow availability for use in

expansion and growth.

Limitations
1. It is not easy to define product/market segments. 2. It provides an illusion of scientific rigor when some subjective judgments are involved.
Considering both its advantages and disadvantages,

portfolio analysis should be regarded as a disciplined and organized way of thinking about asset allocation. It is only a subjective tool, however, and is not a substitute for the ultimate professional judgment of the responsible decision-makers.

PROGRAM EVALUATION WORKSHEET

Line of Business_______________________________________ Product or Service______________________________________ Analysis by_________________________ Date______________ Instructions: Evaluate the program or service on a scale of 1 to 5, with 1 being least favorable and 5 being most favorable. Then add your ratings in each section, average them, and write the numerical score at the end of the section. Then check which description best fits your analysis. Give a high score if the average was 5. Give everything else a low score. Example: if you rate Question 1 as 5 and 3 respectively, this would result in an average score of 4. You would then check "poor fit." 1. GOOD PROGRAM FIT: Does the program fit our mission? a. Does this program carry out the mission, goals and objectives of the association's strategic plan? 1 2 3 4 5 b. Is the program sharply focused on core concerns that are vital to a significant segment of the members/customers? 1 2 3 4 5 NUMERICAL SCORE for #1:______ GOOD FIT POOR FIT

PROGRAM EVALUATION WORKSHEET

EASY BUSINESS: Is this program an "easy business" for the association? High appeal to those whose financial support is essential to the continuing success of the program? 1 2 3 4 Is financial support stable for the foreseeable future? 1 2 3 4 Does this program appeal to the volunteer leadership? 1 2 3 4

5 5 5

b. c.

d.

Is there a market demand from a large, concentrated customer base? 1 2 3 4 e. Are there measurable, reportable program results? 1 2 3 4 SCORE for #2:______ EASY BUSINESS DIFFICULT BUSINESS

5 5

PROGRAM EVALUATION WORKSHEET

ALTERNATIVE COVERAGE a. High Alternative Coverage: Do others offer

many similar programs? b. Low Alternative Coverage: Do others offer few comparable programs? Many Programs Few Programs 1 2 3 4 5 LOW ALTERNATIVE COVERAGE (Few programs) HIGH ALTERNATIVE COVERAGE (Many programs)

PROGRAM EVALUATION WORKSHEET

COMPETITIVE POSITION: Is our program strongly positioned against competition? a. Dominant market share or strong prospects for achieving market dominance 1 2 3 4 b. Better quality/value/service than competitors 1 2

c. 1 d.

Superior ability to produce and market this program 2 3

Cost-effective program delivery 1 2

e. 1

Strong match between the program and the future needs of members/customers 2 3 4 STRONG COMPETITIVE POSITION WEAK COMPETITIVE POSITION

SCORE for #4:______