Download STRATEGY

MANAGEMENT POLICY AND STRATEGY
SESSION - I
Strategic Management
Introduction
Prof. Sushil
Department of Management Studies
Indian Institute of Technology, Delhi
INDIA
Prof. Sushil\IITD\Session - I
Email: [email protected]
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What is Strategy?

Large-scale, future-oriented plan for
interacting with competitive environment to
achieve objectives

Company’s “game plan”

Framework for managerial decisions
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STRATEGY
• Direction and scope of an organisation
over the long term.
• Matches its resources to its changing
environment.
• In particular its markets, customers or
clients.
• So
as
to
meet
stakeholders’
expectations.
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STRATEGIC DECISIONS
•
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Modernization
Divestment
Product Launch
Acquisition/Merger
Collaboration/Alliance
Overseas Expansion
Turnaround
Technology Transfer
Entry into New Markets
Restructuring
Reengineering
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Dimensions of Strategic Decisions
•
•
•
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•
Strategic issues . . .
Require top-management decisions
Require large amounts of firm’s resources
Affect firm’s long-term prosperity
Are future oriented
Usually have multifunctional or multibusiness
consequences
• Require consideration of firm’s external environment
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STRATEGY DEVELOPMENT ROUTES
Opportunistic
Strategy
Imposed
Strategy
Emergent
Strategy
Planned
Intended
Strategy
Realized
Strategy
Unrealized
Strategy
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STRATEGY

Derived from Greek `strategies
• a general set of maneuvers carried out to overcome an enemy
STRATEGIC MANAGEMENT






A way of regenerating an organization,
Through continuous attention to a vision of what the people, who
make up the organization, wish to do.
A proactive process of seeking to change the organization, its
stakeholders
and the content or environment within which it seeks to attain its
aspirations
It is particularly about stretching the organization to gain leverage
from its distinctive competencies and ability to change them.
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STRATEGIC MANAGEMENT
Contd...

It involves creating and moulding the future,

along with making sense of the past

rather than predicting and responding to some
predetermined future reality

It is about developing the capability for long term
flexibility and strategic opportunism

rather than making and sticking to long term plans.
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What is Strategic Management?
 The
set of decisions and actions that
result in the formulation and
implementation of plans designed to
achieve a company’s objectives.
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Critical Tasks of Strategic Management
1
Formulate the company’s mission
2
Develop company profile, reflecting its internal conditions
3
Assess company’s external environment
4
Analyze company’s options
5
Identify most desirable options
6
Select long-term objectives and grand strategies
7
Develop annual objectives and short-term strategies
8
Implement the strategic choices
9
Evaluate success of theProf.
strategic
process
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-I
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LANDMARK CONTRIBUTIONS TO THE
DEVELOPMENT OF STRATEGIC MANAGEMENT
1963-70
Stanford Research
Institute
1965
Igor Ansoff
1972
Igor Ansoff
1980
James Quinn
Structured thinking about
planning systems
Analytical approach to
corporate strategy
Strategic management
concept
Logical incrementalizm
1982
Kenichi Ohmae
Strategic thinking
1982
Thomas Peters and
Robert Waterman
In search of excellence
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LANDMARK CONTRIBUTIONS TO THE
DEVELOPMENT OF STRATEGIC MANAGEMENT
CONTD….
1985
Deliberate and
emergent strategies
Henry Mintzberg
Contingency approach
(environmental turbulence)
1985 Ignor Ansoff
1986
Noel Tichy and Mary
Devanna
1987
Michael Porter
1994
Gary Hamel and
C.K. Prahalad
Transformational leadership
From competitive advantage to
corporate strategy
Reshaping industries (competing for
the future)
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Single-Business Firms
Corporate/
business level
POM/R&D
strategies
Financial/
accounting
strategies
Marketing
strategies
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Human
relations
strategies
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Multiple Business Firms
Corporate/
business level
Business 1
POM/R&D
strategies
Business 2
Business 3
Financial/
Marketing
accounting
strategies
strategies
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Human
relations
strategies14
Hierarchy of Objectives and Strategies
Strategic Decision Makers
Ends
(What is to be
achieved?)
Means
(How is it to be
achieved?)
Board of
Directors
Corporate
Managers
Business
Managers
Functiona
l
Managers
Mission,
including
goals &
philosophy
Long-term
objectives
Grand strategy
Annual
objectives
Short-term
strategies &
policies
Note:
indicates a principal responsibility;
indicates a secondary responsibili
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Characteristics of Strategic Management
Decisions
Greater risk, cost, and
profit potential
Corporate
-level
decisions
involve
Greater need for
flexibility
Longer time horizons
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Characteristics of Strategic Management
Decisions
Bridge decisions at corporate
and functional levels
Business level
decisions
Are less costly, risky, and
potentially profitable than
corporate-level decisions
Are more costly, risky, and
potentially profitable than
functional-level decisions
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Characteristics of Strategic Management
Decisions
Implement overall strategy
Functionallevel
decisions
Involve action-oriented
operational issues
Are relatively short range
and low risk
Incur only modest costs
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Benefits of Strategic Management
Enhances firm’s ability to prevent problems
Emphasizes group-based strategic decisions likely to
be based on best available alternatives
Improves understanding of employees of
productivity-reward relationship
Reduces gaps/overlaps in activities among
employees as their participation clarifies differences
in roles
Reduces resistance to change
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Risks of Strategic Management
Time involved may negatively impact operational
responsibilities of managers
Lack of involvement of strategy makers in strategy
implementation may result in shirking of
responsibility for strategic decisions
Potential disappointment of employees over
unattained expectations requires managerial time
and training
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PATTERNS OF STRATEGY DEVELOPMENT
•
Continuity
•
Incremental
•
Flux
•
Transformational
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STRATEGY DEVELOPMENT
•
•
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•
Natural Selection View
Planning View
Logical Incremental View
Cultural View
Political View
Visionary View
Integrative View
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STGRATEGIC MANAGEMENT AS A
PROCESS
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Managing power and politics
Procedural rationality and justice
Role of group processes in socially negotiating
strategy
Power of emotional and cognitive commitment in
delivery strategy
Conflict and cooperation
Pascal - `present is determined by the future not
the past’.
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SCHOOLS OF THOUGHT


Interpretive framework
Political
Cultural
(The management
(Shared beliefs
of means)
and traditions)
Learning / Planning / Design
Cognitive
(Mental processes)
Political
 Strategy formulation as a political process
 where strategic aspirations are disputed, conflict exists
 managers compete for scarce resources
 the internal political dynamic
 the dynamic between the organization and its stake holders
 conflict and consensus co-exist
 process of negotiating action is central.
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CULTURAL
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
The strategy is ultimately expressed through the culture of an
organization
Cultural web
•
•
•
•
•
•
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control systems
rituals and routines
symbols
stories
organizational structure
power structure
shared beliefs developed into organizational recipes reinforced
by tradition, habit, stories, ideology
central focus for change- strategy is about changing culture.
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COGNITIVE
 Bounded
rationality
 The challenge is that of creating a
mental framework for strategic action
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LEARNING, PLANNING AND DESIGN
SCHOOLS

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Learning
Strategy formulation and enacting are concurrent
Concrete experiences are the basis for observation and reflection,
which enable the formation of abstracts concepts
Strategy making and its realization together create a sequence of
platforms for strategic change and organizational achievement
Planning
Developing explicit plans which are decomposed into substrategies and programs
It favours seeing organizations as bureaucracies where central
players are planners.
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LEARNING, PLANNING AND DESIGN
SCHOOLS
Contd...
Design

Seeking strategic fit through an external and internal appraisal
which is central to a sequence of steps:
• classification of organizational mandates, of organizational
mission,
• situational strategic analysis
• identification of strategic issues
• strategy formulation
• implementation
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STRATEGIC MANAGEMENT PROCESS
 Strategic Learning and Unlearning
 Strategic Intent
 Strategy Evolution
 Strategic Resonance
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STRATEGIC MANAGEMENT PROCESS
 Strategic Analysis
 Strategic Choice
 Strategy Implementation
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STRATEGIC MANAGEMENT PROCESS
 Strategic Situation Analysis
 Strategic Capability Analysis
 Strategic Process Evolution
 Strategy Implementation and Impact
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STRATEGIC MANAGEMENT PROCESS
 Environmental Analysis
 Internal External
 Establishing Organizational Direction
- Vision
- Mission
- Objectives
 Strategy Formulation
 Strategy Implementation
 Strategic Control
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Strategic Management Model
Company mission
& social
responsibility
Possible?
External
Environment
Desired?
Internal analysis
Long-term
objectives
Short-term
objectives; reward
system
Generic & grand strategies
Functional
tactics
Feedback
Feedback
Strategic analysis & choice
Policies that empower
action
Restructuring, reengineering & refocusing the
organization
Legend
Major impact
Minor impact
Strategic control & continuous
improvement
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Components of the Strategic Management
Model
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
Mission
• Specifies unique purpose of company
• Identifies scope of operations
• Describes product, market, and technological areas of
emphasis
• Reflects values and priorities of decision makers
• Expresses approach to social responsibility efforts
Internal Analysis
• Depicts quantity and quality of company’s financial, human,
and physical resources
• Assesses company’s strengths and weaknesses
• Contrasts past successes and concerns with current
capabilities to identify future capabilities
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Components of the Strategic Management
Model


External Environment
• Consists of all conditions and forces affecting firm’s
strategic options, typically beyond its control
• Includes three interactive segments - operating, industry,
and remote environments
Strategic Analysis and Choice
• Involves simultaneous assessment of external environment
and internal analysis to identify range of attractive options
• Incorporates screening process based on mission to
generate possible and desired opportunities
• Results in selection of options from which a strategic choice
is made
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Components of the Strategic Management
Model
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Long-term Objectives
• Profitability
• Return on investment
• Competitive position
• Technological leadership
• Productivity
• Employee relations
• Public responsibility
Generic and Grand Strategies
• Low cost
• Differentiation
• Focus
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Components of the Strategic Management
Model
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Short-term Objectives and Action Plans
• Translate generic and grand strategies into “action”
– Identify specific functional tactics to be taken in the near term
– Establish a clear time frame for completion
– Create accountability
– Specify one or more immediate objectives as outcomes of the
action
Functional Tactics
• Involve identifying activities unique to the function to help build
competitive advantage
• Specify detailed statements of “means” to be used to achieve
short-term objectives
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Components of the Strategic Management
Model


Policies that Empower Action
• Include broad, precedent-setting decisions that substitute
for repetitive or time-sensitive decision making
• Often increase managerial effectiveness by empowering
discretion of subordinates in implementing strategies
Restructuring, Reengineering, and Refocusing the
Organization
• Involves an internal focus - getting work done efficiently
and effectively to make the strategy work
– Organizational structure
– Leadership
– Culture
– Reward systems
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Components of the Strategic Management
Model

Strategic Control and Continuous Improvement
• Control
– Tracks a strategy during implementation
– Detects problems
– Involves making necessary adjustments
• Continuous improvement
– Provides another approach to strategic control
– Allows an organization to respond more proactively and
timely to rapid developments
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Implications of the Strategic Management
Process
Changes in any one component will affect other
components
Recognition of the sequential nature of strategy
formulation and implementation
Necessity of feedback from institutionalization,
review, and evaluation to early stages of process
Must be viewed as dynamic, involving constant
changes in interdependent strategic activities
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