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Strategic management

Module-1
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Team Exterminators

------------------------------------------------------------Definitions of strategic management:


According to Llyod L. Byars, Strategic management is concerned with making
decisions about organizations future direction and implementing those decisions.
According to Glueck, Strategic management is a stream of decisions and actions, which
leads to the development of an effective strategy or strategies to help achieve corporate
objectives.
Strategy

A plan of action or policy designed to achieve a major or overall aim.

Strategy is all about How:

How to outcompete rivals.

How to respond to economic and market conditions and growth opportunities.

How to manage functional pieces of the business.

How to improve the firms financial and market performance.

A firm does strategy:

To improve its financial performance.

To strengthen its competitive position.

To gain a sustainable competitive advantage over its market rivals.

A creative, distinctive strategy:


Can yield above-average profits.
Makes competition difficult for rivals.

Nature of strategy:

Strategy links firm to its environment.


Strategy combines factors. (instrument to integrate organization)
It is dynamic in nature.
Strategy is forward looking.

It is complex in nature.
Importance/relevance of strategic management:
1
2
3
4
5
6
7

Give directions to organization


Helps in forecasting
Helps in growth of organizations
Helps in profit generation
Neutralizes threats
Influence organizations performance
Analyzing the external environment.

Characteristics of strategic management

Long term issue


Long term implication
Competitive advantage
Effect on operations
Uncertain
Complex
Organization wide
Fundamental
1. Long term issues
It deals primarily with long term issues that may or may not have an
immediate effect.
2. Long term implications
Strategic management is not concerned with day to day operations. It has long
term implications. It deals with vision mission and objective. It ensures that
strategic is put into action and implementation is done through action plan.
3. Competitive advantage
Help managers to find new resources of sustainable Competitive advantage.
Executives that apply the principles of strategic management in their work
continuously try to deliver products or services cheap. Produce customer
satisfaction and make employee more satisfied with their jobs.
4. Effect on operations
It always has an effect on operational issue. Operational decisions include
decisions that deal with questions such as how to sell to certain customers or
whether to open a credit line to them. Operational decisions are made in the
organizational hierachy.
5. Uncertain
Strategic management deals with future oriented non routine situation. They
create uncertainly. Managers face environment which is difficult to
comprehend. External and internal environment is analysed.
6. Complex

Uncertainly brings complexity for strategic management. Managers face


environment which is difficult to comprehend. External and internal
environment is analysed.
7. Organization wide
Strategic management has organization wide implications. It is not operation
specific. It is a systems approach. It involves strategic choice.
8. Fundamental
Strategic management is fundamental for improving the long term
performance of the organisation.
The Nine Task of Strategic Management :
1. Determining the vision & mission of the Company, about its purpose, philosophy &
goals.
2. Developing a Company Profile that reflects internal conditions & capabilities.
3. Assessment of the Companys external environment in terms of both competitive &
general contextual factors.
4. Analysis of possible opportunity uncovered in the matching of the company profile
with the external environment.
5. Identifying the desired options uncovered when possibilities are considered in the
light of the company mission.
6. Strategic choice of a particular set of long-term objectives and grand strategies.
7. Development of annual objectives and short term strategies compatible with long term
objectives and grand strategies.
8. Implementing strategic choice decisions based on budgeted resource allocations and
emphasizing the matching of tasks, people, structures, technologies, and reward
systems.
9. Review and evaluation of the success of the strategic process to serve as a basis for
control.

Strategic management process


The process of strategy making is depicted through a model which consists of different
phases; each phase having a number of elements. Most authors agree on dividing the strategic
management process into four phases consisting of about twenty elements. The model of
strategic management is provided.
1. Strategic intent
The hierarchy of strategic intent lays the foundation for strategic
management of any organization. In this hierarchy, the vision, mission,
business definition, business model and objective are established. The vision
hierarchy of strategic intent serves the purpose of stating what the organisation
wishes to achieve in the long run. The mission relates the organisation to the
society. The business definition explains the business of the organisation of the
organisation in terms of customer needs, customer groups and alternative
technologies. The business model clarifies how the organisation creates
revenue. These objectives serve as bench mark for measuring the organisation
performance.

2. Strategic formulation

Environmental and organisational appraisal deal with identifying the


opportunities and threats operating in the environment and the strength and
weaknesses of the organisation.
Formulation of strategy takes place at 4 levels- corporate business, functional,
and operational. Corporate level strategies relate to the strategic decisions
regarding the management of the portfolio of the business. Business level
strategy aim at developing a competitive advantage in the individual
businesses that a company has in its portfolio. The process used for choosing
strategies involves strategic analysis and choice. The end result of the set of
elements is the strategic plan to be implemented.
3. Strategy implementation
It is the translation of chosen strategy into organisational action so as to
achieve strategic goals and objectives. Strategy implementation is also defined
as the manner in which an organisation should develop, and culture to follow
strategies that lead to competitive advantage and a better performance.
Organisational structure allocates special value developing tasks and roles to
the employees and states how these tasks and roles can be correlated so as
maximise efficiency, quality and customer satisfaction- the pillars of
competitive advantage.
4. Strategic evaluation and control
The last phase of strategic evaluation appraises the implementation of
strategies and measures organisational performance. The feedback from
strategic evaluation is meant to exercise strategic control over the strategic
management process. Strategies may be reformulated if necessary.

Strategy . . .
Deals with a companys competitive initiatives and business approaches.
Business Model . . . Concerns whether revenues and costs flowing from the strategy
demonstrate a business can be adequately profitable and viable.
A business model addresses How do we make money in this business?
Company Strategy:
It is a long and short term plan that Deals with a companys competitive initiatives and
business approaches.
Business Model:
It is a plan for the successful operation of a business, identifying sources of revenue, the
intended customer base, products, and details of financing.

Business Model
Canvas

Relationship between a companys Strategy and Its business model.


Basis
Perspective:

Focus

Rationale

Company s Strategy
It relates to its competitive
initiatives and business
approach.
It is mainly concerned with
competition.

Business Model
It is narrowly focused than
companys business strategy.

It is the paln of how to put that


business model into action

It forms the underlying


rationale for being in business .

It start by seeking and creating


value for the customer.

Assumption

It assumes careful,analytical
calculation and choice,which
assumes that there is a great
deal of reliable information
available.

It assumes that knowledge of


customer.

Competitive advantage:
A competitive advantage is essentially a position of superiority on the part of the firm in some
function relation to its competition.
Strategy and competitive advantage:
Cost Leadership Strategy:
The goal of Cost Leadership Strategy is to offer products or services at the lowest cost in the
industry. The challenge of this strategy is to earn a suitable profit for the company, rather than
operating at a loss and draining profitability from all market players. Companies such as
Walmart succeed with this strategy by featuring low prices on key items on which customers
are price-aware, while selling other merchandise at less aggressive discounts. Products are to
be created at the lowest cost in the industry.
An example is to use space in stores for sales and not for storing excess product.

Differentiation Strategy
The goal of Differentiation Strategy is to provide a variety of products, services, or features to
consumers that competitors are not yet offering or are unable to offer. This gives a direct
advantage to the company which is able to provide a unique product or service that none of
its competitors is able to offer.

An example is Dell which launched mass-customizations on computers to fit consumers'


needs. This allows the company to make its first product to be the star of its sales.

Innovation Strategy
The goal of Innovation Strategy is to leapfrog other market players by the introduction of
completely new or notably better products or services. This strategy is typical of technology

start-up companies which often intend to "disrupt" the existing marketplace, obsoleting the
current market entries with a breakthrough product offering. It is harder for more established
companies to pursue this strategy because their product offering has achieved market
acceptance.

Apple has been a notable example of using this strategy with its introduction of iPod personal
music players, and IPad tablets. Many companies invest heavily in their research and
development department to achieve such statuses with their innovations.

Operational Effectiveness Strategy


The goal of Operational Effectiveness as a strategy is to perform internal business activities
better than competitors, making the company easier or more pleasurable to do business with
than other market choices. It improves the characteristics of the company while lowering the
time it takes to get the products on the market with a great start.

State Farm Insurance pursues this strategy by promoting their agents as "good neighbors"
who actively help customers.

Levels of strategy:

Corporate strategythis strategy seeks to determine what businesses a company should be


in or wants to be in. Corporate strategy determines the direction that the organization is going
and the roles that each business unit in the organization will plan in pursuing that direction.
Business strategythis strategy seeks to determine how an organization should compete in
each of its businesses. For a small organization in only one line of business or the large
organization that has not diversified into different products or markets, the business strategy
typically overlaps with the organizations corporate strategy.
Functional strategythis strategy seeks to determine how to support the business strategy.
For organizations that have traditional functional departments such as manufacturing,
marketing, human resources, research and development, and finance, these strategies need to
support the business strategy.

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