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UnitI: Introduction Concepts in Strategic Management, Strategic Management as a process Developing a strategic vision, Mission, objectives, Policies Factors that shape a companys strategy Concepts of core competence, crafting a strategy.
A course on Business Policy and Strategic Management, will give students an opportunity to pull together what they have learned in the separate business fields like (human resources, marketing, production/operations, finance, organizational behavior and operations research) and utilize the knowledge in the analysis of complex business problems. The course on business policy considers the total organization and its environment as a single system. New techniques such as industry analysis prompted the leaders in the field of study to change the title of the course from Business Policy to Strategic Management.
Definition of Strategy
A strategy is a combined, complete, and integrated plan that relates the strategic advantages of the firm to the challenges of the environment. It is designed to ensure that the basic objectives of the enterprise are achieved through proper execution by the organization. Alfred D. Chandler defines 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. Strategy is defined by Arthur Sharplin as, a plan or course of action which is of vital pervasive, or continuing importance to the organization as a whole.
James Brain Quinn defines the term strategy as, the pattern of plan that integrates an organizations major goals, policies and action sequences into a cohesive whole.
ii. iii.
iv. v. vi. vii.
Definitions of Strategic Management 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. The strategic management process is the way in which strategists determine objectives and make strategic decisions. Strategic decisions are means to achieve ends. These decisions covers the definition of the business, products and markets to be served, functions to be performed, and major policies needed for the organization to execute these decisions to achieve objectives.
A strategic business unit (SBU) is an operating division of a firm which serve a distinct product-market segment of a well-define set of customers or a geographic area. The SBU is given the authority to meet its own strategic decisions within corporate guidelines as long as it meets corporate objectives.
Benefits of Strategic Management i. ii. iii. iv. Helps an organization to be proactive rather than reactive. Helps organizations to respond to its relevant environment. Helps organizations to make effective strategies. Helps the organizations to achieve understanding and commitment from all managers and employers. v. Encourages the organizations to decentralize the management process involving lower level managers and employees. vi. Strategic management can boost profits. vii. Long run planning resulted in high performance of the businesses. viii. Strengthens the employee commitment to and participation in formulating long-term goals. ix. Reduce the chance of being affected by the changes in the environment. x. Helps for increased employee productivity. xi. Enhances problem-prevention capabilities. xii. Often brings order and discipline to a firm. xiii. Allows for identification and exploitation of opportunities.
Benefits of Strategic Management xiv. xv. xvi. xvii. xviii. xix. xx. xxi. xxii. Provides an objective view of management problems. Represents a framework for improved control of activities. Minimizes the effects of adverse conditions and changes. Allows major decisions and supports established objectives. Allows fewer resources and less time to be devoted. Helps to integrate the behavior. Encouragement to forward thinking. Encourages favorable attitude towards change. Gives a degree of discipline and formality to the management of business.
Marketing Market:
Geographic scope and target segments Unserved potential
Human Resources
Man power planning Recruiting Employment Development Retaining Compensation Job security Culture quality of work life
Product:
Supplementary Service/benefits Technological level Extent of Product Line Focus of Development
Types of Operations:
Process type flexibility Capital / labour intensity
Development:
Process / product Technology Risk level Engineering content
Price:
Relative Price Level and Range Use of Price Changes
Place:
Number of Channels Channel Role Services Rendered Margins allowed Product Development
Five tasks of Strategic Management i. ii. iii. iv. v. vi. Articulate a vision of the Organizations future Translating that vision into a mission that defines the organizations purpose. Converting the mission into performance objectives. Objectives are converted into plans and policies. Detailing each objective into specific goals. Formulating strategies and tactics to achieve the goals.
Top management
Goals
Strategies & Tactics
Vision Statement EXAMPLES: Our purpose is to be the global leader in educate the people. Our mission is to create distinctive value. Our approach is to be trustworthy, creative and enterprising. Our performance measures are engaged employees, satisfied customers, enriched communities and profitable growth.
Characteristics of Vision Statement Should be specific Should be communicated effectively What insiders of the organization create or perceive Streamline and correlate the personal goals of employees with organizational goals
Mission Statements
The fundamental and enduring purpose of an organization that set it apart from other organizations of a similar nature A mission statement Describes the product Describes the market Describes the technological areas of emphasis for the business
Characteristics of Mission Statement: Differentiate the company from its competitors Defines the business Should Inspire Relevant to all the stakeholders Clarify the purpose of existence of the organization
A mission statement focuses on current business activities -- who we are and what we do
A strategic vision concerns a firms future business path -- where we are going
Current product and service offerings Customer needs being served Technological and business capabilities
Markets to be pursued Future technology-product-customer focus Kind of company that management is trying to create
Our VISION is to be the world's premier consumer Products Company focused on convenient foods and beverages. We seek to produce financial rewards to investors as we provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate. And in everything we do, we strive for honesty, fairness and integrity. Our MISSION is put into action through programs and a focus on environmental stewardship, activities to benefit society, and a commitment to build shareholder value by making PepsiCo a truly sustainable company.
BUSINESS DEFINITION
BUSINESS DEFINTION
Customer Needs
Customer Groups
OBJECTIVES
Accomplishment of mission of an organization requires the formulation of a number of objectives. Achievement of the organizational objectives, in turn, requires the formulation and fulfillment of departmental and unit goals.
Objectives
Departmental Objectives
Unit-Level Objectives
Goal is to increase earning per share by 20% Close-ended attributes which are precise and expressed in specific terms.
AREAS OF OBJECTIVES
Profitability Markets Productivity Innovation Product Financial Resources Physical Facilities Organization Structure and Activities Manager Performance and Development Employee Performance and Attitude Customer Service Social Responsibility
STRATEGIC MANAGEMENT
To determine mission, goals, and values of the firm and key decision makers
Enterprise strategists
To search the environment and diagnose the impact of threats and opportunities To examine and diagnose the firms strengths and weaknesses To consider various alternatives and assure that the appropriate strategy is chosen To match plans, policies, resources, structure and administrative style with the strategy To ensure strategy and implementation will meet objectives (feedback)
Internal factors
Generic strategy alternatives Strategy variations Strategy choice Resources and structure Policies, Plans and administration Evaluation and control
(feed forward) Choice
Implementation
Strategy formulation
Strategy implementation
Mission
Objectives
Societal environment
Task environment
Strategies Policies
Internal
Structure Culture Resources
feedback