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Introduction to Strategic Management

- By Vidushi Sharma

Definition
The Determination of the basic long term goals and objectives of an enterprise and adoption of the course of action and allocation of resources necessary for carrying out these goals. - Alfred D Chandler (1962) Strategy is derived from the Greek word Strategos which means the art of general.

Cont..
A unified, comprehensive and integrated plan designed to assure that the basic objectives of the enterprise are achieved. - William F. Glueck (1972) Strategy is formulated to cope up with the dynamic External Environment

There is a difference in Strategy and Operational effectiveness (reducing prices, TQM) Strategy is doing unique things or things differently whereas due to information revolution all the companies know about operational effectiveness. Operational effectiveness is achieving excellence in individual activities while strategy is about achieving excellence in combined activities.

1. Strategy is a long term plan. 2. Any shifts or changes in strategy are costly and difficult to make, 3. A wrong strategy may lead to many pitfalls (losses) 4. It is a plan leading to a particular direction. 5. It is related to companys activities. 6. It depends on the vision/ mission of the company.

Characteristics of Strategy

Cont.
7. It deals with the future. 8. It deals with the resources available today and those that will be necessary in the future for implementing a plan. 9. It is connected to the strategic positioning of a firm (Unique position which is advantageous for the firm).

Cont
10. A Common thread binding all the organizational activities. 11. Those activities which take organization from current position to desired future state.

Limitations of Strategy
1. Over simplification of things

2. Leads to a predetermined path

Levels at which Strategy Operates

Cont.

SBU
When a company has different businesses (portfolio of products); it is generally organized in the form of Strategic Business Units. (SBUs) Companies divide their business into different operating divisions, each performing a common set of activities. These divisions are called as Profit Centers or Strategic Business Units or SBUs

Cont..
Each SBU is unique in either Product, Customers they serve and markets operate in. Different levels of Strategy Levels vary for Single SBU firm and Multiple SBU firm

Characteristics of SBU
1. Every SBU has a different set of managers responsible for success and failure of that SBU. 2. Every SBU has a different set of competitors. 3. Every SBU has a different requirement of resources. 4. Different potential for generation of profits.

Strategic Business Area (SBA)


A distinctive segment of environment in which the firm does the business. Different SBUs with their relevant SBAs form a corporate umbrella

Societal Level
Certain companies have a societal level above the corporate level. Societal level emphasizes on what the company wants to for society. It is some needs of the society which the company wants to serve. E.g. company wants to provide alternate source of energy at affordable prices

Strategic management
It focuses on second generation planning.
2nd generation planning: analysis of business and preparation of several scenarios of future and preparing contingency strategies.

Definitions It is a stream of actions which lead to the development of effective strategy or strategies to help achieve corporate objectives. A systematic approach to a major and increasingly important responsibility of general management to position and relate the firm to its environment in a way that will assure its continued success and make it secure from surprises. - Ansoff

The formulation and implementation of plans and carrying out of activities relating to matters which are of vital, pervasive or continuing importance to total organization - Sharplin

Latest Definition
The process through which organizations analyze and learn from their internal and external environments, establish strategic decision, create strategies that are intended to help achieve established goals, and execute these strategies, all in effort to satisfy key organizational stakeholders. - Harrison & St. John

Strategic Management Process


Phase I: Hierarchy of Strategic Management Process It makes clear the purpose of organization What it stands for? It states various purposes it wants to fulfill in long run. Strategic intent includes deciding the vision, mission, business definitions, objectives and goals for an organization

These objectives act as yardstick & benchmark for measuring organizational performance Phase II: Environmental Scanning It includes appraising both the external environment and organizational environment. External environment scanning helps in finding out various opportunities and threats. A detailed appraisal helps in finding the strengths and weaknesses

Phase III Formulation of Strategies: Here many alternative strategies are worked on and the best alternative, as per the opportunities and threats is selected. Strategies are selected at the corporate and SBU level. End result of this phase is strategic plan which needs to be implemented.

Phase IV: Implementation of Strategy A strategic plan can be implemented through 6 sub processes i. Project Implementation deals with setting of organization ii. Procedural Implementation deals with various regulatory frameworks within which an organization has to work. iii. Resource Allocation deals with procurement and commitment of resources.

iv. Structural Implementation deals with organizational structures, one which matches the strategy. v. Behavioral Implementation deals with corporate culture, use of power, business ethics and social responsibility. vi. Functional and Operational implementation deals with productivity, processes, people and pace of implementing strategies.

Phase V: Strategic evaluation and control Appraisal of implementation of strategies is done. Organizational performance is measured. As per the feedback of strategic evaluation; strategic control is exercised.