Business Strategy
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BUSINESS STRATEGY Companies today face increasingly turbulent, complex and threatening environments.
The strategic management perspective highlights the significance of devoting more attention to analyzing environments and formulating strategies that relate directly to environment changes.
The ultimate purpose is to help the organization increase its performance through improved effectiveness, efficiency and flexibility
A strategy is a way of doing something. It usually includes the formulation of goal and set of action plans for accomplishment of the goal.
Strategic management is “that set of managerial decisions and actions that determine the long term performance of a corporation. It involves environmental scanning, strategy formulation, strategy implementation, evaluation and control”.
The best way to predict future is to create it. A strategic plan is the first step in bringing out a new product. A well-crafted strategic plan gives one control over the vagaries of the marketplace. Strategic management can be defined as the set of decisions and actions resulting in formulation and implementation of strategies designed to achieve the objectives of the organization.
Strategic management is a comprehensive procedure and starts with a strategic diagnosis. It continues with a series of additional steps, culminating in new products, markets, technologies and capabilities. The strategist’s work is to challenge the prevailing setup with a single question: “why?” , and to ask the same question as many times necessary to make the future as clear as the present for managers at all levels.
The word Strategy comes from the Greek word Strategia , which means a General or Military Commander. The systematic study of strategic management was pioneered by Ansoff. There is no universal success formula for all firms. The level of turbulence in the environment determines the strategy required for the success of a firm.
The aggressiveness of the strategy should be aligned with the turbulence in the environment to optimize the firm’s success. The management capabilities should be aligned with the environment to optimize the firm’s success. Internal capability variables i.e., cognitive, psychological, political, anthropological and sociological variables, all jointly determine the firm’s success.
COMPONENTS OF STRATEGIC MANAGEMENT
VISION: It is a description of what the organization is trying to do and to become. Gives a view of an organization’s future direction and course of business activity. A powerful motivator and keeps an organization moving forward in an intended direction. Communicated through the mission statement.
COMPANY MISSION: Sets a part one company from other companies in the same area of business. Identifies the scope of the companies operation, describes the companies product, market and technological areas of thrust and reflects the values and priorities of its strategic decision makers. Looks to an endless future as if the firm was immortal.
COMPANY PROFILE: Depicts the quantity and quality of the company’s financial, human and physical resources. Assesses the strengths and weaknesses of the company’s management and organizational structure. Analyses the companies past successes and traditional concerns in the context of the companies current capabilities to identify its future capabilities.
EXTERNAL ENVIRONMENT: Consists of all the conditions and forces that affect an organizations strategic options and define its competitive situations.
Consists of three interactive segments namely operating environment, the industry environment and the remote environment.
STRATEGIC ANALYSIS AND CHOICE: Enables a firm to identify a range of possible attractive investment opportunities, desired opportunities to strategic choices. Entire process of strategic choice is to combine long-term objectives and generic and grand strategies for achievement of the company machine. Ex: core competencies, maximization of share holder value.
ANNUAL OBJECTIVES: Objectives that the firm seeks to achieve in one year.
Short term objectives- more specific-based on long term objectives. Ex: cutting manufacturing costs by 20%- 4 years- 5% each year.
LONG-TERM OBJECTIVES: Refers to those results that an organization seeks to achieve over a number of years. Ex: profitability, ROI, competitive position, technological leadership, productivity, employee relations, public responsibility and employee development
GRAND STRATEGY: A statement of means that indicates the methods to be used to achieve the company’s objectives. A unique package of long-term strategies. Provides the frame work for the entire business of the firm. Focuses on market development, product development, innovation, horizontal integration, vertical integration, joint ventures etc
FUNCTIONAL OR OPERATIONAL STRATEGIES: The grand strategy is split into strategies for each business division or function. Specific to the needs of each functional area and prescribe an integrated action plan for every function. Provides the means for achieving annual objectives
POLICIES: Directives or guidelines given to managers and their subordinates as the frame work to guide their thoughts, decisions and actions while implementing the organization’s strategy. Help to make the operating processes (standard operating procedures). Ex: HO to authorize every purchase activity, annual performance review of an employee.
INSTITUTIONALIZING THE STRATEGY: Translation of long-term objectives into short-term goals will make the strategy operational. Implementation of strategy must become part of day-to-day activities of the company (institutionalization). Structure, leadership and culture help institutionalize a firm’s strategy.
CONTROL AND EVALUATION: After a strategy is implemented, it should be monitored to determine the extent of success. Strategic managers should employ early monitoring and control methodsmodifications. Ultimate test of the strategy is its ability to achieve the ends. Ex: annual objectives, long-term objectives an company’s mission.
Strategic management involves four steps: Step No.1 : Analyze the opportunities and threats or constraints that exist in the external environment. Step No.2 : Formulate strategies that will match the organization’s strengths and weaknesses with the environment’s threats and opportunities. Step No.3 : Implement the strategies. Step No.4 : Evaluate and control activities to ensure that, the organization's objectives are achieved.
IMPORTANCE OF STRATEGIC MANAGEMENT Strategy comprises the most fundamental ends and means of an organization. Allows for identification, prioritization and exploitation of opportunities. Provides an objective view of management problems. Represents a frame work for improved coordination and control activities.
Strategy refers to the plans made and actions taken to enable an organization fulfill its intended objectives. Minimizes the effects of adverse conditions and changes. Allows major decisions to better support, established objectives. Allows more effective allocation of time and resources to identified opportunities.
Allows fewer resources and less time to be devoted to correcting erroneous or adhoc decisions. Creates a framework for internal communication among personnel. Helps to integrate the behaviors of individuals into a total effort. Provides s basis for the clarification of individual responsibilities.
Gives encouragement to forward thinking.
Provides a cooperative ,integrated and enthusiastic approach to tackling problems and opportunities.
Encourages a favorable attitude towards change.
Gives a degree of discipline and formality to the management of a business.
STRATEGIC MANAGEMENT PROCESS
ENVIRONMENTAL SCANNING: Environment need to be scanned in order to determine the trends and projections of factors that will affect fortune of the organizations. STRATEGY FORMULATION( 3 levels): Corporate Level Strategy: This is formulated by the top management to oversee the interests and operations of an organization made up of more than one line business.
Business Unit Level Strategy: A single company that operates within one industry is considered as a business unit. For instance, an independent company that builds and sells swimming pools is considered as a business unit. Functional Level Strategy: Functional strategies identify the basic courses of action that each of the department must pursue in order to help the business unit to attain its goals.
The strategic management perspective highlights the significance of devoting more attention to analyzing environments and formulating strategies that relate directly to environment changes.
The ultimate purpose is to help the organization increase its performance through improved effectiveness, efficiency and flexibility
A strategy is a way of doing something. It usually includes the formulation of goal and set of action plans for accomplishment of the goal.
Strategic management is “that set of managerial decisions and actions that determine the long term performance of a corporation. It involves environmental scanning, strategy formulation, strategy implementation, evaluation and control”.
The best way to predict future is to create it. A strategic plan is the first step in bringing out a new product. A well-crafted strategic plan gives one control over the vagaries of the marketplace. Strategic management can be defined as the set of decisions and actions resulting in formulation and implementation of strategies designed to achieve the objectives of the organization.
Strategic management is a comprehensive procedure and starts with a strategic diagnosis. It continues with a series of additional steps, culminating in new products, markets, technologies and capabilities. The strategist’s work is to challenge the prevailing setup with a single question: “why?” , and to ask the same question as many times necessary to make the future as clear as the present for managers at all levels.
The word Strategy comes from the Greek word Strategia , which means a General or Military Commander. The systematic study of strategic management was pioneered by Ansoff. There is no universal success formula for all firms. The level of turbulence in the environment determines the strategy required for the success of a firm.
The aggressiveness of the strategy should be aligned with the turbulence in the environment to optimize the firm’s success. The management capabilities should be aligned with the environment to optimize the firm’s success. Internal capability variables i.e., cognitive, psychological, political, anthropological and sociological variables, all jointly determine the firm’s success.
COMPONENTS OF STRATEGIC MANAGEMENT
VISION: It is a description of what the organization is trying to do and to become. Gives a view of an organization’s future direction and course of business activity. A powerful motivator and keeps an organization moving forward in an intended direction. Communicated through the mission statement.
COMPANY MISSION: Sets a part one company from other companies in the same area of business. Identifies the scope of the companies operation, describes the companies product, market and technological areas of thrust and reflects the values and priorities of its strategic decision makers. Looks to an endless future as if the firm was immortal.
COMPANY PROFILE: Depicts the quantity and quality of the company’s financial, human and physical resources. Assesses the strengths and weaknesses of the company’s management and organizational structure. Analyses the companies past successes and traditional concerns in the context of the companies current capabilities to identify its future capabilities.
EXTERNAL ENVIRONMENT: Consists of all the conditions and forces that affect an organizations strategic options and define its competitive situations.
Consists of three interactive segments namely operating environment, the industry environment and the remote environment.
STRATEGIC ANALYSIS AND CHOICE: Enables a firm to identify a range of possible attractive investment opportunities, desired opportunities to strategic choices. Entire process of strategic choice is to combine long-term objectives and generic and grand strategies for achievement of the company machine. Ex: core competencies, maximization of share holder value.
ANNUAL OBJECTIVES: Objectives that the firm seeks to achieve in one year.
Short term objectives- more specific-based on long term objectives. Ex: cutting manufacturing costs by 20%- 4 years- 5% each year.
LONG-TERM OBJECTIVES: Refers to those results that an organization seeks to achieve over a number of years. Ex: profitability, ROI, competitive position, technological leadership, productivity, employee relations, public responsibility and employee development
GRAND STRATEGY: A statement of means that indicates the methods to be used to achieve the company’s objectives. A unique package of long-term strategies. Provides the frame work for the entire business of the firm. Focuses on market development, product development, innovation, horizontal integration, vertical integration, joint ventures etc
FUNCTIONAL OR OPERATIONAL STRATEGIES: The grand strategy is split into strategies for each business division or function. Specific to the needs of each functional area and prescribe an integrated action plan for every function. Provides the means for achieving annual objectives
POLICIES: Directives or guidelines given to managers and their subordinates as the frame work to guide their thoughts, decisions and actions while implementing the organization’s strategy. Help to make the operating processes (standard operating procedures). Ex: HO to authorize every purchase activity, annual performance review of an employee.
INSTITUTIONALIZING THE STRATEGY: Translation of long-term objectives into short-term goals will make the strategy operational. Implementation of strategy must become part of day-to-day activities of the company (institutionalization). Structure, leadership and culture help institutionalize a firm’s strategy.
CONTROL AND EVALUATION: After a strategy is implemented, it should be monitored to determine the extent of success. Strategic managers should employ early monitoring and control methodsmodifications. Ultimate test of the strategy is its ability to achieve the ends. Ex: annual objectives, long-term objectives an company’s mission.
Strategic management involves four steps: Step No.1 : Analyze the opportunities and threats or constraints that exist in the external environment. Step No.2 : Formulate strategies that will match the organization’s strengths and weaknesses with the environment’s threats and opportunities. Step No.3 : Implement the strategies. Step No.4 : Evaluate and control activities to ensure that, the organization's objectives are achieved.
IMPORTANCE OF STRATEGIC MANAGEMENT Strategy comprises the most fundamental ends and means of an organization. Allows for identification, prioritization and exploitation of opportunities. Provides an objective view of management problems. Represents a frame work for improved coordination and control activities.
Strategy refers to the plans made and actions taken to enable an organization fulfill its intended objectives. Minimizes the effects of adverse conditions and changes. Allows major decisions to better support, established objectives. Allows more effective allocation of time and resources to identified opportunities.
Allows fewer resources and less time to be devoted to correcting erroneous or adhoc decisions. Creates a framework for internal communication among personnel. Helps to integrate the behaviors of individuals into a total effort. Provides s basis for the clarification of individual responsibilities.
Gives encouragement to forward thinking.
Provides a cooperative ,integrated and enthusiastic approach to tackling problems and opportunities.
Encourages a favorable attitude towards change.
Gives a degree of discipline and formality to the management of a business.
STRATEGIC MANAGEMENT PROCESS
ENVIRONMENTAL SCANNING: Environment need to be scanned in order to determine the trends and projections of factors that will affect fortune of the organizations. STRATEGY FORMULATION( 3 levels): Corporate Level Strategy: This is formulated by the top management to oversee the interests and operations of an organization made up of more than one line business.
Business Unit Level Strategy: A single company that operates within one industry is considered as a business unit. For instance, an independent company that builds and sells swimming pools is considered as a business unit. Functional Level Strategy: Functional strategies identify the basic courses of action that each of the department must pursue in order to help the business unit to attain its goals.
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