Strategic Management

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STRATEGIC MANAGEMENT

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MEANING & DEFINITION What is strategic management? Strategic Management can be defined as “the art and science of formulating, implementing and evaluating cross-functional decisions that enable an organization to achieve its objective.” l

Definition: “The on-going process of formulating, implementing and controlling broad plans guide the organization in achieving the strategic goods given its internal and external l

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INTERPRETATION

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IMPORTANCE OF STRATEGIC MANAGEMENT l Globalization:

The survival for

l E-Commerce:

A business tool

business

l Earth

environment has become a major strategic issue

l Strategic

success

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management – A route to

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STAGES OF SM l l l l

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The strategic management process consists of three stages: Strategy Formulation (strategy planning) Strategy Implementations Strategy Evaluation

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THREE ASPECTS OF STRATEGIC FORMULATION l Corporate

Level Strategy: In this aspect of strategy, we are concerned with broad decisions about the total organization's scope and direction. l It is useful to think of three components of corporate level strategy: (a) growth or directional strategy (b) portfolio strategy (c) parenting strategy 6

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Global Corporate Strategies High

Need for Global Integration

Globalization Strategy

• Treats world as a single global market • Standardizes global products/advertising strategies

Export Strategy •Domestically focused •Exports a few domestically produced products to selected countries

Transnational Strategy • Seeks to balance global efficiencies and local responsiveness • Combines standardization and customization for product/advertising strategies

Multi-domestic Strategy • Handles markets independently for each country • Adapts product/advertising to local tastes and needs

Low

Low Need for National Responsiveness 7

High

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Global Strategy l

l l

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Globalization = product design and advertising strategies are standardized around the world Multi-domestic = adapt product and promotion for each country Transnational = combine both globalization and national responsiveness

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Competitive Strategy (often called Business Level Strategy): This involves deciding how the company will compete within each line of business (LOB) or strategic business unit (SBU).

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Functional Strategy: These more localized and shorter-horizon strategies deal with how each functional area and unit will carry out its functional activities to be effective and maximize resource productivity.

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Tools for Putting Strategy into Action

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Environment Organization

Leadership Persuasion

Strategy

Motivation Structural Design Organization Chart Teams

Human Resources Recruitment/selection

Centralization Transfers/promotions nDecentralization, Training nFacilities, task design Information and Control Systems Pay, reward system Budget allocations Information systems

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Performance

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Portfolio Strategy l

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Mix of business units and product lines that fit together in a logical way to provide synergy and competitive advantage

BCG Matrix

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Exhibit 8.5

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Scan External Environment – National, Global Evaluate Current Mission, Goals, Strategies

SWOT

Scan Internal Environment – Core Competence, Synergy, Value Creation

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Identify Strategic Factors – Opportunities, Threats

Define new Mission Goals, Grand Strategy

Formulate Strategy – Corporate, Business, Functional

Identify Strategic Factors – Strengths, Weaknesses

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Implement Strategy via Changes in: Leadership culture, Structure, HR, Information & control systems

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conclusion l In

order to formulate Business functions strategy is to be formulated as well as implemented with the right approach l Management is basically managing the strategies and making them function. l Strategic management of an organization leads to the benefits as well as growth of the organization.

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