Stretegy

STRATEGIC MANAGEMENT - I Session 1 The Concept of Strategy

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STRATEGY STRATEGY is the  long-term  direction and scope  of an organisation  to achieve advantages  by using its resources  in a changing environment. In general, there is no higher-level statement of an organisation’s objectives. 2

THREE PARTS OF SM There are three parts of STRATEGIC MANAGEMENT function: Formulation of strategy Implementation of strategy: managing the organisation Managing the implementation and formulation in a changing environment: managing strategy itself 3

STRATEGIC vs. OPERATIONAL MANAGEMENT STRATEGIC MANAGEMENT ♦ Ambiguous/ uncertain ♦ Complex ♦ Organisation-wide ♦ Fundamental ♦ Long-term implications

OPERATIONAL MANAGEMENT ♦ Routinised ♦ Operationally specific ♦ Short-term implications

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LONG-TERM All decisions about the long term are STRATEGIC DECISIONS, because they address issues other than those addressed by OPERATING or TACTICAL decisions, and require different tools for taking these decisions.

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DIRECTION AND SCOPE The strategy statement gives the direction that the organisation is to pursue. It also defines the scope of operations.

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ORGANISATION  The nature of the organisation.  The values and beliefs of the people in

command/ stakeholders.  The SWOT analysis  The PESTEL framework analysis

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ADVANTAGES This is the “Strategic intent” – why the organisation wants to pursue a strategy, based on the SWOT and PESTEL analysis. It could be for a specific advantage, or to ward off a disastrous threat. It could be for Survival, Profits or Growth 8

RESOURCES  Matching of the resources and activities of

an organisation to the environment: This is the “strategic fit”

 Building on or stretching an organisation’s

resources to create opportunities or to capitalise on them. This is the “resource-led stretch”

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RESOURCES -II ASPECT OF “FIT” STRATEGY Underlying Fit between basis market and org. Advantage Proper through direction of resources

“STRETCH” Leverage resources to improve VFM Creating competence or market need

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RESOURCES - III ASPECT OF STRATEGY

“FIT”

Small players survival

Find and defend a niche

Risk reduction by

Portfolio of products/ businesses Strategies of business units

Corporate investment in

“STRETCH” Change the rules of the game Portfolio of competences Core competences

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ENVIRONMENT ♦ Ever-changing ♦ The PESTEL framework ♦ The FIVE FORCES model ♦ Uncertain and ambiguous ♦ Complex in nature

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BENEFITS OF THE STRATEGIC APPROACH - I ♦ Providing better guidance to the entire

organisation about “what is it that we are trying to do” ♦ Making everyone more alert to new opportunities and threats

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BENEFITS OF THE STRATEGIC APPROACH - II ♦ Unify the organisation ♦ More proactive management posture ♦ Constantly, automatically developing

organisation ♦ Provide a basis for evaluating budget proposals 14

VOCABULARY OF STRATEGY ♦ VISION: the desired future state – also

called the Strategic Intent ♦ MISSION: what the organisation will do to achieve its basic purpose ♦ GOAL: general and simple statement of aim or purpose ♦ OBJECTIVE: more precise statement of goal, quantified when possible 15

VOCABULARY OF STRATEGY- II ♦ BUSINESS UNIT STRATEGY: it is about

how to compete successfully in particular markets ♦ STRATEGIC BUSINESS UNIT: is a part of an organisation for which there is a distinct external market for goods or services that is different from another SBU

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PATTERNS OF STRATEGY - I ♦ To outcompete rivals ♦ Respond to external changes ♦ To alter geographic coverage ♦ To merge/ acquire a rival ♦ To form strategic alliances/ collaborations ♦ To capitalise on new opportunities ♦ To defend against new threats

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PATTERNS OF STRATEGY - II ♦ To define how the company manages R&D,

production, sales and marketing, finance, and other key functions ♦ To strengthen resource base and competitive capabilities ♦ Related/ unrelated diversification

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ELEMENTS OF STRATEGIC MANAGEMENT ♦ Strategic intent ♦ Strategic choices ♦ Analysis

STRATEGY! ♦ Implementation design ♦ Evaluation design ♦ “GO!” ♦ Monitor and control 19

APROACHES TO STRATEGY-MAKING ♦ Design – the range of influences on an

organisation’s performance can be best understood by analysis ♦ Experience – how an organisation performs depends mostly on what experience it has built up, even in new areas of operations ♦ Ideas – order and innovation emerge from the variety and diversity in and around the organisation. 20

APPROACHES TO FORMULATION ♦ The Chief Architect approach – one person takes

the full charge of the vision ♦ The Delegation approach – the manager in charge delegates big parts of the work to trusted subordinates and teams ♦ The Collaborative or Team approach – a strategy team is put in charge of evolving strategy ♦ The Corporate Intrapreneur approach – encourage individuals and teams to come up with new initiatives and approaches 21

TEST OF A GOOD STRATEGY A good strategy must fulfill: ♦ Competitive Advantage Test: it must provide a sustainable competitive advantage ♦ Performance Test: it must boost company performance: gains in profitability, and in competitive strength ♦ Goodness of Fit Test:The best fit to the external and internal situation of a company

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