Business Strategic Management Alokesh Banerjee 1 What is

Business Strategic Management Alokesh Banerjee 1

What is strategic management? n n A continuous, iterative process aimed at keeping an organization as a whole approporiately matched to its environment (Certo and Peter) Keeping the business in tune with management and marketing forces both outside and inside the firm 2

Benefits of strategic management n n n n Establish the mission Formulate philosophy Establish policies Setting objectives Developing strategy Plan the organizational structure Provide personnel n n n n Establish procedures Provide facilities Provide capital Set standards Establish programs and plans Control information Activate people 3

Steps to strategic management n n n Environmental analysis Establish organizational direction Strategy formulation Strategy implementation Strategic control 4

Environmental analysis n Process of examining the organization’s environment to determine: n n Strengths Weaknesses Opportunities Threats 5

Environmental structure n General environment n n Operating environment n n Social, economic, political, legal, technical International, supplier, labor, competition, customer Internal environment n Organizational, marketing, financial, personnel, production 6

Methods of environmental forecasting n Expert opinion n Cross-impact analysis n Trend extrapolation n Multiple scenarios n Trend correlation n Demand/hazard forecasting n Dynamic modeling 7

Establish organizational direction n Establishing an organizational direction for the company involves determining two indicators: n n Organizational mission – the reason why the organization exists Objectives – measurable targets to track the growth of the business 8

Key objective areas n n n n Market standing Innovation Productivity Resource levels Profitability Manager performance and development Worker performance and attitude Social responsibility 9

Types of objectives n n n n Profitability Growth Market share Social responsibility Employee welfare Product Quality Service n n n R&D Diversification Efficiency Financial stability Resource conservation Mgt & labor development 10

Strategy formulation n n What are the purpose(s) and objective(s) of the organization? Where is the organization presently going? What critical environmental factors does the organization currently face? What can be done to achieve organizational objectives more effectively in the future? 11

Growth-share matrix 22 Stars Question Marks 20 Market Growth Rate (percent) 18 14 12 10 Dogs Cash Cows 8 6 4 2 10. 0 5. 0 2. 0 1. 0 Relative Market Share 0. 5 0. 1 12

Formulating business strategies n Structural analysis of competitive forces n n n Threat of new entrants Bargaining power of suppliers Bargaining power of buyers Threat of substitute products Rivalry among existing competitors Strategic alternatives 13

Formulating functional strategies n Operations strategy n Financial strategy n Marketing strategy n Human resource strategy 14

Strategy implementation n Commander approach n Organizational change approach n Collaborative approach n Cultural approach n Crescive approach 15

Commander approach n n n Manager determines “best” strategy Manager uses power to see strategy implemented Three conditions must be met n n n Manager must have power Accurate and timely information is available No personal biases should be present 16

Commander approach n Limitations n n Can reduce employee motivation and innovation Advantages n n n Managers focus on strategy formulation Works well for younger managers Focuses on objective rather than subjective 17

Organizational change approach n n n Focuses on the organization Behavioral tools are used Includes focusing on the organization’s staffing and structure Often more effective than Commander Used to implement difficult strategies 18

Organizational change approach n Limitations n n Managers don’t stay informed of changes occuring within the environment Doesn’t take politics and personal agendas into account Imposes strategies in a “top-down” format Can backfire in rapidly changing industries 19

Collaborative approach n n Enlarges the Organizational Change Approach Manager is a coordinator Management team members provide input Group wisdom is the goal 20

Collaborative approach n Advantages n n n Increased quality and timeliness of information Improved chances of effective implementation Limitations n n Contributing managers have different points of view and goals Management retains control over the process 21

Cultural approach n n Includes lower levels of the company Breaks down barriers between management and workers Everyone has input into the formulation and implementation of strategies Works best in high resource firms 22

Cultural approach n Advantage n n More enthusiastic implementation Limitations n n Workers should be informed, intelligent Consumes large amounts of time Strong company identity becomes handicap Can discourage change and innovation 23

Crescive approach n n Addresses formulation and implementation simultaneously Subordinates develop, champion, and implement strategies on their own “Bottoms-up” approach Ultimate strategy is sum of all “successful” approaches 24

Crescive approach n Advantages n n n Encourages middle management to participate Strategies are more operationally sound Limitations n n Resources must be available Tolerance must be extended 25

Strategic control n Typically consists of three steps n Monitoring performance n Comparing performance to standards n Taking corrective action where needed 26

The material for this presentation was taken from: Strategic Management: Concepts and Applications Samuel C. Certo and J. Paul Peter Random House Business Division 27