Strategic Management n UNIT 1 n Strategic mgt

Strategic Management n UNIT – 1 n Strategic mgt – Definition, need, benefits Strategy Vision Mission Goals & Objectives Strategic Mgt process Levels of strategy Concept of SBU Role of Leaders Competitive advantage of nations n n n n n

FIRM & ITS ENVIRONMENT REMOTE EXTERNAL ENVT IMMEDIATE EXTERNAL ENVT COMPETITORS INTERNAL ENVT TECHNOLOGY DEVELOPMENT CUSTOMERS OWNERS FIRM TOP MANAGERS EMPLOYEES GOVT. AGENCIES POLITICAL FACTORS SUPPLIERS SOCIAL CHANGE

Strategic Management - Definition n Set of decisions and actions resulting in formulation and implementation of strategies designed to achieve the objectives of an organisation. n It involves Planning Directing Organising Controlling 1. 2. 3. 4.

NEED FOR STRATEGIC MGT Complexity and sophistication of business decision making n Unstable environment n Increasing competition n

9 CRITICAL AREAS OF ST. MGT n Determining mission of the company n Developing company profile n Assessment of co’s external envt n Matching co profile with external envt n Choice of long - term objectives n Grand strategies needed n Development of annual objectives and short term strategies n Implementing the decisions n Review and evaluation

STRATEGY - DEFINITION n Large scale future oriented plans for interacting with the competitive envt to optimise achievement of organizational objectives.

DIMENSIONS OF STRATEGIC DECISIONS n Require top mgt decisions n Involve allocation of large amount of company resources n Have significant impact on the long – term prosperity of the firm n Future – oriented n Usually have major multi – functional or multi – business consequences n Necessiate considering factors in the firm’s external envt

BENEFITS OF STRATEGIC MANAGEMENT n Enhances problem prevention capabilities of the firm n Group based strategic decisions n Employee motivation n Provides understanding of sub – group responsibilities n Resistance to change reduced

How does St. Mgt help the firm? n Provides the direction to the firm and serves as a road map n Prepares the firm to face the future n Brings forth the strategic decisions concerning the firm n Helps acquire competitive advantage n Ensures optimum utilisation of resources n Provides the best possible fit btw the firm and the envt n Ensures the firm’s business, products and markets are wisely chosen

HIERARCHY OF STRATEGIC INTENT Most Integrative Fewest in number VISION MISSION GOALS OBJECTIVES PLANS Most specific Greatest in number

VISION Vision represents what the organization would be in future n Create projections about where it should go in future n Definition: ‘A realistic, credible and attractive future for an organization’

EXAMPLES OF VISION STATEMENTS "Mc. Donald's vision is to be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile. " 'to become the world's leading consumer company for automotive products and services'.

FEATURES OF A GOOD VISION n Should be realistic and idealistic n Clarifies direction for the organization n Inspires organization members and encourages commitment n Reflects the uniqueness of the organization, its distinctive competence n Appropriate for the organization, consistent with its values and culture n Well articulated and easily understood

MISSION n Defined as the fundamental, unique purpose that sets a business apart from other firms of its type and identifies the scope of its operations in product and market terms n It is a statement of attitude, outlook and orientation n It communicates what the firm wants to be n It indicates the businesses the firm will pursue and the customer needs it will seek to satisfy n Shaped by the vision of the corporation’s leaders

EXAMPLES OF MISSION STATEMENTS ‘Our mission is to make every Indian a Britannia consumer’ ‘to meet the everyday needs of people everywhere in India. We stand committed to continuously improving the quality of life of each and every Indian. Because ultimately, our future is closely linked to the future of every Indian home and the housewives who run them’

NEED FOR A MISSION n To ensure unanimity of purpose within the organization n To provide a basis for motivation n To establish an organization climate n To serve as a focal point n To facilitate the translation of objectives and goals into work structure n It implies the image which the firm seeks to project

FEATURES OF A GOOD MISSION Should be clear n Should be feasible n Precise but explanatory n Distinctive n

DIFFERENCE BTW VISION AND MISSION n VISION n MISSION n Forward looking n States what the organization is and why it exists n Emphasis on long term concept n How the orgn will interact with its stakeholders, products or services it offers, way it is offered.

STRATEGIC MGT PROCESS COMPANY MISSION Feedback COMPANY PROFILE EXTERNAL ENVT STRATEGIC ANALYSIS AND CHOICE LONG TERM OBJECTIVES GRAND STRATEGY ANNUAL OBJECTIVES OPERATING STRATEGIES POLICIES INSTITUTIONALIZING OF STRATEGY Feedback CONTROL AND EVALUATION

LEVELS OF STRATEGY CORPORATE STRATEGY SBU 1 R&D STRATEGIES SBU 2 FINANCIAL STRATEGIES SBU – Strategic Business Unit CORPORATE LEVEL BUSINESS LEVEL SBU 3 MARKETING STRATEGIES HR STRATEGIES FUNCTIONAL LEVEL

THE CONCEPT OF SBU n A systematic grouping of the businesses of a multi – business corporation n Each SBU is treated as a separate business n Products within an SBU receive same strategic planning treatment n Facilitate effective planning

ILLUSTRATION ON SBU n 1. 2. 3. 4. 5. 5 SBUs Titan Watches Sonata Watches Jewellery business Personal accessories Precision engineering

ROLE OF BOARD OF DIRECTORS n Trusteeship n Determination of basic objectives and policies n Selection of top executives n Determination of organization structure n Approval of financial matters n Checks and controls n Legal functions

ROLE OF CHIEF EXECUTIVE n Formulation of Long – term plans n Guidance and Direction n Integration n Staffing n Review and Control n External Relations

ROLE OF OTHER MANAGERS n Heads of SBU / functional managers n Some managers act as directors on board usually on rotation basis Eg: HUL n Implementation of strategy

ROLE OF CONSULTANTS n Professional service performed by specially trained and experienced persons n Advice and assist managers and administrators n Specific, time – bound assignments n Consultancy fee quite high sometimes Eg: SAIL paid Rs. 8 crore to Mc. Kinsey & Company to advise on its business restructuring. Examples of Indian Consultancy firms §A. F. Ferguson §ABC Consultants §Billimoria Consultants Examples of Foreign Consultancy firms §Mc Kinsey & Company §Arthur Anderson §Ernst & Young §Boston Consulting Group §KPMG

COMPETITIVE ADVANTAGE OF NATIONS What do you understand from this picture?

COMPETITIVE ADVANTAGE OF NATIONS n Competitive advantage is the advantage gained over the other competitors in terms of its offering – product, quality, price, technology etc. n Porter defined the competitive advantage of a nation as its capacity to entice firms (both local and foreign) to use the country as a platform from which to conduct business. n Competitive advantage can be created or, at the very least, raised significantly. n “National prosperity is created, not inherited. ” - Michael Porter n In a world of increasingly liberalized trade, strategy must concentrate on generating and maintaining competitive advantage.

Porter’s diamond of national ADVANTAGE Firm strategy, structure & rivalry Factor Conditions (resources) Demand conditions Related and Supporting industries