Strategic Management- summary

• STRATEGIC MANAGEMENT : 1. Evolution of concept 2. Importance of strategic management 3. Components of strategic management 4. The three levels of strategic planning 5. Making strategic decisions Strategic management is the process of specifying an organization's objectives, developing policies and plans to achieve these objectives, and allocating resources to implement the policies and plans to achieve the organization's objectives. It is the highest level of managerial activity, usually performed by an organization's Chief Executive Officer (CEO) and executive team. 
  
• Strategic management provides overall direction to the enterprise. Or 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 an organization. 
• Evolution Igor Ansoff is the pioneer. Henry Mintzberg and Michael E Porter enriched it. Ansoffs strategic success paradigm identifies the conditions that optimize profitability- He developed a strategy grid that compared market penetration strategies, product development strategies, market development strategies and horizontal and vertical integration and diversification strategies. 
• Ansoff’s paradigm : a) There is no universal success formula for all firms. b) The level of turbulence determines the strategy. c) To optimize firms’ success the aggressiveness of strategy should be aligned with the turbulence. d) The management’s capabilities should be aligned with the turbulence to optimize firm success. e) Internal capability variables – cognitive, psychological, political, anthropological and sociological variables, all jointly determines the firms success. On empirically testing for 11 years made this to a diagnostic instrument ‘Strategic readiness diagnoses’ in his book ‘Corporate strategy (1965)’ introduced ‘gap analysis’ and the concept of synergy. Mintzberg: Strategy as a craft. In this book ‘The nature of management work (1973)’ coined a term ‘crafting strategy’. Strategy formulation is a deliberate delicate and dangerous process. 
•  Peter Drucker observed that by consciously using formal planning a company could extent some positive control over market forces became the rationale for business strategy. He introduced the concept of MBO-shifting focus from process to goals. 
• Philip Kottler was a well-known proponent of marketing warfare strategy. There were generally thought to be four types of business warfare theories. They are: Offensive marketing warfare strategies Defensive marketing warfare strategies Flanking marketing warfare strategies Guerrilla marketing warfare strategies Michael Eugene Porter : He received an M.B.A. with high distinction in 1971 from the Harvard Business School, An important contributor to strategic management theory Porter's main academic objectives focus on how a firm or a region can build a competitive advantage and develop competitive strategy. Porter's strategic system consists primarily of: 5 forces analysis strategic groups (also called strategic sets) the value chain the generic strategies of cost leadership, differentiation, and focus the market positioning strategies of variety based, needs based, and access based market position Strategic management can be seen as a combination of strategy formulation and strategy implementation.
•  Strategy formulation involves: Doing a situation analysis: both internal and external; both micro-environmental and macro-environmental. Concurrent with this assessment, objectives are set. This involves crafting vision statements (long term view of a possible future), mission statements (the role that the organization gives itself in society), overall corporate objectives (both financial and strategic), strategic business unit objectives (both financial and strategic), and tactical objectives. These objectives should, in the light of the situation analysis, suggest a strategic plan. The plan provides the details of how to achieve these objectives. This three-step strategy formulation process is sometimes referred to as determining where you are now, determining where you want to go, and then determining how to get there. Strategy implementation involves: Allocation of sufficient resources (financial, personnel, time, technology support) Establishing a chain of command or some alternative structure (such as cross functional teams) Assigning responsibility of specific tasks or processes to specific individuals or groups It also involves managing the process. This includes monitoring results, comparing to benchmarks and best practices, evaluating the efficacy and efficiency of the process, controlling for variances, and making adjustments. When implementing specific programs, this involves acquiring the requisite resources, developing the process, training, process testing, documentation, In most (large) corporations there are several levels of strategy formation. Strategic management is the highest in the sense that it is the broadest: applying to all parts of the firm. It gives direction to corporate values, corporate culture, corporate goals, and corporate missions. Under this broad corporate strategy there are often functional or business unit strategies. Functional strategies include marketing strategies, new product development strategies, human resource strategies, financial strategies, legal strategies, and information technology management strategies. The emphasis is on short and medium term plans and is limited to the domain of each department’s functional responsibility. Each functional department attempts to do its part in meeting overall corporate objectives, and hence to some extent their strategies are derived from broader corporate strategies. Importance of strategic management Strategy comprises the most fundemental ends and means of an organization. Components of strategic management Vision , Company Mission, Company Profile , External Enviornment , Strategic Analysis And Choice , Long Term Objectives, Annual Objectives, Grand Strategy, Funtional And Operational Strategies, Policies, Institutionalising Control And Evaluation.  
• Three levels of strategic planning Corporate level Business level Functional level Making strategic decisions Strategic management is defined as a set of decisions and actions resulting in formulation and implementation of plans designed to achieve the companies objectives. Such as : – Efficiency- reduction of cost – Profitability – Growth- total assets , sales etc., – Wealth for shareholders- stock market ,dividends – Resource utilization – return on investment, equity etc., – Brand reputation , market share – Contribution to employees –job security , compensation – Societal ,- tax, community service – Leadership in technology etc., 
• § Mintzberg classified strategic decision making into 3 modes: Entrepreneurial mode – where formulation of strategy is done by a single person. Focus is on opportunities and growth. Advantage is the speed with which strategy can be formulated and implemented. Disadvantage is that does not consider problems that may arise in the processes. Strategy is characterized by bold decisions. For example WIPRO Infotech , Apple computers Adaptive mode – it is characterized by reactive solutions than proactive search for new opportunities. Example : introduction of customized personal computers in response to DELL in Indian market or coke. This results in fragmented strategy for incremental improvement. Planning mode : this involves systematic information gathering for situational analysis generating alternate strategies and selection of appropriate strategy. This mode includes both reactive and proactive solutions to current problems. Ex: entry of MNCs in the automotive markets in India made the lead player Maruti Suzuki come out with new models and slowdown production of non moving models. Some times organizations may adopt a forth mode called logical incrementalisation mode This is a synthesis of all three modes indicated above. This is an interactive processes in which the organization probes the future, experiments and learns from a series of partial commitments rather than through global formulations of total strategies. § 
• Developing strategic perspective Strategic management comprises nine critical tasks: 1. Formulating the company’s mission- including broad statements about its purpose, philosophy and goals. 2. Developing a company profile- that reflects its internal conditions and capabilities. 3. Assessing the company’s external environment- including both the competitive and general contextual factors. 4. Analyzing the company’s options - by matching its resources and the external environment. 5. Identifying the most desirable options - by evaluating each option in light of the company’s mission. 6. Selecting a set of long term objectives and grand strategies - that will achieve the most desirable options. 7. Developing annual objectives and short-term strategies that are compatible with the selected set of long-term objectives and grand strategies. 8. Implementing the strategic choices by means of budgeted resource allocations in which the matching of tasks, people, structures, technologies, and reward systems is emphasized. 9. Evaluating the success of the strategic process as an input for future decision making. 
•  Strategic management process – § Strategic management at corporate level, business level and functional level. The process in management is defined as a perceptible flow of information through interrelated stages of analysis directed towards achievement of the objective. 
•  4 basic elements in the processes of strategic management 1. Environmental scanning and analysis 2. Strategy formulation 3. Strategy implementation 4. Evaluation and control §
•  Environmental scanning and analysis SWOT analysis is the most commonly used technique for environmental scanning- tools like surveys, qstnrs, focus groups , open forums too may be employed. The organization will benefit from environmental scanning by development of a common perception, identification of strength and weakness, an understanding trends and conditions, and optimum utilization of internal and external information.  
• Strategy formulation Strategy formulation refers to the development of long term plans for managing opportunities and threats in the external environment and utilizing the strengths and overcoming the weakness with in the organization. Strategy formulation helps an organization to : – Capitalize on available opportunities – Address the challenges faced by the organization – Provide leadership to master change – Incorporate an in -depth planning model §
•  Strategy implementation The processes by which the strategies are put in action is called strategy implementation: Programs, budgets and procedures are developed for this purpose. This may necessitate changes in overall culture, structure and management system of the organization. Implementation is handled normally by middle and lower level managers and reviewed by top management from time to time. Structure and budget are important for implementation of strategy. The firms structure is vital for achievement of objectives ; a proper structure is essential for making strategy operational by managers by utilizing all the skills available, to motivate , to ensure efficiency , quality control innovate and ensure customer satisfaction. Budget is a statement of programs to be implemented in monetary terms and used for planning and control. The details of investments, returns etc. are also included. A performance budget too is made for monitoring performance of each section , activity or division. §
•  Evaluation and control It is the process by which proposed activities are compared with the actual results, achievements and performance. Corrective steps are taken based on evaluation of results and problems solved. This provides opportunities for organizational learning and incorporating changes.. The evaluation phase marks the beginning and end of strategic management process. It includes a through review of results of the strategy in terms of its contributions in financial & operational terms , and in terms of social goals. 
•  Three levels of strategy planning / formulation There are three levels in the processes of formulation of strategy. Corporate level managers give direction to the organization. They steer the organization in the turbulence of the dynamic business environment. Business level managers give shape to the vision of the corporate managers. Functional level managers make strategy a reality. Contribution of managers at all the three levels is equally important for success. In a single business scenario the corporate and business level responsibilities are clubbed together and under taken by a single group ie., the top management, whereas in conglomerate business firms there are three fully operative levels. Corporate level At the corporate level, strategies are devised in an attempt to exploit the firms distinctive competencies by developing long term plans for business operations. To a great extend attitudes at the corporate level reflect the concerns of the stake holders and society at large. Corporate level strategy deals basically with selection of the areas of business operations of the company. This strategy is concerned with the objectives of the organization, the way in which business will be integrated and managed, the development of synergies by coordinating and sharing different resources and investment of financial resources across business units. Fords Revival §Business level Business level strategy involves making decisions about competitive positions of a single business unit. The managers at this level translate the corporate strategies into concrete functional objectives and strategies for individual divisions. Business level managers determine the basis of competitive advantage in a specific product / market area. The goal of business level managers is to select, enter and grow in the most profitable market segment with highest potential. ABB minimizes cost § Functional level This level consists of managers from geographic, product and functional areas. These managers design short term strategies and fix annual objectives in different areas such as research and development, finance and accounting, marketing, production, operations and human relations. Functional level managers address problems related to the efficiency and effectiveness of production, success of particular products and services in increasing their market share and quality of customer service. The functional objectives are quantifiable and operational in nature. These objectives relate particular period, hence can be modified from time to time. The cost of failure of these strategies is relatively small, hence risk perception is marginal. Methods of manufacturing at CANON