Strategic Management An Introduction

What is Strategic Management? Strategy refers to the plans made and action taken to enable an organization to fulfill its identified objectives Strategy is management’s game plan for strengthening the organization’s position, pleasing customers, and achieving performance targets A continuous, iterative process aimed at keeping an organization as a whole approporiately matched to its environment Keeping the business in tune with management and marketing forces both outside and inside the firm Without a strategy, managers have: No thought-out course to follow No roadmap to manage by No action program to produce the intended result

Components of Strategic Management Vision, Mission, and Company Profile Recognizing and evaluating external and internal environment Strategic Analysis and Choice Strategy Formulation Strategy Implementation Evaluation of performance

What does a company’s strategy consist of? How to respond to changing industry and market conditions How best to capitalize on new opportunities How to manage each functional piece of the business How to achieve strategic and financial objectives How to satisfy customers Broad or narrow product line? Amount of customer service provided? How to grow the business Concentrate on a single business strategy? Diversify into related or unrelated industries? Expand globally?

Benefits of strategic management Establish the mission Formulate philosophy Establish policies Setting objectives Developing strategy Plan the organizational structure Provide personnel Establish procedures Provide facilities Provide capital Set standards Establish programs and plans Control information Activate people It helps in answering questions: Where is the Organization now? Where will be the organization in a certain timeframe? What are the risks and payoffs? What could be possible changes in organization’s internal & external environment?

Phases of strategic management Phase I: Basic Financial Planning Phase II: Forecast based planning Phase III: Externally oriented planning Phase IV: Strategic Management

Basic Model of strategic management Environmental Scanning Strategy Formulation Strategy Implementation Evaluation & Control Internal External Mission Objectives Strategies Policies Programs Budgets Procedures Actual vs Desired performance

Environmental Scanning Environmental scanning is the monitoring, evaluating, and dissemination of information from the external and internal environments to key people within the organization Internal Environment External Environment Tools for scanning

Environmental Variables Societal Environment Sociocultural forces Economic forces Task Environment Governments Shareholders Suppliers Internal Environment Structure Culture Resources Associations Trade Creditors Special Interest Groups Employees/ Labor Unions Competitors Customers Political Legal Forces Technological Forces

Strategy Formulation Strategy Formulation is the development of long-range plans for the effective management of environmental opportunities and threats, in light of the organization’s weaknesses and strengths Vision & Mission Objectives: end results of planned activity (it can be in terms of profitability, efficiency, growth, shareholder wealth, market leadership etc.) Levels of Strategies: Corporate, Business and Functional Policies: a broad guideline for decision making that links the formulation of strategy with its implementation ITC Vision: Sustain ITC's position as one of India's most valuable corporations through world class performance, creating growing value for the Indian economy and the Company’s stakeholders ITC Mission: To enhance the wealth generating capability of the enterprise in a globalising environment, delivering superior and sustainable stakeholder value

Strategy Implementation Strategy Implementation is the process by which strategies and policies are put into action through the development of programs, budgets and procedures Programs Budgets Procedures

Evaluation and Control Evaluation and control is the process in which corporate activities and performance results are monitored so that actual performance can be compared with desired performance. Performance is the end result of activities

Initiation of Strategy Henry Mintzberg: “It is most often an irregular, discontinuous process, proceeding in fits and starts. There are periods of stability in strategy development, but also there are periods of flux, of groping, of piecemeal change and of global change.” New CEO External Intervention Threat of a change in ownership Performance Gap Strategic Inflection Point: introduction of new technologies, different regulatory environment, change in customers values or preferences

Strategic Decision Making What makes decision strategic? Rare: unusual with few precedents Consequential requiring: commit substantial resources and demand a great level of commitment Directive: set precedents for lesser decisions and actions throughout the organization Modes of Strategic Decision Making (Mintzberg) Entrepreneurial Adaptive Planning Logical Incrementalism: Mix of above three