Strategic Management

What is a Strategy? “how we get from where we are not to where we want to be in the future”... EXAM QUESTIONS... Usually Essay based question (20 marks) Use of Management Tools to be able to carry out strategic plans of the business

Definitions: Corporate Strategy: LONG TERM plan of action for the WHOLE organisation (to achieve a particular goal) Tactic: SHORT TERM policy or decision – aimed at resolving a particular problem or meeting a goal Strategic Management: ROLE of management – when setting the long term goals and implementing them (cross functional decisions)

So, what are the stages of effective Strategic Management?  Assess the current position (market, competition, ext environment)  Set the Companies Mission, vision and objectives  What will the long term decisions be in order to meet these objectives?  Integrate and coordinate the activities of the functions in business  Allocate the resources necessary for the decisions to take effect (costs?)  Evaluate the success All of these tie into Management by Objectives

Different levels of strategies... Corporate Strategy – Whole Corporation Business Strategy – Product or geographical units of the overall business – must sustain competitive position The success of each business will strengthen the overall Corporate Strategy Functional Strategy – Product development, Marketing, HRM etc – do they have limitations?

Strategies that have been used by businesses? Esso – “Price Watch” against supermarkets Why did they do it? Did they need to do it? Nintendo Wii – a break from convention? Xbox Kinect – non control gaming? Do businesses worry about shareholder returns, or do they go for the more ethical route of strategic planning (Social Responsibility Objectives?)

Does Business Structure follow it’s strategy? Alfred Chandler believed yes! He based his argument on DuPont, GM, Standard Oil... All had:  Acquired labour and materials to allow for growth  Established departments to improve specialisation and efficiency  Developed new products and markets outside domestic markets  Developed independent divisional organisations – Centralising decision making. He argued that business diversity can only be managed effectively if they changed their internal management structure to a multi-divisional one... BUT – what does it rely on for this type of changing and expanding structure to be successful?

Examples of changing structures... Change by Merger – product-focused profit centres Asea and Brown Boveri Merger Asea Brown Boveri structure changes radically and dramatically Global Market Penetration was the focus (robotics and power systems) Product decisions were made more independently from HQ – decentralisation of responsibility Individual accountability became more important than Centralised decision making It only became successful due to the development of electronic forms of communication and MIS – allowing for the delayering

Examples of changing structures... Strategy of developing new markets leading to new structure Divisions created to meet new markets... Coca Cola – Indian market They took the decision to decentralise it’s structure, with regional managers moving closer to the countries they were responsible for. Decision making moved further down the chain of command – to suit the Indian market requirements

Examples of changing structures... Strategy of a conglomerate to cut costs and increase flexibility Tata Group Delayering the organisational structure from 10 to 6 management layers Reason – the 6 management layers will have clear defined job descriptions to equate jobs of a similar nature across the Tata Group. This should ensure mobility and provide opportunities for managers to work in different departments within each division (Motivational Theory)

Strategy and Competitive Advantage... Porter: 2 main factors that can lead to significant competitive advantage: Low Costs and Prices Or Product Differentiation = higher prices But, what do you do in an ever increasing globalised marketplace?

Strategy and Competitive Advantage... AUTOMATION? BMW took over Mini Cars at a cost of $400 million – why? 230 new robots in the UK factory Most advanced and productive manufacturing facilities in the world Reduced costs of manufacture (Technological EoS) Flexible production systems

Strategy and Competitive Advantage... RATIONALISATION? Merger of Thomas Cook and MyTravel – why? Saving $300 million through redundancies (duplication of job roles) Reduced Costs – Bulk Purchasing of holiday accommodation (Purchasing EoS)

Strategy and Competitive Advantage... Research and Development Shell increased R&D spend by 36% in 2008 – why? Diversification away from the oil and gas business Pushed by low reserves compared to competition Moving focus to biotechnology, carbon emission storage and alternative fuels