FUNDAMENTALS OF STRATEGIC MANAGEMENT

STRATEGIC MANAGEMENT -It takes into consideration various external as well as internal factors and the environment in general as well as competitiveness and sustainability over the long-term period in the industry or sector it belongs.

Strategic Management Strategic management is the study of why some firms outperform others. How to create a competitive advantage in the market place that is unique, valuable, and difficult to copy “Total organization” perspective, integrating across functional areas. Two perspectives of leadership: romantic view and external control perspective. Strategies put together an understanding of the external environment with an understanding of internal strengths and weaknesses.

Attributes of Strategic Management Directs the organization toward overall goals and objectives. Includes multiple stakeholders in decision making. Needs to incorporate short-term and long-term perspectives. Recognizes trade-offs between efficiency and effectiveness.

Mintzberg’s Views of Strategy Plan - consciously intended course of action Ploy - maneuver to outwit opponent Pattern - consistency in behavior Position - location in environment Perspective - way of perceiving the world

Mintzberg’s Modes Entrepreneurial mode Adaptive mode Planning mode Strategic Decision Making Mintzberg’s Modes Entrepreneurial mode Adaptive mode Planning mode Logical incrementalism Prentice Hall, Inc. © 2006 Prentice Hall 2006

Forms of Strategy Formal versus informal - associated with size of firm and stage of development. Mintzberg’s distinction between entrepreneurial and planning mode. Intended versus realized - intended strategies are the plans managers develop; realized strategies are the actions that actually take place over time.

Forms of Strategy Source:H. Mintzberg and J. A. Waters, “Of Strategies, Deliberate and Emergent,” Strategic Management Journal 6 (1985), pp. 257-72.

CHRACTERISTICS OF STRATEGY Traditionally meant to be a grand plan in the light of what is was believed and adversary might do or might not do. Derives its relevance given from the existence of a competition in the business It is done in the presumption of the existence of a negative scenario

CHRACTERISTICS OF STRATEGY 4. It also connotes general program of action and deployment of emphasis and resources to attain comprehensive objectives 5. Strategy may, in some extreme or necessary cases, exist without a policy

STRATEGY VS. POLICY In may instances, business policies exist amidst absence of business strategy and strategies may exist without the established business policies. If ever they exist, business policies are generally directional in nature and strategy is more operational in context. Business policies are often formal or written and strategies may be informal and not necessarily written and often confidential

STRATEGY VS. POLICY In may instances, business policies exist amidst absence of business strategy and strategies may exist without the established business policies. If ever they exist, business policies are generally directional in nature and strategy is more operational in context. Business policies are often formal or written and strategies may be informal and not necessarily written and often confidential

STRATEGY VS. TACTICS As to level of conduct, strategy developed a the highest level of management whereas tactics are employed and related to lower levels of management. As to regularity, formulation of strategy is both continuous and irregular whereas tactics are determined on a periodic cycle with fixed time schedule.

STRATEGY VS. TACTICS 3. As to subjective values, strategic decision making is more heavily weighed with subjective values of managers than is tactical decision making. 4. As to the range of alternativeness, the total possible range of alternatives from which management must choose is far greater in strategic than in tactical decision-making

STRATEGY VS. TACTICS 5. As to uncertainty, uncertainty is usually much greater in both formulation and implementation of strategy than in deciding upon and knowing the results of tactical decisions

STRATEGIC TYPES Defenders- This type includes companies with a limited product line that focus on improving the efficiency of the existing operations. This cost orientation makes them unlikely to innovate in a new area.

STRATEGIC TYPES 2. Prospectors- This type of companies includes firms with fairly broad product lines that focus on product innovation and market opportunities. They tend to emphasize creativity and over efficiency.

STRATEGIC TYPES 4. Reactors- This type includes companies that lack a consistent strategy-structure-culture relationship. Their responses to environmental pressures tend to be piecemeal strategic changes.

STRATEGIC TYPES 3. Analyzers- This type includes business organization that operate in at least two different product market areas, one stable and one variable. In stable areas, efficiency is emphasized. In variable areas, innovation is emphasized.

BASES OF POLICIES AND STRATEGIES Legal Mandate Vision and Mission statement Specific Objectives Programs and Policies

STRATEGY FOUR GENERIC APPROACHES CLASSICAL APPROACH EVOLUTIONARY PROCESSUAL SYSTEMATIC

STRATEGY FOUR GENERIC APPROACHES CLASSICAL APPROACH This approach follows a pattern of analyzing, planning and directing. Profitability is the supreme goal and rational planning is the means to achieve it.

STRATEGY FOUR GENERIC APPROACHES 2. EVOLUTIONARY- This approach is conscious in keeping cost or expenses low with open options.

STRATEGY FOUR GENERIC APPROACHES PROCESSUAL This approach is more adaptive to situation by playing the local rules.

STRATEGY FOUR GENERIC APPROACHES 4. SYSTEMATIC - This approach is relativistic, regarding the ends and means of the strategy and inescapably linked to the cultures and powers of the local social systems in which it takes place.

Coherence in Strategic Direction Company vision Massively inspiring Overarching Long-term Driven by and evokes passion Fundamental statement of the organization’s Values Aspiration Goals Hierarchy of Goals Company vision

Coherence in Strategic Direction Mission statements Purpose of the company Basis of competition and competitive advantages More specific than vision Focused on the means by which the firm will compete Hierarchy of Goals Company vision Mission statements

Coherence in Strategic Direction Hierarchy of Goals Company vision Mission statements Strategic objectives Operationalize the mission statement Measurable, specific, appropriate, realistic, timely, challenging, resolve conflicts that arise, and yardstick for rewards and incentives Strategic objectives