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

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

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

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

5. 9 CRITICAL AREAS OF ST.MGT Determining mission of the company Determining mission of the company Developing company profile Developing company profile Assessment of co’s external envt Assessment of co’s external envt Matching co profile with external envt Matching co profile with external envt Choice of long - term objectives Choice of long - term objectives Grand strategies needed Grand strategies needed Development of annual objectives and short term strategies Development of annual objectives and short term strategies Implementing the decisions Implementing the decisions Review and evaluation Review and evaluation

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

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

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

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

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

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

12. EXAMPLES OF VISION STATEMENTS "McDonald'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'.

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

14. MISSION 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 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 It is a statement of attitude, outlook and orientation It is a statement of attitude, outlook and orientation It communicates what the firm wants to be It communicates what the firm wants to be It indicates the businesses the firm will pursue and the customer needs it will seek to satisfy It indicates the businesses the firm will pursue and the customer needs it will seek to satisfy Shaped by the vision of the corporation’s leaders Shaped by the vision of the corporation’s leaders

15. 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’

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

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

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

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

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

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

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

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

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

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

26. ROLE OF CONSULTANTS Professional service performed by specially trained and experienced persons Advice and assist managers and administrators Specific, time – bound assignments Consultancy fee quite high sometimes Eg: SAIL paid Rs. 8 crore to McKinsey & 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

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

28. COMPETITIVE ADVANTAGE OF NATIONS Competitive advantage is the advantage gained over the other competitors in terms of its offering – product, quality, price, technology etc. Competitive advantage is the advantage gained over the other competitors in terms of its offering – product, quality, price, technology etc. 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. 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. Competitive advantage can be created or, at the very least, raised significantly. Competitive advantage can be created or, at the very least, raised significantly. “National prosperity is created, not inherited.” - Michael Porter “National prosperity is created, not inherited.” - Michael Porter In a world of increasingly liberalized trade, strategy must concentrate on generating and maintaining competitive advantage. In a world of increasingly liberalized trade, strategy must concentrate on generating and maintaining competitive advantage.

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