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BBM(IB),IPM-Session 2.1

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The word strategy derives from the Greek (strategia ), "office of general, command,generalship", in turn from (strategos ), "leaderor commander of an army, general", acompound of (stratos ), "army, host" + (agos ),"leader, chief", in turn from " (ago ), "to lead.

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A company’s strategy consists of thecombination of competitive moves andbusiness approaches, that Managers employto please/satisfy customers, compete

successfully and achieve organizationalobjectives.

Definition by William F.Glueck:

“A unified, comprehensive and integratedplan, designed to assure that the basicobjectives of the Enterprise are achieved.” 

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Definition, by A.D.Chandler:“The determination of the basic long-term

Goals, while adopting a course of actionalong with the allocation of Resources” 

It means:Planning and preparing an action plan, toachieve desired long term Goals/Objectives.

How to compete and position the company,so that it achieves sustainable above averageprofits in the long run.

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 Johnson and Scholes define strategy as follows: "Strategy is the and of an

organization over the which achievesfor the organization through its

configuration of  within a challenging

, to meet the needs of  andto fulfill expectations". In other words, strategy is about: * Where is the business trying to get to in the

long-term (   * Which markets should a business compete in

and what kind of activities are involved in suchmarkets? ( ; )

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* How can the business perform better than thecompetition in those markets? ( )?

* What resources (skills, assets, finance,relationships, technical competence, facilities)

are required in order to be able to compete?( )?

* What external, environmental factors affect thebusinesses' ability to compete? ( )?

* What are the values and expectations of thosewho have power in and around the business?(  

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Strategies exist at several levels in any organization - rangingfrom the overall business (or group of businesses) through toindividuals working in it.

- is concerned with the overall purpose andscope of the business to meet stakeholder expectations. This is acrucial level since it is heavily influenced by investors in thebusiness and acts to guide strategic decision-making throughoutthe business. Corporate strategy is often stated explicitly in a"mission statement".

- is concerned more with how a businesscompetes successfully in a particular market. It concernsstrategic decisions about choice of products, meeting needs of customers, gaining advantage over competitors, exploiting or

creating new opportunities etc. - is concerned with how each part of the

business is organized to deliver the corporate and business-unitlevel strategic direction. Operational strategy therefore focuseson issues of resources, processes, people etc.

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Long term/range Action oriented

Multipronged and integrated

Flexible and can be modified, based on theneeds

Dynamic in nature, to cope with uncertainties

Formulated by the top management team and

flows down

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Strategy is Significant because it is not possible to foresee thefuture. Without a perfect foresight, the firms must be ready todeal with the uncertain events which constitute the businessenvironment.

Strategy deals with long term developments rather than routineoperations, i.e. it deals with probability of innovations or newproducts, new methods of productions, or new markets to bedeveloped in future.

Strategy is created to take into account the probable behavior of customers and competitors. Strategies dealing with employeeswill predict the employee behavior.

. It definesthe overall mission, vision and direction of an organization. The

objective of a strategy is to maximize an organization’sstrengths and to minimize the strengths of the competitors. Strategy, in short, bridges the gap between “where we are” and

“where we want to be”. 

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The term Strategic Management refers to theManagerial Process of:

Forming a strategic Mission and Vision

Setting corporate goals and objectives Crafting/creating a strategy

Implementing and executing the strategy

And making corrective adjustments in the V-

M/O,strategies and execution, as deemedappropriate

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  Thus strategic management is the Art & Science

of structurally and systematically developingstrategic

options/alternatives,evaluating,formulating andimplementing critical descisions,such as:

Specifying roles and objectives

Developing long term policies and plans

Allocation of resources for successfulimplementation/execution

Creation of long term value and distributing thesame to customers and all other stakeholders.

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The systematic analysis of the factors associated with customers and competitors (the external environment) and theorganization itself (the internal environment)

to provide the basis for maintaining optimum management practices.

The objective of strategic management is toachieve better alignment of corporate policies and strategic priorities.

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Strategic management is the conduct of drafting, implementing and evaluating cross-functional decisions that will enable anorganization to achieve its long-term

objectives. It is an organization-wide task involving both

the development and implementation of strategy. It demands the ability to steer the

organization as a whole through strategicchange under conditions of complexity anduncertainty.

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Strategic management consists of the analysis,decisions, and actions an organization undertakes

in order to create and sustain competitiveadvantages.

This definition captures two main elements that go tothe heart of the field of strategic management.

First, the strategic management of an organizationentails three ongoing processes: analysis, decisions,and actions. That is, strategic management is concerned with the analysis of strategic goals (vision,mission, and strategic objectives) along with theanalysis of the internal and external environment of the organization.

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Next, leaders must make strategic decisions.These decisions, broadly speaking, address two basic questions: 

What industries should we compete in? 

How should we compete in those industries?

Why some firms outperform others?

How should we compete in order to create 

competitive advantages in the marketplace? 

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  Environmental scanningrefers to a process of collecting, scrutinizing andproviding information for strategic purposes. It helpsin analyzing the internal and external factorsinfluencing an organization. After executing theenvironmental analysis process, management shouldevaluate it on a continuous basis and strive toimprove it.

  Strategy formulation is theprocess of deciding best course of action foraccomplishing organizational objectives and hence

achieving organizational purpose. After conductingenvironment scanning, managers formulatecorporate, business and functional strategies.

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  Strategy implementationimplies making the strategy work as intended orputting the organization’s chosen strategy intoaction. Strategy implementation includes designingthe organization’s structure, distributing resources,developing decision making process, and managinghuman resources.

  Strategy evaluation is the finalstep of strategy management process. The keystrategy evaluation activities are: appraising internaland external factors that are the root of present

strategies, measuring performance, and takingremedial / corrective actions. Evaluation makes surethat the organizational strategy as well as it’simplementation meets the organizational objectives.

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This is all about the analyzing the strength of businesses' position and understanding the importantexternal factors that may influence that position. Theprocess of Strategic Analysis can be assisted by anumber of tools, including:

- a technique for understanding the"environment" in which a business operates

- a technique that builds variousplausible views of possible futures for a business

- a technique for identifying theforces which affect the level of competition in an

industry - a technique which seeks to

identify similarities and differences between groupsof customers or users

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- a technique whichsummarizes the competitive strength of abusinesses operations in specific markets

- a wide range of techniquesand analysis that seeks to summarize a

businesses' overall competitive position - a technique to

identify those areas in which a business mustoutperform the competition in order to succeed

- a useful summary technique for

summarizing the key issues arising from anassessment of a businesses "internal" positionand "external" environmental influences.

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1. Diversification: To expand businessactivities thru Diversification.(ADITYA BIRLA)

2. Vertical integration: To expand businessactivities by producing it’s own RM.(RIL) 

3. Consolidation: Divest non-profitableunits/products and concentrate on coreprofitable activities.

4. Expansion strategy: Expanding markets thruexports.

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5.Change management: Adapting new strategies ormodifying existing plans/strategies, to suit theenvironmental changes ineconomy,policy,technolgy etc.

6.Employee skills upgradation:Strtegy to

continuously upgrade employee skills tomatch/lead the environmental changes.(IT,Automation)

7.Rewrite/tweak the agenda: Review the existingstrategy/plan continuously and change/modify,

whenever necessary.8.Mergers & Acqusitions:To expand thru buyingother related/non-related businesses.

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1.Corporate

Vision,Mission,Goals

2.Strategic

Analysis(PESTLE,SWOT)

3.Strategicchoices/Alternatives

4.Strategyimplementation

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•Environmental analysis(PESTLE/SWOT)

• Internal analysis

B

•Develope CORPORATE PLANS,POLICIES

•Allocate resources

C

D

•Expand,stabilize,Retrench/Exit, React/Panic

• Implement strategy-Diversification, Vertical

integration,M&A,Export

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Strategic planning is intended to accomplishthree important tasks:

to clarify the outcomes that an organizationwishes to achieve;

to select the broad strategies that will enablethe organization to achieve those outcomes;

to identify ways to measure progress

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The mission statement describes the company'sbusiness vision, including the unchanging valuesand purpose of the firm and forward-lookingvisionary goals that guide the pursuit of futureopportunities.

Guided by the business vision, the firm's leaderscan define measurable financial and strategicobjectives. Financial objectives involve measuressuch as sales targets and earnings growth.

Strategic objectives are related to the firm'sbusiness position, and may include measuressuch as market share and reputation.

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The environmental scan includes the followingcomponents: Internal analysis of the firm Analysis of the firm's industry (task environment) External macro environment (PEST analysis)  The internal analysis can identify the firm's strengths and

weaknesses and the external analysis reveals opportunitiesand threats. A profile of the strengths, weaknesses,opportunities, and threats is generated by means of aSWOT analysis 

An industry analysis can be performed using a framework developed by Michael Porter known as Porter's five forces.This framework evaluates entry barriers, suppliers,customers, substitute products, and industry rivalry.

 

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Given the information from the environmentalscan, the firm should match its strengths tothe opportunities that it has identified, whileaddressing its weaknesses and external

threats. To attain superior profitability, the firm seeks

to develop a competitive advantage over itsrivals. A competitive advantage can be based

on cost or differentiation. Michael Porteridentified three industry-independent genericstrategies from which the firm can choose.

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The selected strategy is implemented by means of programs, budgets, and procedures. Implementationinvolves organization of the firm's resources andmotivation of the staff to achieve objectives.

The way in which the strategy is implemented can have a

significant impact on whether it will be successful. In alarge company, those who implement the strategy likelywill be different people from those who formulated it. Forthis reason, care must be taken to communicate thestrategy and the reasoning behind it. Otherwise, theimplementation might not succeed if the strategy is

misunderstood or if lower-level managers resist itsimplementation because they do not understand why theparticular strategy was selected.

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The implementation of the strategy must bemonitored and adjustments made as needed.

Evaluation and control consists of the followingsteps:

Define parameters to be measured Define target values for those parameters Perform measurements Compare measured results to the pre-defined

standard Make necessary changes

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Management tool/roadmap to: Set priorities

Focus on energy/resources

Teamwork towards common goals, with clearexpectations/responsibilities/accountabilities

Adjust according to the changes inexternal/internal environment

Integrated, focused action plan, toshape/guide organizational activities(who,why,how,what),with an eye on future.