MBA IV Semester 401: Strategic Management Section I Unit -1

DEFINITION, NATURE AND SCOPE OF STRATEGIC MANAGEMENT

NSR Murthy
MA MBA MPhil (PhD)

Syllabus
Section I -Unit 1
 Introduction to Strategic Management  Concept of Strategy, Definition, Scope and Importance  Central Concepts in Strategic Management  Collecting Information on an External Environment  Deciding the Scope of an Organisation  Acquiring Organisational Resources and the Skills to

Match External Opportunities and Threats  Deciding the Investment Patterns for Future  Nature of Strategic Management  Scope and Importance of Strategic Management  Strategic decision making  Process of Strategic Management  Levels at which strategy operates  Role of a Strategist

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Study this for better placement (Indian Author)

Strategic Management

R. Srinivasan

1-3

Study this for better placement (Indian Author)

Strategic Management

Francis Cherunilam

1-4

Study this for better placement (Foreign Author)

Strategic Management Theory

An Integrated Approach

Charles W. L. Hill Gareth R. Jones

Fifth Edition
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Concept of Strategy
The word strategy is derived from the Greek strategy word strategia means the art and science strategia of directing military force Strategy is a plan or course of action, which is action, of vital, pervasive, or continuing importance to an organisation as a whole Emergence of Strategy is a major component of management Strategy is the means used to achieve ends (objectives)
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Concept of Strategy - Vyuuh

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Chakra - Vyuuh

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Chakra - Vyuuh
The Chakravyuha was specially difficult to penetrate since the attacker is not able to focus on a still target in front as the targets keep changing with the rotation of the Chakras. Even if an attacker can penetrate one ring and get inside the Chakravyuha, the rotating nature of the vyuha makes sure that the ring he has penetrated closes behind him. As a result, the attacker is trapped within the Chakravyuha.
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Chakra - Vyuuh As it is said in the Mahabharat, only 4 people; Abhimanyu, Arjuna, Krishna and Pradyumna; knew how to breach this formation. Since Ved Vyas, who recited the great epic, himself did not know the secret, how could he mention how it was supposed to be done in the story.
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Garuda - Vyuuh

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Definition

A Strategy is a unified, comprehensive and integrated plan that relates the strategic advantages of the firm to the challenges of the environment.

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Definition

A Strategy is a unified, comprehensive and integrated plan that relates the strategic advantages of the firm to the challenges of the environment.

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Overview
What is strategy?
 An action a company takes to attain superior

performance.

Why do some firms succeed while others fail?

 A central objective of strategic management is to

learn why this happens.

What is the strategic management process?

 The process by which managers choose a set of

strategies for the enterprise to pursue its vision.

Strategic Planning
Rational planning by top management
Basic Strategic Planning Model
Defining the Mission and Setting Top-Level Goals TopExternal Analysis of Opportunities and Threats Internal Analysis of Strengths and Weaknesses Selection of Appropriate Strategies Implementation of Chosen Strategies

Definition of Strategy
Strategy is the direction and scope of an organisation over the long-term which achieves advantage for the organisation through its configuration of recources within a challenging environment, to meet the needs of markets and to fulfol stakeholders expectations Johnson & Scholes

Orientation of Strategy
 What is our business?  What should it be?  What are our products and markets?  What can our firm do to accomplish objectives?  How do we leverage the advantages offered by the

environmental parameters?
 How do we stay clear of the threats posed by the

environment?

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Orientation of Strategy
Strategic Management Ambiguity Complexity Non-routine Operational Management Routined

Organisation-wide Fundamental Significant change

Operationally specific

Small-scale change

Environment or Resource driven expectations driven

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Strategic Management

Creating & Sustaining Competitive Advantages, Globally

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The Main Components of the Strategic Planning Process

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Strategic Management
 Strategic Management refers to the managerial

process of forming a strategic vision, setting objectives, crafting a strategy, implementing and executing the strategy and then over time initiating whatever corrective adjustments in the vision, objectives, strategy and execution are deemed appropriate

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SWOT analysis of strengths, weaknesses, opportunities,and threats.

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Mission and Goals

Mission ission
 Sets out why the organization

exists and what it should be doing.

Major goals
 Specify what the organization hopes

to fulfill in the medium to long term.

Secondary goals
 Are objectives to be attained that lead to superior

performance.

External Analysis
Identify strategic opportunities and threats in the operating environment.

Immediate (Industry) Macroenvironment National

Internal Analysis
Identify strengths
 Quality and quantity of resources available  Distinctive competencies

Identify weaknesses
 Inadequate resources  Managerial and

organizational deficiencies

SWOT and Strategic Choice

Strengths and Weaknesses Opportunities and Threats (SWOT Analysis)

Strategic Choice
Business Functional Global Corporate

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Business-Level Strategies BusinessCost leadership

 Attaining, then using the lowest total cost basis

as a competitive advantage.

Differentiation
 Using product features or services to distinguish

the firms offerings from its competitors.

Market niche focus

 Concentrating competitively on

a specific market segment.

Functional-Level Strategies FunctionalFocus is on improving the effectiveness of operations within a company.

 Manufacturing  Marketing  Materials management  Research and development  Human resources

GlobalGlobal-Level Strategies
Multidomestic International & Global

Corporate-Level Strategies CorporateDiversification Strategic alliances Acquisitions New ventures Business portfolio restructuring

Strategy Implementation
Designing organizational structure Designing control systems
 Market and output controls  Bureaucratic controls  Control through organizational culture  Rewards and incentives
Controls Structure

Matching strategy, structure, and controls

 Congruence (fit) among strategy,
Strategy

structure, and controls

Managing Strategic Change

The only constant is change. Success requires adapting strategy and structure to a changing world. The feedback loop in Corporate strategic planning.
Operational Business

Functional

Strategic Managers
General managers
 Responsible for the overall (strategic)

performance and health of the total organization.

Operations managers
 Responsible for specific business

functions or operations.

Strategic Managers for All Levels

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Strategic Leadership
Vision, eloquence, and consistency Commitment to the vision Being well informed Willingness to delegate and empower Astute use of power Emotional intelligence

Intended and Emergent Strategies

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The Strategic Management Process for Intended and Emergent Strategies

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Six Steps in Decision Making

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General Criteria for Evaluating Possible Courses of Action

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Group Decision Making

Allows managers to process more information Managers affected by decisions agree to cooperate

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Group Decision Making

Potential Disadvantages
Can take much longer than individuals to make decisions Can be difficult to get two or more managers to agree because of different interests and preferences Can be undermined by biases

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Improved Group Decision Making

Devils Advocacy
Critical analysis of a preferred alternative to ascertain its strengths and weaknesses before it is implemented One member of the group who acts as the devils advocate by critiquing the way the group identified alternatives and pointing out problems with the alternative selection.

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Technique for Improving Decision Making Devils Advocacy

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Improved Group Decision Making

Dialectical Inquiry
Two different groups are assigned to the problem and each group is responsible for evaluating alternatives and selecting one of them Top managers then hear each group present their alternatives and each group can critique the other.

Promote Diversity
Increasing the diversity in a group may result in consideration of a wider set of alternatives.

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Technique for Improving Decision Making Dialectic Inquiry

Techniques of Improving Decision Making

 Devils Advocacy
  

Generation of both plan and a critical analysis of the plan One member acts as a devils advocate This helps to become aware of possible pitfalls

 Dialectic Inquiry
 

Generation of a plan (thesis) and a counter plan (antithesis) Strategic managers listen to a debate between advocates of plan and counter-plan counter-

Helps strategic managers forming more inclusive conceptualisation of the problem

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Devil s Advocacy and Dialectical Inquiry

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Scope and Importance of Strategic Management

 Contributes optimally to the performance of the

organisation
 Organisations practiced SM surpassed and outdid

other non-managing organisations non SM practicing organisations could able to predict the

outcome much better than others

 Sole measure to anticipate future opportunities?  Helps the executives to provide necessary direction
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Disadvantages of Strategic Management

 A costly exercise  Sense of frustration among employees  Evading responsibility

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Role of a Strategist
Strategist is an expert in developing and implementing strategies. His role is:  Forecaster


Person who sees the future An artist who carves from raw material Skilled in the art of manoeuvring and manipulating A person who gives personal spiritual guidance Who shows employees how to escape from captivity and boredom
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 Sculptor


 The Diplomat


 Guru


 The Jail buster



McKinseys 7-s Framework 7 Developed in 70s by McKinsley Company, US. Based on the proposal that effective Organisational Change is best understood in terms of complex relationship between:
 Strategy  Structure  Systems  Style  Skills  Shared Values

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McKinseys 7 S Model
Strategy

Structure Super Ordinate GoalsShared Values

Systems

Style

Skills

Staff

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THE HARD Ss
Strategy: the direction and scope of the company over the long term. Structure: the basic organization of the company, its departments, reporting lines, areas of expertise and responsibility (and how they inter-relate). Systems: formal and informal procedures that govern everyday activity, covering everything from management information systems, through to the systems at the point of contact with the customer (retail systems, call center systems, online systems, etc).
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THE SOFT Ss
Skills: the capabilities and competencies that exist within the company. What it does best. Shared values: the values and beliefs of the company. Ultimately they guide employees towards 'valued' behavior. Staff: the company's people resources and how the are developed, trained and motivated. Style: the leadership approach of top management and the company's overall operating approach.

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MCKINSEYS APPROACH TO PROBLEM-SOLVING

The problem is not always the problem Dont reinvent the wheel Every client is unique (no cookie cutter solutions) Dont make the facts fit your solution Make sure your solution fits your client Sometimes let the solution come to you No problem is too tough to solve

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THE 80/20 RULE

- 80% of an effect under study will be generated by 20 of the examples analyzed - A small fraction of elements account for a large fraction of the effect Examples: 80% of sales from 20% of sales force 80% of orders from 20% of customers
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DON T BOIL THE OCEAN

Work smarter, not harder. Theres a lot of data out there relating to your problem, and a lot of analyses you could do. Ignore most of them. Lesson: be selective and dont try to analyze everything.
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FIND THE KEY DRIVERS

Many factors affect business. Focus on the most important ones the key drivers

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THE ELEVATOR TEST

Know your solution so thoroughly that you can explain it clearly and precisely to your client in 30 seconds. If you can do that, then you understand what youre doing well enough to sell your solution.

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PLUCK THE LOW-HANGING LOWFRUIT

Sometimes in the middle of the problemsolving process, opportunities arise to get an easy win, to make immediate improvements, even before the overall problem has been solved. Seize those opportunities! They create little victories for you and your team. They boost morale and give you added credibility by showing anybody who may be watching that youre on the ball and mean business.
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MAKE A CHART EVERY DAY

During the problem-solving process, you learn something new every day. Put it down on paper. It will help you push your thinking. You may use it, or you may not, but once you have crystallized it on the page, you wont forget it.
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HIT SINGLES
You cant do everything, so dont try. Just do what youre supposed to do and get it right. Its much better to get to first base consistently than to try to hit a home run and strike out 9 times out of 10.
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LOOK AT THE BIG PICTURE

Every now and then, take a mental step back from whatever youre doing. Ask yourself some basic questions: How does what youre doing solve the problems? How does it advance your thinking? Is it the most important thing you could be doing right now? If its not helping, why are you doing it?
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JUST SAY, I DON T KNOW

Professional integrity is of utmost importance in consulting. One aspect of professional integrity is HONESTY with your client, your team members, (your professor), and yourself. Honesty includes recognizing when you havent got a clue. Admitting that is a lot less costly than bluffing.
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DON T ACCEPT I HAVE NO IDEA

People always have an idea if you probe just a bit. Ask a few pointed questions youll be amazed at what they know. Combine that with some educated guessing, and you can be well along the road to the solution.
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Strategic Problem-Solving Model ProblemManaging

Team Client Self

Leadership
Vision Inspiration Delegation

Business Need
Competitive Organizational Financial Operational

Implementation Intuition Data Solution

Dedication Reaction Completion Iteration

Problem

Analyzing
Framing Designing Gathering Interpreting

Presenting
Structure Buy-in
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