strategic management chapter-2 business policy · pdf fileframe work of strategic management...

P.S. Rathore

• Strategy – Origins 1 • Features of Strategy 2 • SWOT Analysis 3 • Define Strategy 4 • Fundamental Area 5 • Market 6

1 Customers / Consumers

2 Competitors

3 Value Chain / Supply Chain

4 Management

5 Strategic Management

6 Importance of Strategic Management

Benefits of Strategic Management

Frame work of Strategic Management

Strategic Decision Making

Strategic Management Model

Vision & Mission

Strategic Vision

1 • Feature of Mission

2 • Formulation of Mission

3 • Objectives & Goal

4 • Characteristics of Objective

5 • Management

6 • Dynamics of Competitive Strategy

Army

War

Vision Share

Shared Vision

Mission

LION DIAL

Long Term in Nature • Can have Short Term & Medium Term

Integration of all Resources • Man, Money, Machine, Material and Motivation

Orientation • The way you perceive and act to achieve the formed vision. • Includes: Patterns, Priorities, Sequence, Combinations,

Timing, Means and Approach

• Adversity of Competitive and Complex Business Environment Dynamic and Flexible

• to achieve destination

Negating

Intertwining the Elements of SWOT

• Vision • Mission • Goal • Objective

Achieving

Level of Management

An Intro.

SWOT

Strength

Weakness

Opportunities

Threats

Inherent Capability of an organization

Helps Organisations to gain Strategic Advantages over its Competitors

Inherent Limitation or Constraint

Creates Strategic

Disadvantage

Favourable Condition

Enables it to Strengthen its

Position

Unfavourable Condition

Causes a risk for, or damage to its

Position

Executing Ideas into Action

For Short Term, Medium Term and Long Term

"Without Strategy, an organization is like a ship without a rudder.”

Analytical Thinking, Future Planning

Commitment of Resources to the action

A Trigger to Target Dream

Opens Door of all possibilities.

Takes a company ahead of time.

Guiding Force or Driving Force of

Vision

Mission & Objective of Company

An Answer for Hostile & dynamic business environment

A Blueprint of organization's desire

Image, Direction and Destination

Formulated by top level, business level and functional level

Focus on Stability, Expansion, Retrenchment and Combination

1 Move with Perfect Planning, set procedure

2 Look at Opportunities grab in planned way

3 Help Organization to be leader

4 Fosters high risk and rewards

5 Deliberate game plan for product analysis

6 Seeking the buyers’ patronage

1 • Provides the triggers to move fasters.

2 • Provides extra power to take on external

environment.

3 • Does not care for risk and reward,

4 • Focus on Goal to be achieved.

• Market • Customers • Competitors • Skills • Technology • Knowledge • Orientation • Function MRP, OF, HLA • Value Chain • Supply Chain

Evaluation Areas

Know Meaning of Market closely

Allows the Purchaser and the Seller to invent

Gather information's

Carry out exchange of various products & services

A place where trading of goods take place

1 • Actual size of Market

2 • Attractiveness of Market

3 • Potential size of Market

4 • How is Law

5 • Growth of Market

6 • Trends and Development

Marketing mix can be explained with 4 Ps:

Product

Pricing Place

Promotion

Cost Structure

Price sensitivity

Technological structure

Distribution system

Maturity

Market is larger than customers

Situation

Performance Analysis

SWOT Analysis

Business Aim- create and retain customers

Pay Money to Acquire Products and Services

No Organisation can survive without customers

Consumer and Customer can be different

Evaluate change in customer tastes

Their preference and buying habits

No body buys products rather they buy benefits

Strategist must asks

Who are the customers/ consumers

Benefits are they looking for

Trends and buying patterns

Competitors are other persons

They fight to snatch resources and markets

Competitor forces to run on toe and invest sleepless nights

Direct Competitors

Indirect Competitors

Who are the competitors?

What are they up to?

What are their products and services?

What are their market share?

What are their financial positions?

What gives them cost and price advantages?

What are Their present Strategy ?

What are They likely to do next ?

What are Their Objectives ?

Who are Most Aggressive and Powerful Competitors ?

Who are Potential Competitors?

Capacity to Carry out

Predetermined Results.

Makes to get Maximum Results

• With minimum time

• Minimum energy

Usage and knowledge of tools • Techniques and crafts, or system • Or Methods of Organisation

Can be used in Different Areas: • Automobile Technology • Construction Technology • Medical Technology • State of the Art Technology

Expertise & skills acquired by a person

Through Experience or Education

Theoretical & Practical Understanding

Complete knowledge in a particular subject

Complete awareness or familiarity

Pattern

Priority

Sequences

Combination

Timing

Means

Approach

1 • Marketing Research

2 • Production

3 • Other

4 • Finance

5 • Human

6 • Logistic, Accounts

Porter Value chain :

Known as value chain analysis

Concept from Business Management

First Described and Popularized by Michael Porter

• Creating, • Sustaining • Superior performance.

In his book Competitive Advantages:

Chain of Activities for specific industry product

Pass Through all Activities

At Each Activity, Product gains some value

Gives the Products more added value

The chain has Significance, not the cost

A System of Organisations, people

Activities, Information

Resources involved in moving a product from supplier to customers

Activities transform natural resources

Finished Product Delivered to End Customers

Network of Retailers, Distributors

Transporters, Storage Facilities

Suppliers that participate in sale

Delivery and production of particular product

A set patterns consistently followed in each function of the organization

Harvard Business School introduced integrative course in management in 1911 We find capital budgeting policy

Cash budget policy Recruitment policy etc

According to William F Glueck

Business policy arose from developments in the use of planning techniques by managers

Managers tried to

anticipate future through

Preparation of budgets

Using control systems like

capital budgeting

Management by objectives

Long-range planning came to be used

Long-range planning replaced strategic planning

Later by strategic management

Describe process of strategic decision making

Term ‘management’ used in two major contexts

(a) As noun :

A key group in an organisation in-charge of its affairs.

Chief organ entrusted with the task of making it purposeful

Productive entity

Undertaking the task of bringing together

Integrating disorganised resources of manpower

Money, materials

Technology into a functioning whole

Include adoption of certain techniques

Tools and methods for carrying on activities

Through articulation of skills and efforts

Installation of communication and control systems

Ensure what is planned is achieved

As per Peter Drucker:

Management is a function

A discipline

A task to be done

And Managers practice this discipline

Carry out the functions and discharge these tasks

As per Dalton McFarland: A process by which managers create Direct, maintain And operate purposive organisations Through systematic Co-ordinated & co-operative human effort

An influence process to make things happen To gain command over phenomena To induce and direct events and people in a

particular manner Influence is backed by power Competence, knowledge and resources

Managers formulate their goals Values and strategies To cope with To adapt and to adjust themselves With behaviour and changes of environment

Managerial process of Knowing the mission

Forming a strategic vision Setting objectives Crafting strategy to

implementing Executing functions

Initiating corrective adjustments in Vision Objectives Strategy Execution are deemed appropriate

Most important action plan of management As propagated by Charles Darwin- “The principle of survival is the fittest” Fittest does not mean the largest and strongest Any creature cannot adopt to change, survive

However strongest it is ? example of dinosaurs

‘Survival of fittest position exist

Company follows the war principle of ‘win or lose’

Not necessarily win-win situation arises in business world

Organization to build its competitive advantage Over the competitors in the business warfare in

order to win

A structured plan or support of a project or plan A structure or frame supporting ideas or concepts

generated Knitting all frames collectively step by step

The five stages are as follows:

Stage Five How can we ensure arrival?

(Control) Introduction Stage Four Stage One Which way is Best? Where are we Now ? (Evaluation) (Beginning) Stage Three Stage Two How might we get There? Where do we want to be? (Means) (Ends)

Where are we Now? (Beginning): This is the starting point of strategic planning At this stage we must do following: ◦ Situational analysis ◦ Market position analysis ◦ Corporate image analysis ◦ Swot Analysis

Where are we Want to Be? (Ends): At this stage we must do following: ◦ Vision ◦ Mission (What, how ,and for whom) ◦ Setting objectives ◦ Goal setting

How Might we Get There? (Means): Here the organization deals with various strategic

alternatives

Which Way is Best? (Evaluation): All the alternatives generated in the earlier stage The best suitable alternative in line with its

SWOT analysis

How Can we Ensure Arrival? (Control): Implementation & control stage of suitable

strategy

Strategic decision making Decision making is a

managerial process Function of choosing a

particular course of action Decisions may relate to

general day to day operations

Strategic decision making They may be major or minor They may also be strategic in nature Strategic decisions are different in nature

Major dimensions of strategic decisions are: Issues require top-management decisions Issues involve thinking in totality There is lot of risk involved Problems to be considered by top management

Strategic issues : Involve large amounts of company resources: May require huge financial investment May require huge number of manpower Significant impact on the long term prosperity Results are seen on a long term basis

Develop Vision And

Mission Statements

Implement Strategies Marketing,

Finance, Accounting R&D, MIS

Issues

Establish Long-term Objectives

Generate, Evaluate, and select Strategies

Implement Strategies Manage-

ment Issues

Measure and Evaluate

Performance

Perform External Audit

Perform Internal Audit

Strategy Strategy Strategy Formulation Implementation Evaluation

Strategic Management Model: It is widely accepted It is very comprehensive Cannot assume it as sure-shot success formula

Strategic Management Model: A clear and practical approach for: ◦ Formulating ◦ Evaluating ◦ And implementing strategies

Annual, Semi-Annual Conferences for setting: ◦ Vision ◦ Mission ◦ Objective ◦ And Goal

Vision is: Road Map of Company Intention of Top Management Set Objective Indicator of Swot Utilisation Orientation

Three Primary Elements: Mission related Long term path Communication

Accountability Clarity in direction Competitive environment creation Change, if any, required Resources utilization

Mission statement is typically- Focused on its present business scope – “Who we are and what we do” Describe present capabilities Customer focus Activities Business makeup

Guidelines Profit is not only motive behind business Present evaluation & Reason to exist Orientation & Future oriented Indicator of Swot utilization Transparency

Why Mission To be dynamic and flexible Evaluation of SWOT analysis Ensure corporate vision achieved Ensure proper level of management

Objectives are organizations performance targets

Results and outcomes wants to achieve

Yardstick for Tracking Performance Translate Vision and Mission into

objectives Objectives is synonymous with goals

Objectives are open-ended attributes Denote the future states or outcomes Goals are close-ended attributes Precise and expressed in specific terms Goals are more specific Translate objectives

Competitive Strategy

COMPETITIVE STRATEGY

Industry Opportunities andThreats (Economic &Technical)

Company Strength &Weakness

Factors Internal to the Company

Factors External tothe Company

Personal Values of the keyImplementers

Broader SocietalExpectation

Figure: Context in which Competitive Strategy is formulated

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