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strategic management

1What is strategic management?

Strategic Management can be defined as: the art and science of formulating, implementing and evaluating cross-functional decisions that enable an organization to achieve its objective.

2How the strategic management work?

On-going process: Strategic management is a on-going process which is in existence through out the life of organization. Shaping broad plans: An on-going process in which broad plans are firstly formulated then implemented and finally controlled. Strategic goals: Strategic goals are those which are set by top management. The broad plans are made in achieving the goals. Internal and external environment: Internal and external environment generally set the goals.

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Stages of Strategic management:

The strategic management process consists of three stages: Strategy Formulation (strategy planning) Strategy Implementations Strategy Evaluation

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Strategic Formulation:

Strategic formulation means a strategy formulate to execute the business activities. Strategy formulation includes developing:-

Vision and Mission (The target of the business)Strength and weakness (Strong points of business and also weaknesses) Opportunities and threats (These are related with external environment for the business)4

Key Terms in Strategic ManagementStrategists Mission statements Internal strengths and weaknessesExternal opportunities and threats Long-term objectives Annual objectives, and policies5

Vision StatementsMany organizations today develop a "vision statement" which answers the question, what do we want to become?

Developing a vision statement is often considered the first step in strategic planning, preceding even development of a mission statement.5

Mission Statements

Mission statements are enduring statements of purpose that distinguish one business from other similar firms.

A mission statement identifies the scope of a firm's operations in product and market terms.

A clear mission statement describes the values and priorities of an organization and also a path to achieve organizational objective .5

Strategic ManagementStrengthsWeaknessesOpportunitiesThreats

SWOT Analysis

SWOT AnalysisSWOT analysis is a great technique for identifying your Strengths and Weaknesses and study any Opportunities and Threats you face.It is also a powerful strategic planning tool used to evaluate a project or in a business venture or in any other situation of an organization or individual requiring a decision in pursuit of an objective. It involves monitoring the marketing environment internal and external to the organization or individual.

SWOT Analysis Internal and External FactorsThe aim of any SWOT analysis is to identify the key internal and external factors that are important to achieving the objective. SWOT analysis groups key pieces of information into two main categories:

Internal Factors OrganizationExternal Factors External EnvironmentStrengthsWeaknessesOpportunitiesThreats

11The internal factors may be viewed as strengths or weaknesses depending upon their impact on the organization's objectives. The external factors may include macroeconomic matters, technological change, legislation, and socio-cultural changes, as well as changes in the marketplace or competitive position. The results are often presented in the form of a matrix.

SWOT Analysis Errors to Be Avoided

Conducting a SWOT analysis before defining and agreeing upon an objective (a desired end state). SWOTs should not exist in the abstract. They can exist only with reference to an objective. Opportunities external to the company are often confused with strengths internal to the company. They should be kept separate.SWOTs are sometimes confused with possible strategies. SWOTs are descriptions of conditions, while possible strategies define actions.

DiversificationA business strategy designed to reduce exposure to risk by combining a variety of investments, such as stocks, bonds, and real estate, which are unlikely to all move in the same direction. Diversification is the process of spreading the total investment money available across different asset classes, countries, industries, and individual companies.The goal of diversification is to reduce the risk in a business. Diversification can only reduce unsystematic risk.

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Types of TakeoversTakeoverThe transfer of control from one ownership group to another.AcquisitionThe purchase of one firm by anotherMergerThe combination of two firms into a new legal entityA new company is createdBoth sets of shareholders have to approve the transaction.AmalgamationA genuine merger in which both sets of shareholders must approve the transactionRequires a fairness opinion by an independent expert on the true value of the firms shares when a public minority exists

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Strategic alliances

Meaning cooperative agreements between two or more organizationsA means to enhance strategic resources: self-sufficiency is becoming increasingly difficult in a complex, uncertain, and discontinuous external environment.Strategic alliances that bring organizations together promise unique opportunities for partners.

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Turnaround strategy

There are three stages of a turnaround strategy: I Pre-turnaround II Period of CrisisIII Period of Recovery

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Steps in turnaround strategy

Changing the leadership

Redefining strategic focus

Selling or divesting unnecessary assets

Improving Profitability

Making careful acquisitions14

Divest StrategyPlan whereby a product line (or a product division of a business) is liquidated or sold so as to limit either real or anticipated losses

To redirect the resources behind that product line or division to other company products or divisions.

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16What Is a Critical Success Factor? A key area where satisfactory performance is required for the organization to achieve its goalsA means of identifying the tasks and requirements needed for successAt the lowest level, CSFs become concrete requirements A means to prioritize requirements

16The CSF MethodStart with a vision: mission statementDevelop 5-6 high level goalsDevelop hierarchy of goals and their success factors Leads to concrete requirements at the lowest level (a single, implementable idea)Along the way, identify the problems being solved and the assumptions being madeCross-reference usage scenarios and problems with requirements