Introduction to Strategic Management
Course Objectives
•
Explain What is Strategic Management
•
Explain What is a Strategy
•
Describe the Strategy Statement and its Components
•
Explain the Steps of Strategic Management Process
•
Describe the Components of Strategic Management Process
•
Differentiate between Strategy Formulation and Strategy Implementation
•
Differentiate between Strategic, Administrative and Operational Decisions
•
Describe the Qualities of a Strategic Leader
•
Explain What is a Business Policy
•
Describe the Structure of BCG Matrix
•
Describe the Factors of SWOT Analysis
•
Explain Porter’s Five Forces Model of Competition
•
Explain What is Corporate Governance
•
Explain What is Business Ethics
•
Describe the Core Competency Theory of Strategy
Introduction
•
Helium Inc. is a leading
manufacturer of electrical safety
equipments such as Miniature
Circuit Breakers (MCBs), Molded
Case Circuit Breaker (MCCBs) etc.
for the past six decades.
•
It has carved a niche for itself in
this area and captures the largest
market share in its industry and
segment.
Introduction
•
However, now Helium wants to
venture into the mobile and
Smartphone market.
•
It has decided to launch a range
of mobiles and Smartphone that
will cater to the various segments
of the society.
Introduction
•
What do you think Helium should
do to become successful in its
venture?
•
Yes, a careful strategy planning
will help Helium recognize its
position in the market, its
competitors, and challenges etc.
to help it become successful in its
new venture.
What is Strategic Management?
Strategic Management can be defined as a bundle of decisions and acts
which a manager undertakes and which decides the result of the firm’s
performance.
Strategic Management is all about identification and description of the
strategies that managers can undertake so as to achieve better performance
and a competitive advantage for their organization. An organization is said to
have competitive advantage if its profitability is higher than the average
profitability for all companies in its industry.
What is a Strategy?
The word “strategy” is derived from the Greek word
“stratçgos”; stratus (meaning army) and “ago”
(meaning leading/moving).
Strategy is an action that managers undertake to attain
one or more of the organization’s goals. Strategy can
also be defined as “A general direction set for the
company and its various components to achieve a
desired state in the future. Strategy results from the
detailed strategic planning process”.
Hence, a strategy is all about integrating organizational
activities and utilizing and allocating the scarce
resources within the organizational environment so as
to meet the present objectives. While planning a
strategy it is essential to consider that decisions are
not taken in a vacuum and that any act taken by a firm
is likely to be met by a reaction from those affected:
competitors, customers, employees or suppliers.
Strategy Statement and its Components
The ‘Strategy Statement’ of a firm sets the firm’s long-term strategic direction
and broad policy directions. It gives the firm a clear sense of direction and a
blueprint for the firm’s activities for the upcoming years. The main constituents
of a strategic statement are as follows:
Strategic Intent
Mission
Vision
Statement
Let us look at each in detail.
Goals and Objectives
Mission
Goals:
A goal is a desired future state or objective that an organization tries to achieve.
The following
the features
wellbe
defined
Goals
specify inare
particular
whatofmust
done ifgoals:
an organization is to attain its
mission or vision. Goals make mission more prominent and concrete. They co• They are precise and measurable.
ordinate and integrate various functional and departmental areas in an
• They look after critical and significant issues.
organization.
• They are realistic and challenging.
Objectives:
• They must
be achieved
within
specific timewants
frame.
Objectives
are defined
as goals
thataorganization
to achieve over a period of
time. These are the foundation of planning. Policies are developed in an
• They include both financial as well as non-financial components.
organization so as to achieve these objectives. Formulation of objectives is the
task of top level management.
Real Life Example
Vision
Vision:
“To create exciting new digital
entertainment experiences for consumers
by bringing together cutting-edge
products with latest generation content
and services.”
Real Life Example
Vision
Mission
Mission:
“Sony is committed to developing a
wide range of innovative products and
multimedia services that challenge the
way consumers’ access and enjoy
digital entertainment. By ensuring
synergy between businesses within the
organization, Sony is constantly striving
to create exciting new worlds of
entertainment that can be experienced
on a variety of different products.”
Components of Strategic Management Process
The image given below shows the components of the Strategic Management
Process.
Let us look at each
component in detail.
Real Life Example
Strategy Formulation Process
Performance Analysis:
Performance analysis includes discovering and analyzing the
gap between the planned or desired and actual
performance. A critical evaluation of the organization’s past
performance, present condition and the desired future
conditions must be done by the organization. This critical
evaluation identifies the degree of gap that persists
between the actual reality and the long-term aspirations of
the organization. An attempt is made by the organization to
estimate its probable future condition if the current trends
persist.
Did You Know?
People learn more from their failures than
from their success. Hence, one of the best
approaches to avoid copying best practices
is to create a process involving frank
discussion about worst practices. This will
help create very effective strategies because
people debate on the merits of different
examples of good practice, scout the
organizations for promising practices that
may already be bubbling up and then
develop a view of what next practice should
be.
Strategic Leadership
Policy vs. Strategy
The term “policy” should not be considered as synonymous to the term
“strategy”. The difference between policy and strategy are as follows:
Policy
Policy is a blueprint of the organizational
activities which are repetitive/routine in
nature.
Policy formulation is the responsibility of
top level management.
Policy deals with routine/daily activities
essential for effective and efficient
running of an organization.
Policy is concerned with both thought
and actions.
A policy is about ‘what is’ or ‘what is not
done’.
Strategy
Strategy is concerned with those
organizational decisions which have not
been dealt/faced before in same form.
Strategy formulation is basically done by
middle level management.
Strategy deals with strategic decisions.
Strategy is concerned mostly with action.
A strategy is the methodology used to
achieve a target as prescribed by a policy.
Structure of BCG Matrix
BCG matrix has four cells, with
the horizontal axis representing
relative market share and the
vertical axis denoting market
growth rate. The mid-point of
relative market share is set at
1.0.; if all the SBUs are in same
industry, the average growth
rate of the industry is used.
While, if all the SBUs are located
in different industries, then the
mid-point is set at the growth
rate for the economy.
What is Competitor Analysis?
Organizations always operate within a
competitive industry environment. They
do not exist in vacuum. Analyzing an
organization’s competitors helps an
organization to discover its weaknesses,
to identify opportunities for and threats
to the organization from the industrial
environment. While formulating an
organization’s strategy, managers must
also consider the strategies used by the
organization’s competitors. Competitor
analysis is a driver of an organization’s
strategy and affects how firms act or
react in their sectors. The organization
carries out a competitor analysis to
measure/assess its standing amongst its
competitors.
What is Corporate Governance?
Corporate Governance refers to the
way a corporation is governed. It is
the technique by which companies
are directed and managed. It means
carrying the business as per the
stakeholders’ desires. It is actually
conducted by the board of Directors
and the concerned committees for
the company’s stakeholder’s benefit.
It is all about balancing individual
and societal goals, as well as,
economic and social goals.
Building Core Competencies
The two key factors to be
considered for building the core
competencies of an
organization are: Resources and
Capabilities.
Resources and Capabilities are
the building blocks upon which
an organization creates and
executes value-adding strategy
so that an organization can earn
reasonable returns and achieve
strategic competitiveness.
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