STRATEGIC MANAGEMENT Unit I

Concept of Strategic Management Vision Description of something in future, distant dream backed by logic and wisdom, forward thinking What a firm, virtual organisation or a person would like to become in future Mission Why the organization exist & what it should be doing to achieve its vision It is a reason for the firms existence The mission statement is a broadly defined but enduring statement of purpose that identifies the scope of an organizations operation & its offering to the various stakeholders

Objectives and Goals End results which an organization strives for Qualitative Measurement - Market leadership Quantitative Measurement - Percentage of Increase in Sales Long term Objectives (5>) Short term Objectives (<1) SMART (Short Term, Measurable, Achievable, Realistic and Time Bound)

Need & Importance of objectives:1. 2. 3. 4. 5. 6. Sense of Mission Unified Planning Individual Motivator Basis of decentralization (Delegation of authority) Basis for control Voluntary coordinators

Essentials of value Objectives:1. 2. 3. 4. 5. 6. 7. Objectives must be clear and specific Objectives must be measurable. Objectives must be result oriented Objectives should be balanced Objectives must be acceptable Objectives must be valid Objectives must be acceptable.

STRATEGY Strategy is the complete plan for bringing the organisation from a given pasture to a divide position in a future period of time.

Need of Strategy:1. It is a dynamic or relative concept. 2. It is a complain plan encompassing other plans in order to achieve org objectives. 3. It is forward looking. 4. Strategy provides the direction in which human & physical resources will be allocated & developed for achieving Orgn goals in the face of environmental pressures & constraints. 5. It an values the right or judicious contributions of all of factors. 6. It is primarily the responsibility of top Mgt. Importance of Strategy 1. Ensures efficiency & consisting in the allocation & employment of resources. 2. It is an essential requirement for effective Mgt. 3. It enables enterprise to take advantage of environmental opportunities & combat the environmental pressures. 4. It provides useful framework for guiding Strategy Formulation:1. Environmental analysis:External OT 2. Corporate appraisal S.W. 3. Strategic decision making Developing alternative strategies Evaluating alternatives Selection

Three types of Strategy:1. Corporate Strategy:- describes a companys overall direction in terms of its general attitude towards growth & the Mgt. of its various business & product wise corporate strategy is composed of Directional Strategy (Grand Strategies) Portfolio Strategy (BCG & GE Model)

Parenting Strategy (Examine each business unit in terms of its critical success factors). (Elements of success & failure) Examine each Business unit in terms of areas in which performance can be improved. Analyses now well the parent corporation fits with the business unit.

2. Business Strategy:- Usually occurs at the business unit or product level, and its emphasizes improvement of the competitive position of a corporations products or services in the specific industry or market segment served by that business unit. Eg:- Differentiation, Overall Cost leadership. 3. Functional Strategy:- is the approach taken by a functional area, such as Marketing, RED, finance HR to achieve corporate or business unit objectives.

Hierarchy of Strategy

Corporate Strategy
Business Strategy Functional Strategy

Corporate parenting uses the corporation in terms of resources & capabilities to build business unit & generate synergies areas business units. OPERATIONAL STRATEGIES Marketing Strategy 1. 2. 3. 4. 5. 6. Financial Strategy R & D Strategy Operations Strategy Human Resource Mgt. Strategy Information System Strategy Logistic Strategy

Logistic Strategy: Deals with flow of the product into & out of the manufacturing concern. Transportation & Storage.

Information Systems Strategy:Different Information system to form closer relationship with both their customer & suppliers to improve efficiency. Purchasing Strategy Single Sourcing Multiple Sourcing

Functional Strategies in finance Key functional Strategies Capital acquisition Typical Questions that should be answered by the functional strategy What is an acceptable cost of capital? What is the desired proportion of short and long-term debt: preferred and common equity? What balance is between internal and external funding? What risk and ownership restrictions are appropriate? What level and forms of leasing should be used in providing assets? Capital allocation What are the priorities for capital allocation projects? On what basis is final selection of projects to be made? What level of capital allocation on be made by operating managers without higher approval? Divided and working What portion of earnings should be paid out as dividends? capital management How important is divided stability? Are things other than cash appropriate as dividends? What are the cash flow requirements; minimum and maximum cash balances? How liberal/conservative should credit policies be? What limits, payment terms, and collection procedures are necessary? What payment timing and procedure should be followed?

Functional Strategies in R & D R & D decision area Typical questions that should be answered by the functional strategy Basic research versus Commercial To what extent should innovation and break-through research

be emphasized. In relation to the emphasis on product

Development development refinement and modification? What new projects are necessary to support growth?

Time horizon Is the emphasis short term or long term? Which orientation best supports the business strategy? Marketing and production strategy? Organizational fit Should R & D be done in-house or contracted out?

Should it be centralized or decentralized? What should be the relationship between the R & D unit(s) and product manages? Marketing managers? Production Managers? Basic R & D posture Should the firm maintain an offensive posture, seeking to lead innovation and development in the industry? Should the firm adapt a defensive posture, responding quickly to competitors developments? Functional strategies in Marketing Key functional Typical questions that should be answered by the functional Strategies Product (or service) Strategy Which products do we emphasize? Which products/services contribute most to profitability? What is the product/service image we seek to project? What consumer needs does the product/service seek to meet? What change should be influencing our customer orientation? Price Are we primarily cooperating on price? Can we offer discounts or other pricing modifications? Are pricing policies standard nationally or is there regional control? What price segments are we targeting (high, medium, low, etc.)? What is the gross profit margin? Do we emphasize cost/demand or competition-oriented pricing? Place What level of market coverage is necessary? Are there priority geographic areas? What channels of distribution are key?

What are the channel objectives, structure and management? Should the marketing managers change their degree of reliance on distributors, sales reps and direct selling. What sales organization do we want? Is the sales force organized around territory, market or product? Promotion What are key promotion priorities and approaches? Which advertising/communication priorities and approaches are linked to different products markets and territories? Which media would be most consistent

Functional Strategies in POM Key operating Typical questions that should be answered by the functional Strategy Strategies Facilities and equipment How centralized should the facilities be? big facility or several small facilities?) How integrated should the separate processes be? To what extent will further mechanization or automation be pursued? Should size and capacity be oriented toward peak or normal operating levels? Purchasing How many sources are needed? How do we select suppliers and manage relationships over time? What level of forward buying (hedging) is appropriate? Operations planning Should work be scheduled to order or to stock? And control What level of inventory used (FIFO/LIFO), controlled and replenished? (One

What are the key foci for control efforts (quality, labor cost, downtime, product usage, other)? Should maintenance efforts be preventive or breakdown oriented? What emphasis should be placed on job specialization? Plant safety?Use of standard?

FUNCTIONAL STRATEGIES IN HRM Employee recruitment, selection and orientation. Career development and counseling, performance evaluation and training anddevelopment. Compensation. Labor/union relations and Equal Employment Opportunity Commission (EEOC) requirements. Discipline, control and evaluation

Corporate Planning Corporate Planning includes the setting of objectives, organizing the work & system to enable these objectives to be attained motivating through the planning process & through the plans, measuring performance & so controlling progress of the plan & developing people through better decision making, clearer objective, more involvement and awareness of progress. Corporate Planning = Strategic Planning + Operational Planning
Strategic Planning 1. SP is the process of deciding on objectives of the organisation, on changes in these objective, on the resources used to attain these objectives & on the policies that are to govern the acquisition, use & disposition of these resources 2. Wider in Scope 3. External Environment & relates to 4. Comes before operational planning 5. Usually done by top management

internal Environment.

Operational Planning Operational Planning is the process of deciding the most effective use of the resources already allocated and to develop a control mechanism to assure effective implementation of the actions so that organisations objectives can be achieved. Narrower in Scope Internal Environment. Comes after strategic planning Usually done by middle management

Unit II
Environmental Scan &SWOT Analysis Environmental Scanning Environmental Scanning is the monitoring, evaluating, and disseminating of information from the external and internal environment to the key people within the organisation for long term health of the organisation. External strategic factors have major impact on the corporation

Threat of entry Barriers to entry:1) 2) 3) 4) 5) 6) Economics of Scale Product differentiation Capital Requirements Cost disadvantage independent of size Access to distribution channel Government Policy

Experience Curve:- Unit is many manufacturing industries as well in service industries decline with experience or a parties company undulate of production. Learning Curve:- Refers to the efficiency achieved over a period of time by workers through much repetition. Rivalry Among Existing Firms Number of competitors Rate of Industry Growth Product or Service Characteristic Amount of Fixed Cost Capacity Height of Exit Barriers Diversity of Rivals

SWOT Analysis Internal S = Strength (Resources, Skills and Advantages) W = Weakness (Limitation or deficiency in resources, skills or capabilities)

External O = Opportunities (A major favorable situation) T = Threats (A major un favorable situation MODEL OF ANALYSIS

Environmental Threat and Opportunity Profile (ETOP) 1. 2. 3. 4. Various environmental factors are difficult to segregate into neat categories and clearly interpret them as opportunities or threats. The managers brain storm on different issues, rank them and them prioritize them on the basis of the organisations. The manager them places the issue either as threat or opportunity. Issue Selection Accuracy of data Impact Studies (of threat and opportunities on vision and mission) Flexibility in Operations

Different Types of Strategies Grand/Master Strategies Business strategies Functional/Operational strategies

Grand Strategies/ Master Strategies 1. Concentration 2. Market Development 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Product Development Innovation (Risky) Horizontal Integration Vertical Integration (Forward and Backward) Joint Venture Concentric Diversification Conglomerate Diversification Retrenchment/Turnaround Divestiture Liquidation

. Business Strategies 1. 2. 3. Cost Leadership Differentiation (Johnsons, SagarRatna) Focus (Narrow/ Niche/Segment [Demography, Geography and Lifestyle]) Functional/Operating Strategies 1. 2. 3. 4. Human Resource Finance Production Marketing 5. MIS

Unit III
STRATEGY IMPLEMENTATION
It is the process by which strategies & policies are put into action through the development of programs, budget & procedures. Strategy formulation & implementation are two sides of the same coin. I. Who implements strategy:The heads of functional areas & divisions & their subordinate have to work together for implementation of plans. Most of the people in the org who are crucial to successful strategy implementation probably had little, to do with the development of corporate & be strategy they have to be communicated about it very explicitly. II. What Must be done:The managers of divisions & functional areas work with their fellow managers to develop programs, budgets & procedures for implementation of the strategy. a). A programs is a statement of the activities or steps needed to accomplish objectives. b). Budget is a statement of a corporations program in rupee terms. c). Procedure sometimes turned as SOP are a system of estuarial steps or techniques that describe in detail how a particular task or job is to be done. III. How is strategy to be Implemented:- organising for action Before actual implementation, a company should be appropriately organised in terms of staffing & activities to achieve objectives. Changes in corporate strategy may result in the change of Orgn structure & skills at particulars level. Changes in corporate strategy may lead to changes in Orgn structure. These structural changes, occur because the old structure having been pushed too far, has caused in efficiencies that are detrimental.

Following are the sequence of occurrence New Strategy is created. New administrative problems are created Economic performance declares. New appropriate structure is invented. Profit returns to its precious level. Strategy, structure & environment need to be clearly aligned otherwise the orgn suffers. A structure is division of task for efficiency & clarity of purpose & co-ordination b/w the interdependent parts of the org to ensure orgn effectiveness. Simple Functional Divisional Matrix

Choice of Strategy

Environmental Factors 1) Organisation strategic choice will be limited by the extent to which it is dependent on owners, competitors, customers, govt. & the community for its survival. Eg:- Ancillary Industries, firms who supply to single buyer. 2) Organisation which has more dependence on its external environment for its various inputs has limited strategic alternative. Single RM Org Organizational Factors:1) Organisation Mission. 2) Organizations Strengths & Weakness.

Behavioral Implementation
1. Leadership

It is the most important element affecting Organizational Performance Visionary, Accept Change, Intellectual, Delegation, Decision Making (A TO Z of Leadership) Type of leadership 2. Corporate Culture Strategy chosen

Culture is the set of important assumption often unstated which the members of an Organisation share in Common. Shared things (the way people dress) Shared sayings (lets get down to work) Shared actions (service oriented approach) Shared feelings (hard work not rewarded here)

Weak & Unhealthy Cultures: Hostility to change, Politicized Organizational Environment Strong & Healthy Culture: Strong Communication between different levels of management. In strong company culture, values & behavioral norms are deeply rooted & difficult are to weed out Creating strategy supportive culture is very important Adapt strategy to suit culture Change strategy to fit culture 3 Corporate Politics & Power

Power is the ability to influence people & events Politics relate to the way people gain & use power in organisation. 4) Reward Power Coercive Power Legitimate Power Referent Power Expert Power Personal Values & Business Ethics

Values is a view of life & a judgment of what is desirable which is very much a part of persons personality. (Personal experiences & influence) Happiness, Hard Work, Lasting Friendship, Being Caring , Helpful & Obedient, Striving for Success & Avoiding debt at all Costs. Ethics is our code of conduct. Ethics are a set of rules & standard that guide our behavior. e.g. Medical, Chartered Accountant and Academicians etc 5 Social Responsibility and Strategic Management Insiders & Outsiders.

Functional Implementation Functional Polices Large & more complex organisations need it for every major aspect. Published in company manuals & documents. Smaller organisation need fewer and informal policies

Financial Plans & Policies Sources of funds, uses of funds to generate more funds. Marketing Plans & Policies Product, Price, Place & Promotion Operation Plans & Policies Production System (capacity, location, Layout & degree of automations) Operation Planning & Control Material Supply, Inventory, Cost, Quality Management Maintenance of Plant & Equipment. Research& Development Product Development, Technology Development, Technical Collaboration Personal Plan and Policies Personal System (Human Resource Planning, Selection, Department compensation) Information Management Plan and Policies Acquisition and Retention of Information Processing and Synthesis of Information Retrieval and Usage of Information Transmission and Dissemination of Information

Unit IV
ORGANISATIONAL DESIGN & CHANCE
Organisational Design:Which structure is best suited to a particular strategy? 1) Identification of key activities to be performed to activities to be performed to achieve the Objectives. 2) Grouping of Activities of similar nature which require common set of skills to be performed. 3) Choice of structure that could accommodate the different group of activities. 4) Creation of dept. & division to which the group of activities could be assigned. 5) Establishing interrelationship b/w different department for the purpose of co-ordination & communication. Span of Mgt., Basic departmental line & staff relationship, committee. Orgnaisational change:1) Structural changes accompanying behavioural changes. Structural changes:- Modification in structural relationship & may entail the creation or disbandment of dept or Positions.

Structural Modification- How people would react to changed situation. How new relationships would be managed Cohesiveness maintained

ORGANISATIONAL SYSTEMS:1) Information system:Links different activities being performed in an orgn& ensures that it works in a coordinated manner.

2) Control System: Establish standard Measure Performance Evaluate Performance against standards Determine corrective action.

3) Appraisal System: Need Choice of factor used in managerial appraisal

- Multiple criteria or single criteria Procedure of Appraisal who, when, how

4) Motivation System:Financial & Non-financial Incentives Reward & Punishment 5) Development System:- A process of gradual, systematic improvement in the knowledge, skills attitudes & Performance of those individual in an org who carry mgt. responsibility. Training & Development 6) Planning System:Formulation of Plans Participation STAGES OF ORGANISATION DEVELOPMENT OLC Introduction, growth, maturity & Decline. Stage I:* Small Scale * Single Person * Simplicity of Objectives, operations & Mgt. (Ordinary) Stage II:* Bigger & wider in scope of operation. Implementation of Plans

* Functional or Process based. (VE) Stage III:* Large & widely scattered. * Units & plants at different places. * Each unit is semi-Autonomous linked to head quarter but functionally independent. (XIDAS) Stage IV:* Complex * Multi product, Multiplan * Divisional structure * Corporate house from policy L & T

ORGANISATIONAL LEARNING Learning organisation View a change as a positive opportunity to learn & create new sources of competitive advantage. Characteristics of Learning Organisation. Frequent Rotation of Managers different experiences, functional skills, competence, perspectives, new insights & ideas. Continual Training of Personnel Lower cost, Higher quality, better morale, more openness about thinking to problems. Decentralization of Decision Making Wherever needed, It encourages manager to work better Encouragement of Multiple Experiments Separate teams work on a solution to the same problem. This helps us or org not to overlook superior approach.

High Tolerance for Failure Efforts are meaningful & reasonable people should be appreciated learning from failures. Openness & Diversity of View Points new ideas, suggestion & criticism

MANAGEMENT OF CHANGE
Change: Continuous process Disturbs the equilibrium Change affects the organisation

Planned changed is the deliberate design & implementation of a structural innovation, a new policy or goal or a change in operating philosophy, climate or style. Relationship (hierarchy, form of organisation, span & management

Management of Change Causes of Organizational change 1) Change as a result of growth & decay cycle. 2) Technology & Organizational change. 3) Other Environmental forces & Organizational change GNP, taxation policies, legal forces socio-cultural force, demographic forces

Resistance to change
a) Causes of Individuals Resistance to change. b) c) Change operates through attitudes. Perceived threat to Economic Security (Tech) Threat to Established Ways. Disruption of social relationship Group Resistance to Change. Cohesiveness or itself. Organizational Resistance to change.

Organisation structures, role relationship, philosophy & values, counting past success resource limitations. Factors of Resistance to change:I. Individual factors Economic factors 1) Skill obsolescence I pod, mobile 2) Fear of Economic Loss SPSS, S TATA 3) Reduced opportunities for Incentives Psychological Factors 1) Ego Weakness (Individual Performance vs TEAM) 2) Status Quo- VRS, CRS 3) Less tolerance for change (GOVT.) 4) Lack of trust in change agent (Labour& Mgt.) 5) Fear of Unknown (Anxiety & Stress) Social factors 1) Desire to maintain existing social interaction- country head. 2) Feeling of outside interference Mgt. workers II. Group factors- Cohesiveness & Vested Interest

Management of Change:1) Top management commitment & support. 2) Multiple Communication (inadequate or distorted communication grapevine) 3) Participative Decision Making 4) Reducing Resistance to change 5) Using Group Methods 6) Training 7) Organizational Development Is a response to change, a complex educational strategy intended to change the belief, attitudes, values & structure of an organisation so that they can better adopt to new technologies, market challenges & the dizzying rate of change itself. 8) 9) 10) Union consultation & Bargaining. Preparing & Maintaining the Psychological climate of the enterprise. Use of Positional Power. Change steps:1) Sense the need for strategic change (Senior Management should realize it early) 2) Build Awareness of need to change & learn 3) Foster debates ( encourages new thinking, Multiple teams ) 4) 5) i) ii) Create consensus:Assign Responsibility:Existing Dept. New autonomous unit

6) Allocate resources Ethical dimensions 1) Using diversity to enrich the firms knowledge base. 2) Helping employees cope with change.

Implementing change in static Organisation Change as an opportunity for improvement & renewal of competitive advantage. Static Organisationare those that have adapted extremely well to a particular environment but lack the ability to respond quickly to change. They are Inwardly focus Inflexible

Resistance to change in static Organisation:1) Lack of Awareness Preoccupied with daily operating task & fail to appreciate the need for change, especially if change means learning new methods, process or techniques that are significantly different from what they currently practice. 2) Lack of interest in the opportunities that environmental change presents. 3) Incompatibility with cherished values culture, strategies, outlook 4) Fear of cannibalization 5) Fear of Personal loss It alters how they interact with others & affects their bases power. Change may render their skills obsolete, reduce career opportunities.

5) Actions for change:- Improve Performance Unfreezing :-clear the minds. In appropriate, irrelevant or inadequate to changing demand of situation. Changing:- Learn new behavior methods of working, new thinking. Refreezing :-Individual internalize the new beliefs, feelings, behavior. 6) Feedback:- feedback & follow up Right direction Minor Problems

Unit V
BUSINESS POLICIES Standard operating procedure or guidelines. Policies serve to increase managerial effectiveness by standardizing many routine decision& controlling the discretion of managers & subordinates in implementing strategies Policies define how the company will deal with stakeholder, employee, customer, suppliers, distributors & other important groups. Policies narrow the range of individual discretion so that employed act consistently on important issues Purpose of Policies: 1. Policies establish indirect control over independent action by making clear statement about new things are new to be done 2. Policies promote uniform handling of similar activities and it reduces favoritism and discrimination 3. Policies ensure quicker decision by standardizing 4. Policies reduce uncertainty in repetitive & day to day decisions 5. Policies offer a pre-determined answer to routine problems 6. Policies provides manager a mechanism for avoiding hasty & ill-conceived decision in changing operations Advantages: The policy is explicit so misunderstanding are reduced Equitable & consisted treatment of problem is more likely to take place Indirect control & co-ordination A convenient & authoritative reference can be supplied to all concerned.