BUSINESS STRATEGY

Chapter One
Introduction to Strategic
Management

Topics to be covered in the chapter

Evolution of the concept

Components of strategic management

The three levels of strategic planning

Making strategic decisions

Topics to be covered in this class

What is strategic management ?
Evolution of the concept of strategic
management.
- Igor Ansoff
- Mintzberg
- Peter Drucker
- Micheal Porter

What is strategic management ?

It can be defined as the set of decisions

and actions resulting in formulation and
implementation of strategies designed to
achieve the objectives of an
organization.

Evolution of the concept of strategic

management

Ansoffs strategic success paradigm (Igor

Ansoff)

Extensive research on acquisition by American

companies between 1948 & 1968.
- Rational acquisition better that opportunistic
decisions.

Mintzberg : Strategy as craft

Added new dimension to strategic

management by adding personal side of the
manager to the picture.
Proposed an intuitive view to the concept.
Attacked rationalism of contemporaries.
Advocated more human approach to strategy
formulation and implementation.
Coined the term crafting strategy.

Peter Drucker
Use of formal strategic thinking encouraged
after world war II.
Argued that, management is not just passive,
adaptive behavior. It means taking action to
make the desired results come to pass.
Introduced the concept of Management By
Objectives in 1954.
Shift of focus from processes to goals.

Micheal Porter

Focus on Strategy and competitive

advantage.
Suggested the study of the different
components of strategic management like
operating environment.
Five forces theory
Threat of new entrants
Bargaining power of consumers,
Bargaining power of suppliers,
Threat of substitute,
Rivalry between existing players.

Summary

Strategic Management ?
Evolution
Strategic success paradigm Igor Ansoff.
Mintzberg crafting strategy.
Peter Drucker Management By Objective.
Micheal Porter Five forces Theory.

Operational Workout
Visit a taken over unit, like bank or

establishment and ascertain the points of

consideration during the take over
process.

For the Next Class

Importance of Strategic Management.

Components of Strategic Management.

Importance of Strategic Management

Plans made and actions taken.

Reference to an intended strategy.
Future plans are Intended strategy.
Hierarchy of strategic intent refers to the purpose (s) an
organization strives to achieve.
Carefully align the broad and narrow scenarios.
Focus of narrow consistent with broader ones.

Components of Strategic Management

Vision
Mission
Company profile
External environment
Strategic analysis and choice
Annual objectives
Long term objectives

Grand strategy
Functional and operational strategies
Policies
Institutionalizing the strategy
Control and evaluation.

Summary

Importance of Strategic Management.

Components of Strategic Management.

For the Next Class

Three levels of strategic planning.

Making strategic decisions.

Three levels of strategic planning

Corporate level
Exploit firms distinctive competencies.
Selection of areas of business the company is going
to operate.
Business level
Decision making on competitive position of single
unit.
Concerned with using generic strategies like cost
leadership, differentiation & creation of competitive
advantage.

Functional level
Consists of management of geographic,
product and functional areas.
Address problems related to efficiency and
effectiveness.
These are quantifiable and operational in
nature.
Relate to a particular period.
Cost of failure is relatively small hence risk
perception marginal.

Making strategic decisions

Formulating company mission.

Developing company profile.
Assessing external environment.
Identifying most desirable options.
Selection of long term objectives.
Developing annual and short term strategies.
Implementing the strategic choices.
Evaluating the success.
Traditionally the study is divided into three major
parts analysis, formulation & implementation.

Summary
Three levels of strategic planning.
- Corporate, business and functional.
Making strategic decisions.

For the Next Class

Characteristics of strategic decisions.

Developing a strategic perspective.

Characteristics of strategic decisions

Strategic management integrates various
functions.
Considers a broad range of stakeholders.
Entails multiple time horizons.
Concerned with efficiency and effectiveness.
- It is the difference between doing things right
and doing the right things.

Developing a strategic perspective

The reasons for developing strategic perspective are,

Top management ignorance on real operating
situation.
Kidding themselves syndrome.
Vested interest of managers.
Excessive involvement in operational problems.
Complacence of top management after initial success.
Misinterpretation of change in direction.
Inability of top management to locate competitive
edge.

Summary

Characteristics of strategic decisions.

Developing a strategic perspective.
Solution is to make strategy development
process a formal activity.

For the next class

Chapter 2

Strategic Management Process