STRATEGIC MANAGEMENT

What is strategic management?

The set of managerial decisions and actions that determines the long-run performance of an organization.

Definition:
Strategic management consists of the analysis, decisions, and actions an organization undertakes in order to create and sustain competitive advantages.

Strategic Management
The process of specifying an organization's objectives developing policies and plans to achieve these objectives allocating resources so as to implement the plans It is the highest level of managerial activity, usually performed by the company's Chief Executive Officer(CEO) and executive team.

Why strategic management is important

1. It results in higher organisational performance. 2. It requires that managers examine and adapt to business environment changes. 3. It coordinates diverse organisational units, helping them focus on organisational goals. 4. It is very much involved in the managerial decision-making process.

Key Attributes of Strategic Management:



Directs the organization toward overall goals and objectives. Involves the inclusion of multiple stakeholders in decision making. Needs to incorporate short-term and long-term perspectives. Recognizes tradeoffs between efficiency and effectiveness.

Elements of Strategic Management Process

The main elements of strategic management process are following Establishing the hierarchy of strategic intent Formulation of strategies Implementation of strategies Performing strategic evaluation and control

Strategist
Strategists are individuals or groups whoa re primarily involved in the formulation, implementation and evaluation of strategy. Role of strategist change according to type of organization like private, public, multinational, national etc. In any firm we can identify following strategists a) Board of directors b) CEO c) Entrepreneurs d) Senior Management e) SBU- level Executives h) Middle level Managers

Strategy at Different Levels of a Business

Strategies exist at several levels in any organization - ranging from the overall business (or group of businesses) through to individuals working in it.

THE THREE LEVELS OF ENTERPRISE STRATEGY

Enterprise strategy can be formulated and implemented at three different levels: Corporate level Business unit level Functional or departmental level

A Simple Organization Chart (Dominant or Related Product Business)

Corporate Level Multibusiness Corporation

Business Level

Business 1 (Related)

Business 2 (Related)

Business 3 (Related)

Functional Level Research and Manufacturing Development Marketing Human Resources Finance

Corporate Strategy
It is concerned with the overall purpose and scope of the business to meet stakeholder expectations. This is a crucial level since it is heavily influenced by investors in the business and acts to guide strategic decisionmaking throughout the business. Corporate strategy is often stated explicitly in a "mission statement".

Corporate Level Strategy

What businesses are we in? What businesses should we be in? Four areas of focus
Diversification management (acquisitions and divestitures) Synergy between units Investment priorities Business level strategy approval

Corporate-Level Strategies
Valuable strengths

Concentric Diversification (Economies Corporate of Scope) growth strategies Conglomerate Diversification (Risk Mgt.) Corporate stability strategies Corporate retrenchment strategies Can still go for business-level growth (economies of scale) Environmental Status
Critical environmental threats

Firm Status

Critical weaknesses Abundant environmental opportunities

Corporate-level strategies
Top managements overall plan for the entire organisation and its strategic business units Types of corporate strategies Growth: expansion into new products and markets Stability: maintenance of the status quo Renewal: redirection of the firm into new markets

Growth strategy
Seeking to increase the organisations business by expansion into new products and markets. Types of growth strategies Concentration Vertical integration Horizontal integration Diversification

Concentration Focusing on a primary line of business and increasing the number of products offered or markets served. Vertical integration Backward vertical integration: attempting to gain control of inputs (become a self-supplier). Forward vertical integration: attempting to gain control of output through control of the distribution channel and/or provide customer service activities (eliminating intermediaries)

Horizontal integration Combining operations with another competitor in the same industry to increase competitive strengths and lower competition among industry rivals. Related diversification Expanding by merging with or acquiring firms in different, but related industries that are strategic fits. Unrelated diversification Growing by merging with or acquiring firms in unrelated industries where higher financial returns are possible.

Stability strategy
A strategy that seeks to maintain the status quo to deal with the uncertainty of a dynamic environment, when the industry is experiencing slow- or nogrowth conditions, or if the owners of the firm elect not to grow for personal reasons.

Renewal strategies
Developing strategies to counter organization weaknesses that are leading to performance declines. Retrenchment: focusing of eliminating non-critical weaknesses and restoring strengths to overcome current performance problems. Turnaround: addressing critical long-term performance problems through the use of strong cost elimination measures and large-scale organizational restructuring solutions.

Business-level strategy
A strategy that seeks to determine how an organization should compete in each of its SBUs (strategic business units). A strategic business unit may be any profit center that can be planned independently from the other business units of your corporation. At the business unit level, the strategic issues are about both practical coordination of operating units and about developing and sustaining a competitive advantage for the products and services that are produced.

Business Level Strategy

How do we support the corporate strategy? How do we compete in a specific business arena? Three types of business level strategies:

Low cost producer Differentiator Focus Generate sustainable competitive advantages Develop and nurture (potentially) valuable capabilities Respond to environmental changes Approval of functional level strategies

Four areas of focus

Functional Strategy
It is concerned with how each part of the business is organised to deliver the corporate and business-unit level strategic direction. Operational strategy therefore focuses on issues of resources, processes, people etc. It involves the development and coordination of resources through which business unit level strategies can be executed effectively and efficiently.