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Strategic Management. UNIT – 1 Strategic mgt – Definition, need, benefits Strategy Vision Mission Goals & Objectives Strategic Mgt process Levels of strategy Concept of SBU Role of Leaders Competitive advantage of nations. FIRM & ITS ENVIRONMENT. REMOTE EXTERNAL ENVT. - PowerPoint PPT Presentation
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Strategic ManagementManagement
UNIT – 1UNIT – 1 Strategic mgt – Definition, Strategic mgt – Definition,
need, benefitsneed, benefits StrategyStrategy VisionVision MissionMission Goals & ObjectivesGoals & Objectives Strategic Mgt processStrategic Mgt process Levels of strategyLevels of strategy Concept of SBUConcept of SBU Role of LeadersRole of Leaders Competitive advantage of Competitive advantage of
nationsnations
FIRM & ITS ENVIRONMENTFIRM & ITS ENVIRONMENT
COMPETITORS
OWNERS
INTERNAL ENVT
TOP MANAGERS
EMPLOYEES
FIRM
IMMEDIATE EXTERNAL ENVT
SUPPLIERS
GOVT. AGENCIES
CUSTOMERS
REMOTE EXTERNAL ENVT
SOCIAL
CHANGE
POLITICAL FACTORS
TECHNOLOGY
DEVELOPMENT
Strategic Management - Strategic Management - DefinitionDefinition
Set of decisions and actions resulting in formulation and Set of decisions and actions resulting in formulation and implementation of strategies designed to achieve the implementation of strategies designed to achieve the objectives of an organisation.objectives of an organisation.
It involvesIt involves1.1. PlanningPlanning2.2. DirectingDirecting3.3. OrganisingOrganising4.4. ControllingControlling
NEED FOR STRATEGIC MGTNEED FOR STRATEGIC MGT
Complexity and sophistication of business Complexity and sophistication of business decision makingdecision making
Unstable environmentUnstable environment Increasing competitionIncreasing competition
9 CRITICAL AREAS OF ST.MGT9 CRITICAL AREAS OF ST.MGT Determining mission of the companyDetermining mission of the company
Developing company profileDeveloping company profile
Assessment of co’s external envtAssessment of co’s external envt
Matching co profile with external envtMatching co profile with external envt
Choice of long - term objectivesChoice of long - term objectives
Grand strategies neededGrand strategies needed
Development of annual objectives and short term strategiesDevelopment of annual objectives and short term strategies
Implementing the decisionsImplementing the decisions
Review and evaluationReview and evaluation
STRATEGY - DEFINITIONSTRATEGY - DEFINITION
Large scale future oriented plans for interacting Large scale future oriented plans for interacting with the competitive envt to optimise with the competitive envt to optimise achievement of organizational objectives.achievement of organizational objectives.
DIMENSIONS OF STRATEGIC DIMENSIONS OF STRATEGIC DECISIONSDECISIONS
Require top mgt decisionsRequire top mgt decisions
Involve allocation of large amount of company resourcesInvolve allocation of large amount of company resources
Have significant impact on the long – term prosperity of the Have significant impact on the long – term prosperity of the firmfirm
Future – orientedFuture – oriented
Usually have major multi – functional or multi – business Usually have major multi – functional or multi – business consequencesconsequences
Necessiate considering factors in the firm’s external envtNecessiate considering factors in the firm’s external envt
BENEFITS OF STRATEGIC BENEFITS OF STRATEGIC
MANAGEMENTMANAGEMENT
Enhances problem prevention capabilities of the Enhances problem prevention capabilities of the firmfirm
Group based strategic decisionsGroup based strategic decisions
Employee motivationEmployee motivation
Provides understanding of sub – group Provides understanding of sub – group responsibilitiesresponsibilities
Resistance to change reducedResistance to change reduced
How does St. Mgt help the firm?How does St. Mgt help the firm? Provides the direction to the firm and serves as a road mapProvides the direction to the firm and serves as a road map
Prepares the firm to face the futurePrepares the firm to face the future
Brings forth the strategic decisions concerning the firmBrings forth the strategic decisions concerning the firm
Helps acquire competitive advantageHelps acquire competitive advantage
Ensures optimum utilisation of resourcesEnsures optimum utilisation of resources
Provides the best possible fit btw the firm and the envtProvides the best possible fit btw the firm and the envt
Ensures the firm’s business, products and markets are Ensures the firm’s business, products and markets are wisely chosenwisely chosen
HIERARCHY OF STRATEGIC INTENTHIERARCHY OF STRATEGIC INTENT
VISION
MISSION
GOALS
OBJECTIVES
PLANS
Most Integrative
Most specific
Fewest in number
Greatest in number
VISIONVISION
Vision represents what the organization would be Vision represents what the organization would be in futurein future
Create projections about where it should go in Create projections about where it should go in futurefuture
Definition:Definition:
‘‘A realistic, credible and attractive future for an A realistic, credible and attractive future for an organization’organization’
EXAMPLES OF VISION STATEMENTSEXAMPLES OF VISION STATEMENTS
"McDonald's vision is to be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile."
'to become the world's leading consumer company for automotive products and services'.
FEATURES OF A GOOD VISIONFEATURES OF A GOOD VISION
Should be realistic and idealisticShould be realistic and idealistic
Clarifies direction for the organizationClarifies direction for the organization
Inspires organization members and encourages Inspires organization members and encourages commitmentcommitment
Reflects the uniqueness of the organization, its distinctive Reflects the uniqueness of the organization, its distinctive competencecompetence
Appropriate for the organization, consistent with its values Appropriate for the organization, consistent with its values and cultureand culture
Well articulated and easily understoodWell articulated and easily understood
MISSIONMISSION
Defined as the fundamental, unique purpose that sets a Defined as the fundamental, unique purpose that sets a business apart from other firms of its type and identifies the business apart from other firms of its type and identifies the scope of its operations in product and market termsscope of its operations in product and market terms
It is a statement of attitude, outlook and orientationIt is a statement of attitude, outlook and orientation
It communicates what the firm wants to beIt communicates what the firm wants to be
It indicates the businesses the firm will pursue and the It indicates the businesses the firm will pursue and the customer needs it will seek to satisfycustomer needs it will seek to satisfy
Shaped by the vision of the corporation’s leadersShaped by the vision of the corporation’s leaders
EXAMPLES OF MISSION STATEMENTSEXAMPLES OF MISSION STATEMENTS
‘‘Our mission is to make every Indian a Britannia consumer’Our mission is to make every Indian a Britannia consumer’
‘‘to meet the everyday needs of people everywhere in India. We to meet the everyday needs of people everywhere in India. We stand committed to continuously improving the quality of life of stand committed to continuously improving the quality of life of each and every Indian. Because ultimately, our future is closely each and every Indian. Because ultimately, our future is closely linked to the future of every Indian home and the housewives who linked to the future of every Indian home and the housewives who run them’run them’
NEED FOR A MISSIONNEED FOR A MISSION
To ensure unanimity of purpose within the organizationTo ensure unanimity of purpose within the organization
To provide a basis for motivationTo provide a basis for motivation
To establish an organization climateTo establish an organization climate
To serve as a focal pointTo serve as a focal point
To facilitate the translation of objectives and goals into To facilitate the translation of objectives and goals into work structurework structure
It implies the image which the firm seeks to projectIt implies the image which the firm seeks to project
FEATURES OF A GOOD MISSIONFEATURES OF A GOOD MISSION
Should be clearShould be clear Should be feasibleShould be feasible Precise but explanatoryPrecise but explanatory DistinctiveDistinctive
DIFFERENCE BTW VISION AND MISSIONDIFFERENCE BTW VISION AND MISSION
VISIONVISION
Forward lookingForward looking
Emphasis on long term Emphasis on long term conceptconcept
MISSIONMISSION
States what the States what the organization is and why it organization is and why it existsexists
How the orgn will interact How the orgn will interact with its stakeholders, with its stakeholders, products or services it products or services it offers, way it is offered.offers, way it is offered.
STRATEGIC MGT PROCESSSTRATEGIC MGT PROCESS
COMPANY MISSION
COMPANY PROFILE EXTERNAL ENVT
STRATEGIC ANALYSIS AND CHOICE
GRAND STRATEGYLONG TERMOBJECTIVES
ANNUALOBJECTIVES
OPERATING STRATEGIES POLICIES
INSTITUTIONALIZING OF STRATEGY
CONTROL AND EVALUATION
Feedback
Feedback
LEVELS OF STRATEGYLEVELS OF STRATEGY
CORPORATESTRATEGY
SBU 1 SBU 2 SBU 3
R & DSTRATEGIES
FINANCIALSTRATEGIES
MARKETINGSTRATEGIES
HRSTRATEGIES
CORPORATE LEVEL
BUSINESS LEVEL
FUNCTIONAL LEVEL
SBU – Strategic Business Unit
THE CONCEPT OF SBUTHE CONCEPT OF SBU
A systematic grouping of the businesses of a multi – A systematic grouping of the businesses of a multi – business corporationbusiness corporation
Each SBU is treated as a separate businessEach SBU is treated as a separate business
Products within an SBU receive same strategic planning Products within an SBU receive same strategic planning treatmenttreatment
Facilitate effective planningFacilitate effective planning
ILLUSTRATION ON SBUILLUSTRATION ON SBU
5 SBUs5 SBUs
1.1. Titan WatchesTitan Watches2.2. Sonata WatchesSonata Watches3.3. Jewellery businessJewellery business4.4. Personal accessoriesPersonal accessories5.5. Precision engineeringPrecision engineering
ROLE OF BOARD OF DIRECTORSROLE OF BOARD OF DIRECTORS
TrusteeshipTrusteeship
Determination of basic objectives and policiesDetermination of basic objectives and policies
Selection of top executives Selection of top executives
Determination of organization structureDetermination of organization structure
Approval of financial mattersApproval of financial matters
Checks and controlsChecks and controls
Legal functionsLegal functions
ROLE OF CHIEF EXECUTIVEROLE OF CHIEF EXECUTIVE
Formulation of Long – term plansFormulation of Long – term plans
Guidance and DirectionGuidance and Direction
IntegrationIntegration
StaffingStaffing
Review and ControlReview and Control
External RelationsExternal Relations
ROLE OF OTHER MANAGERSROLE OF OTHER MANAGERS
Heads of SBU / functional managersHeads of SBU / functional managers
Some managers act as directors on board usually on rotation basisSome managers act as directors on board usually on rotation basis
Eg: HULEg: HUL
Implementation of strategyImplementation of strategy
ROLE OF CONSULTANTSROLE OF CONSULTANTS Professional service performed by specially trained and experienced
persons
Advice and assist managers and administrators
Specific, time – bound assignments
Consultancy fee quite high sometimesEg: SAIL paid Rs. 8 crore to McKinsey & Company to advise on its business restructuring.
Examples of Indian Consultancy firms
A.F. Ferguson
ABC Consultants
Billimoria Consultants
Examples of Foreign Consultancy firmsMc Kinsey & CompanyArthur AndersonErnst & YoungBoston Consulting GroupKPMG
COMPETITIVE ADVANTAGE OF COMPETITIVE ADVANTAGE OF NATIONSNATIONS
What do you understand from this picture?
COMPETITIVE ADVANTAGE OF COMPETITIVE ADVANTAGE OF NATIONSNATIONS
Competitive advantage is the advantage gained over the other Competitive advantage is the advantage gained over the other competitors in terms of its offering – product, quality, price, competitors in terms of its offering – product, quality, price, technology etc.technology etc.
Porter defined the competitive advantage of a nation as its Porter defined the competitive advantage of a nation as its capacity to entice firms (both local and foreign) to use the country capacity to entice firms (both local and foreign) to use the country as a platform from which to conduct business. as a platform from which to conduct business.
Competitive advantage can be created or, at the very least, raised Competitive advantage can be created or, at the very least, raised significantly. significantly.
““National prosperity is created, not inherited.” - Michael Porter National prosperity is created, not inherited.” - Michael Porter
In a world of increasingly liberalized trade, strategy must In a world of increasingly liberalized trade, strategy must concentrate on generating and maintaining competitive concentrate on generating and maintaining competitive advantage. advantage.
Porter’s diamond of national Porter’s diamond of national ADVANTAGEADVANTAGE
Firm strategy,structure &
rivalry
FactorConditions(resources)
Demandconditions
Related andSupportingindustries