Strategic Management

Book reference- Strategic management (8th edition)

Charles W.L. Hill

Gareth R. Jones

Chapter-1-Introduction Strategy

Strategy is a series of actions by a firm that are decided according to the particular situation.Strategy is the determination of the basic long-run goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out those goals.Strategy is an action that managers take to attain one or more of the organization’s goals.Strategy is the forging of company missions, setting objectives for the organization in light of external and internal forces, formulating specific policies and strategies to achieve objectives, and ensuring their proper implementation so that the basic purposes and objectives of the organization will be achieved.

Strategy

Strategy

opportunityDiscover

Strength Apply, sustain

WeaknessOvercome Threat

Avert

ManagementManagement is the process of designing and maintaining an environment in which individuals, working together in groups, efficiently accomplish selected aims.

Strategic managementStrategic management is a process of analyzing, formulating, implementing and evaluating some set of actions taken or to be taken for the achievement of predetermined organizational goals and objectives.It focuses on integrating management, marketing, finance, accounting, productions/operations, research and development and CIS to achieve organizational success.

Strategic planningA strategic planning is a process which describes how a firm will adapt to take advantages of opportunities in its constantly changing environment, in order to maintain a strategic fit between the firm’s goals and capabilities and these market opportunities.

◦ Corporate level: CEO, other senior executives and corporate staff

◦ Business level: Divisional manager

◦ Functional level: functional manager

Head office

Division-ADivision-B Division-C

Business function Business function Business function

Strategic Management Process

Select the corporate mission and major corporate goals.

Analyze the organization’s external competitive environment to identify organization’s opportunities and threats.

Analyze the organization’s internal operating environment to identify organization’s strengths and weaknesses.

Select strategies that build on the organization’s strengths and correct its weaknesses in order to take advantage of external opportunities and counter external threats.

Implement the strategy.

Strategic intentStrategic intent refers to an obsession with achieving an objective that stretches the company and requires it to build new resources and capabilities.

Vision, mission, goal and objective

Vision- The highest aspirations and ideals of a person or organization; what a firm wants to be. Vision statements often describe the firm or organization in lofty, even romantic or mystical tones.

Mission- An organization’s mission is an overall goal of the organization that provides a sense of direction and a guide to decision making for all levels of management.

It should define the organization line of products, identifying its products or services and specify the markets it serves at present and within a time frame work.

Mission statement should include the following components:

Target customers and markets. Principal products and services. Geographic domain. Core technologies. Concern for survival , growth and maturity. Organizational self concept. Desired public image. Values and guiding standard. Major goals and objectives.

Goals-A goal is a desired future state or objective that a company attempts to realize. The purpose of goals is to specify with precision what must be done if the company is to attain its mission or vision.

Characteristics of well constructed goals-SMART-

o Specific. o Measurable. o Attainable.o Realistic and o Timeliness.

Qualities of a strategic leader Vision, eloquence, and consistency Articulation of the business model Commitment Being well informed Willingness to delegate and empower The astute use of power Emotional intelligence (self awareness, self-regulation, motivation, empathy, social skills

Self awareness: The ability to understand one’s own moods, emotions, and drives as well as their effect on others.

Self-regulation: The ability to control or redirect disruptive impulses or moods, that is , to think before acting.

Motivation: A passion for work that goes beyond money or status and a propensity to pursue goals with energy and persistence.

Empathy: Understanding the feelings and viewpoints of subordinates, and taking those into account when making decision.

Social skills: Friendliness with a purpose.

Cognitive biases and strategic decision makingPrior hypotheses bias: Prior hypothesis biases refers to

the fact that decision makers who have strong prior belief about the relationship between two variables tend to make decisions on the basis of these beliefs, even when presented with evidence that their beliefs are wrong.Moreover, they tend to seek and use information that is consistent with their prior beliefs while ignoring information that contradicts these beliefs.

Escalating commitment: It occurs when decision makers having already committed significant resources to a project, commit even more resources if they receive feedback that the project is failing.

Reasoning by analogy: It involves the use of simple analogies to make sense out of complex problem.

Representativeness: It is a bias rooted in the tendency to generalize from a small sample, or even a single vivid anecdotes.

Illusion of control: It is the tendency to overestimate ability to control events. Top level management seems to be particularly prone to this bias, having risen to the top of an organization, they tend to be overconfident about their ability to succeed.

Availability error: The availability error arises from our predisposition to estimate the probability of an outcome based on how easy the outcome is to imagine.

Technique for improving decision makingDevils advocacy

Expert plan

Devil’s advocate criticizes

Devil’s advocate criticizes

Dialectic inquiry

Expert plan-1(Thesis)

Final plan

Debate (synthesis)

Expert plan-2(Antithesis)