BA9210 STRATEGIC MANAGEMENT LT P C
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UNIT- I STRATEGY AND PROCESS 9
Conceptual framework for strategic management, the Concept of Strategy and the Strategy Formation Process – Stakeholders in business – Vision, Mission and Purpose – Business definition, Objectives and Goals - Corporate Governance and Social responsibility-case study.
UNIT – II COMPETITIVE ADVANTAGE 9
External Environment - Porter’s Five Forces Model-Strategic Groups Competitive Changes during Industry Evolution-Globalisation and Industry Structure - National Context and
Competitive advantage Resources- Capabilities and competencies–core competencies-Low cost and differentiation Generic Building Blocks of Competitive Advantage- Distinctive
Competencies-Resources and Capabilities durability of competitive Advantage- Avoiding failures and sustaining competitive advantage-Case study.
UNIT - III STRATEGIES 10
The generic strategic alternatives – Stability, Expansion, Retrenchment and Combination strategies - Business level strategy- Strategy in the Global Environment-Corporate Strategy-
Vertical Integration-Diversification and Strategic Alliances- Building and Restructuring the corporation- Strategic analysis and choice - Environmental Threat and Opportunity Profile
(ETOP) - Organizational Capability Profile - Strategic Advantage Profile - Corporate Portfolio Analysis - SWOT Analysis - GAP Analysis - Mc Kinsey's 7s Framework - GE 9 Cell Model -
Distinctive competitiveness - Selection of matrix - Balance Score Card-case study.
UNIT – IV STRATEGY IMPLEMENTATION & EVALUATION 9
The implementation process, Resource allocation, Designing organisational structure-Designing Strategic Control Systems- Matching structure and control to strategy-Implementing Strategicchange-Politics-Power and Conflict-Techniques of strategic evaluation & control-case study.
UNIT – V OTHER STRATEGIC ISSUES 8
Managing Technology and Innovation- Strategic issues for Non Profit organisations. New Business Models and strategies for Internet Economy-case study
TOTAL:45 PERIODS
TEXT BOOKS
1. Thomas L. Wheelen, J.David Hunger and Krish Rangarajan, Strategic Management andBusiness policy, Pearson Education., 2006
2. Charles W.L.Hill & Gareth R.Jones, Strategic Management Theory, An Integratedapproach, Biztantra, Wiley India, 2007.
3.Azhar Kazmi, Strategic Management & Business Policy, Tata McGraw Hill, Third Edition,2008.
REFERENCES
1. Fred.R.David, Strategic Management and cases, PHI Learning, 2008.
2. Upendra Hachru , Strategic Management concepts & cases , Excel Books, 2006.
3. Adriau HAberberg and Alison Rieple, strategic Management Theory & Application, Oxford University Press, 2008.
4. Arnoldo C.Hax and Nicholas S. Majluf, The Strategy Concept and Process – A Pragmatic Approach, Pearson Education, Second Edition, 2005.
5. Harvard Business Review, Business Policy – part I & II, Harvard Business School.
6. Saloner and Shepard, Podolny, Strategic Management, JohnWiley, 2001.
7. Lawerence G. Hrebiniak, Making strategy work, Pearson, 2005.
8. Gupta, Gollakota and Srinivasan, Business Policy and Strategic Management – Concepts and Application, Prentice Hall of India, 2005.
Strategic Management
Strategic management has now evolved to the point that it is primary value is to helpthe organization operate successfully in dynamic, complex global environment.Corporations have to become less bureaucratic and more flexible. In stableenvironments such as those that have existed in the past, a competitive strategy simplyinvolved defining a competitive position and then defending it. Because it takes lessand less time for one product or technology to replace another, companies are findingthat there are no such thing as enduring competitive advantage and there is need todevelop such advantage is more than necessary.
Corporations must develop strategic flexibility: the ability to shift from one dominantstrategy to another. Strategic flexibility demands a long term commitment to the development and nurturing of critical resources. It also demands that the companybecome a learning organization: an organization skilled at creating, acquiring, andtransferring knowledge and at modifying its behaviour to reflect new knowledge andinsights. Learning organizations avoid stability through continuous self-examinationsand experimentations. People at all levels need to be involved in strategic management: scanning the environment for critical information, suggesting changesto strategies and programs to take advantage of environmental shifts, and workingwith others to continuously improve work methods, procedures and evaluationtechniques. At Murugappa Group in Tamilnadu, for example, all employees havebeen trained in small-group activities and problem solving techniques. In Eqitas reverse roles are planned where the employees sit on the platform and all mangerslisten to them.
Strategic intent includes directing organization’s attention on the need of winning; inspiring people by telling them that the targets are valuable; encouraging Individualand team participation as well as contribution; and utilizing intent to direct allocationof resources. Strategic intent differs from strategic fit in a way that while strategic fitdeals with harmonizing available resources and potentials to the externalenvironment, strategic intent emphasizes on building new resources and potentials soas to create and exploit future opportunities.
Mission Statement
Mission statement is the statement of the role by which an organization intends toserve it’s stakeholders. It describes why an organization is operating and thusprovides a framework within which strategies are formulated. It describes what theorganization does (i.e., present capabilities), who all it serves (i.e., stakeholders) andwhat makes an organization unique (i.e., reason for existence). A mission statement differentiates an organization from others by explaining its broad scope of activities, its products, and technologies it uses to achieve its goals and objectives. It talks aboutan organization’s present (i.e., “about where we are”).For instance,Microsoft’s mission is to help people and businesses throughout the world to realize their fullpotential.
Wal-Mart’s mission
is “To give ordinary folk the chance to buy the samething as rich people.” Mission statements always exist at top level of an organization, but may also be made for various organizational levels. Chief executive plays asignificant role in formulation of mission statement. Once the mission statement isformulated, it serves the organization in long run, but it may become ambiguous withorganizational growth and innovations. In today’s dynamic and competitive environment, mission may need to be redefined. However, care must be taken that theredefined mission statement should have original fundamentals/components. Missionstatement has three main components-a statement of mission or vision of thecompany, a statement of the core values that shape the acts and behaviour of theemployees, and a statement of the goals and objectives.
Features of a Mission
A .Mission must befeasibleand attainable. It should be possible to achieve it.
b.Mission should beclearenough so that any action can be taken.
c.It should beinspiringfor the management, staff and society at large.
d.It should bepreciseenough, i.e., it should be neither too broad nor too narrow.
e.It should beuniqueand distinctive to leave an impact in everyone’s mind.
f.It should beanalytical, i.e., it should analyze the key components of thestrategy.
g.It should becredible, i.e., all stakeholders should be able to believe it.
Vision
A vision statement identifies where the organization wants or intends to be in futureor where it should be to best meet the needs of the stakeholders. It describes dreams and aspirations for future. For instance,Microsoft’s visionis “to empower peoplethrough great software, any time, any place, or any device.”Wal-Mart’s visionis tobecome worldwide leader in retailing. A vision is the potential to view things ahead ofthemselves. It answers the question “where we want to be”. It gives us a reminder about what we attempt to develop. A vision statement is for the organization and its members, unlike the mission statement which is for the customers/clients. Itcontributes in effective decision making as well as effective business planning. Itincorporates a shared understanding about the nature and aim of the organization and utilizes this understanding to direct and guide the organization towards a better purpose. It describes that on achieving the mission, how the organizational futurewould appear to be.
An effective vision statement must have following features-
a.It must beunambiguous
b.It must beclear
c.It mustharmonizewith organization’s culture and values.
D .The dreams and aspirations must berational/realistic
e.Vision statements should beshorterso that they are easier to memorize.
In order to realize the vision, it must be deeply instilled in the organization, beingowned and shared by everyone involved in the organization.
Goals and objectives
A goal is a desired future state or objective that an organization tries to achieve. Goalsspecify in particular what must be done if an organization is to attain mission orvision. Goals make mission more prominent and concrete. They co-ordinate andintegrate various functional and departmental areas in an organization. Well madegoals have following features-
1. These areprecise and measurable
2.These look aftercritical and significantissues.
3.These arerealisticand challenging.
4.These must be achieved within aspecific timeframe.
5.These include both financial as well as non-financial components
.Objectives are defined as goals that organization wants to achieve over a period oftime. These are the foundation of planning. Policies are developed in an organization so as to achieve these objectives. Formulation of objectives is the task of top level management. Effective objectives have following features-
1.These are not single for an organization, butmultiple
2.Objectives should be bothshort-term as well as long-term
3.Objectives must respond and react to changes in environment, i.e., they mustbeflexible
4.These must be feasible realistic and operational
Tactics
Tactics are concerned with the short to medium term co-ordination of activities andthe deployment of resources needed to reach a particular strategic goal. Some typicalquestions one might ask at this level are: "What do we need to do to reach our growth/ size / profitability goals?" "What are our competitors doing?" "What machinesshould we use?" The decisions are taken more at the lower levels to implement thestrategies based on ground realities.
How strategy is initiated?
A triggering event is something that stimulates a change in strategy .Some of thepossible triggering events is:
New CEO By asking a series of embarrassing questions, the new CEO cuts throughthe veil of complacency and forces people to question the very reason for thecorporation’s existence.
Intervention by an external institution: The firm’s bank suddenly refuses to agreeto a new loan or suddenly calls for payment in full on an old one.
Threat of a change in ownership: Another firm may initiate a takeover by buyingthe company’s common stock.
Management’s recognition of a performance gap: A performance gap exists whenperformance does not meet expectations. Sales and profits either are no longerincreasing or may even be falling.
Innovation of a new product that threatens the existence of the present status quo.
Basic model of strategic management
Strategic management consists of four basic elements
1. Environmental scanning
2. Strategy Formulation
3. Strategy Implementation and
4. Evaluation and control
Management scans both the external environment for opportunities and threats andthe internal environmental for strengths and weakness. The following factors that aremost important to the corporation’s future are called strategic factors: strengths,weakness, opportunities and threats (SWOT)
Strategy Formulation
Strategy formulation is the development of long-range plans for they effectivemanagement of environmental opportunities and threats, taking into considerationcorporate strengths and weakness. It includes defining the corporate mission,specifying achievable objectives, developing strategies and setting policy guidelines
Mission
An organization’s mission is its purpose, or the reason for its existence. It states whatit is providing to society .A well conceived mission statement defines the fundamental, unique purpose that sets a company apart from other firms of its types and identifiesthe scope of the company ‘s operation in terms of products offered and markets served
Objectives
Objectives are the end results of planned activity; they state what is to be accomplished by when and should be quantified if possible. The achievement ofcorporate objectives should result in fulfillment of the corporation’s mission.
Strategies
A strategy of a corporation is a comprehensive master plan stating how corporation will achieve its mission and its objectives. It maximizes competitive advantage and minimizes competitive disadvantage. The typical business firm usually considers three types of strategy: corporate, business and functional.
Policies
A policy is a broad guideline for decision making that links the formulation ofstrategy with its implementation. Companies use policies to make sure that theemployees throughout the firm make decisions and take actions that support thecorporation’s mission, its objectives and its strategies.
Strategic decision making
Strategic deals with the long-run future of the entire organization and havethree characteristic
1. Rare- Strategic decisions are unusual and typically have no precedent to follow.
2. Consequential-Strategic decisions commit substantial resources and demand a greatdeal of commitment
3. Directive- strategic decisions set precedents for lesser decisions and future actionsthroughout the organization.
Mintzberg’s mode s of strategic decision making
According to Henry Mintzberg, the most typical approaches or modes of strategicdecision making are entrepreneurial, adaptive and planning.
Making better strategic decisions
He gives seven steps for strategic decisions1. Evaluate current performance results2. Review corporate governance3. Scan the external environment4. Analyze strategic factors (SWOT)5. Generate, evaluate and select the best alternative strategy6. Implement selected strategies7. Evaluate implemented strategies
SBU or Strategic Business Unit
An autonomous division or organizational unit, small enough to be flexible and largeenoughtoexercisecontrolovermostofthefactors
Affectingitslong term performanceBecausestrategicbusinessunitsaremoreagile(and
Usually have independent missionsand objectives), they allow the owning conglomerate torespond quickly to changing economic or market situations.
Corporate Governance
Corporate governance is a mechanism established to allow different parties tocontribute capital, expertise and labour for their mutual benefit the investor orshareholder participates in the profits of the enterprise without taking responsibilityfor the operations. Management runs the company without being personallyresponsible for providing the funds. So as representatives of the shareholders,directors have both the authority and the responsibility to establish basic corporatepolicies and to ensure they arte followed. The board of directors has, therefore, an
obligation to approve all decisions that might affect the long run performance of the corporation. The term corporate governance refers to the relationship among these three groups (board of directors, management and shareholders) in determining the direction and performance of the corporation
Responsibilities of the board
Specific requirements of board members of board members vary, depending on the state in which the corporate charter is issued. The following five responsibilities of board of directors listed in order of importance
1. Setting corporate strategy, overall direction, mission and vision
2. Succession: hiring and firing the CEO and top management
3. Controlling , monitoring or supervising top management
4. Reviewing and approving the use of resources
5. Caring for stockholders interests
Role of board in strategic management
The role of board of directors is to carry out three basic tasks
1. Monitor
2. Evaluate and influence
3. Initiate and determine
CORPORATE SOCIAL RESPONSIBILITY
Corporate Social Responsibility (CSR)is animportant activity tofor businesses.As globalizationaccelerates andlarge corporationsserve asglobal providers, these corporations have progressively recognized the benefits ofproviding
CSR programsin theirvarious locations.CSR activitiesare now being
undertaken throughout the globe.
What is corporate social responsibility?
The term is often used interchangeably for other terms such as Corporate Citizenship and is also linked to the concept of Triple Bottom Line Reporting (TBL) that is people, planet and profits., which is used as a framework for measuring an organization’s performance against economic,social andenvironmental parameters. Itis about building sustainable businesses, which need healthy economies, markets and communities.
The key drivers for CSR are
Enlightened self-interest - creating a synergy of ethics, a cohesive society and a sustainable global economy where markets, labour and communities are able to functionwelltogether.Sustainability
You need to understand sustainability. It is being used mostly in organizational forums and a basic understanding is needed for you. The discussion on sustainability is only for your understanding.
Sustainabilitymeans"meetingpresentneedswithoutcompromisingtheabilityof
future generations to meet their needs’. These well-established definitions set an idealpremise, but do not clarify specific human and environmental parameters formodelling and measuring sustainable developments.
The following definitions are more specific:
1."Sustainable means using methods, systems and materials that won't depleteresources or harm natural cycles".
2. Sustainability "identifies a concept and attitude in development that looks at asite's natural land, water, and energy resources as integral aspects of thedevelopment".
3."Sustainability integrates natural systems with human patterns and celebratescontinuity, uniqueness and place making"
Combining all these definitions; Sustainable developments are those which fulfilpresent andfuture needswhile usingand notharming renewable resourcesandunique human-environmental systems of a site:[air, water, land, energy, and humanecology and/or those of other [off-site] sustainable systems (Rosenbaum 1993 and Vieria 1993).
Social investment - contributing to physical infrastructure and social capital is increasingly seen as a necessary part of doing business.
Transparency and trust - business has low ratings of trust in public perception.There is increasing expectation that companies will be more open, more accountableand be prepared to report publicly on their performance in social and environmentalarenas . Increased public expectations of business - globally companies are expected todo more than merely provide jobs and contribute to the economy through taxes andemployment.Corporate social responsibility is represented by the contributions undertaken bycompaniesto society through its core business activities, its social investment and philanthropyprogrammes and itsengagement in public policy.In recent yearsCSR has becomeafundamental business practice and has gained much attention from chief executives,chairmen, boards of directors and executive management teams of larger internationalcompanies.They understand that astrong CSR program isan essential element inachievinggoodbusinesspracticesandeffectiveleadership.Companieshavedeterminedthat their impact on the economic, social and environmental landscape directly affectstheirrelationships with stakeholders, in particular investors, employees, customers,businesspartners, governments and communities.According to theresults of aglobal survey in2002 byErnst &Young, 94per cent ofcompanies believe the development ofa Corporate SocialResponsibility(CSR) strategycandeliver realbusiness benefits, however only 11 per cent have made significant progress in implementing the strategy in theirorganisation.Senior executivesfrom147 companiesin arangeofindustry sectors acrossEurope, NorthAmerica andAustralasia wereinterviewed forthe survey. The survey concluded that CEOs are failing to recognize the benefits ofimplementing Corporate Social Responsibility strategies, despite increased pressure to include ethical,social andenvironmental issues into theirdecision-making processes. Research found that company CSR programs influence 70 per cent of all consumer purchasing decisions, with many investors and employees also being swayed in their choice of companies."While companies recognizethe valueof anintegrated CSR strategy, the majorityare failingto maximizethe associated businessopportunities,"said Andrew Grant, Ernst & Young Environment and Sustainability Services Principal."Corporate Social Responsibility is now a determining factor in consumer andclient choice which companies cannotafford toignore.Companies whofail to maximize their adoption of a CSR strategy will be left behind."The World Economic Forum has recognized the importance of corporate social responsibility by establishingthe GlobalCorporate Citizenship Initiative.The Initiativehopes to increase businesses' engagement in and support for corporate social responsibility as a business strategy with long-term benefits both for the companies themselves as well as societyingeneral.