Strategic Management 2010 Notes

8/13/2019 Strategic Management 2010 Notes

1/15

________________________________________________________ Strategic Management ____________

Q1: Elaborate concept of Strategic Management & Discuss strategic management as a

process.

“With out a strategy, an organization is lie a ship !ith out a ru""er, going

aroun" in circles. #t$s lie a tramp% it has no place to go.

E'olution of Strategic Management(

1) In early 1920’s and 1930’s the managers used day-to-day planning methods to perform

any task.

2) To antiipate the future! they tried using tools like preparation of "udgets and ontrol

systems like apital "udgeting and management "y o"#eti$es.

3) The tehni%ues &ere una"le to emphasi'e the future ade%uately.

() The net step &as they tried using long range planning &hih &as replaed "y strategi

planning and later "y strategi management.

*) In mid 1930’s! aording to the nature of "usiness the planning &as done during +dho

poliy making.

The strategi management is the modern term for &hat &as earlier alled business policy.

The &ord strategy is deri$ed from the anient ,reek &ord strategia! &hih onnoted the art

and siene of direting military fores.

Strategic management is "efine" as the set of deisions and ations &hih leads to the

de$elopment an effeti$e strategy or strategies to help ahie$e orporate o"#eti$es.

It is a proess of formulating! implementing and e$aluating ross funtional deisions that

ena"le an organi'ation to ahie$e its o"#eti$es.

/trategi management is indeed managing for the future or competing for the future+

)enefits of strategic management

1. It pro$ides an o"#eti$e $ie& of management pro"lems

2. It gi$es enouragement to for&ard thinking

3. It allo&s ma#or deisions supports esta"lished o"#eti$es

(. it failitates "etter delegation! o-ordination! monitoring performane e$aluation andontrol.

*. It helps for inreased employee produti$ity and redued resistane to hange

_________________________________________________ Madhira College of Engineering ____________


2/15


Strategic management process

1. +ording to ofer strategi management is the proess! &hih deals &ith fundamental

rgani'ational! rene&al gro&th &ith the de$elopment of strategies! /trutures and

/ystems neessary to ahie$e suh rene&al and gro&th and &ith the organi'ational

systems needed to effeti$ely manage the strategy formulation and implementation

proess.

*he process of strategic management is,

1. Identifying defining "usiness mission purpose o"#eti$es

2. 4n$ironmental analysis

3. 5e$ise organi'ational diretion

(. /trategi alternati$es and hoie

*. /trategy implementation

6. /trategi e$aluation ontrol

Defining business +ision, mission purpose& obecti'es

7efining on organi'ations eisting mission! purpose and o"#eti$es is the logial starting

point as they lay foundation for strategi management. 4$ery organi'ation has mission! purpose

and o"#eti$es! e$en if these elements are not onsiously designed! &ritten ommuniated.

These elements relate the organi'ation &ith the soiety and states that it has to ahie$e for it

self and to the soiety.

2. 8ompany +ision is hat a 8ompany ishes to "eome or aspire to "e.

3. 8ompany Mission is &hat the 8ompany is and &hy it eists

(. -becti'es( ong term! ,eneral! ess measura"le*. oals( short term! speifi! more measura"le.



3/15


En'ironmental analysis

4n$ironmental fators-"oth Internal 4ternal en$ironment! i.e.!

1. identify hanges in the en$ironment

2. identify present future threats opportunities

3. +ssess ritially its o&n strengths &eaknesses.

4n$ironmental fators may help in "uilding a sustaina"le ompetiti$e ad$antage.

/e'ise organizational "irection

+ thorough analysis of organi'ations en$ironment pinpoints its strengths! &eaknesses!

opportunities and threats ;/T). This an often help management to reaffirm or re$ise its

organi'ation diretion.

Strategic alternati'es an" choice

+lternati$e strategies &ill "e ranked "ased on the /T analysis. The "est strategy out

of the alternati$es &ill "e hosen.

The steps from identifiation of "usiness mission! purpose and o"#eti$es of

alternati$e strategies and hoie an "e grouped in to the "road step of strategy formulation.

Strategy implementation

The organi'ation an not reap the "enefits of the strategi management! unless the

strategy is effeti$ely implemented.

The managers should ha$e lear $ision ideas a"out the ompetitor’s strategy! organi'ations

ulture! handling hange! skills of the managers-in-harge of implementation.

Strategic e'aluation an" control

It fouses on monitoring e$aluating the strategi management proess in order to

impro$e it and ensure that it funtions properly. The managers must understand the proess of

strategi ontrol the role of strategi audit to perform the task of ontrol suessfully.



4/15


Q0( Eplain the !oring of *-WS matri. &Mc2insey 34s 5rame !or of strategic

analysis.

*6/E7*S4-88-/*9:#*#ES4WE72:ESSES4S*/E:*6S ;*-WS< M7*/#=

T/ is also named as /T analysis. + T/ +nalysis is a strategi

planning tool used to e$aluate the Threats! pportunities and /trengths! eaknesses! in$ol$ed

in a pro#et or in a "usiness $enture or in any other situation re%uiring a deision. This is an

important tool in order to formulate strategy. This S Weanesses > W

-pportunities > -

*hreats > *

S- Strategies( 4$ery firm desires to o"tain "enefit form its resoures suh "enefit an only "e

o"tained if utili'e its strength to take eternal opportunity. 5esoures ;+ssets) an important

firm’s strength to get opportunity for eternal resoures. 5or eample the firm en#oying a good

finanial position &hih is strength for a firm and eternally opportunity to epand "usiness. The

strong finanial position pro$ides an opportunity to epand the "usiness. The mathed strategy

is kno&n as / strategy.

W- Strategies( /trategies de$eloped to math &eakness &ith opportunities of the firm.

strategy is $ery useful if the firm take ad$antage to eternal resoures in order to o$erome

the &eakness. 5or eample the firm is in the ritial finanial pro"lems that is &eakness and

firm is a$ailing merger &ith


5/15


S* Strategies /T /trategies is an important strategy to o$erome eternal threats. This does

not mean that a strong organi'ation should al&ays meet threats in the eternal en$ironment

head-on. This strategy is adopted "y $arious olleges "y opening ne& "ranhes in order to

o$erome ompetiti$e thereat. These threats also eplain "y the >orter in its ompetiti$e model.

W* Strategies 4$ery firm has a desire to o$erome its &eakness and reduing threats. This

type of strategy helpful &hen &eaknesses are remo$ed to o$erome eternal threats. It is

diffiult to target T strategy. 5or eample &eak distri"ution net&ork reating many pro"lems

for the firm if it strong many eternal threats an "e remo$ed.

*he Mc2insey 3S 5rame!or

The


6/15


Q@( Eplain Michael 8orter Aontribution to Strategic management

8orter contribution to strategic management is,

1. >orter’s generi strategies

2. Bi$e fore model or industry en$ironment analysis3. Calue hain analysis

E:E/#A S*/7*E#ES

Aost lea"ership emphasi'es produing standardi'ed produts at $ery lo& per-unit ost for

onsumers &ho are prie-sensiti$e.

Differentiation is a strategy aimed at produing produts and ser$ies onsidered uni%ue

industry &ide and direted at onsumers &ho are relati$ely prie-insensiti$e.

5ocus means produing produts and ser$ies that fulfill the needs of small groups of

onsumers.

Bo!er Aost Differentiation

)roa" *arget

:arro! *arget


Cost

Leadership

Differentiation

Cost Focus Differentiation

Focus


7/15


Michael 8orterCs fi'e forces

>orter referred to these fores as the miroen$ironment! They onsist of those fores lose to a

ompany that affet its a"ility to ser$e its ustomers and make a profit. + hange in any of the

fores normally re%uires a ompany to re-assess the marketplae.

4ah of these fores has se$eral determinants:

*he bargaining po!er of customers

1. "uyer onentration to firm onentration ratio

2. Dargaining le$erage 3. "uyer $olume

(. Duyer information a$aila"ility *. a"ility to "ak&ard integrate

6. +$aila"ility of eisting su"stitute produts @. "uyer prie sensiti$ity

*he bargaining po!er of suppliers

1. /upplier s&ithing osts relati$e to firm s&ithing osts

2. 7egree of differentiation of inputs 3. presene of su"stitute inputs

@. supplier onentration to firm onentration ratio

E. ost of inputs relati$e to selling prie of the produt 6.importane of $olume to supplier

*he threat of ne! entrants

1. the eistene of "arriers to entry

2. eonomies of produt differenes

3. Drand e%uity (. /&ithing osts *. apital re%uirements*. +ess to distri"ution @. +"solute ost ad$antages E. go$ernment poliies



8/15


*he threat of substitute pro"ucts

1. "uyer propensity to su"stitute

2. relati$e prie performane of su"stitutes

3. "uyer s&ithing osts

(. perei$ed le$el of produt differentiation

*he intensity of competiti'e ri'alry

1. po&er of "uyers po&er of suppliers

2. threat of ne& entrants threat of su"stitute produts

3. num"er of ompetitors

(. rate of industry gro&th

*. eit "arriers di$ersity of ompetitors

6. informational ompleity and asymmetry

@. "rand e%uity fied ost alloation per $alue added

E. le$el of ad$ertising epense

+alue Ahain 7nalysis ;+A7<

The $alue hain! also kno&n as 'alue chain analysis. The ?primary

acti'ities? inclu"e: in"ound logistis! operations ;prodution)! out"ound logistis! marketing

and sales! and ser$ies ;maintenane). The ?support acti'ities? inlude: administrati$e

infrastruture management! human resoure management! 57! and prourement. The osts

and $alue dri$ers are identified for eah $alue ati$ity. The $alue hain frame&ork %uikly made

its &ay to the forefront of management thought as a po&erful analysis tool for strategi

planning. Its ultimate goal is to maimi'e $alue reation &hile minimi'ing osts.

The ati$ities of the Calue 8hain

8rimary acti'ities ;line functions<

1. #nboun" Bogistics. Inludes reei$ing! storing! in$entory ontrol! transportation planning.

2. -perations. Inludes mahining! pakaging! assem"ly! e%uipment maintenane! testing

and all other $alue-reating ati$ities that transform the inputs into the final produt.

3. -utboun" Bogistics. The ati$ities re%uired to get the finished produt at the ustomers:

&arehousing! order fulfillment! transportation! distri"ution management.

(. Mareting an" Sales. The ati$ities assoiated &ith getting "uyers to purhase the produt!

inluding: hannel seletion! ad$ertising! promotion! selling! priing! retail management..*. Ser'ice. The ati$ities that maintain and enhane the produtFs $alue! inluding: ustomer

support! repair ser$ies! installation! training! spare parts management! upgrading! et.



9/15


Supporting

acti'ities

8rimary

acti'ities

Support acti'ities ;Staff functions, o'erhea"<

1. 8rocurement. >rourement of ra& materials! ser$iing! spare parts! "uildings! mahines!

2. *echnology De'elopment. Inludes tehnology de$elopment to support the $alue hain

ati$ities. /uh as: 5esearh and 7e$elopment! >roess automation! design! redesign.

3. 6uman /esource Management. The ati$ities assoiated &ith reruiting! de$elopment

;eduation)! retention and ompensation of employees and managers.

(. 5irm #nfrastructure. Inludes general management! planning management! legal! finane!

aounting! pu"li affairs! %uality management! et.

Q( Discuss the role of en'ironment in the strategic management of an organization.

4n$ironment means the surrounding. It inludes "oth internal and eternal o"#ets! fators

influenes under &hih someonesomething eist. +n rgani'ation must "e flei"le enough to

ad#ust %uikly &ith this hanging en$ironment.

*he en'ironmental scan inclu"es the follo!ing components(

1. Internal analysis of the firm

2. +nalysis of the firmFs industry ;task en$ironment)

3. 4ternal maro en$ironment ;>4/T analysis)

*he Eternal business en'ironment may be "i'i"e" in to 0 sectors



10/15


D5+7 T+/? 4n$ironment

*as en'ironment(

The task en$ironment onsists of eternal stakeholders groups or indi$iduals outside the

organi'ation that are signifiantly influened "y or ha$e a ma#or impat on the organi'ation! like:

Austomers

Suppliers

Aompetitors

)roa" en'ironment(

#t consists of "omestic an" global forces.

1. >olitial trends ;e.g. open markets)

2. 4onomi trends;e.g. gro&ing eonomy)

3. /oio-ultural trends;e.g. demographis)

(. Tehnologial trends;e.g. internet)

8ES* 7:7BS#S(

8olitical(

• ,o$ernment term and hange

• ars onflit

• egislationsregulatorypoliy

• Bunding! grants and initiati$es

Economic

• 7omestiinternational eonomy

• Taes! B7I! interests

• /tok markets and ehange rates

• /easonality &eather issues

• syhographis

•

8onsumer attitudes opinions• 8onsumption "uying patterns

• 4thial religious fators



11/15


*echnological(

• 8ompeting emerging tehnologies

• 57

• Inno$ation

• iensing! patents

• urpose of internal analysis is to determine strengths opportunities for ompetiti$e ad$antage

and &eaknesses and organi'ational $ulnera"ilities ;eposures) to "e orreted.

Aomponents of internal en'ironment

1. -rganizational aspects(

>oliies! proedures and rules! /truture! 8ommuniation net&ork

0. Mareting aspects(


12/15


a"our relations! reruitment praties! training progr%ammes! performane

appraisal system! turno$er and a"senteeism

F. 8ro"uction aspects(

>lant faility layout! researh de$elopment! use of tehnology! purhasing of ra&

materials! in$entory ontrol

G. Managerial aspects(


13/15


(. moti$ated employees strong 57

*. atest Tehnology good reputation among ustomers

6. elusi$e aess to high grade natural resoures

@. fa$ora"le aess to distri"ution net&orks

Weanesses

The a"sene of ertain strengths may "e $ie&ed as a &eakness. It is an inherent inade%uay

that is again in relation to the en$ironment. It gi$es strategi disad$antage and something that

re%uired for suess is missing. It leads to ompetition &here &eakness an "e used to gain

more due to inherent limitation onstraintinade%uay.

Bor eample! eah of the follo&ing may "e onsidered &eaknesses:

1. lak of patent protetion poor "rand image

2. narro& produt mi &eak distri"ution

3. poor reser$es eess manpo&er

(. inaessi"le loation poor reputation among ustomers

*. high ost struture lak of aess to key distri"ution hannels

-pportunities

The eternal en$ironmental analysis may re$eal ertain ne& opportunities for profit and gro&th.

>>5T=GITH: an "e aomplished and an help to onsolidate and strengthen the

organi'ation. It’s a fa$ora"le ondition for an organi'ation in its en$ironment

/ome eamples of suh opportunities inlude:

1. prie deontrol deliensing

2. import relaations B7I norms

3. gro&ing ur"an inomes and population

(. gro&th of onsumerism an unfulfilled ustomer need

*. arri$al of ne& tehnologies loosening of regulations

6. remo$al of international trade "arriers

*hreats

8hanges in the eternal en$ironmental also may present threats to the firm. +lso &hen the

opportunities are not utili'ed properly it an ause pro"lem to the to the organi'ation &hih



14/15


auses threat. It is unfa$ora"le ondition for the organi'ation. It auses riskdamage to an

organi'ation.

/ome eamples of suh threats inlude:

1. reession politial insta"ility

2. religious "attles soial ati$ism

3. import li"erali'ation

(. shifts in onsumer tastes a&ay from the firmFs produts

*. emergene of su"stitute produts ne& regulations

6. inreased trade "arriers onsumerism

)A matri

The D8, matri ;D.8.,.-matri! Doston 8onsulting ,roup analysis) is a hart that had "een

reated "y Drue enderson for the Doston 8onsulting ,roup in 19@0 to help orporations &ith

analy'ing their "usiness units or produt lines. This helps the ompany alloate resoures and

is used as an analytial tool in "rand marketing! produt management! strategi management

and portfolio analysis.



15/15


Stars are units &ith a high market share in a fast-gro&ing industry. The hope is that stars

"eome the net ash o&s. /ustaining the "usiness unitFs market leadership may re%uire etra

ash! "ut this is &orth&hile if thatFs &hat it takes for the unit to remain a leader. hen gro&th

slo&s! stars "eome ash o&s if they ha$e "een a"le to maintain their ategory leadership! or

they mo$e from "rief stardom to dogdom.

Question mars =nits &ith lo& market share in a fast-gro&ing industry. /uh "usiness units

re%uire large amounts of ash to gro& their market share. The orporate goal must "e to gro&

the "usiness to "eome a star. ther&ise! &hen the industry matures and gro&th slo&s! the

unit &ill fall do&n into the dog’s ategory.

Aash co!s are units &ith high market share in a slo&-gro&ing industry. These units typially

generate ash in eess of the amount of ash needed to maintain the "usiness. They are to "e

AmilkedA ontinuously &ith as little in$estment as possi"le! sine suh in$estment &ould "e

&asted in an industry &ith lo& gro&th.

Dogs, or more harita"ly alled pets! are units &ith lo& market share in a mature! slo&-gro&ing

industry. These units typially A"reak e$enA! generating "arely enough ash to maintain the

"usinessFs market share.


Documents

Strategic Management 2010 Notes