STRATEGIC MANAGEMENT

Indra Prasad Joshi

Strategic Management
What is Strategy?
A company’s strategy consists of the set of competitive
moves and business approaches that management is
employing to run the company
Strategy is management’s “game plan” to
►Attract and please customers
►Stake out a market position
►Conduct operations
►Compete successfully
►Achieve organizational objectives

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 What is Strategy?

Firm
Competitive Shareholder
Advantage Value

Strategy Profit
• Strategy: Goal and set of policies designed to achieve
competitive advantage in a particular marketplace
• Competitive advantage: Ability to transform inputs into
goods and services at a maximum profit on a sustained
basis, better than competitors

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What is Strategy?
► Means by which long-term objectives are
achieved
► Large-scale, future-oriented plan
► Used to interact within competitive environment
to achieve company goals
► Provides a framework for managerial decisions
► Reflects a company’s awareness of the main
elements of competition

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 Thinking Strategically:
The Three Big Strategic Questions
1. Where are we now?
2. Where do we want to go?
• Business(es) to be in and market positions
to stake out?
• Buyer needs and groups to serve?
• Outcomes to achieve?
3. How do we get there?

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 The How's That
Define a Firm's Strategy
• How to grow the business
• How to please customers Strategy
is HOW
• How to outcompete rivals to . . .

• How to respond to changing

market conditions
• How to manage each functional piece of the
business and develop needed organizational
capabilities
• How to achieve goals & objectives
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 Figure : A Company’s Strategy is Partly
Planned and Partly Reactive

t r a te gy
d o n eds
Aban atures
fe
Company Planned Stra
tegy
Experiences, New initiativ
es plus ong
strategy fea oing
Know-how, tures contin
ued
Resource from prior p
eriods Actual
Strengths and Company
Weaknesses, Strategy
and ti o n s to
v e rea c
Ad a pt i an ces
Competitive r c um s t
n g c i
Capabilities ch angi
i v e Strategy
Re a c t

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What is a Strategic Plan?
Where firm is headed --
Strategic vision and business
mission

Short and long term

performance targets – Strategic
& financial goals & objectives

Action approaches to achieve

targeted results –
A comprehensive strategy
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 Dimensions of Strategic
Decisions

1 . Strategic issues require

top-management decisions
– Strategic decisions overarch several
areas of a firm’s operations
– Usually only top management has the
perspective needed to understand their
broad implications
– Usually only top managers have the
power to authorize necessary resource
allocations

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Dimensions of Strategic
Decisions
2. Strategic issues require large amounts
of the firm’s resources
► They involve substantial allocations of
people, physical assets, and money
► Strategic decisions commit the firm to
actions over an extended period
► In highly competitive firms, achieving
and maintaining customer satisfaction
frequently involves commitment from
every facet of the firm

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Dimensions of Strategic
Decisions
3. Strategic issues often affect the firm’s
long-term prosperity
► Strategic decisions commit the firm for a long
time, typically 5 years; however the impact
lasts much longer
► Once a firm has committed itself to a
strategy, its image and competitive
advantages are usually tied to that strategy
► Firms become known for what they do and
where they compete. Shifting away from that
can jeopardize their previous gains.

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Dimensions of Strategic
Decisions
4. Strategic issues are future-oriented
• They are based on what managers
forecast, rather than what they know
• Emphasis is on the development of solid
projections that will enable a firm to seek
the most promising strategic options
• A firm will succeed only if it takes a
proactive (anticipatory) stance toward
change

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Dimensions of Strategic
Decisions
5. Strategic issues usually have
multifunctional or multi-business
consequences.
• Strategic decisions have complex
implications for most areas of the firm
• Decisions about customer mix, competitive
emphasis, or organizational structure involve
a number of the firm’s SBUs, divisions, or
program units

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Dimensions of Strategic
Decisions

6. Strategic issues require considering the firm’s

external environment
► All businesses exist in an open system. They
affect and are affected by external conditions that
are largely beyond their control
► Successful positioning requires that strategic
managers look beyond operations and consider
what are the other relevant areas likely to impact
its strategic moves.

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 Three Levels of Strategy

⚫ Corporate level: board of directors, CEO &

administration [Highest]

⚫ Business level: business managers [Middle]

⚫ Functional level: product, geographic, and

functional area managers [Lowest]

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 Levels of strategy

Corporate
What direction are we going and what
business(es) are we in or do we want to be in?

Business
How are we going to compete in our chosen
business(es)?

Functional
What resources and capabilities do we have to
support the corporate and competitive strategies?

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Alternative Strategic Management Structures

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 Figure : Levels of Strategy-Making in
a Diversified Company

Corporate-Level Corporate
Managers Strategy

Two-Way Influence
Business-Level
Managers Business Strategies

Two-Way Influence

Functional
Managers Functional Strategies

Two-Way Influence

Operating Operating Strategies

Managers
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 Characteristics of Strategic
Management Decisions: Corporate
• Corporate level decisions tend to be value oriented,
conceptual and less concrete than those at business
level and functional level.
• Are characterized by greater risk, cost and profit
potentials.
• Longer-time horizons and greater needs for flexibility.
• Examples of decisions include choice of business,
dividend policies, sources of long-term financing and
priorities for growth.

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Characteristics of Strategic Management
Decisions

Greater risk, cost,

and profit potential

Corporate-lev
Greater need for
el
flexibility
decisions
Longer time horizons

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 Characteristics of Strategic
Management Decisions : Business

• Help bridge decisions at the corporate and functional

levels
• Less costly, risky, and potentially profitable than
corporate-level decisions
• More costly, risky, and potentially profitable than
functional-level decisions
• Include decisions on plant location, marketing
segmentation, and distribution channels

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Characteristics of Strategic Management
Decisions

Bridge decisions at
corporate and functional
levels

Are less costly, risky, and

Business-level potentially profitable than
decisions corporate-level decisions

Are more costly, risky, and

potentially profitable than
functional-level decisions

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 Characteristics of Strategic
Management Decisions: Functional
• Implement the overall strategy formulated at the
corporate and business levels
• Involve action-oriented operational issues.
• Are made periodically and leads to the implementation of
some part of overall strategy.
• Relatively short-range and involve low risk and modest
cost/ dependent on available resources.
• Are concrete, quantifiable and adaptable to ongoing
activities.
• E.g. Brand-name labeling, R&D applications, Inventory
levels etc.

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Characteristics of Strategic Management
Decisions

Implement overall strategy

Functio
Involve action-oriented
nal- operational issues
level
Are relatively short range
decisio
and low risk
ns
Incur only modest costs

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Formality in Strategic Management

Formality is the degree to which participation,

responsibility, authority, and carefulness in
decision-making are specified in strategic
management

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Three Modes of Formality

• Entrepreneurial Mode – most small firms

• Planning Mode – most large firms
• Adaptive Mode – most medium size firms

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Forces Determining Formality

• Organizational Size
• Predominant Management Styles
• Complexity of Environment
• Production Process
• Purpose of the Planning System
• Stage of Firm’s Development

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 Strategy Makers

• Ideal strategic team includes decision makers

from all three levels
• Top managers must give final approval
• Strategic decisions coincide with managers’
responsibilities

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 Strategy Makers: The CEO

• A firm’s CEO plays a dominant role in

strategic planning
• The CEO’s principal duty is giving
long-term direction to the firm
• The CEO bears ultimate responsibility for
the firm’s success and strategic success
• CEOs are typically strong-willed,
company-oriented individuals

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Strategy Makers: The CEO
• As a figurehead (organization head)
• Leadership Role
• Interpersonal Role
• Decision Role
• As an entrepreneur
• As a disturbance handler
• As a resource allocator
• As a negotiator
• Information Role
• Monitor
• Disseminator
• Spokesperson

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Benefits of Strategic
Management
• Financial benefits
• Improvement in sales
• Improvement in profitability
• Improvement in productivity

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Benefits of Strategic
Management
• Non-Financial benefits
• Enhanced awareness of external threats
• Improved understanding of competitors’
strategies
• Increased employee productivity
• Reduced resistance to change
• Understanding of performance-reward
relationships
• Enhances problem-prevention capabilities

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Benefits of Strategic
Management
1. Identification of opportunities
2. Objective view of management problems
3. Improved coordination and control
4. Minimizes adverse conditions and changes
5. Decisions to better support objectives
6. Effective allocation of time and resources
7. Internal communication among personnel

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 Benefits of Strategic
Management

8. Integration of individual behaviors

9. Clarifies individual responsibilities
10. Encourages forward thinking
11. Encourages favorable attitude toward change
12. Discipline and formality to the management of
the business

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Risks of Strategic Management

1. Managers’ time away from other

responsibilities
2. Unrealistic expectations promised by strategy
formulators
3. Possible disappointment of participating
subordinates if goal is not reached

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 Strategic Management Process
• Businesses vary in formulation and other processes
• The basic components of the models used to analyze
strategic management are similar
• Strategic management is a process—a flow of information
through interrelated stages of analysis toward the
achievement of some goal

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Thank you!