CHAPTER 2 STRATEGIC MANAGEMENT PROCESS / STRATEGIC DECISION MAKING The word Decision has been arrived from the

he Latin word Decidere which means a cutting away or a cutting off. Thus, a decision involved a cut of alternatives between those that are desirable and those that are not desirable. The decision is a kind of choice of a desirable alternative. Lopez has defined a decision as follows: A decision represents a judgment; a final resolution of a conflict of needs, means or goals; and a commitment to action made in face of uncertainty, complexity and even irrationally. Decision-making is a process to arrive at a decision; the process by which an individual or organization selects one position or action from several alternatives. Strategic Decision Making Nature / What it is? The business decision-making has increasingly become complex and sophisticated. While some organizations succeed others fail. Successful organizations are distinguished from failures and some firms consistently outperform the industry even in difficult times. Modern business executives' responsibilities and tasks include managing various and multifaceted internal tasks of the organization. A firm's immediate external environment that consists of forces and conditions in the form of competitors, suppliers, government agencies and customers, poses a set of challenging factors. A firm's remote external environment consisting of economic conditions, social factors, political priorities and technological advancements also contributes to the general yet pervasive climate in which a business operates. The natural environment has also become an important strategic issue. Global warming, and increased pollution suggests that perhaps there is no greater threat to business and society than the continuous exploitation and decimation of our natural environment. Each of the factors of external environment needs to be assessed, anticipated, monitored and incorporated in the critical decision-making of the firm. Such an exercise thereby facilitates the optimal positioning of the firm in its competitive environment. Such positioning is possible because these strategic processes allow more accurate anticipation of environmental changes and improved preparedness for reacting to unexpected internal or competitive demands." This chapter provides you with an overview of strategic management. It introduces a practical integrative model of the strategic management process. It defines basic activities and terms in strategic management. It discusses different phases, elements and models of strategic management. It also gives an insight as to what are different levels of strategies and how they run within an organization (already been covered in the earlier chapter), and the roles of different strategists. Strategic management is a set of management decisions and actions that determines the long-run performance of a corporation.

Strategic Management

Strategic Decision Making + Action taken (D.M. Implemented)

Strategic Mgmt has 2 Models Model has 4 Phases & 12 Elements

Strategic Management thus includes Environmental scanning, Strategy formulation, Strategy implementation and evaluation and, Control to achieve the objectives of an organization. Definitions of Strategic Management: Wheelen and Hunger- describe strategic management as 'that set of managerial decisions and actions that determine the long-run performance of a corporation. It includes environmental scanning (both external and internal), strategy formulation (strategic or long-range planning), strategy implementation and evaluation and control. The definitions point out the following elements of strategic management. (Same as what strategic management includes prev. page) Analysis and diagnosis involves determining environmental problems and opportunities and internal strengths and weaknesses, recognizing problems and exploring opportunities and assessing information needs to solve the problems and heuristics for evaluating the information. Choice involves generating alternative solutions to the problem, assessing them and choosing the best ones. Implementation involves making the strategy work by building the structure to support the strategy and developing appropriate plans and policies. Evaluation involves review of results and future possibilities, determining whether the strategy is working and taking steps to make it work.

PHASES IN STRATEGIC MANAGEMENT The definition quoted above give us the idea that strategic management as a process consists of different phases, which are sequential in nature. Most authors agree that there are four essential phases in the strategic management process, though they may differ with regard to its sequence, emphasis, or nomenclature. These four phases could be encapsulated as follows: 1. Establishing the hierarchy of strategic intent, 2. Formulation of strategies, 3. Implementation of strategies, and 4. Performing strategic evaluation and control. These four phases are considered as sequentially linked to each other and each successive phase provides a feedback to the previous phases. The phases in strategic management are depicted in the following Exhibit. Phases in the Strategic Management Process However, in practice, the different phases of strategic management may not be clearly differentiable Establishment of Formulation of Implementation of Strategic Evaluation from each other. prefer to call them phases rather than stages or steps to signify that the Strategic IntentIn fact, weStrategy Strategy different phases, at the interface, may exist simultaneously, and that the strategic activities gradually emerge in one phase to merge into the following phase. The feedback arising from each of the successive phases is meant to revise, reformulate or redefine the previous phases, if necessary. Such a representation yields a dynamic model of strategic Control management. Strategic /
feedback

Elements in the Strategic Management Process / Elements in each phase Each phase of the strategic management process consists of a number of elements, which are discrete, and identifiable activities performed in logical and sequential steps. We may note here that most or all of the following activities are considered as part of the strategic management process: (I) Establishing the hierarchy of strategic intent: (a) Creating and communicating a vision, (b) Designing a mission statement, (c) Defining the business, (d) Setting objectives, (2) Formulation of strategies:

(e) Performing environmental appraisal, (t) Doing Organizational appraisal, (g) Considering corporate-level strategies, (h) Considering business-level strategies, (i) Undertaking strategic analysis, U) Exercising strategic choice, (k) Formulating strategies; (I) Preparing a strategic plan, (3) Implementation of strategies: (m) Activating strategies, (n) Designing structures and systems, (0) Managing behavioural implementation, (p) Managing functional implementation, (q) Operationalizing strategies, (4) Performing strategic evaluation and control: (r) Performing strategic evaluation, (s) Exercising strategic control, and (t) Reformulating strategies. Models of the Strategic Management Process The process of strategic management is depicted through a model, which consists of different phases, each phase having a number of elements. There are two types of models indicating the strategic management process. In the first exhibit (exhibit 1), we provide a vertical representation of a comprehensive model of the strategic management process. In Exhibit 2, we depict the process laterally and provide a working model. The purpose in additionally giving a working model, which is a simpler one, is to assist you in remembering and recalling it with ease. The remainder of this book will deal with the various elements of the strategic management process. Lets have a bird's-eye view of the different elements of the process.

Exhibit 1 Comprehensive Model of Strategic Management Process

Establishing Strategic Intent

Vision, Mission, Business Definition, Objectives

S T R A T E G I C Strategy implementation*
(Setting up of an organization) ---- Project

Formulation of strategies
Environmental Organizational Appraisal Appraisal

CONTROL

---- Procedural ---- Resource Allocation Strategic Evaluation / feedback

About Strategy implementation* Project implementation setting up the organization. Procedural implementation different aspects of the regulatory framework within which Indian organizations have to operate. Resource allocation procurement and commitment of resources for implementation. The structural aspects designing of appropriate organizational structures and systems, and reorganizing to match the structure to the needs of the strategy. The behavioural aspects the leadership styles, corporate culture, and use of power, personal values and business ethics, and social responsibility. The functional aspects policies to be formulated in different functional areas. The operational implementation deals with the productivity, processes, people, and pace of implementing the strategies.

1.The hierarchy of strategic intent lays the foundation for the strategic management of any organization. In this hierarchy, the vision, mission, business definition, and objectives are established. The strategic intent makes clear what an organization stands for. The element of vision in the hierarchy of strategic intent serves the purpose of stating what an organization wishes to achieve in the long run. The mission relates an organization to society. The business definition explains the businesses of an organization in terms of customer needs, customer groups, and alternative technologies. The objectives of an organization state what is to be achieved in a given time period. 2. Environmental and organizational appraisal help to find out the' opportunities and threats operating in the environment and the strengths and weaknesses of an organization in order to create a match between them. Thus, the SWOT analysis done here helps organizations to use the opportunities available, see the threats coming into the way of organization, thereby capitalize on organization strength and minimize the weakness. 3. Strategic alternatives and choices are required for evolving alternative strategies out of the many possible options, and choosing the most appropriate strategy or strategies in the light of environmental opportunities and threats and corporate strengths and weaknesses. Strategies are chosen at the corporate level and the business-level. The end result of this set of elements is a strategic plan, which can be implemented. 4. For the implementation of a strategy, the strategic plan is put into action through six sub-processes: project implementation, procedural implementation, resource allocation, structural implementation, behavioural implementation, and functional

and operational implementation. Project implementation deals with setting up the organization. Procedural implementation deals with different aspects of the regulatory framework within which Indian organizations have to operate. Resource allocation relates to the procurement and commitment of resources for implementation. The structural aspects of implementation deal with the designing of appropriate organizational structures and systems, and reorganizing to match the structure to the needs of the strategy. The behavioural aspects consider the leadership styles for implementing strategies and other issues like corporate culture, and use of power, personal values and business ethics, and social responsibility. The functional aspects relate to the policies to be formulated in different functional areas. The operational implementation deals with the productivity, processes, people, and pace of implementing the strategies. The emphasis in the implementation phase of strategic management is on action. 5. The last phase of strategic evaluation appraises the implementation of strategies and measures organizational performance. The feedback from. Strategic evaluation is meant to exercise strategic control over the strategic management process. Strategies may be reformulated, if necessary.