Documente Academic
Documente Profesional
Documente Cultură
PHASES FO STRATEGIC MANAGEMENT: Following are the Phases of the Strategic Management.
1. BASIC FINANCIAL PLANING: Seeking better operational control by trying to meet annual budgets. 2. FORECASTING BASED PLANING: Seeking more effective planning for growth by trying to predict the future beyond the next year. 3. EXTERNAL ORIENTED PLANING (Strategic planning): Seeking increase responsiveness to market and competition by try to think strategically. 4. STRATEGIC MANAGEMENT: Seeking a competitive advantage by considering implementation and evaluation and control when formulating strategy.
INTUITION OF STRATEGY:
Henry Mintzberg Discovered that strategic formulation typically is not a regular and continuous process. It is most often an irregular, discontinuous process, proceeding in fit and starts. There are periods of stability in strategy development, but also there are periods of flux, of grouping, of piecemeal change and of global change. This period of so called strategy draft may simple be a result of organizations inertia, or it may reflects the managements believe that the current strategy is still appropriate and need only some fine tuning.
A TRIGGERING EVENT:
A triggering event something that stimulates a change in strategy some of these possible triggering events are as follows. 1. NEW CEO: By asking a series of embarrassing questions. 2. EXTERNAL INTERVENTION: The firms bank suddenly refused to agree to a new loan or suddenly call for payment in full on an old one. 3. Threat of change in ownership: Another firm may initiated a takeover by buying the companys common stock. 4. PERFORMANCE GAP: Performance gaps exist when performance does not meet expectation, sale and profit are no longer increasing or many even are falling.
1. Environmental scanning: Environmental scanning is monitoring, evaluating and discriminating of information from external and internal environment to keep people within the corporation. The external environment consists of variable (opportunity and threat). 2. Strategy formulation: Strategy formulation is the development of long range plans for the effective management of environmental opportunities and threats, in light of corporate strength and weaknesses. 3. Strategy Implementation: Strategy implementation is the process by which strategies and policies are put into the action through developments programs, budgets and procedures. 4. Evaluation and Control: Evaluation and control is the process by which corporate activities and performances result are monitored so that actual performance can be compared with desired performance. Performance is the end result of activities the actual outcome. The practice of strategic management is justified in terms of ability to improve an organization performance, typically measure in term of profit and return on investment
What is a strategy? A strategy of a corporation is comprehensive plan starting how the corporation will achieved its mission and objective.
Example:
After Rockwell International Corporation realized that it can no longer achieved its objectives by continuousing with its strategy of diversification into multiple line of business.
Types of Strategy:
Following are the types of the Strategy 1. Corporate strategy: Describes a company overall direction in terms of its general attitude toward growth and management of its various business and product line. 2. Business Strategy: Usually occurs in the business unit or product level, and it emphasis improvement of the competitive position of a corporation product or services. e.g. Apple computer user a differentiation competitive strategy that emphasis an innovative product with creative design. 3. Functional strategy: Functional strategy is the approach by a functional area, such as marketing or R&D, to achieve corporate and business unit objectives and strategies by maximize resource productivity.
Strategic decision making process: Following are the steps of Decision Making Process.
Evaluated current performance result in term of (a) Return on investment, profitability and so forth. (b) The current strategy posture of the company (mission, objective and policies). Review corporate governance, i.e. the performance of firms, board of directors and management. Scan the external environment to locate strategic factors that pose opportunities and threats. Scan the internal corporate environment to determine strategic factor that are strength and weaknesses. Analyze strategic factors SWOT analyses. Generate, evaluate and select the best alternative strategy in light of analyses conduct in step 5. Implement select strategies via programs, budgets and procedures. Evaluated implemented strategies via feedback systems and the control of activities to ensure their minimum deviation from plans.
Strategic Plan:
Strategic Plan is a companys just as football team needs a good game plan to have a chance for success. A strategic plan results from tough managerial choices among many good alternatives. It signals commitment to specific market, policies, procedures and operations.
1) Strategy Formulation:
Strategy formulation decisions commit in organization to specific product, market, resources and technologies over an extended period of time. Strategy formulation includes deciding what new business to enter, how to allocate resources, weather to expand operations or diversify.
2) Strategy Implementation:
Strategy Implementation requires a firm to establish annual objectives, devise policies, motivate employees and allocate resources so that formulated strategies can be executed. Strategy Implementation includes developing a strategy supporting culture, creating an effective organizational structure and preparing budgets.
3) Strategy Evaluation:
It is the final stage in strategic management. Managers desparately need to know when particular strategies are not working well. Strategy Evaluation is the primary mean for obtaining this information. Following are three fundamental activities. Reviewing external & Internal factors that are the basis for the current strategies. Measuring performance. Taking correct actions.
Competitive Advantage:
Strategic Management is all about gaining and maintaining Competitive Advantage. Competitive Advantage can be defined as Anything that a firm does especially will compare to rival firms. When a firm can do something that rival firms cant do, on something that rival firms desires that can represent a Competitive Advantage.
Example:
Having less fixed assets than rival firms also can provide major Competitive Advantages in the global recession. Apple has no manufacturing facilities of its own where as rival Sony has 57 electronics factories. Apple relies on contract manufacturers for the production of all of it products.
Adapting to Change:
The strategic management process is based on the belief that organizations should continuously monitor internal and external events and trends so that timely changes can be made as needed. The rate and magnitude of changes that effect organizations are increasing dramatically. Firms that dont change dont survive. Example: Corporate Bankcurrupcies had become doubled in 2009 from an already bad 2008 year. All industries were hit hard. China annual growth slowed down from 13 % 2007 to 9% in 2008 and than 5 % for 2009.
Example:
Strength may involve ownership of natural resources of a historic reputation for quality. Strengths and weaknesses may be determined relative to a firms own objectives. Internal factors can be determined in number of ways including computing ratios, measuring performance and comparing to past period and industry average. Various types of service also can be developed and administered to examine internal factors such as employees morale, production efficiency, advertising effectiveness and customer loyalty.
Strategies:
Strategies are the mean by which long term objective will be achieved. Business strategies may include geographic expansion, diversification, acquisition, product development, market penetration, retrenchment, liquidation and joint ventures.
Annual Objectives:
Annual Objectives are short term mile stones that organization must achieve to reach long term objectives. Like long term objectives, annual objectives should be measureable, quantitative, challenging, realistic and consistent. They should be established at the corporate, divisional and functional levels in a large organization. Annual Objectives should be stated in terms of management, marketing, finance, production, R&D and MIS accomplishments.
Policies:
Policies are the means by which annual objective will be achieved. Policies include guidelines, rules and procedures established to support efforts to achieve static objectives. Policies are guides to decision making and address repetitive recurring situations. Policies are most often stated in terms of management, marketing, finance, production, R&D and Computer information System activities. Policies can be established at the corporate level and apply to an entire organization.
Greater Commitment
a. To achieve objectives.
The Result
All managers and employees on a mission to help the firm Succeed.
Using Strategic planning to gain control over decisions and resources. Doing Strategic planning only to satisfy regulatory requirements. Too fast moving from mission development to strategy formulation. Failing to communicate the plan to the employees. Top managers not actively supporting the strategic planning process. Delegating planning to a Planner rather the involving all managers. Viewing planning as unimportant.
Approach:
Clear & unique strategies are formulated in a deliberate process. In this process, the internal situation of the organization is matched to the external situation OF THE ENVIRONMENT.
Basis:
Architecture as a metaphor.
Contributions:
Order. Reduced ambiguity. Simplicity. Useful in the relatively stable environment. It supports strong, visionary leadership.
Limitations:
Simplification may distort reality. Strategy has many variables and is inherently complex. Bypassing learning. Inflexible. Weak and fast changing environment. The risk of resistance.
Approach:
A rigorous set of sets are taken, from the analysis of the situation to the execution of the strategy.
Basis:
System theory, Cybernetics.
Contributions:
Give clear direction. Enable firm resources allocation. Control.
Limitations:
Strategy can become too static. The risk exists of group thing. Predicting is difficult. Strategy is partly an art.
Approach:
It places the business within the contact its industry, and looks it how the organization can improve its strategic position with in that industry.
Basis:
Industrial organization (Economics) and military strategy.
In short:
Analyze, Nothing but the facts.
Contributions:
This school made strategic management into a science, enabling future progress. Provides content in a systematic way to the existing way of looking its strategy. Focus on hard (Economic facts).
Limitations:
Neglects power, politics, culture and social element.
Entrepreneurship:
This school sees strategy formation as a visionary process.
Approach:
The visionary process takes place within the mind of charismatic leader of an organization. Intuition, judgment, wisdom, experience and insight. Economics.
In short:
Envision The CEO is the architect of the strategy.
Contributions:
A sound vision and a visionary CEO can help organization to sail cohesively through muddy waters. Flexible and emerged in the details.
Limitations:
How can you find the right leader, with all of the many needed qualities? Entrepreneurial visionary leaders have a tendency to go too far. Being CEO is an extremely demanding job in the perspective.
Approach:
It analyzes how people pursue pattern and process information. It concentrates on what is happening in the mind of the strategist, and how it processes the information.
Basis:
Psychology.
In short:
Frame I will see it when I believe it.
Contributions:
Sees strategy as a cognitive process in the mind of the strategist. Strategies emerge as concepts, maps, schemas and frames of reality. Stresses the creative side of the strategy process. Very useful to explain why our minds are imperfect.
Limitations:
Not very practical beyond the conceptual stage. Not very practical to conceive great ideas or strategies. Currently not very useful to guide collective strategy processes.
Approach:
The management pays close attention over time to what does work, and what doesnt work.
Contributions:
It offers a solution to deal with complexity and unpredictability in strategy formation. More people can learn that just the leader. No need for omnipotent leader. (All powerful). Strong in complex conditions with continuous change. Strong in professional organization.
Basis:
Political Science
In short:
Look out for number one.
Approach:
The strategy is developed as a process of negotiation between power holders within the company, and/or between the company and its external stakeholder.
Micro Power:
The development of strategy within in the org as in entity that uses its power over other and among its partner in alliances, joint venture, and other network relationships. To negotiate collective strategies in its interests.
Anthropology.
In short:
An apple never falls far from the tree.
Contribution:
Emphasizes the crucial role that social process, believe and vales are playing in decision making and in strategy formation. It explains ressistance to strategic change and helps to deal with dominant values in organization.
Limitation:
Unclear, can feed resistance to change and can be misused to justified the status-quo.gives few clues on how things should become.
Approach:
The strategy is a response to the challenges imposed by the external enorvitment. Where other school sees the environment as a factor, the environmental school sees it as an actor-indeed the actor.
Basis:
Biology. Contributions: It gives a central role to the environmental in strategy formation. Limitation: The dimensions of the environment are often vague and aggregated.
In short: Integrate, transform! To everything there is a season. Contributions: Strategy and organizational shape (organizational development) are closely integrated and should be reconciled. An organization can be described in terms of some stable configuration of its characteristics, which it adopts for a period of time in a particular type of context. This causes it to behave in a particular ways that give rise to a particular set of strategies. Limitations: In reality there are many shades of grey, not just a limited number of valid configurations. Also, pattern is in the eye of the beholder. If you describe the reality by using configurations, you are distorting the reality in order to explain it.
Mission Statement:
Drucker says that asking a question What is our business is similar is asking the question What is our Business the mission statement is a declaration for any organization Reasoning for being. It is the statement of purpose that distinguishes one organization from the other. All the organization has a reason for being, even if strategist have not consciously transformed this reason into writing the figure below tells us about the Carefully prepared vision and mission statement.
Vision Statement:
Many organizations develop their mission statement and vision statement. The vision statement answers the question What do we want to become.
Vision and mission statement represents a great opportunity for the strategists to obtain needed support for all managers in the firm. Vision and mission statement should create an Emotion bond between the organization and its employees. The emotion bond keeps the employees committed with organization and hence the turnover rate decreases.
4)
5)
6) 7)
8) 9)
Example: Our emphasis is North America market, although global opportunities will be explored. (BlockWay). Technology: is the firm technologically current? Example: We will continually strive to meet the preference of adult smoker by developing technologies that have the potential to reduce the health risk associated with smoke. (RJ Reynolds). Concern for survival, growth and profitability: Is the firm committed to growth financial soundness? Example: in this respect, the company will conduct its operations prudently and will [provide the profits and growth which will ensure Hoovers ultimate success. Philosophy: What are the basic believes values, inspiration and ethically priorities of the firm? Example: Our world class leadership is delegated to a management philosophy that holds people above profit. (Kellogg). Self Concept: What is the firm destructive component or major competitive advantage? Example: Crown Zellerbach is committed to leapfrogging ongoing competition within one thousand days by unleashing the constructive and creative abilities and energies of each of its employees. Concern for Public Image: Is the firm responsive to social, community and environmental concern? Example: To share the worlds obligation for the protection of environment. (Dow Chemicals). Concern for employee: Are employees a valuable asset of the firm? Example: To compensate its employees with remuneration and fringe benefits competitive with other employment opportunity it. Its geographically area and commensurate with their contributions towards efficient corporate operations. (Public service Electric and Gas Co).