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INTRODUCTION
INTRODUCTORY QUESTION
others?
THE CONCEPT OF STRATEGY
Effective managers live in the present but concentrate on the future." James L.
Hayes
What is Strategy?
The word strategy comes from a combination of the words; stratos, which meant
army, and agein meaning to lead. Greek Language (6th century BC)
A strategy is a comprehensive action plan that identifies long-term direction and
guides resource utilization to accomplish organizational goals with sustainable
competitive advantage.
Strategy is the direction and scope of an organization over the long term: which
achieves advantage for the organization through its configuration of resources
within a changing environment, to meet the needs of markets and to fulfill
stakeholder expectations.
Strategy becomes a fundamental framework through which an organization can
assert its vital continuity, while at the same time purposefully managing its
adaptation to the changing environment to gain competitive advantage. Strategy
includes the formal recognition that the recipients of the results of a firms actions
are the wide constituency of its stakeholders. Therefore the ultimate objective of
strategy is to address stakeholder benefits to provide a base for ,establishing the
host of transactions and social contracts that link a firm to its stakeholders.
BUSINESS POLICY
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3.Specific Policies:- These are framed by the foremen and supervisors and
are very specific in nature. They are applicable to routine activities.
Examples of business policies are A company will not consider any cost reduction options if it means
compromising quality.
A company decides to grow only through retained earnings.
A company will not consider adding new products with less than
10 percent return on investment.
A company sells exclusively on cash terms.
TOPIC 2
CONCEPT OF STRATEGY AND STRATEGIC MANAGEMENT
Military Origins of Strategy:
Substitute "resources" for troops and the transfer of the concept to the
business world begins to take form.
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the environment and is designed to ensure that the basic objectives of the
enterprise are achieved through proper implementation process
Henry
response to its environment over a period of time to achieve its goals and
mission.
Michael E Porter(1996) : Creation of a unique and valued position
involving a different set of activities. The company that is strategically
positioned performs different activities from rivals or performs similar
activities in different ways
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Strategy.
2. Competitive Advantages: The external environment is continuously
monitored & Strategy is made to have the firm a continuous
Competitive Advantage.
3. Vector: is a Direction with Force. Series of actions are to be taken &
they should have same direction for whole organisation.
4. Synergy: Once a series of decisions are taken to accomplish the
objectives in same direction, there will be synergy. Synergy can happen
due to Competitive Advantages and Growth Vector. The Objectives
need be measurable and could be : ROI, Sales Growth Rate,
Strategy as Action & Nature of Strategy
Three types of actions are involved in Strategy:
1. Determination of Long Term Goals & Objectives.
2. Adoption of courses of action.
3. Allocation of resources.
Therefore, Strategy is Creation of unique & valued position involving a
different set of activities. The Company that is strategically positioned
performs different activities from rivals or performs similar activities in
different ways Michael Porter.
Thus Nature of Strategy is:
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Strategy requires some systems and norms for its efficient adoption in
any organisation.
Characteristics of Strategy
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behaviour, whether or not intended. The outcome of strategy does not derive from the
design, or plan, but from the action that is taken as a result
5. Strategy is a POSITION:
Strategy is also a position; specifically a means of locating a firm in its environment. In
ecological terms: strategy becomes that firm's "niche." In management terms: a "domain"
consisting of a particular combination of services, clients and markets. Position is often
defined competitively (literally so in the military, where it becomes the site of a battle.)
6. Strategy is a PERSPECTIVE:
While position is outwardly focused, perspective looks inward into the firm; even into the
heads of the strategists themselves. Strategy in terms of this definition becomes an
ingrained way of perceiving the world. Some firms are aggressive pacesetters; others
build protective shells around themselves. Almost every profession has about it unique
perspectives, that indelibly flavour the strategies that firms practicing those professions
craft for themselves. A law firm's view of their business is fundamentally different to that
of an accounting firm, and engineering firm or a graphic design studio, yet all are staffed
by professionals.
1. Strategy is Perspective, that is, vision and direction.
The Three Levels of Strategy
The decision-making hierarchy of a firm typically contains three levels:
The corporate level
At the top of this hierarchy is the corporate level, composed principally of a board of directors
and the chief executive and administrative officers. In a multibusiness firm, corporate-level
executives determine the businesses in which the firm should be involved. Corporate-level
strategic managers attempt to exploit their firms distinctive competences by adopting a portfolio
approach to the management of its businesses and by developing long-term plans, typically for a
five-year period.
In the middle of the decision-making hierarchy is the business level, composed principally of
business and corporate managers. These managers must translate the statements of direction and
intent generated at the corporate level into concrete objectives and strategies for individual
business divisions or SBUs. They strive to identify and secure the most promising market
segment within that arena.
The functional level
At the bottom of the decision-making hierarchy is the functional level, composed principally of
managers of product, geographic, and functional areas. Whereas corporate- and business-level
managers center their attention on doing the right things, managers at the functional level
center their attention on doing things right. Thus, they address such issues as the efficiency and
effectiveness of production and marketing systems, the quality of customer service, and the
success of particular products and services in increasing the firms market shares.
1. Purpose
The organization's purpose outlines why the organization exists; it includes a description of its
current and future business (Leslie W. Rue, and Loyd L. Byars) The purpose of an organization is
its primary role in society, a broadly defined aim (such as manufacturing electronic equipment)
that it may share with many other organizations of its type.
2. Mission
The mission of an organization is the unique reason for its existence that sets it apart from all others. The
organization's mission describes why the organization exists and guides what it should be doing. Often,
the organization's mission is defined in a formal, written mission statement. Decisions on mission are the
most important strategic decisions, because the mission is meant to guide the entire organization.
Although the terms "purpose" and "mission" are often used interchangeably, to distinguish between them
may help in understanding organizational goals.
3. Goals
A goal is a desired future state that the organization attempts to realize.
4. Objectives
The term objective is often used interchangeably with goal but usually refers to specific targets for which
measurable results can be obtained.
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Organizational objectives are the end points of an organization's mission. Objectives refer to the specific
kinds of results the organizations seek to achieve through its existence and operations. Objectives define
what it is the organization hopes to accomplish, both over the long and short term.
5. Tactics
In contrast, tactics are specifics actions the organization might undertake in carrying its strategy.
6. Strategists
Strategists are the individuals who are involved in the strategic management process. Several levels
of management may be involved in strategic decision making. Strategists have various job
titles such as CEO, President, Owner, Chair of the board, Executive Director,
Chancellor, Dean, Entrepreneur.
7. Competitive Advantage
Anything that a firm does especially well compared to rival firms.
Getting and keeping competitive advantage is essential for the long term
success in an organization.
A firm must strive for sustained competitive advantage.
Vision statement
Answers the question what do we want to become
It is the first step in strategic Management.
Many vision statements are single statements
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9.
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1.
Formulate the companys mission, including broad statements about its purpose,
capabilities.
3. Assess the companys external environment, including both the competitive and
general contextual factors.
4. Analyze the companys options by matching its resources with the external
environment.
5.
Identify the most desirable options by evaluating each option in light of the
companys mission.
6.
Select a set of long-term objectives and grand strategies that will achieve the
Develop annual objectives and short-term strategies that are compatible with the
which the matching of tasks, people, structures, technologies, and reward systems is
emphasized.
9. Evaluate the success of the strategic process as an input for future decision-making.
1.
2.
Group-based strategic decisions are likely to be drawn from the best available alternatives.
Gaps and overlaps in activities among individuals and groups are reduced as participation in
strategy formulation clarifies differences in roles.
5.
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