REVIEWER IN STRATEGIC MANAGEMENT

Strategic Planning is the process of formulating a direction for an

organization , while Strategic Management is the process of determining
how this direction can be achieved

Strategic Management it defines is a management field focusing on

long-term planning and direction of the organization. Strategic
management in an organization ensures that things do not happen
randomly but according to pre-planned, long-term plan

Strategic Management ‘s objectives are as follows:

1. It guides the company to move in a special direction. It defines

organization’s goal and fixes realistic objective, which are align with the
organization’s vision and mission.
2. It assist the firm in becoming pro-active , rather than reactive. It
analyses action of competitors and take the necessary step to compete in
the market, instead of becoming spectators.
3. It act as a foundation for all key decision .
4. It ensures the long term survival of the organization while coping with the
competition and surviving the dynamic environment
FIVE (5) TASK OF STRATEGIC MANAGEMENT

1. developing a strategic vision and mission, (mission is used to define why the
organization exists. The vision is management’s view of where the company is going)

2.setting objectives, (how the mission and vision accomplished )

3.crafting tactics to achieve those objectives, (how to achieve the set objective)

4. implementing and executing the tactics, and (, includes determining what company
resources should be allocated to each activity, establishing policies, motivating employees,
providing the resources necessary to achieve objectives, and encouraging a continuous
improvement culture

5. evaluating and measuring performance how management determines whether or not

the tactics implemented effectively to achieve organizational objectives and comply with the
strategic vision. If performance is not to expectations, corrective action must be taken.)

I. THE PERFORMER OF THE ABOVE-STATED TASKS OF STRATEGIC

MANAGEMENT ARE:

Developing Mission and Vision Chief Operating Officer or Senior Corporate

Setting Objectives
Crafting Tactics to Achieve
Organizational Objectives
Implementing and Executing the
Tactics
Evaluating and Measuring
Performance
Executives
Subsidiary Unit Managers
Functional Area Managers
Operating Managers
Subsidiary Unit Managers
Frameworks cycle through some variation on some very basic phases:
1) analysis or assessment, where an understanding of the current internal and
external environments is developed,
2) strategy formulation, where high level strategy is developed and a basic
organization level strategic plan is documented
3) strategy execution, where the high level plan is translated into more
operational planning and action items, and
4) evaluation or sustainment / management phase, where ongoing refinement
and evaluation of performance, culture, communications, data reporting, and
other strategic management issues occurs.

Mintzberg Theory - 5 P’s

1. Strategy as Plan: The strategy is made in advance of its implementation and is

followed up by actual implementation and development.
2. Strategy as Ploy: This is a specific maneuver intended to outperform a competitor.
3. Strategy as Pattern: Strategy can sometimes be explained in terms of a pattern that
emerged rather than something that was preplanned.
4. Strategy as Position: This is represented by finding a niche, providing distinctive
product, or by exploiting existing competences to deter competitors.
5. Strategy as Perspective: This refers organizational culture as strategy can be a result
of the way a company views itself.

I. Strategy formulation

Strategy formulation refers to the process of choosing the most appropriate course of action for
the realization of organizational goals and objectives and thereby achieving the organizational
vision. The process of strategy formulation begins with analysis with the principal factors in a
firm's internal and external environment and ends with functional strategies designed. It also
includes such activities as analysis, planning and selecting mission, objectives, and corporate
and business strategies. SWOT Analysis is the most renowned tool for audit and analysis of the
overall strategic position of the business and its environment.

II. SWOT analysis

SWOT analysis is a strategic planning technique used to
help a person or organization identify strengths,
weaknesses, opportunities, and threats related
to business competition or project planning. It is
intended to specify the objectives of the business
venture or project and identify the internal and external
factors that are favorable and unfavorable to achieving
those objectives:

SWOT analysis aims to identify the key internal and

external factors seen as important to achieving an objective. SWOT analysis groups key pieces
of information into two main categories:

 Internal factors — the strengths and weaknesses internal to the organization

 External factors — the opportunities and threats presented by the environment external
to the organization

Analysis may view the internal factors as strengths or as weaknesses depending upon their
effect on the organization's objectives. What may represent strengths with respect to one
objective may be weaknesses (distractions, competition) for another objective. The factors may
include all of the 4Ps as well as personnel, finance, manufacturing capabilities, and so on.

The external factors may include macroeconomic matters, technological change, legislation, and
socio-cultural changes, as well as changes in the marketplace or in competitive position. The
results are often presented in the form of a matrix.

III. Steps in Strategy Formulation Process

The process of strategy formulation basically involves six main steps.

1. Setting Organizations’ objectives

The key component of any strategy statement is to set the long-term objectives of the
organization.

2. Evaluating the Organizational Environment

 The next step is to evaluate the general economic and industrial environment in which
the organization operates. This includes a review of the organizations competitive
position. It is essential to conduct a qualitative and quantitative review of an
organizations existing product line. The purpose of such a review is to make sure that
the factors important for competitive success in the market can be discovered so that
the management can identify their own strengths and weaknesses as well as their
competitors’ strengths and weaknesses.

3. Setting Quantitative Targets

In this step, an organization must practically fix the quantitative target values for some
of the organizational objectives. The idea behind this is to compare with long term
customers, so as to evaluate the contribution that might be made by various product
zones or operating departments.

4. Aiming in context with the divisional plans

In this step, the contributions made by each department or division or product category
within the organization are identified and accordingly strategic planning is done for each
sub-unit. This requires a careful analysis of macroeconomic trends.

5. Performance Analysis
Performance analysis includes discovering and analyzing the gap between the planned
or desired performance. A critical evaluation of the organizations past performance,
present condition and the desired future conditions must be done by the organization.
This critical evaluation identifies the degree of gap that persists between the actual
reality and the long-term aspirations of the organization. An attempt is made by the
organization to estimate its probable future condition if the current trends persist.
 6. Choice of Strategy
This is the ultimate step in Strategy Formulation. The best course of action is actually
chosen after considering organizational goals, organizational strengths, potential and
limitations as well as the external opportunities.

IV. Corporate Strategy

Corporate strategy deals with three key issues facing the corporation as a whole:

1. The firm’s overall orientation toward growth, stability, or retrenchment (directional

strategy)
2. The industries or markets in which the firm competes through its products and business
units (portfolio analysis)
3. The manner in which management coordinates activities and transfers resources and
cultivates capabilities among product lines and business units (parenting strategy)

Corporate strategy is primarily about the choice of direction for a firm as a whole and the
management of its business or product portfolio.

DIRECTIONAL STRATEGY

A corporation’s directional strategy is composed of three general orientations (sometimes called

grand strategies):

1. Growth strategies expand the company’s activities. The two basic growth strategies
are concentration on the current product line(s) in one industry and diversification into
other product lines in other industries

a. Concentration
If a company’s current product lines have real growth potential,
concentration of resources on those product lines makes sense as a strategy
for growth.
 Two basic concentration strategies:
 Vertical Growth. This can be achieved by taking over a function
previously provided by a supplier or by a distributor. The company, in
effect, grows by making its own supplies and/or by distributing its own
products.
 Horizontal Growth. A firm can achieve horizontal growth by expanding
its operations into other geographic locations and/or by increasing the
range of products and services offered to current markets.

b. Diversification
According to strategist Richard Rumelt, companies begin thinking about
diversification when their growth has plateaued and opportunities for growth
in the original business have been depleted.

Two basic diversification strategies:

1. Concentric (Related) Diversification. Growth through concentric

diversification into a related industry may be a very appropriate
corporate strategy when a firm has a strong competitive position but
industry attractiveness is low.
2. Conglomerate (Unrelated) Diversification. When management
realizes that the current industry is unattractive and that the firm lacks
outstanding abilities or skills that it could easily transfer to related
products or services in other industries, the most likely strategy is
conglomerate diversification—diversifying into an industry unrelated to its
current one.

2. Stability strategies make no change to the company’s current activities.

a. Pause/Proceed with Caution Strategy

A pause/proceed-with-caution strategy is, in effect, a timeout—an
opportunity to rest before continuing a growth or retrenchment strategy.
 b. No-Change Strategy
A no-change strategy is a decision to do nothing new—a choice to continue
current operations and policies for the foreseeable future.

c. Profit Strategy
A profit strategy is a decision to do nothing new in a worsening situation but
instead to act as though the company’s problems are only temporary. The
profit strategy is an attempt to artificially support profits when a company’s
sales are declining by reducing investment and short term discretionary
expenditures.

3. Retrenchment strategies reduce the company’s level of activities.

a. Turnaround Strategy
Turnaround strategy emphasizes the improvement of operational efficiency
and is probably most appropriate when a corporation’s problems are
pervasive but not yet critical.

b. Captive Company Strategy

A captive company strategy involves giving up independence in exchange for
security.

c. Sell-Out/Divestment Strategy
If a corporation with a weak competitive position in an industry is unable
either to pull itself up by its bootstraps or to find a customer to which it can
become a captive company, it may have no choice but to sell out.

If the corporation has multiple business lines and it chooses to sell off a
division with low growth potential, this is called divestment.

d. Bankruptcy/Liquidation Strategy
Bankruptcy involves giving up management of the firm to the courts in
return for some settlement of the corporation’s obligations

In contrast to bankruptcy, which seeks to perpetuate a corporation,

liquidation is the termination of the firm.
PORTFOLIO ANALYSIS

In portfolio analysis, top management views its product lines and business units as a series of
investments from which it expects a profitable return.

 BCG GROWTH-SHARE MATRIX

Using the BCG (Boston Consulting Group) Growth-Share Matrix is the simplest
way to portray a corporation’s portfolio of investments. Each of the corporation’s
product lines or business units is plotted on the matrix according to both the
growth rate of the industry in which it competes and its relative market share.

a. Question Marks – are new products with the potential for success but they
need a lot of cash for development.
b. Stars – are market leaders that are typically at the peaks of their product life
cycle and are able to generate enough cash to maintain their high share of
the market and usually contribute to the company’s profits.
c. Cash Cows – typically bring in far more money than is needed to maintain
their market share.
d. Dogs – have low market share and do note have the potential to bring in
much cash.
  GE BUSINESS SCREEN

General Electric, with the assistance of the McKinsey & Company consulting firm,
developed a more complicated matrix. The GE Business Screen includes nine
cells based on long-term industry attractiveness and business strength
competitive position.

CORPORATE PARENTING

Corporate parenting, views a corporation in terms of resources and capabilities that can be used
to build business unit value as well as generate synergies across business units. It generates
corporate strategy by focusing on the core competencies of the parent corporation and on the
value created from the relationship between the parent and its businesses.

DEVELOPING A CORPORATE PARENTING STRATEGY

1. Examine each business unit (or target firm in the case of acquisition) in terms
of its strategic factors.
2. Examine each business unit (or target firm) in terms of areas in which
performance can be improved.
3. Analyze how well the parent corporation fits with the business unit (or target
firm).
 A horizontal strategy is a corporate strategy that cuts across business unit
boundaries to build synergy across business units and to improve the
competitive position of one or more business units.
 In multipoint competition, large multi-business corporations compete against
other large multi-business firms in a number of markets.

V. Functional Strategy and Strategic Choice

Functional strategy is the approach a functional area takes to achieve corporate and
business unit objectives and strategies by maximizing resource productivity. It is concerned
with developing and nurturing a distinctive competence to provide a company or business
unit with a competitive advantage.

Marketing strategy deals with pricing, selling, and distributing a product. Using a market
development strategy, a company or business unit can (1) capture a larger share of an
existing market for current products through market saturation and market penetration or
(2) develop new uses and/or markets for current products.

Financial strategy examines the financial implications of corporate and business-level

strategic options and identifies the best financial course of action. It can also provide
competitive advantage through a lower cost of funds and a flexible ability to raise capital to
support a business strategy. Financial strategy usually attempts to maximize the financial
value of a firm.
R&D strategy deals with product and process innovation and improvement. It also deals
with the appropriate mix of different types of R&D (basic, product, or process) and with the
question of how new technology should be accessed through internal development, external
acquisition, or strategic alliances.

Operations strategy determines how and where a product or service is to be

manufactured, the level of vertical integration in the production process, the deployment of
physical resources, and relationships with suppliers. It should also deal with the optimum
level of technology the firm should use in its operations processes.

Purchasing strategy deals with obtaining the raw materials, parts, and supplies needed to
perform the operations function. Purchasing strategy is important because materials and
components purchased from suppliers comprise 50% of total manufacturing costs of
manufacturing companies in the United Kingdom, United States, Australia, Belgium, and
Finland.

Logistics strategy deals with the flow of products into and out of the manufacturing
process. Three trends related to this strategy are evident: centralization, outsourcing, and
the use of the Internet. To gain logistical synergies across business units, corporations
began centralizing logistics in the headquarters group. This centralized logistics group
usually contains specialists with expertise in different transportation modes such as rail or
trucking
Human Resource Management strategy, among other things, addresses the issue of
whether a company or business unit should hire a large number of low-skilled employees
who receive low pay, perform repetitive jobs, and are most likely quit after a short time (the
McDonald’s restaurant strategy) or hire skilled employees who receive relatively high pay
and are cross-trained to participate in self managing work teams.

Corporations are increasingly using information technology strategy to provide business

units with competitive advantage.