STRATEGIC MANAGEMENT AND BUSINESS POLICY

STRAT 401

Introduction to strategic management and business policy

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Learning objectives

Historical development of strategic management and business policy in the world and in India

Concept of strategy and its limitations

Process of strategic decision making

Various schools of thought on strategy formation

Strategic management process

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Evolution of strategic management and business policy

The genesis of strategic management and business policy- 1911 Harvard Business School

Evolution based on management practices- MBO Capital Budgeting etc

Historical perspective- Acc. to hofer Adhoc policy making, 1930’s

Planned policy formulation 1940-50

Strategy paradigm 1960’s

Current- Strategic Management

Pointers to the future Development of strategic thinking

Alternative models like of Hambrick & fredrickson

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Vision and

Mission

Goals and

Objectives

Strategy:

Arenas

Vehicles

Differentiators

Staging

Economic logic

Implementation Levers

and Strategic

Leadership

Internal and External

Strategic Analysis

Hambrick and Fredrickson model of strategic management

D. C. Hambrick & J. W. Fredrickson: “Are you sure you have a strategy?” (2001). Academy of Management Executive Vol. 15, No. 4, pp. 48-59

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The Indian scenario

Role of IIMs and ASCI

Role of AICTE

Role of AIMS

Role of AIMA

India-focused international studies

Strategic Management Forum of India

Publications

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Business policy defined

Business policy, as defined by Christensen and others, is "the study of the function and responsibilities of senior management, the crucial problems that affect success in the total enterprise, and the decisions that determine the direction of the organisation and shape its future. The problems of policy in business, like those of policy in public affairs, have to do with the choice of purposes, the moulding of organisational identity and character, the continuous definition of what needs to be done, and the mobilisation of resources for the attainment of goals in the face of competition or adverse circumstance”.

Strategy

Term derived from Greek word strategos meaning generalship- the actual direction of military force as distinct from the policy governing its deployment.

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The concept of strategy

A strategy could be: plan or course of action or a set of decision rules making a

pattern or creating a common thread; the pattern or common thread related to the organisation's

activities which are derived from the policies, objectives and goals;

related to pursuing those activities which move an organisation from its current position to a desired future state;

concerned with the resources necessary for implementing a plan or following a course of action; and

connected to the strategic positioning of a firm, making trade-offs between its different activities, and creating a fit among these activities.

the planned or actual coordination of the firm's major goals and actions, in time and space that continuously co-align the firm with its environment.

Time

Change

Time

Where we are?

Where we want to be?

A global economy is one which goods, services, people,

skills and ideas move freely across geographic borders.

Europe is now world’s largest market.

GDP 35% more than US.

China extremely competitive market. Source of low cost

goods

GE headquartered in US, will have 60% revenue from

developing countries 2015.

Globalization is the increasing economic interdependence

among countries and their organization as reflected in the

flow of goods and services, financial capital knowledge

across country border.

Wal-Mart- Boundary-less retailing, global pricing,

sourcing and logistics

Globalization- Design, production, distribution and

servicing of goods and services.

N=1

Serving one customer at a time.

R=G

Resource = Global

Radius of operation= Global

Characteristics

Node within a global web

Personalized experience

Co-creation

Celebration of individual

Thematic experience

Delivery Network

A strategy is an integrated and coordinated set

commitments and actions designed to exploit core

competencies and gain a competitive advantage.

Integrated

Two or more component merged together into a single system

Core Competencies

Specific factor that a business sees as being central to the way

it works.

Competitive advantage

A strategy competitors are unable to duplicate or find to costly

to try to imitate

“A unified, comprehensive, and integrated plan designed

to ensure that the basic objectives of the enterprise are

achieved.” (Glueck, 1980)

“The pattern or plan that integrates an organization’s

major goals, policies, and action sequences into a

cohesive whole.” (Quinn, 1980)

“A pattern of resource allocation that enables firms to

maintain or improve their performance.

Increasing rate of change and diffusion

Perpetual Innovation

Continuous and carry high priority

Shorter life cycle

Rapid diffusion of innovation

Replicated within short period

Speed to market may become a source of competitive advantage

The information age

Companies are wired

Customers

Employees

Vendors

Increasing Knowledge Intensity

Converting accumulated knowledge of employees into corporate asset

Shareholder value is increasingly influenced by the firm’s intangible

assets such as knowledge

From assessing information to exploiting information

Capturing intelligence

Transforming intelligence into usable knowledge

Embedding it as organizational learning

Diffusing it rapidly throughout the organization

1996 takeover of tandem computers

1998 took over digital

1999 CEO, Pfeiffer Sacked, Why?

By 1995 Compaq become leading seller of PC

Purchase of DEC also made it leading computer service firm competing with IBM.

Compaq lost focus of selling PC, went behind Dell in Internet selling.

Announced a bigger move in web sales

Reseller become anxious

Announced number of reseller to de downsized to 4 from 20.

1998, in charge of service business resigned.

Creating further uncertainty about their future

2002 taken over by HP

Valuable

Allow the firm to exploit opportunities or neutralize

threats in its external environment.

Rare

Possessed by few, if any, current and potential

competitors

Costly to imitate

When other firms cannot obtain them or must

obtain them at much higher cost

Organized to be exploited

The firm is organized appropriately to obtain the

full benefits of the resources in order to realize a

competitive advantage.

Core Competence

Costly

Valuable Rare

Organized

Levels at which strategy operates

Corporate

Office

SBU

A SBU

B

Finance Marketing Operations HRM Information

LEVELS OF MANAGEMENT LEVELS OF STRATEGY

CORPORATE CORPORATE-LEVEL

SBU BUSINESS-LEVEL

FUNCTIONAL

SBU

C

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Strategic decision-making

Objectives to be achieved are determined;

Alternative ways of achieving the objectives are identified;

Each alternative is evaluated in terms of its objective-achieving ability; and

The best alternative is chosen.

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Issues in strategic decision-making

Criteria for decision-making

Rationality in decision-making

Creativity in decision-making

Variability in decision-making

Person-related factors in decision-making

Individual versus group decision-making.

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Schools of thought on strategy formation

The prescriptive schools

The descriptive schools

The integrative school

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Strategic management defined

Strategic management is defined as the dynamic process of formulation, implementation, evaluation and control of strategies to realise the organization’s strategic intent.

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Four phases in strategic management

Formulation of

strategies

Implementation of

strategies

Strategic

evaluation

Strategic control

Establishment of

strategic

intent

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Comprehensive model of strategic management

Strategy Formulation

Environmental Organisational

Appraisal Appraisal

SWOT Analysis

Corporate-level Strategies

Business-level Strategies

Strategic analysis and choice

Strategic plan

Strategic Intent

Vision

Mission

Business definition

Business model

Objectives

Strategy

Implementation

Project

Procedural

Resource allocation

Structural

Behavioural

Functional &

Operational

Strategic control

Strategic

Evaluation