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Business Strategic Management
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What is a Strategy?
A decision taken at a suitable timerelevant to achieve specific objectiveconsidering the micro and/or macrovariables influencing at that time.
Business Strategy of a firm includes theplans, policies and their implementationin a given time frame.
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What is a Tactic?
A tactic is a specific operating plandetailing how a strategy is implementedin terms of when & where it is to be putinto action.
Tactics are short term actions takenwhile implementing a strategy.
It is the link between formulation &implementation of strategies.
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What is meant by Vision?
It is the first business intent of an entrepreneur. It is a statement of what a firm can do and what
it wants to be.
It can be defined as the broad intentions, all
encompassing forward thinking, for the good ofthe customers and prospective customers.
It may state how the firm would like to be interms of employees, products or services.
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What is meant by a Mission? It defines the fundamental unique purpose that sets a
firm apart from other firms.
Mission is the purpose or reason for the firm’s existence.
It is a more tangible vision, which gives the firm itscharacter and cultural stream.
It acts a guiding force that propels the firm towards itsvision.
It also sets standards for its employees and their
behavior. Mission statements enshrine the values, beliefs and
character of the firm.
It is the second of the strategic intents.
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What are Goals? They are more specific than mission statements.
It is a statement of what a firm wants to
achieve. It may not have a time frame and can be an
open ended statement with a generalisedexpression of a business intent.
Goals set should be reachable, but with astretch.
It is the third business intent.
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What are Objectives? These are goals operationalised.
They are measurable, time-bound, and
should reduce or eliminate conflicts andtensions within a firm.
An objective statement says about what
a firm wants to achieve with definitivecommitment on quantity and time frame.
It is the fourth business intent.
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What are Policies? Policy is a broad guideline for decision making
to link strategy formulation and strategyimplementation.
They are made for long run applications (andhence are different from tactics) & are useful fordecision making at all levels and places.
It offers guidance or orientation along which
decisions are made. It considers the mission, objectives and vision of
the firm and help it to make appropriatedecisions or strategies.
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What is Strategic Management?
A continuous, iterative process aimed at keepingan organization as a whole appropriatelymatched to its environment (Certo and Peter)
Keeping the business in tune with managementand marketing forces both outside and insidethe firm
Planning for foreseeable eventualities as also,perhaps more importantly, for those impossiblecontingencies of which the firm has no priorknowledge.
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Benefits of Strategic Management
Establish the mission
Formulate philosophy
Establish policies
Setting objectives
Developing strategy
Plan the organi-zational structure
Provide personnel
Establish procedures
Provide facilities
Provide capital
Set standards
Establish programsand plans
Control information
Activate people
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Steps to Strategic Management
Environmental analysis Establish organizational direction
Strategy formulation
Strategy implementation
Strategic control
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Environmental analysis
Process of examining the organization’senvironment to determine:
Strengths
Weaknesses
Opportunities Threats
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Environmental structure
General environment Social, economic, political, legal, technical
Operating environment International, supplier, labor, competition,
customer Internal environment
Organizational, marketing, financial,personnel, production
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Methods of environmentalforecasting
Expert opinion
Trend extrapolation
Trend correlation
Dynamic modeling
Cross-impact analysis
Multiple scenarios
Demand/hazardforecasting
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Establish organizational direction
Establishing an organizational directionfor the company involves determiningtwo indicators:
Organizational mission – the reason why the
organization exists Objectives – measurable targets to track the
growth of the business
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Key objective areas
Market standing
Innovation
Productivity
Resource levels
Profitability
Manager performance and development
Worker performance and attitude
Social responsibility
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Types of objectives
Profitability
Growth
Market share
Social responsibility
Employee welfare Product Quality
Service
R&D
Diversification
Efficiency
Financial stability
Resource conservation Mgt & labor
development
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Strategy formulation
What are the purpose(s) and objective(s)
of the organization? Where is the organization presently
going?
What critical environmental factors does
the organization currently face? What can be done to achieve
organizational objectives more effectivelyin the future?
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Growth-share matrix
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4
6
8
10
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18
20
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M a r k e t G r o w t h R a t e ( p e r c e n t )
10.0 5.0 2.0 1.0 0.5 0.1
Relative Market Share
Stars
Cash Cows Dogs
Question Marks
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Formulating business strategies
Structural analysis of competitive forces Threat of new entrants
Bargaining power of suppliers
Bargaining power of buyers
Threat of substitute products Rivalry among existing competitors
Strategic alternatives
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Formulating functional strategies
Operations strategy
Financial strategy
Marketing strategy
Human resource strategy
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Strategy implementation
Commander approach
Organizational change approach
Collaborative approach
Cultural approach
Crescive approach
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The material for this presentationwas taken from:
Strategic Management:Concepts and Applications
Samuel C. Certo and J. Paul PeterRandom House Business Division
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Commander approach
Manager determines “best” strategy Manager uses power to see strategy
implemented
Three conditions must be met
Manager must have power
Accurate and timely information is available
No personal biases should be present
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Commander approach
Limitations Can reduce employee motivation and
innovation
Advantages
Managers focus on strategy formulation Works well for younger managers
Focuses on objective rather than subjective
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Organizational change approach
Focuses on the organization Behavioral tools are used
Includes focusing on the organization’sstaffing and structure
Often more effective than Commander
Used to implement difficult strategies
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Organizational change approach
Limitations Managers don’t stay informed of changes
occuring within the environment
Doesn’t take politics and personal agendas
into account Imposes strategies in a “top-down” format
Can backfire in rapidly changing industries
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Collaborative approach
Enlarges the Organizational Change Approach
Manager is a coordinator
Management team members provide
input
Group wisdom is the goal
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Collaborative approach
Advantages Increased quality and timeliness of information
Improved chances of effective implementation
Limitations
Contributing managers have different points ofview and goals
Management retains control over the process
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Cultural approach
Includes lower levels of the company Breaks down barriers between manage-
ment and workers
Everyone has input into the formulation
and implementation of strategies
Works best in high resource firms
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Cultural approach
Advantage More enthusiastic implementation
Limitations
Workers should be informed, intelligent
Consumes large amounts of time
Strong company identity becomes handicap
Can discourage change and innovation
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Crescive approach
Addresses formulation and implemen-tation simultaneously
Subordinates develop, champion, andimplement strategies on their own
“Bottoms-up” approach
Ultimate strategy is sum of all “success-ful” approaches
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Crescive approach
Advantages Encourages middle management to
participate
Strategies are more operationally sound
Limitations Resources must be available
Tolerance must be extended
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Strategic control
Typically consists of three steps
Monitoring performance
Comparing performance to standards
Taking corrective action where needed