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Strategic
ManagementProf. Swati A. Mishra
Indian Institute ofManagement Lucknow
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Learning Objectives ofthe Course
Develop a understanding of: What is strategy?
Content and process of strategic
management. How organizational strategies are
formulated?
Issues and challenges relating to theprocess of strategy formulation.
The context in which the strategy is
formulated. 2
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Learning Objectives ofthe Course
The course will help develop An integrated view of all functional
areas
A general management orientation Analytical & conceptual skills in
analysing & formulating corporate
strategy
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Course Structure
1. Introduction to Strategic
Management: Ch 1
2. Analysis of External Environment :
Chap 2
3. Analysis of Internal Environment:
Chap 3
4. Business Level Strategy: Chap 4 4
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Introduction to
Strategic
Management5
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What isStrategy?
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What is Strategy?
Strategy is a well definedroadmap of an organization. Itdefines the direction of an
organization. The objective of astrategy is to maximize anorganizations strengths and to
minimize the strengths of thecompetitors.
Strategy, in short, bridges the gap
between where we are and where7
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Strategy Definition
Derived from Greek word,Strategos, or the art of thegeneral
Strategy is an action thatmanagers take to attain one or moreof the organizations goals.
It is imperative for an organization tohave a clear strategy: an integrated,overarching concept of how the
business will achieve its objectives. 8
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Strategy Definition
Strategy is an integrated andcoordinated set of commitmentsand actions undertaken to gain
competitive advantage through itsconfiguration ofresources andcore competencies within a
challenging business environment,to acheive above average returnsand
fulfil stakeholder expectations". 9
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What ConstitutesStrategy?
Strategy has become a catchall termused to mean whatever one wants itto mean.
Actually they are pieces of strategiesand cannot be decided in isolation.
Strategy is an integrated set ofactions but it is not a catchall forevery important choice an executivefaces.
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Elements of Strategy
A strategy has five elements: Arenas: Where will we be active?
Vehicles: How will we get there?
Differentiators: How will we win inthe marketplace?
Staging: What will be our speed and
sequence of moves? Economic logic: How will we obtain
our returns?12
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ComprehensiveStrategies at IKEA
A strategy is more than simplechoices on these five fronts: it is anintegrated, mutually reinforcing set
of choices choices that form acoherent whole
Example: Global furniture retailer
IKEA
IKEAs strategy over the past 25years has been highly coherent, with
all five elements reinforcing each 14
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Sound Strategy
Is it sufficient to simply make thesefive sets of choices.
Noa business needs not just a
strategy, but a soundstrategy. Strategic-analysis tools are very
helpful for improving the soundness
of strategies: industry analysis,technology cycles, value chainanalysis, and core competencies, to
name a few. 15
i h li f
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Testing the Quality ofStrategy
1. Does it fit with the environment?2. Does it exploit the key
resources?
3. Are the differentiatorssustainable?
4. Are the elements of strategyinternally consistent?
5. Have enough resources to
pursue this strategy? 16
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Strategy is all aboutChoice
Strategy is not primarily aboutplanning.
It is about intentional, informed and
integrated choices.Strategy involves making choices on 3
dimensions:
Which customers to focus on Which products to offer
Which activities to perform17
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The Heart & Soul ofStrategy
In every industry there are severalviable positions that companiesoccupy
Essence of strategy is in identifyingthe strategic position that differsfrom its competitors:
Who are the target customers?What are the products/ services
offered to them?
How can the company do this 18
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The Heart & Soul ofStrategy
Asking the who-what-howquestions
Developing alternatives, and
Selecting specific goals & actions As industries change, new strategic
positions arise to challenge the
existing positions.Thus designing a successful strategy
is never-ending.
Continuously revisit and challenge 19
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Strategic
Management
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Strategic Management
The set of decisions and actions thatresult in formulation andimplementation of plans designed toachieve a companys objectives.
The study ofwhy some firmsoutperform others
How to compete in order to createcompetitive advantages
How to create competitive advantages
Unique and valuable
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Nine Critical Tasks ofStrategic Management
1. Formulate the companys mission
2. Conduct an internal analysis
3. Assess the external environment4. Analyze the companys options by
matching its resources with the
external environment5. Identify the most desirable
options in light of the mission
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9 Critical Tasks of SM
6. Select a set of long-termobjectives and grand strategiesthat will achieve the most
desirable options7. Develop annual objectives and
short-term strategies that are
compatible with long-termobjectives and grand strategies
8. Implement the strategic choices
9. Evaluate the success of the
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Three Levels of Strategy
Corporate level: board ofdirectors, CEO & administration[Highest]
Business level: business andcorporate managers [Middle]
Functional level: Product,geographic, and functional areamanagers [Lowest]
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Alternative StrategicManagement Structures
aracter st cs o
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aracter st cs oStrategic Management
Decisions: Corporate Often carry greater risk, cost,and profit potential
Greater need for flexibility Longer time horizons
Choice of businesses,dividend policies, sources oflong-term financing, and
riorities for rowth
Characteristics of
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Characteristics ofStrategic Management
Decisions: Functional Implement the overallstrategy formulated at the
corporate and business levels Involve action-oriented and
operational issues
Relatively short range andlow risk
Modest costs: de end u on
aracter st cs o
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aracter st cs oStrategic Management
Decisions: Business Help bridge decisions at thecorporate and functional levels
Less costly, risky, and potentiallyprofitable than corporate-leveldecisions
More costly, risky, and potentiallyprofitable than functional-leveldecisions
Include decisions on lant
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Strategy Makers
Ideal strategic team includesdecision makers from all threelevels
Top managers must give finalapproval
Strategic decisions coincidewith managers responsibilities
S i M
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Strategic ManagementProcess
Businesses vary in formulationand other processes
The basic components of the
models used to analyzestrategic management aresimilar
Strategic management is aprocessa flow of information
through interrelated stages of
St t i M t
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Strategic ManagementProcess
Analysis Strategic goals (vision, mission, strategic
objectives) Internal and external environment of the firm
Formulation What industries should we compete in? How should we compete in those industries?
Implementation Allocate necessary resources
Design the organization to bring intendedstrategies to reality
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