How Strategy is Managed - Strategic

Management
Glueck (1984) defines strategic management as “a
streams of decisions and actions which lead to the
development of an effective strategy or strategies to
help achieve corporate objectives”.
Sharplin (1985) says,” strategic management is the
formulation and implementation of plans and carrying
out of activities relating to the matters which are of
vital, pervasive or continuing importance to the total
organization”
Contd..

• In its broadest sense, strategic management is about

taking "strategic decisions" - decisions that answer
the questions above.
• In practice, a thorough strategic management
process has three main components, shown in the
figure below:
 1950s 1960s-early 70s Mid-70s-mid-80s Late 80s –1990s
2000s
DOMINANT
THEME Budgetary Corporate Positioning Competitive Strategic
planning & planning advantage
innovation
MAIN control
ISSUES

Financial Planning Selecting Focusing on Reconciling

control growth &- sectors/markets. sources of
KEY size with
CONCEPTS diversification Positioning for competitive
& flexibility &
TOOLS leadership advantage agility

Capital Forecasting. Industry analysis Resources &

Cooperative
budgeting. Corporate Segmentation capabilities.
MANAGE-
MENT strategy.
IMPLIC- Financial planning. Experience curve Shareholder Complexity.
ATIONS planning Synergy Portfolio analysis value. Owning
E-commerce.
standards.
— Knowledge
Management—
Strategic Management Process

Strategic management process is a method by

which managers conceive of and implement a
strategy that can lead to a sustainable competitive
advantage.
“It is a process by which an organization establishes
its objectives, formulates actions (strategies)
designed to meet these objectives in the desired
timescale, implements the actions, and assesses
progress and results.
• As managers attempt to better deal with their
changing world, a firm generally evolves the
following four phases of Strategic management:
• A. Environmental scanning
• B. Strategy formulation
• C. Strategy Implementation
• D. Strategy Evaluation and control:
Strategic Management Development
process
• Establishing the hierarchy of strategic intent:
• Creating & communicating vision
• Designing mission statement
• Defining businesses
• Adopting business model
• Setting objectives
• Strategy Formulation:
• External Environmental scanning
• Organizational Appraisal
• Undertaking strategic analysis
• Formulation of corporate level strategies
• Formulation of business unit level strategies
• Formulation functional level strategies
• Strategy Implementation
• Activating strategies
• Designing structure, system, procedures
• Managing behavioural issues in implementation
• Managing functional implementation
• Operationalizing Strategies
• Strategic evaluation and control
• Strategic evaluation
• Strategic control
STRATEGIC MANAGEMENT OPERATIONAL MANAGEMENT

Ambiguous / Uncertain Routine

Complex Operationally specific

Fundamental Change Non Radical Change

Organization wide Short Term implications

Fundamental / Basic / Core Lead by resources

Lead by environment or expectation

Long term implications

Adapted from - Jhonson and Scholes, “exploring corporate strategy”, Prentice – Hall India
Mintzberg's 5 Ps for Strategy

The word "strategy" has been used implicitly in different ways even if
it has traditionally been defined in only one. Explicit recognition of
multiple definitions can help people to manoeuvre through this
difficult field. Mintzberg provides five definitions of strategy:
•
5 P’s of strategy

Plan

Perspective Ploy

Position Pattern
Ist P is :Plan

• Strategy is a plan –

some sort of consciously intended course of action, a

guideline (or set of guidelines) to deal with a
situation. By this definition strategies have two
essential characteristics: they are made in advance of
the actions to which they apply, and they are
developed consciously and purposefully.
II P is :Ploy
nd

IInd P is :Ploy
As plan, a strategy can be a ploy too, really just a
specific manoeuvre intended to outwit an opponent
or competitor
IIIrd P is : Pattern

• Strategy is a pattern - specifically, a pattern in a

stream of actions. Strategy is consistency in
behaviour, whether or not intended.Plans are
intended strategy, whereas patterns are realised
strategy.
IV P is :Perspective

• Strategy is a perspective - its content consisting not

just of a chosen position, but of an ingrained way of
perceiving the world.
V P is :Position
th

Strategy is Position ; that is, it reflects decisions to

offer particular products or services in particular
markets. Strategy is also a position ; specifically a
means of locating a firm in its environment. Position
is often defined competitively
Benefits of strategic management
 Kaplan and Norton's organizational
performance management tool

• Balanced scorecard – (Robert S. Kaplan & David P. Norton)

• Balanced scorecard also highlights strengths and weaknesses of an
organization from four perspectives.
• It removes bias towards financial performance and built holistic view
towards entire firm.
• The balanced scorecard allows managers to look at the business from
four important perspectives.
• How do customers see us? (customer perspective)
• What must we excel at? (internal business perspective)
• Can we continue to improve and create value? (innovation and
learning perspective)
• How do we look to shareholders? (financial perspective)
 Table 2.7 - Measures suggested by balanced scorecard

Perspective Generic Measurements

Financial Return of Capital Employed, Economic value added, Sales

growth, Cash flow

Customer Customer satisfaction, retention, acquisition, profitability,

market share

Internal Includes measurements along the internal value chain for:

business Innovation - measures of how well the company identifies the
process customers’ future needs.
Operations - measures of quality, cycle time, and costs.
Post sales service - measures for warranty, repair and
treatment of defects and returns.
Learning Includes measurements for:
and growth People - employee retention, training, skills, morale.
Systems - measure of availability of critical real time
information needed for front line employees.
Balance scorecard implementation

A Balanced Scorecard should result in:

• Improved processes
• Motivated/educated employees
• Enhanced information systems
• Monitored progress
• Greater customer satisfaction
• Increased financial usage
Ansoff’s matrix
• Market Penetration / Consolidation – Intensifying business activities
in current markets with current products and services by increasing
sales offices, expanding distribution channels, etc. Firm is aiming
higher market share.
• Market Development – Expanding into new markets with current
products and services offered by the firm
• Product Development - Increasing the range of product and services
offered in current markets.