management policy and strategy session - i
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MANAGEMENT POLICY AND STRATEGY SESSION - I. Strategic Management Introduction Prof. Sushil Department of Management Studies Indian Institute of Technology, Delhi INDIA Email: [email protected]. What is Strategy?. - PowerPoint PPT PresentationTRANSCRIPT
Prof. Sushil\IITD\Session - I 1
MANAGEMENT POLICY AND STRATEGYSESSION - I
Strategic Management Introduction
Prof. SushilDepartment of Management StudiesIndian Institute of Technology, Delhi
INDIAEmail: [email protected]
Prof. Sushil\IITD\Session - I 2
What is Strategy?
Large-scale, future-oriented plan for interacting with competitive environment to achieve objectives
Company’s “game plan”
Framework for managerial decisions
Prof. Sushil\IITD\Session - I 3
STRATEGY
• Direction and scope of an organisation over the long term.
• Matches its resources to its changing environment.
• In particular its markets, customers or clients.
• So as to meet stakeholders’ expectations.
Prof. Sushil\IITD\Session - I 4
STRATEGIC DECISIONS
• Modernization• Divestment• Product Launch• Acquisition/Merger• Collaboration/Alliance• Overseas Expansion• Turnaround• Technology Transfer• Entry into New Markets• Restructuring• Reengineering
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Dimensions of Strategic Decisions
• Strategic issues . . .• Require top-management decisions• Require large amounts of firm’s resources• Affect firm’s long-term prosperity• Are future oriented• Usually have multifunctional or multibusiness
consequences• Require consideration of firm’s external
environment
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STRATEGY DEVELOPMENT ROUTES
OpportunisticStrategy
ImposedStrategy
EmergentStrategy
PlannedIntendedStrategy
RealizedStrategy
UnrealizedStrategy
Prof. Sushil\IITD\Session - I 7
STRATEGY
Derived from Greek `strategies• a general set of maneuvers carried out to overcome an enemy
STRATEGIC MANAGEMENT
A way of regenerating an organization, Through continuous attention to a vision of what the people,
who make up the organization, wish to do. A proactive process of seeking to change the organization,
its stakeholders and the content or environment within which it seeks to
attain its aspirations It is particularly about stretching the organization to gain
leverage from its distinctive competencies and ability to change them.
Prof. Sushil\IITD\Session - I 8
STRATEGIC MANAGEMENTContd...
It involves creating and moulding the future,
along with making sense of the past
rather than predicting and responding to some predetermined future reality
It is about developing the capability for long term flexibility and strategic opportunism
rather than making and sticking to long term plans.
Prof. Sushil\IITD\Session - I 9
What is Strategic Management?
The set of decisions and The set of decisions and actions that result in the actions that result in the formulation and formulation and implementation of plans implementation of plans designed to achieve a designed to achieve a company’s objectives.company’s objectives.
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Critical Tasks of Strategic Management
11 Formulate the company’s missionFormulate the company’s mission
22Develop company profile, reflecting its internal conditionsDevelop company profile, reflecting its internal conditions
33 Assess company’s external environmentAssess company’s external environment
44 Analyze company’s optionsAnalyze company’s options
55 Identify most desirable optionsIdentify most desirable options
66 Select long-term objectives and grand strategiesSelect long-term objectives and grand strategies
77Develop annual objectives and short-term strategiesDevelop annual objectives and short-term strategies
88 Implement the strategic choicesImplement the strategic choices
99 Evaluate success of the strategic processEvaluate success of the strategic process
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LANDMARK CONTRIBUTIONS TO THE DEVELOPMENT OF STRATEGIC
MANAGEMENT
Stanford Research Institute
Structured thinking about planning systems
Igor Ansoff Analytical approach to corporate strategy
Igor Ansoff
James QuinnKenichi Ohmae
Thomas Peters and Robert Waterman
Strategic management concept Logical incrementalizm
Strategic thinking
1965
1972
1980
1982
1982
1963-70
In search of excellence
Prof. Sushil\IITD\Session - I 12
LANDMARK CONTRIBUTIONS TO THE DEVELOPMENT OF STRATEGIC
MANAGEMENT
CONTD….
Henry Mintzberg
Ignor Ansoff
Noel Tichy and Mary Devanna
Michael Porter
Gary Hamel and
C.K. Prahalad
Deliberate and emergent strategies
Contingency approach (environmental turbulence)
Transformational leadership
From competitive advantage to corporate strategy
Reshaping industries (competing for the future)
1985
1986
1987
1994
1985
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Single-Business Firms
Corporate/business level
Corporate/business level
POM/R&D strategie
s
POM/R&D strategie
s
Marketing
strategies
Marketing
strategies
Human relations strategie
s
Human relations strategie
s
Financial/ accounti
ng strategie
s
Financial/ accounti
ng strategie
s
Prof. Sushil\IITD\Session - I 14
Multiple Business Firms
Corporate/business level
Corporate/business level
Business 1Business 1 Business 2Business 2 Business 3Business 3
POM/R&D strategiesPOM/R&D strategies
Marketing strategiesMarketing strategies
Human relations
strategies
Human relations
strategies
Financial/ accountin
g strategies
Financial/ accountin
g strategies
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Board of Directors
Corporate Managers
Strategic Decision Makers
Business Managers
Functional Managers
Mission, including goals & philosophy
Ends(What is to be achieved?)
Means(How is it to be achieved?)
Long-term objectives
Grand strategy
Annual objectives
Short-term strategies & policies
Note: indicates a principal responsibility; indicates a secondary responsibility
Hierarchy of Objectives and Strategies
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Characteristics of Strategic Management Decisions
Greater risk, cost, and profit potential
Greater need for flexibility
Longer time horizons
Corporate -level
decisions involve
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Characteristics of Strategic Management Decisions
Bridge decisions at corporate and functional
levels
Are less costly, risky, and potentially profitable than corporate-level
decisions
Are more costly, risky, and potentially profitable
than functional-level decisions
Business -level
decisions
Prof. Sushil\IITD\Session - I 18
Involve action-oriented operational
issues
Are relatively short range and low risk
Incur only modest costs
Functional- level
decisions
Implement overall strategy
Characteristics of Strategic Management Decisions
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Benefits of Strategic Management
Enhances firm’s ability to prevent problemsEnhances firm’s ability to prevent problems
Emphasizes group-based strategic decisions likely to be based on best available alternatives
Emphasizes group-based strategic decisions likely to be based on best available alternatives
Improves understanding of employees of productivity-reward relationship Improves understanding of employees of productivity-reward relationship
Reduces gaps/overlaps in activities among employees as their participation clarifies differences in roles
Reduces gaps/overlaps in activities among employees as their participation clarifies differences in roles
Reduces resistance to changeReduces resistance to change
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Risks of Strategic Management
Time involved may negatively impact operational responsibilities of managersTime involved may negatively impact operational responsibilities of managers
Lack of involvement of strategy makers in strategy implementation may result in shirking of responsibility for strategic decisions
Lack of involvement of strategy makers in strategy implementation may result in shirking of responsibility for strategic decisions
Potential disappointment of employees over unattained expectations requires managerial time and training
Potential disappointment of employees over unattained expectations requires managerial time and training
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PATTERNS OF STRATEGY DEVELOPMENT
• Continuity
• Incremental
• Flux
• Transformational
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STRATEGY DEVELOPMENT
• Natural Selection View• Planning View• Logical Incremental View• Cultural View• Political View• Visionary View• Integrative View
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STGRATEGIC MANAGEMENT AS A PROCESS
Managing power and politics Procedural rationality and justice Role of group processes in socially
negotiating strategy Power of emotional and cognitive
commitment in delivery strategy Conflict and cooperation Pascal - `present is determined by the
future not the past’.
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SCHOOLS OF THOUGHT
Interpretive frameworkPolitical Cultural Cognitive (The management (Shared beliefs (Mental processes)of means) and traditions)
Learning / Planning / Design
Political Strategy formulation as a political process where strategic aspirations are disputed, conflict exists managers compete for scarce resources the internal political dynamic the dynamic between the organization and its stake holders conflict and consensus co-exist process of negotiating action is central.
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CULTURAL
The strategy is ultimately expressed through the culture of an organization
Cultural web• control systems• rituals and routines• symbols• stories• organizational structure• power structure
shared beliefs developed into organizational recipes reinforced by tradition, habit, stories, ideology
central focus for change- strategy is about changing culture.
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Bounded rationality The challenge is that of creating a
mental framework for strategic action
COGNITIVE
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LEARNING, PLANNING AND DESIGN SCHOOLS
Learning Strategy formulation and enacting are concurrent Concrete experiences are the basis for observation and
reflection, which enable the formation of abstracts concepts Strategy making and its realization together create a
sequence of platforms for strategic change and organizational achievement
Planning Developing explicit plans which are decomposed into sub-
strategies and programs It favours seeing organizations as bureaucracies where
central players are planners.
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LEARNING, PLANNING AND DESIGN SCHOOLS
Contd...
Design
Seeking strategic fit through an external and internal appraisal which is central to a sequence of steps:• classification of organizational mandates, of
organizational mission,• situational strategic analysis• identification of strategic issues• strategy formulation• implementation
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STRATEGIC MANAGEMENT PROCESS
Strategic Learning and UnlearningStrategic Learning and Unlearning
Strategic IntentStrategic Intent
Strategy EvolutionStrategy Evolution
Strategic ResonanceStrategic Resonance
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STRATEGIC MANAGEMENT PROCESS
Strategic AnalysisStrategic Analysis
Strategic ChoiceStrategic Choice
Strategy ImplementationStrategy Implementation
Prof. Sushil\IITD\Session - I 31
STRATEGIC MANAGEMENT PROCESS
Strategic Situation AnalysisStrategic Situation Analysis
Strategic Capability AnalysisStrategic Capability Analysis
Strategic Process EvolutionStrategic Process Evolution
Strategy Implementation and ImpactStrategy Implementation and Impact
Prof. Sushil\IITD\Session - I 32
STRATEGIC MANAGEMENT PROCESS
Environmental Analysis Internal External Establishing Organizational Direction
- Vision- Mission- Objectives
Strategy Formulation Strategy Implementation Strategic Control
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Strategic Management ModelCompany
mission & social responsibility
Long-term objectives
Generic & grand strategies
Short-term objectives;
reward systemFunctional
tacticsPolicies that
empower action
Restructuring, reengineering & refocusing the organization
Strategic control & continuous improvement
External Environment
Internal analysis
Strategic analysis & choice
Legend
Major impact
Minor impact
Feed
back
Feed
back
Possible?
Desired?
Prof. Sushil\IITD\Session - I 34
Components of the Strategic Management Model
Mission• Specifies unique purpose of company• Identifies scope of operations• Describes product, market, and technological areas of
emphasis• Reflects values and priorities of decision makers• Expresses approach to social responsibility efforts
Internal Analysis• Depicts quantity and quality of company’s financial,
human, and physical resources• Assesses company’s strengths and weaknesses• Contrasts past successes and concerns with current
capabilities to identify future capabilities
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External Environment• Consists of all conditions and forces affecting firm’s
strategic options, typically beyond its control• Includes three interactive segments - operating,
industry, and remote environments Strategic Analysis and Choice
• Involves simultaneous assessment of external environment and internal analysis to identify range of attractive options
• Incorporates screening process based on mission to generate possible and desired opportunities
• Results in selection of options from which a strategic choice is made
Components of the Strategic Management Model
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Long-term Objectives• Profitability• Return on investment• Competitive position• Technological leadership• Productivity• Employee relations• Public responsibility
Generic and Grand Strategies• Low cost• Differentiation• Focus
Components of the Strategic Management Model
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Short-term Objectives and Action Plans • Translate generic and grand strategies into “action”Translate generic and grand strategies into “action”
– Identify specific functional tactics to be taken in the Identify specific functional tactics to be taken in the near termnear term
– Establish a clear time frame for completionEstablish a clear time frame for completion– Create accountabilityCreate accountability– Specify one or more immediate objectives as Specify one or more immediate objectives as
outcomes of the actionoutcomes of the action Functional Tactics
• Involve identifying activities unique to the function to Involve identifying activities unique to the function to help build competitive advantagehelp build competitive advantage
• Specify detailed statements of “means” to be used to Specify detailed statements of “means” to be used to achieve short-term objectivesachieve short-term objectives
Components of the Strategic Management Model
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Policies that Empower Action• Include broad, precedent-setting decisions that
substitute for repetitive or time-sensitive decision making
• Often increase managerial effectiveness by empowering discretion of subordinates in implementing strategies
Restructuring, Reengineering, and Refocusing the Organization• Involves an internal focus - getting work done
efficiently and effectively to make the strategy work
– Organizational structure– Leadership– Culture– Reward systems
Components of the Strategic Management Model
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Strategic Control and Continuous Improvement
• Control
– Tracks a strategy during implementation
– Detects problems
– Involves making necessary adjustments
• Continuous improvement
– Provides another approach to strategic control
– Allows an organization to respond more proactively and timely to rapid developments
Components of the Strategic Management Model
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Implications of the Strategic Management Process
Changes in any one component will affect other components
Changes in any one component will affect other components
Recognition of the sequential nature of strategy formulation and implementation
Recognition of the sequential nature of strategy formulation and implementation
Necessity of feedback from institutionalization, review, and evaluation to early stages of process
Necessity of feedback from institutionalization, review, and evaluation to early stages of process
Must be viewed as dynamic, involving constant changes in interdependent strategic activities
Must be viewed as dynamic, involving constant changes in interdependent strategic activities