str mgmnt 1.ppt
TRANSCRIPT
Strategic Management
Strategic management is the set of decisions and actions used to formulate and implement strategies that will provide a competitively superior fit between the organization and its environment so as to achieve organizational
goals.
GE Nine Cell Matrix
Different factors can be used to define Industry Attractiveness. Like:- Market Size, Market Growth Rate, Demand variability, Industry
Profitability, Competitive Rivalry, Global Opportunities, Entry and exit barriers, Capital requirement, Macro environmental Factors (PEST)
Different factors can also be used to define SBU Strength. Like:- Market Share, Distribution Channel Access, Financial Resources, R&D
Capability, Brand equity, Production Capacity, Knowledge of customer and market, Caliber of management. Relative cost position
The factors and their relative weightings are selected. The rating values for each factor are entered for each SBU and Industry.
GE Nine Cell Matrix
Industry Attractiveness
Business Unit Strength
Strong Average Weak
High Grow Grow Hold
Medium Grow Hold Harvest
Low Hold Harvest Harvest
GE Nine Cell Matrix
Grow - Business units that fall under grow attract high investment. Firms may go for product differentiation or Cost leadership. Huge cash is generated in this phase. Market leaders exist in this phase.
Hold - Business units that fall under hold phase attract moderate investment. Market segmentation, Market penetration, imitation strategies are adopted in this phase. Followers exist in this phase.
Harvest - Business units that fall under this phase are unattractive. Low priority is given in these business units. Strategies like divestment, Diversification, mergers are adopted in this phase.
Market Attractiveness
Annual market growth rate Overall market size Historical profit margin Current size of market Market structure Market rivalry Demand variability Global opportunities
Current market share Brand image Production capacity Corporate image Profit margins relative to
competitors R & D performance Promotional effectiveness
Business Strength
GE Nine Cell Matrix
Strength a) It allows intermediate ratings between high and low and between
strong and week.
b) It helps in channeling the corporate resources to business and achieving competitive advantage and superior performance.
c) It helps in better strategic decision making and better understanding of business scope.
Weaknessa)It tends to obscure business that are become to winners because their
industries are entering at exit stage.
b)Assessment of business in terms of two factors is not fair.
EXAMPLE OF GE NINE CELL MATRIX
The Grand Strategy
Plan of major action to achieve long term goals.
The Grand Strategy
Growth Stability Retrenchment
Growth
New products Developed products Strategic alliance Starbucks HP Disney Avon ebay
stability
Maintain current business and product portfolios
maintains the existing level of effort satisfied with incremental growth.
It decides to serve the same markets with the same products
It continues to pursue the same objectives with a strategic thrust on incremental improvement of functional performances
Dell, Videocon
Retrenchment
Retrenchment is a short-run renewal strategy designed to overcome organizational weaknesses that are contributing to deteriorating performance.
TATA group continued concentrating on its various business including steel, automobile manufacturing, etc while Tomco, which did not share a synergistic relationship with its current portfolio of businesses.
Globalization - Mc D, Ford 2000 Multidomestic - Caterpillar, P&G Transnational - local yet unique
Hierarchy of Strategy
Functional Strategy
Business (Division Level)
Strategy
Corporate Strategy
Manufacturing Finance MarketingResearch
and Development
Human Resources
Strategic Business
Unit
Strategic Business
Unit
Strategic Business
Unit
Corporate Headquarters
Strategic Management Defined
The set of managerial decisions and actions that determines the long-run performance of a corporation. It includes:environmental scanning (internal & external)strategy formulationstrategy implementationevaluation and control
It focuses on integrating management, marketing, finance/accounting, production/operations, research and development, and computer information systems to achieve organizational success.
Benefits of Strategic Management
Clearer sense of strategic vision Sharper focus on what is strategically
important Improved understanding of rapidly
changing environment
Three Key Strategic Questions
Where is the organization now? If no changes are made, where will the
organization be in one, two, five or ten years? Are the answers acceptable?
If the answers are not acceptable, what specific actions should management undertake? What are the risks and payoffs involved?
Strategic Management Model
Strategy Formulation
Strategy Implementation
Evaluation and Control
Mission
Objectives
Strategies
Policies
Feedback/Learning
Environmental Scanning
Societal Environment
General Forces
Task Environment
Industry Analysis
Structure Chain of Command
Resources Assets, Skills
Competencies, Knowledge
Culture Beliefs, Expectations,
Values
Reason for existence
What results to accomplish by when Plan to
achieve the mission & objectives Broad
guidelines for decision making
Programs
Activities needed to accomplish a plan
Budgets
Cost of the programs Procedures
Sequence of steps needed to do the job
Process to monitor performanceand take corrective action
Performance
External
Internal
Environmental Scanning
Monitoring, evaluating and disseminating information from the environment to key people within the corporation.
Scan via SWOT analysis:Look for opportunities/threats in the external environment
Look for strengths/weaknesses in the internal environment
Strategy Formulation
The process of developing long-range plans to deal effectively with environmental opportunities and threats in light of corporate strengths and weaknesses.
Composed of:
Mission Objectives Strategies Policies
Mission
The purpose or reason for the corporation’s existence. It tells who the company is, what they do as well as what they’d like to become.
Objectives
The end results of planned activity. They state WHAT is to be accomplished by WHEN. They should be quantified, if possible.
Should be specific, measurable and obtainable.
Strategies
A strategy is a comprehensive master plan stating HOW the corporation will achieve its mission and objectives. There are three types:
Corporate - a corporation’s overall direction and the management of its businesses.
Business - emphasizes improving the competitive position of a corporation’s products or services in a specific industry or market segment.
Functional - concerned with developing a distinctive competence to provide a company or business unit with a competitive advantage.
Hierarchy of Strategy
Functional Strategy
Business (Division Level)
Strategy
Corporate Strategy
Manufacturing Finance MarketingResearch
and Development
Human Resources
Strategic Business
Unit
Strategic Business
Unit
Strategic Business
Unit
Corporate Headquarters
Policies
Broad guidelines for making decisions.
E.g. - 3M’s policy requiring researchers to spend 15% of their time working on something other than their primary project.
Strategy Implementation
The process of putting strategies and policies into action through the development of:
Programs - statements of activities or steps needed to accomplish a single-use plan.
Budgets - statements of a corporation’s programs in dollar terms.
Procedures - systems of sequential steps or techniques that describe in detail how to perform particular tasks or jobs.
Evaluation and Control
The process of monitoring corporate activities and performance results so that actual performance can be compared with desired performance.
Strategic Decision-Making Process
Review and Revise as Necessary: Mission Objectives
Generate and Evaluate Strategic Alterna- tives
Select and Recommend Best Alternative
Implement Strategies: Programs Budgets Procedures
StrategyImplementation
Step 7
5(b) 6(a) 6(b) 7 8
Analyze External Factors: Opportun- ities Threats
Scan and Assess Internal Environment: Structure Culture Resources
Analyze Internal Factors: Strengths Weak- nesses
Select Strategic Factors (SWOT) in Light of Current Situation
Scan and Assess External Environment: Societal Task
Evaluate Current Performance Results
Examine and Evaluate the Current: Mission Objectives Strategies Policies
Review Corporate Governance: Board of Directors Top Man- agement
Strategy
Formulation:
Steps 1 – 6
3(a)
1(a) 1(b) 2 5(a)
4(a)
3(b)
4(b)
Evaluationand
Control:Step 8