COURSE CODE:: MP101COURSE ::MANAGEMENT THEORY AND PRACTICE

Unit -9::STRATEGY AND STRATEGIC MANAGEMENT

OBJECTIVES

Discuss the concept of strategy Describe the importance of strategy Explain different types of strategies Detail upon the concept of strategic management Learn the role of strategic management Outline the concept of strategic planning

INTRODUCTION

A strategy refers to the direction and scope of an organization in the long run. In

other words, a strategy can be defined as a set of decision making procedures to be

followed by an organization to accomplish its goals and objectives. It helps an

organization to cope with the dynamic business environment. Therefore, an

organization needs to pay a lot of attention and supervision, while formulating its

different strategies. Strategic management is an ongoing process of formulating,

implementing, and evaluating strategies to achieve long-term organizational

objectives. The strategic management process also helps an organization to update

its strategies with respect to changes taking place in the business environment.

Strategic planning is one of the most important aspects of the strategic management

process. It involves defining strategies and allocating resources for the

implementation of those resources. Strategic planning also includes assessing the

strengths, weaknesses, opportunities, and threats in the business environment of an

organization. Therefore, the overall success of the strategic management process

depends on the effectiveness of strategic planning.

CONCEPT OF STRATEGY

A strategy refers to a plan of actions to achieve a specific target. It includes steps, actions, standards, plans, and policies required to attain future goals of an organization.

The objectives of strategy are as follows: Providing direction and stability to the organization Determining long-term goals of the organization Helping the organization to prioritize the targets on the basis of

organizational resources Facilitating the planning and execution of long-term, medium-term, short-

term, and day-to-day plans Facilitating the decision-making process Allocating the resources to various departments, such as marketing, human

resource, finance, and operations, of the organization Increasing the organizational effectiveness by making judicious use of

organizational resources, such as funds, human resources, technology, and infrastructure

Defining the code of conduct that lays down various rules and policies for an organization

STRATEGIC BUSINESS UNITS AND ITS TYPES

Strategic Business Units (SBUs) refer to units that have their own sets of strategies, objectives, and competitors.

The two types of SBUs are as follows: Single-level SBUs: Imply a single business

unit that deals in a single product or one area.

Multiple-level SBUs: Imply the business units of an organization that are divided according to geographical areas or products.

LEVELS OF STRATEGY

The different levels of strategy are explained as follows:1. Corporate-Level Strategy: Includes

strategies designed by the top management consisting of board of directors and the chief executive officer.

2. Business-Level Strategy: Involves the strategies designed by the business heads of each SBU.

3. Functional-Level Strategy: Involves the strategies designed by functional managers to carry out day-to-day activities of an organization.

DEFINE STRATEGIC MANAGEMENT

Strategic management is an ongoing process that evaluates and controls the business and the industries in which the company is involved; assesses its competitors and sets goals and strategies to meet all existing and potential competitors; and then reassesses each strategy annually or quarterly [i.e. regularly] to determine how it has been implemented and whether it has succeeded or needs replacement by a new strategy to meet changed circumstances, new technology, new competitors, a new economic environment, or a new social, financial, or political environment. ---- Lamb

Strategic management is a system that links strategic planning and decision-making with day-to-day business of operational management. ---- Gluck, Kaufman, and Walleck

COMPONENTS OF STRATEGIC MANAGEMENT

Vision: Gives a long-term view of the organization. It focuses on what an organization is trying to achieve in the long run.

Mission: Describes the scope and purpose of an organization.

Objectives: Refer to the results that an organization seeks to achieve in the short and long run.

Policies: Refer to guidelines given to managers and subordinates for guiding their decisions and actions, while implementing the organization’s strategy.

External Environment: Consists of the factors that affect the organization’s activities.

Grand Strategy: Implies a package of different long-term strategies.

PROCESS OF STRATEGIC MANAGEMENT

The different stages of strategic management process are as follows:

1. Establishment of Strategic Intent: Lays down the foundation for strategic management of the organization.

2. Formulation of Strategies: Refers to the development of strategies of an organization

3. Implementation of Strategies: Implies a process of putting formulated strategies into action.

4. Strategic Evaluation and Control: Refers to the process of comparing the actual results with the desired performance.

SCHOOLS OF THOUGHTS IN STRATEGIC MANAGEMENT

Mintzberg has given 10 schools of thoughts on strategy formation, which are as follows:

Design School: Refers to an approach that treats strategy formation as a simple and informal process.

Planning School: Treats strategy formation as a formal process, where strategy is divided into sub-strategies and programs.

Positioning School: Perceives strategy formation as an analytical, systematic, and deliberate process.

Entrepreneurial School: Treats strategy formation as a visionary process that involves experience, intuition, judgment, and insight of an entrepreneur.

Cognitive School: Analyzes how people perceive information in an organization. Learning School: Sees strategy formation as an emergent and informal process. Power School: Treats strategy formation as a process of negotiation. Cultural School: Involves a collective, ideological, constrained, and deliberated

perspective for the process of strategy formation in an organization. Environmental School: Recognizes strategy formation as a reactive process. Configuration School: Identifies strategy formation as a transformation process

that involves changing one type of decision-making structure of an organization into another.

STRATEGIC MANAGEMENT IN MARKETING

Marketers try to possess strategic thinking and improve the value of the organization by developing effective marketing plans.

They achieve vision and mission of the organization with the help of the marketing strategies, such as:

Enhances customer loyalty by retaining them Expands the channels of distribution of the organization Increases sales of the organization by penetrating in

the market Understands the customers and competitors; adapts to

the changing environment Aims at relationship marketing with the clients

STRATEGIC MANAGEMENT IN FINANCE

Organizations aim at achieving maximized returns on the funds invested and gain financial success through effective strategies.

The financial strategies relate to the following: Allocating least cost combinations of capital resources Taking investment decisions, which maximize the net

present value and shareholder wealth Identifying scarce financial resources and balancing

them effectively Raising funds for the organization through issue of

shares Conducting cash, credit and risk management

STRATEGIC MANAGEMENT IN HUMAN RESOURCE

Human resource and top management work together for achieving business strategies.

The strategic management policies for human resource relate with the following:

Developing high quality workforce by hiring and retaining talented people

Enabling employee participation for achievement of the objectives

Ensuring special motivational programs for employees Establishing performance targets for employees Measuring the performance related to targets Providing appraisal systems, training and development to

employees

CONCEPT OF STRATEGIC PLANNING

Strategic planning includes a comprehensive planning process to achieve long-term goals of the organization.

The features of strategic planning are as follows: Deals with the future decisions of an organization Aligns long-term plans with short-term plans Assists in developing strategic intent and action

plans of an organization Identifies new areas of investment for the

organization Ensures rational allocation of resources

SUMMARY

A strategy can be defined as a set of decision making procedures to be followed by an organization to accomplish its goals and objectives.

It helps an organization to cope with the dynamic business environment.

Strategic management is an ongoing process of formulating, implementing, and evaluating strategies to achieve long-term organizational objectives.

The strategic management process also helps an organization to update its strategies with respect to changes taking place in the business environment.

Strategic planning is one of the most important aspects of the strategic management process.

It involves defining strategies and allocating resources for the implementation of those resources.

Therefore, the overall success of the strategic management process depends on the effectiveness of strategic planning.

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