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Strategic Thinking: Session-2

1. Strategy is an action plan designed to achieve a company's goals through deploying resources to gain a favorable market position or defend against competitors. 2. While operational effectiveness is necessary, it is not a strategy on its own and does not provide sustained competitive advantage as best practices diffuse rapidly. 3. Strategic management is the process of formulating strategy through analyzing the external environment, identifying internal strengths and weaknesses, developing objectives and alternative strategies, and selecting strategies to implement and evaluate.

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Abhyjeet Bhansali
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32 views

Strategic Thinking: Session-2

1. Strategy is an action plan designed to achieve a company's goals through deploying resources to gain a favorable market position or defend against competitors. 2. While operational effectiveness is necessary, it is not a strategy on its own and does not provide sustained competitive advantage as best practices diffuse rapidly. 3. Strategic management is the process of formulating strategy through analyzing the external environment, identifying internal strengths and weaknesses, developing objectives and alternative strategies, and selecting strategies to implement and evaluate.

Uploaded by

Abhyjeet Bhansali
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Strategic Thinking

Session-2
Strategy- definition
• An action plan a company designs to attain its targeted goals
• Overall action plan for deploying resources to establish a favorable
position in the market.
• Actions plan prepared to ensure that the organization is
better off than its competitors or is able to fend off
competitive actions from competitors.

Tactic is a scheme for a specific maneuver.


Operational Efficiency is not Strategy
• Use of management tools (i.e. benchmarking, best practices,
outsourcing) are not strategy
• Operational effectiveness (OE) - productivity, speed, quality - and
strategy are both necessary for superior performance
Productivity Frontier
• Sum of all best practices at a given time
• The maximum value that a firm can provide at a given cost using best
practices
• As OE improves within a firm, it moves closer to the productivity
frontier.
• OE is necessary for superior profitability but not solely sufficient.
Rapid diffusion of best practices reduces long-term impact of OE on
profitability.
Productivity Frontier
• OE competition pushes the productivity frontier outward
• OE competition produces absolute improvement in firm performance
yet no relative improvement between surviving competitors. Leads to
self-inflicted wounds i.e. hyper-competition, zero-sum competition,
static or declining prices and lower profitability.
OE Programs
• TQM • Continuous Improvement
• Time-based Competition • Virtual Organization Forms
• Benchmarking • Best Practices
• Learning Organization • SQC
• Outsourcing • Change Management
• Empowerment
Competitive Convergence
• The more rivals copy and imitate OE ‘best practices’ the more they
begin to look the same.
• Leads to imitation (consultants as seed sowers) and homogeneity.
• OE imitation leads to strategy convergence and competition becomes
mutually destructive leading to wars of attrition (lose-lose). Leads to
M&A activity as end-game.
Competitive Strategy
• Being different in the marketplace from rivals
• Deliberately choosing a different set of activities to deliver a unique
mix of value
• The essence of strategy is in choosing to perform activities differently,
or to perform different activities (or both), than rivals.
Three levels of strategy

1. Corporate Strategy
At this level the fundamental task is to develop a balanced portfolio of businesses
which will achieve the goals of the corporation and satisfy its stakeholders.
2. Business Strategy
At this level the business, or set of activities is given and the major task for
strategic planner at this level is for business to succeed against competitors and
also satisfy corporate success criteria.
3. Functional Strategy
At this level the major task is to provide an appropriate functional strategies (
finance and accounting, marketing, R+D, production, personnel) for SBU or
corporate level strategy.
Three levels of strategy
Strategic Management
• The process by which managers choose a set of strategies
for the enterprise to pursue its vision.
• Art & science of formulating, implementing, and evaluating, cross-
functional decisions that enable an organization to achieve its
objectives
• Full set of commitments, decisions, and actions required for a firm to
achieve strategic competitiveness
• Set of decisions and actions that result to the formulation and
implementation of plans designed to achieve a company’s objectives
Strategic Management Process
The strategic management process is made up of three main steps:
• strategy formulation,
• strategy implementation and
• strategy evaluation.
Strategy Formulation

Vision & Mission

External Opportunities & Threats

Internal Strengths & Weaknesses

Long-Term Objectives

Alternative Strategies

Strategy Selection
Strategy formulation

• Identifying the company’s mission and vision in the starting point for
strategic management process.
• The mission and vision statements set the direction for where the
company is going.
• In order to achieve the organization’s mission, would need to
operationalize the mission statement into strategic objectives.
• Objectives – are concrete goals the organization aims to achieve in
pursuing its basic mission.
Strategy formulation

Before organization establish its objectives, it must perform external


and internal analysis, also called Situation analysis.
• Situation Analysis
• Scanning and evaluating the organization’s internal and external environment
– this provides the critical information to establish the organization’s
objectives.
• Also use to identify the organization’s opportunities and threats.
Strategy formulation

• An organization can develop alternative strategies once the


organization had a clear picture of its environment.
• Strategy formulation involves designing and developing the company
strategies.
Strategy Implementation

Annual Objectives

Policies

Employee Motivation

Resource Allocation
Strategy Implementation
• Strategy implementation means executing the strategies or when
business strategies are translated into action.
• It includes allocating resources to execute the formulated strategies,
preparing budgets, and developing and utilizing information systems
and employees.
Strategy Evaluation

Internal Review

External Review

Performance Metrics

Corrective Actions
Strategy Evaluation
• The final stage in the strategic management process
• The firm’s managers seek to determine which strategies worked and
which were not successful.
• Involves:
• Reviewing external and internal factors that form the basis of the current
strategies
• Measuring performance against objectives
• Taking corrective action – if the strategies formulated did not results in the
objectives being met or not in line with the actual goals, à the strategy should
be modified or reformulated.
What is Formality?
• The degree to which participation, responsibility, authority, and
discretion in decision-making are specified in strategic management.
Formality in Strategy Formulation
• Entrepreneurial Mode : The informal, intuitive, and limited approach
to strategic management associated with owner-managers of smaller
firms.

• Adaptive Mode :The strategic formality associated with firms that


emphasize the incremental modification of existing competitive
approaches.

• Planning Mode: The strategic formality associated with large firms that
operate under a comprehensive, formal planning system
Dimensions of Strategic Decisions
• Require top-management decisions
• Require large amounts of the firm’s resources
• Often affect the firm’s long-term prosperity
• Future oriented
• Usually have multifunctional or multi-business consequences
• Require considering the firm’s external environment
Strategy -work in progress
Changes may be necessary to react to
• Shifting market conditions
• Technological breakthroughs
• Fresh moves of competitors
• Evolving customer preferences
• Emerging market opportunities
• New ideas to improve strategy
• Crisis situations

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