Module 1 - Overview of Strategic Management - Presentation

Module-1
OVERVIEW OF STRATEGIC
MANAGEMENT
Prof. Kirthika
AIT, Bengaluru
"Most of us fear change. Even when our minds say change is normal,
our stomachs quiver at the prospect. But for strategists and managers
today, there is no choice but to change.“
—Robert Waterman Jr.
"Without a strategy, an organization is like a ship without a rudder,
going around in circles. It’s like a tramp; it has no place to go.“
—Joel Ross and Michael Kami
Strategy - Definition
 The word “strategy” is derived from the Greek word “strategos”; stratus
(meaning army) and “ago” (meaning leading/moving).
 Strategy is an action that managers take to attain one or more of the
organization’s goals.
 Strategy can also be defined as “A general direction set for the company and
its various components to achieve a desired state in the future. Strategy results
from the detailed strategic planning process”.
Defining Strategic Management
 Strategic management can be defined as the art and science of formulating,
implementing, and evaluating cross-functional decisions that enable an organization
to achieve its objectives.
 As this definition implies, strategic management focuses on integrating management,
marketing, finance/accounting, production/operations, research and development,
and information systems to achieve organizational success.
 The term strategic management in this text is used synonymously with the term
strategic planning.
 The purpose of strategic management is to exploit and create new and different
opportunities for tomorrow
Stages of strategic management
• developing a vision and mission, identifying an organization’s external opportunities and
threats,
• Determining internal strengths and weaknesses, establishing long-term objectives,
Strategy formulation
• generating alternative strategies, and choosing particular strategies to pursue
• deciding what new businesses to enter, what businesses to abandon, how to allocate
resources
• requires a firm to establish annual objectives, devise policies, motivate employees, and
allocate resources so that formulated strategies can be executed
Strategy implementation • includes developing a strategy-supportive culture, creating an effective organizational
structure, redirecting marketing efforts, preparing budgets, developing and utilizing
information systems, and linking employee compensation to organizational performance.
• Three fundamental strategy-evaluation activities are

• (1) reviewing external and internal factors that are the bases for current strategies,
Strategy evaluation • (2) measuring performance, and
• (3) taking corrective actions
The Strategic Management Model
Benefits of Strategic Management
Key terms in Strategic Management
 Competitive advantage
 Strategic management is all about gaining and maintaining competitive
advantage.
 This term can be defined as “anything that a firm does especially well
compared to rival firms.”
 When a firm can do something that rival firms cannot do, or owns something
that rival firms desire, that can represent a competitive advantage.
 Normally, a firm can sustain a competitive advantage for only a certain period due
to rival firms imitating and undermining that advantage. Thus it is not adequate to
simply obtain competitive advantage. A firm must strive to achieve sustained
competitive advantage by
(1) continually adapting to changes in external trends and events and internal
capabilities, competencies, and resources; and by
(2) (2) effectively formulating, implementing, and evaluating strategies that
capitalize upon those factors
 Strategists
 Strategists are the individuals who are most responsible for the success or failure
of an organization.
 Strategists have various job titles, such as chief executive officer, president,
owner, chair of the board, executive director, chancellor, dean, or entrepreneur.
 Strategists help an organization gather, analyze, and organize information. They track
industry and competitive trends, develop forecasting models and scenario analyses,
evaluate corporate and divisional performance, spot emerging market opportunities,
identify business threats, and develop creative action plans
 Usually found in higher levels of management, they typically have considerable
authority for decision making in the firm. The CEO is the most visible and critical
strategic manager.
Vision and Mission Statements
 Many organizations today develop a vision statement that answers the
question “What do we want to become?”
 Developing a vision statement is often considered the first step in strategic
planning, preceding even development of a mission statement.
 Many vision statements are a single sentence.
BBC: “To be the most creative organization in the world”
Disney: “To make people happy.”
Google: “To provide access to the world’s information in one click”
IKEA: “To create a better everyday life for the many people”
Instagram: “Capture and share the world’s moments”
Uber: “We ignite opportunity by setting the world in motion”
 Mission statements are “enduring statements of purpose that distinguish one business
from other similar firms.
 A mission statement identifies the scope of a firm’s operations in product and market
terms.” It addresses the basic question that faces all strategists: “What is our
business?”
 A clear mission statement describes the values and priorities of an organization.
 Developing a mission statement compels strategists to think about the nature and scope
of present operations and to assess the potential attractiveness of future markets and
activities.
 A mission statement broadly charts the future direction of an organization.
Microsoft mission statement: To empower every person and every organization on the planet to
achieve more.
Pinterest mission statement: Bring everyone the inspiration to create a life they love.
Spotify mission statement: To unlock the potential of human creativity — by giving a million creative
artists the opportunity to live off their art and billions of fans the opportunity to enjoy and be inspired
by it.
Nike mission statement: Bring inspiration and innovation to every athlete in the world. If you have a
body, you are an athlete.
Long-Term Objectives
 Objectives can be defined as specific results that an organization seeks to achieve
in pursuing its basic mission.
 Long-term means more than one year. Objectives are essential for organizational
success because they state direction; aid in evaluation; create synergy; reveal
priorities; focus coordination; and provide a basis for effective planning,
organizing, motivating, and controlling activities.
 Objectives should be challenging, measurable, consistent, reasonable, and clear.
In a multidimensional firm, objectives should be established for the overall
company and for each division.
Strategies
 Strategies are the means by which long-term objectives will be
achieved. Business strategies may include geographic expansion,
diversification, acquisition, product development, market
penetration, retrenchment, divestiture, liquidation, and joint
ventures.
Annual Objectives and Policies
 Annual objectives are short-term milestones that organizations must achieve to
reach longterm objectives. Like long-term objectives, annual objectives should be
measurable, quantitative, challenging, realistic, consistent, and prioritized.
 They should be established at the corporate, divisional, and functional levels in a
large organization. Annual objectives should be stated in terms of management,
marketing, finance/accounting, production/operations, research and development,
and management information systems (MIS) accomplishments.
 Policies are the means by which annual objectives will be achieved. Policies include
guidelines, rules, and procedures established to support efforts to achieve stated
objectives. Policies are guides to decision making and address repetitive or
recurring situations.
 Policies are most often stated in terms of management, marketing,
finance/accounting, production/operations, research and development, and
computer information systems activities. Policies can be established at the
corporate level and apply to an entire organization at the divisional level and apply
to a single division, or at the functional level and apply to particular operational
activities or departments.

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Module-1

• Three fundamental strategy-evaluation activities are

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