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Lesson 1

  1. 1. STRATEGIC MANAGEMENT Dr S Sarangapani STRATEGIC MANAGEMENT Dr S Sarangapani
  2. 2. Strategy- IntroductionStrategy- Introduction So far you studied about HRM, PSY, OB, R&S, FIS, T&D, HRIS, T/E, Ecom., DM, TQM, IHRM,RM, SP, etc., Now SM-----How it is different?????????????????????????????? It is about managing whole organisation as well as your level What is happening today? • Business, technology and product life is shrinking. • Demographic shift in terms of consumer preference and requirements. • A direct promotion from Agricultural economy to service or Hi-tech economy in the new growth economy. • Dramatic change in IT & Communication • A concept from liberalization, privatization & Globalization (LPG) to regionalization
  3. 3. 4 Strategic Management Creating & Sustaining Competitive Advantages, Globally Why? To ensure Growth with Profits in the long-run!
  4. 4. 5 Competitive success is transient...unless care is taken to preserve competitive position Only 16 of the 100 largest U.S. companies at the start of the 20th century are still identifiable today! In a recent year, 44,367 businesses filed for bankruptcy and many more U.S. businesses failed Challenge of Strategic ManagementChallenge of Strategic Management
  5. 5. Can you share views about strategy? A strategic intent is a company's vision of what it wants to achieve in the long term. Bill Gates –Microsoft - Visionary Leadership Steve Jobs – Apple Inc Strategy……… concerns managerial decisions and actions which affect the success and survival of business involves the judgment to maximize long-term profits in the face of uncertainty and aggressive competition strategy is the linkage between a business and its current and future environment
  6. 6. Why should you study Strategic Management?Why should you study Strategic Management? You may feel that SM & managing strategically have little to do with you. •that everyone in an organization plays a role in managing strategically. •life after B-school for most of you means finding a job in order to have an income, this means you'll be working for some organization, OR •even if you choose to start your own business, managing strategically is important. •Thus, understanding SM and how you can be a more effective and efficient strategic decision maker so that your work performance will be valued and rewarded accordingly. •whether an organization's employees manage strategically makes the organization performs. •organizations of all types and sizes continually face changing situations. These changes may be minor or significant, but there is still change to cope with. •strategic decision makers examine all the important aspects in order to determine the most appropriate decisions and actions. •there to develop and implement appropriate strategies
  7. 7. Introduction to Strategy:Introduction to Strategy: • The term ‘strategy’ -from the Greek word “STRATEGOS” • ( Generalship) - the actual direction of military force, as distinct from governing its deployment. Therefore, the word ‘strategy’ means “THE ART OF GENERAL”. It is a part of every successful business. The process of outlining a strategy involves: Vision, Goals, Plan of Action, Implementing the Plan, and Evaluating Progress (Five Elements of a Plan). Without guidelines set up through a written strategy, there is little effective communication or common direction toward the goal. It is difficult to achieve the business objectives of survival, profit and growth without the five elements of a plan
  8. 8. 9 Three Big Strategic QuestionsThree Big Strategic Questions • Where Are We Now? • Where Do we Want to Go? • How Will We Get There?
  9. 9. Key Characteristics of Strategic DecisionsKey Characteristics of Strategic Decisions Before making a decision, managers have to look into the course of deciding since strategy involves situations like: • How to face the competition in the face of uncertainty • Whether to undertake expansions/diversification • How to chart a turn around • Ensuring stability shall need disinvestments, etc. What makes a decision strategic? decision-making in requires choice • To be focused/broad-based multi-functional in scope/consequences • entrepreneurial future oriented • dealing with competition • concerning the external environment... primarily product/market choices
  10. 10. DefinitionsDefinitions • The determination of the long run goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals (Alfred Chandler) • William Glueck defines strategy as “a unified, comprehensive and integrated plan designed to assure that the basic objectives of the enterprises are achieved”.
  11. 11. Distinguishing Strategy from TacticsDistinguishing Strategy from Tactics • Strategy is the overall plan for deploying resources to establish a favorable position • Tactic is a scheme for a specific maneuver
  12. 12. 1313 Initiation of StrategyInitiation of Strategy Triggering event •New CEO •External intervention •Threat of change in ownership •Performance gap •Strategic inflection point Stimulus for change in strategy
  13. 13. Initiation of Strategy: Triggering EventsInitiation of Strategy: Triggering Events • A triggering event is something that stimulates a change in strategy. • New CEO General understanding and practice is that whenever there is change in the top management; it is meant for strategy change. • Intervention by an External Institution The firm’s bank refuses to agree to a new loan that was apart of the business plan or suddenly calls for payment in full on the old one, prompting new strategy to counter the finance crisis.(Ex: Oman Development bank restricts loan for trading activities) • Threat of a Change in Ownership Another firm may initiate a takeover by buying a company’s common stock. By gaining majority shares the new shareholders' group can switch to a new Board of Directors (BoD) and change the existing strategic outlook. (P&G takeover of Gillette) • Management’s Recognition of a Performance Gap A performance gap exists when performance does not meet expectations. For example, company realizes that sales and profits are no longer increasing or may even be falling.
  14. 14. Nature of StrategyNature of Strategy • Companies can outperform rivals • – choosing to perform things differently • to perform different activities than rivals”. Strategy is long term. • If company’s focus is only on operational effectiveness, it can be good and not better. Over-emphasis on growth leads to the dilutions of strategy.
  15. 15. Benefits of StrategyBenefits of Strategy • It provides direction to business—to take the company from the present position to a new position in future. This is about the company size, image or position with competition. • It guides on the markets—the size, share and scope; local, domestic and international. • It prepares the company to face the competition effectively—creating an advantage over competition regard to products and markets. • It allows the business to organize the resources required to achieve the objectives—4 Ms—Money, Material, Machines and Manpower like skills, technology, facilities, etc. It is concerned with the resource available today and those that will be required for the future plan of action. Otherwise we won’t • It allows the company to analyze the environment—the area in which a business operates. It gathers all information regarding the internal forces and external forces, (PEST analysis) to complete the (SWOT Analysis) Strengths, Weaknesses, Opportunities and Threats analysis. It is about the trade off between its different activities and creating a fit among these activities. • It addresses the values of all stakeholders—Shareholders, Employees, Customers, Suppliers, Institutions, Government, and Society • Q: What is the value of them? Draw picture..
  16. 16. Strategic ManagementStrategic Management • Strategic Management is a dynamic process of preparing and aligning strategies, performance and business results; it is all about leadership, people, technology and processes. • Strategic Management – is the process of identifying and pursuing the organization’s long term objectives by aligning internal capabilities with the external demands of its environment, and then ensuring that the plans are being executed properly to accomplish business goals. • Strategic Management is defined as “the process of specifying an organization’s objectives, developing plans and policies to achieve these objectives and allocating resources (4 Ms) to implement the plans to achieve the objectives”.
  17. 17. Development as a DisciplineDevelopment as a Discipline As a discipline originated in the 1950s and 1960s. • Phase 1 - Basic financial planning :operational control by trying to meet budgets. • Phase 2 - Fore-cast based planning :planning for growth by trying to predict the future beyond next year. • Phase 3- Externally oriented planning (strategic planning): Seeking increasing responsiveness to markets and competition • Phase 4- Seeking a competitive advantage and a successful future by managing all resources; consideration of strategy implementation, evaluation and control • Can you see an evolution here? Discuss
  18. 18. CONTRIBUTORS TO STRATEGIC MANAGEMENTCONTRIBUTORS TO STRATEGIC MANAGEMENT • Alfred Chandler • coordinating the various aspects of management under one all-encompassing strategy. • Prior to this functions of management were separate. • Interactions between departments handled by a boundary position one or two managers. • In his (book)groundbreaking work Strategy and Structure, Chandler showed that a long-term coordinated strategy was necessary. He says, “ structure follows strategy.”
  19. 19. CONTRIBUTORS TO STRATEGIC MANAGEMENTCONTRIBUTORS TO STRATEGIC MANAGEMENT • Philip Selznick • matching the organization's internal factors with external environmental circumstances. • what we now call SWOT analysis • Strengths and weaknesses of the firm are assessed in light of the opportunities and threats from the business environment
  20. 20. CONTRIBUTORS TO STRATEGIC MANAGEMENTCONTRIBUTORS TO STRATEGIC MANAGEMENT • Igor Ansoff • strategic concepts and inventing a whole new vocabulary. developed a strategy grid that compared market penetration strategies, product development strategies, market development strategies and horizontal and vertical integration and diversification strategies. In his 1965 classic Corporate Strategy, he developed the gap analysis & “gap reducing actions
  21. 21. Ellen-Earle ChaffeeEllen-Earle Chaffee • Ellen-Earle Chaffee summarized the main elements of strategic management theory - 1970s: • involves adapting the organization to its business environment. • is fluid and complex. Change creates novel combinations of circumstances requiring unstructured non-repetitive responses. • affects the entire organization by providing direction. • involves both strategy formation (she called it content) and also strategy implementation (she called it process). • is done at several levels: overall corporate strategy, and individual business strategies.
  22. 22. CONTRIBUTORS TO STRATEGIC MANAGEMENTCONTRIBUTORS TO STRATEGIC MANAGEMENT Peter Drucker: • his theory of management by objectives (MBO). • the procedure of setting objectives and monitoring the progress towards them should permeate the entire organization, top to bottom. His other seminal contribution was in predicting the importance of what today we would call intellectual capital. He predicted the rise of what he called the “knowledge worker”
  23. 23. • Michael E. Porter • His Five Force Model that explains the attractiveness of an industry and the value chain analysis and the concept of core competency
  24. 24. Test your understandingTest your understanding • MULTIPLE CHOICE QUESTIONS 1. Which one is not the approach to strategic decision making? • A) Analytical B) emotional • C) External –internal environment analysis D) allocation/ using resources 2. Strategic management helps – • A) to define organization’s objectives and directions • B ) to deploy the firm’s resources more carefully • C) Keeps all levels of management informed about changes in environment • D) Maintains records of one financial year 3. Which of the following statements is not true when describing a successful strategy? • A) It provides some property to organisation • B) It provides the means for competitive advantage • C) It addresses changes in the external environment • D) It guarantees long term survival 4. A strategic decision can be distinguished from other types of decisions by • A) Daily routines B) immediate C) Longevity D) risk involved
  25. 25. Role of Managers In Strategic ManagementRole of Managers In Strategic Management • Strategic decisions: Managers take strategic decisions to initiate major changes and STM involves using their knowledge and experience in various functions of management. • Ex: Expansion of production capacity, market, etc. • Plan strategically: Managers plan strategically to have a safe position among the competition and achieve high revenue and long term success. • Lead to high performance: It is the manager who motivates the employees and reward them in a fair way based on their performance. Strategic management organisations are high performing organisations and they want performance in the long term. • Ex: Performance target is given to employees in Oman LNG and they are motivated to achieve it. • Understand and act upon the environment: Managers understand the business environment and frame (make) policies based on the complex environment and the strength and weakness of the organisation. They also successfully implement the policies. Hence their role is important in Strategic management. •
  26. 26. Limitations / Reasons for failure of strategy: •   Failure to execute in overcoming the four key organizational hurdles Cognitive , Motivational, Resource, Political HURDLES • Failure to understand the customer • Why do they buy; Is there a real need for the product • inadequate or incorrect marketing research • Inability to predict environmental reaction • What will competitors do • Fighting brands • Price wars
  27. 27. • Over-estimation of resource competence • Can the staff, equipment, and processes handle the new strategy • Failure to develop new employee and management skills • Failure to coordinate • Reporting and control relationships not adequate • Organizational structure not flexible enough • Failure to obtain employee commitment • New strategy not well explained to employees • No incentives given to workers to achive the new strategy
  28. 28. Keys to successful strategies:ActivityKeys to successful strategies:Activity • Samsung has recorded a 120 per cent year-on-year growth in mobile communication device sales in 2012 in Oman. In the Gulf region, Samsung recorded a 214 per cent increase, following the launch of the Galaxy S III, the Galaxy Note II and its comprehensive portfolio of mid-range feature phones, smart phones and tablets. • The success of the Galaxy series, on the back of an improved distribution network and the expansion of their reach even to the interior villages, has been the main reason of the phenomenal growth of mobile sales in Oman. They enjoy a 70 per cent market share in the Smartphone segment in Oman up to 2013. • The company's global telecommunications business posted revenue of US$52 bn in the fourth quarter of 2012. 2012 has been an eventful year, globally as well as regionally as customers across the Gulf have responded positively to the launch of their products, the Galaxy S III and the Galaxy Note II. Within the GCC they reported a huge 214 per cent growth year on year. In 2013 also, sales is very high. For 2013, Samsung the demand for smart phones and tablet PCs increased more, while the growth for feature phones is expected to remain static. • Discuss the strategic elements / terms and plans here.
  29. 29. Keys to successful strategiesKeys to successful strategies • Searching actively for innovative ways the organization can improve on what it is already doing. • Identifying new opportunities for the organization to pursue. • Developing ways to increase the firm's competitive strength and put it in a stronger position to cope with competitive forces. Devising ways to build and maintain a competitive advantage. • Deciding how to meet threatening external developments. • Encouraging individuals throughout the organization to put forth their ideas • Directing resources away from areas of low or diminishing results toward areas of high or increasing results. • Deciding when and how to diversify. • Choosing which businesses (or products) to abandon, which of the continuing ones to emphasize, and which new ones to enter or add. • •
  30. 30. Importance of strategic management:Importance of strategic management: • Gives direction to the organisation: It makes to move the organisation towards business goals and achieve them. It enables achieving vision and mission and makes the employees to have one unified vision. • Facilitates development and growth: It makes organisation to grow using strategies such as expansion, diversification, etc. • Helps in forecasting: It focuses on future and predicts future. • Gives reputation to organisation: The success of the orgainsation every year makes it more famous and gives reputation.
  31. 31. Importance of strategic management:Importance of strategic management: • Threats minimised: The threats from political, economical, societal, technological, legal, ecological and competitive environments are faced using competencies. • Grasping the opportunity: By proactive methods, the organisation sees the opportunities in the market and uses them. • Increased performance and profits: Increased employee performance leads to increased profits.

Notas del editor

  • routine decisions are not strategic
    can be replaced by policy or delegated
    Importance of making a decision
    Soccer analogy
    Road analogy
    Macro environment
    Stakeholders
    suppliers
    customers
    competitors
    Government
    Owners
    Employees
  • entrepreneur theorizing
    develop a view of the world and how you fit in it
    Environmental Scanning

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