Strategic Management: an overview Session 1 Civil Service College Dhaka Presentation by Dr. Muhammad G. Sarwar Email: sarwar_mg@yahoo.com Cell: 01821443741

Presentation Contents Strategic Management: course outline Strategic Management: references What is Strategic Management? Stages of Strategic Management Strategic Management Model Benefits of Strategic Management Why Strategic Planning/Management may fail? Strategic Management and Business Ethics Guidelines for Effective Strategic Management

Strategic Management: course outline Sl. No. Topic Title Session no. 1 Strategic Management: an overview 2 Strategy Formulation Designing Vision and Mission Statements Setting Company/Organization Objectives Internal Assessment External Assessment Strategy Analysis and Choice 4 Strategy Evaluation 5 Limitations of Strategic Management: why strategy may fail ?

Strategic Management: references Fred R. David (2008), Strategic Management: Concepts and Cases, 11th Edition, Prentice Hall Arthur A. Thompson, Jr. (2010) Crafting and Executing Strategy: the quest for comparative, 16th Edition, McGraw Hill

What is Strategic Management? Strategic Management is an art and science of formulating, implementing and evaluating cross-functional decisions that enable an organization to achieve its objectives (Fred R. David, 2008). Strategic Management is the approaches to grow, attract and please clients, compete successfully and achieve targeted levels of organizational performance (Arther A. Thompson, 2010)

What is Strategic Management? (contd.) In ultimate analysis Strategic Management is the Quest for Competitive Advantage. 4 most frequently used strategic approaches: Striving to be the industry’s low-cost provider Outperforming rivals based on quality, diversity, style, technology, value –added services etc Focusing on a narrow market niche Developing capability that rivals can’t easily imitate.

What is Strategic Management? (contd.) Strategic Management focuses on Integrating management, Production/operation. Financing/accounting, Marketing, Research & development, MIS

Strategic Management vs. Strategic Planning The term ‘Strategic Management’ is mostly used in academia, whereas the term ‘Strategic Planning’ is mostly used in business world. Strategic Management refer to strategy formulation, implementation and evaluation. Strategic Planning refer only to strategy formulation.

Stages of Strategic Management Strategic Management process consists of 3 stages: Strategy formulation, Strategy implementation, and Strategy evaluation.

Strategy formulation Strategy formulation includes: Developing a vision and mission statements Identifying organization’s external opportunities and threats Indentifying internal strengths and weaknesses Establishing long-term objectives Generating alternative strategies Choosing particular strategies.

Strategy formulation (contd.) Strategy formulation involves questions like: What new businesses to enter ? What businesses to abandon ? How to allocate resources to attain goals and targets? Whether to expand existing production capacity or diversify ! Whether to enter international market ! Whether to merge or form a joint venture ! How to avoid a hostile takeover ?

Strategy implementation Strategy implementation is the ‘action stage’ of Strategic Management. It requires: Setting annual objectives Devise policies to attain set objectives Motivate employees to achieve objectives Allocating resources for achieving objectives

Strategy evaluation Strategy evaluation is the final stage of strategic management. 3 strategy evaluation activities: Reviewing external and internal factors that are the basis of current strategies, Measuring performance, and Taking corrective actions.

Strategic Management Model Strategy Formulation Strategy Implementation Strategy Evaluation

Strategy as a Blend of Proactive Initiatives and Reactive Adjustments Strategy Evolves over Time Prior version of strategy New initiatives + ongoing strategy elements Adaptive reactions to changing circumstances Latest version of strategy

Management Strategy vs. Business Model An Organization's management strategy relates broadly to its competitive initiatives and action plan to attain the set objectives. Business model focus on how the business will generate revenues sufficient to cover cost, produce attractive profits and return on investment. A business model is the story line of the Management how the strategy will be a moneymaker.

Historical Development of Strategic Management History of Strategic Planning began in the military. Word ‘Strategy’ comes from Greek word ‘Straegos’, that refers to military general and combines ‘stratos’ (army) and ‘ago’ (to lead). Both Military Strategy and Business Strategy focus how to use their own strengths to exploit enemy’s / competitor’s weaknesses. Fundamental difference between Military Strategy and Business Strategy is that Military strategy is based on the assumption of ‘Conflict’, whereas Business Strategy is based on the assumption of ‘Competition’.

Historical Development of Strategic Management (contd.) Strategic Management as an academic discipline started to develop in the 1950s. Most influential pioneers were: Alfred Chandler, Philip Selznick, Igor Ansoff and Peter Drucker. Alfred Chandler developed the idea of coordinating the various aspect of management under one all-encompassing strategy.

Historical Development of Strategic Management (contd.) Philip Seznick introduced the idea of matching organization’s internal factors with the external environmental circumstances. Igor Ansoff developed a strategy grid that compared market penetration strategies, product development strategies, market development strategies, horizontal and vertical integration and diversification strategies. Peter Drucker developed the theory of management by objectives (MBO) that involve the entire organization in setting objectives.

Benefits of Strategic Management Financial Benefits: Strategic management make organization more profitable and successful Nonfinancial Benefits: Objective view of management problems Framework for improved coordination Identify, prioritize and exploit opportunities Encourage forward thinking Encourage favorable attitude toward change

Why Some Firms Do No Strategic Planning ? Poor Reward Structure Fire Fighting Content with Success Overconfidence Prior Bad Experience Fear of Failure Waste of Time

Why Strategic Planning/Management may fail? Strategic planning to satisfy regulatory requirement, Top management not actively supporting the strategic planning process Failing to involve key employees in all phases of strategic planning Becoming so engrossed in current problems that insufficient planning is done Failing to communicate the strategy to employees who continue working in dark

Strategic Management and Business Ethics All Strategy formulation, implementation and evaluation decisions have ethical ramifications. Good Business Ethics is a prerequisite for good strategic Management. Business Ethics is defined as principles of conduct within organization that guide decision making and behavior, like harming the natural environment is unethical.

Strategic Management and Business Ethics (contd.) A strategy can’t be considered ethical just because it is legal, To meet the standard of being ethical, a strategy must pass moral scrutiny, To be ethical a strategy must not be shady, unconscionable, injuries to others or unnecessarily harmful to the environment.

Guidelines for Effective Strategic Management Effective Strategic Management is open- mindedness; a willingness and eagerness to consider new information, new viewpoints, new ideas, and new possibilities. Strategic Management is a self-reflective learning process that familiarizes managers and employees in the organization with key strategic issues and feasible alternatives for resolving those issues.

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