Prof. Sushil\IITD\Session - I1 MANAGEMENT POLICY AND STRATEGY SESSION - I Strategic Management Introduction Prof. Sushil Department of Management Studies Indian Institute of Technology, Delhi INDIA

Prof. Sushil\IITD\Session - I2 What is Strategy?   Large-scale, future-oriented plan for interacting with competitive environment to achieve objectives   Company’s “game plan”   Framework for managerial decisions

Prof. Sushil\IITD\Session - I3 STRATEGY Direction and scope of an organisation over the long term. Matches its resources to its changing environment. In particular its markets, customers or clients. So as to meet stakeholders’ expectations.

Prof. Sushil\IITD\Session - I4 STRATEGIC DECISIONS Modernization Divestment Product Launch Acquisition/Merger Collaboration/Alliance Overseas Expansion Turnaround Technology Transfer Entry into New Markets Restructuring Reengineering

Prof. Sushil\IITD\Session - I5 Dimensions of Strategic Decisions Strategic issues... Require top-management decisions Require large amounts of firm’s resources Affect firm’s long-term prosperity Are future oriented Usually have multifunctional or multibusiness consequences Require consideration of firm’s external environment

Prof. Sushil\IITD\Session - I6 STRATEGY DEVELOPMENT ROUTES

Prof. Sushil\IITD\Session - I7 STRATEGY   Derived from Greek `strategies a general set of maneuvers carried out to overcome an enemy STRATEGIC MANAGEMENT   A way of regenerating an organization,   Through continuous attention to a vision of what the people, who make up the organization, wish to do.   A proactive process of seeking to change the organization, its stakeholders   and the content or environment within which it seeks to attain its aspirations   It is particularly about stretching the organization to gain leverage   from its distinctive competencies and ability to change them.

Prof. Sushil\IITD\Session - I8 STRATEGIC MANAGEMENT Contd...   It involves creating and moulding the future,   along with making sense of the past   rather than predicting and responding to some predetermined future reality   It is about developing the capability for long term flexibility and strategic opportunism   rather than making and sticking to long term plans.

Prof. Sushil\IITD\Session - I9 What is Strategic Management?  The set of decisions and actions that result in the formulation and implementation of plans designed to achieve a company’s objectives.

Prof. Sushil\IITD\Session - I10 Critical Tasks of Strategic Management 1 1 Formulate the company’s mission 2 2 Develop company profile, reflecting its internal conditions 3 3 Assess company’s external environment 4 4 Analyze company’s options 5 5 Identify most desirable options 6 6 Select long-term objectives and grand strategies 7 7 Develop annual objectives and short-term strategies 8 8 Implement the strategic choices 9 9 Evaluate success of the strategic process

Prof. Sushil\IITD\Session - I11 LANDMARK CONTRIBUTIONS TO THE DEVELOPMENT OF STRATEGIC MANAGEMENT Stanford Research Institute Structured thinking about planning systems Igor Ansoff Analytical approach to corporate strategy Igor Ansoff James Quinn Kenichi Ohmae Thomas Peters and Robert Waterman Strategic management concept Logical incrementalizm Strategic thinking In search of excellence

Prof. Sushil\IITD\Session - I12 LANDMARK CONTRIBUTIONS TO THE DEVELOPMENT OF STRATEGIC MANAGEMENT CONTD…. Henry Mintzberg Ignor Ansoff Noel Tichy and Mary Devanna Michael Porter Gary Hamel and C.K. Prahalad Deliberate and emergent strategies Contingency approach (environmental turbulence) Transformational leadership From competitive advantage to corporate strategy Reshaping industries (competing for the future)

Prof. Sushil\IITD\Session - I13 Single-Business Firms Corporate/ business level Corporate/ business level POM/R&D strategies Marketing strategies Human relations strategies Financial/ accounting strategies

Prof. Sushil\IITD\Session - I14 Multiple Business Firms Corporate/ business level Corporate/ business level Business 1 Business 2 Business 3 POM/R&D strategies Marketing strategies Human relations strategies Financial/ accounting strategies

Prof. Sushil\IITD\Session - I15 Board of Directors Corporate Managers Strategic Decision Makers Business Managers Functiona l Managers Mission, including goals & philosophy Ends (What is to be achieved?) Means (How is it to be achieved?) Long-term objectives Grand strategy Annual objectives Short-term strategies & policies Note: indicates a principal responsibility; indicates a secondary responsibility Hierarchy of Objectives and Strategies

Prof. Sushil\IITD\Session - I16 Characteristics of Strategic Management Decisions Greater risk, cost, and profit potential Greater need for flexibility Longer time horizons Corporate -level decisions involve

Prof. Sushil\IITD\Session - I17 Characteristics of Strategic Management Decisions Bridge decisions at corporate and functional levels Are less costly, risky, and potentially profitable than corporate-level decisions Are more costly, risky, and potentially profitable than functional-level decisions Business - level decisions

Prof. Sushil\IITD\Session - I18 Involve action-oriented operational issues Are relatively short range and low risk Incur only modest costs Functional- level decisions Implement overall strategy Characteristics of Strategic Management Decisions

Prof. Sushil\IITD\Session - I19 Benefits of Strategic Management Enhances firm’s ability to prevent problems Emphasizes group-based strategic decisions likely to be based on best available alternatives Improves understanding of employees of productivity-reward relationship Reduces gaps/overlaps in activities among employees as their participation clarifies differences in roles Reduces resistance to change

Prof. Sushil\IITD\Session - I20 Risks of Strategic Management Time involved may negatively impact operational responsibilities of managers Lack of involvement of strategy makers in strategy implementation may result in shirking of responsibility for strategic decisions Potential disappointment of employees over unattained expectations requires managerial time and training

Prof. Sushil\IITD\Session - I21 PATTERNS OF STRATEGY DEVELOPMENT Continuity Incremental Flux Transformational

Prof. Sushil\IITD\Session - I22 STRATEGY DEVELOPMENT Natural Selection View Planning View Logical Incremental View Cultural View Political View Visionary View Integrative View

Prof. Sushil\IITD\Session - I23 STGRATEGIC MANAGEMENT AS A PROCESS   Managing power and politics   Procedural rationality and justice   Role of group processes in socially negotiating strategy   Power of emotional and cognitive commitment in delivery strategy   Conflict and cooperation   Pascal - `present is determined by the future not the past’.

Prof. Sushil\IITD\Session - I24 SCHOOLS OF THOUGHT   Interpretive framework PoliticalCulturalCognitive (The management (Shared beliefs (Mental processes) of means)and traditions)   Learning / Planning / Design Political   Strategy formulation as a political process   where strategic aspirations are disputed, conflict exists   managers compete for scarce resources   the internal political dynamic   the dynamic between the organization and its stake holders   conflict and consensus co-exist   process of negotiating action is central.

Prof. Sushil\IITD\Session - I25 CULTURAL   The strategy is ultimately expressed through the culture of an organization   Cultural web control systems rituals and routines symbols stories organizational structure power structure   shared beliefs developed into organizational recipes reinforced by tradition, habit, stories, ideology   central focus for change- strategy is about changing culture.

Prof. Sushil\IITD\Session - I26   Bounded rationality   The challenge is that of creating a mental framework for strategic action COGNITIVE

Prof. Sushil\IITD\Session - I27 LEARNING, PLANNING AND DESIGN SCHOOLS Learning   Strategy formulation and enacting are concurrent   Concrete experiences are the basis for observation and reflection, which enable the formation of abstracts concepts   Strategy making and its realization together create a sequence of platforms for strategic change and organizational achievement Planning   Developing explicit plans which are decomposed into sub- strategies and programs   It favours seeing organizations as bureaucracies where central players are planners.

Prof. Sushil\IITD\Session - I28 LEARNING, PLANNING AND DESIGN SCHOOLS Contd... Design   Seeking strategic fit through an external and internal appraisal which is central to a sequence of steps: classification of organizational mandates, of organizational mission, situational strategic analysis identification of strategic issues strategy formulation implementation

Prof. Sushil\IITD\Session - I29 STRATEGIC MANAGEMENT PROCESS  Strategic Learning and Unlearning  Strategic Intent  Strategy Evolution  Strategic Resonance

Prof. Sushil\IITD\Session - I30 STRATEGIC MANAGEMENT PROCESS  Strategic Analysis  Strategic Choice  Strategy Implementation

Prof. Sushil\IITD\Session - I31 STRATEGIC MANAGEMENT PROCESS  Strategic Situation Analysis  Strategic Capability Analysis  Strategic Process Evolution  Strategy Implementation and Impact

Prof. Sushil\IITD\Session - I32 STRATEGIC MANAGEMENT PROCESS   Environmental Analysis   Internal External   Establishing Organizational Direction - -Vision - -Mission - -Objectives   Strategy Formulation   Strategy Implementation   Strategic Control

Prof. Sushil\IITD\Session - I33 Strategic Management Model Company mission & social responsibility Long-term objectives Generic & grand strategies Short-term objectives; reward system Functional tactics Policies that empower action Restructuring, reengineering & refocusing the organization Strategic control & continuous improvement External Environment Internal analysis Strategic analysis & choice Legend Major impact Minor impact Feedback Possible? Desired?

Prof. Sushil\IITD\Session - I34 Components of the Strategic Management Model   Mission Specifies unique purpose of company Identifies scope of operations Describes product, market, and technological areas of emphasis Reflects values and priorities of decision makers Expresses approach to social responsibility efforts   Internal Analysis Depicts quantity and quality of company’s financial, human, and physical resources Assesses company’s strengths and weaknesses Contrasts past successes and concerns with current capabilities to identify future capabilities

Prof. Sushil\IITD\Session - I35   External Environment Consists of all conditions and forces affecting firm’s strategic options, typically beyond its control Includes three interactive segments - operating, industry, and remote environments   Strategic Analysis and Choice Involves simultaneous assessment of external environment and internal analysis to identify range of attractive options Incorporates screening process based on mission to generate possible and desired opportunities Results in selection of options from which a strategic choice is made Components of the Strategic Management Model

Prof. Sushil\IITD\Session - I36   Long-term Objectives Profitability Return on investment Competitive position Technological leadership Productivity Employee relations Public responsibility   Generic and Grand Strategies Low cost Differentiation Focus Components of the Strategic Management Model

Prof. Sushil\IITD\Session - I37   Short-term Objectives and Action Plans Translate generic and grand strategies into “action”Translate generic and grand strategies into “action” –Identify specific functional tactics to be taken in the near term –Establish a clear time frame for completion –Create accountability –Specify one or more immediate objectives as outcomes of the action   Functional Tactics Involve identifying activities unique to the function to help build competitive advantageInvolve identifying activities unique to the function to help build competitive advantage Specify detailed statements of “means” to be used to achieve short-term objectivesSpecify detailed statements of “means” to be used to achieve short-term objectives Components of the Strategic Management Model

Prof. Sushil\IITD\Session - I38   Policies that Empower Action Include broad, precedent-setting decisions that substitute for repetitive or time-sensitive decision making Often increase managerial effectiveness by empowering discretion of subordinates in implementing strategies   Restructuring, Reengineering, and Refocusing the Organization Involves an internal focus - getting work done efficiently and effectively to make the strategy work – –Organizational structure – –Leadership – –Culture – –Reward systems Components of the Strategic Management Model

Prof. Sushil\IITD\Session - I39   Strategic Control and Continuous Improvement Control – –Tracks a strategy during implementation – –Detects problems – –Involves making necessary adjustments Continuous improvement – –Provides another approach to strategic control – –Allows an organization to respond more proactively and timely to rapid developments Components of the Strategic Management Model

Prof. Sushil\IITD\Session - I40 Implications of the Strategic Management Process Changes in any one component will affect other components Recognition of the sequential nature of strategy formulation and implementation Necessity of feedback from institutionalization, review, and evaluation to early stages of process Must be viewed as dynamic, involving constant changes in interdependent strategic activities