Basic Concepts of Strategic Management

1. Basic Concepts of • Strategic Management

2. Origin The word “strategy” has been in use since Sun Tzu wrote the Art of War in the fourth Century B.C. Sun Tzu was talking about military strategy. The word strategy has been derived from ‘strategos’ in Greek, which means ‘art of the army general’, or art of deploying army. Strategy signified the skill of planning the movements of armies before actual battle starts ! In 1960-70’s the term strategy was used in business due to the outstanding work of Porter, Drucker, Mintzberg, D’Avine… Who saw business as a WAR and the Market the BATTLE GROUND for a business.

3. What is Strategy? Maturity PLC Growth Sales Decline Introduction Time Entire emphasis is on sustaining the business by generating demand The organisation tries to build systems which can make day to day operational decisions. Now top management wants to secure its position by grooming and developing competencies which cannot be copied easily. This is making strategy!

4. Von Neumann and Morgernstern Thought of strategy as an elaborated game of moves and countermoves, bluffs and counterbluffs, between competing yet independent Business. • “A strategy is defined as a pattern, of purposes, policies, programmes, actions, decisions, or resource allocations that define what an organisation is, what it does, and why it does it. Strategies can vary by level function, and by time frame.” • (Bryson, 1995) Glueck, a Distinguished Professor of Management at the University of Georgia defined strategy precisely as: “A unified, comprehensive and integrated plan designed to assure that the basic objectives of the enterprise are achieved”.

5. Strategy is A Plan that is intended to achieve a particular purpose. Plan is consciously developed course of action Are all plans Strategy? No! Strategy has a pattern which is consistent in behaviour over a time span. Amitab Bachan in 70’s Signed only angry young man’s movies –this was his strategy. For example Just as ford Motor offered his model T only in Black. Picasso painted blue pictures Amir Khan does only one movie at a time Plans don’t have a pattern, they are independent of previous plans. Strategy starts with identifying desired ends and then working it backwards plans don’t start with ends.

6. Mintzberg and Quinn (1996) define a strategy as “the pattern or plan that integrates an organization’s major goals, policies, and action sequences into a cohesive whole. A well-formulated strategy helps to marshal and allocate an organization’s resources into a unique and viable posture based on its relative internal competencies and shortcomings, anticipated changes in the environment and contingent moves by intelligent opponents”. Some Definitions Michael Porter (1996) “The essence of strategy is choosing to perform activities differently than rivals do.” D’Aveni (1994) takes the view that strategy is not only the creation of advantage but “also the creative destruction of the opponent’s advantage.”

7. What is Strategy in Management? • A company’s strategy consists of the set of competitive moves and business approaches that management is employing to run the company • Strategy is management’s “game plan” to Attract and please customers Stake out a market position Conduct operations Compete successfully Achieve organizational objectives

8. “In small businesses this is a responsibility for the livelihood of the owners, the employees and their families. In large organisations it means responsibility not only for large financial investments but also the jobs and well being of perhaps thousands of people, possibly around the world, who might be affected directly by the firms operations. Thus strategic management truly is important, concerned as it is with the sustained well being of the organisation and with the groups and individuals affected by its activities” Finlay P (2000) “ Strategy is a serious and exciting often bizarre game that managers play every day. It is a game that groups of mangers play with other groups in their own organisations and with individuals both inside and outside their organisations. The smallest players in the game are individual managers, single person households and one person businesses. The largest players are powerful teams of top managers in global corporations and government departments” Stacey R.D. (1993)

9. In Fact it’s difficult to define strategy in one way so different approaches are used Strategy is a plan or a direction, a guide or course of action into the future to achieve specific objectives. a path to get from here to there. a pattern that is consistent in behavior over time. a perspective, namely an organizations fundamental way of doing things, i.e a vision. a position, i.e it reflects decisions to offer a particular product in a particular market, or how an organisation will offer value to its customers or how to compete. These are called as 5 P’s of Strategy.

10. Strategy in general refers to How a given objective will be achieved, it is concerned with the relationship between ends and means; i.e. between the results we seek and resources at our disposal. Is concerned with long term plan. Is consistent over time i.e. does not change. Comes from top levels.

11. Strategic Management Defined: Set of managerial decisions and actions that determines the long-run performance of a firm. In essence, strategic Management has to do with understanding where an organization will go in the future and how it will get there.

12. T S hreats trengths Internal Factors External Environment W O eakness pportunities

13. Strategic Management has Four Components First, strategy should include a clear set of long term goals. Second components are that it should define the scope of the firm i.e. the types of products the firm will serve etc. Thirdly, a strategy should have a clear statement of what competitive advantage it will achieve and sustain. Finally, the strategy must represent the firms’ internal contest that will allow it to achieve a competitive advantage in the environment in which it has chosen to compete.

14. Thinking Strategically:The Three Big Strategic Questions Most Important • Where do we want to go? • Business(es) to be in and market positions to • stake out? • Buyer needs and groups to serve? • Outcomes to achieve? Where are we now? How do we get there?

15. Be Careful Top Mgmt. Strategic Manager

16. A Review 1. Is their any relationship between the size of an organisation and the strategy formulation. 2. The management scholar in 2001 put 1,435 good companies through a rigorous performance analysis and discovered only 11 became great. Why? Sales Figs can be misleading 3. Impact of LPG crisis(1991) on strategy of Indian Companies like TATA Automobiles, BPL , & ONGC.

17. McDonald's is a classic case in this regard! In the early 1960s, by redefining the way that hamburgers would be prepared and sold, and by being first to market, it created the fast food industry. And until new entrants into the market subsequently forced it down one step in the profit ladder, it was an amazingly profitable business! Today McDonald's is but one important differentiated brand name among an expanded field of important brand names. Similarly, as a result of its thirty-minute delivery innovation, Domino's Pizza in its early days enjoyed the above-average profits of a niche marketer. Once again, competition subsequently arose thus reducing Domino's original niche position to the more conventional differentiation level. The fact of entropy exists, then, in both the physical and the economic world.

18. identify the strategy of McDonalds identify the strategy of Dominos identify the strategy for a local brand who want to compete with these brands.