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MANAGEMENT POLICY AND STRATEGY SESSION - I. Strategic Management Introduction Prof. Sushil Department of Management Studies Indian Institute of Technology, Delhi INDIA Email: sushil@dms.iitd.ernet.in. What is Strategy?.

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Management policy and strategy session i

MANAGEMENT POLICY AND STRATEGYSESSION - I

Strategic Management Introduction

Prof. Sushil

Department of Management Studies

Indian Institute of Technology, Delhi

INDIA

Email: sushil@dms.iitd.ernet.in

Prof. Sushil\IITD\Session - I


What is strategy
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 - I


Strategy
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 - I


Strategic decisions
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 - I


Dimensions of strategic decisions
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 - I


Strategy development routes
STRATEGY DEVELOPMENT ROUTES

Prof. Sushil\IITD\Session - I


Strategy1
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 - I


Strategic management contd
STRATEGIC MANAGEMENTContd...

  • 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 - I


What is strategic management
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 - I


Critical tasks of strategic management

1

Formulate the company’s mission

2

Develop company profile, reflecting its internal conditions

3

Assess company’s external environment

4

Analyze company’s options

5

Identify most desirable options

6

Select long-term objectives and grand strategies

7

Develop annual objectives and short-term strategies

8

Implement the strategic choices

9

Evaluate success of the strategic process

Critical Tasks of Strategic Management

Prof. Sushil\IITD\Session - I


Landmark contributions to the development of strategic management
LANDMARK CONTRIBUTIONS TO THE DEVELOPMENT OF STRATEGIC MANAGEMENT

Structured thinking about planning systems

Stanford Research Institute

1963-70

Analytical approach to corporate strategy

Igor Ansoff

1965

Strategic management concept

1972

Igor Ansoff

James Quinn

Logical incrementalizm

1980

Strategic thinking

Kenichi Ohmae

1982

Thomas Peters and Robert Waterman

In search of excellence

1982

Prof. Sushil\IITD\Session - I


Landmark contributions to the development of strategic management contd
LANDMARK CONTRIBUTIONS TO THE DEVELOPMENT OF STRATEGIC MANAGEMENTCONTD….

Deliberate and emergent strategies

Henry Mintzberg

1985

Contingency approach (environmental turbulence)

Ignor Ansoff

1985

Noel Tichy and Mary Devanna

Transformational leadership

1986

From competitive advantage to corporate strategy

1987

Michael Porter

Gary Hamel and

C.K. Prahalad

Reshaping industries (competing for the future)

1994

Prof. Sushil\IITD\Session - I


Single business firms
Single-Business Firms MANAGEMENT

Corporate/

business level

POM/R&D strategies

Financial/ accounting strategies

Marketing strategies

Human relations strategies

Prof. Sushil\IITD\Session - I


Multiple business firms
Multiple Business Firms MANAGEMENT

Corporate/

business level

Business 1

Business 2

Business 3

POM/R&D strategies

Financial/ accounting strategies

Marketing strategies

Human relations strategies

Prof. Sushil\IITD\Session - I


Hierarchy of objectives and strategies

Strategic Decision Makers MANAGEMENT

Ends

(What is to be achieved?)

Means

(How is it to be achieved?)

Board of Directors

Corporate Managers

Business Managers

Functional Managers

Mission, including goals & philosophy

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 - I


Characteristics of strategic management decisions

Corporate -level decisions involve MANAGEMENT

Characteristics of Strategic Management Decisions

Greater risk, cost, and profit potential

Greater need for flexibility

Longer time horizons

Prof. Sushil\IITD\Session - I


Characteristics of strategic management decisions1

Business -level decisions MANAGEMENT

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

Prof. Sushil\IITD\Session - I


Characteristics of strategic management decisions2

Functional- level decisions MANAGEMENT

Characteristics of Strategic Management Decisions

Implement overall strategy

Involve action-oriented operational issues

Are relatively short range and low risk

Incur only modest costs

Prof. Sushil\IITD\Session - I


Benefits of strategic management
Benefits of Strategic Management 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 - I


Risks of strategic management
Risks of Strategic Management 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 - I


Patterns of strategy development
PATTERNS OF STRATEGY DEVELOPMENT MANAGEMENT

  • Continuity

  • Incremental

  • Flux

  • Transformational

Prof. Sushil\IITD\Session - I


Strategy development
STRATEGY DEVELOPMENT MANAGEMENT

  • Natural Selection View

  • Planning View

  • Logical Incremental View

  • Cultural View

  • Political View

  • Visionary View

  • Integrative View

Prof. Sushil\IITD\Session - I


Stgrategic management as a process
STGRATEGIC MANAGEMENT AS A PROCESS MANAGEMENT

  • 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 - I


Schools of thought
SCHOOLS OF THOUGHT MANAGEMENT

  • Interpretive framework

    Political Cultural Cognitive

    (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 - I


Cultural
CULTURAL MANAGEMENT

  • 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 - I


Management policy and strategy session i

COGNITIVE MANAGEMENT

  • Bounded rationality

  • The challenge is that of creating a mental framework for strategic action

Prof. Sushil\IITD\Session - I


Learning planning and design schools
LEARNING, PLANNING AND DESIGN SCHOOLS MANAGEMENT

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 - I


Learning planning and design schools contd
LEARNING, PLANNING AND DESIGN SCHOOLS MANAGEMENTContd...

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 - I


Strategic management process
STRATEGIC MANAGEMENT PROCESS MANAGEMENT

  • Strategic Learning and Unlearning

  • Strategic Intent

  • Strategy Evolution

  • Strategic Resonance

Prof. Sushil\IITD\Session - I


Strategic management process1
STRATEGIC MANAGEMENT PROCESS MANAGEMENT

  • Strategic Analysis

  • Strategic Choice

  • Strategy Implementation

Prof. Sushil\IITD\Session - I


Strategic management process2
STRATEGIC MANAGEMENT PROCESS MANAGEMENT

  • Strategic Situation Analysis

  • Strategic Capability Analysis

  • Strategic Process Evolution

  • Strategy Implementation and Impact

Prof. Sushil\IITD\Session - I


Strategic management process3
STRATEGIC MANAGEMENT PROCESS MANAGEMENT

  • Environmental Analysis

  • Internal External

  • Establishing Organizational Direction

    • Vision

    • Mission

    • Objectives

  • Strategy Formulation

  • Strategy Implementation

  • Strategic Control

Prof. Sushil\IITD\Session - I


Strategic management model
Strategic Management Model MANAGEMENT

Company mission & social responsibility

Possible?

External Environment

Internal analysis

Desired?

Strategic analysis & choice

Long-term objectives

Generic & grand strategies

Feedback

Feedback

Short-term objectives; reward system

Functional tactics

Policies that empower action

Restructuring, reengineering & refocusing the organization

Legend

Major impact

Strategic control & continuous improvement

Prof. Sushil\IITD\Session - I

Minor impact


Components of the strategic management model
Components of the Strategic Management Model MANAGEMENT

  • 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 - I


Components of the strategic management model1
Components of the Strategic Management Model MANAGEMENT

  • 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

Prof. Sushil\IITD\Session - I


Components of the strategic management model2
Components of the Strategic Management Model MANAGEMENT

  • Long-term Objectives

    • Profitability

    • Return on investment

    • Competitive position

    • Technological leadership

    • Productivity

    • Employee relations

    • Public responsibility

  • Generic and Grand Strategies

    • Low cost

    • Differentiation

    • Focus

Prof. Sushil\IITD\Session - I


Components of the strategic management model3
Components of the Strategic Management Model MANAGEMENT

  • Short-term Objectives and Action Plans

    • 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 advantage

    • Specify detailed statements of “means” to be used to achieve short-term objectives

Prof. Sushil\IITD\Session - I


Components of the strategic management model4
Components of the Strategic Management Model MANAGEMENT

  • 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

Prof. Sushil\IITD\Session - I


Components of the strategic management model5
Components of the Strategic Management Model MANAGEMENT

  • 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

Prof. Sushil\IITD\Session - I


Implications of the strategic management process
Implications of the Strategic Management Process MANAGEMENT

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

Prof. Sushil\IITD\Session - I