Strategic Mgt 3rd Sem Mms2
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STRATEGIC MANAGEMENTAN INTRODUCTION
Is attained when a firm generates supernormal returns on its investments, by offering services of value, and using a cost effective technological base. Is sustained when the firm appropriately exploits and develops its technological base, thereby avoiding erosion of its competitive position from competitive attacks and changes in the market preferences. Business policy set of management decisions oriented towards enhancing and sustaining the firms competitive advantage based on a system of extrinsic and intrinsic values.
Process of planning, programming, performing, profiting from and developing business policy.
Strategy refers to the pursuit of competitive advantage i.e., winning in the marketplace.
Organization as a battleship As a bundle of market activities As a bundle of resources As a pattern in a stream of decisions As a contingent systems. As a portfolio of platforms As an exchange hub. As a managerial function. As a dealer in value.5
POPULARIZED BY Gary Hamel and C.K.Prahalad (1989). Refers to the purpose of the organization and the ends it wishes to pursue. Represents the organizations belief about its state of the future. The ends the organization wishes to pursue vary from being long term (vision and mission), to being narrow with a focus on the short term (objectives or goals)6
Strategic intent must inform all of organisational life Strategic intent must take account of the realities of the organisation and its environment Strategic intent is more important than strategy.
Refers to the broad category of long-term intentions that the organization wishes to pursue. At General Electric (GE) the corporate vision is 'We bring good things to life'. The Ford Motor Company vision is 'to become the world's leading consumer company for automotive products and services'.
On a lighter note..
"Business Partners" A man is flying in a hot air balloon and realizes he is lost. He reduces height and spots a man down below. He lowers the balloon further and shouts, "Excuse me, can you tell me where I am?" The man below says: "Yes. You're in a hot air balloon, hovering 30 feet above this field." "You must work in Information Technology" says the balloonist. "I do" replies the man. "How did you know?" "Well" says the balloonist, "Everything you have told me is technically correct, but it's no use to anyone." The man below says, "You must work in business." "I do" replies the balloonist, "but how did you know?" "Well," says the man, "You don't know where you are, or where you're going, but you expect me to be able to help. You're in the same position you were before we met, but now it's my fault."10
Three Legged Chicken" A man was driving along a freeway when he noticed a chicken running along side his car. He was amazed to see the chicken keeping up with him because he was doing 50 MPH. He accelerated to 60 and the chicken stayed right next to him. He speeded up to 75 MPH and the chicken passed him up. The man noticed the chicken had three legs. So, he followed to chicken down a road and ended up at a farm. He got out of his car and saw that all the chickens had three legs. He asked the farmer "What's up with these chickens?" The farmer said "Well, everybody likes chicken legs. I bred a three legged bird. I'm going to be a millionaire." The man asked him how they tasted. The farmer said "Don't know, haven't caught one yet.
the mission statement makes the vision statement more tangible and comprehensible. A mission statement clearly specifies why an organization exists, what differentiates the organization from others and the basic beliefs, values, and philosophy of the organization.
Represent commonly held beliefs, mindsets, and assumptions that shape how work is done in an organization. Are derived out of the organizations mission statement and aid in differentiating the organization from others.
Provide the basis for action towards the achievement of the organizations mission, in the form of specific milestones. Goals are both financial and non financial. Stretch goals- make the organization in order to achieve them.
Are operational definitions of the organizations goals. Provide the measurable parameters for evaluating the performance of the organization.
Indicate the specific actions that will be taken by the organization in order to achieve the objectives. Specify the roles members of the organization will perform, the resource allocation across different organizational sub units and departments, and prioritize and schedule the various activities.
DETERMINATION OF A FIRMS STRATEGIC INTENT
What business we are in? What do we want to be known for/as in future? In what way will the organization serve the interests of the various stakeholders? How does the organization define its various scopes of businesses? How broad, aggressive, and powerful will the organizations intent be defined?17
LIMITATIONS OF STRATEGIC INTENT
Dorothy Leonard- Burton (1995) has highlighted how pursuit of firms strategic intent can create core rigidities that blind the firms to opportunities/threats in the business environment.
Hambrick and Frederickson (2001) specify the architecture of strategy in the form of a strategy diamond.
Where will we be active?
What will be our speed And sequence of moves?
How will we get there?
How will we obtain our results?
How will we win?20
The Indian pharmaceutical industry is characterized by impending change in patent regimes from product patents to process patents. The process patent regime forced firms to build distinctive competencies in process chemistry and reverse engineering of products whose patents had expired in the international market. As the country readies itself for product patents, firms have to build new capabilities,viz., basic research, and an integrated process of new drug discovery. The time taken for a molecule from discovery to approval and commercialization (five to seven years), and the large amounts of money required for new molecular discovery, it is imperative that companies invest heavily in building these competencies. These situations that signal changes in the business environment, shifting the basis of competition among firms and redefine the way business is done in an industry , are called STRATEGIC INFLECTION POINTS. (GROVE, 1996)
Business Level Strategy
How can we best compete in the industry we are in? The goal is to improve the effectiveness of various functions within an organization to enable it to obtain competitive advantage. Miles and Snow (1978) have developed a typology that categorized firms strategic positions into the following categories: prospectors, defenders, reactors and analyzers.
The three generic strategies are: Cost leadership Differentiation Focus
Stuck in the Middle
Firms that do not have a clear positioning and which make choices that include a few elements of different strategies. Such firms do not develop successful competitive advantage.
Miller and Dees, 1993 suggest that hybrid strategies are also useful. Include combinations of generic strategies, such as simultaneous low cost and differentiation strategy.
Business Level Strategy and the Industry Life CycleDiagram
Strategy in emerging industries
The pioneer needs to be able to make its design the dominant design in the industry. This is important in industries where there is a technical standard that firms converge towards. Protect the product from imitation. (with patents, innovations)
Balance the firms self-interest with actions that benefit the whole industry.
Careful understanding of the industry and its evolution as customer needs will change as they use the product, and firms need to be vigilant and be able to change as customer needs change and technology evolves.
Strategy in Growth Industries
The effort is to make a new product or service widely used. The technology adoption life cycle model describes the attributes of various customer groups that adopt a product. (Moore, 2000)
Strategy in Mature Industries
Baden- Fuller and Stopford (1992) studied cases of innovation in mature businesses. Firms need to focus on reconciling alternatives- high quality at low cost, variety at low cost. Price cutting can be used to deter entrants. Product proliferation to close all niches.
Strategies in declining industries
Divest quickly Leadership Niche Harvests
THE ART OF WAR
The Art of War is a Chinese military treatise that was written during the 6th century BC by Sun Tzu. Composed of 13 chapters, each of which is devoted to one aspect of warfare, it has long been praised as the definitive work on military strategies and tactics of its time.
Laying Plans Waging War Attack by Stratagem Tactical Dispositions Energy Weak Points and Strong Manoeuvring Variation of Tactics The Army on the March Terrain The Nine Situations The Attack by Fire The Use of Spies
Laying Plans OCS explores the five key eleme