Strategy (1) for Gmp

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Strategic

ManagementProf. Swati A. Mishra

Indian Institute ofManagement Lucknow

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Learning Objectives ofthe Course

Develop a understanding of: What is strategy?

Content and process of strategic

management. How organizational strategies are

formulated?

Issues and challenges relating to theprocess of strategy formulation.

The context in which the strategy is

formulated. 2


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Learning Objectives ofthe Course

The course will help develop An integrated view of all functional

areas

A general management orientation Analytical & conceptual skills in

analysing & formulating corporate

strategy

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Course Structure

1. Introduction to Strategic

Management: Ch 1

2. Analysis of External Environment :

Chap 2

3. Analysis of Internal Environment:

Chap 3

4. Business Level Strategy: Chap 4 4


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Introduction to

Strategic

Management5


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What isStrategy?

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What is Strategy?

Strategy is a well definedroadmap of an organization. Itdefines the direction of an

organization. The objective of astrategy is to maximize anorganizations strengths and to

minimize the strengths of thecompetitors.

Strategy, in short, bridges the gap

between where we are and where7


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Strategy Definition

Derived from Greek word,Strategos, or the art of thegeneral

Strategy is an action thatmanagers take to attain one or moreof the organizations goals.

It is imperative for an organization tohave a clear strategy: an integrated,overarching concept of how the

business will achieve its objectives. 8


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Strategy Definition

Strategy is an integrated andcoordinated set of commitmentsand actions undertaken to gain

competitive advantage through itsconfiguration ofresources andcore competencies within a

challenging business environment,to acheive above average returnsand

fulfil stakeholder expectations". 9


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What ConstitutesStrategy?

Strategy has become a catchall termused to mean whatever one wants itto mean.

Actually they are pieces of strategiesand cannot be decided in isolation.

Strategy is an integrated set ofactions but it is not a catchall forevery important choice an executivefaces.

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Elements of Strategy

A strategy has five elements: Arenas: Where will we be active?

Vehicles: How will we get there?

Differentiators: How will we win inthe marketplace?

Staging: What will be our speed and

sequence of moves? Economic logic: How will we obtain

our returns?12


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ComprehensiveStrategies at IKEA

A strategy is more than simplechoices on these five fronts: it is anintegrated, mutually reinforcing set

of choices choices that form acoherent whole

Example: Global furniture retailer

IKEA

IKEAs strategy over the past 25years has been highly coherent, with

all five elements reinforcing each 14


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Sound Strategy

Is it sufficient to simply make thesefive sets of choices.

Noa business needs not just a

strategy, but a soundstrategy. Strategic-analysis tools are very

helpful for improving the soundness

of strategies: industry analysis,technology cycles, value chainanalysis, and core competencies, to

name a few. 15

i h li f


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Testing the Quality ofStrategy

1. Does it fit with the environment?2. Does it exploit the key

resources?

3. Are the differentiatorssustainable?

4. Are the elements of strategyinternally consistent?

5. Have enough resources to

pursue this strategy? 16


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Strategy is all aboutChoice

Strategy is not primarily aboutplanning.

It is about intentional, informed and

integrated choices.Strategy involves making choices on 3

dimensions:

Which customers to focus on Which products to offer

Which activities to perform17


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The Heart & Soul ofStrategy

In every industry there are severalviable positions that companiesoccupy

Essence of strategy is in identifyingthe strategic position that differsfrom its competitors:

Who are the target customers?What are the products/ services

offered to them?

How can the company do this 18


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The Heart & Soul ofStrategy

Asking the who-what-howquestions

Developing alternatives, and

Selecting specific goals & actions As industries change, new strategic

positions arise to challenge the

existing positions.Thus designing a successful strategy

is never-ending.

Continuously revisit and challenge 19


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Strategic

Management

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Strategic Management

The set of decisions and actions thatresult in formulation andimplementation of plans designed toachieve a companys objectives.

The study ofwhy some firmsoutperform others

How to compete in order to createcompetitive advantages

How to create competitive advantages

Unique and valuable


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Nine Critical Tasks ofStrategic Management

1. Formulate the companys mission

2. Conduct an internal analysis

3. Assess the external environment4. Analyze the companys options by

matching its resources with the

external environment5. Identify the most desirable

options in light of the mission


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9 Critical Tasks of SM

6. Select a set of long-termobjectives and grand strategiesthat will achieve the most

desirable options7. Develop annual objectives and

short-term strategies that are

compatible with long-termobjectives and grand strategies

8. Implement the strategic choices

9. Evaluate the success of the


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Three Levels of Strategy

Corporate level: board ofdirectors, CEO & administration[Highest]

Business level: business andcorporate managers [Middle]

Functional level: Product,geographic, and functional areamanagers [Lowest]


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Alternative StrategicManagement Structures

aracter st cs o


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aracter st cs oStrategic Management

Decisions: Corporate Often carry greater risk, cost,and profit potential

Greater need for flexibility Longer time horizons

Choice of businesses,dividend policies, sources oflong-term financing, and

riorities for rowth

Characteristics of


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Characteristics ofStrategic Management

Decisions: Functional Implement the overallstrategy formulated at the

corporate and business levels Involve action-oriented and

operational issues

Relatively short range andlow risk

Modest costs: de end u on

aracter st cs o


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aracter st cs oStrategic Management

Decisions: Business Help bridge decisions at thecorporate and functional levels

Less costly, risky, and potentiallyprofitable than corporate-leveldecisions

More costly, risky, and potentiallyprofitable than functional-leveldecisions

Include decisions on lant


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Strategy Makers

Ideal strategic team includesdecision makers from all threelevels

Top managers must give finalapproval

Strategic decisions coincidewith managers responsibilities

S i M


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Strategic ManagementProcess

Businesses vary in formulationand other processes

The basic components of the

models used to analyzestrategic management aresimilar

Strategic management is aprocessa flow of information

through interrelated stages of

St t i M t


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Strategic ManagementProcess

Analysis Strategic goals (vision, mission, strategic

objectives) Internal and external environment of the firm

Formulation What industries should we compete in? How should we compete in those industries?

Implementation Allocate necessary resources

Design the organization to bring intendedstrategies to reality

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Strategy (1) for Gmp

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