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Strategic Management

A definition of Strategy: Goal-directed decisions and actions in which capabilities and resources are matched with the opportunities and threats in the environment.

Military Influences in Strategy: “Strategos” referred to a general in command of an army The art of the general By 450 B.C. it came to mean managerial skill By 330 B.C. it referred to the skill of employing forces to overcome positions to create a system of global governance Carl von Clausewitz “tactics…(involve) the use of armed forces in the engagement, strategy (is) the use of engagements for the object of war” 1838

Academic Influences in Strategy: 1911 Scientific management (Taylor) – Still in place today (UPS), some consider it micromanaging HBS requires a class in Business Policy in 1912 Adam Smith’s “invisible hand” (the market) gives way to Alfred Sloan (GM CEO from 1923-1946) concept of the “visible hand”—middle manager Chester Bernard influential book “The Executive” argues that managers should pay attention to “strategic factors” Ronald Coase’s 1937 article “why firms exist” (Nobel Prize in economics) and Joseph Schumpter’s concept of “disruptive technologies” written in 1942 bring in organizational economics Max Weber warns against bureaucratic organizations but sees a shift toward this way of organizing

Recent Influences in Strategy: 1960s (Strategy and structure; Corporate Strategy) 1963 Harvard business conference leads to SWOT analysis BCG founded in 1963 “strategy boutique” Created the portfolio analysis Stars, dogs, cash cows, question marks 1980s (Porter’s 5 forces) 1990s (Resource based view of the firm)

Why is Strategic Management Important?: Gives everyone a role Makes a difference in performance levels Provides systematic approach to uncertainties Coordinates and focuses employees

Why Strategy?: To change, an organization needs Burning Platform Vision Leadership Strategic Management Political Management

Strategy vs. Strategic Management: Strategy A series of goal-directed decisions and actions matching an organization’s skills and resources with the opportunities and threats in its environment Strategic management Analyse current situation Develop appropriate strategies Put strategies into action Evaluate, modify, or change strategy

Strategy involves Organization’s goals Goal-oriented action Related decisions and actions Internal strengths External opportunities and threats Strategic management Planning Organizing Implementing Controlling

Basics of Strategic Management: Four aspects that set strategic management apart Interdisciplinary Capstone of the Business degree External focus Competition Internal focus Future direction

Who does strategy?: The Role of the Board of Directors Elected representatives of the company’s stockholders Legally obligated to represent and protect stockholder’s The Role of Top Management Responsible for decisions and action of every employee Providing effective leadership Other Organizational Employees Implement— put the strategies into action and monitor performance Evaluate—do the actual evaluations and take necessary actions

The Role of the Board of Directors: Review and approve strategic goals and plans Review and approve organization’s financial standards and policies Approve an organizational philosophy Monitor organizational performance and regularly review performance results Select, evaluate, and compensate top-level managers Develop management succession plans Monitor relations with shareholders and other key stakeholders

Who is on the board of directors?: Chairman of the board Chief Executive officer (CEO) President Chief Operating officer (COO) Other C’s Chief Financial officer Chief Information officer Inside board members Outside board members

Strategic Management Principle: Effective strategy-making begins with a vision of where the organization needs to head!

Elements of a Strategic Vision: Use the mission statement as a starting point Develop a strategic vision that spells out a course to pursue Communicate the vision in a clear and exciting manner

Characteristics of a Mission Statement: Defines current business activities Highlights boundaries of current business Conveys Who we are, What we do, and Where we are now

Company specific, not generic —so as to give a company its own identity A company’s mission is not to make a profit ! The real mission is always—“What will we do to make a profit?”

Communicating the Vision: An exciting, inspirational vision Challenges and motivates workforce Arouses strong sense of organizational purpose Induces employee buy-in Galvanizes people to live the business

Concept of Strategic Intent: A company exhibits strategic intent when it relentlessly pursues an ambitious strategic objective and concentrates its competitive actions and energies on achieving that objective!

Lessons about change: Built to last: Built to last Understand why superior companies are better than peer companies which are better than most companies $1 invested in stock market in 1926 yields $420 in all other companies $960 in peer companies $6360 in superior (visionary) companies

Crafting a Strategy: An organization’s strategy deals with How to make the strategic vision a reality and achieve target objectives The game plan for Pleasing customers Conducting operations Building a sustainable competitive advantage

Take Away’s: Strategy has become more important Information, technology, globalization Key ideas in the strategy making process Mission (who are we) Vision (where do we want to go) Strategic intent / BHAG (major goal) Strategy (specific plan at different levels) Ethics (code of conduct or values) Linkage & communication are important Avoid mission creep!

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