Chapter 3 : Introduction to Strategic Management

Strategic Management

Strategic management contains a bundle of strategic decisions.

Strategic decisions indicate long-term, risky, expensive, controversial, and critical decisions .
These are aimed at achieving long-term objectives and determining strong response to the environment. Increased complexity and sophistication in business decisionmaking, multifaceted internal activities, and firms immediate external environment have necessitated the use of strategic management.

Management and Strategic Management

Emphasis on Strategic Issues (or Strategic Orientation)

Management

Planning Organising Staffing Directing Controlling

Long-term Goal and Objectives Priority to Survival and Growth Role of Strategic Alliances Emphasis on Environmental Diagnosis and Analysis Futuristic and Proactive Offensive and Defensive Options to React Rivalry Firms Decisions with Long-lasting Impact Long-term Strategic options like Acquisition, Merger, Takeover, Turnaround, etc. Active Involvement of Top Management

Strategic Management

Strategic Planning Strategic Organising Strategic Staffing Strategic Directing Strategic Controlling

Characteristics of Strategic Management

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Revised Form of Traditional Management Setting Goals and devising Means Survival and development Priorities Top Managements Job Reaction to Environment Three facets Types of Decisions Long-term Investment and Impact Levels of Strategic Decision Need for SWOT analysis

SWOT Analysis
A useful framework that shows how far the organisation is capable of exploiting opportunities and facing challenges and threats in a given environment.
Attempts to determine firms strengths, (i.e., plus or strong aspects), weaknesses, (i.e., vulnerable aspects), opportunities, (i.e., prospects or better chances), and threats, (i.e., challenges, uncertainties, or risks). It is a yardstick to measure firms overall health.

Strategic Management Process

Seven S Model

McKinsey & Company, the international management consultancy firm, has developed the Seven S Model. The model is implementation. particularly concerned with strategy

It is indicative of change-identifying seven key factors.

Structure

Strategy

Skills

Superordinate Goal

Systems

Staff

Styles

Michael Porters Five Forces Model

Michael Porter developed a popular Five Forces approach to corporate strategy The approach is a useful framework to formulate corporate level strategy.
The framework is based on five competitive forces in the companys environment.
Threat of substitute products or services Threat of New Entrants

Business Units:
Technical & Economic Resources

Bargaining power of suppliers

Rivalry among Competitors

Bargaining Power of Customers