Without a strategy the organization is like

a ship without a rudder, going around in

circles.
Joel Ross and Michael Kami

What is Strategy?
A companys strategy consists of the set of competitive moves and
business approaches that management is employing to run the
company
Strategy is managements game plan to
Attract and please customers
Stake out a market position
Conduct operations
Compete successfully
Achieve organizational objectives

What is Strategic Management?

The set of decisions and actions that result
in the formulation and implementation of
plans designed to achieve a companys
objectives.
What is a Business Model?
A companys business model addresses How do we make money in this
business?
Is the strategy that management is pursuing capable of delivering good
bottom-line results?
Do the revenue-cost-profit economics of the companys strategy make good
business sense?
Look at the revenue streams the
strategy is expected to produce
Look at the associated cost structure
and potential profit margins
Do the resulting earnings streams and
ROI indicate the strategy makes sense and that the company has a
viable business model?

Strategy vs. Business Model :

What is the Difference?

Strategy -- Deals
with a
companys
competitive
initiatives and
business
approaches

Business Model -Concerns whether

the revenues and
costs flowing from
the strategy
demonstrate that
the business can
be amply profitable
and viable

Microsofts Business Model

Employ a cadre of highly skilled programmers
to develop proprietary code; keep source code
hidden from users
Sell resulting operating system and software
packages to PC makers and users at relatively
attractive prices and achieve large unit sales
Most costs arise in developing the software;
variable costs are smallonce breakeven
volume is reached, revenues from additional
sales are almost pure profit.
Provide technical support to users at no cost

Redhat Linuxs Business Model

Use volunteer programmers to create the
software; make source code open and
available to all users
Give Linux operating system away free of
charge to those who download it (charge a
small fee to users who want a copy on CD
Make money by employing a cadre of technical
support personnel who provide technical
support to users for a fee

Strategic Management Concept

Competent execution of a well-conceived strategy is the best
test of managerial excellence and a proven recipe for
organizational success!
Good StGood Strategy + Good Strategy Execution = Good
Strategy + Good Strategy Execution Good Strategy + Good Strategy
Execution = Good Management
= Good Management
Good Management
rategy + Good Strategy Execution = Good Management

The Nature of Strategic Management

A global perspective is a matter of survival
for businesses.
E-commerce is a vital strategic
management tool.
The natural environment is an important
strategic issue.

Critical Tasks of Strategic Management

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

Formulate the companys mission

Conduct internal analysis
Assess the companys external environment
Analyze companys options
Identify most desirable options
Select long-term objectives and grand strategies
Develop annual objectives and short-term strategies
Implement the strategic choices
Evaluate success of the strategic process

Dimensions of Strategic Decisions

Strategic issues
Require top-management decisions
Require large amounts of the firms resources
Often affect the firms long-term prosperity
Are future oriented
Usually have multifunctional or multibusiness

consequences
Require considering the firms external environment

Three Levels of Strategy

1. Corporate level
2. Business level
3. Functional level

Single-business Firms

C o rp o ra te /
b u s in e s s le v e l
P O M /R & D
s t r a te g ie s

F i n a n c i a l/
a c c o u n t in g
s t r a te g ie s

M a r k e t in g
s t r a te g ie s

H um an
r e la t io n s
s t r a te g ie s

Multiple business Firms

Corporate
Corporate
strategies
strategies
Business
Business11
POM/R&D
POM/R&D
strategies
strategies

Business
Business22
Financial/
Financial/
accounting
accounting
strategies
strategies

Business
Business33

Marketing
Marketing
strategies
strategies

Human
Human
relations
relations
strategies
strategies

The Strategy Makers

The ideal strategic management team includes
Chief executive officer (CEO)
Product managers
Heads of functional areas

The strategic management team obtains input from

Planning staff
Lower-level management and supervisors

Role of CEO
Provides long-term direction
Assumes ultimate responsibility for firms success
Solicits guidance from Board of Directors

Benefits of Strategic Management

Enhances the firms ability to prevent problems
Emphasizes group-based strategic decisions likely to be
based on best available alternatives
Improves employees understanding of the productivityreward relationship
Reduces gaps/overlaps in activities among employees as
their participation clarifies differences in roles
Resistance to change is reduced

Levels of Strategy-Making in
a Diversified Company
Corporate-Level
Managers

Corporate
Strategy
Two-Way Influence

Business-Level
Managers

Business Strategies
Two-Way Influence

Functional
Managers

Functional Strategies
Two-Way Influence

Operational
managers

Operating Strategies

Risks of Strategic 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

Ex 1-6:
Strategic
Management
Process

Company mission
and social
responsibility
Possible?

Internal analysis
Desired?

Feedback

Feedback

External
environment

Strategic analysis and choice

Long-term
objectives
Short-term objectives;
reward systems

Generic and grand strategies

Functional tactics

Restructuring, reengineering
and refocusing the organization
Legend
Major impact
Minor impact

Strategic control and

continuous improvement

Policies that
empower action

Components of the Strategic

Management Model
Company 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 companys financial, human, and

physical resources
Assesses companys strengths and weaknesses
Contrasts past successes and concerns with current capabilities to
identify future capabilities

Components of the Strategic

Management Model (contd.)
External Environment
Consists of all conditions and forces affecting firms strategic

options and define its competitive situation

Includes three interactive segments remote, industry, and
operating environments

Strategic Analysis and Choice

Involves simultaneous assessment of external environment and

company profile
Incorporates screening process based on mission to generate
possible and desired opportunities
Results in selection of options from which a strategic choice is
made

Components of the Strategic

Management Model (contd.)
Long-term Objectives
Profitability
Return on investment
Competitive position
Technological leadership
Productivity
Employee relations
Public responsibility
Employee development

Components of the Strategic

Management Model (contd.)
Generic Strategies
Low cost
Differentiation
Focus

Grand Strategies
Comprehensive, general plan of major actions

through which the firm intends to achieve its

long-term objectives in a dynamic environment

Components of the Strategic

Management Model (contd.)
Action Plans and Short-Term Objectives
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
Creates accountability
Specify one or more immediate objectives as outcomes of the
action

Components of the Strategic

Management Model (contd.)
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

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

Components of the Strategic

Management Model (contd.)
Restructuring, Reengineering, and Refocusing the
Organization
Involves an internal focus getting work done efficiently and

effectively to make the strategy work

Downsizing, restructuring and reengineering reflect the critical
stage in strategy implementation wherein managers attempt to
recast their organization.

Components of the Strategic

Management Model (contd.)
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

Implications of Viewing Strategic

Management as a Process
Changes in any one component will affect other
components
Strategy formulation and implementation are
sequential
Necessity of feedback from institutionalization,
review, and evaluation to early stages of process
Need to regard it as dynamic, involving constant
changes in interdependent strategic activities