On its way to success, every company has its objectives and ways of reaching them. In this article, we will talk about strategic management definition, why it is crucial for all businesses across industries, and the steps to take to manage a company strategically. Without further ado, let us introduce you to the concept.
Strategic Management Mba Notes Pdf Download
First of all, the company needs to have or set key objectives, both short and long-term and understand the value that they bring to the table. Basically, it means answering the what and why questions, preferably in the most comprehensive and concise way possible. Right after this, the concept of strategic management comes in to take care of the how.
SWOT analysis will provide you with a clear understanding of the present-day state of affairs. It is considered to be one of the powerful techniques to be used in strategic management meaning it is vital to complete.
1.2 The Strategic Management Process
Three ongoing processes that are central to strategic management are analyses, decisions and actions. These three processes, referred to as strategy analysis, formulation and implementation, are highly interdependent.
The relationship among various participants in determining the direction and performance of corporations. The primary participants are:
1) the shareholders;
2) the management (led by the chief executive officer);
3) the board of directors.Generating long-term returns for the shareholders is the primary goal of a publicly held corporation.
1.4 The Strategic Management Perspective: An Imperative throughout the Organization
To develop and mobilize people and other assets, leaders are needed throughout the organization. Everyone must be involved in the stratgic management process. There is a critical need for three types of leaders:
1) Local line leaders who have significant profit-and-loss responsibility;
2) Executive leaders who champion and guide ideas, create a learning infrastructure and establish a domain for taking action;
3) Internal networkers who, although they have little positional power and formal authority, generate their power through the convinction and clarity of their ideas.
Industry Life Cycle
The stages of introduction, growth, maturity, and decline that typically occur over the life of an
Industry:
1) Introduction Stage: the first stage of the industry life cycle characterized by (1) new products that are not known to customers, (2) poorly defined market segments, (3) unspecified product features, (4) low sales growth, (5) rapid technological change, (6) operating losses, and (7) a need for financial support;
2) Growth Stage: the second stage of the product life cycle characterized by (1) strong increases in sales; (2) growing competition; (3) developing brand recognition; and (4) a need for financing complementary value-chain activities such as marketing, sales, customer service, and research and development;
3) Maturity Stage: the third stage of the product life cycle characterized by (1) slowing demand growth, (2) saturated markets, (3) direct competition, (4) price competition, and (5) strategic emphasis on efficient operations. Firms are able to rescue products floundering in the maturity phase of their life cycles and return them to the growth phase by:
Parenting advantage
The positive contributions of the corporate office to a new business as a result of expertise and support provided and not as a result of substantial changes in assets, capital structure, or management.
Restructuring Advantage
The intervention of the corporate office in a new business that substantially changes the assets,
capital structure, and/or management, including selling off parts of the business, changing the
management, reducing payroll and unnecessary sources of expenses, changing strategies, and
infusing the new business with new technologies, processes, and reward systems.
Portfolio Management
A method of a) assessing the competitive position of a portfolio of businesses within a corporation, b)
suggesting strategic alternatives for each business, and c) to identify priorities for the allocation of
resources across the businesses.
b. Strategic Alliance and Joint Venture
Strategic Alliance: a cooperative relationship between two or more firms.
Joint venture: new entities formed within a strategic alliance in which two or more firms, the parents, contribute equity to form the new legal entity.
Benefits: since firms start from scratch in sales and distribution when they enter new markets
and they recognize that they cannot master local business practices, meet regulatory requirements,
hire and manage local personnel, they minimize their risk by hiring local distributors and investing
very little in the undertaking. The firm gives up control of strategic marketing decisions to the local
partners to benefit from their valuable expertise and knowledge of their own markets
Risks and Limitations: in a study of 250 instances in which multinational firms used local distributors
o implement their exporting entry strategy, the results were dismal, mainly because of the lack of a
collaborative, win-win relationship.
4) Strategic Alliances and Joint Ventures: joint ventures and strategic alliances differ in that joint ventures entail the creation of a third-party legal entity, whereas strategic alliances do not. In addition, strategic alliances focus on smaller initiatives than joint ventures.
Human Capital
The most important asset an entrepreneurial firm can have is strong and skilled management. Managers need to have a strong base of experience and extensive domain knowledge, as well as an
ability to make rapid decisions and change direction as shifting circumstances may require.
1) Traditional approach to strategic control: a sequential method of organizational control in which (1) strategies are formulated and top management set goals, (2) strategies are implemented, and (3) performance is measured against the predetermined goal set. Control is based on a feedback loop from performance measurement to strategy formulation (see the figure below).
2) Contemporary approach to strategic control: this approach suggests continually monitoring the environments (internal and external) as well as identifying trends and events that signal the need to revise strategies, goals and objectives. Relationships between strategy formulation implementation and control are highly interactive.
Corporate Governance
The relationship among various participants in determining the direction and performance of corporations. The primary participants are (1) the shareholders, (2) the management, and (3) the board of directors.
Board of Directors
Group that has a fiduciary duty to ensure that the company is run consistently with the long-term interests of the owners, or shareholders, of a corporation and that acts as an intermediary between the shareholders and management. Duties of the Board:
Media and public activists
The press is not usually recognized as an external control mechanism in the literature of corporate governance. There is, however, no denying that in all developed capitalist economies, the financial press and media play an important indirect role in monitoring the management of public corporations.
Corporate Governance: An International Perspective
2) Modular Organization: an organization in which non-vital functions are outsourced, which uses the knowledge and expertise of outside suppliers while retaining strategic control. Three advantages:
a. Decrease overall costs, leverage capital;
b. Enables company to focus scarce resources on areas where it holds competitive advantage;
c. Adds critical skills and accelerates organizational learning.
Staffing to Capture Value from Innovation
People are central to the processes of identifying, developing, and commercializing innovations effectively. Four practices are especially important:
1) Create innovation teams with experienced players;
2) Require that employees seeking to advance their career with the organization serve in the new venture group as part of their career climb;
3) Once people have experience with the new venture group, transfer them to mainstream management positions where they can use their skills;
4) Separate the performance of individuals from the performance of the innovation.
Product Champion
An individual working within a corporation who brings entrepreneurial ideas forward, identifies what kind of market exists for the product or service, finds resources to support the venture, and promotes the venture concept to upper management.
Project impetus
For a project to gain impetus, its strategic and economic impact must be supported by senior managers who have experience with similar projects. The project then becomes an embryonic business with its own organization and budget.
Measuring the Success of Corporate Entrepreneurship Activities
Techniques used to limit the expense of venturing or to cut losses when entrepreneurial initiatives (CE) appear doomed
Strategic management is the ongoing planning, monitoring, analysis and assessment of all necessities an organization needs to meet its goals and objectives. Changes in business environments will require organizations to constantly assess their strategies for success. The strategic management process helps organizations take stock of their present situation, chalk out strategies, deploy them and analyze the effectiveness of the implemented management strategies. Strategic management strategies consist of five basic strategies and can differ in implementation depending on the surrounding environment. Strategic management applies both to on-premise and mobile platforms.
Strategic management is generally thought to have financial and nonfinancial benefits. A strategic management process helps an organization and its leadership to think about and plan for its future existence, fulfilling a chief responsibility of a board of directors. Strategic management sets a direction for the organization and its employees. Unlike once-and-done strategic plans, effective strategic management continuously plans, monitors and tests an organization's activities, resulting in greater operational efficiency, market share and profitability.
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