Strategic Management

What is strategic management?

Strategic Management can be defined as:

“The art and science of formulating, implementing and evaluating cross-functional decisions that enable an organization to achieve its objective”

How the strategic management work?
On-going process:

Strategic management is a on-going process which is in existence through out the life of organization.

Shaping broad plans:

An on-going process in which broad plans are firstly formulated then implemented and finally controlled.

Strategic goals:

Strategic goals are those which are set by top management. The broad plans are made in achieving the goals.

Internal and external environment:

Internal and external environment generally set the goals.

Stages of Strategic management:

The strategic management process consists of three stages:

· Strategy Formulation (strategy planning)

· Strategy Implementations

· Strategy Evaluation

Strategic Formulation:

Strategic formulation means a strategy formulate to execute the business activities. Strategy formulation includes developing:-

· Vision and Mission (The target of the business)

· Strength and weakness (Strong points of business and also weaknesses)

· Opportunities and threats (These are related with external environment for the business)

Key Terms in Strategic Management

· Strategists

· Mission statements

· Internal strengths and weaknesses

· External opportunities and threats

· Long-term objectives

· Annual objectives, and policies

Vision Statements

Many organizations today develop a "vision statement" which answers the question, what do we want to become?

Developing a vision statement is often considered the first step in strategic planning, preceding even development of a mission statement.

Mission Statements

Mission statements are enduring statements of purpose that distinguish one business from other similar firms.

A mission statement identifies the scope of a firm's operations in product and market terms.

A clear mission statement describes the values and priorities of an organization and also a path to achieve organizational objective.

SWOT Analysis

SWOT analysis is a technique for identifying your Strengths and Weaknesses

Study any Opportunities and Threats you face

It is also a powerful strategic planning tool used to evaluate a project or in a business venture or in any other situation of an organization or individual requiring a decision in pursuit of an objective.

It involves monitoring the marketing environment internal and external to the organization or individual.

SWOT Analysis – Internal and External Factors

The aim of any SWOT analysis is to identify the key internal and external factors that are important to achieving the objective. SWOT analysis groups key pieces of information into two main categories:

SWOT Analysis – Errors to Be Avoided

Conducting a SWOT analysis before defining and agreeing upon an objective (a desired end state) SWOTs should not exist in the abstract. They can exist only with reference to an objective.

Opportunities external to the company are often confused with strengths internal to the company. They should be kept separate.

SWOTs are sometimes confused with possible strategies. SWOTs are descriptions of conditions, while possible strategies define actions.

Diversification

A business strategy designed to reduce exposure to risk by combining a variety of investments, such as stocks, bonds, and real estate, which are unlikely to all move in the same direction.

Diversification is the process of spreading the total investment money available across different asset classes, countries, industries, and individual companies.

The goal of diversification is to reduce the risk in a business. Diversification can only reduce unsystematic risk.

Types of Takeovers

Takeover

The transfer of control from one ownership group to another

Acquisition

The purchase of one firm by another

Merger

· The combination of two firms into a new legal entity

· A new company is created

· Both sets of shareholders have to approve the transaction.

Amalgamation

A genuine merger in which both sets of shareholders must approve the transaction

Requires a fairness opinion by an independent expert on the true value of the firm’s shares when a public minority exists

Strategic alliances
Meaning cooperative agreements between two or more organizations

A means to enhance strategic resources:

Self-sufficiency is becoming increasingly difficult in a complex, uncertain, and discontinuous external environment.

Strategic alliances that bring organizations together promise unique opportunities for partners.

Turnaround strategy
There are three stages of a turnaround strategy:

I – Pre-turnaround

II – Period of Crisis

III – Period of Recovery

Steps in turnaround strategy

Changing the leadership

· Redefining strategic focus

· Selling or divesting unnecessary assets

· Improving Profitability

· Making careful acquisitions

Divest Strategy

· Plan whereby a product line (or a product division of a business) is liquidated or sold so as to limit either real or anticipated losses

· To redirect the resources behind that product line or division to other company products or divisions.

What Is a Critical Success Factor?

· A key area where satisfactory performance is required for the organization to achieve its goals

· A means of identifying the tasks and requirements needed for success

· At the lowest level, CSFs become concrete requirements

· A means to prioritize requirements

The CSF Method

· Start with a vision: mission statement

· Develop 5-6 high level goals

· Develop hierarchy of goals and their success factors

· Leads to concrete requirements at the lowest level (a single, implementable idea)

· Along the way, identify the problems being solved and the assumptions being made

· Cross-reference usage scenarios and problems with requirements