Strategic management pdf download

The third level of strategy is at the functional or operating end of an organization. Here there are functional or operational strategies, which are concerned with how the component parts of an organization deliver effectively the corporate- and business-level strategies in terms of resources, processes and people.

For example, Yahoo! Functional strategy is therefore the approach a functional area takes to achieve corporate and business unit objectives and strategies by maximizing resource productivity.

It is concerned with developing and nurturing a distinctive competence to provide a company or business unit with a competitive advantage. If a business unit were to follow a low-cost competitive strategy, however, a different set of functional strategies would be needed to support the business strategy. To emphasize, what is being said is that functional- level strategy is directed at improving the effectiveness of operations within a company, such as manufacturing, marketing, materials management, product development, and customer service.

Indeed, in most businesses, successful business strategies depend to a large extent on decisions that are taken, or activities that occur, at the operational level. The integration of operational decisions and strategy is therefore of great importance. In the context of international business, just as competitive strategies may need to vary from one region of the world to another, functional strategies may need to vary from region to region.

Global strategic management on the other hand relates to managing a wide variety of business strategies, and a high level of adaptation to the local business environment. The challenge here is to develop one single strategy that can be applied throughout the world while at the same time maintaining the flexibility to adapt that strategy to the local business environment when necessary Yip G.

A global strategy involves a carefully crafted single strategy for the entire network of subsidiaries and partners, encompassing many countries simultaneously and leveraging synergies across many countries.

So what are the differences between these two? In other words, what differences are there between the global strategy and international strategy management? There are three key differences. The first relates to the degree of involvement and coordination from the centre. International strategy does not require strong coordination from the centre. Global strategy, on the other hand, requires significant coordination between the activities of the centre and those of subsidiaries.

The second difference relates to the degree of product standardization and responsiveness to local business environment. Product standardization is the degree to which a product, service, or process is standardized across countries.

An international strategy assumes that the subsidiary should respond to local business needs unless there is a good reason for not doing so. The third difference has to do with strategy integration and competitive moves. For example, a multinational firm subsidizes operations or subsidiaries in countries where the market is growing with resources gained from other subsidiaries where the market is declining, or responds to competitive moves by rivals in one market by counter-attacking in others.

The international strategy gives subsidiaries the independence to plan and execute competitive moves independently— that is, competitive moves are based solely on the analysis of local rivals. In contrast, the global strategy plans and executes competitive battles on a global scale. Firms adopting a global strategy, however, compete as a collection of globally integrated single firms. Explain different types of international strategies. There are basically four international strategies.

In this strategy, marketing of the exported product is very loosely coordinated overseas, most probably handled by independent sales agents in different markets. Pricing, packaging, distribution and even branding policies may all be locally determined. This strategy is typically chosen by organizations with a strong locational advantage but where either the organization has insufficient managerial capabilities to coordinate marketing internationally or where coordinated marketing would add little value, for example in agricultural or raw material commodities.

Multidomestic; A multidomestic strategy is an international strategy in which strategic and operating decisions are decentralized to the strategic business unit in each country so as to allow that unit to tailor products to the local market. A multidomestic strategy focuses on competition within each country. It assumes that the markets differ and therefore are segmented by country boundaries.

This strategy is similarly loosely coordinated internationally, but involves dispersion overseas of various activities, including manufacturing and sometimes product development. Instead of export, therefore, goods and services are produced locally in each national market. Local adaptations can make the overall corporate portfolio increasingly diversified. This strategy is appropriate where there are few economies of scale and strong benefits to adapting to local needs.

This multidomestic strategy is particularly attractive in professional services, where local relationships are critical, but it carries risks towards brand and reputation if national practices become too diverse. However, the use of these strategies results in more uncertainty for the corporation as a whole, because of the differences across markets and thus the different strategies employed by local country units.

Moreover, multidomestic strategies do not allow the development of economies of scale and thus can be more costly. Complex export; This strategy still involves the location of most activities in a single country, but builds on more coordinated marketing. The coordination demands are really considerably more complex than in the simple export strategy.

Global strategy; This strategy describes the highest level of international strategy. It involves highly coordinated activities dispersed geographically around the world. Using international value networks to the full, geographical location is chosen according to the specific locational advantage for each activity, so that product development, manufacturing, marketing and headquarters functions might all be located in different countries.

In contrast to a multidomestic strategy, a global strategy assumes more standardization of products across country markets. As a result, a global strategy is centralized and controlled by the home office. The strategic business units operating in each country are assumed to be interdependent, and the home office attempts to achieve integration across these businesses. The firm uses a global strategy to offer standardized products across country markets, with competitive strategy being dictated by the home office.

Thus, a global strategy emphasizes economies of scale and offers greater opportunities to take innovations developed at the corporate level or in one country and utilize them in other markets.

Improvements in global accounting and financial reporting standards are facilitating this strategy. The global strategy is not as responsive to local markets and is difficult to manage because of the need to coordinate strategies and operating decisions across country borders.

In practice, these four international strategies are not absolutely distinct. Managerial coordination and geographical concentration are matters of degree rather than sharp distinctions.

Companies may often oscillate within and between the four strategies. Their choices, moreover, will be influenced by changes in the internationalization drivers. Where, for example, tastes are highly standardized, companies will tend to favor complex export or global strategies.

Where economies of scale are few, the logic is more in favor of multidomestic strategies. Our above idea of the different types of international strategies was based on the exposition of Johnson et al in their Exploring Corporate Strategy 8 Edition , book. It is important to note that some authors like Michael.

Hitt divided the types of international strategies along the following line; Mustidomestic strategy is already explained Global strategy is already explained Transnational strategy; A transnational strategy is an international strategy through which the firm seeks to achieve both global efficiency and local responsiveness.

Realizing these goals is difficult: One requires close global coordination while the other requires local flexibility. The transnational strategy is difficult to use because of its conflicting goals.

On the positive side, the effective implementation of a transnational strategy often produces higher performance than does the implementation of either the multidomestic or global international corporate level strategies.

Value Chain Analysis Value chain analysis VCA can be said to be a process where a firm identifies its primary and support activities that add value to its final product and then analyze these activities to reduce costs or increase differentiation.

Value chain represents the internal activities a firm engages in when transforming inputs into outputs. VCA is a strategy tool used to analyze internal firm activities. Its goal is to recognize which activities are the most valuable i.

The firm that competes through differentiation advantage will try to perform its activities better than competitors would do. If it competes through cost advantage, it will try to perform internal activities at lower costs than competitors would do. When a company is capable of producing goods at lower costs than the market price or to provide superior products, it earns profits.

Porter introduced the generic value chain model in Value chain represents all the internal activities a firm engages in to produce goods and services. VC is formed of primary activities that add value to the final product directly and support activities that add value indirectly.

Nowadays, competitive advantage mainly derives from technological improvements or innovations in business models or processes.

On the other hand, primary activities are usually the source of cost advantage, where costs can be easily identified for each activity and properly managed.

The more activities a company undertakes compared to industry VC, the more vertically integrated it is. Below you can find an industry value chain and its relation to a firm level VC. There are two different approaches on how to perform the analysis, which depend on what type of competitive advantage a company wants to create cost or differentiation advantage.

The table below lists all the steps needed to achieve cost or differentiation advantage using VCA. Evaluate the the product. Identify cost for improving customer drivers for each activity. Identify the best between activities.

Identify opportunities for reducing costs. To gain cost advantage a firm has to go through 5 analysis steps: Step 1. All the activities from receiving and storing materials to marketing, selling and after sales support that are undertaken to produce goods or services have to be clearly identified and separated from each other.

The managers who identify value chain activities have to look into how work is done to deliver customer value. Step 2. Establish the relative importance of each activity in the total cost of the product. The total costs of producing a product or service must be broken down and assigned to each activity. Activity based costing is used to calculate costs for each process. Activities that are the major sources of cost or done inefficiently when benchmarked against competitors must be addressed first.

Step 3. Identify cost drivers for each activity. Only by understanding what factors drive the costs, managers can focus on improving them. Costs for labor-intensive activities will be driven by work hours, work speed, wage rate, etc. Different activities will have different cost drivers.

Step 4. Identify links between activities. Reduction of costs in one activity may lead to further cost reductions in subsequent activities. For example, fewer components in the product design may lead to less faulty parts and lower service costs. Therefore identifying the links between activities will lead to better understanding how cost improvements would affect he whole value chain.

Sometimes, cost reductions in one activity lead to higher costs for other activities. Step 5. When the company knows its inefficient activities and cost drivers, it can plan on how to improve them. Too high wage rates can be dealt with by increasing production speed, outsourcing jobs to low wage countries or installing more automated processes.

VCA is done differently when a firm competes on differentiation rather than costs. This is because the source of differentiation advantage comes from creating superior products, adding more features and satisfying varying customer needs, which results in higher cost structure. Step 1. After identifying all value chain activities, managers have to focus on those activities that contribute the most to creating customer value.

Evaluate the differentiation strategies for improving customer value. Identify the best sustainable differentiation. Usually, superior differentiation and customer value will be the result of many interrelated activities and strategies used. The best combination of them should be used to pursue sustainable differentiation advantage.

This example is partially adopted from R. It illustrates the basic VCA for an automobile manufacturing company that competes on cost advantage. High-quality assembling process reduces defects and costs in quality control and dealer support activities.

Locating plants near the cluster of suppliers or dealers reduces purchasing and distribution costs. Fewer model designs reduce assembling costs. Higher order sizes increase warehousing costs. Create just one model design for different regions to cut costs in designing and engineering, to increase order sizes of the same materials, to simplify assembling and quality control processes and to lower marketing costs.

Manufacture components inside the company to eliminate transaction costs of buying them in the market 5 and to optimize plant utilization. This would also lead to greater economies of scale. Perhaps a business is especially good at outbound logistics linked to its marketing and sales operation and supported by its technology development.

It might be less good in terms of its operations and its inbound logistics. The value chain also prompts managers to think about the role different activities play. Value chain analysis can be used by firms as a way of identifying what they should focus on in developing a more profitable business model. A single organization rarely undertakes in-house all of the value activities from design through to delivery of the final product or service to the final consumer. There is usually specialization of role so any one organization is part of a wider value network.

The value network is the set of inter-organizational links and relationships that are necessary to create a product or service. However, since much of the cost and value creation will occur in the supply and distribution chains, managers need to understand this whole process and how they can manage these linkages and relationships to improve customer value. It is not sufficient to look within the organization alone.

For example, the quality of a cooker or a television when it reaches the final purchaser is influenced not only by the activities undertaken within the manufacturing company itself, but also by the quality of components from suppliers and the performance of the distributors. Since then it has been widely used by practitioners and academics alike in analyzing hundreds of organizations. We will have an extensive look on each of the seven components of the model and the links between them.

It also includes practical guidance and advice for the budding managers to analyze organizations using this model. The McKinsey 7S model was named after a consulting company, McKinsey and Company, which has conducted applied research in business and industry. All of the authors worked as consultants at McKinsey and Company; in the s, they used the model to analyze over 70 large organizations. The McKinsey 7S Framework was created as a recognizable and easily remembered model in business.

The seven variables, which the authors term "levers", all begin with the letter "S": These seven variables include structure, strategy, systems, skills, style, and staff and shared values. Lets have a look at each of these.

Structure: Business needs to be organized in a specific form of shape that is generally referred to as organizational structure. Organizations are structured in a variety of ways, dependent on their objectives and culture. The structure of the company often dictates the way it operates and performs Waterman et al. Many layers of management controlled the operations, with each answerable to the upper layer of management. Although this is still the most widely used organizational structure, the recent trend is increasingly towards a flat structure where the work is done in teams of specialists rather than fixed departments.

The idea is to make the organization more flexible and devolve the power by empowering the employees and eliminate the middle management layers. Systems: Every organization has some systems or internal processes to support and implement the strategy and run day-to- day affairs.

For example, a company may follow a particular process for recruitment. These processes are normally strictly followed and are designed to achieve maximum effectiveness. Traditionally the organizations have been following a bureaucratic- style process model where most decisions are taken at the higher management level and there are various and sometimes unnecessary requirements for a specific decision e.

Increasingly, the organizations are simplifying and modernizing their process by innovation and use of new technology to make the decision-making process quicker. Special emphasis is on the customers with the intention to make the processes that involve customers as user friendly as possible.

It includes the dominant values, beliefs and norms which develop over time and become relatively enduring features of the organizational life. It also entails the way managers interact with the employees and the way they spend their time. However, there have been extensive efforts in the past couple of decades to change to culture to a more open, innovative and friendly environment with fewer hierarchies and smaller chain of command.

Culture remains an important consideration in the implementation of any strategy in the organization. Staff: Organizations are made up of humans and it's the people who make the real difference to the success of the organization in the increasingly knowledge-based society. The importance of human resources has thus got the central position in the strategy of the organization, away from the traditional model of capital and land. It is also important for the organization to instill confidence among the employees about their future in the organization and future career growth as an incentive for hard work.

This may be to make money or to achieve excellence in a particular field. These values and common goals keep the employees working towards a common destination as a coherent team and are important to keep the team spirit alive. The organizations with weak values and common goals often find their employees following their own personal goals that may be different or even in conflict with those of the organization or their fellow colleagues. The shape of the model was also designed to illustrate the interdependency of the variables.

The seven components described above are normally categorized as soft and hard components. The hard components are the strategy, structure and systems which are normally feasible and easy to identify in an organization as they are normally well documented and seen in the form of tangible objects or reports such as strategy statements, corporate plans, organizational charts and other documents. The remaining four Ss, however, are more difficult to comprehend. The capabilities, values and elements of corporate culture, for example, are continuously developing and are altered by the people at work in the organization.

For example, it is seen that a rigid, hierarchical organizational structure normally leads to a bureaucratic organizational culture where the power is centralized at the higher management level. It is also noted that the softer components of the model are difficult to change and are the most challenging elements of any change- management strategy. Changing the culture and overcoming the staff resistance to changes, especially the one that alters the power structure in the organization and the inherent values of the organization, is generally difficult to manage.

However, if these factors are altered, they can have a great impact on the structure, strategies and the systems of the organization. This is, however, not easy to achieve where the traditional culture is been dominant for decades and therefore many organizations are in a state of flux in managing this change.

What compounds their problems is their focus on only the hard components and neglecting the softer issues identified in the model which is without doubt a recipe for failure. However, to achieve a factual result, one must analyze in depth the cultural dimension of the structure, processes and decision made in an organization. Q4: Why do firms globalize? One of the primary reasons for firms going global or implementing a global strategy as opposed to a strategy focused on the domestic market is that the global market yields potential new opportunities.

New large-scale, emerging markets, such as China and India, provide a strong global operations incentive based on their high potential demand for consumer products and services. Raymond Vernon captured the classic rationale for global diversification. He suggested that typically a firm discovers an innovation in its home-country market, especially in an advanced economy such as that of the United States.

Often demand for the product then develops in other countries, and exports are provided by domestic operations. Another traditional motive for firms to become global is to secure needed resources. A ISBN : Strategic Management is a book that succinctly captures the nuances of leveraging strategy in the management of corporations and businesses. Peter M. Jack Duncan,Linda E. Author : Peter M. Paul W. Author : Paul W. We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits.

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Necessary Necessary. Functional Functional. To be effective in solving social and local problems by providing communication and cooperation between institutions 4 main strategic objectives were identified with the main headings. Highlights of Strategic Management It would be relatively easier to manage an organization that operates in a sector that is fairly static, simple and has a low rate of change. But nowadays, such a sector is almost inexhaustible.

This situation confronts strategic management as an indispensable approach to the management of organizations. Every business fulfills a number of activities designed to create products or services that it orients itself to sell, deliver, or distribute to an individual or corporate customers. Customers also need to be willing to accept, demand, obtain and pay for these products or services. This situation, which is currently in effect, may change over time. This is because customers may be directed to other businesses as a result of changes in competitive or quality products or services of their competitors or in their wishes and reference frames.

This adaptation may require that any part of the organization's operations or orientation be altered. The product or services may vary; the methods of producing them may vary; products or services may be offered to customers.

Stakeholders are the individuals and groups that the employer is influencing and influencing while trying to achieve their goals. One approach used in the formulation and implementation of strategies is based on the analysis of these individuals or groups for both detection and better understanding.

Stakeholders have a significant impact on the success of the business. It is, therefore, one of the concepts related to strategic management. Strategists set the overall objective of the business so that it goes beyond the needs of key stakeholders, not just to meet their known needs.

It clarifies the mission and vision expressions of these enterprises. These groups vary depending on the size of the enterprises, the nature of their activities, and their geographical prevalence. In some cases, government policies, local governments, media, activists may challenge the implementation of a well-defined strategy. In summary, conducting stakeholder analysis at the beginning allows for better formulation, implementation, and monitoring of the strategies.

Stakeholder analysis is a critical factor, especially in the implementation phase when the strategy becomes visible. All the necessary operational systems are designed to sustain the organization's resources, actions and efforts focused on its mission.

Many of the company's partners and lenders may not be particularly interested in what the mission is, as long as the response to the offer is sufficient. The main motivation behind rational strategies is to achieve mission and stakeholder satisfaction, perhaps, even more, to survive.

Even if the stakeholders have given up and their mission is not supported, some organizations endeavor to maintain their lives. New emerging laws, changes in the consumer demographics, separation of the retirement of key personnel, will lead to the need for strategy. Appropriate operational arrangements will be made to accommodate these changes; new legislative alignment policies and procedures, adding or subtracting to existing products and services, recruiting new employees and renewing job descriptions.

Though there is no intense pressure from the outside to make it happen, these adjustments will be necessary to make it happen quickly. In the end, every organization has to face a kind of competition. Competition and risk are the natural characteristics of business life for profit-seeking entrepreneurs.

Strategic management is about acquiring and sustaining competitive advantage. Sometimes it is the operator's best when compared to his competitors; sometimes something the operator can do, but his opponents can not do; sometimes it is a desire of their opponents the owner of the thing can show itself as a competitive advantage. For example; we can say that in the period of economic stagnation, a company with large cash holdings has a significant competitive advantage.

Having a competitive advantage and protecting it is essential to the long-term success of the business. The business can only sustain this advantage for a given period, as competitors can imitate or trivialize the advantage they have under normal conditions. That's why it's not just about getting him. For this reason, they constantly struggle to adapt to their inherent capacities, competencies, and resources, and to changes in the outward trends and events; Under these conditions, they strategically define, apply and evaluate strategically for their winnings.

In order to understand strategic management, three theoretical bases must be mentioned. The approach includes the analysis of the operator and its environment SWOT , the formulation, implementation and control of the strategy. This approach is based on seizing and managing resources that will help the business develop a sustainable competitive advantage.

The stakeholder perspective centers the business on the network of contracts formed by mutual benefit relationships. The effective management of these relationships and the stakeholder network itself can improve competitive performance.

As can be seen, these approaches point to different aspects of gaining competitive advantage, which is the goal of strategic management. Most successful organizations have the resources and talents that provide a competitive advantage. Moreover, they are able to manage and satisfy large segments of the environment known as stakeholders.

Because they lead the development of the strategies and the control of the executive. This unit is referred to when it comes to concepts related to strategic management. You will learn some other concepts in our other units. Here, two concepts must be mentioned in order that strategic management can be understood better.

These are basic skills and concepts of strategic intent. The development of strategic management has begun with the long-term planning of the majority of the business sectors. Most of the long-term planning enterprises appeared in the s.

It was very difficult to prepare the activity budgets without any data on future sales and cash flow. After World War II, economies grew and demand many products and services increased. Long-cycle demand forecasts have facilitated detailed marketing and distribution, production, human resources and financial planning developments for managers of growing organizations.

The goal of long-term planning is to estimate the size of the claim to the business's products and services for a specific future timeframe and determine where that claim will emerge.

Many businesses use long-term planning to make decisions such as expanding their investments, hiring forecasts, capital needs, and so on. The underlying assumption of long-term planning is that it will continue to produce the operator's existing products and services, and for that reason, the key critical issue of the enterprise is ensuring consistency between demand and production capacity. But the underlying assumption of strategic planning is that there are large-scale economic, social, political, technological and competitive changes in the environment.

Although the strategies are usually based on a specific time frame, the primary focus of strategic planning is not on time. Competitive changes can sometimes occur in a few years. In this case, the useful life of existing strains can be shorter. For this reason, "long-term" or "short-term" is preferable to explain the time required to achieve the strategy far from a type of planning. The strategic planning process provided a more systematic approach to managing these business units.

Moving the planning and budgeting horizon beyond the traditional twelve- month operating period. In addition, business managers learned only that financial planning was not a suitable framework. In the s, the concept of strategic planning expanded as strategic management. This development has revealed that environmental dynamics are not only important but that businesses can rediscover themselves as a whole. Continuous management and evaluation of the strategy is the key to success.

Thus, we can say that strategic management will continue its long-term existence as a philosophy or approach to managing complex organizations Swayne et al. Strategic planning Strategies and strategic decisions are the searches for the future of an enterprise in the long run. Strategic planning takes place at the center. Strategic planning is a disciplined struggle that involves a specific period and produces the main decisions and actions that shape and guide who is who, what they do, why they do it, and what they do.

The organization is a management tool that helps you do your job better. The organization provides the focus of energy; ensure that the members of the organization work for the same purpose; evaluate the organization's direction and, if necessary, reshape it in order to be able to give accurate answers to changing environmental conditions.

This process is strategic. Because the future conditions are already known and unknown, the organization includes the best preparation for meeting these environmental conditions. Being strategic means, for that reason, to be clear about the goals of the organization, to be aware of the organization's resources, and to consciously respond to a dynamic environment.

Planning is a process. This includes developing the desired objectives to be achieved and an approach to achieve those goals. This process requires discipline because a specific template or a specific sequence is followed in order to be focused and productive.

A number of questions are used in the process flow.