Introduction To Strategic Management
Introduction To Strategic Management
Economy Business
Basically, the role of business is to produce goods and services which consumers need.
The business firm produces goods and services from the factors of production provided by
society. Consumers, in turn, buy these goods and services
Land – pertains to all-natural resources, including timber, minerals, petroleum and the land itself
Labor – refers to the physical and mental input of the people who produce the goods and services
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The Entrepreneur or businessman buys and organizes these three factors of production – land,
labor and capital to provide goods and services
LAND
Materials
ENTREPRENEUR
Management Skills
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Owners
Customers
Workers
Business Business
Suppliers
association firms
Community
Kinds of Business
1. Industries – involve the conversion of raw materials into finished products or goods and
the application of labor upon raw materials so that greater usefulness becomes possible
after the process in the industrial group can be divided into extractive industries; farming,
fishing and mining.
2. Commerce – involves the process of buying and selling where the goods are moved from
the point of production to the point of consumption. Consumption involves purchasing
and the actual investment of capital in the merchandise handled with the intention of
reselling of profit
3. Service enterprise – are primarily concerned with the satisfaction of the needs and wants
of the consumers. These are subdivided into:
a. Public and community service
b. Professional of trade service
Services subdivided into:
Recreation services which include TV stations, movie productions and the theaters
Personal services which include hotels, restaurants, schools, beauty parlors
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Communism refers also to the economic system in the People’s Republic of China. In
this country, the state owns and controls all means of production. The government plans
economic activities. This country is sometimes called “centrally-planned economies”
whereas capitalist countries are referred to as “market economies”
Strategy
- Comes from the Greek word strategeia – which means the art of science of being a
General (military head)
- The Greek knew the importance of generalship in winning and losing battles. An
effective General needs to define the purpose of leading an army, winning and holding
territories, protecting area from invasion, and wiping out enemies
- Army strategy can be defined as the actual pattern of action that it takes in response to the
army.
Strategy in involves: Planning and Actual pattern of action in light of the opposite party
Management
- The term Management is generic term and it implies many things.
- Management is knowledge consisting of concepts, principles, functions and processes.
- The knowledge is used for achieving organizational objectives by effective utilization of
resources and coordinated human efforts
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- Management is a process of planning, organizing, staffing, directing, and controlling
(budgeting and reporting) human efforts to achieve organizational objectives effectively
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-Administration is the phase enterprise that concerns itself with the overall
determination of institutional objectives and policies necessary to be followed in
achieving those objectives.
- Management is an executive function which is primarily concerned with carrying out
broad policies laid down by the administration.
2. Administration is a part of management
- Administration deals with routine, day-to-day function while management is
concerned with the policy-making function.
- Administration doesn’t involve decision-making.
- Administration is an implementing agency whereas management is determinative (the
deciding agency)
- Part of management that is concerned with the installation and involves a carrying out
of procedures by which it is laid down and communicated and involves process of
activities regulated and checked against plans.
Administrative and
Administration
(Policy Formulation Task)
Management Functions
Administration is a subordinate
function to management and is
concerned with its day-to-day
– routine and repetitive
functions
Management
(Policy Execution Task)
Bureaucratic structure – is the most rational means to exercise control over human being at work.
The system is directed to coordinate efforts of many people in the large organization.
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7. Official records (creating and maintaining official employee records for several purposes
such as promotion, demotion and transfer)
Problems associated with bureaucratic administrative pattern:
• Poor efficiency, Invalid bureaucratic assumptions, Over emphasizing on rules and
procedures, Lack of clear responsibility, Rigidly, Slow decisions, Goals displacement,
Impersonal approach, Evils of nepotism and favouritism, Close system perspective,
Inhumane approach, Lack of professionalism, incapability in turbulent environment,
Conflict between organizations and individuals.
• Lack of human aspects is the root-cause of major problems and criticism.
2. Managerial Qualities – Henry Fayol was the first identify various qualities the manager
should possess for effective performance.
i. Physical qualities – health and vigor (stamina)
ii. Mental qualities – ability to learn and understand judgmental, mental vigor and
capability
iii. Moral qualities – energy, firmness and willingness to accept responsibility,
initiative, loyalty, tact and dignity
iv. Educational qualities – general acquaintances with matters related to general
functioning of the organization
v. Technical qualities – acquaintances with the functions being performed
vi. Experience qualities – experience arising from work
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x. Order – related to the arrangement of things and people. There should be a place
for everything and everything should be in place.
xi. Equity – is a combination of justice, fairness, and kindness.
xii. Stability of tenure – stability of staff, reduce the unnecessary turnover, surety of
jobs and staff stability can contribute of efficiency
xiii. Initiative – within limits of authority and discipline, reasonable freedom to
conceive and carry out plans.
xiv. Esprit de Corps – concerned with promoting team spirit.
Levels in Management
- Refers to the classification of managerial functions on the basis of their relative
importance
I. Top Level Management – is comprised of key position includes the Board of Directors,
Chairman or Managing Director, Chief Executive or General Manager
Functions:
1. Analyze and evaluate the business environment and determine the firm’s response to it
2. Determine basic objectives for the enterprise
3. Formulate main long-term policies, rules, procedures, budgets, etc.
4. Decide the structure of the organization and select top executives
5. Deal with legal formalities and procedures
6. Deal with matters related to financial and technological issues
7. Finalize strategic decisions, such as long-term contracts, mergers, acquisitions, etc.
8. Guide, supervise, review, and control middle level executives
9. Integrate efforts of departmental heads
II. Middle Level Management – this level works directly under the top level and exercise direct
authority over the bottom level and includes departmental, divisional and sectional heads
B. Lower-middle level management operates between the upper-middle management and the
bottom level management. it comprises of duty or assistant heads, area, sales, branch managers,
chief accountants and office superintendents.
- They assist respective departmental heads to carry our relevant activities.
- The executives at this level serve as link between departmental heads and supervisory
management.
Functions:
1. Carry out operations according to the plan formulated by the top level
2. Make arrangement for necessary resources and facilities for the department
3. Coordinate and control efforts of people working in their department
4. Maintain amicable relations with other department
5. Serve as the link between the top level and the operating level
6. Recruit, select, and train supervisory personnel
7. Motivate employees working at the lower level
8. Collect and analyze necessary information and prepare report for the top management
9. Guide, instruct, and control lower level employees
10. Perform any task assigned by the higher authority
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III. Lower/Bottom Level Management – also known as supervisory or operating management
consists of senior, functional and frontline supervisors or operating management
1. Extend all possible cooperation to higher authorities in implementing departmental plans
2. Prepare and implement operating plans for carrying out day-to-day activities effectively
3. Deal with recruitment, selection and training for workers
4. Supervise and control activities of workers / salesmen
5. Maintain discipline and order at work place
6. Create and maintain healthy work climate
7. Manage necessary materials and facilities for workers
8. Communicate problems of workers with the higher authorities and seek suitable solutions
9. Report performance of workers to the higher authority
10. Perform any activity assigned by the higher authority
Luther Gulick and Urwick – have described managerial functions in form of the Planning,
Organizing, Staffing, Directing, Coordinating, Reporting, Budgeting - POSDCORB formula
contains Reporting and Budgeting functions, they are just tools or techniques of controlling
(some writers consider coordination as one of the management functions which in fact, is not a
function is as result of a systematic / effective performance of all managerial functions.
Process of planning
i. Analyzing business environment
ii. Establishing objectives
iii. Setting planning premises
iv. Identifying alternatives
v. Evaluating alternatives
vi. Selecting best alternatives
vii. Formulating secondary plans
viii. Implementing the plan and review the results
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- As a result of organizing – various positions come into existence, different departments
and divisions are created, communication network is prepared, various levels of
management are also created and superior-subordinates relations are established
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- Various traditional and modern techniques are used for the purpose and helps in both
preventing and improving poor performance
Planning and controlling are interrelated and interdependent. Planning provides a base on which
control can be exercised. And controlling ensures effective implementation of the plan. It can be
sad that – planning is meaningless, if there is no control, and controlling is impossible, if there is
no plan.
Significance of Management
Significance of management can be discussed with regard to its contribution, described as under:
1. Achieving Goals and Objectives – management is responsible for acquiring and utilizing
productive resources, appointing competent people, organizing and coordinating
activities, directing and coordinating efforts of people, and exercising control over their
operations
2. Optimum Utilization of Resources – management ensures the optimum – management
ensures the optimum utilization of resources. Effective use of Men, Money, Materials,
Machines, can help an organization achieve its objectives in time and reduce unnecessary
wastage, duplication and misuse of the resource.
3. Efficient Running of Business Organization – management involves leadership,
motivation, communication and supervision that are crucial for guiding, encouraging and
informing the people in an organization. It integrates employees with the organization
and ensures that their coordinated efforts result into a successful completion of the work.
Improved quality, increased productivity and better human relations are the outcomes of
good management.
4. Sound Organizational Structure – management establishes a pattern of authority-
responsibility relationships, and helps in creating a formal structure. It specifies roles,
status, positions, and direction of communication to facilitate action. It helps coordination
and control of human efforts and facilitate in creating a sound organizational structure.
5. Smooth (undisruptive) Functioning of Organization – management works to avoid
conflicts and promote cooperation. It minimizes possibilities of strikes, lockout, mass
leaves and other disruptive events.
6. Image, Reputation and Goodwill in Market – many companies, with local and foreign
origin, like SM group of companies, Cola-cola and other few, reputed companies in the
corporate world due to their quality management.
7. Successful Implementing Change – management helps in identifying, inviting and
incorporating useful innovations successfully. This help the organization in adjusting and
coping with changing business environment and keeps organization alert, active, and
alive.
8. Management Role for Conflict and Stress – poor managerial is responsible for conflict
and can be a source of employee stress. Managerial functions are performed effectively,
unnecessary conflicts and excessive stress level of employee can be reduced. Stress an
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conflict do not relate to a particular function, they are the result of the whole management
process and practice.
9. Better Industrial Relations – industrial relations include both internal and external
relations. Management helps in establishing and maintaining healthy relations with
outside parties like customers, suppliers, financiers, governments, service providers,
media owners.
10. Other: in addition, the following points highlight the significance of management
• Tackling complexities, competition and uncertainties
• Prosperity and improved living standard
• Dealing with vast cultural diversities
• Economic, social, and cultural development of the nation
• Surviving during tough time
• Development of human resources
• Fulfillment of social obligations
Management is such a powerful device that transforms impossible into potential, difficult into
easy, easy into effective and effective into successful.
Objectives of Management
- Objectives are viewed as the expected end result
- Mission, goals, aims, purpose, targets… etc. are closely related to objectives
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4. National Objective – every business unit can directly or indirectly contribute to the
development of the nation, modern managers generally try to achieve one or more of the
following:
- To pay levies (taxes, duties, charges and etc.) honestly, regularly to help the nation
undertake developmental activities
- To support government(s) in implementation policies in the interest of the nation
- To extend all possible cooperation for national unity and integrity
- To help the nation during natural climate – like epidemics, typhoons, floods, tsunami,
earthquakes. And man-made calamities (like strikes, riot, wars, etc.)
- To use influence with international level agencies in favour of the nation
- To help the nation achieve global recognition, fame, and credibility
- To refrain from any act that effects national interest adversely
- To ensure careful use of natural resources and conservation of ecological balance
- To donate liberally for the activities aimed at overall development of the nation
STRATEGIC MANAGEMENT
Since today’s business operations are undertaken in an intense competition, strategic
management seems to be more relevant
Strategic management contains a bundle of strategic decisions and acts which a manager
undertakes and which decide the result of the firm’s performance. Strategic decisions indicate
– long-term, risky, expensive, controversial and critical decisions aimed at achieving long-term
objectives and determining a strong response to the environment.
In turbulence and fast changing business environment – the term Management has transformed
into “STRATEGIC MANAGEMENT”
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In strategic management – managerial decisions are taken by the top executive known as:
• Chief Executive Officer (CEO)
• Managing Director (MD)
• Chairman
• Executive Director
• President
• They are also called Strategist or the strategy maker
Strategic Options - All long-term decisions like mergers, acquisition, takeover, expansion,
diversification, backward and forward integration, strategic alliance with other companies,
outsourcing and have strategic implications
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Strategic
Management Emphasis on Strategic Issues or Strategic Orientation
Management
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