It means substantially reducing the scope of business activities. It may take the form of Mergers and Acquisitions (like Tata Motors acquired Jaguar Land Rover facilities of UK); Joint Ventures (like Indian Oil company floated an oil marketing company in Sri Lanka in collaboration with a local company), and Strategic Alliances (the two cooperating firms remain independent but cooperate for synergy). Basic approach in the stability strategy is ‘maintain present course: steady as it goes.’ It can be No-change strategy (taking no decision is a decision too); Profit strategy (lying low and managing profit through cost cutting, price rise, etc. In fact the two are mutually reinforcing. Corporate strategies are decided by the top management, Business Unit level strategies by the top people of individual strategic business units, and the functional strategies are decided by the functional heads. (e) To match the strength to opportunity to exploit it. In actual practice, there are many managers who participate in policy formulation. Copyright 2020 Leaf Group Ltd. / Leaf Group Media, All Rights Reserved. Adding a new customer function(s), customer group(s), or alternative technologies to an existing business is known as diversification. Non-convertibility of currency Barriers to repatriation of profits, New sources of inexpensive raw materials & parts, Poor knowledge of local culture, consumer behaviour, and educational system. Ask a railway company the reply will be in railway business. We typically see an … Though these steps do not follow a rigid chronological order, however they are very rational and can be easily followed in this order. It helps in analyzing the internal and external factors influencing an organization. Simply copying the leader means value is destroyed for all the firms. Lack of sufficient information for strategy formulation is the most common. In the last chapter we have already mentioned about corporate, strategic Business Unit strategies, and functional Strategies. Formulating a strategic plan involves discussions on what constitutes wise business decisions, how to recognize competition and how to respond to it. The way to satisfy that need may change, and business will opt the new methods. Determining the strategic direction for an organization is a major undertaking, and executive leadership is primarily responsible for this task. It is an internal evaluation to be in fit with external world. On the top come corporate strategies, then come business unit strategies, and finally functional strategies. Strategy is to create a fit between the environment and the organisation’s actions. so as to fulfil the needs of all concerned. In this regard Michael Porter has given three generic strategies, which can be converted into four. The quality of financial analysis is generally very poor. It is not merely a good idea; it is making that idea happen too. Plagiarism Prevention 5. Strategic management process is a method by which managers conceive of and implement a strategy that can lead to sustainable competitive advantage. No discussion on strategy formulation will be complete without a discussion of SWOT Analysis. Characteristics that leaders exhibit during this step in the strategic process include strong analytical skills, as well as the ability to synthesize and present data. When the firm wants to go for incremental improvement of its performance, it is known as stability strategy. It is the process of managing, planning, and analyzing in order to reach all organizational goals. Leadership characteristics during this phase of strategic management include forward thinking and the rationale to determine what constitutes in-time action. Reviewed by: Hashaw Elkins, MSPM, PMP, CSM, CSPO, PMI-PBA, LSSBB. Using Strategic Management Process, an organization decides to implement a selected few strategies along with stakeholders, details the implementation plan and keeps on appraising the progress & success of implementation through … It includes computerization, electronisation, and digitalization (conversion of analogue electrical signals into digital signals). Ask anyone who is manufacturing readymade garments, about his business and his answer will be readymade garments manufacturing. These strategies may be Operations Strategy, Marketing Strategy, Finance Strategy, and Human Resource Strategy. Often values relate to the organization’s organizational culture. Strengths refer to competencies, weaknesses refer to constraints, opportunities refer to favourable condition in the business environment of the firm, and threat means an unfavourable condition in the firm’s environment creating a risk. Poor reward structure, fear of failure, self interest (status achieved using old strategy), fear of unknown (to undertake new roles), different perceptions of a situation and distrust in management are the other barriers to strategy formulation. Corporate Strategies or Grand Strategies: There can be four types of strategies a corporate management pay pursue: Growth, Stability, Retrenchment, and Combination. Businesspersons must always view their business from customer’s view, not production. Her work appears in "The Multi-Generational Workforce in the Health Care Industry," and she has been cited in numerous publications, including journals and textbooks that focus on human resources management practices. If someone asks any businessperson to define his business, almost everyone sill give a manufacturing definition. It involves creating organizations which generate value even in turbulent environment over a sustained period of time. Strategic management is a process. In addition, she is a certified facilitator for the Center for Creative Leadership Benchmarks 360 Assessment Suite, and is a Logical Operations Modern Classroom Certified Trainer . Business-level strategies are fundamentally concerned with the competition. It can be of two types, viz., Backward Integration – acquiring a firm engaged in raw materials (Tata steel buying a coal mine company in Indonesia); and Forward Integration — acquiring control over a firm/activity taking it nearer to the ultimate consumer (Reliance Industries, a petro refining company, also starting petrol pumps). It states that integral components of strategic management are corporate governance, social responsibility and sustainability. 6. The three kinds of environments need to be scanned – External,(to know of Opportunities and Threats), Internal (to know of strengths and weaknesses), and Industry (to determine competitive scenario). Content Filtration 6. Integration can be of following types: It means when a firm takes over the other firm operating at the same level of production or marketing. The process of strategy formulation basically involves of the following five steps. Idea is not a telephone company, it is in the business of connectivity; Tata Tea is not in fruit juice, tea, or water business, it is in hydration business; Colgate is not in tooth paste business, but in oral healthcare business; and a cinema hall is in the business of entertainment. However, the two terms are different as given in the Table 8.1. Terms of Service 7. It is the senior management which resolves paradoxes between the conflicting objectives, existing functions and future activities, and the resources allocation. And in such situations strategic decisions rely mainly on judgment and intuition. There are specific characteristics inherent to the strategic management process, and the University of Minnesota is among many universities that teach strategic management to business and non-business majors alike.
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