55860048 strategic management notes

7/23/2019 55860048 Strategic Management Notes

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STRATEGIC MANAGEMENT

STRATEGY

Strategies are the means by which long term objectives will be achieved.

Business strategies may include geographical expansion, diversification,

product development, joint ventures.

A unified, Comprehensive integrated plan to achieve organi!ational

objective is "nown as Strategy.

STRATEGIC MANAGEMENT

Strategic management is defined as the set of decisions and actions in

formulation and implementation of strategies designed to achieve the

objectives of an organi!ation.

CHARACTERISTICS

Strategic issues warrant #op management decisions.

Strategic issues involve the allocation of large amounts and resources.

Strategic issues are li"ely to have impact on long term prosperity.

Strategic issues have conse$uences of multi business.

Strategic issues are future oriented.

Strategic issues give top importance to the external environment.

Strategic management as a process.

Strategic management stress both %fficiency and %ffectiveness.

#o &a"es discipline.


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#o ma"e control.

Need of Strategic Management

'ue to change

#o provide guide lines

(esearch and development

)robability for business performance

Systemi!ed decision

*mproves Communication

Allocation of resource

*mproves Coordination

HIERARCHY IN STRATEGIC MANAGEMENT

1. MULTIPLE BUSINESS IRMS !+-C()(A#% /%0%/

+1-B2S*3%SS /%0%/

+4-523C#*3A/ /%0%/

". SINGLE BUSINESS IRMS !

+-C()(A#% /%0%/6B2S*3%SS /%0%/

+1-523C#*3A/ /%0%/

1. MULTIPLE BUSINESS IRMS !#


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C()(A#% /%0%/ C$RP$RATE STRATEGIES

B2S*3%SS /%0%/ SB2 A SB2 B SB2 C

+Strategic Business 2nit-

523C#*3A/ /%0%/ 5inance &ar"eting peration 7.( *.#

". SINGLE BUSINESS IRMS !#

C$RP$RATE LE%EL C$RP$RATE LE%EL&BUSINESS LE%EL

UNCTI$NAL LE%EL 5inance &ar"eting peration 7.( *.#

C$RP$RATE LE%EL STRATEGIES


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Consisting of mainly members of board of directors and C%s. *t is an

overarching plan of action performed by different SB2s. #he plan deals with

objectives of the company, allocation of resources and coordination of the SB2s

for the optimal performance.

B'(ine(( )e*e)

SB2 level strategy is a comprehensive plan providing objectives of SB2s,

allocation of resources among functional areas and coordination between them for

ma"ing an optimal contribution to the achievement of corporate level objectives

'nctiona) )e*e) (trategie(

*t deals with a relatively restricted plan providing objectives for a specific

function, allocation of resources among different operations within that functional

area and coordination between them for optimal contribution to the achievement

of SB2 and corporate level objectives.

BENEITS $ STRATEGIC MANAGEMENT

8ith the help of S& the problems can be prevented in the organi!ation.

9roup based strategic decisions are most li"ely to reflect the best available

alternatives.

&otivation to the employees.

9aps can be reduced among the employees.

(esistance to the change can be reduced.

*t allows more effective allocation of time and resources to identified

opportunities. *t helps to integrate the behavior of individuals into a total effort.

*t provides a cooperative, integrated and enthusiastic approach to tac"ling

problems and opportunities.

*t gives a degree of discipline and formality to the management of a

business.


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+HY S$ME IRMS A%$I, STRATEGIC PLANNING-

. 8aste of time.

1. #oo expensive.4. /a!iness .

:. verconfidence .

;. )rior bad experience.


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Creating learning organi!ation.-

4. Strateg e*a)'ation and contro)

'esigning evaluation control system.Setting criteria for evaluation control

$RGANI5ATI$NAL MISSI$N AN, $B6ECTI%ES

0ision has been defined in several ways.

o >otter defines it as a ?description of something+an organi!ation ,corporate

culture , a business , a technology , an activity- in future@.

o%*3ama"i considers it as a ?mental perception of the "ind of environment an

individual, or an organi!ation, aspires to create within a broad time hori!on and

the underlying conditions for the actualisation of this perception@

o&iller and 'ess view it simply as the ?category of intentions that are broad , all

inclusive and forward thin"ing.@

o #he common stand of though evident in these definitions relates vision being

future aspirations that lead to an inspiration to be best in ones field of activity.

Te 7enefit( of a*ing a %i(ion

9ood visions are inspiring.

0isions represent a discontinuity, a step function and a jump ahead so that

the company "nows what it is to be.

9ood visions help in the creation of common identity.

9ood visions are competitive, original and uni$ue.

9ood visions foster +promote- long term thin"ing.

9ood vision foster +promote- ris" ta"ing and experimentation.

9ood vision represents integrity and can be used for the benefit of people.

MISSI$N


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#7&)S3 defines mission as the ?essential purpose of the organi!ation,

concerning particularly why it is an existence , the nature of business it is in, and

the customers it see"s to serve and satisfy.

7unger and 8heelen says that mission is the ?purpose or reason for the

organi!ations existence.@

,ifference 7et8een mi((ion (tatement 9 *i(ion (tatement

A mission statement answers three "ey $uestions

8hat do we doD5or whom do we do itD

8hat is the benefitD

A vision statement, on the other hand, describes how the future will loo" if the

organi!ation achieves its mission. A mission statement gives the overall purpose

of an organi!ation, while a vision statement describes a picture of the Epreferred

future.@

Caracteri(tic( of Mi((ion Statement

. *t should be feasible.

1. *t should be precise.

4. *t should be clear.

:. *t should be motivating.

;. *t should be distinctive.


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:. #o specify organi!ational purposes and the translation of these purposes into

goals in such a way that cost , time and performance parameters can be

evaluate and control.

;. #o facilitate the translation of objectives and goals into a wor" structure.

Com3onent( of Mi((ion Statement

. C'(tomer(G who are the firms customersD

1. Prod'ct( or Ser*ice( what are the firms major products or services.

4. Mar:et( 9eographically, where does the firm compete.

:. Tecno)og *s the firm technologically currentD

;. Concern for ('r*i*a) ; gro8t 9 3rofita7i)it is the firm committed to

growth and financial soundness D


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C'(tomer Gro'3( A)ternati*e tecno)ogie(+8ho is being satisfied- +7ow the need is being satisfied-

G$ALS AN, $B6ECTI%ES

Goa)(denote what an organi!ation hopes to accomplished in a future period of

time.

$7


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bjectives should be set within constraints.

+at o7


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;. *nternational environment.+%conomic factors ,#ax factors , )olitical legal

factors , 7uman (esource factors , 9eographic and Competitive factors ,

Socio G Culture factors.-

Ro)e of En*ironmenta) Ana)(i(

(ole of environment analysis in strategy can be studied with the concept of

S8#

S S#(%39#7S

88%A>3%SS

))(#23*#J

##7(%A#

8ith all of above factors we can ma"e the strategies to improve our organisation.

En*ironmenta) (canning

#he process by which organisation monitor their relevant environment to identify

opportunities and threats affecting their business is "nown as environmental

scanning.

A33roace( to en*ironmenta) (canning

Systematic Approach under this approach information for environmental

scanning is collected systematically. *nformation related to mar"ets and

customers, the changes in legislation and regulations , governmental policies

and so on, is collected continuously to monitor changes .


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Ad hoc approach-*n this the organisation may conduct special surveys to

deal with specific environment issues from time to time. e.g. special

projects, evaluate existing strategies .

Processed form approach *n this the organisation uses information in a

processed form, available from different sources both inside and outside the

organisation +various 9ovt. agencies -.

=. TYPES $ STRATEGIES

GENERIC STRATEGIES

C$ST LEA,ERSHIP STRATEGY+#hat allows the firm to excel

competitors by least cost-

,IERENTIAL STRATEGY+that is ma"ing products services more

valuable than competitors-


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$CUS STRATEGY+it is selecting of one or two segments in the total

mar"et to meet the re$uirement of target group of customers-

%ertica) Integration Strategie(

> or8ard integration

> Bac:8ard integration

> Hori?onta) integration

o or8ard integration

9ainingownership or increased control over distributors or retailerso G'ide)ine( for or8ard Integration

. )resent distributors are expensive, unreliable, or incapable of meeting

firms needs

1. Availability of $uality distributors is limited.

4. 8hen firm competes in an industry that is expected to grow mar"edly.

:. )resent distributor have high profit margins.

Bac:8ard integration

See"ing ownership or increased control of a firms suppliers

8hen present suppliers are expensive, unreliable, or incapable of

meeting needs

Guidelines for

BackwardIntegration


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3umber of suppliers is small and number of competitors large

7igh growth in industry sector

5irm has both capital and human resources to manage new business

Advantages of stable prices are important

Hori?onta) Integration!#

See"ing ownership or increased control over competitors

G'ide)ine( for Hori?onta) Integration

5irm can gain monopolistic characteristics without being challenged by

federal government

Competes in growing industry

*ncreased economies of scale provide major competitive advantages

5altering due to lac" of managerial expertise or need for particular

resources

@. Inten(i*e Strategie(

> Mar:et 3enetration> Mar:et de*e)o3ment

> Prod'ct de*e)o3ment

&ar"et penetration +See"ing increased mar"et share for present

products or services in present mar"ets through greater mar"eting

efforts-

GUI,ELINES

Current mar"ets not saturated. 2sage rate of present customers can be increased significantly.

&ar"et shares of competitors declining while total industry sales

increasing.

Mar:et ,e*e)o3ment


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*ntroducing present products or services into new geographic area-

GUI,ELINES!

3ew channels of distribution that are reliable, inexpensive, and of

good $uality. 5irm is very successful at what it does.

2ntapped or unsaturated mar"ets.

Capital and human resources necessary to manage expanded

operations.

%xcess production capacity.

> Prod'ct ,e*e)o3ment+See"ing increased sales by improving present

products or services or developing new ones-

> GUI,ELINES!

)roducts in maturity stage of life cycle

&ajor competitors offer better$uality products at comparable prices

Compete in highgrowth industry

Strong research and development capabilities.

,i*er(ification Strategie(

Concentric di*er(ification

Cong)omerate di*er(ification

Hori?onta) di*er(ification

Concentric ,i*er(ification+Adding new, but related, products or

services-.G'ide)ine(!

o Competes in no or slowgrowth industry

o Adding new related products increases sales of current products

o 3ew related products offered at competitive prices

o Current products are in decline stage of the product life cycle

o Strong management team


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Cong)omerate ,i*er(ification

+Adding new, unrelated products or services-

GUI,ELINES!

o 'eclining annual sales and profits

o Capital and managerial talent to compete successfully in a new

industry

o %xiting mar"ets for present products are saturated.

Hori?onta) ,i*er(ification!# +Adding new, unrelated products or services

for present customers-

G'ide)ine(

o (evenues from current products6services would increase significantly

by adding the new unrelated products

o 7ighly competitive

o )resent distribution channels can be used to mar"et new products to

current customers

,efen(i*e Strategie(

1. 6oint *ent're

". Retrencment


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/. ,i*e(tit're

0. Li'idation

1. 6oint %ent're+#wo or more sponsoring firms forming a separateorgani!ation for cooperative purposes-

a. 'omestic forms joint venture with foreign firm, can obtain local

management to reduce certain ris"s

b. verwhelming resources and ris"s where project is potentially

very profitable

c. #wo or more smaller firms have trouble competing with larger firm

d. A need exists to introduce a new technology $uic"ly

". Retrencment +(egrouping through cost and asset reduction to reverse

declining sales and profit .

a. 5irm has failed to meet its objectives and goals consistently over

time

b. 5irm is one of the wea"er competitors

c. *nefficiency, low profitability, poor employee morale, and pressure

from stoc"holders to improve performance.

d. 8hen an organi!ations strategic managers have failed

/. ,i*e(tit're +Selling a division or part of an organi!ation-

a. 8hen firm has pursued retrenchment but failed to attain needed

improvements


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b. 8hen a division needs more resources than the firm can provide

c. 8hen a division is responsible for the firms overall poor

performance

d. 8hen a large amount of cash is needed and cannot be obtained

from other sources.

0. Li'idation+Selling all of a companys assets, in parts, for their tangible

worth-

a. 8hen both retrenchment and divestiture have been pursued

unsuccessfully

b. *f the only alternative is ban"ruptcy, li$uidation is an orderly

alternative

c. 8hen stoc"holders can minimi!e their losses by selling the firms

assets

En*ironmenta) Treat 9 $33ort'nit Profi)e ET$P

%nvironmental diagnosis is the assessment of environmental factors in terms

of opportunity or threat the importance of their impact.

> Pre3aration of ET$P

. *dentification of different components of relevant environment.

1. Assessing Significance of environmental factors.

4. Assessing impact factors.

:. Combining significance impact factors.

$rgani?ationa) Ca3a7i)it Profi)e $CP


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C) is a summari!ed statement which provides an overview of strength

wea"ness in "ey result areas li"ely to affect future of the organi!ation. *nformation

may be in $ualitative and $uantitative. *n $ualitative terms, strengths wea"nesses

are described in the form of narration in $uantitative terms in the form of various

point scales +from to ; etc.-

Strategic Ad*antage Profi)e SAP

*# is the process by which strategists examine a firms resources

capabilities in the "ey functional areas to determine where the firm has

significant strengths wea"ness so that it can exploit the opportunities

meet the threats in the environment.

#he essential purpose of each analysis is to ta"e advantage of the distinctive

competencies of the firm by way of

A. developing different strategies following a course of action different

from those of rival firms.

B. ma"ing it difficult for other firms to duplicate the strategies.

> Ana)(i( of te fo))o8ing factor( i( m'(t

. mar"eting

1. finance

4. production

:. )ersonnel and labour relations

;. ( '


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)otential entry for new competitors shows a balance between

different firms competing in a mar"et. *t also refers whenever a new partner

enter into a mar"et he may become threat for one and opportunity for other

competing partners. As all the new entries and existing firms are competing

with each other so the new entry will definitely ma"e an effect on every one

transacting in the mar"et.

Potentia) de*e)o3ment of ('7(tit'te 3rod'ct(

A potential development of substitute products also develops an

environment of competition in the mar"et among the competing partners. As

all firms want to compete in term of $uality and substitute will lasts for

longer in the mar"et if the $uality of the substitute will be greater than the

existing alternate.

Co))ecti*e 7argaining 3o8er of ('33)ier( and con('mer(

if vendors are less in the mar"et and the organi!ations that have to

purchase from those vendors are more then the demand for those suppliers

will be more as the firms have to purchase from that less suppliers. #he

reverse is the case if suppliers are more and buyers are less. #hen the demand

for those suppliers will be less. Such circumstances create difficulties in

bargaining.

Mc in(eD( =( rame8or:

#he model is based on the theory that, for an organi!ation to

perform well, these seven elements need to be aligned and mutually

reinforcing. So, the model can be used to help identify what needs to be


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realigned to improve performance, or to maintain performance during other

types of change. 8hatever the type of change G restructuring, new

processes, organi!ational merger, new systems, change of leadership, and so

on G the model can be used to understand how the organi!ational elements

are interrelated.


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Strateg!the plan devised to maintain and build competitive advantage over

the competition.

Str'ct're!the way the organi!ation is structured and who reports to whom.


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S(tem(!the daily activities and procedures that staff members engage in to

get the job done.

Sared %a)'e(!

8hat is the corporate6team cultureD

7ow strong are the valuesD

8hat are the fundamental values that the company6team was built onD

St)e!the style of leadership adopted.

Staff!the employees and their general capabilities.

S:i))(!the actual s"ills and competencies of the employees wor"ing for the

company.

)lacing Shared 0alues in the middle of the model emphasi!es that these

values are central to the development of all the other critical elements. #he

companyKs structure, strategy, systems, style, staff and s"ills all stem from

why the organi!ation was originally created, and what it stands for. #he

original vision of the company was formed from the values of the creators.

As the values change, so do all the other elements

GAPS M$,EL


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C'(tomer Ga3

#his is the focus of the model and in many respects the gap most

providers should address first. *t represents the difference between Kexpected


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serviceK and Kperceived serviceL. #o close this gap, providers need to consider

closing the following four gaps.

GAP 1

*t is that the service provider does not accurately "now, understand or

appreciate what their customer expects. All service employees should be

charged with closing the resultant gap by changing or influencing service

policies and procedures. #he gap can exist because there is insufficient or no

dialogue between providers and users. *t can also exist because the

organi!ation is unwilling to investigate expectations of the customer.

GAP "

*t is the difference between a service providersK perception of clients 6 users

expectations and the subse$uent development of customerdriven designs

and standards. *t is not enough to simply understand clients 6 users

perceptions, that "nowledge must translate itself to meaningful service

offerings at an appropriate level or to an appropriate standard. #he gap may

exist because the personnel responsible for determining and setting

standards are of the opinion that clients 6 users expectations are unrealistic or

unreasonable.

GAP /

#his is the gap between the service designs and standards and actual servicedelivery. *n other words having guidelines, manuals and wellcommunicated

standards is not enough to guarantee excellent service. (esources in the form

of people, systems and appropriate technology also need to be in place and

ade$uately monitored. Contact personnel must be properly trained,


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motivated, measured and compensated according to service delivery

standards.

#hus, successful implementation of service standards that ade$uately reflect

clients users expectations is meaningless if the $uality of delivery falls

short. %nsuring that ade$uate resources are available is the only way the gap

can be narrowed.

GAP 0

#he final gap exists when there is a difference between actual service

delivery and the external communications and promises made by the

provider. #hese can be in the form of leaflets, web pages, presentations and

any other promotional media.

Strateg im3)ementation

?#he implementation of policies strategies is concerned with the design

and management of systems to achieve the best integration of people,

structure, processes and resources, in reaching organi!ational purposes.@

?strategy implementation may be said to consists of securing resources,

organi!ing these resources and directing the use of these resources within

and outside the organi!ation.@

I(('e( in (trategie( im3)ementation

. )roject implementation


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1. )rocedural implementation

4. (esource allocation

:. Structural implementation

;. Behavioural implementation


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1. *t focuses attention on critical activities because a delay in their performance

will delay the whole projects.

Te 3roce(( in 3re3aration of PERT&CPM

. *dentification of activities.

1. Se$uential arrangements of activities.

4. #ime estimates of activities

:. 3etwor" construction

;. Critical path +where critical activities are determined-

". Proced'ra) im3)ementation

Any organi!ation which is planning to implement strategies must be aware

of the procedural framewor" within which the plans, programmes projects

have to be approved by the government at the central, state local levels.

Te reg')ator e)ement( to 7e re*ie8ed are a( fo))o8(

. 5ormation of company.

1. /icensing procedures.


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4. S%B* re$uirements.

:. &onopolies (estrictive #rade )ractices +&(#)- re$uirements.

;. 5%&A re$uirements.


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I. Strategy formulation re$uires coordination among a few individuals.

M.Strategy implementation re$uires coordination among many persons.

/. RES$URCE ALL$CATI$N

*n strategic planning, a resourceallocation decision is a plan for using

available resources, especially human resources especially in the near term,

to achieve goals for the future. *t is the process of allocating resourcesamong the various projects or business units.

Proc'rement of re(o'rce(

. 5inancial resources.

1. )hysical resources.

4. 7uman resources.

:. #echnological resources

A33roace( to Re(o'rce A))ocation

#op down approach +top to operational level-

Bottom up approach +starting from operational level-

&ix of two above

Mean( of Re(o'rce A))ocation


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Strategic 7'dgeting

*n this the )osition papers on different aspects such as environment

, mar"eting , past performance and so on are prepared and presented to the top

management which uses them to formulate corporate policy guidelines and stating

long short term goals.

#he operating management meanwhile prepares operational plans and sets

targets which are coordinated with corporate objectives . Based on resources and

corporate guidelines, the strategic budget is prepared and presented to top

management for approval and then communicated down the line tas" of

implementation ta"en up.

BC9 Gbased budgeting.

)/C based budgeting.

Nero based budgeting+in this the strategist justify resource allocation

demand , not on the basis of the previous years budget, but on ? ground

!ero@, which is based on fresh calculation of costs each time a plan is to be

implemented.-

actor( affecting Re(o'rce A))ocation

)reference of dominant strategists.

*nternal policies.

%xternal influences. +9overnment policies.-


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,iffic')tie( in Re(o'rce A))ocation

(esources are limited.

#here are competing organi!ational units with each trying to get more.

rgani!ations past commitments.

0. Str'ct'ra) im3)ementation

An organi!ation structure is the way in which the tas"s and subtas"s

re$uired to implement a strategy are arranged. the various structures

.%ntrepreneurial structure.

1.5unctional structure.

4. 'ivisional structure.

:. Strategic business unit.

;. &atrix structure.

Entre3rene'ria) Str'ct're

rgani!ation that is owned manage by one person. %.g SS*. #hese

organisations are, product or service based firms singlebusiness that serve

local mar"ets. #he owner loo"s after all decisions , whether they are day to

day operational matters or strategic in nature.

$8ner # Manager


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Em3)oee(

Ad*antage(

Ouic" decision ma"ing.

#imely response.

*nformal and simple organisation.

,ISA,%ANTAGES!

%xcessive reliance on owner G manager.

*nade$uate for future re$uirements if volume of business expands.

'nctiona) Str'ct're

As the volume of business expands , the entrepreneurial structure outlives its

usefulness. #he need arises for speciali!ed s"ills delegation of authority to

managers who can loo" after different functional areas.

Genera) manager

Prod mgr. M:t mgr. in mgr. Per(onne) mgr.


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Ad*antage( !

%fficient distribution of wor".

'elegation of day to day operational function.

#ime for top mgt. to loo" for strategic decisions.

,i(ad*antage(!

&isuse of authority.

Creates difficulty in coordination.

Complicated

3o unity or command.

,i*i(iona) Str'ct're

*n this wor" is divided on the basis of product lines, types of

customers served, geographical area covered, and then separate divisions or groups

are created and placed under the divisional level management. #he functional

structure still operates under divisional structures.


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Ad*antage(

9enerates $uic" response to environmental changes.

%nables top mgt. to focus on strategic matters.

#he efficiency level is at its pea".

,i(ad*antage( !

Costly.

)roblem in allocation of resources.

)roblems of coordination.

Competition between divisions.


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Strategic 7'(ine(( 'nit(

SB2 has been defined by Sharplin as ?any part of a business

organi!ation which is treated separately for strategic management purposes.@

8hen the organi!ation faces difficulty in managing divisional operations

due to an increasing si!e number of divisions, it becomes difficult for the

top mgt. to exercise strategic control. #hen the concept of SB2 is helpful

.SB2 is considers as a head$uarter to control the divisions coming under it.

CE$

GR$UP HEA, SBU 1 GR$UP HEA, SBU " GR$UP HEA, SBU /

,i*i(ion( ,i*i(ion( ,i*i(ion(

A ; B; C ,; E; G; H; I

A,%ANTAGES

Better coordination .

Better control.

Assured accountability.

,i(ad*antage(!


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Costly.

9ap between divisions and head officies.

)olitics.

MatriF Str'ct're

#he result is matrix structure re$uirement. #his type of structure is created

by assigning *n large organisations, there is often need to wor" on major

projects., each of which is strategically significant functional specialists to

wor" on a special project. 5or the duration of the project, the specialists from

different areas form a group or team and report to a team leader. #hey may

also wor" in their respective parent departments.


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Ad*antage( !

%nhance creativity because of various talents.

)rovides good exposure to specialists in general management.

)articipative management

,i(ad*antage(

'ual accountability creates confusion and difficulty for individual team

members.


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Shared authority may create communication problems.

Bea*iora) Im3)ementation

#hose aspects of strategy implementation that have an impact on the

behaviour of strategists in implementing the chosen strategies. #he major

issues are

/eadership styles.

Corporate culture.

Corporate politics and power.

)ersonal 0alues

Business ethics.

Leader(i3 9 (t)e(

/eadership plays an important role in implementing the strategies in the

organisation. #he leader can easily communicate the various policies to the

wor"ers. #he leaders should always be ready to ta"e ris"s. 7e should ta"e

wor" as team from the employees.

Cor3orate c')t're


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#he culture of organisation also put impact on the implementation of the strategies.

*n a well mannered well organised organisation it is easier to implement the

strategies. %.g A participative type of organisation.

Cor3orate 3o)itic( and 3o8er

)olitics and power affect the way a strategy is formulated and implemented. A

manager cannot effectively formulate and implement strategy without being

perceptive about company politics and the managers have to use his powers.

Per(ona) %a)'e( 9 B'(ine(( Etic(

)ersonal 0alues Business %thics see" to prevent an indiscriminate use of

power politics within organisation. #he personal values of the employees should

not get hurt by the organisation. And with the help of ethics the strategies can be

implemented in the organisations

Strategic E*a)'ation and Contro)

Nat're of Strategic E*a)'ation

%valuate effectiveness of organisational strategy in achieving organisational

objectives

)erform the tas" of "eeping organisation on trac"


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Im3ortance of Strategic E*a)'ation

#he need for feedbac"

Appraisal and reward

Chec" on the validity of strategic choice

comparison between decisions and intended strategy

Successful end of the strategic management process

Creating inputs for new strategic planning

Ability to coordinate the tas"s performed

Barrier( in E*a)'ation

/imits of Controls

'ifficulties in measurement

(esistance to evaluation

Shorttermism

(elying on efficiency versus effectiveness

+efficiency is ?doing the things rightly@ effectiveness is ? doing the right

things.@-

Re'irement( of Effecti*e E*a)'ation


44/50

Control should involve only the minimum amount of information

Control should monitor only managerial activities and results

Control should be timely

/ong term and short term control should be used

Control should aim at problemsolving exceptions

(ewards for meeting or exceeding standards should be emphasi!ed

Partici3ant( in Strategic E*a)'ation

#he B's

#he C%s

#he SB2s head

5inancial controllers, external internal auditors.

&iddle level managers.

#he shareholders.

Strategic Contro)

5our #ypes of Strategic Controls

)remise Control

*mplementation Control


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Strategic Surveillance

Special alert control

Premi(e Contro)

%very strategy is based on certain assumptions about

environment organisational factors. )remises control is necessary to

identify the "ey assumptions and its implementation. )remises control serves

the purpose of continually testing the assumptions to find out whether they

are still valid or not. #his enables the strategists to ta"e corrective action at

the right time rather than continuing with a strategy which is based on wrong

assumptions.

Im3)ementation Contro)

*mplementation control is aimed at evaluating whether the plans,programmes, and projects are actually guiding the organi!ation towards its

predetermined objectives or not.

Strategic S'r*ei))ance


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Strategic surveillance aimed at a more generali!ed and overarching control

?designed to monitor a broad range of events inside and outside the

company that are li"ely to threaten the course of a firms strategy@.

S3ecia) A)ert Contro)

Special alert control, which is based on a trigger mechanism for rapid

response and immediate reassessment of strategy in the light of sudden and

unexpected events. %.g. sudden fall in government at central or state level, or

a natural disasters.

$3erationa) Contro)

Aimed at the allocation and use of organisational resources Concerned with

action or performance

Ho8 do Strategic Contro) and $3erationa) Contro) ,iffer


47/50

Proce(( of E*a)'ation

Setting standards of performance

&easurement of performance

Analy!ing variances

#a"ing corrective action


48/50

Tecni'e( of Strategic E*a)'ation and Contro)

%valuation #echni$ues for Strategic Control

%valuation #echni$ues for perational Control

E*a)'ation Tecni'e( for Strategic Contro)

#echni$ues for strategic control could be classified into two groups on the

basis of the type of environment faced by the organisation. #he organisation

that operate in a relative stable environment may use strategic momentum

control, while those which face a relatively turbulent environment may find

strategic leap control more appropriate.


49/50

Strategic moment'm contro)

#hese are to ensure that the assumptions on whose basis strategies were

formulated are still valid and finding out what needs to be done in order to

allow the organisation to maintain its existing strategic momentum.

Strategic )ea3 contro)

Strategic leap control assist organisations by helping to define the new

strategic re$uirements and to cope with emerging environment realities.

E*a)'ation Tecni'e( for $3erationa) Contro)

perational control is aimed at the allocation and use of organisational

resources

#he evaluation techni$ues are classified into three parts

*nternal analysis+strengths wea"ness of firm-.

Comparative analysis+compares the performance of firm with its own past

performance or with other firms- .

Comprehensive analysis+this analysis adopts a total approach rather than

focusing on one area of activity, or a function or department-.


50/50

Ro)e of $rgani(ation S(tem in E*a)'ation

*nformation system.

Control system.

Appraisal system.

&otivation system.

'evelopment system.

)lanning system.

55860048 strategic management notes

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