Definition of Strategic management:
A strategy is a set of related actions that managers take to increase their company’s performance. For most, If not all, companies, achieving superior performance relative to rivals is the ultimate challenge.
Mean by Strategy:
- What is our present situation?
- Business Environment and industry conditions.
- Firm’s financial and competitive capabilities.
- Where do we want to go from here?
- Creating a vision for the firm’s future direction
- How are we going to get there?
- Crafting an action plan for heading the firm in the intended direction, staking out a market position, attracting customers, achieving the targeted financial and market performance, and getting the firm where it wants to go is its strategy.
Strategic management, a central objective of strategic management is to find out why some organizations succeed while others fail. Three broad factors of company’s success.
- The industry where it is based
- The country where it is located
- Its own resources, capabilities, and strategies.
Strategy traditional approach: Defined strategy as rational planning. Integrated / comprehensive planning.
New approach: Also require emergent strategy (unplanned) along with intended (planned, deliberate) strategy.
Criticism of Formal Strategy or Planning System:
Planning equilibrium: No competitive advantage. Every company same technique levels the playing field.
Planning under uncertainty: Future is unpredictable.
Ivory Tower planning: Top management mistake in planning as they have no direct connection with market.
Strategic intend versus Strategic fit: Strategic fit model matching existing resources and capabilities with external environment.
Danger in Strategic Decision Making:
Decision making biases: Five well known cognitive biases.
- Prior hypothesis bias: Decision maker prior belief. Ignoring information that contradicts these beliefs.
- Representativeness: From a small sample generalize the result.
- Escalating commitment: Already committed significant resources to a project, commit even more resources if they receive feedback that project is falling.
- Reasoning by analogy: Simple analogy / correction with complex problems.
- Illusion of Control: Over estimated one’s ability to control events.
Level of Strategic Management:
- Corporate level
- Business Level
- Functional level
There three kind strategic managers. Corporate level managers, business level managers, functional level managers.
Strategic leadership is about how to most effective manage a company’s strategy making process to create competitive advantage. The strategy making process is the process by which managers select and then implement a set of strategies that aim to achieve a competitive advantage.
Strategy formulation is the task of selecting strategies based on analysis of an organizations external and internal environment.
Strategy implementation is the task of putting strategies into action, which includes designing, delivering, and supporting products; improving the efficiency and effectiveness of operations; and designing a company’s organizational structure, control systems and culture.
