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Strategic Management The Total Overview Part Two
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The strategies have tobe made at three levels as given below and they must be telescoped with eachother.
- Corporate strategy: It is the top level strategy of a company at the corporate or head office level. It decides for the company it's businesses areas and how does being in these business areas help the corporation as a whole in competition?
- Business strategy: It is the strategy of a single business firm or a strategic business unit (SBU) of the company. The business strategy is derived from corporate strategy.
- Functional strategy: It is the strategy of each function of the SBU. Therefore, it includes marketing strategy, new product development strategy, financial strategy, supply chain strategy, manufacturing strategy, human resource strategy, information technology strategy etc. These functional strategies are derived from the business strategy.
Strategies and tacticsintegrates the three levels of management which are strategic management,operations management and transactions management.
Five Tasks ofstrategic Management
- Defining business, stating mission and forming vision for the company.
- Setting measurable objectives.
- Crafting strategy to achieve objectives.
- Implementing strategy
- Evaluating performance, reviewing new developments and initiating corrective adjustments.
TOWS Matrix of StrategyFormulation
SO Strategy(Maxi-Maxi): Potentially the most successful strategyutilizing organization's strengths to take advantages of opportunities.
ST Strategy(Maxi-Mini): Use of strengths to cope withthreats or to avoid threats.
WO Strategy(Mini-Maxi): Developmental strategy to overcome weaknesses totake care of the opportunities.
WT Strategy(Mini-Mini): Retrenchment, liquidation, joint venture etc.
Possible avenues offuture development can be identified by examining the relative growth prospectsof a company's line of products. It also helps the company to manage its cashflow or funds to best advantage.
Matrix considering the sales growthof the products of the company and their relative market share with referenceto the competitors with throw up four possibilities as given below:
- Products or activities that have high market share but a low growth rate (called cash cows)
- Products or activities that have both, a high market share and a high growth rate (called stars)
- Products or activities that currently have a low market share but a high growth rate (called question marks)
- Products or activities that have low market share and also, a low growth rate (called dogs)
This matrix facilitates thestrategic management to consider their range of products and services todetermine the product mix and to determine where to use cash to best advantageto invest in future. With this analysis a company can decide:
- Which of its SBUs (strategic business units) or product lines should be maintained
- In which of the SBUs or product lines it should invest more
- Which SBUs or product lines should be divested, closed or sold.
Strategic Planning Failures
- Managers are inadequately prepared for strategic planning.
- Information for preparing the strategic plans is insufficient.
- Organizational objectives are too vague to be of value.
- Business units are not clearly defined.
- Lack of communication of strategies to all key decision making managers.
- Reviews of strategic plans of business units are not done effectively.
- Link between strategic planning and control is insufficient.