Thursday, 4 December 2014

Strategic Management



Strategic Management
Strategic Management - An Introduction
Strategic Management is all about identification and description of the strategies that managers can carry so as to achieve better performance and a competitive advantage for their organization. An organization is said to have competitive advantage if its profitability is higher than the average profitability for all companies in its industry.
Strategic management can also be defined as a bundle of decisions and acts which a manager undertakes and which decides the result of the firm’s performance. The manager must have a thorough knowledge and analysis of the general and competitive organizational environment so as to take right decisions. They should conduct a SWOT Analysis (Strengths, Weaknesses, Opportunities, and Threats), i.e., they should make best possible utilization of strengths, minimize the organizational weaknesses, make use of arising opportunities from the business environment and shouldn’t ignore the threats. Strategic management is nothing but planning for both predictable as well as unfeasible
contingencies. It is applicable to both small as well as large organizations as even the smallest organization face competition and, by formulating and implementing appropriate strategies, they can attain sustainable competitive advantage.
Strategic Management is a way in which strategists set the objectives and proceed about attaining them. It deals with making and implementing decisions about future direction of an organization. It helps us to identify the direction in which an organization is moving.
Strategic management is a continuous process that evaluates and controls the business and the industries in which an organization is involved; evaluates its competitors and sets goals and strategies to meet all existing and potential competitors; and then reevaluates strategies on a regular basis to determine how it has been implemented and whether it was successful or does it needs replacement.
Strategic Management gives a broader perspective to the employees of an organization and they can better understand how their job fits into the entire organizational plan and how it is co-related to other organizational members. It is nothing but the art of managing employees in a manner which maximizes the ability of achieving business objectives. The employees become more trustworthy, more committed and more satisfied as they can co-relate themselves very well with each organizational task. They can understand the reaction of environmental changes on the organization and the probable response of the organization with the help of strategic management. Thus the employees can judge the impact of such changes on their own job and can effectively face the changes. The managers and employees must do appropriate things in appropriate manner. They need to be both effective as well as efficient.
One of the major role of strategic management is to incorporate various functional areas of the organization completely, as well as, to ensure these functional areas harmonize and get together well. Another role of strategic management is to keep a continuous eye on the goals and objectives of the organization.

Strategy - Definition and Features

Strategy is an action that managers take to attain one or more of the organization’s goals. Strategy can also be defined as “A general direction set for the company and its various components to achieve a desired state in the future. Strategy results from the detailed strategic planning process”.
A strategy is all about integrating organizational activities and utilizing and allocating the scarce resources within the organizational environment so as to meet the present objectives. While planning a strategy it is essential to consider that decisions are not taken in a vaccum and that any act taken by a firm is likely to be met by a reaction from those affected, competitors, customers, employees or suppliers.
Strategy can also be defined as knowledge of the goals, the uncertainty of events
and the need to take into consideration the likely or actual behavior of others. Strategy is the blueprint of decisions in an organization that shows its objectives and goals, reduces the key policies, and plans for achieving these goals, and defines the business the company is to carry on, the type of economic and human organization it wants to be, and the contribution it plans to make to its shareholders, customers and society at large.
Features of Strategy
  1. Strategy is Significant because it is not possible to foresee the future. Without a perfect foresight, the firms must be ready to deal with the uncertain events which constitute the business environment.
  2. Strategy deals with long term developments rather than routine operations, i.e. it deals with probability of innovations or new products, new methods of productions, or new markets to be developed in future.
  3. Strategy is created to take into account the probable behavior of customers and competitors. Strategies dealing with employees will predict the employee behavior.
Strategy is a well defined roadmap of an organization. It defines the overall mission, vision and direction of an organization. The objective of a strategy is to maximize an organization’s strengths and to minimize the strengths of the competitors.
Strategy, in short, bridges the gap between “where we are” and “where we want to be”.

Components of a Strategy Statement

The strategy statement of a firm sets the firm’s long-term strategic direction and broad policy directions. It gives the firm a clear sense of direction and a blueprint for the firm’s activities for the upcoming years. The main constituents of a strategic statement are as follows:
1.       Strategic Intent
An organization’s strategic intent is the purpose that it exists and why it will continue to exist, providing it maintains a competitive advantage. Strategic intent gives a picture about what an organization must get into immediately in order to achieve the company’s vision. It motivates the people. It clarifies the vision of the vision of the company. Strategic intent helps management to emphasize and concentrate on the priorities. Strategic intent is, nothing but, the influencing of an organization’s resource potential and core competencies to achieve what at first may seem to be unachievable goals in the competitive environment. A well expressed strategic intent should guide/steer the development of strategic intent or the setting of goals and objectives that require that all of organization’s competencies be controlled to maximum value.
Strategic intent includes directing organization’s attention on the need of winning; inspiring people by telling them that the targets are valuable; encouraging individual and team participation as well as contribution; and utilizing intent to direct allocation of resources. Strategic intent differs from strategic fit in a way that while strategic fit deals with harmonizing available resources and potentials to the external environment, strategic intent emphasizes on building new resources and potentials so as to create and exploit future opportunities.
2.       Mission Statement
Mission statement is the statement of the role by which an organization intends to serve it’s stakeholders. It describes why an organization is operating and thus provides a framework within which strategies are formulated. It describes what the organization does (i.e., present capabilities), who all it serves (i.e., stakeholders) and what makes an organization unique (i.e., reason for existence). A mission statement differentiates an organization from others by explaining its broad scope of activities, its products, and technologies it uses to achieve its goals and objectives. It talks about an organization’s present (i.e., “about where we are”). For instance, Microsoft’s mission is to help people and businesses throughout the world to realize their full potential. Wal-Mart’s mission is “To give ordinary folk the chance to buy the same thing as rich people.” Mission statements always exist at top level of an organization, but may also be made for various organizational levels. Chief executive plays a significant role in formulation of mission statement. Once the mission statement is formulated, it serves the organization in long run, but it may become ambiguous with organizational growth and innovations. In today’s dynamic and competitive environment, mission may need to be redefined. However, care must be taken that the redefined mission statement should have original fundamentals/components. Mission statement has three main components-a statement of mission or vision of the company, a statement of the core values that shape the acts and behaviour of the employees, and a statement of the goals and objectives.
Features of a Mission
    1. Mission must be feasible and attainable. It should be possible to achieve it.
    2. Mission should be clear enough so that any action can be taken.
    3. It should be inspiring for the management, staff and society at large.
    4. It should be precise enough, i.e., it should be neither too broad nor too narrow.
    5. It should be unique and distinctive to leave an impact in everyone’s mind.
    6. It should be analytical,i.e., it should analyze the key components of the strategy.
    7. It should be credible, i.e., all stakeholders should be able to believe it.
3.       Vision
A vision statement identifies where the organization wants or intends to be in future or where it should be to best meet the needs of the stakeholders. It describes dreams and aspirations for future. For instance, Microsoft’s vision is “to empower people through great software, any time, any place, or any device.” Wal-Mart’s vision is to become worldwide leader in retailing. A vision is the potential to view things ahead of themselves. It answers the question “where we want to be”. It gives us a reminder about what we attempt to develop. A vision statement is for the organization and it’s members, unlike the mission statement which is for the customers/clients. It contributes in effective decision making as well as effective business planning. It incorporates a shared understanding about the nature and aim of the organization and utilizes this understanding to direct and guide the organization towards a better purpose. It describes that on achieving the mission, how the organizational future would appear to be.
An effective vision statement must have following features-
    1. It must be unambiguous.
    2. It must be clear.
    3. It must harmonize with organization’s culture and values.
    4. The dreams and aspirations must be rational/realistic.
    5. Vision statements should be shorter so that they are easier to memorize.

In order to realize the vision, it must be deeply instilled in the organization, being owned and shared by everyone involved in the organization.
4.       Goals and Objectives
A goal is a desired future state or objective that an organization tries to achieve. Goals specify in particular what must be done if an organization is to attain mission or vision. Goals make mission more prominent and concrete. They co-ordinate and integrate various functional and departmental areas in an organization. Well made goals have following features-
    1. These are precise and measurable.
    2. These look after critical and significant issues.
    3. These are realistic and challenging.
    4. These must be achieved within a specific time frame.
    5. These include both financial as well as non-financial components.
Objectives are defined as goals that organization wants to achieve over a period of time. These are the foundation of planning. Policies are developed in an organization so as to achieve these objectives. Formulation of objectives is the task of top level management. Effective objectives have following features-
    1. These are not single for an organization, but multiple.
    2. Objectives should be both short-term as well as long-term.
    3. Objectives must respond and react to changes in environment, i.e., they must be flexible.
    4. These must be feasible, realistic and operational.

Strategic Management Process - Meaning, Steps and Components

The strategic management process means defining the organization’s strategy. It is also defined as the process by which managers make a choice of a set of strategies for the organization that will enable it to achieve better performance. Strategic management is a continuous process that appraises the business and industries in which the organization is involved; appraises it’s competitors; and fixes goals to meet all the present and future competitor’s and then reassesses each strategy.
Strategic management process has following four steps:
1.
Environmental Scanning- Environmental scanning refers to a process of collecting, scrutinizing and providing information for strategic purposes. It helps in analyzing the internal and external factors influencing an organization. After executing the environmental analysis process, management should evaluate it on a continuous basis and strive to improve it.
2.
Strategy Formulation- Strategy formulation is the process of deciding best course of action for accomplishing organizational objectives and hence achieving organizational purpose. After conducting environment scanning, managers formulate corporate, business and functional strategies.
3.
Strategy Implementation- Strategy implementation implies making the strategy work as intended or putting the organization’s chosen strategy into action. Strategy implementation includes designing the organization’s structure, distributing resources, developing decision making process, and managing human resources.
4.
Strategy Evaluation- Strategy evaluation is the final step of strategy management process. The key strategy evaluation activities are: appraising internal and external factors that are the root of present strategies, measuring performance, and taking remedial / corrective actions. Evaluation makes sure that the organizational strategy as well as it’s implementation meets the organizational objectives.
These components are steps that are carried, in chronological order, when creating a new strategic management plan. Present businesses that have already created a strategic management plan will revert to these steps as per the situation’s requirement, so as to make essential changes.

Components of Strategic Management Process
Strategic management is an ongoing process. Therefore, it must be realized that each component interacts with the other components and that this interaction often happens in chorus.

Steps in Strategy Formulation Process

Strategy formulation refers to the process of choosing the most appropriate course of action for the realization of organizational goals and objectives and thereby achieving the organizational vision. The process of strategy formulation basically involves six main steps. Though these steps do not follow a rigid chronological order, however they are very rational and can be easily followed in this order.
  1. Setting Organizations’ objectives - The key component of any strategy statement is to set the long-term objectives of the organization. It is known that strategy is generally a medium for realization of organizational objectives. Objectives stress the state of being there whereas Strategy stresses upon the process of reaching there. Strategy includes both the fixation of objectives as well the medium to be used to realize those objectives. Thus, strategy is a wider term which believes in the manner of deployment of resources so as to achieve the objectives.
While fixing the organizational objectives, it is essential that the factors which influence the selection of objectives must be analyzed before the selection of objectives. Once the objectives and the factors influencing strategic decisions have been determined, it is easy to take strategic decisions.
  1. Evaluating the Organizational Environment - The next step is to evaluate the general economic and industrial environment in which the organization operates. This includes a review of the organizations competitive position. It is essential to conduct a qualitative and quantitative review of an organizations existing product line. The purpose of such a review is to make sure that the factors important for competitive success in the market can be discovered so that the management can identify their own strengths and weaknesses as well as their competitors’ strengths and weaknesses.
After identifying its strengths and weaknesses, an organization must keep a track of competitors’ moves and actions so as to discover probable opportunities of threats to its market or supply sources.
  1. Setting Quantitative Targets - In this step, an organization must practically fix the quantitative target values for some of the organizational objectives. The idea behind this is to compare with long term customers, so as to evaluate the contribution that might be made by various product zones or operating departments.
  2. Aiming in context with the divisional plans - In this step, the contributions made by each department or division or product category within the organization is identified and accordingly strategic planning is done for each sub-unit. This requires a careful analysis of macroeconomic trends.
  3. Performance Analysis - Performance analysis includes discovering and analyzing the gap between the planned or desired performance. A critical evaluation of the organizations past performance, present condition and the desired future conditions must be done by the organization. This critical evaluation identifies the degree of gap that persists between the actual reality and the long-term aspirations of the organization. An attempt is made by the organization to estimate its probable future condition if the current trends persist.
  4. Choice of Strategy - This is the ultimate step in Strategy Formulation. The best course of action is actually chosen after considering organizational goals, organizational strengths, potential and limitations as well as the external opportunities.

Strategy Implementation - Meaning and Steps in Implementing a Strategy

Strategy implementation is the translation of chosen strategy into organizational action so as to achieve strategic goals and objectives. Strategy implementation is also defined as the manner in which an organization should develop, utilize, and amalgamate organizational structure, control systems, and culture to follow strategies that lead to competitive advantage and a better performance. Organizational structure allocates special value developing tasks and roles to the employees and states how these tasks and roles can be correlated so as maximize efficiency, quality, and customer satisfaction-the pillars of competitive advantage. But, organizational structure is not sufficient in itself to motivate the employees.
An organizational control system is also required. This control system equips managers with motivational incentives for employees as well as feedback on employees and organizational performance. Organizational culture refers to the specialized collection of values, attitudes, norms and beliefs shared by organizational members and groups.
Follwoing are the main steps in implementing a strategy:
Developing an organization having potential of carrying out strategy successfully.
Disbursement of abundant resources to strategy-essential activities.
Creating strategy-encouraging policies.
Employing best policies and programs for constant improvement.
Linking reward structure to accomplishment of results.
Making use of strategic leadership.
Excellently formulated strategies will fail if they are not properly implemented. Also, it is essential to note that strategy implementation is not possible unless there is stability between strategy and each organizational dimension such as organizational structure, reward structure, resource-allocation process, etc.
Strategy implementation poses a threat to many managers and employees in an organization. New power relationships are predicted and achieved. New groups (formal as well as informal) are formed whose values, attitudes, beliefs and concerns may not be known. With the change in power and status roles, the managers and employees may employ confrontation behaviour.

Strategy Evaluation Process and its Significance

Strategy Evaluation is as significant as strategy formulation because it throws light on the efficiency and effectiveness of the comprehensive plans in achieving the desired results. The managers can also assess the appropriateness of the current strategy in todays dynamic world with socio-economic, political and technological innovations. Strategic Evaluation is the final phase of strategic management.
The significance of strategy evaluation lies in its capacity to co-ordinate the task performed by managers, groups, departments etc, through control of performance. Strategic Evaluation is significant because of various factors such as - developing inputs for new strategic planning, the urge for feedback, appraisal and reward, development of the strategic management process, judging the validity of strategic choice etc.
The process of Strategy Evaluation consists of following steps-
  1. Fixing benchmark of performance - While fixing the benchmark, strategists encounter questions such as - what benchmarks to set, how to set them and how to express them. In order to determine the benchmark performance to be set, it is essential to discover the special requirements for performing the main task. The performance indicator that best identify and express the special requirements might then be determined to be used for evaluation. The organization can use both quantitative and qualitative criteria for comprehensive assessment of performance. Quantitative criteria includes determination of net profit, ROI, earning per share, cost of production, rate of employee turnover etc. Among the Qualitative factors are subjective evaluation of factors such as - skills and competencies, risk taking potential, flexibility etc.
  2. Measurement of performance - The standard performance is a bench mark with which the actual performance is to be compared. The reporting and communication system help in measuring the performance. If appropriate means are available for measuring the performance and if the standards are set in the right manner, strategy evaluation becomes easier. But various factors such as managers contribution are difficult to measure. Similarly divisional performance is sometimes difficult to measure as compared to individual performance. Thus, variable objectives must be created against which measurement of performance can be done. The measurement must be done at right time else evaluation will not meet its purpose. For measuring the performance, financial statements like - balance sheet, profit and loss account must be prepared on an annual basis.
  3. Analyzing Variance - While measuring the actual performance and comparing it with standard performance there may be variances which must be analyzed. The strategists must mention the degree of tolerance limits between which the variance between actual and standard performance may be accepted. The positive deviation indicates a better performance but it is quite unusual exceeding the target always. The negative deviation is an issue of concern because it indicates a shortfall in performance. Thus in this case the strategists must discover the causes of deviation and must take corrective action to overcome it.
  4. Taking Corrective Action - Once the deviation in performance is identified, it is essential to plan for a corrective action. If the performance is consistently less than the desired performance, the strategists must carry a detailed analysis of the factors responsible for such performance. If the strategists discover that the organizational potential does not match with the performance requirements, then the standards must be lowered. Another rare and drastic corrective action is reformulating the strategy which requires going back to the process of strategic management, reframing of plans according to new resource allocation trend and consequent means going to the beginning point of strategic management process.

Strategic Decisions - Definition and Characteristics

                                  
Strategic decisions are the decisions that are concerned with whole environment in which the firm operates, the entire resources and the people who form the company and the interface between the two.
Characteristics/Features of Strategic Decisions
  1. Strategic decisions have major resource propositions for an organization. These decisions may be concerned with possessing new resources, organizing others or reallocating others.
  2. Strategic decisions deal with harmonizing organizational resource capabilities with the threats and opportunities.   
  3. Strategic decisions deal with the range of organizational activities. It is all about what they want the organization to be like and to be about.
  4. Strategic decisions involve a change of major kind since an organization operates in ever-changing environment.
  5. Strategic decisions are complex in nature.
  1. Strategic decisions are at the top most level, are uncertain as they deal with the future, and involve a lot of risk.
  2. Strategic decisions are different from administrative and operational decisions. Administrative decisions are routine decisions which help or rather facilitate strategic decisions or operational decisions. Operational decisions are technical decisions which help execution of strategic decisions. To reduce cost is a strategic decision which is achieved through operational decision of reducing the number of employees and how we carry out these reductions will be administrative decision.
The differences between Strategic, Administrative and Operational decisions can be summarized as follows-
Strategic Decisions
Administrative Decisions
Operational Decisions
Strategic decisions are long-term decisions.
Administrative decisions are taken daily.
Operational decisions are not frequently taken.
These are considered where The future planning is concerned.
These are short-term based Decisions.
These are medium-period based decisions.
Strategic decisions are taken in Accordance with organizational mission and vision.
These are taken according to strategic and operational Decisions.
These are taken in accordance with strategic and administrative decision.
These are related to overall Counter planning of all Organization.
These are related to working of employees in an Organization.
These are related to production.
These deal with organizational Growth.
These are in welfare of employees working in an organization.
These are related to production and factory growth.


Benefits of Strategic Management

There are many benefits of strategic management and they include identification, prioritization, and exploration of opportunities. For instance, newer products, newer markets, and newer forays into business lines are only possible if firms indulge in strategic planning. Next, strategic management allows firms to take an objective view of the activities being done by it and do a cost benefit analysis as to whether the firm is profitable.
Just to differentiate, by this, we do not mean the financial benefits alone (which would be discussed below) but also the assessment of profitability that has to do with evaluating whether the business is strategically aligned to its goals and priorities.
The key point to be noted here is that strategic management allows a firm to orient itself to its market and consumers and ensure that it is actualizing the right strategy.
Financial Benefits
It has been shown in many studies that firms that engage in strategic management are more profitable and successful than those that do not have the benefit of strategic planning and strategic management. When firms engage in forward looking planning and careful evaluation of their priorities, they have control over the future, which is necessary in the fast changing business landscape of the 21st century. It has been estimated that more than 100,000 businesses fail in the US every year and most of these failures are to do with a lack of strategic focus and strategic direction. Further, high performing firms tend to make more informed decisions because they have considered both the short term and long-term consequences and hence, have oriented their strategies accordingly. In contrast, firms that do not engage themselves in meaningful strategic planning are often bogged down by internal problems and lack of focus that leads to failure.
Non-Financial Benefits
The section above discussed some of the tangible benefits of strategic management. Apart from these benefits, firms that engage in strategic management are more aware of the external threats, an improved understanding of competitor strengths and weaknesses and increased employee productivity. They also have lesser resistance to change and a clear understanding of the link between performance and rewards. The key aspect of strategic management is that the problem solving and problem preventing capabilities of the firms are enhanced through strategic management. Strategic management is essential as it helps firms to rationalize change and actualize change and communicate the need to change better to its employees. Finally, strategic management helps in bringing order and discipline to the activities of the firm in its both internal processes and external activities.
Closing Thoughts
In recent years, virtually all firms have realized the importance of strategic management. However, the key difference between those who succeed and those who fail is that the way in which strategic management is done and strategic planning is carried out makes the difference between success and failure. Of course, there are still firms that do not engage in strategic planning or where the planners do not receive the support from management. These firms ought to realize the benefits of strategic management and ensure their longer-term viability and success in the marketplace.

Strategic Leadership - Definition and Qualities of a Strategic Leader

Strategic leadership refers to a manager’s potential to express a strategic vision for the organization, or a part of the organization, and to motivate and persuade others to acquire that vision. Strategic leadership can also be defined as utilizing strategy in the management of employees. It is the potential to influence organizational members and to execute organizational change. Strategic leaders create organizational structure, allocate resources and express strategic vision. Strategic leaders work in an ambiguous environment on very difficult issues that influence and are influenced by occasions and organizations external to their own.
The main objective of strategic leadership is strategic productivity. Another aim of strategic leadership is to develop an environment in which employees forecast the organization’s needs in context of their own job. Strategic leaders encourage the employees in an organization to follow their own ideas. Strategic leaders make greater use of reward and incentive system for encouraging productive and quality employees to show much better performance for their organization. Functional strategic leadership is about inventiveness, perception, and planning to assist an individual in realizing his objectives and goals.
Strategic leadership requires the potential to foresee and comprehend the work environment. It requires objectivity and potential to look at the broader picture.
A few main traits / characteristics / features / qualities of effective strategic leaders that do lead to superior performance are as follows:
Loyalty- Powerful and effective leaders demonstrate their loyalty to their vision by their words and actions.
Keeping them updated- Efficient and effective leaders keep themselves updated about what is happening within their organization. They have various formal and informal sources of information in the organization.
Judicious use of power- Strategic leaders makes a very wise use of their power. They must play the power game skillfully and try to develop consent for their ideas rather than forcing their ideas upon others. They must push their ideas gradually.
Have wider perspective/outlook- Strategic leaders just don’t have skills in their narrow specialty but they have a little knowledge about a lot of things.
Motivation- Strategic leaders must have a zeal for work that goes beyond money and power and also they should have an inclination to achieve goals with energy and determination.
Compassion- Strategic leaders must understand the views and feelings of their subordinates, and make decisions after considering them.
Self-control- Strategic leaders must have the potential to control distracting/disturbing moods and desires, i.e., they must think before acting.
Social skills- Strategic leaders must be friendly and social.
Self-awareness- Strategic leaders must have the potential to understand their own moods and emotions, as well as their impact on others.
Readiness to delegate and authorize- Effective leaders are proficient at delegation. They are well aware of the fact that delegation will avoid overloading of responsibilities on the leaders. They also recognize the fact that authorizing the subordinates to make decisions will motivate them a lot.
Articulacy- Strong leaders are articulate enough to communicate the vision(vision of where the organization should head) to the organizational members in terms that boost those members.
Constancy/ Reliability- Strategic leaders constantly convey their vision until it becomes a component of organizational culture.
To conclude, Strategic leaders can create vision, express vision, passionately possess vision and persistently drive it to accomplishment.

Mintzberg’s Five Configurations of Strategic Management

The famous management expert, Henry Mintzberg, proposed a five configurations approach to strategic management wherein any organization can be broken down into five core elements or parts. The interactions between these parts determine the strategy of the organization.
The five parts according to Mintzberg are:
  • The Operating Core which consists of those doing the basic work and whose output can be directly linked to the goods and services that the organization makes and sells. According to Mintzberg, this part is common to all organizations since the core work must be done and hence, the operating element has to be put in place.
  • The Strategic Apex, which is composed of senior management and the senior leadership, which provides the vision, mission, and sense of purpose to the organization. Indeed, it can be said that this part consists of those men and women who shape and control the destinies of the organization.
  • The Middle Level Managers who are the “sandwich” layer between the apex and the operating core. This element is peopled by those who take orders from above and pass them as work to the operating core and supervise them. In other words, they perform the essential function of acting as a buffer between the senior management and the rank and file employees.
  • The fourth element is the Technostructure that is composed of planners, analysts, and trainers who perform the intellectual work. This element provides the advice for the other parts and it is to be noted that they do not do any work but function in an advisory capacity.
  • The final element is the Support Staff who perform supporting roles for the other units and exist as specialized functions that are responsible for the peripheral services in the organization.
The key aspect about these configurations is that it can be used to predict the organizational structure of any organization and used to model the strategy that the organization follows as a result of the interaction between these parts.
For instance, in many service sector companies, the organization structure is very fluid and interchangeable with the result that the middle managers perform crucial tasks and the apex gets directly involved in running the organization.
On the other hand, in many manufacturing companies, it is common to find the Technostructure prevailing as the organizational processes are bureaucratic and have mechanistic characteristics which makes the organization function like a machine. This is the configuration in many public sector and governmental organizations as well.
Finally, the startups have a structure that is composed of the strategic apex and the supporting staff in their initial years of operation as the organization structure is yet to be formalized.
The key implications of Mintzberg’s configurations are that it gives us a useful model to describe how the organizational structure affects strategy. As many theoretical models depend on external strategy alone, this model is preferred by those who want to understand how internal dynamics produce strategy.


Role of Planning, Plans and Planners in Mintzberg’s Five Configurations

Role of Planning, Planners, and Plans
The previous article discussed the five configurations of organizational structure that Mintzberg proposed as part of his theory. This article examines the role of planning, plans, and planners in each of the configuration. To start with planning is an important element of strategy whenever there is excessive standardization and where the organizational structure is mechanistic and where the technocrats are in positions of importance.
For instance, the Department of Defense or the Pentagon in the United States relies extensively on standardized work processes and planning to carry out its activities. This is the case with large organizations like GM (General Motors) as well. These organizations rely on “experts” and “planners” who form an “army of techno structural bureaucrats” who plan and who assist the organization in carrying out its activities by formalizing plans for the future.
Some Real World Examples
On the other hand, startups in the software industry hardly plan for the longer term when their focus is on the next year’s results. However, the role of plans in strategy cannot be underestimated because all organizations need longer-term plans for their survival. Indeed, as the example of the planning commission in developing countries like India illustrates, longer-term plans are crucial to ensure that countries and organizations do not lose track of their sense of purpose and mission. The role of planning is crucial in the machine bureaucracies and the professional organizations that need a vision and mission to take them forward. As we have discussed, plans, planning, and planners all contribute to the development of strategy.
Difference between Strategy Formulation and Strategy Implementation
Talking about strategy, there is a crucial difference in the terms strategy formulation and strategy implementation. Mintzberg and his associates researched extensively and found that in most cases, strategy formulation and strategy implementation are entirely different aspects. The difference is that whereas planners plan strategy and formulate it, managers execute strategy and implement it. Hence, there is the aspect of two different elements of the organizational structure that is involved in planning and execution of strategy. Indeed, in many organizations, there exists a creative tension between the planners and the implementers and the way in which the organizations resolve this aspect makes the difference between organizational transformation and organizational failure that is at the heart of Mintzberg’s configuration model of strategy.
Closing Thoughts
Since the contemporary business environment is characterized by rapid pace of change and unpredictable trends that take everyone by surprise, planners and managers have to ensure that their strategies take into account these aspects. For instance, an Army commander follows the strategy to tackle an enemy unit but also must make changes on the fly to ensure that the situation on the field is amenable to their strategy. Different organizations strategize differently and it is the nature of longer term planning combined with the adaptation to shorter-term needs that determines how well an organization performs in the real world.

Own the Future: Insights from Recent Research into Strategizing for the Future

This article discusses the ten qualities needed for companies to stay ahead of the competition and win the race for the market in the next decade. With so much of rapid change and accelerating trends, it is important for companies to be, the biggest and the best or else they run the risk of getting left behind and becoming also ran companies.
  • Adaptable
The winners of tomorrow will be those companies that are best at identifying and anticipating market shifts and managing complex and multi-company systems. The need for shorter cycles and faster reaction time is greater as the pace of change is rapid and only those companies that can adapt to it will succeed.
  • Global
It is a fact that everybody is competing with everyone from everywhere. This means that the future markets for growth in Asia would take many business leaders out of their comfort zones. Hence, what works in Munich might not work in Mumbai and therefore there is a need to understand the fluid marketplace.
  • Connected
As the world gets smaller because of greater integration and better communications technologies, there are changes in the realm of strategy, which the business leaders of tomorrow must embrace. This means that the companies of tomorrow must deal with newer forms of customer behavior and newer business models.
  • Sustainable
With the ever-looming threat of climate change and environmental catastrophe, businesses need to pursue growth strategies that are sustainable and ensure that they use limited resources more efficiently. These strategies lead to all round stakeholder development instead of profits for the firms alone.
  • Customer First
For companies to achieve greatness, they must develop deep and lasting emotional bonds with their consumers. They need to transform consumers into repeat buyers and in some cases, they need the customers to be brand evangelists which means that the customers are the best source of advertising for the companies.
  • Fit to Win
The art of execution is one of the core drivers of competitive advantage and the truly great companies strategize in a manner that drives improvement in the critical areas identified for success. These companies have flat and agile structures that speed up the flows of information, improve decision-making, and have sophisticated pricing models.
  • Value-Driven
It is a fact that companies must create value for all their stakeholders, this is something that is ageless, and timeless which makes the companies and their legacies enduring for all stakeholders. The value that a company creates has two components, which are earnings and growth. It is impossible to separate the two and since they work in tandem, the value that the company creates must be both short-term profits and longer term success.
  • Trusted
Though trust does not appear on a company’s balance sheet, it is the most valuable asset for the companies. Hard to build and harder to sustain as well as easier to squander, trust reposed by the customers determines how successful a company is over the longer term. The digital revolution offers never before opportunities to expand and accelerate reputational aspects of the companies.
  • Bold
If companies do not evolve with the times, they run the risk of becoming redundant. Hence, companies need to be forward looking and reinvent themselves to keep pace with their competitors. These companies would not be blindsided and outpaced by competition. This means that companies must experiment on a continual basis and not be afraid to embrace radical change from outside and from within.
  • Inspiring
Finally, the business leaders of tomorrow are inspirational figures much in the mold of religious and mythological figures from history. This means that epic leadership is needed from the leaders of tomorrow as they go about setting the agenda that their followers can adapt and emulate, if possible that translates into an inspired workplace as well as external respect.

Auditing the internal and external business environment

What is internal environmental auditing?

Internal environmental audits are the regular examination of your business' actual operating methods - comparing them against those set out in your environmental management system (EMS) manual. These can be reviews of procedures and areas of operation, and are designed to assess effectiveness.

Key aims of internal audits

An audit should help you identify:
  • where your environmental management processes are working well
  • where they need to be improved
  • whether there are any new potential environmental risks
More specifically, the aims of the audit are to assess whether clear objectives and targets are being met and that your site:
  • complies with the agreed policies, objectives and targets of your EMS
  • has effective emergency procedures and control systems
  • meets legal requirements
  • meets the requirements of a formal EMS standard - if you are following one
  • makes sure employees, contractors and suppliers have the skills needed and are given appropriate training
  • makes provision for adequate communications

External environmental audits

In addition to carrying out internal audits of their environmental management system (EMS), many businesses use an external organisation to check that their EMS meets the standard they are working towards.
A successful external audit will confirm that your EMS:
  • conforms to specified requirements
  • is able to consistently achieve its policy and objectives
  • is effectively carried out
The benefits of having your EMS externally certified include:
  • attracting investors, employees and clients through showing your commitment to environmental management
  • confidence that your EMS meets requirements
  • confirmation that you have adopted the right approach to your EMS
Business-Level Strategy
Business-level strategy: an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets. Or Business-level strategy details the actions managers take in their quest for competitive advantage when competing in a single product market.2 It may involve a single product or a group of very similar products that use the same channel. It concerns the broad question, “How should we compete?” To formulate an appropriate business-level strategy, managers must answer the “who-what-why-and-how” questions of competition:
  • Who—which customer segments—will we serve?
  • What customer needs, wishes, and desires will we satisfy?
  • Why do we want to satisfy them?
  • How will we satisfy our customers’ needs?3
To formulate an effective business strategy, managers need to keep in mind that a firm’s competitive advantage is determined jointly by industry characteristics and firm characteristics. The more attractive an industry is, the more profitable it is.
Purpose of business level strategy to create differences between position of a firm and its competitors.  Firm must make a deliberate choice to
- perform activities differently
- perform different activities.
satisfying customers is the foundation of successful business strategies.

Two types of competitive advantage firms must choose between
. cost (are we lower than others)
. uniqueness ( are we different? How?)
The two types of Competitive scope firms must choose between
. broad target
. narrow target

These comdine to yield 5 different generic business level strategies.
   This generic business level strategies can be used by any organisation competing in any industry.

Diagram here check the first notes printed




Cost leadership strategies
- firms must offer relatively standardised products with features or characteristics that are acceptable to customers at the lowest competitive price
- firms must consider their value chain of primary and secondary activities and link those activities to implemtn a cost leadership strategy

Differentiation strategy
- goal is to provide value to customers through unique features and characteristics of a firm's products
- differentiators focus or concentrate on product innovation and developing product features that customers value
- cant completely ignore costs

Focus strategies
-focus on a particular buyer group, segment of the market
- to serve a narrow target or market segment more effectively than broad based competitors can due to core competencies
-select target segments which are the least vulnerable to substitutes or where competitors are the weakest.

Intergrated cost leadership/differentiation
- efficiently produce products with differentiated attributes
- can adapt to new technology and rapid changes in external environment
- simultaneously concentrate on two sources of competitive advantage: cost and differentiation consequently

Corporate Level Strategy

Corporate Level Strategy Guides the Organization as a Whole. Corporate level strategy covers the strategic scope of the organization as a whole. For most organizations the corporate strategic plan is the only strategic plan required. Often strategy at the corporate level is simply referred to as corporate strategy, or in unified companies the corporate business strategy.  The process that produces it is called corporate strategic planning, or sometimes simply corporate planning.  In a few situations however, it may be justified to speak of corporate level strategy to distinguish it from other kinds of planning.
In the first case the organisation may be multidivisional in nature to the extent that in principle or even in law, separate parts of the enterprise could operate as viable entities in their own right.
These ‘group structures’ may undertake strategic planning as group exercise where under the corporate level strategy, each separate subsidiary or division has its own strategic planning process and strategic plan. In these cases however, one of the most significant inputs to each divisions’ strategic planning is the output of the corporate strategic planning. These outputs from corporate level strategy; usually in the form of performance targets for the divisions cannot be ignored by the subsidiary unit.
The corporate business strategy may also set down a small number of other factors that the divisions, or strategic business units as they may sometimes be called. These might include guidance on market definition, including geographic scope. For example the subsidiaries of a multinational bank may be defined by the country they operate in. In this case the corporate business strategy would set profit targets for each country bank. The corporate strategy would yield to the country banks as to the strategies they pursue in generating these profits. The country level banks would have their own business unit level strategies.
In the second case corporate level strategy is used to distinguish it from the many other plans and planning processes that get the term ‘strategic’ in their names. The word strategy has acquired a kind of aura that seems to make many people want to use it, regardless of how actually strategic the matter at hand is in relation to the overall performance of an organisation. So we can end up with strategic plans for every level, part and functional process in the organization.
Strategic planning is a systematic, formally documented process for deciding the handful of key decisions that an organisation, viewed as a corporate whole, must get right in order to thrive over the next few years.
Decisions in corporate level strategy
Remember that at the beginning we said that corporate-level strategies address the entire strategic scope of the enterprise. This is the "big picture" view of the organization and may include deciding in which product or service markets to compete and the geographic boundaries of the organizations’ operations.
For multi-divisional organizations or enterprises, how capital, staffing, and other resources are allocated is usually established at the corporate level. Additionally, because market definition is usually the domain of corporate-level strategy, the responsibility for diversification, or the addition of new products or services to the existing offerings, also mostly comes within the responsibility of corporate-level strategy. Also, whether to compete head on with other companies or to selectively establish cooperative partnering arrangements, or ‘strategic alliances’ is a decision for corporate-level strategy, while requiring ongoing input from business unit or divisional level managers.
Corporate level strategic questions
So crucial questions addressed by corporate-level strategy, among other possibilities may include:
What should be the scope of operations; i.e.; what businesses should the firm be in? And where should it be in business?
How should the organization allocate its resources its various existing lines of business or business units?
What level of diversity should exist in the business as it moves into the future? Are there other activities the enterprise should be in or are there current activities that should be targeted for stopped or sold off to others?
What should be the nature of this diversity or how diversified should the organization be? Should it diversify in similar product or service markets, or into completely different areas; becoming a more conglomerate entity.
How should the firm be organized? What will be the boundaries of the enterprise? How will these boundaries impact relationships among parts of the business, with suppliers, customers and other interest groups? How will the organizational functions such as product development, production, distribution finance, marketing, sales customer service, etc. fit together? Are the responsibilities for each business unit clearly identified and is accountability established? Which will be carried out in-house, and which will be contracted out?
Should the firm enter into cooperative, mutually-beneficial relationships or alliances with others? If so, on what basis? If not, what impact might this have on future organizational performance?
As these questions show, corporate strategies address the long-term direction for the organization as a whole. Corporate strategies deal with plans for the entire organization and change as the capabilities of the organization develop and as the environment of the organization changes.

Designing organizational structures
An organasitional structure defines how activities such as task allocation, coordination and supervision are directed towards the achievement of organizational aims.[1] It can also be considered as the viewing glass or perspective through which individuals see their organization and its environment.[ An organization can be structured in many different ways, depending on their objectives. The structure of an organization will determine the modes in which it operates and performs. Organizational structure allows the expressed allocation of responsibilities for different functions and processes to different entities such as the branch, department, workgroup and individual. Organizational structure affects organizational action in two big ways. First, it provides the foundation on which standard operating procedures and routines rest. Second, it determines which individuals get to participate in which decision-making processes, and thus to what extent their views shape the organization’s actions. Organizational structure is used to develop how groups and individuals are arranged or departmentalized to help meet an organization's goals. It defines a reporting structure, jobs, compensation and responsibilities for each role. Designing an organizational structure requires consideration of an organization's values, financial and business goals. It should allow for growth for the organization and the ability to add additional jobs or departments.
Step 1
Define business units or departments. Each business unit should have similar goals and responsibilities that can be overseen and directed by one or several managers. The business units or departments will then align to assist in creating an appropriate organizational structure. Depending on which type of organizational structure is used, departments may align laterally with other departments or one may oversee another.
Step 2
Determine which type of organizational structure best fits your business needs. The several types of organizational structure ensure an organization can successfully function with its reporting structure, expand if necessary and successfully meet its goals. For example, if your organization is small, it may simply require the organizational structure be broken into departments, such as production, human resources and finance. Your organization's business type, units and how it operates will determine which type of organizational structure to choose.
Step 3
Define the executive and management teams. Executives and managers are responsible for ensuring each business unit meets the organization's goals. This may include one or several top executives to oversee the entire organization and managers to direct each business unit within the organizational structure. the organization may require one supervisor to oversee all operations, or several supervisors to direct each business unit, ultimately reporting to a top executive or owner.
Step 4
Establish performance metrics and compensation. When the organizational structure is determined, job descriptions can be clearly defined and where each job fits in the hierarchy. Each job description should reflect the competencies required to do the job and the expectations of each job to meet the organization's goals. After each job within the structure is defined, compensation should be defined based on the responsibilities of each job.

Integration and control systems
A management control system (MCS) is a system which gathers and uses information to evaluate the performance of different organizational resources like human, physical, financial and also the organization as a whole considering the organizational strategies. Finally, MCS influences the behavior of organizational resources to implement organizational strategies. MCS might be formal or informal. The term ‘management control’ was given of its current connotations by Robert N. Anthony (Otley, 1994). Robert N. Anthony (2007) defined Management Control as the process by which managers influence other members of the organization to implement the organization’s strategies. Management control systems are tools to aid management for steering an organization toward its strategic objectives and competitive advantage. Management controls are only one of the tools which managers use in implementing desired strategies. However strategies get implemented through management controls, organizational structure, human resources management and culture. Anthony & Young (1999) showed management control system as a black box. The term black box is used to describe an operation whose exact nature cannot be observed. MCS involves the behavior of managers and these behaviors cannot be expressed by equations. According to Horngren et al. (2005), management control system is an integrated technique for collecting and using information to motivate employee behavior and to evaluate performance.  According to Simons (1995), Management Control Systems are the formal, information-based routines and procedures managers use to maintain or alter patterns in organizational activities.
Management control systems use many techniques such as
  • Balanced scorecard: The balanced scorecard (BSC) is a strategy performance management tool - a semi-standard structured report, supported by design methods and automation tools, that can be used by managers to keep track of the execution of activities by the staff within their control and to monitor the consequences arising from these actions.[
  • Total quality management (TQM): Total quality management (TQM) consists of organization-wide efforts to install and make permanent a climate in which an organization continuously improves its ability to deliver high-quality products and services to customers.
  • Kaizen (Continuous Improvement): Kaizen , Japanese for "good change". It has been applied in healthcare, psychotherapy, life-coaching, government, banking, and other industries. When used in the business sense and applied to the workplace, kaizen refers to activities that continually improve all functions and involve all employees from the CEO to the assembly line workers. It also applies to processes, such as purchasing and logistics, that cross organizational boundaries into the supply chain. By improving standardized activities and processes, kaizen aims to eliminate waste
  • Activity-based costing: Activity-based costing (ABC) is a costing methodology that identifies activities in an organization and assigns the cost of each activity with resources to all products and services according to the actual consumption by each
  • Target costing: is a pricing method used by firms. It is defined as "a cost management tool for reducing the overall cost of a product over its entire life-cycle with the help of production, engineering, research and design".
  • Benchmarking and Benchtrending: is the process of comparing one's business processes and performance metrics to industry bests or best practices from other companies.
  • JIT: An inventory strategy companies employ to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, thereby reducing inventory costs.
  • Budgeting
  • Capital budgeting: Capital budgeting, or investment appraisal, is the planning process used to determine whether an organization's long term investments such as new machinery, replacement machinery, new plants, new products, and research development projects are worth the funding of cash through the firm's capitalization structure
  • Program management techniques, etc.

SWOT Analysis
A SWOT analysis (alternatively SWOT matrix) is a structured planning method used to evaluate the strengths, weaknesses, opportunities and threats involved in a project or in a business venture. A SWOT analysis can be carried out for a product, place, industry or person. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieve that objective. The degree to which the internal environment of the firm matches with the external environment is expressed by the concept of strategic fit. Strategic fit expresses the degree to which an organization is matching its resources and capabilities with the opportunities in the external environment. SWOT analysis is a method for analysing a business, its resources, and its environment. SWOT is commonly used as part of strategic planning and looks at:
  • Internal strengths
  • Internal weaknesses
  • Opportunities in the external environment
  • Threats in the external environment
SWOT can help management in a business discover:
  • What the business does better than the competition
  • What competitors do better than the business
  • Whether the business is making the most of the opportunities available
  • How a business should respond to changes in its external environment
The key point to remember about SWOT is that:
Strengths and weaknesses
  • Are internal to the business
  • Relate to the present situation
Opportunities and threats
  • Are external to the business
  • Relate to changes in the environment which will impact the business
·         There is no point producing a SWOT analysis unless it is actioned! SWOT analysis should be more than a list - it is an analytical technique to support strategic decisions
·         Strategy should be devised around strengths and opportunities






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