Chapter 4 & 5.docx

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Management Studies
MGST 391
Ahmad Ali Sohrabi

Chapter 4 & 5 : Strategic Management : Traditional & other models Traditional and other models of Strategic Management Strategic Management: “Strategic Management is the analysis, choice, implementation and control of agreed strategies” Strategy is a course of action including the specification of resources required to meet a specific objective. Tactics is the deployment of resources to execute an agreed strategy. Policy is a general statement providing guidelines for management of decision-making. Levels of strategy: (by Hofer and Schendel) 1. Corporate Strategy determines the overall purpose and scope of the organization. It is concerned with what types of business the organization is in. Defining aspects of corporate strategy:  Scope of activities (whole organization)  Faces environment (opportunities and threats)  Resources (how to obtain and allocate them)  Values (of people in power in organization affect it)  Time scale (long term)  Complexity (uncertainty of future) 2. Business Strategy is how an organization approaches a particular product market area (applied at SBU level). 3. Functional/Operational strategies deal with specialized area of activity within an SBU e.g. Production, Marketing, HRM, Finance. Traditional approach to make strategy: (through Planning in a systematic way) o Strategic analysis  Analyzing Vision, Mission and Objectives (Strategic Direction)  Corporate appraisal (where we are) o Analyzing external environment i. SLEPT analysis ii. Porter‟s 5 forces model iii. Scenarios o Analyzing internal environment (Situation analysis/Position audit) i. Resources Audit ii. BCG and GEBS matrices iii. Value chain iv. System structure o SWOT Analysis o Gap analysis o Strategy formulation/Choice (how we can go) o Strategy implementation o Strategy evaluation and Control Favor of rational model: (Ansoff and Drucker support it) 1. Corporate level first 2. Strategies are best generated from Top-Down 3. Provide a common thread 4. Enables decision making in conditions where i. Partial ignorance (Ansoff) ii. Risk is inevitable (Drucker) 5. Basis for strategic control 6. Improves stakeholders‟ perception Problems with rational model: (Mintzberg criticizes it) 1. Organizations are incapable of having objectives because i. Objectives may conflict with each other. ii. Objectives will change from time to time iii. Objectives are unlikely to be directly related to economic benefits of shareholders. 2. Senior management should not be only strategy- setter. 3. In reality formulation is not a simple step by step process. 4. Strategies that firms follow are not the same as ones they set in plans. 5. Over reliance on formalization. 6. Predetermination 7. Failure in practice (suitable for only stable environment) 8. Hinders innovation and radical change. Other models of(making strategy) Strategic Management Mintzberg’s emergent strategy model: (Considers random shocks)  It is unlikely that a firm‟s environment is totally predictable.  Emergent strategy is a non-conscious strategy arising from patterns of behavior.  Strategic Management is to control and shape/craft these emergent strategies as they arise. Intended Deliberate Strategies Strategies Unrealized Realized Strategies Strategies Patterns of Unexpected Emergent behavior Contingencies Strategies Activities affecting Crafting Strategy:  Manage stability o Implement, not just plan o Obsession to change is dysfunctional; know when to change  Manage patterns o Detect patterns and help them shape; grow positives and eliminate negatives.  Know the business operations  Detect discontinuing and significance of environmental changes.  Crafting strategy---- requires natural synthesis of past, present and future. (reconcile change and continuity) Mintzberg’s 8 styles of strategic management: 1. Planned strategies (imposed by central leadership, large no. of controls, precise intentions) 2. Imposed strategies (imposed by environment e.g. influential customers) 3. Ideological strategies (collective vision of organization‟s members, shared values) 4. Umbrella strategies (ends are defined, means are emergent, target based) 5. Disconnected strategies (members mind their own business, strategies are deliberate for sub-units but emergent for organization) 6. Consensus strategies ( groups shares common patterns) 7. Entrepreneurial strategies (visioned from strong leadership) 8. Process strategies Mintzberg’s 5 ways to describe strategy: 1. Plan - consciously intended course of action 2. Ploy - a competitive game (e.g discouraging competitors to enter) 3. Pattern - ideas of emergent strategies 4. Position - “environmentally fit” & relationship with other organisations 5. Perspectives - approach towards world Strategy and managerial intent: (Johnson and Scholes) not emergent The Command view:  Strategy develops through the direction of an individual or group, but not necessarily through formal planning.  Control of strategy direction is possessed by autocratic or charismatic leader. Paradigm and Politics:  Paradigm (basic assumption and beliefs common in organization‟s decision makers) is inhabitant and conservative than culture.  Politics is process of bargaining and negotiation of strategy among powerful stakeholders.  Process by which Paradigm and Politics influence process of strategy development. o Issue awareness (by internal results, customer response or environmental change) o Issue formulation (analysis of issue to get its root) o Solution development Summary:  Memory search (from past experience) a) Managers do not take best  Passive search (time will tell) decisions but satisfactory o Solution selection  Eliminate unacceptable plans (politics) ones.  Endorsement to junior management b) Managers do not pursue the whole rational model but take small-scale decisions. Incrementalism: Bounded Rationality Theory: (Herbert Simon)  Mangers are limited by time, information and skills.  They satisfice rather than maximize. Incrementalism: (Lindblom)  It involves small-scale extension of past practices.  Organizations change increment
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