Benefits of strategic management

Proactive approach strategic management helps an organisation to be proactive rather than reactive. Strategic management evaluates opportunities and threats outside the organisation and prepare the organisation to face the future well in advance. Strategic management helps in formulating machine and make objectives clear.

Facilitates better delegation - strategic management helps in better delegation and co-ordination. Executives working at the lower levels can formulate their respective functional and operational strategies within the broad framework of the organisational strategy.

Exploiting opportunities - strategic management helps a company to adopt suitable strategies for exploiting opportunities and fight threats. It will also help the company to drop those businesses which are not successful or which do not meet their opportunities. Assist realistic and effective plans - strategic management will help the company to have constant watch on the environment to identify changes and to modify the strategy as and when required. Based on these modifications executives are allowed to formulate their policies to suit the modified corporate strategy. This leads to formulations of realistic and effective plans.

To gain competitive advantage strategic management enables a company to meet competitions more effectively. Careful understanding of changes in external environment including competition helps the policy makers to frame policies to explore and exploit opportunities for the organisation benefit. Quick adoption to the changing environment helps the company to gain competitive edge over competitors Minimize the weakness every organisation will have both strategies and weakness. Prudent strategy maker converts these weakness into strength by reinforcing appropriate strategies. Earlier identification of weakness helps an organisation to reduce it through proper measures. Promotes employees participation top level management formulates overall objectives and develops corporate strategies based on the objectives to be accomplished. Operational and functional policies are formulated by the executives working at the bottom line. This in turn helps in employee participation to a greater extent. Boost profits number of research studies have suggested that a well designed strategic management can boost profits. Strategic management helps in identifying, evaluating and adopting best course of action from out of the alternatives available. This careful selection helps the company to go for improved action which would really improve the profitability of the organisation. Systematic approach for management decisions Well designed strategic management adopts system approach to problem solving. It concentrates on all functional areas of the organisation. It establishes co-ordination and integration between these functional areas of the organisation. Strategic management designs appropriate authority and responsibility for each functional area. This leads to systematic allocation of organizational resources based on priority and urgency.

Empowerment of employees - strategic management helps the organisation to achieve commitment from all the members of the organisation. This commitment helps managers and employees to become more creative and innovative. This process results in employee empowerment which in turn increases organizational effectiveness.

Limitations of strategic management

Strategic management is not free from limitations. Many firms fail despite adopting strategic management and many firms which do not have strategic management are successful. In short, strategic management by itself does not ensure success.

strategic management decisions are based on certain assumptions. If these assumptions are not valid, the plans based on them would not be realistic. strategic management is a means to achieve organisational mission or objectives. If mission or objectives are unrealistic, strategy formulated based on these objectives will also turn out to be unrealistic. Sometimes it is argued that strategic management makes an organisation over-ambitious. This over-ambition leads to organisational failure. strategic management uses SWOT analysis as a powerful tool for making suitable strategies. If this SWOT analysis is not right, strategy formulated to address the opportunities and kill threats is an utter failure. strategic management decisions are based on environmental factors. Company does not have any control over external environment. Sudden changes call for alteration of strategies formulated earlier. Frequent changes in strategy reduce confidence of e3mployees. Success of strategic management is dependent not only on the strategy formulation but also on effective implementation. If implementation is not effective, even an excellent strategy would not produce excellent result. Many strategies fail at implementation phase. It is also argued that strategic management is a costly exercise. An elaborate exercise is needed to identify opportunities, understand weaknesses and threats. This also calls for analysis and implementation of best course of alternative. strategic planning is a complex and difficult task. It requires people with vision, commitment and expertise. For proper implementation, appropriate system must also exist. As mentioned earlier, strategic management provides for flexibility. It means that strategies will be reviewed and modified based on the change in the environment. People may resist to adopt to these changes frequently. Many people question the use of strategic management. The reason for this is that there are examples of failure of organisations in spite of adopting strategic management. Also there are instances of success of organisations without adopting strategic management.

Strategic decision making often, managers fail to make decision in right time and allow opportunities to slip from their hands. Decisions should be taken and implemented in right time. Decision involves choosing better course of action from out of availbale alternatives. Each alternative should be evaluated carefully, evaluated under the lights of financial, social, technological and political implications.

Decision making process consists of identification of problems, scanning the environment, developing and analysing alternatives possible and selecting and implementing best alternative solution to attain business goals. Top level management formulate strategic decision. Strategic decision are related to the organisational decision. They determine the direction and destination of the organisation. Based on the strategic decisions, operational decisions are formulated by lower level management to accomplish the objective set by the top management. Features of strategic decisions Strategic decisions are concerned with organisational activities strategy is the means to achieve the end, i.e. the mission and goals. Strategic decisions seek to establish a suitable organisation to cover various activities involved in accomplishment of objectives. Activities vary from organisation to organisation. The range of activities are fundamental to strategic decision. Matching organisational activities to its environment - Strategic decisions helps in matching the activities of an organisation to its internal and external environment. Strategies are formulated after evaluating alternative course of actions based on the environmental threats and opportunities. Matching organisation activities to its resources while formulating decisions, organisation must not forget the available resources with it. Resource base includes financial, human, material and informational resources. Allocation and reallocation of organizational resources organisation exists within external environment. Change in the external environment calls for modifications of strategies. Hence, organisational resources must be reallocated based on the changed strategies. Decisions are affected by value system - Strategic decisions are affected by value system including business ethics, philosophy etc., which will decide the magnitude of the strategies. Strategic decisions affect operational decision operational decisions are made to accomplish strategic decisions formulated by top management. Therefore, Strategic decisions affect operational decisions. Strategic decisions determine long run direction of the company long term future direction of the organisation is an important aspect of Strategic decisions. Strategic decisions often emerge from perspective views about the economy and society, including regularity environment, prospects of different business, competitive environment etc. Competitive orientation - Strategic decisions aim at gaining a sustainable competitive edge for the firm.

Levels of strategy In most of the organisation, strategic management takes place at three levels. They are 1. Corporate strategy 2. Business strategy 3. Functional strategy Corporate strategy Corporate strategy is the top management plan to direct and run the organisation as a whole. Corporate strategy is the long-term strategy encompassing the entire organisation. Corporate strategy addresses fundamental questions such as what is the purpose of the organisation, how to establish/ expand it.

Business strategy Business strategy is also called competitive strategy. Business strategy occurs at the business unit or product level. It emphasizes improvement of the competitive position of the enterprise. While corporate strategy decides the type of business, the business strategy decides the strategies to succeed in chosen business. Business strategy deals with the allocation of resources within the business unit. SBU strategy has to confirm to the corporate philosophy and strategy. In short, SBU level strategic management of SBUs effort to compete effectively in a particular line of business and to contribute to overall organisational purpose.

Functional strategy Functional strategies are formulated for different functional area like production, finance, marketing, personnel etc.

Reasons for failure of strategic management

1. Strategy is concerned with future course of action and the future being uncertain due to various reasons, definite strategy cannot be determined. It is likely to be erroneous if adopted. Hence, it leads to failure of strategic management. 2. Business cycles, government rules, competitors role, etc., make strategy planners weak and force them to change strategy very often. Frequent changes indicate poor planning and then the management loses faith in strategy programme. 3. Risk involved in the implementation of a strategy is more since strategy involves long range planning which is subject to greater degree of uncertainty. As a result of it, strategy is likely to be erroneous.

4. Sources of strategy depends, as noted above, on the joint efforts and co-operation of people in the organisation and in practice, it is seldom expected and therefore there are more unforeseen impediments in the successful implementation of the strategy. 5. Conflicts between managers goals and company goals may be an additional impediment. Because of such conflict, the manager is likely to use his own strategy which may defeat the overall strategy of the company. 6. Management is generally reluctant either to drop or modify the predetermined strategy for achieving the benefits of market opportunities. Management therefore depends on short term benefits which could have been obtained had there been a change in the established strategy. 7. To communicate a strategy requires as much trouble and time as to conceive it. 8. Under changing circumstances, strategy becomes obsolete unless it is suitably modified. 9. A strategy once accepted does not in itself point out the course of action to be taken in difficult situation.

STRATEGISTS AND THEIR ROLE IN STRATEGIC MANAGEMENT TOP MANAGEMENT CONSTITUENTS 1. BOARD OF DIRECTORS 2. SUB COMMITTEE 3. CHIEF EXECUTIVE OFFICER 4. TASK RESPONSIBILITIES AND 5. SKILLS OF TOP MANAGEMENT There are nine Strategists (TOP MANAGEMENT), who, as individuals or in groups are concerned with and play a role in strategic management their role in strategic management is explained below:(1) Role of Board of Directors The ultimate legal authority of an organisation vests in the board of directors. The owners of the organisation shareholders, controlling agencies, government, financial institutions, holding company or the parent company-elect and appoint the directors on the board. The board is responsible to them for the governance of the organisation. As directors, the members of the board, are responsible for providing guidance and establishing the directives according to which the managers of the organisation can operate. The board exercises its authority according to the memorandum of association and articles of association of the company. Legally, they have to conform to the various provisions of the Companies Act, 1956. Apart from the legal framework, the board acts according to the policies, rules, procedures and conventions of the organisation. The role of the board in strategic management is to guide the senior management in setting and accomplishing objectives, reviewing and evaluating organizational performance and appointing senior executives. However, there is no clarity regarding the exact role that the board should play in managing the affairs of the organisation. Much depends on the relative strength, in terms of power, held by the board and the chief executive. Where there is a high level of clarity regarding their respective rules, the relationship between the board and the chief executive is cordial and the functioning of the board is smooth. Where such clarity is less, problems occur. As the board of directors operates as the representatives of stockholders so the board has also following major responsibilities:

1. To establish and update the company mission. 2. To elect the companys top officers, the formost of whom is the CEO. 3. To establish the compensation level of the top officers, including their salaries and bonuses. 4. To determine the amount and timing of the dividends paid to stockholders. 5. To set broad company policy on such matters as labour management relations, product or service lines of business and employee benefit packages. 6. To set company objectives and to authorize managers to implement the long-term strategies that the top officers and the board have found agreeable. 7. To mandate company compliance with legal and ethical dictates. (2) Role of Chief Executives The chief executive (CE) is the most important strategist who is responsible for all aspects of strategic management from formulation to evaluation of strategy. The CE is variously designated as managing director, executive director, president or general manager in business organizations. As the chief strategist, the CE plays a major role in strategic decision-making. The functioning of the board critically depends on its relationship with the chief executive. Where there are differences of opinion between the respective perspectives of the role of the board and the chief executive, disagreements arise. The CE of an organisation plays the most crucial role in determining whether an organisation is successful or not. The role of the CE in strategic management is the most important among the roles played by different strategists. He is the person who is chiefly responsible for the execution of functions which are of strategic importance to the organisation. In other words, a CE performs the strategic tasks; actions which are necessary to provide a direction to the organisation so that it achieves its purpose. He plays a pivotal role in setting the mission of the organisation, deciding the objectives and goals, formulating and implementing the strategy and, in general, seeing to it that the organisation does not deviate from its predetermined path designed to move it from the position it is in to where it wants to be. The role modeling approaches attempt to describe the CE in terms of the different roles that they play in organisations. For instance, a CE may be considered as: Chief architect of organizational purpose, strategist or planner; Organisation leader, organizer or organisation builder; Chief administrator, implementer or coordinator; and Communicator of organizational purpose, motivator, personal leader or mentor. (3) Role of enterprises According to Drucker, the entrepreneur always searches for change, responds to it and exploits it as an opportunity. The entrepreneur has been usually considered as the person who starts a new business, is a venture capitalist, has a high level of achievementmotivation, and is naturally endowed with qualities of enthusiasm, idealism, sense of purpose, and independence of thought and action. However, not all these qualities are present in all entrepreneurs; nor are these found uniformly. An entrepreneur may also demonstrate these qualities in different measures at different stages of life. Contrary to the generally accepted view of entrepreneurship, entrepreneurs are not only to be found in small businesses or new ventures. They are also present in established and large businesses, in service institutions and also in the bureaucracy and government. Entrepreneurs play a proactive role in strategic management. As initiators, they provide a sense of direction to the organisation, set objectives and formulate strategies to achieve them. They are the major implementers of strategies and also their evaluators. The strategic management process adopted by entrepreneurs is, generally, not based on a formal system and, usually, they play all the

strategic roles simultaneously. Strategic decision-making is quick and the entrepreneurs generate a sense of purpose among their subordinates. (4) Role of Senior Manager The senior (or top) management consists of managers at the highest level of the managerial hierarchy. Starting from the chief executive to the level of functional or profit centre heads, these managers are involved in various aspects of strategic management. Some of the members of the senior management act as directors on the board usually on a rotational basis. All of them serve on different top-level committees set up by the board to look after matters of strategic importance and other policy issues. Executive, committees, consisting of senior managers, are responsible for implementing strategies and plans, and for a periodic evaluation of performance. Ad hoc committee formed to deal with new projects has senior managers as project - 45 managers. When assigned specific responsibilities, senior managers look after modernization, technology upgradation, diversification and expansion, plan implementation, and new product development. On the whole, senior managers perform a variety of roles by assisting the board and the chief executive in the formulation, implementation and evaluation of strategy. (5) Role of SBU-level Executive. The rationale for organizing structure according to the strategic business units (SBUs) is to manage a diversified company as a portfolio of businesses; each business having a clearly defined productmarket segment and a unique strategy. The role that the SBU-level executives play is, therefore, important in strategic management. SBU-level executives, also known as either profit-centre heads or divisional heads, are considered as chief executives of a defined business unit for the purpose of strategic management. In practice, however, the concept of SBU is adapted to suit traditions, shared facilities and distribution channels, and manpower constraints. With regard to strategic management, the SBU-level strategy formulation and implementation are the primary responsibilities of the SBU-level executives. Many public and private sector companies have adopted the SBU concept in some or the other form. (6) Role of Corporate Planning Staff The corporate planning staff play a supporting role in strategic management. They assist the management in all aspects of strategy formulation, implementation and evaluation. Besides these, they are responsible for the preparation and communication of strategic plans, and for conducting special studies and research pertaining to strategic management. The corporate planning department is not responsible for strategic management and, usually, does not initiate the process on its own. By providing administrative support, it fulfills its functions of assisting the introduction, working and maintenance of the strategic management system. How corporate planning works at voltas The basic function of the corporate planning cell (CPC) at Voltas Ltd. is to disseminate the concept of corporate planning and make planning a way of life in the company. The main objective of the CPC is to convert the existing budgeting system into a corporate planning system which deals with strategic issues. The CPC supports the corporate planning process by assisting the top management in the formulation of corporate plans and integrating the divisional plans with the corporate plan. Based on the companys long-range plan, divisional strategic plans are made annually. The strategies for each division are explicitly stated by the CPC and communicated to the senior managers. After this, the CPC staff acts as a catalyst in the implementation process by helping the senior managers implement the plan. Evaluation is done quarterly by the corporate executive committee consisting of the president and six vice presidents in different functional areas. The staff at CPC is mainly drawn from within and they possess a few years line experience in different functional areas in the company. (7) Role of Consultants Many organizations which do not have a corporate planning department owing to reasons of small

size, infrequent requirements, financial constraints, etc. take the help of external consultants in strategic management. These consultants may be individuals, academicians or consultancy companies specializing in strategic management activities. According to Management Consultants Association of India, management consultancy is a professional service performed by specially trained and experienced person to advise and assist managers and administrators to improve their performance and effectiveness and that of their organisation. Among the many functions that management consultants perform, corporate strategy and planning is one of the important services offered. The main advantages in hiring consultants are getting an unbiased and objective opinion from a knowledgeable outsider, cost-effectiveness and using specialists skills. (8) Role of Middle- level Managers The major functions of middle-level managers relate to operational matters and, therefore, they rarely play an active role in strategic management. They may, at be st, be involved as sounding boards for departmental plans, as implementers of decisions taken above, followers of policy guidelines and passive receivers of communication regarding strategic plans. Basically involved in the implementation of functional strategies, the middle-level managers are rarely employed for other purposes in strategic management. The importance of middle management cadres lies in the fact that they form the catchments areas for developing future strategists for the organisation. (9) Role of Executive Assistant The emergence of executive assistants in the managerial hierarchy is relatively a recent phenomenon. An executive assistant is a person who assists the chief executive in the performance of his duties in various ways. These ways could be to assist the chief executive in data collection and analysis, suggesting alternatives where decisions are required, preparing briefs of various proposals, projects and reports, help in public relations and liaison functions, coordinating activities with the internal staff and outsiders and acting as filters for information coming from different sources. The executive assistants assist the chief executive, they help to optimise their time utilisation. The requirements for an executive assistant, in terms of skills and attitudes, include a generalist orientation, a few years line experience, exposure to different functional areas, excellent written and oral communication ability, and a pleasing personality. The qualification required is, generally, an MBA or CA. The position of executive assistant offers a unique advantage to young managers as nowhere else can he or she gain a comprehensive view of the organisation which can help in career planning and development and rapid advancement to the senior levels of management.