Diploma In Business

Managemet
Chapter 1-3

➜Strategic
Managemen

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Welcome to strategic Management
Agenda
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Strategy Formulation
➜ Approach to Formulate Strategy
➜ Objective Formulation
➜ Stakeholders
➜ Business Vision and Mission
➜ Organization Structure and Culture
➜ Types of Organization Structure and Culturesting facts about animals!

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 Strategy Formulation
Definition: Strategy Formulation is an analytical process of
I will talk about Strategy selection of the best suitable course of action to meet the
Formulation . organizational objectives and vision. It is one of the steps of
the strategic management process. The strategic plan allows
an organization to examine its resources, provides a financial
plan and establishes the most appropriate action plan for
increasing profits.

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 Steps in Strategy
Formulation Process

1.
a) Strategy formulation refers to the process of choosing the most appropriate
2.
course of action for the realization of organizational goals and objectives and
3. thereby achieving the organizational vision. The process of strategy
formulation basically involves six main steps.
4.

b) Though these steps do not follow a rigid chronological order, however they are
5.
very rational and can be easily followed in this order.

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 Setting Organizations’ objectives
Step 1  The key component of any strategy statement is to set the long-term
Setting Organizations’ objectives of the organization.
objectives
 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.

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 Evaluating The Organizational Environment

1.
Know your environment
Step 2
2.  The next step is to evaluate the general economic  The purpose of such a review is to make sure
and industrial environment in which the that the factors important for competitive
3. success in the market can be discovered so that
organization operates. This includes a review of
the organizations competitive position. the management can identify their own
4.
strengths and weaknesses as well as their
 It is essential to conduct a qualitative and competitors’ strengths and weaknesses.
5.
quantitative review of an organizations existing
product line.

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 Setting Quantitative
Targets
 In this step, an organization must practically fix
the quantitative target values for some of the
organizational objectives.
Step 3  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.

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1.

2.

3.

4.

5.

Peter Drucker
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 Aiming in context with the
Step 4 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.

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 Performance
Analysis

1. Step 5
2.  Performance analysis includes discovering and analyzing the gap between the planned or
desired performance. A critical evaluation of the organizations past performance, present
3. condition and the desired future conditions must be done by the organization.

4.  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
5. estimate its probable future condition if the current trends persist.

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Step 6 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.
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 3 Component of Objective Formulations of an
Organization

1. PROCESS PURPOSE
2.

3.

4. CONSIDERATIONS
5.

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Process
Step 1
➜ The process of formulating objectives varies from one organization to another. In many
cases, multiple leaders have input.

➜ For example, a board of directors may state broad goals and allow managers to develop
specific objectives.

➜ In the case of a small business, an owner may use past performance data and industry
trends to set performance benchmarks that serve as objectives, without input from
employees or investors.

➜ Objectives must consist of both measurable results and dates by which those results
should be reached

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 Purpose
 Organizations need to formulate objectives for a number of reasons. In a general
sense, organizational objectives drive strategic planning.

 This affects decisions about allocating resources, creating time lines for project
completion and projecting costs and revenues from various business activities.

 Objectives also provide a benchmark for an organization's leadership to measure

efficiency and progress.

 Objectives that require hard work but are within the realm of possibility also motivate
members of an organization and give workers clear information about shared
expectations.
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Considerations

As an organization operates and grows, its objectives are likely

to change. Each project will meet its objectives or fail to
achieve them.

Objective success rates further impact future objective

formulations

Organizations rely on both short- and long-term objectives to measure

progress over time and remain focused on major goals despite
unexpected changes in revenue, market position and leadership.

However, flexibility is key to formulating objectives that are relevant

and address real challenges and opportunities.

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 Stakeholder

What Is a Stakeholder?
 A stakeholder is a party that has an interest in a company and can either affect or be
affected by the business.

 The primary stakeholders in a typical corporation are its investors, employees, customers
and suppliers.

 However, the modern theory of the idea goes beyond this original notion to include
additional stakeholders such as a community, government or trade association
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 Understanding Stakeholder

 Stakeholders can be internal or external. Internal

stakeholders are people whose interest in a company
comes through a direct relationship, such as
employment, ownership or investment.

 External stakeholders are those people who do not

directly work with a company but are affected in some
way by the actions and outcomes of said business.

 Suppliers, creditors and public groups are all considered

external stakeholders.

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Problems With Stakeholders
A common problem that arises with having numerous
stakeholders in an enterprise is their various self interests
may not all be aligned. In fact, they may be in direct
conflict.

The primary goal of a corporation, for example, from the

viewpoint of its shareholders, is to maximize profits and
enhance shareholder value. Since labor costs are a critical
input cost for most companies, a company may seek to
keep these costs under tight control.

This might have the effect of making another important

group of stakeholders, its employees, unhappy. The most
efficient companies successfully manage the self-
interests and expectations of their stakeholders.
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 Stakeholders vs Shareholders

Stakeholders are bound to a company with some type of

vested interest, usually for a longer term and for reasons of
greater need. A shareholder, meanwhile, has a financial
interest, but a shareholder can sell a stock and buy different
stock or keep the proceeds in cash; they do not have a long-
term need for the company and can get out at any time.

For example, if a company is performing poorly financially,

the vendors in that company's supply chain might suffer if
the company no longer uses their services. Similarly,
employees of the company, who are stakeholders and rely
on it for income, might lose their jobs. However,
shareholders of the company can sell their stock and limit
their losses.
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Assignment & Home work

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Thank You

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