Unit I Introduction for Global Strategic Management Mcom sem 3 Delhi University
Unit I Introduction for Global Strategic Management Mcom sem 3 Delhi University – To help students understand strategy making process that is informed integrative and responsive to rapid changes in an organization’s globally oriented environment and also to help them understand tasks of implementing strategy in a global market.
Unit I Introduction for Global Strategic Management Mcom sem 3 Delhi University
Unit I Introduction for Global Strategic Management Mcom sem 3 Delhi University contains following Topics
Unit I Introduction: Concept and Role of Strategy; The Strategic Management Process; Approaches to Strategic Decision Making; Strategic Role of Board of Directors & Top Management. Strategic Intent; Concept of Strategic Fit, Leverage and Stretch; Global Strategy and Global Strategic Management; Strategic flexibility and learning organization.
Concept and Role of Global Strategic Management
Unit I Introduction for Global Strategic Management Mcom sem 3 Delhi University -Global Strategy is a shortened term that covers three areas: global, multinational and international strategies. Essentially, these three areas refer to those strategies designed to enable an organization to achieve its objective of international expansion.
Unit I Introduction for Global Strategic Management Mcom sem 3 Delhi University – Global strategic management involves a set on conceptual tools that help in navigating through the often contradictory and ambiguous mass of information, market, working staff and to sum it all up this all done and appreciated on an international platform.
Implications of the three definitions within global strategy:
- International strategy: the organisation’s objectives relate primarily to the home market. However, we have some objectives with regard to overseas activity and therefore need an international strategy. Importantly, the competitive advantage – important in strategy development – is developed mainly for the home market.
- Multinational strategy: the organisation is involved in a number of markets beyond its home country. But it needs distinctive strategies for each of these markets because customer demand and, perhaps competition, are different in each country. Importantly, competitive advantage is determined separately for each country.
- Global strategy: the organisation treats the world as largely one market and one source of supply with little local variation. Importantly, competitive advantage is developed largely on a global basis.
Benefits of a global strategy
Unit I Introduction for Global Strategic Management Mcom sem 3 Delhi University – The business case for achieving a global strategy is based on one or more of the factors set out below – see academic research by Theodore Leavitt, Sumanthra Ghoshal, Kenichi Ohmae, George Yip and others. For the full, detailed references, go to the end of Chapter 19 in either of my books, Corporate Strategy or Strategic Management
- Economies of scope: the cost savings developed by a group when it shares activities or transfers capabilities and competencies from one part of the group to another – for example, a biotechnology sales team sells more than one product from the total range.
- Economies of scale:the extra cost savings that occur when higher volume production allows unit costs to be reduced – for example, an Arcelor Mittal steel mill that delivers lower steel costs per unit as the size of the mill is increased.
- Global brand recognition: the benefit that derives from having a brand that is recognized throughout the world – for example, Disney..
- Global customer satisfaction: mulitnational customers who demand the same product, service and quality at various locations around the world – for example, customers of the Sheraton Hotel chain expect and receive the same level of service at all its hotels around the world.
- Lowest labour and other input costs: these arise by choosing and switching manufacturers with low(er) labour costs – for example, computer assembly from imported parts in Thailand and Malaysia where labour wages are lower than in countries making some sophisticated computer parts (such as high-end computer chips) in countries like the USA
- Recovery of research and development (R&D) costs and other development costs across the maximm number of countries – new models, new drugs and other forms of research often amounting to billions of US dollars. The more countries of the world where the goods can be sold means the greater number of countries that can contribute to such costs. For example, the Airbus Jumbo A380 launched in 2008 where development costs have exceeded US$ 10 billion.
- Emergence of new markets: means greater sales from essentially the same products.
The Strategic Management Process
Unit I Introduction for Global Strategic Management Mcom sem 3 Delhi University – Strategic Management Process is defined as the way an organization defines its strategy. It is a continuous process in which the organization decides to implement a selected few strategies, details the implementation plan and keeps on appraising the progress & success of implementation through regular assessment.
The strategic management is a five stage process as shown in the figure below.
i. Goal Setting:
The vision and goals of the organization are clearly stated. The short-term and long-term goals are defined, processes to achieve the objectives are identified and current staff is evaluated to choose capable people to work on the processes.
Data relevant to achieve the goals of the organization is gathered, potential internal and external factors that can affect the sustainable growth of the organization are examined and SWOT analysis is also performed.
iii. Strategy Formulation:
Once the analysis is done, the organization moves to the Strategy Formulation stage where the plan to acquire the required resources is designed, prioritization of the issues facing the business is done and finally the strategy is formulated accordingly
iv. Strategy Implementation:
After formulation of the strategy, the employees of the organization are clearly made aware of their roles and responsibilities. It is ensured that funds would be available all the time. Then the implementation begins.
v. Strategy Evaluation:
In this process, the strategies being implemented are evaluated regularly to check whether they are on track and are providing the desired results. In case of deviations, the corrective actions are taken.
As shown in the figure, the five stages are not stand-alone and constantly interact with each other in order to ensure better management of the business.
Approaches to Strategic Decision Making
There are 4 approaches to Strategic decision making
- The Classical Decision Making Process (Dewey, 1910)
- The General Model (Mintzberg, 1976)
- Cynefin Framework (Kurtz & Snowden, 2003)
- MCDA for SDM (Montibeller & Franco, 2010)
The Classical Decision Making Process is sequential and based on rational thinking. The process is simple and easy to use, and is based on the belief in rationale.
The General Model is a 3 step process that each have a routine focused on the critical element in decision making. The 3 phases of this model are the identification phase, development phase, and selection phase. This approach was well received because of the attention placed in key aspects of strategic decision making.
The Cynefin Framework is one of the more recent models. It’s non-sequential and focuses on research from a variety theories psychologies. Kurtz and Snowden said “it’s concerned with how people perceive and make sense of situations in order to make decisions” (The New Dynamics of Strategy, 2003). With this framework, there’s four approaches that rely on the characteristics of the situation presented.
The most recent approach, MCDA for SDM, focuses on decision problems that have multiple, often conflicting criteria. It’s not sequential but does follow a set of procedures. These analyze difficult decisions by conflicting criteria and determining scores that offer an overall ordering of options. The results are then organized by option from most preferred to least preferred.
Strategic Role of Board of Directors & Top Management
Board role in strategic planning
Unit I Introduction for Global Strategic Management Mcom sem 3 Delhi University – In the interest of improving corporate governance, it is vital to clarify the board role in strategic planning, and especially to clarify respective roles for governors and for managers in the strategic planning process. By strategic planning, we mean the process of determining an organization’s long-term goals and then identifying the best approach for achieving those goals.
In simple terms, it is the board role in strategic planning to set the organization’s goals, and to specify the limits of conduct within which the managers are to operate while pursuing those goals. In contrast with the board role in strategic planning, it is the role of the managers to achieve these goals within these constraints.
Unit I Introduction for Global Strategic Management Mcom sem 3 Delhi University – At Simply Strategic Planning, the ‘corporate goal’ or fundamental purpose is ‘’satisfying the Intended Beneficiaries’. It is the board’s job to identify who these Intended Beneficiaries are. They must also identify what benefit they are expecting from their organization. The Board must also determine how much, in terms of quantity and/or quality, the beneficiaries would deem to be ‘satisfactory’. Boards should set realistic targets for this aim, and then hand these down to the managers for action. It is not the job of the managers to set corporate targets, although, it is, at present, commonly and irrationally, they who do so. This does not rule out consultation between the board and managers over appropriate targets.
Strategic Intent can be understood as the philosophical base of strategic management process. It implies the purpose, which an organization endeavor of achieving. It is a statement, that provides a perspective of the means, which will lead the organization, reach the vision in the long run.
Strategic intent gives an idea of what the organization desires to attain in future. It answers the question what the organization strives or stands for? It indicates the long-term market position, which the organization desires to create or occupy and the opportunity for exploring new possibilities.
How to Implement Strategic Intent???
Unit I Introduction for Global Strategic Management Mcom sem 3 Delhi University – It is a three step process where the first step starts with setting the strategic intent which aims at setting all the three attributes discussed earlier, namely, direction, discovery and destiny, right. This refers to having clarity of what actually the organization intends to be in all respects.
Second step is to set the challenges which should be appropriate and communicated to everyone in the organization effectively. For instance, Canon, in order to beat Xerox, had set a challenge as to come up with a Home Copier which is priced at $ 1000.
Third and final step is the empowerment of Strategic Intent and here the key is to involve everyone. Downward and upward communication of ideas should be free-flow and everyone’s opinion should be given considerable importance. Here the term empowerment is used in a vary holistic manner so as to encompass both individuals and organization.
Concept of Strategic Fit, Leverage and Stretch
Unit I Introduction for Global Strategic Management Mcom sem 3 Delhi University – The concepts of leverage, stretch, and fit can have a strong influence on how a company or firm positions itself in the market.
The main difference is that “fit” strategic management attempts to take a realistic approach, which is more likely to take off.
Leverage and stretch is more idealistic – and as such is less likely to be successful, but can yield higher growth and rewards if successful.
Examples of leverage stretch and fit positioning
Stretch – is when a firm doesn’t have the resources or capability to take up the position it would like in the market, so it attempts to augment or alter its capabilities to better fit into the market.
Leverage – is when a firm takes its current resources, and tries to make the most of them in order to get a “foot in the door” of the market it aspires to command.
Fit – Is when a firm positions itself in an environment that suits its resources and capabilities.
This is the most realistic approach, based on SWOT analysis and the marketing mix
Strategic flexibility and learning organization.
Unit I Introduction for Global Strategic Management Mcom sem 3 Delhi University – An organization’s ability to learn is a key strategic capability to compete in modern markets. This research seeks to achieve an in-depth understanding of learning’s contribution to a firm’s competitiveness by analyzing how organizational learning (OL), understood as a dynamic capability, shapes firms’ strategic flexibility and competitive strategy implementation to ultimately improve customer, financial, and market-related performance. This article proposes that OL acts as a forerunner of a firm’s ability to adapt to evolving market conditions (strategic flexibility), and that OL and flexibility simultaneously foster the implementation of differentiation and cost-leadership strategies. This strategic behavior allows firms to reduce costs without damaging differentiation levels, and to improve customer and business performance. The study employs structural equation modeling (SEM) to evaluate the causal links that the research model depicts. Data analysis follows from a sample of 181 medium-sized Spanish manufacturing firms. The results confirm the expected relationships and reveal OL to be an important instrument in modern markets to provide customer value and to improve organizational performance by means of efficient competitive strategy design and flexible adaptation to rapid market evolution.