Modes of strategic management are the actual kinds of approaches taken by managers in formulating and implementing strategies. They address the issues of who has the major influence in the strategic management process and how the process is carried out. Research indicates that managers tend to use one of three major approaches to, or modes of strategic management: entrepreneurial, adaptive, and planning. The mode selected is likely to influence the degree of innovation that occurs within the organization. Innovation is particularly important in the context of strategic management, because organizations that do not continually incorporate new ideas are likely to fail behind competitively, particularly when the environment is changing rapidly. 1. Entrepreneurial Mode “Entrepreneurial mode is an approach in which strategy is formulated mainly by a strong visionary chief executive who actively searches for new opportunities, is heavily oriented toward growth, and is willing to make bold strategies rapidly” (Management, Continue reading
Strategic Management Concepts
Mass Customization – Dynamic Stability Product/Process Matrix
Mass Customization Concept “It is the customer who determines what a business is” – Drucker, 1954 The concept of mass customization was coined by Stan Davis in 1987, in his book “Future Perfect”. In this book, he emphasizes that in traditional industrial production there is on the one hand mass production, using economies of scale to produce goods at low costs, but with nearly no variety or on the other hand individual production with a high degree of variety but in small volumes with high costs. Joseph Pine, an IBM-executive turned consultant and author who is the father of the mass customization concept, in his 1993 book “Mass Customization — A New Frontier in Business Competition”, outlines more about Mass Customization. “developing, producing, marketing and delivering affordable goods, and services with enough variety and customization that nearly everyone finds exactly what they want.” – Joseph Pine, 1993 “Mass customization is a system Continue reading
The Concept of Strategic Groups
Meaning of Strategic Groups Strategic group is a group of firms within an industry which face the same environmental forces, have same resources and follow similar strategy in response to the environmental forces. These strategies include pricing practices, level of technology investment and leadership, product scope and scale capabilities, and product quality. By identifying strategic groups, analysts and managers are better able to understand the different types of strategies that multiple firms are adopting within the same industry. For example, the restaurant industry can be divided into several strategic groups including fast-food and fine-dining based on variables such as preparation time, pricing and presentation. The number of groups within an industry and their composition depends on the dimensions used to define the groups. The concept of strategic groups in strategic management stems from an observation by Hunt (1972). Hunt coined the term strategic groups to describe a group of firms Continue reading
Business Clusters
In a globalized economy, companies can access capital, goods, information and technology from all parts of the world. Thanks to faster methods of transportation and communication, physical location has become less important. Yet, there are geographic concentrations of industrial activities. For example, Silicon Valley in California is reputed for its cluster of computer hardware and software companies. Even though it is a very expensive location, many tech companies continue to perform their key value adding activities in this region. Michael Porter uses the term “clusters” to describe geographical concentrations of interconnected companies and institutions in a particular business. Business clusters include suppliers of components, machinery, services and institutions which provide specialized infrastructure. Sophisticated, demanding customers who keep companies on their toes can also be considered a part of the cluster. So can the local government, universities, research centers and think-tanks who play a vital role in encouraging innovation and creating Continue reading
Corporate Governance and Clause 49 of the Listing Agreement
SEBI revise Clause 49 of the Listing Agreement pertaining to corporate governance vide circular date October 29th, 2004, which superseded all other earlier circulars issued by SEBI on this subject. All existing listed companies were required to comply with the provisions of the new clause by 31st December 2005. The major provisions included in the new Clause 49 are: The board will lay down a code of conduct for all board members and senior management of the company to compulsorily follow. The CEO an CFO will certify the financial statements and cash flow statements of the company. If while preparing financial statements, the company follows a treatment that is different from that prescribed in the accounting standards, it must disclose this in the financial statements, and the management should also provide an explanation for doing so in the corporate governance report of the annual report. The company will have Continue reading
The Link Between Innovation and Strategy
Innovation is usually defined as the successful commercial exploitation of new ideas or simply as the successful implementation of new ideas. This encompasses ideas that are ‘new to the world’, ‘new to an industry’ or merely ‘new to a particular firm’. The prominence given to the role of innovation in strategy is to a large extent the result of the prevailing social and economic conditions. In what Peter Drucker – the most influential management thinker of the second-half of the twentieth century – termed the ‘knowledge economy’ that has emerged due to the rise of the service industry and decline of manufacturing since the end of the Second World War, business organizations have increasingly had to react to change more rapidly if they wish to succeed in the marketplace. Indeed, so important is the successful implementation of new ideas that Drucker famously reflected that: ‘Business has only two basic functions Continue reading