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level and risk of strategic management


Levels of Strategy
•         At the top of this hierarchy is the corporate level, composed principally of board of directors and the CEOs.
•         Responsible for the firm’s financial performance and for the achievement of nonfinancial goals, such as enhancing the firm’s image and fulfilling its social resoonsibilities.
•         In the middle of the decision-making hierarchy is the business level, composed principally of business and corporate managers.
•         These managers must translate the statements of direction and intent ( determination) generated at the corporate level into concrete objectives and strategies for individuals business divisions.
•         Business-level strategic managers determine how the firm will compete in the selected product-market arena.
•         They strive (struggle) to identify and secure the most promising market segment within the arena.
•         At the bottom of the decision-making hierarchy is the functional level, composed principally of managers of product, geographic, and functional areas.
•         They develop annual objectives and short term objectives in such areas as production, operations, research and development, finance and accounting, marketing and human relations.
•         However, their principal responsibility is to implement or execute the firm’s strategic plans.
•         Managers at the functional level center their attention on “doing things right”
•         Thus, they address such issues as the efficiency and effectiveness of production and marketing systems, the quality of customer service, and the success of particular products and services in increasing the firm’s market shares.

Benefits of Strategic Management
•         Using the strategic management approach, managers at all levels of the firm interact in planning and implementing.
•         As a result, the behavioral consequences of strategic management are similar to those of participative decision making.
•         Accurate assessment of the impact of strategy formulation on organizational performance requires not only financial evaluation criteria but also nonfinancial evaluation criteria-measures of behavior based effects.
Benefits….
  1. Strategy formulation activities enhance the firm’s ability to prevent problems.
  2. Group-based strategic decisions are likely to be drawn from the best available alternatives. The strategic management process results in better decisions because group interaction generates a greater variety of strategies.
  3. 3. The involvement of employees in strategy formulation improves their understanding of the productivity-reward relationship in every strategic plan and thus, heightens their motivation.
  4. 4. Gaps and overlaps in activities among individuals and groups are reduced as participation in strategy formulation clarifies differences in roles.
  5. 5. Resistance to change is reduced.

Risks of Strategic Management
Managers must be trained to guard three types unintended negative consequences of involvement in strategy formulation.
First, the time that managers spend on the strategic management process may have a negative impact on operational responsibilities. Managers must be trained to minimize that impact by scheduling their duties to allow the necessary time for strategic activities.
Second, if the formulators of strategy are not involved in its implementation, they may shirk (avoid) their individual responsibility for the decisions reached.
Third, strategic managers must be trained to anticipate and respond to the disappointment of participating subordinates over unattained expectations.
Role of CEOs in Strategic Management
A firm’s president or CEO characteristically plays a dominant role in the strategic planning process.
In many ways, this situation is desirable. The CEO’s principal duty often is defined as giving long-term direction to the firm, and the CEO is ultimately responsible for the firm’s success and, therefore, for the success of its strategy.
In addition, CEOs are typically strong willed, company-oriented individuals.
However, when the dominance of the CEO approaches autocracy, the effectiveness of the firm’s strategic planning and management processes is likely to be diminished.
For this reason, establishing a strategic management system implies that the CEO will allow managers at all levels to participate in the strategic posture of the company
In implementing a company’s strategy, the CEO must have an appreciation for the power and responsibility of the board, while retaining the power to lead the company with the guidance of informed directors.
The interaction between the CEO and board is key to any corporation’s strategy.
Empowerment of non managerial employees has been a recent trend across major management teams.
For e.g., in 2003, IBM replaced its 92-year old executive board structure with three newly created management teams: strategy, operations and technology/
Each team combined top executives, managers, and engineers going down six levels in some cases.
•         This new team structure was responsible for guiding the creation of IBM’s strategy and for helping to implement the strategies once they were authorized


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