History and evolution of Strategic Management

Evolution of business policy and strategic management as a discipline

 Origin – 1911- Harvard Business School – Integrated Course in Management aimed at providing general management capability.

• Hofer: Strategic Management – A Casebook in Policy and Planning: The Business Policy evolution has undergone four Paradigm Shifts. This transition is of overlapping nature.
• Development of subject of Business Policy has always followed the demands of real life business.
• 1930 -1960: Environment change: New Products: Continuously changing market: Ford Foundation recommended report, by Gordon and Howell, suggested a “Capstone” course of Business Policy which would give the students an opportunity to pull together what they have learned in the separate business fields and utilise this knowledge in the analysis of complex business problems.
• 1969: The course was made mandatory by American Assembly of Collegiate School of Business (AACSB)
• 1990: The course has become an integral part of management education curriculum.

Evolution of Business Policy has undergone four Paradigms

• Paradigm One: Ad-hoc Policy – making.
• 1900 -1930: Era of Mass Production – Maximising output, Normally a Single Product, Standardised and low cost product, catering to unique set of customers servicing limited geographical area – Informal control and co-ordination. The Strategic planning was centred on maximising output.

Paradigm Two – Integrated Policy Formulation.

1930-1940: Changes in Technology, Turbulence in Political environment, Emergence of new industries, Demand for novelty products even at higher costs, Product Differentiation, Market segmentation in increasingly competitive and changing markets. These all made investment decisions increasingly difficult. This was era of integrating all functional areas and framing policies to guide managerial actions.

Paradigm Three – The Concept of Strategy.

• 1940- 1960: Planned policy became irrelevant due to increasingly complex and accelerating changes. Firms had to anticipate environmental changes.
• A strategy needed to be formed with critical look at basic concept of Business and its relationship to the existing environment then.

Paradigm Four – The Strategic Management.

• 1980 & onwards: The focus of Strategic Management is on the strategic process of business firms and responsibilities of general management.
• Everything out side the four walls is changing rapidly and this phenomenon is called as “Discontinuity” by Mr. Peter Drucker. Past experiences are no guarantee as science and technology is moving faster. The future is no more extension of the past or the present.
• The world is substantially compressed and managing the External & Internal environment becomes crucial function.
• What to produce, where to market, which new business to enter, which one to quit and how to get internally stronger and resourceful are the new stakes.
• Strategic Planning is required to be done to endow the enterprise with certain fundamental competencies / distinctive strengths which could take care of eventualities resulting from unexpected environmental changes.

The Indian Scenario:

• However, the evolution of this fourth phase is still continuing and is yet not formed into a theory of how to manage an enterprise. But Strategic Management is a very important tool for and way of thinking to resolve strategic issues.
• The Indian Scenario:
• IIMs and Administrative Staff College of India formed in early sixties were based on American Model. IIM-A is based on Harvard Model. The All India Council of technical Education (AICTE), The Association of Indian Management Schools (AIMS) have recommended a standard curriculum including “Business Policy and Strategic Management” as a compulsory course. Business Policy is the preferred nomenclature but Strategic management is being progressively adapted.

Evolution of Strategic Management in India is divided in three periods

Till 1980: Pre-liberalisation Stage:

• Strategic management on Government fringes.
• Entwining enterprise objectives into the national Planning framework.
• Grabbing opportunities, high diversification, non- competitive scales, and weak technology.
• Secretive & one man Strategic Management Process.

Till 2000: Liberalisation Stage:

• ‘Foreign Complex’ governed strategy.
• Strategy of focus on rationalisation and operations improvement.
• Strategy of growth through acquisitions, internationalisation and product market expansion.
• Employing international consulting firms in Strategic Management.

2000-2010:Post Liberalisation Stage:

• ‘Global maverick’ mindset & Acquire professional skills in Strategic Management and synergise entrepreneurial flair.
• Portfolio rationalisation, entry into emerging sectors.
• Mobilise resources and ensure adequate growth through existing business.
• De-merge businesses as independent companies and improve market capabilities.
• Development of Technology capabilities
• Decentralize organizations, develop institutionalized control mechanism.