Introduction to Strategic

Management
STRATEGY
• Strategy originated from the Greek word ‘Strategio’ meaning
‘General’ or military commander.

• Strategy is a set of actions aimed at gaining a sustainable

advantage over the competitors, improving position through
customers or allocating resources.
Definitions of strategy
Chandler(1962)Strategy is the determinator of the basic long-term
goals of an enterprise, and the adoption of courses of action and
the allocation of resources necessary for carrying out these goals.
Mintzberg (1979) Strategy is a mediating force between the
organization and its environment: consistent patterns in streams of
organizational decisions to deal with the environment.

Prahlad (1993) Strategy is more than just fit and allocation of

resources. It is stretch and leveraging of resources.
Strategy is the framework that provides general
guidance for specific actions to be executed
successfully to meet particular ends.
Concept of Strategy

Strategy is “ The direction and scope of the organization over the long
term, which achieves advantage for the organization through its
configuration of resources within a challenging environment, to meet
the needs of the market and fulfill the stakeholder expectations”
Johnson and Scholes

Strategic Management
“It is a set of decisions and actions leading to formulation, implementation
of strategies or plans to achieve a firm’s long-term objectives”.
Objectives of SM
• Long term survival or viability,
• To gain a competitive advantage. Competitive advantage occurs when an
organization acquires or develops an attribute or combination of attributes that
allows it to outperform its competitors.
• Managing for future or competing for future.
• Anticipate the future & risk reduction .
• Allocation of limited resources to get best result .
• To balance short term goals & long term goals .
• To identify the new & different businesses ,technologies and markets which
have future potential .
• Helps organisation to be proactive ie..Solves problems before they occur
• Creates Unity of purpose in the organisation.
• Better understanding and communication in the organisation
Strategic Business Units
• SBU is an operating division of a firm that serves a distinct product/ market
segment or a well-defined set of customers or geographic units.

• SBU is given authority to make its own strategic decision within corporate
guidelines aas longas it meets the corporate objective

• a single business or collection of related businesses that is

independent and formulates its own strategy
Phases in Strategic Management
Process (SMP)
Strategic management is the dynamic process of formulation,
implementation, evaluation and control of strategies to achieve
the organization's strategic intent.”
SWOT analysis of Strengths, Weaknesses,
Opportunities & Threats.
3 Stages of the Strategic Management Process

• Strategy Analysis
• Strategy Formulation
• Strategy Implementation
• Strategy Evaluation

Ch 1 -9
Strategy Formulation

Vision & Mission

Long-Term Objectives

Alternative Strategies

Strategy Selection
Strategy formulation requires following steps :

1. Define the organization

2. Define the strategic mission & vision
3. Define the strategic objectives
4. Determining strategic position
5. Determine Alternative Strategies.
6. Evaluate all alternatives.
Step 1. Define the Organization

• The first step in defining an organization is to identify the organizational

structure & its customers. Organizational structure should be flexible with
proper delegation of authority & responsibility.
• Without a strong customer base, whose needs are being fulfilled, an
organization will not be successful. A company must identify the factors
that are valued by its customers.
• Is the value based on a superior product or service relative to the
competition? Are your customers buying your products for your low prices?
Do you produce products that meet image needs of your customers?
Step 2- Define the Strategic Mission & Vision
• Mission- It is a statement of the purpose of existence of the organization as
given by the founder. It is a short and inspiring statement of what the
organization intends to become at some point in future.

• Mission identifies the scope of the company’s operations, describes the

company ‘s product, market & technological areas of thrust & reflects the
aims that a company hopes to realize in future .

• MISSION communicates the Core values to which the firm is committed &
Core purpose of the firm

• Mission is the framework or context with in which company’s strategies are

formulated
• GE “ we bring good things to life”
• Ford Motor Company “To become the world’s leading consumer
company for automotive products and services”
• Microsoft “To enable people and businesses throughout the world to
realize their full potential ”

VISION – gives a view of an organization‘s future direction & course of

business activity. This vision describes some milestones that the firm
will reach in the future and may require a decade or more to achieve.
 Step 3. Define the Strategic Objectives
• This third step in the strategic formulation process requires an organization to
identify the performance targets needed to reach clearly stated objectives. These
objectives may include: market position relative to the competition, production of
goods and services, desired market share, improved customer services, corporation
expansion, advances in technology, and sales increases.

• Strategic objectives must be communicated with all employees and stakeholders in

order to ensure success.
• All members of the organization must be made aware of their role in the process
and how their efforts contribute to meeting the organization’s objectives.
• Additionally, members of the organization should have their own set of objectives
and performance targets for their individual roles.
Step 4- Determining Strategic Position
• Scanning the external environment

• Understanding the Strength & weakness of the organization

• Meeting the stakeholders expectation.

Step 5-Choosing the Alternative
strategy
• Identify the alternative strategies.

• Evaluate the alternatives

• Selecting the best strategy

 Step 6. Implement Strategies
• Developing a strategy is only effective if it is put into place. An organization may take
all the necessary steps to understand the marketplace, define itself, and identify the
competition. However, without implementing the strategy, the organization’s work will
be of little to no value.

• The methods employed for implementing strategies are known as tactics. These
individual actions enable an organization to build a foundation for implementation.
Companies are able to identify which of their efforts are more successful than others
and will uncover new methods of implementation
Strategy Evaluation

Internal Review

External Review

Performance Measurement

Corrective Action
Synergy

Synergy exists when the firm’s businesses, products-markets,

resource allocation & competencies complement & reinforce each other

Synergy enables the total performance to be greater than it would

otherwise be ie.. The whole becomes greater than the sum of its part.
Consequently, strategies should be designed to create synergy such
that organizations’ overall efficiency & effectiveness can be improved.
Components of a Strategy Statement

Strategic Intent
An organization’s strategic intent is the purpose that it exists and
why it will continue to exist, providing it maintains a competitive
advantage. Strategic intent gives a picture about what an
organization must get into immediately in order to achieve the
company’s vision. It motivates the people. It clarifies the vision of
the vision of the company.
Components of a Strategy Statement

Vision
• A vision statement identifies where the organization wants or
intends to be in future or where it should be to best meet the
needs of the stakeholders. It describes dreams and aspirations
for future.

Microsoft’s vision is “to empower people through great

software, any time, any place, or any device.” Wal-Mart’s
vision is to become worldwide leader in retailing.
Components of a Strategy Statement

Mission Statement
• Mission statement is the statement of the role by which an
organization intends to serve it’s stakeholders. It describes why
an organization is operating and thus provides a framework
within which strategies are formulated. It describes what the
organization does (i.e., present capabilities), who all it serves
(i.e., stakeholders) and what makes an organization unique
(i.e., reason for existence).
Microsoft’s mission is to help people and businesses
throughout the world to realize their full potential. Wal-Mart’s
mission is “To give ordinary folk the chance to buy the same
thing as rich people.”
Components of a Strategy Statement

Goals and Objectives

• A goal is a desired future state or objective that an organization
tries to achieve. Goals specify in particular what must be done if
an organization is to attain mission or vision. Goals make
mission more prominent and concrete. They co-ordinate and
integrate various functional and departmental areas in an
organization
Comprehensive Model of SMP
Approaches to Strategy making – 1. PRESCRIPTIVE or INTENDED APPROACH
Deliberate – Planned – formal and documented
Mission, Vision and goals

External Analysis Internal Analysis

Strategic choice

Intended strategy

Organizing for
Implementation
• In “ intended” or “ prescriptive” strategy , strategic management
process is viewed as sequential process comprising of-
a) strategic analysis ( swot analysis & defining mission & vision)
b) Strategic development
c) Strategic implementation
Emergent Approach
• According to this approach ,long term corporate strategy cannot be
predetermined due to the dynamic nature of the macro
environment . Thus strategy evolve as a response to changing
environment hence strategy formation is a series of experiments.
Emergent Approach
• According to this approach ,long term corporate strategy cannot be
predetermined due to the dynamic nature of the macro
environment . Thus strategy evolve as a response to changing
environment hence strategy formation is a series of experiments.
2) Emergent – emerges as a result of the dynamic nature of the environment –
flexible
External Analysis Vision, Mission and goals Internal
Analysis

Strategic Choice and

checking its fitness

Emergent Strategy

Organisational Grass roots

Benefits & relevance of SM
• SM helps to envision an organisation’s future
• Helps people in the organisation understand what
organisation stand for ,its objectives missions &
goals .
• Strategic management helps to align individual
objectives & functional objectives, organisational
objective to corporate objective
• It helps company to drop those business which is
not profitable or which donot meet the objective
• It helps to face competition more effectively
• Creates organisations which are Responsive to
changing environment
• It creates a learning organisation which is skilled in
all major activities like..
1. Solving problems systematically
2. Experimenting with new ideas
3. Learning from own and others’ experiences
4. Transferring knowledge quickly and efficiently
throughout the organisation.
Limitation of SM
• SM is based on certain premises & if the premises
do not hold valid, the strategy or plan based on
them would not be realistic or effective .
• SWOT analysis plays an important role in SM ,if
SWOT analysis is not right then strategy based on
it may become useless.
• Limitation of mission & objective affect the
strategy formation .
Strategic Management
Strategic management is a set of managerial decisions and
actions that determines the long run performance of a
corporation. It includes environmental scanning (both external
and internal), strategy formulation (strategic or long-range
planning), strategy implementation, and evaluation and control.
The study of strategic management, therefore, emphasizes the
monitoring and evaluating of external opportunities and threats in
light of a corporation’s strengths and weaknesses