STRATEGIC

MANAGEMEN
T
UNIT - I

WHAT IS STRATEGY?
STRATEGY =
GREEK LANGUAGE
6TH CENTURY BC)

STRATAS ARMY
AGEIN TO LEAD

AD (ANNO DOMINI) - Latin Word In The Year Of Our Lord)

Christ Birth as Starting Point; Dionysius Exiguus, a Monk, invented the
B.C./A.D)
BCE - Before the Common Era - BC), CE (Common Era AD)

A
CONTINUOUS
PROCESS
OF
EFFECTIVELY
RELATING
THE
ORGANIZATIONAL OBJECTIVES AND
RESOURCES
TO
THE
OPPORTUNITIES AND CHALLENGES
IN THE ENVIRONMENT.

S T R A T E G Y?

Strategy is the direction and

scope of an organization over
the long term, which achieves
advantage in a changing
environment
through
the
configuration of its resources
and competences.
Johnson et al. (2009)

STRATEGIC MANAGEMENT
PROCESS
OF
FORMULATING,
IMPLEMENTING AND EVALUATING CROSSFUNCTIONAL DECISIONS THAT ENABLES
ORGANIZATION
TO
ACHIEVE
ITS
OBJECTIVES.
A STREAM OF DECISIONS AND ACTIONS,
WHICH LEAD TO THE DEVELOPMENT OF AN
EFFECTIVE STRATEGY TO HELP AND
ACHIEVE CORPORATE OBJECTIVES.
A SET OF DECISIONS AND ACTIONS
RESULTING
INTO
FORMULATION
AND
IMPLEMENTATION
OF
STRATEGIES
DESIGNED TO ACHIEVE THE OBJECTIVES
OF AN ORGANIZATION.

STRATEGY ?
A STRATEGY IS A DELIBERATE, DESIGNED
AND CONSIDERED DECISION, WHICH IS
TRANSLATED INTO COMPREHENSIVE, AND
INTEGRATED PLANS; DESIGNED TO ENSURE
THAT
BASIC
OBJECTIVES
OF
THE
ORGANIZATION
WITH
STRATEGIC
ADVANTAGES
ARE
ACHIEVED
SUCCESSFULLY
FOR
MEETING
THE
CHALLENGES OF THE ENVIRONMENT.
NOTHING FOCUSES THE MIND BETTER
THAN THE CONSTANT SIGHT OF A
COMPETITOR, WHO WANTS TO WIPE YOU
OFF THE MAP.

STRATEGY ?
STRATEGY
IS
A
COMBINATION
OF
COMPETITIVE
MOVES/EFFORTS
AND
BUSINESS APPROACHES THAT MANAGER
EMPLOYS (a) TO PLEASE AND/OR SATISFY
CUSTOMERS, (b) COMPETE SUCCESSFULLY
IN THE MARKET, AND (c) ACHIEVE
ORGANIZATIONAL
OBJECTIVES
EFFECTIVELY AND EFFICIENTLY.
STRATEGY MAY BE BOTH PROACTIVE
(INTENDED/DELIBERATE)
AND/OR
REACTIVE (ADAPTIVE), AND MAY BE
PARTLY VISIBLE AND PARTLY HIDDEN
(UNDER CURRENTS).

STRATEGY ?
THE ESSENCE OF STRATEGY LIES IN
CREATING TOMORROWS COMPETITIVE
ADVANTAGES
FASTER
THAN
COMPETITORS MIMIC THE ONES WHAT
YOU POSSESS TODAY.
IT IS THE COMPANYS PROPITIOUS
(FAVORABLE) NICHE (USP) i.e. SPECIFIC
COMPETITIVE ROLE THAT IS SO WELL
SUITED TO THE FIRMS INTERNAL AND
EXTERNAL ENVIRONMENT THAT THE
COMPETITORS ARE NOT LIKELY TO
CHALLENGE OR DISLODGE IT

WHAT A STRATEGY DOES?

STRATEGY HELPS A PARTICULAR
COMPANY IN RETAINING ITS
LEAD POSITION IN INDUSTRY.
A STRATEGY BASICALLY
REPRESENTS
A FUNDAMENTAL CONGRUENCE
(MATCH/ANALOGY)
BETWEEN
INTERNAL
STRENGTHS
AND
EXTERNAL OPPORTUNITIES.

EXCELLENT EXECUTION OF AN
EXCELLENT STRATEGY IS THE
BEST TEST OF MANAGERIAL
EXCELLENCE AND IT IS THE
MOST RELIABLE RECIPE FOR
ORGANIZATIONAL SUCCESS.
EFFECTIVE MANAGERS LIVE IN
PRESENT
BUT CONCETRATE ON
FUTURE.

WHY

PLAN A STRATEGY?

SALES GRAPH FAST/SLOW.

NEW
CUSTOMERS

LURE/ATTRACT/RETAIN
WITH
MULTIPLIER EFFECT.
PROFIT
MARGIN

GETTING
NARROW.
NET PROFIT MARGIN POOR AND
RETURN
ON
INVESTMENT
IS
INADEQUATE.
OVERALL FINANCIAL STRENGTH WEAKENING.

WHY

PLAN

A STRATEGY?

CONTINUOUS
IMPROVEMENTS NEEDED
TECHNOLOGY ETC.
SHAREHOLDERS
PERCEPTION ON IMAGE AND
REPUTATION
OF
THE
COMPANY
AND
MARKET
STANDING/VALUE
DIMINISHING.

 IF PRESENT STRATEGY DOES NOT WORK WELL

CONDUCT SWOT ANALYSIS, DO EVALUATIONS,
DRAW CONCLUSIONS FOR WORKING OUT A

WINNING STRATEGY.

SOME TRIGGERING EVENTS LIKE FOLLOWING MAY ALSO

STIMULATE A CHANGE IN STRATEGY:

NEW CEO/CHIEF
EXTERNAL INTERVENTIONS
THREAT OF A CHANGE IN OWNERSHIP
PERFORMANCE GAP
STRATEGIC INFLECTION POINT

ELEMENTS

OF

STRATEGY

STRATEGIC ANALYSIS OF THE

ENVIRONMENT Internal as well
as External;
SETTING
UP
STRATEGY
OBJECTIVES,
SCOPE,
METHODOLOGY FOR GAINNING
COMPETITIVE ADVANTAGES;
IMPLEMENT THE STRATEGY; AND
CRITICALLY
EVALUATE
THE
STRATEGY.

FEATURES

OF

STRATEGY IS ALL ABOUT

STRATEGY

WINNING.

STRATEGY
OFFERS
BROAD
GUIDELINES.
STRATEGY IS FORWARD LOOKING.
LIFE SPAN OF STRATEGY IS LIMITED.
STRATEGY
IS
MADE
BY
TOP
MANAGEMENT.
STRATEGY
IS
A
DYNAMIC
AND
FLEXIBLE PROGRAM OF ACTION.
STRATEGY
IS
AN
INHERENTLY
CREATIVE PROCESS.

SM Answers these questions?

1. What goods or services do we really
sell?
2. How will we produce our goods or
deliver our services?
3. Who will buy our goods or services?
4. How will we finance various
operations?
5. How much risk are we willing to
take?
6. How will we implement our strategy?

TYPES OF STRATEGIES

MASTER/GRAND
STRATEGIES.
PROGRAM STRATEGIES.
SUB-STRATEGIES.
TACTICS SPECIFIC STEPS
OF
EXECUTING
STRATEGIES, FOCUSING ON
MARKET PLAYERS AND THEIR
ACTIONS.

WHAT

MAKES A DECISION
STRATEGIC?

RARE SUCH DECISIONS ARE UNUSUAL AND

TYPICALLY
HAVE
NO
PRECEDENT
TO
FOLLOW.
CONSEQUENTIAL

SUCH
DECISIONS
COMMIT SUBSTANTIAL RESOURCES AND
DEMAND A GREAT DEAL OF COMMITMENT
ON THE PART OF ALL CONCERNED.
DIRECTIVE

SUCH
DECISIONS
SET
PRECEDENTS FOR DIRECTIONS AND FUTURE
ACTIONS
THROUGHOUT
THE
ORGANIZATION.

D IM EN S IO N S O F S TR ATEG IC D EC IS IO N S

IN V O LV EM EN T
OF
TO P
LEV EL
M A N A G EM EN T A M U S T
FU TU R E O R IEN TED
A LLO C ATIO N
OF
HUGE
AM O UN T
OF
R ES O U R C ES M en an d M aterial
EFFEC T O N LO N G TER M P R O S P ER ITY O F
TH E FIR M
M U LTI FU N C TIO N A L / M U LTI-B U S IN ESS
C O N S EQ U EN C ES
FO C U S O N EX TER N A L G R O U P S .

PA S T A P P R O A C H ES TO S TR ATEG Y

TH E D ES IG N A P P R O A C H (A LFR ED
C H A N D LER )
S TR U C TU R E FO LLO W S S TR ATEG Y.
TH E A N A LY TIC A L A P P R O A C H (IG O R A N S O FF)
S TR ATEG Y
C A N B E D IV ID ED IN TO C ER TA IN
IN TER -R ELATED
AN D
C O M P LEM EN TA R Y
C O M P O N EN TS .
TH E P O S ITIO N IN G A P P R O A C H O FFER U N IQ U E
O R D IFFER EN T ID EA S , P R O D U C TS A N D /O R
S ER V IC ES TO C U S TO M ER S .

WHAT IS NOT A STRATEGIC PLANNING?

IT IS NOT A BOX OF TRICKS, A BUNDLE OF
TECHNIQUES. BUT IT IS ANALYTICAL THINKING
AND COMMITMENT OF RESOURCES TO ACTIONS.
IT IS NOT FORECASTING. IT IS TRACKING DOWN
FRUITFUL OPPORTUNITIES AND DEVELOPING
APPROPRIATE STRATEGIES TO ACHIEVE THEM.
IT DOES NOT DEAL WITH FUTURE DECISIONS.
WHAT TO DO TODAY SO AS TO BE READY FOR AN
UNCERTAIN FUTURE.
IT IS NOT AN ATTEMPT TO ELIMINATE OR MINIMIZE
RISK. IT HELPS IN CHOOSING RATIONALLY AMONG
VARIOUS RISKY COURSES OF ACTION RATHER
THAN PLUNGING INTO UNCERTAINTY.

MODES OF STRATEGIC MANAGEMENT

ENTREPRENEURI
AL
MODE
ADAPTIVE
MODE
PLANNING

STRATEGIC MANAGEMENT SKILLS

1.Identification of core problems or

issues in a business situation/case.
2.Assessment of opportunities and
threats in the environment and the
strengths and weaknesses of an
organization and its Managers.
3.Analysis of strategic alternatives
from the perspectives of different
stakeholders.
4.Formulation
and
selection
of
specific courses of action to
implement the chosen strategies.

STRATEGIC MANAGEMENT SKILLS

5.Apply
analytical
skills
to
develop, select, and implement
competitive
strategies
effectively in various functional
areas e.g. production, finance,
marketing, personnel, etc.
6.Issue
communications
(oral/written) for action by
down
below
the
line
Managers.

TASKS OF STRATEGIC MANAGEMENT TEAM

FORMULATE STRATEGIC VISION

WHERE,
HOW,
WHEN
THE
ORGANIZATION IS HEADING TO.
SET CLEAR CUT OBJECTIVES.
CRAFT STRATEGY TO ACHIEVE
DESIRED OUTCOMES.
EXECUTE CHOSEN STRATEGY
WITH PRECISION - EFFECTIVELY
AND EFFICIENTLY.

TASKS OF STRATEGIC MANAGEMENT TEAM

EVALUATE/REVIEW PERFORMANCE
INITIATE CORRECTIVE ADJUSTMENTS
IN VISION,
LONG TERM DIRECTIONS,
OBJECTIVES,
STRATEGIES OF EXECUTION IN THE
LIGHT OF ACTUAL EXPERIENCES,
CHANGE
INTERNAL
CONDITIONS,
GENERATE NEW IDEAS AND THE NEW
OPPORTUNITIES.

KEY SUCCESS FACTORS (KSFs)

WHAT AFFECT INDUSTRYS ABILITY TO
PROSPER IN MARKET PARTICULAR
STRATEGY,
PRODUCT
ATTRIBUTES,
RESOURCES,
COMPETENCIES,
COMPETITIVE CAPABILITIES, .
A). ON WHAT BASIS CUSTOMERS CHOOSE
BETWEEN COMPETING BRANDS?
B). WHAT RESOURCES AND COMPETITIVE
CAPABILITIES A COMPANY NEED SO AS
TO BE COMPETITIVELY SUCCESSFUL?
C). HOW
COMPANIES
ACHIEVE
SUSTAINABLE COMPETITIVE ADVANTAGE?

STRATEGIC

MANAGEMENT

IT IS A TIGHTLY-KNIT PROCESS. IT IS A SET OF

MANAGERIAL DECISIONS AND ACTIONS THAT
DETERMINE LONG-TERM PERFORMANCE OF THE
ORGANIZATION.
IT INVOLVES
+ SCAN AND UNDERSTAND ENVIRONMENT (BOTH
- EXTERNAL AND INTERNAL);
+ DO STRATEGIC
STRATEGY; AND

PLANNING

&

+
CRITICALLY
EVALUATE
AND
IMPLEMENTATION OF STRATEGY.

FORMULATE
CONTROL

PHASES OF STRATEGIC MANAGEMENT

BASIC FINANCIAL PLANNING BETTER

OPERATIONAL CONTROL.
FORECAST-BASED
PLANNING

PREDICT FUTURE.
EXTERNALLY - ORIENTED PLANNING
(STRATEGIC PLANNING) SEEKING
INCREASED
RESPONSIVENESS
TO
MARKET.
STRATEGIC MANAGEMENT SEEKING
COMPETITIVE
ADVANTAGE
WITH
CONCURRENT EVALUATION.

STRATEGY PLANNING

COMPRISES ORGANIZATIONS MISSION

AND FUTURE DIRECTIONS, SHORT TERM
AND
LONG
TERM
PERFORMANCE
TARGETS, AND THE STRATEGY.

STRATEGY PLANNING PROCESS (SMP)

THE BASIC ELEMENTS:

ENVIRONMENTAL SCANNING.
STRATEGY FORMULATION.
STRATEGY IMPLEMENTATION.
EVALUATION AND CONTROL.

STRATEGY PLANNING PROCESS (SMP):

STEPS
IDENTIFY MISSION
IDENTIFY MEASURABLE OBJECTIVES
CRITICALLY SCAN EXTERNAL AND INTERNAL SCENARIO
PREPARE
ENVIRONMENTAL
PROFILE
(ETOP)
BASED
ENVIRONMENTAL FACTORS

THREAT
OPPORTUNITY
ON
ANALYSIS
OF

DO COMPARATIVE STUDY OF DIFFERENT STRATEGIC

BUSINESS UNITS (SBUS) AND
PREPARE DISPLAY
MATRICES (BCG MARTIX, KCKINSAYS MODEL OR GE
MATRIX, SHELLS
DIRECTIONAL POLICY MATRIX,
HOFERS MATRIX).
STUDY INTERNAL CAPABILITIES AND PREPARE SWOT,
RESOURCE DEPLOYMENT MATRIX (RDM) AND SYSTEM
APPLICATIONS
AND
PRODUCTS
(SAP).
PREPARE
ALTERNATE SCENARIO.

STRATEGY PLANNING PROCESS (SMP): STEPS

FORMULATE STRATEGY ALTERNATIVES

DECIDE ABOUT THE BEST STRATEGY AND THE
ALTERNATE STRATEGIES
FORMULE
BUDGET
AND
ALLOCATE
RESOURCES
COMMUNICATE
STRATEGY
TO
ALL
CONCERNED IN THE ORGANIZATION
OBTAIN FEEDBACK ON IMPLEMENTATION OF
STRATEGY
REVIEW PERIODICALLY THE IMPLEMENTATION
PROCESS
STRATEGY,
ENVIRONMENTAL
SCENARIO, ALTERNATE STRATEGIES ETC.
MAKE
SUITABLE
MODIFICATIONS
IN
STRATEGY, IF FELT NECESSARY

STRATEGY MAKING
STRATEGIC MANAGEMENT IS A MARKETDRIVEN
AND
CUSTOMER-DRIVEN
ENTREPRENEURIAL ACTIVITY.
CAPITALIZE
ON
EMERGING
MARKET
OPPORTUNITIES AND CUSTOMER NEEDS
BY USING NEW INNOVATIONS WITH
STRONG
DESIRE
TO
GROW
AND
STRENGTHEN BUSINESS.
STRATEGY MAKING APPROACHES
A).

B).
C).

CHIEF ARCHITECT APPROACH.

DELEGATION APPROACH.
COLLABORATIVE/TEAM

EFFECTIVE STRATEGY MAKING

BEGINS WITH A VISION
WHERE
THE
ORGANIZATION
NEEDS TO HEAD.
(HERE TO
THERE)
STRATEGY IS TAILORED TO FIT
INDUSTRY
AND
COMPETITIVE
CONDITIONS AND MUST BE IN
TUNE WITH THE ORGANIZATION
CULTURE SHARED THINGS,
SHARED
SAYING,
SHARED
ACTIONS AND SHARED FEELINGS.

STRATEGY MAKING
/EXECUTION/IMPLEMENTATION

BASICALLY
IT
IS
AN
ACTIONORIENTED AND MAKE-IT-HAPPEN
PROCESS.
IT
REQUIRES
DEVELOPING COMPETENCIES AND
CAPABILITIES, BUDGETING, POLICY
MAKING, MOTIVATING, CULTUREBUILDING AND LEADERSHIP.
A STRATEGY MUST BE EVALUATED
ON THE BASIS OF THE FOLLOWING:
APPROPRIATENESS

STRATEGY/STRATEGIC MANAGEMENT
PRINCIPLES

CRITICALLY APPRAISE AND ULTIMATELY APPROVE STRATEGIC

ACTION PLANS.
EVALUATE STRATEGIC LEADERSHIP SKILLS OF CEO AND
POSSIBLE SUCCESSOR(S).
BUILD A STRONG LONG-TERM COMPETITIVE POSITION
BENEFITTING STAKEHOLDERS MORE LASTINGLY THAN
IMPROVING SHORT-TERM PROFITABILITY.
IT IS A TOP DOWN PROCESS TO GUIDE AND SUPPORT LOWERLEVEL MANAGERS AND OTHER STAFF TO BOOST OVERALL
BUSINESS ACHIEVEMENTS.
MUST CAPITALIZE ON COMPANYS RESOURCE STRENGTHS
AND MUST NEUTRALIZE ITS RESOURCE DEFICIENCIES.

STRATEGIC

DECISION
PROCESS

MAKING

EVALUATE
CURRENT
PERFORMANCE
RESULTS
EXAMINE
AND
EVALUATE
MISSION,
OBJECTIVES, STRATEGIES, AND POLICIES
REVIEW STRATEGIC MANAGERS BOARD
OF DIRECTORS AND TOP MANAGEMENT
SCAN EXTERNAL ENVIRONMENT
SELECT
STRATEGIC
FACTORS

OPPORTUNITIES AND THREATS

SCAN
INTERNAL
ENVIRONMENT

STRUCTURE, CULTURE AND RESOURCES.

STRATEGIC

DECISION

MAKING

PROCESS

SELECT STRATEGIC FACTORS STRENGTHS

AND WEAKNESSES
ANALYZE STRATEGIC FACTORS (SWOT) IN
THE LIGHT OF THE CURRENT SITUATIONS
REVIEW
AND
REVISE
MISSION
AND
OBJECTIVES AS NECESSARY
GENERATE
AND
EVALUATE
STRATEGIC
ALTERNATIVES
SELECT AND RECOMMEND BEST ALTERNATIVE
IMPLEMENT
SELECTED
STRATEGIES
VIA
PROGRAMS, BUDGET AND PROCEDURES
EVALUATE AND CONTROL VIA FEEDBACK AND
BY ENSURING MINIMUM DEVIATION FROM
PLANS.

STRATEGY MANAGEMENT
BENEFITS/ADVANTAGES/OUTCOMES

ROADMAP FOR THE FIRM - BETTER

GUIDANCE TO ENTIRE ORGANIZATION
ON WHAT IT IS WE ARE TRYING TO
DO.
FRAMEWORK
FOR
INTERNAL
COMMUNICATION - POSITIVE EFFECTS
ON ORGANIZATIONAL PERFORMANCE.
BETTER
RESPONSE
TO
ENVIRONMENTAL CHANGES - MAKING
ALERT TO NEW OPPORTUNITIES AND
THREATENING DEVELOPMENTS.

STRATEGY MANAGEMENT BENEFITS/ADVANTAGES/OUTCOMES

HELP
IN
UNIFY
ORGANIZATION,
MINIMIZING
CHANCES
OF
MISTAKES/FAILURES.
CREATING
NEW
PROACTIVE
MANAGEMENT POSTURE.
CONSTANTLY
EVOLVING
BUSINESS
MODELS FOR SUSTAINED BOTTOM LINE SUCCESS FOR ORGANIZATION.
OPTIMALLY RATIONALIZING RESOURCES
AND THEIR EFFICIENT USE IN RESULTPRODUCING/OPPORTUNITIES AREAS.

STRATEGIC

CONTROL

STAGES (PEARCE AND ROBINSON)

1.

CONTROL ON PRINCIPLES/PREMISES/POSTULATES,

2.

CONTROL ON IMPLEMENTATION,

3.

STRATEGIC SURVEILLANCE CONTROL, AND

4.

SPECIAL ALERT CONTROL (PANIC

STRATEGY

FOR

POSITIONING

BUTTON).

AN ORGANIZATION

IT IS A PROCESS OF MAKING MANAGEMENTS STRATEGIC VISION A

REALITY WITH THE HELP OF WELL CONCEIVED AND CALCULATED GAME
PLANS FOR MOVING AND ESTABLISHING THE COMPANY INTO AN
ATTRACTIVE

AND

SOLID

BUSINESS

POSITION

SUSTAINABLE COMPETITIVE ADVANTAGE.

AND

BUILDING

BUSINESS STRATEGY

ACTIONS

AND

MANAGEMENT

APPROACHES
TO

PRODUCE

CRAFTED

BY

SUCCESSFUL

PERFORMANCE IN THE GIVEN FIELD.

CENTRAL BUSINESS STRATEGY - HOW TO BUILD
A

STRONGER

POSITION.

LONG

TERM

COMPETITIVE

POWERFUL BUSINESS STRATEGY -

PRODUCES

SIZEABLE

COMPETITIVE

ADVANTAGES.
SUCCESSFUL BUSINESS STRATEGY - ACTIVELY
SHAPING THE GAME YOU PLAY, NOT
PLAYING THE GAME YOU FIND.

JUST

SWOT SOME CRITICISMS

GENERATES LENGTHY LISTS.

USES
NO
WEIGHTAGES
TO
REFLECT
PRIORITIES.
USES AMBIGUOUS WORDS AND PHRASES.
SAME FACTOR MAY BE PLACED IN TWO
CATEGORIES.
OPINIONS
ARE
NOT
SUPPORTED
WITH
DATA/ANALYSIS.
REQUIRES
ONLY
A
SINGLE
LEVEL
OF
ANALYSIS.
NO
LOGICAL
LINK
TO
STRATEGY
IMPLEMENTATION.

WINNING STRATEGY
MORE A STRATEGY FITS INTO THE COMPANYS EXTERNAL
AND INTERNAL ENVIRONMENTS, BUILDS SUSTAINABLE
COMPETITIVE ADVANTAGES, AND IMPROVES COMPANYS
PERFORMANCE;
BETTER IT QUALIFIES AS A WINNING
STRATEGY.

WINNING STRATEGY THE TEST PARAMETERS

1. THE GOODNESS OF FIT TEST
THE STRATEGY MUST FIT WITH ALL OTHER IMPORTANT
FACTORS OF THE ORGANIZATION. THE SEVEN IMPORTANT
FACTORS (7S) OF THE ORGANIZATION ARE (MCKINSEY
FRAMEWORK): STAFF,
SKILLS,
STRATEGY,

STRUCTURE,
SYSTEMS,
SUBORDINATE GOALS

STYLES,

2.

THE COMPETITIVE ADVANTAGE TEST

3.

THE PERFORMANCE TEST

AND

DIFFERENTIATION STRATEGY
UNIQUE
VALUABLE
TO
CUSTOMERS AND SUSTAINABLE
ON A LONG TERM BASIS. THIS
STRATEGY WORKS WELL WHEN:
BUYERS PERCEIVE DIFFERENCES
IN TERMS OF VALUE ADDITIONS.
MEETS DIVERSE NEEDS AND
USES OF BUYERS.

DIFFERENTIATION

STRATEGY

FEW RIVAL FIRMS MAY BE

FOLLOWING A MORE OR LESS
SIMILAR
DIFFERENTIATION
APPROACH.
SINCE TECHNOLOGICAL CHANGES
AND PRODUCT INNOVATIONS ARE
FAST-PACKED;
THEREFORE
COMPETITION
REVOLVES
AROUND
RAPIDLY
EVOLVING
PRODUCT FEATURES.

DIFFERENTIATION STRATEGY PITFALLS

DOES NOT IMPACT BUYERS

WELL-BEING.
DOES NOT MATCH WITH THE
BUYERS NEEDS.

TOO
COSTLY
AFFORDABILITY.
NOT MUCH VALUE ADDITION
FOR BUYERS THERE MAY BE
ONLY PRODUCT ATTRIBUTES.

STRATEGIC PLAN FEATURES

IT IS A TOP/HIGHER LEVEL PROCESS

IT IS GENERALLY CONCEIVED TO HIT
ITS TIME SPAN MAY BE LONG RANGE
IT AFFECTS THE WHOLE ORGANIZATION
IT IS USUALLY DEVELOPED FROM THE
GROUND UPWARD
IT
COVERS
A
WIDE
RANGE
OF
ACTIVITIES
IT EXPLOITS A PARTICULAR CONCEPT
IT CALLS FOR SUBSTANTIAL RESOURCE
MOBILIZATION AND ALLOCATION

Comparison

Strategic Plans Intermediate Plans

Operational
Plans
(Long Range) (Tactical Plans) (Short Range)
Long range Intermediate Plans Short Range
Three or more yrs. 2-3 years One year
Top Management Middle/Lower level Mgt. Usually at lower
level
Broad Objectives Internal integration Day-to-day operations
Focus on planning Focus on precise Prime focus on control
and forecasting execution, decision are
more certain and reach to
specific segments of
Organization

VISION
ROADMAP OF A COMPANYS FUTURE, AN
INSPIRATIONAL
PICTURE,
I.E.
THE
DIRECTION IN WHICH THE ORGANIZATION
IS HEADED WITH FOCUS ON TECHNOLOGY,
CUSTOMER, PRODUCT MARKET, GROWTH
AND DIVERSIFICATION.
WHO WE ARE, WHAT WE DO, AND WHERE
WE ARE NOW (FUNDAMENTAL REASONS
FOR EXISTENCE JUST BEYOND MAKING
MONEY).
VISION INCLUDE TIMELESS UNCHANGING
CORE VALUES.

VISION

VISION IS - MAKING CHOICE

ABOUT A. WHERE ARE WE
GOING, AND
B. WITH WHAT STRATEGY.
VISION HAS TO BE IN CLEAR,
EXCITING TERMS THAT AROUSE
ORGANIZATION-WIDE
COMMITMENT.

VISION STATEMENTS
BHEL A WORLD CLASS INNOVATIVE,
COMPETITIVE
AND
PROFITABLE
ENGINEERING ENTERPRISE PROVIDING
TOTAL BUSINESS SOLUTIONS.
COLGATE-PALMOLIVE TO BE THE
COMPANY OF FIRST CHOICE IN ORAL
AND
PERSONAL
HYGIENE
BY
CONTINUOUSLY
CARING
FOR
CUSTOMERS AND PARTNERS.
NTPC TO MAKE AVAILABLE RELIABLE
AND
QUALITY
POWER
IN
INCREASINGLY LARGE QUANTITIES.

Vision

Statement

STRATEGIC VISION CONVEYS A LARGER

SENSE OF PURPOSE SO THAT EMPLOYEES SEE
THEMSELVES AS BUILDING A CATHEDRAL
RATHER THAN LAYING STONES.
COMMUNICATING
REQUIRES:

STRATEGIC

VISION

BREAKING DOWN RESISTANCE TO THE NEW

STRATEGY MISSION;
PUTTING VISION STATEMENT IN WRITING;
AND
CONVEYING IN WELL-CONCEIVED AND WELLWORDED VISION STATEMENT.

MISSION

AN ORGANIZATIONS MISSION IS ITS

PURPOSE, THE REASON FOR ITS
EXISTENCE. THE CONCEPT OF MISSION
IS DYNAMIC AND NOT A STATIC ONE.
MISSION
DESCRIBES
THE
ORGANIZATIONS
VALUES,
ASPIRATIONS, AND REASONS FOR
BEING. IT TELLS THAT WHO WE ARE
AND WHAT WE DO ORGANIZATIONS
PRESENT CAPABILITIES, CUSTOMER
FOCUS, ACTIVITIES AND BUSINESS
MAKEUP.

MISSION

MISSION STATEMENT GIVES

SPECIAL
ENTITY,
BUSINESS EMPHASIS, AND
PATH FOR DEVELOPMENT
TO THE ORGANIZATION,
WHICH IS UNIQUE TO THE
ORGANIZATION.
IT
IS
GENERALLY EXPRESSED IN
A BROAD MANNER AND IT

COMPONENTS OF A MISSION
STATEMENT

PHILOSOPHY;
SELF-CONCEPT;
CUSTOMERS;

PRODUCTS OR SERVICES;
MARKETS;
TECHNOLOGY;
CONCERN FOR PUBLIC IMAGE;
CONCERN FOR EMPLOYEES; AND
CONCERN FOR SURVIVAL, GROWTH AND
PROFITABILITY.

GOOD MISSION STATEMENT FEATURES

GOOD
MISSION
STATEMENTS
ARE
HIGHLY PERSONALIZED UNIQUE FOR
THE ORGANIZATION FOR WHICH THEY
ARE DEVELOPED.
REPRESENTS THE WHOLE THRUST OF
THE FIRM AND ITS CORE VALUES AND
BELIEFS.
SHOULD BE EXITING AND INSPIRING;
ADD ZEAL TO FIRM AND ITS EMPLOYEES.
SHOULD REFLECT ANTICIPATION OF
CUSTOMERS.

MISSION

STATEMENTS

RANBAXY LABORATORIES TO BECOME A

RESEARCH-BASED
INTERNATIONAL
PHARMACEUTICAL COMPANY.
CADBURY INDIA TO ATTAIN LEADERSHIP
POSITION IN THE CONFECTIONARY MARKET
AND
ACHIEVE
A STRONG
NATIONAL
PRESENCE IN THE FOOD DRINKS SECTOR.
ONGC TO STIMULATE, CONTINUE AND
ACCELERATE EFFORTS TO DEVELOP AND
MAXIMIZE THE CONTRIBUTION OF THE
ENERGY SECTOR TO THE ECONOMY OF THE
COUNTRY.

REASONS FOR HAVING A WRITTEN MISSION STATEMENT

ENSURE UNANIMITY OF PURPOSE

PROVIDES BASIC STANDARDS FOR RESOURCE ALLOCATION
ESTABLISHES AN ORGANIZATIONAL CLIMATE
EMPLOYEE IDENTIFY WITH ORGANIZATIONAL PURPOSE AND
DIRECTIONS
FACILITATES TRANSLATION OF OBJECTIVES INTO A WORK
STRUCTURE
SPECIFY THE ULTIMATE AIMS OF THE ORGANIZATION
ATTRACT CUSTOMERS, WHO GIVE MEANING TO THE ORGANIZATION.

HOW MISSION STATEMENT HELP ORGANIZATION?

REFERENCE POINT
EDUCATIVE VALUE
MOTIVATING FORCE
PRODUCTIVE USE OF RESOURCES

OBJECTIVES
OBJECTIVES ARE THE END RESULTS OF PLANNED
ACTIVITIES.
OBJECTIVES STATE WHAT IS TO BE ACCOMPLISHED BY
WHEN AND IF POSSIBLE SHOULD BE QUANTIFIED.
IT
IS
THE
MANAGERIAL
COMMITMENTS
TO
PERFORMANCE TARGETS WITHIN A SPECIFIC TIME
FRAME, THE RESULTS AND THE OUTCOMES IT WANTS
TO ACHIEVE.
OBJECTIVES ARE YARDSTICKS FOR TRACKING AN
ORGANIZATIONAL PERFORMANCE AND PROGRESS.

OBJECTIVES
ROLES/FUNCTIONS
LEGITIMIZE
PRESENCE
OF
THE
ORGANIZATION IN ENVIRONMENT.
PROVIDES
DIRECTIONS
AND
THE
GUIDELINES FOR ORGANIZATIONAL
EFFORTS
PUTS ALL ACTIVITIES ON THE RIGHT
TRACK
ESTABLISH BENCHMARK FOR SUCCESS
OBJECTIVES BECOME MOTIVATORS

PURPOSE

OF

SETTING

OBJECTIVES

CONVERT MANAGERIAL STATEMENTS OF

STRATEGIC
VISION
AND
BUSINESS
MISSION INTO SPECIFIC PERFORMANCE
TARGETS RESULTS AND OUTCOMES THE
ORGANIZATIONS WANTS TO ACHIEVE.
SETTING OBJECTIVES FOR BOTH
STRATEGIC
PERFORMANCE
AND
FINANCIAL
PERFORMANCE
AND
MEASURING THAT WHETHER OBJECTIVES
HAVE
BEEN
ACHIEVED

ORGANIZATIONS PROGRESS.

CHARACTERISTICS

OF OBJECTIVES

OBJECTIVES FORM A HIERARCHY

OBJECTIVES FORM A NETWORK
MULTIPLE OBJECTIVES PLACE THE
ORGANIZATION ON THE PATH OF
PROSPERITY AND PROGRESS IN THE
LONG RUN
OBJECTIVES REINFORCE EACH OTHER
IN SUCH A WAY THAT THE TOTAL
RESULT IS GREATER THAN THE SUM OF
THE EFFORTS MADE INDIVIDUALLY.

 STRATEGIC OBJECTIVES
COMPETITOR-FOCUSED,
OFTEN AIMING AT UNSEATING A
COMPETITOR CONSIDERED TO BE
THE INDUSTRYS BEST IN A
PARTICULAR CATEGORY.
BUSINESS MODEL
WHETHER THE REVENUE-COSTPROFIT
ECONOMICS
OF
ITS
STRATEGY
DEMONSTRATES
THE
VIABILITY OF THE ENTERPRISE AS A

PROF. MICHAEL PORTERS FIVE FORCES

COMPETITIVE POSITION MODEL
(Harvard Business School HBS)

A POWERFUL TOOL FOR 1.

SYSTEMATICALLY
DIAGNOSING
THE
PRINCIPAL
COMPETITIVE PRESSURES AND FORCES IN A GIVEN MARKET,
AND
2. ASSESSING HOW STRONG AND IMPORTANT EACH ONE IS
THE PRESSURES AND FORCES.
COLLECTIVE STRENGTH OF THESE PRESSURES AND FORCES
DETERMINE THE ULTIMATE PROFIT POTENTIAL IN INDUSTRY.
PROFIT POTENTIAL IS MEASURED IN TERMS OF LONG-TERM
RETURNS ON CAPITAL INVESTED.

PROF. MICHAEL PORTERS FIVE FORCES

COMPETITIVE POSITION MODEL
1. Understand where power lies in a business
situation
strength
of
the
current
competitive position, and the strength of a
position one is planning moving into.
2. Where power lies - take fair advantage of
a situation of strength, improve a situation of
weakness, and avoid taking wrong steps. It is
an important part of the planning toolkit.
3. Identify whether new products, services or
businesses
have
the
potential
to
be
profitable.

PROF. MICHAEL PORTER - THE FIVE

FORCES

1. THREAT OF NEW ENTRIES;

2. BARGAINING POWER OF
CUSTOMERS;
3. BARGAINING POWER OF
SUPPLIERS;
4. THREAT OF SUBSTITUTE
PRODUCTS AND/OR
SERVICES; AND

THE FIVE FORCES MODEL - DOS AND DON'TS

Use this Model where there are at

least three competitors in the market
Consider the impact that government
has or may have on the industry
Consider the industry lifecycle stage
earlier stages will be more turbulent
Consider
the
dynamic/changing
characteristics of the industry
Avoid
using
the
Model for an
individual firm; it is designed for use
on an industry basis

1. THREAT OF NEW ENTRIES

A new entry of a competitor into your

market also weakens your power. Threat
of new entry depends upon entry and exit
barriers. Threat of new entry is high
when:
Capital requirements to start the
business are less
Few economies of scale are in place
Customers can easily switch (low
switching cost)
Key technology is not hard to acquire or
isnt protected well
Product is not differentiated

2. BARGAINING POWER OF
CUSTOMERS/BUYERS

Few buyers chasing too many

goods
Buyer purchases in bulk quantities
Product is not differentiated
Buyers cost of switching to a
competitors product is low
Shopping cost is low
Buyers are price sensitive
Credible Threat of integration

3. BARGAINING POWER OF SUPPLIERS

Suppliers are concentrated and

well organized
a few substitutes are available
to supplies
Their product is most effective
or unique
Switching
cost,
from
one
suppliers to another, is high
The
Company
is
not
an

4. THREAT OF SUBSTITUTE
PRODUCTS/SERVICES

Threat of substitute is high, Customer can easily

switch to substitute products when:

There are many substitute products

available
Customer can easily find the product or
service that other are offering at the
same or less price
Quality of the competitors product is
better
Substitute product is earning high
profits so company can reduce prices to
the lowest level.

5. DEGREE OF RIVALRY

RIVALRY IS HIGH WHEN There are a number of small or

equal competitors and when there
is a clear market leader.
Customers have low switching
costs
Industry is growing
Exit barriers are high and rivals
stay and compete
Fixed cost are high resulting huge
production and reduction in prices

RIVALRY AMONG COMPETING SELLERS

RIVALRY INTENSIFIES AS COMPETITORS

NUMBER INCREASES AND COMPETITORS
BECOME MORE EQUAL IN SIZE AND CAPABILITY.
RIVALRY IS USUALLY STRONGER WHEN DEMAND
FOR THE PRODUCT IS GROWING SLOWLY.
RIVALRY IS MORE INTENSE WHEN INDUSTRY
CONDITIONS TEMPT COMPETITORS TO USE
PRICE CUTS/OTHER COMPETITIVE WEAPONS TO
BOOST THEIR BUSINESS.

RIVALRY AMONG COMPETING SELLERS

RIVALRY IS STRONGER WHEN

CUSTOMERS COSTS TO SWITCH OVER
TO OTHER BRANDS ARE LOW.
RIVALRY IS STRONGER WHEN ONE OR
MORE COMPETITORS ARE
DISSATISFIED WITH THEIR MARKET
POSITION AND LAUNCH MOVE TO
BOLSTER THEIR STANDING AT THE
EXPENSE OF RIVALS.
RIVALRY INCREASES IN PROPORTION
TO THE SIZE OF THE PAYOFF FROM A
SUCCESSFUL STRATEGIC MOVE.

RIVALRY AMONG COMPETING SELLERS

RIVALRY TENDS TO BE MORE VIGOROUS

WHEN IT COSTS MORE TO GET OUT OF A
BUSINESS THAN TO STAY IN BUSINESS AND
COMPETE.
RIVALRY BECOMES MORE VOLATILE AND
UNPREDICTABLE WHEN MORE DIVERSE
COMPETITORS HAVE MORE OR LESS
SIMILAR VISIONS, STRATEGIC INTENTS,
OBJECTIVES, STRATEGIES, RESOURCES
ETC.
RIVALRY INCREASES WHEN STRONG
COMPANIES OUTSIDE THE INDUSTRY

ATTEMPTS OF COMPANIES IN OTHER

INDUSTRIES TO WIN OVER
CUSTOMERS TO THEIR OWN
SUBSTITUTE PRODUCTS

WHETHER
ATTRACTIVELY
PRICED
SUBSTITUTES ARE AVAILABLE.
WHETHER BUYERS VIEW SUBSTITUTES
SATISFACTORY
IN
TERMS
OF
THEIR
QUALITY,
PERFORMANCE
AND
OTHER
RELEVANT ATTRIBUTES.
WHETHER
BUYERS
CAN
SWITCH
TO
SUBSTITUTES EASILY.

COMPETITIVE PRESSURES STEMMING FROM SUPPLIER-SELLER COLLABORATION AND

BARGAINING

SUPPLIER BARGAINING POWER

CAN
CREATE
COMPETITIVE
PRESSURES.
COLLABORATIVE PARTNERSHIPS
BETWEEN
SUPPLIERS
AND
SELLERS
CAN
CREATE
COMPETITIVE PRESSURES.

BUYER BARGAINING POWER CAN

CREATE COMPETITIVE PRESSURES

IF BUYERS COST OF SWITCHING OVER TO

COMPETING
BRANDS
OR
SUBSTITUTES
IS
RELATIVELY LOW.
IF THE NUMBER OF BUYERS IS SMALL OR IF A
CUSTOMER IS PARTICULARLY IMPORTANT TO A
SELLER.
IF BUYERS ARE WELL INFORMED ABOUT THE
SELLERS PRODUCTS, PRICES AND COSTS.
IF
BUYERS
POSE
A
CREDIBLE
THREAT
OF
INTEGRATING BACKWARD INTO THE BUSINESS OF
SELLERS.
IF BUYERS HAVE DISCRETION IN WHETHER AND
WHEN THEY PURCHASE THE PRODUCT.

GENERIC STRATEGIES TO COUNTER THE

FIVE FORCES

Strategy can be formulated on three levels:

1. Business Unit Level
2. Functional or Departmental Level.
3. Corporate Level
The Business Unit Level is the primary
context of industry rivalry.
Porter identified three generic strategies
(cost leadership, differentiation, and focus)
that can be implemented at the Business Unit
Level to create a competitive advantage.
These strategies will position the Firm to
leverage its strengths and defend against the
adverse effects of the five forces.

PORTERS GENERIC STRATEGIES

COST LEADERSHIP:
ACHIEVE MINIMUM
COST AND THUS ACQUIRE LARGER MARKET
SHARE.
DIFFERENTIATION:
DIFFERENTIATE
QUALITY
OF
PRODUCTS
AND
SERVICES.

IN
THE

FOCUS: FOCUS SHARPLY ON A SMALL

SEGMENT OF THE MARKET AND OFFER ALL
THE FEATURES THE SEGMENT WANTS.

COMPANYS COMPETITIVE
STRATEGY UNDER PORTER
MODEL?
PROVIDE GOOD DEFENSES AGAINST
THE FIVE COMPETITIVE FORCES,
SHIFT COMPETITIVE PRESSURES IN
SUCH A WAY THAT FAVOR THE
COMPANY, AND
HELP
CREATE
SUSTAINABLE
COMPETITIVE ADVANTAGE.

MINTZBERGS 5Ps OF STRATEGY

IN 1987 MINTZBERG MENTIONED ABOUT 5

Ps OF STRATEGY PLAN, PLOY,
PATTERN,
POSITION
AND
PERSPECTIVE. EACH OF THE 5 Ps SPEAKS
ABOUT A DIFFERENT APPRAOCH FOR
DEVELOPING
A
ROBUST,
PRACTICAL,
ACHIEVABLE AND SUCCESSFUL BUSINESS
STRATEGY.
OFTEN THESE 5 Ps ARE OVERLAPPING AND
THEREFORE MORE THAN ONE P IS USED BY
THE ORGANIZATIONS.

MINTZBERGS 5Ps OF STRATEGY

1. STRATEGY AS A
PLAN
2. STRATEGY AS
PLOY
3. STRATEGY AS
PATTERN

1. STRATEGY AS A PLAN

PLANNING
IS
THE
MOST
ESSENTIAL PART OF STRATEGY
FORMULATION.
EFFECTIVE PLANNING DEPENDS
ON ANALYTICAL SKILLS OF THE
PLANNERS
NECESSARY
FOR
DOING
SWOT
AND
BRAINSTORMING EXERCISES.
DO DEEP INTROSPECTION, THINK
ABOUT NOVEL AND FRESH WAYS

1. STRATEGY AS A PLAN

PRIORITIZATION OF OBJECTIVES, WORKING

OUT RESOURCES QUANTITY AND QUALITY.
DEPLOYMENT
OF
THE
IDENTIFIED
RESOURCES FOR OPTIMAL RESULTS WITHIN
THE PRESCRIBED TIMEFRAME.
PLAN

STRATEGY
NEEDS
DEVELOPED IN ADVANCE AND
DEFINITE PURPOSE.

TO
BE
WITH A

HOWEVER
PLANNING ALONE IS NOT SUFFICIENT.
OTHER 4 Ps HAVE TO COME INTO PLAY.

2. STRATEGY AS PLOY

PLOY STRATEGY IS A MEANS OF

OUTSMARTING THE COMPETITORS.
TECHNIQUES LIKE FUTURE WHEEL,
IMPACT ANALYSIS, AND SCENARIO
ANALYSIS CAN HELP IN EXPLORING
FUTURE BUSINESS SCENARIO.
MAP OUT HOW THE COMPETITIVE
GAME IS LIKELY TO UNFOLD IN THE
TIME TO COME AND SET YOURSELF
TO WIN.

2. STRATEGY AS PLOY

GETTING THE BETTER OF

COMPETITORS.
PLOT
TO
DISRUPT,
DISSUADE, DISCOURAGE, OR
OTHERWISE
INFLUENCE
THEM.
HERE THE STRATGY CAN BE
A PLOY AS WELL AS A
PLAN.

3. STRATEGY AS PATTERN

STRATEGIC PLAN AND PLOY ARE THE

DELIBERATE EXERCISES.
BUT SOMETIME STRATEGY EMERGES FROM
THE PAST PRACTICES AND PATTERNS OF
THE ORGANIZATIONAL BEHAVIOR.
PATTERN WHAT WAS SUCCESSFUL IN THE
PAST CAN LEAD TO SUCCESS IN FUTURE.

3. STRATEGY AS PATTERN

CRITICALLY STUDY THE PATTERN IN

THE TEAM AND THE ORGANIZATION,
AND SEE THAT WHETHER THESE
PATTERNS
HAVE
BECOME
AN
IMPLICIT PART OF THE STRATEGY
AND
HOW
THEY
AFFECT
THE
STRATEGIC PLANNING APPROACH?

TOOLS LIKE USP ANALYSIS AND

CORE COMPETENCY ANALYSIS HELP
IN ANALYSING THIS PATTERN OF
STRATEGY
FORMULATION.
AN

4. STRATEGY AS POSITION

POSITION HOW THE ORGANIZATION

RELATES
TO
ITS
COMPETITIVE
ENVIRONMENT AND WHAT IT CAN DO
TO MAKE ITS PRODUCTS UNIQUE IN
THE MARKET PLACE.
HOW ONE DECIDES TO POSITION
HIMSELF
IN
THE
MARKET?
UNDERSTAND AND BOLDLY PROJECT
THE
ORGANIZATIONS
BIGGER
PICTURE
IN
RELATION
TO
THE
MARKET COMPETITIVE FORCES.

4. STRATEGY AS POSITION

THIS WILL HELP IN:

A.
EXPLORING THE FIT BETWEEN THE
ORGANIZATION
(STRENGTHS
AND
WEAKNESSES)
AND
THE
BUSINESS
ENVIRONMENT; AND
B. DEVELOPING A SUSTAINABLE COMPETITIVE
ADVANTAGE.

TOOLS LIKE PORTERS FIVE FORCES, USP

ANALYSIS, CORE COMPETENCY ANALYSIS WILL
HELP IN ANALYZING THE MARKET AND CRAFTING
A SUCCESSFUL STRATEGY TO KNOW THAT - ARE
WE
DOING
WELL
TO
ENCASH
THE
OPPORTUNITIES.

5.

STRATEGY AS PERSPECTIVE

PERSPECTIVE

SUBSTANTIAL
INFLUENCE THAT ORGANIZATIONAL
CULTURE AND COLLECTIVE THINKING
CAN
HAVE
ON
ITS
STRATEGIC
DECISION MAKING PROCESS.
CHOICE OF STRATEGY OFTEN HEAVILY
DEPENDS ON THE CULTURE OF THE
ORGANIZATION.
PATTERN
OF
THINKING
WILL
SHAPE
AN
ORGANIZATIONALS PERSPECTIVE.
ORGANIZATION WITH RISH TAKING
AND
INNOVATIVE
BACKGROUND

5.

STRATEGY AS PERSPECTIVE

TRADITIONAL ORGANIZATION
WILL PREFER TO SERVE AS
INTERMEDIATERIES BETWEEN
SUCH ORGANIZATIONS.
TOOLS LIKE WULTURAL
CULTURAL
MODELS
CONGRUENCE MODELS
PROVIDE AN INSIGHT

WEB
AND
WILL
INTO

5Ps WILL BE PARTICULARLY HELPFUL

WHEN
ANALYSIS
OF
THE
COLLECTED
INFORMATION
IS
DONE
FOR
STRATEGY
DEVELOPMENT;
2. WHEN INITIAL IDEAS ARE
TESTED
ON
REALISTIC,
PRACTICAL
AND
ROBUST
PARAMETERS; AND
3. TO GIVE SHAPE TO THE
STRATEGY FINALLY DEVELOPED.
1.