Chapter: - 1 Conceptual Framework for Strategic Management 30%

 Concept, Meaning and Definition

1. Strategy
Meaning:-

Strategy word is derived from Greek word “STRATEGOS” which means

generalship, i.e. art of the general. Hence ‘strategy’ is a well thought out systematic plan of
action to defend one-self or to defeat the enemy. In business, strategy is a well thought out
systematic plan of action &the strength &weakness of the competitors as compared to the
company.

In business, strategy is a course of action…….

Definition:-

According to Chandler “strategy is the determination of the basic long term goals
and objectives of an enterprise and adoption of the course of action and allocation of the
resources necessary for caring out these goals”.

According to Glueck “strategy is a unified, comprehensive, and integrated plan

relating the strategic advantages of the firm to challenges of environment. It is design to
ensure that the basic objectives are achieved”.

According to L M Prasad “strategy is a long term course of action through which an

organization relates itself with the environment so as to achieve its objective.”

Characteristics:-

From all these definition we form the characteristic of strategy as follow:

 Strategy is a plan or course of action or a set of decision, rules forming a pattern or

creating a common thread.
 Strategy is related to the pursuing those activities which move an organization from its
current position to a desired future state.
 Strategy is concerned with resources necessary for implementing a plan or following a
course of action.

Levels of Strategy
In a multi-product business enterprise, having several SBU’s there would be three level
of strategy i.e.
a) Corporate level
b) Strategy Business Units
c) Functional Level

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2. Policy
Meaning:-

The term ‘policy’ is derived from the Greek word ‘politeia’ relating to polity, that is
citizen and the Latin word ‘polotis’ means polished, that is to say clear. A policy is
considered to be a guideline for the action. It channelizes the organizational efforts in a
predetermined direction and leads to the achievement of goals, objectives, purposes and
mission of the company.
Definition:-

According to L. M. Prasad “A policy is a statement or a general understanding

which provides guidance in decision making to the member of an organization in respect to
any course of action”.

According to kotler “policies define how the company will deal with stakeholders,
employees, customers, suppliers, distributers and other important groups. Policies narrow
the range of individual decision, so that employee acts consistently on important issue”.
Characteristics:-

 Policy provides guideline to the manager in the organization for deciding a cause of
action.
 Policies are generally expressed in a qualitative, conditional & general way. For ex. To
maintain, to follow, to adhere etc.
 A policy is formulated in the context of organizational objective.
 Policy formulation is a function of all managers in the organization because some
guideline for future cause of action is require at every level.

3. Tactics
Meaning:-

Tactics is another term which creates confusion because sometime what might be a
strategy for lower unit may become tactics for higher unit. The difference lies only in the
degree of importance associated with the tactics. Strategy gives rise to tactics & thus tactics
may be thought of as a sub-strategy. But what is tactics for one may be a strategy for
another & vice-versa. Tactics is related to efficient utilization of various organizational
strategies.

For e.g. a company may plan a strategy of market office in implementing the
strategy, may be add or devise the tactics of creating product awareness through aggressive
selling to a broader segment of the market. The regional marketing office may consider
such as its strategy.

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 Definition:-

“Tactics is related to efficient use of organizational resources committed through

strategies”.

“Tactics are means by which previously determined plans are executed”.

4. Strategic Management

5. Business

6. Stakeholders

Stakeholders are any group of people who has some interest in the activities of an
organization. Customers, employees, supplier and distributors, government, public group
are some example of stake holder. It is a duty of strategist to keep balance between the
varied and conflicting interest of the stake holders.

E.g. If employees demand more salary, the company demand quality from them and
fetch high price for quality.

There are various stakeholders in the organization which is given below:

 Shareholders

Shareholders expect reasonable return on their investment & safety of their

capital. The interest of the majority shareholders are protected through either
participation in management process of the organization or through intervention in key
decision if necessary in order to protect shareholder’s interest, provisions have also
been made in the companies act.
 Employees

Employees are shareholder by their involvement in the organization process. In

today’s competitive context when every organization is trying to develop competitive
context through human resources, their stake has become important. Employees expect
from their organization fair wages & salaries, motivation working condition, secured
future in terms of employment etc.
 Customers

Every business organization focuses on attaining in winning & maintaining

customers. They expect fair prices with good quality, after sales services and honesty in
dealing.

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  Creditors & Suppliers

Creditors and suppliers affect the organization in several ways & are affected by
it. They expect from the organization the creation of healthy & cooperative inter
business relations, relevant and accurate information etc.
 Government

GOVT. is closely related with the business system of the country. It provides
various facilities or the development of the business. Government expects that an
organization behave like a law-abiding citizen, pay taxes and other government dues
fully and timely and does not corrupt administrative system.
 Society

Organizations exist within those of society and get facilities from it. The society
expects that they should fair business practices; setup socially desirable slandered of
living and avoids wasteful expenditure.
 Other financers

Financial resources are provided by other financers, particularly financial

institutions & banks. In many cases their contributions are much more than
shareholders. Such financial expect that they will pay interest and principal. In order to
ensure this, sometime, they appoint their own nominees on the board of directors &
sometimes they put restrictions on the payment of dividend to the shareholders.

7. SBU

SBU as defined by Sharplin is “Any part of business organization which is treated

separately for strategic management process”.

In multi-product area companies division are created in the form of various business
strategic units (SBUs). SBU concept is evolved by General Electric Company (GEC) of
USA to manage its multi-product business.

Fundamental concept in SBU is to identify the independent product/market segment

served by organization. Since each independent product or market has a different
environment, an SBU should be created for each segment.

“SBU is a separate element of the business serving specific product/markets with

identifiable competitors and for which strategic planning can be conducted.”

 Strategic Management Process and its Implications

Strategic management is defined differently by different authors. Strategic mgt. is
considered as either decision making & planning or the set of activities related to the
formulation and implementation of strategic to achieve or organizational objective.
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 Phases of strategic management are:-

 Formulation of strategies
 Implementation of strategies
 Evaluation & control of strategies

Chart of SMP

Establishing Strategic Intent

Environmental Analysis Organizational Analysis

Reset if Required Setting Long term Objectives

Identifying Alternative Strategy

Reformulate if required Choice of strategy

Reimplement if Required Implementation of Strategy

Strategic Control

Feedback

(1) Formulation of strategies:-

It includes…..

(a) Establishing Strategic Intent:-

Since organization is deliberate creations, they have some specific intent i.e. what
they will achieve in future and why they will achieve it. In strategic management, this is
known as strategic intent and consists of three major elements-vision, mission, and
objectives arranged in a hierarchy in that order.

(b) Environmental analysis:-

The second important aspect of strategic mgt. is the environmental analysis.

Since an org. is a social system, it operates within the environment which consists of
many factors such as society, competitors, technology, and legal framework, political,
psychological & cultural framework. An org. has to interact continuously with these
factors. In this interaction process, the org. has to relate itself with the environment. The

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 interaction process provides opportunities or threats to the organization depending on
the situation.

(c) Organizational analysis:-

What opportunity or threats are posed by the environment & how the org. can
take advantages will depend greatly on the orgs. Strength and weakness. Organizational
analysis brings these strength and weakness & evaluates them so that it can relate itself
by emphasizing its strengths and weakness. Thus strategic opportunities and threats are
determined on the basis and both environmental analysis as well as organizational
analysis.

(d) Identifying of strategic alternative:-

Interaction of org. with its environment in the light of its strength and weakness
will result in to various strategic alternatives. This process may result into large no. and
alternatives through which an org. cannot relate it to the environment. All alternatives
cannot be chosen even if all of them produce the same results. So managers may like to
limit themselves to the serious consideration of some of the strategic alternatives. So
that they are saved from unnecessary exercise. Therefore the strategic alternative should
be identified in the light of strategic opportunities and threats.

(e) Choice of strategy:-

The identification of various strategic alternatives leads to the level where

managers can consider some alternative seriously & may choose one of the most
acceptable. Since the particular strategy attempts to affect the organizational operation
in some predetermined manner, the choice process systematically considers how each
alternative strategy affects the various critical factors the organizational functioning.

(2) Implementation of strategy:-

Once the creative & analytical aspect of strategy formulation has been settled, the
organization tries to convert the strategy into something operationally effective. To bring
the result the strategy should be put to action because only choice of strategies will not
affect organizational activities & achievement of its objectives. In strategy implementation
include are design of org. structure to suit the chosen strategy, effective leadership,
development of functional policies, development of allocation of resources, development
and effective information system etc.

(3) Evaluation & control:-

Evaluation and control is ongoing process & it should be taken as the process for
future course of action. For effective implementation & achievement of the organizational
objective, it is necessary that there is continuous monitoring of the implementation of the

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 strategy so that there is a continuous monitoring of the implementation of the strategy so
that suitable action is taken whenever something goes wrong.

Evaluation & control of strategy & its implementation may into various action that
the org. will have to take to be successful, depending on the situation. Such action may
require in the area of correcting implementation of strategy, choice & change in
organizational mission and objectives & consequently leading to change in identification of
strategy. Therefore strategic mgt. process should never be taken as static but as dynamic so
that new action is taken whenever there is change in any of the factors affecting strategy.
 IMPLIMENTATION OF STRATEGIC MANAGEMENT PROCESS

1. All the elements of the process can be thought of in sequential nature. It implies that each step must be
undertaken in a sequence, at least for a new strategic action. In the case of an existing organization &
existing strategic action, these elements may not be put in a very strict sequence because the action may be
repetitive.

2. The various element of the process are inter-related. This suggests effect of each factor on there. Thus
there may be two way impact of a factor, each affecting there and in turn, being affected by others. The
relative force of this impact may differ for various elements.

3. Feedback is necessary to relate the implementation of the strategy with the early stage element of the
process. Feedback can be defined as the post-implementation result of a strategy which is collected as
inputs for the enhancement of the future decision making through strategy management process.

4. Strategic management can be termed as a dynamic system i.e. constantly changing nature. Since the
organization has to function in an environmental that is dynamic & constantly changing, the various
elements & activities of the strategic management have to be adjusted accordingly.

 Strategic Intent
Hierarchy of strategic intent:-

vision
m ission
objective
plans
policies
goals
t
a
strategic
c
ti
e
s
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 1. Articulating a vision of the organizat6ion future where the organization needs to be
needed.
2. Translating that vision into a mission that defines the organization purpose.
3. Converting the mission into performance objectives.
4. Sometime objective is converted into plans & policies.
5. Dealing each objective into specific goals.
6. Formulating strategies & tactics to achieve the goals.

Vision: definition meaning, formulation

Vision is the starting point of expressing an organization’s strategic intent. Nations have
vision, organizations have vision, and individuals have vision. They have vision explicitly or
implicitly. In the organization point of view vision represents what the organization would be
in future; it implies that the organization should create projections about where it should go in
future and what major challenges lay ahead.

For achieving visionary dream, the firm requires commitment, hard work and maximum
utilization of resources.

Mahatma Gandhi had vision of free India; Dhirubhai Ambani had vision of KAR LO
DUNIYA MUTHI MEIN about reliance communication.

“Vision refers to an inspirational picture of a future that can be created”

 According to kotler (1990) defines it as a “description of something in the future.”

 Vision represented the imagination of future events & prepares the organization for the
same.
 Vision represents the challenging portrait of what the organization would be in future.
Implies the organization should create projection about where it should go & what
major challenges lay down.
 Vision is a “realistic, credible, and attractive future of an organization.”

There may not be a clear cut answer of this question because of differences in
organizational practice. In other type of organizations, vision is the outcome of agreement
of various stakeholders both within the organization and outside it.

 Developing a Vision
Following steps are relevant for developing a vision:

1. Conducting a vision audit.

First step in developing a vision is to assess the current direction and movement of
the organization. At this key question that should be answered are:
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  Does the organization have a clearly stated vision
 What is the organizational current direction?
 Do the key organizational leaders know where the organization is headed and degree
of the direction?

2. Targeting the vision

This step involves starting to narrow on a vision. At this step, key question are:

 What are the boundaries and constraints to the vision?

 What must the vision accomplish?
 What critical issues must be addressed in the vision?

3. Setting the vision content

Since vision is the desirable future for the organization, there is need for identifying
what the organization’s future environment might look line. However, vision has a very
long term orientation and, therefore, only broad direction of future environment should be
identifying either then going for elaborate forecasting of environment.

4. Developing the future scenarios

Developing the future scenarios follows directly from setting the vision content.
Scenarios are the likely the future behavior of the environment. Since distant future
environment cannot be predicted accurately, alternative scenarios are developed for
different environment behaviors.

5. Generating the Alternative Visions

At this stage, possible visions are developed for possible environments. The purpose of
this step is to generate visions reflecting different directions in which the organization may
go.

6. Choosing the Final Vision

Alternative visions are evaluated in the light of environmental variables as well as

organizational variables. That vision is selected which is most likely to meet the demands
of these variables.

MISSION- definition, meaning, formulation and role

Mission is at the second level of hierarchy of strategic intent and broadly defines why an
organization exists. Mission means fundamental objectives justifying the long term existence
of business unit or any other institution.

“Mission is a statement which define the role that an organization plays in a society”

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 According to Pearce & Robinson, “the company mission is defined as the
fundamental unique purpose that sets a business apart from other firms of its type &
identifies the scope of its operations in product & market term”

Mission provides guidelines to an organization to link its activities to the needs of

the society in general & legitimizes its existence as an organization of the society.

 Formulation of organizational mission:-

Every organization develops some kind of mission, either explicitly or implicitly,

either written or unwritten. However, for a large organization where face to face interaction
is not possible among organizational member or outside related to it, is better to have
mission explicitly expressed & in written form. In formulating mission two factors are
important (1) components of mission & (2) mission statement.
(1) Components of mission:-

The first basic information of its various components. Mission should include the
benefits, assumptions & desires of the following types:

(a) Entrepreneur’s self-concept of the business can be communicated & adopted by

employees & stakeholders.

(b) The organization will create favorable public image which will result in contribution
from environment.

(c) The organization can grow & be profitable then just survive in the long run with the
support of various constituents.

(d) The product & service offered by the organization can provide benefits at least equal
to its price.

(E) Technology used in producing product or service will be cost & quality competitive.

(2) Mission statement:-

Mission statement is the description of the organizational mission. Explicit mission

statement is described as it serves the purpose of communicating to the organization’s
member about the corporate philosophy, character & image of the organization. While
farming the mission statement, following points should in to consideration so that it serves
the purpose for which it is prepared.

(a) Mission should be clear both in term of intention & a word used.

(b) It should be feasible, neither too high to be unachievable, nor too low to determinate
the people for work.

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 Role of mission in strategy formulation:-

Organization mission, when clearly defined, helps strategies in formulating their

strategies in the following ways:
(1) It helps in deciding the direction in which it proceeds. Therefore, strategic actions
can easily be generated in that direction.
(2) It helps the organization to clarify its aspiration & those of various stakeholders. The
strategic action can be aligned to these aspirations.
(3) It helps integrating the organization with its relevant environment by taking suitable
actions. The way these have been specified in the mission.

OBJECTIVES- definition, meaning, role and formulation

Objective is the open ended attributes denoting a future state or outcome than an
organization strives for.

The objectives are sought to be achieved in order to take the organization towards its
purpose & to fulfill its mission. A mission & purpose may lead to several objectives which
are stated in general terms.

 Role of objectives in strategic management

Objectives play an important role in strategic management. We could identify the

various facts of such a role as described below:
1. Objective defines the organizational relationship with its environment.
2. Objective provides the basis for strategic decision making.
3. Objective provides the standards for performance appraisal.

 Formulation of objective:-

1. Involves that entire employee who is responsible for carrying out these objectives.
2. All the objective within an organization should support the overall objective.
3. Objectives should have some reach.
4. Objective should be realistic.
5. Objective should be contemporary as well as innovative.
6. The number of objectives for each manager should not be too many.
7. Objective should be ranked according to their relative priority.
8. Objective should be in balance within a given enterprise.

Goals – definition and meaning

When the objective is stated in specific terms, they become goals to be attained.

A goal is a closed-ended attribute which is precise & expressed in specific terms.

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 The objective of increase in market share may be stated thus: to rise the existing
market share 5 % to 35 % of the total over a period of two years. In order to attain goals,
policies need to be set the basis of which action is then initiated. Short term goals,
expressed in very precise terms & for time bound programmed are known as targets.

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