Meaning :

Strategic management is a crucial part of an organisation’s management, ensuring

resources are being properly utilized and things are moving in the right direction to help
the organisation achieve its intended goals and objectives.

It involves analysing competitors, evaluating the available resources, setting objectives,

analysing the internal organisation, developing new strategies, and rolling out the same
across the organisation.

Features :

1. Facilitates Strategy Implementation -

Strategic management makes sure that strategies are effectively executed and
implemented with the help of action oriented plans.

2. Long - Term Implications -

 The concept of strategic management are concerned with mission, vision and
objectives of the organisation. The implication of strategic management are long-
term and do not affect the routine operations of the organisation.

3. Long - Term Issues -

The issues which strategic management handles are usually of long-term in nature.
These issue is not necessarily affect the organisation immediately but will benefit the
organisation in the future.

4. Uncertain and Future Oriented -

Managers are ignorant about the after effect of their decision because of the dynamic and
uncertain business environment. Strategic management makes decisions regarding situation
that would occur in the future and are not a part of the day to day activities.

5. Organization-Wide -
The implementation of strategic management of the entire organisation and not merely the
operation on which strategic management principles are applied. It entails strategic choices
and is a systematic approach.

6. Complex -
Manager come across situations related to the business environment that are not easy to
understand. There is a need for analysing internal and external environment. Strategic
management is uncertain it becomes complex as well.

7. Impact on Operations -
An effective strategic management process affect the operation is shoes positively. For
example, if increase in salary and performance are correlated then this will increase the
operation productivity as the employees will be motivated to put more efforts in their work.
Operation decisions are the ones that involve topics like deciding the best way to handle
sales with particular segment of customers are making decision regarding selling products
on credit. Decision concerned with operational issues are made by lower level managers.
Importance and Signification of Strategic Management :
1. Helps in Measuring the Progress -
In order to establish success measures it is important that the organisation analyses the
factors that are crucial to its current success. Then the organisation needs to revise, re-
evaluate or update and then implemented its objectives.
By implementing the process of strategic management the organisation is forced to establish
objectives and set measures of organisational success. It is also important that the board
members and corporate level managers are also aware of these performance measures.

2. Improves Stability -
Strategic management aims at helping the organisation in acquiring more customers so that
the business is no longer dependent on only few clients. There are certain strategies that
provide strength to the organisation by opening more avenues of growth. By implementing
strategic management an organisation can enhance its stability by executing strategies like,
developing a new product line, acquiring a new company, catering a new customer segment
etc.

3. Fulfillment the Responsibilities of the Board Member -

One of the most important reasons for implementing the process of strategic management in
an organisation is that it relieves the board members from their duties 

4. Provides an Organisational Viewpoint -

Strategic management considers the organisation viewpoint and also lays stress on the
interrelated sector so that a strategy that is beneficial for the entire organisation is
developed. While handling the operational issues manager generally tend to overlook the
inter-departmental issues for the issue relating to the organisation as a whole.

5. Helps in Assessing the Objectives -

Disciplines of strategic management help the organisation to gain a wider perespective
instead of putting all their efforts in meeting short-term challenges. Strategic management
relieves the board and senior management from their daily tasks to some extent so that they
can focus on securing the future of the organisation.

6. Strengthens Brand Management -

Strategic management keeps in mind the objectives of brand management while making
organisational decision. A companys brand  image can be damaged by introducing a new
product in the product line or by acquiring a company that does not match with the market
image of the organisation.

7. Identifies SWOT -
Once SWOT are identified it becomes easy to find out the issues relating to the product line,
marketing channels, marketing practices, pricing method, staffing practices, e-commerce
activities etc. Strategic management scans the organisation environment for identifying the
strengths, weaknesses, opportunities and threats that are faced by the organisation as a
whole, as well as by its separate department.
SWOT ANALYSIS

SWOT analysis is a planning methodology that helps organizations build a strategic

plan to meet goals, improve operations and keep the business relevant. During
SWOT analysis, organizations identify strengths, weaknesses, opportunities and
threats (the four factors SWOT stands for) pertaining to organizational growth,
products and services, business objectives and market competition.

A two-by-two matrix is used to build a SWOT analysis, with horizontal pairings of

internal (strengths and weakness) and external (opportunities and threats) factors
and vertical pairings of helpful (strengths and opportunities) and harmful
(weaknesses and threats) factors in achieving an objective. Final results of the
analysis will help the organization determine whether objectives, products, services,
projects or goals are a strategic fit. The best strategic fits are when the internal
environment (strengths and weaknesses) aligns with the external environment
(opportunities and threats).

Strengths and weaknesses

Strengths and weaknesses are internal factors that are dependent on the objective,
project or initiative being analyzed. Since it’s subjective to the chosen objective,
what’s considered a strength for one objective or project might be a weakness for
another.

Strengths are within the organization’s control and this category includes everything
the business does right when trying to achieve a specific goal, initiative, project or
objective. Anything that gives the organization an advantage or that helps processes
and projects run smoothly or helps the organization achieve business goals will fall
into this category. 00:1525:14 
Weaknesses are also within the organization’s control, but the category includes
everything that keeps the business from staying on track to achieving business or
project goals and objectives. These are the things that need to be fixed or changed
in order to achieve success.

Opportunities and threats

Opportunities and threats are part of the external environment — it includes factors
that impact the objective or project from outside the company. This can include
economics, technology, regulation and legislation, sociocultural changes and shifts in
competition.

Opportunities are factors outside the organization that the business can take
advantage of to reach business goals and move the business forward. Threats
include anything in the external environment that might cause issues for a project or
that pose a future threat to the organization’s success.

Process of Environmental Analysis

1. Scanning-  The process of analyzing the environment to spot the
factors that may impact the business is known as Environmental
Scanning. It alerts the enterprise to take suitable strategic decisions
before it reaches a critical situation.
2. Monitoring- The data is gathered from various sources and is utilized
to monitor and find out the trends and patterns in the environment. The
main sources of collecting data are spying, publication talks with
customers, suppliers, dealers and employees.
3. Forecasting- The process of estimating future events based on
previously analyzed data is known as environmental forecasting.
4. Assessment-  T In this stage, the environmental factors are assessed
to identify whether they provide an opportunity for the business or pose
a threat.
 
6 Elements of the PESTEL Framework
The PESTEL framework helps you understand your overall business environment.
These are the macro-environmental factors it tracks:

1. 1. Political factors: Complete political stability from one administration to the next is
hard to guarantee. By taking changing political factors into account, businesses can
prepare to alter their own practices should new employment laws, foreign trade
policies, deregulation actions, or trade restrictions arise. Similarly, they can watch for
any incentives and subsidies the government might offer them to expedite certain
processes.
 2. 2. Economic factors: The broader economy has a powerful influence over both
companies and consumers. Inflation rates, tariff and tax policy, exchange
rates, gross domestic product (GDP) growth, and more all affect how companies can
operate since they directly affect the disposable income levels and purchasing power
of their customers.
3.
4. 3. Social factors: Broader cultural factors and social trends greatly impact businesses.
For example, if the age distribution of a society is skewing younger rather than older,
companies that tailor their products to older generations might need to adapt to
survive and thrive. Social movements—whether they reflect a broader health
consciousness or calls for greater consumer protection—can also help you decide
how to adapt your company’s practices to contemporary norms.

5. 4. Technological factors: From one year to the next, technological change proves
constant—and new technology opens the door into new markets. Keep an eye on
automation trends, data protection laws, and innovations both inside and outside of
your industry. Use this sort of external analysis to further your internal research and
development goals.

6. 5. Environmental factors: In an era of ecological crises and climate change concerns,

it’s more important than ever for businesses to pay attention to environmental issues
as they arise. This facet of PESTEL analysis informs companies as to how they can
reduce their carbon footprint, respond to natural disasters, and increase their
sustainability.

7. 6. Legal factors: This PESTEL factor differs from its political counterpart because it
focuses on current laws rather than potential ones. In order to maintain both integrity
and profitability, a company must observe all relevant intellectual property and
antitrust laws. Adhering to antidiscrimination laws is also essential.

Explaining the 5 P's of strategy

Mintzberg initially mentioned the notion in 1987. Each of the 5 P's indicates a distinct
strategic approach. You design a good business plan that takes full use of the
company's strengths and skills by knowing each P. Here are each of the 5 P's
explained in more detail:
Plan

The benefits of making an effective plan are myriad. Planning comes with only a
small amount of expense attached to it, whereas later steps in strategy can be more
expensive. The more planning a company does, the more likely they're to be able to
achieve their goals and minimise risk. SWOT Analysis, PEST Analysis and realistic
business planning are all tools that assist you in developing a successful plan.
Effective plans help managers to provide clarity to their teams and set actionable
steps towards each goal.

Ploy

Getting ahead of competitors by trying to disrupt, deter, dissuade or otherwise

influence them, according to Mintzberg, is part of a larger strategy. He refers to this
as a ploy. An example of this could be a grocery chain that has the option to threaten
to expand a shop to prevent a competitor from doing so or a telecoms corporation
that might acquire patents that a rival uses to establish a competing product. Tools
and technologies like the Futures Wheel and Scenario Analysis help you investigate
future situations where competition might arise.

Pattern

A strategy is occasionally derived from historical organisational behaviour. A

coherent and successful style of doing business might turn into a strategy instead of
being a conscious choice. Take notice of the patterns you find in the team and
organisation to apply this part of the five P's. Then consider if these patterns have
become an unspoken element of the company's strategy and what influence they
have on how to handle future strategic planning. This is also known as an emergent
strategy.

Position

The importance of position in establishing organisational strategy must be carefully

considered, created, planned and implemented, as it determines the organisation's
entire position in the market after taking into account all internal and external
elements. It focuses on how the company wants to portray itself in the marketplace
and in the minds of customers to attain a competitive advantage.

To determine the position of a company in regards to strategy, you may want to

consider what the brand's basic values are, the nature and qualities of the products
and services it offers and its overarching brand strength. Exploring these variables in
depth makes it easier to establish the business in a niche and to attract customers
that desire its unique services.
 Perspective

The aspect of perspective doesn't relate to any of the above approaches. Instead, it
utilises a wider scope while maintaining the business at the centre. The organisation
creates the strategy by considering the business's most vital and significant factors,
such as how the intended audience perceives the company, how the business's
employees feel about the management as a whole and what the views of the
organisation's investors are. The sum of all of these distinct viewpoints and their
thought patterns serve as a useful source of information for the organisation,
assisting it in making strategic decisions.

Example of Mintzberg's 5 P's of strategy

Incorporating each of the five sections into the strategic planning can help you create
a solid, realistic and attainable business strategy. Below is an example of the way a
tech company could use Mintzberg's 5 P's of strategy:

 Plan: The tech company plans and develops consumer products that

are both functional and simple to use. They also design and
implement numerous software updates to broaden their ecosystem.
 Ploy: The business is well-known for producing original, one-of-a-
kind and extravagant items, giving them a competitive advantage in
the market. They threaten to sue any competitors who replicate their
software or product features.
 Pattern: The company takes earlier inventions that have been highly
successful in the past and refines them. The power of their brand
hooks consumers into purchasing these products and quickly
establishes them as a market leader.
 Position: The company builds a place for itself in the market and
creates a reputation with consumers as a specialised and premium
brand. Its adherence to high standards of quality means it's known for
producing high-end goods that are tough to compete with in terms of
both software and hardware capabilities.
 Perspective: The company's key principles include innovation and
the ability to think creatively, which act as the foundation for the
company's culture and its unique selling point.
There are six functional areas in an organization:
 Strategy.
 Marketing.
 Finance.
 Human Resources.
 Technology and Equipment.
 Operations.
 INTERNATIONALIZATION GROWTH STRATEGY

1. International Strategy: The firms adopt an international strategy to create

value by offering those products and services to the foreign markets where
these are not available. This can be done, by practicing a tight control over
the operations in the overseas and providing the standardized products
with little or no differentiation.
2. Multidomestic Strategy: Under this strategy, the multi-domestic firms offer
the customized products and services that match the local conditions
operating in the foreign markets. Obviously, this could be a costly affair
because the research and development, production and marketing are to
be done keeping in mind the local conditions prevailing in different
countries.
3. Global Strategy: The global firms rely on low-cost structure and offer
those products and services to the selected foreign markets in which they
have the expertise. Thus, a standardized product or service is offered to
the selected countries around the world.
4. Transnational Strategy: Under this strategy, the firms adopt the combined
approach of multi-domestic and global strategy. The firms rely on both the
low-cost structure and the local responsiveness i.e. according to the local
conditions. Thus, a firm offers its standardized products and services and
at the same time makes sure that it is in line with the local conditions
prevailing in the country, where it is operating.
So, in order to globalize, the firm should assess the international
environment first, and then should evaluate its own capabilities and plan
the strategies accordingly to enter into the foreign markets.

What is the McKinsey 7S Model?

The McKinsey 7S Model refers to a tool that analyzes a company’s
“organizational design.” The goal of the model is to depict how
effectiveness can be achieved in an organization through the interactions of
seven key elements – Structure, Strategy, Skill, System, Shared Values, Style,
and Staff.

The focus of the McKinsey 7s Model lies in the interconnectedness of the

elements that are categorized by “Soft Ss” and “Hard Ss” – implying that a
domino effect exists when changing one element in order to maintain an
effective balance. Placing “Shared Values” as the “center” reflects the crucial
nature of the impact of changes in founder values on all other elements.
Structure of the McKinsey 7S Model

Structure, Strategy, and Systems collectively account for the “Hard Ss”
elements, whereas the remaining are considered “Soft Ss.”

1. Structure

Structure is the way in which a company is organized – chain of command

and accountability relationships that form its organizational chart.

2. Strategy

Strategy refers to a well-curated business plan that allows the company to

formulate a plan of action to achieve a sustainable competitive advantage,
reinforced by the company’s mission and values.

3. Systems

Systems entail the business and technical infrastructure of the company

that establishes workflows and the chain of decision-making.

4. Skills

Skills form the capabilities and competencies of a company that enables its
employees to achieve its objectives.

5. Style

The attitude of senior employees in a company establishes a code of

conduct through their ways of interactions and symbolic decision-making,
which forms the management style of its leaders.

6. Staff

Staff involves talent management and all human resources related to

company decisions, such as training, recruiting, and rewards systems

7. Shared Values

The mission, objectives, and values form the foundation of every

organization and play an important role in aligning all key elements to
maintain an effective organizational design.
Understanding Porter's Five Forces
Porter's Five Forces is a business analysis model that helps to explain why
various industries are able to sustain different levels of profitability. The
model was published in Michael E. Porter's book, Competitive Strategy:
Techniques for Analyzing Industries and Competitors in 1979.1

The Five Forces model is widely used to analyze the industry structure of a
company as well as its corporate strategy. Porter identified five undeniable
forces that play a part in shaping every market and industry in the
world, with some caveats. The Five Forces are frequently used to measure
competition intensity, attractiveness, and profitability of an industry or
market.

1. Competition in the Industry

The first of the Five Forces refers to the number of competitors and their
ability to undercut a company. The larger the number of competitors, along
with the number of equivalent products and services they offer, the lesser
the power of a company.

Suppliers and buyers seek out a company's competition if they are able to

offer a better deal or lower prices. Conversely, when competitive rivalry is
low, a company has greater power to charge higher prices and set the
terms of deals to achieve higher sales and profits.

2. Potential of New Entrants Into an Industry

A company's power is also affected by the force of new entrants into its
market. The less time and money it costs for a competitor to enter a
company's market and be an effective competitor, the more an established
company's position could be significantly weakened.

An industry with strong barriers to entry is ideal for existing companies

within that industry since the company would be able to charge higher
prices and negotiate better terms.

3. Power of Suppliers
The next factor in the Porter model addresses how easily suppliers can
drive up the cost of inputs. It is affected by the number of suppliers of key
inputs of a good or service, how unique these inputs are, and how much it
would cost a company to switch to another supplier. The fewer suppliers to
an industry, the more a company would depend on a supplier.

As a result, the supplier has more power and can drive up input costs and
push for other advantages in trade. On the other hand, when there are
many suppliers or low switching costs between rival suppliers, a company
can keep its input costs lower and enhance its profits.

4. Power of Customers
The ability that customers have to drive prices lower or their level of power
is one of the Five Forces. It is affected by how many buyers or customers
a company has, how significant each customer is, and how much it would
cost a company to find new customers or markets for its output.

A smaller and more powerful client base means that each customer has

more power to negotiate for lower prices and better deals. A company that
has many, smaller, independent customers will have an easier time
charging higher prices to increase profitability.

5. Threat of Substitutes
The last of the Five Forces focuses on substitutes. Substitute goods or
services that can be used in place of a company's products or services
pose a threat. Companies that produce goods or services for which there
are no close substitutes will have more power to increase prices and lock
in favorable terms. When close substitutes are available, customers will
have the option to forgo buying a company's product, and a company's
power can be weakened.

Understanding Porter's Five Forces and how they apply to an industry, can
enable a company to adjust its business strategy to better use its
resources to generate higher earnings for its investors.