DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

MASTER OF BUSINESS ADMINISTRATION

SEMESTER 4

DMBA401
STRATEGIC MANAGEMENT & BUSINESS
POLICY

Unit 4: Strategy Formulation and Implementation 1

DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

Unit 4
Strategy Formulation and Implementation
Table of Contents

SL Fig No / Table SAQ /

Topic Page No
No / Graph Activity
1 Introduction 1 -
3-4
1.1 Learning Objectives - -
2 Strategy Formulation - 1 5-7
3 Process in Strategy Formulation 2 2 8 - 10
4 Strategy Implementation and Its Stages 3 3 11 - 13
5 Reasons for Strategy Failure and Methods to - 4
14 - 16
Overcome
6 Strategy Leadership and Strategy 4 5
17 - 20
Implementations
7 Strategic Business Units (SBU's) 5 6 21 - 23
8 Summary - - 24
9 Glossary - - 25
10 Case Study - - 26 - 27
11 Terminal Questions - - 27
12 Answers - - 28 - 30
13 Suggested Books and E-References - - 31

Unit 4: Strategy Formulation and Implementation 2

DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

1. INTRODUCTION
As we have learnt, strategic management is the process by which an organisation determines
what needs to be done to achieve corporate objectives, and more importantly, how these
objectives are to be met. It is a process by which senior management examines the external
business environment to analyse opportunities and threats as well as its internal functional
areas to identify its strengths and weaknesses. Thereafter, it attempts to establish an
appropriate and optimal ‘fit’ between the two to ensure the organisations’ success and to
have an edge over competitors.

Strategic management includes managerial decision-making and planning for an

organisation as a whole.

The strategic management process is an important function that leads to the development of
effective strategies. It is a formalised and rational management process to establish a road
map for the firm to anticipate changes and respond to the uncertain business environment.

Organizations follow this process to formulate and implement strategies, plans and policies
to counter competitors, external threats, or to identify new opportunities to gain competitive
advantage. This process of strategic management includes environmental scanning, strategy
formulation, strategy implementation, and evaluation and control to attain organisational
goals.

These four phases of strategic management are:

1. Defining business mission, purpose, and objectives

2. Strategic formulation
3. Strategic implementation
4. Strategic evaluation and control

These four phases are sequentially interrelated. Each successive phase provides feedback to
the previous phases. These are called phases, rather than stages or steps, to signify that each
phase has a co-relation and co-existence. Each phase has to be monitored and provided with
feedback to make changes -- if any deviation occurs in the strategy or in the previous phase.

Unit 4: Strategy Formulation and Implementation 3

DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

Defining
Business
Mission,
Purpose
and
Objectives

Strategic
Evaluation Strategic
and Formulation
Control

Strategic
Implementation

FIG.1 STRATEGIC MANAGEMENT PROCESS

1.1 Learning Objectives

After studying this chapter, you will be able to:

❖ Explain the concept of strategic formulation.

❖ Describe the personal characteristics of a leader that supports implementation
❖ Recall the concept of Strategic Business Units (SBU's).
❖ Restate strategic implementation.
❖ Identify reasons for the failure of strategies.
❖ Explain methods to overcome failures.

Unit 4: Strategy Formulation and Implementation 4

DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

2. STRATEGY FORMULATION

Strategy Formulation is that phase of the strategic management process, where the
organisation sets long-term goals to help a firm avail opportunity identified in the external
business environment, by using its internal capabilities.

2.1 Strategic Management Process:

1. Defining business vision, mission, purpose and objectives are critical to lay the
foundation of strategic management. The organisation has to create its corporate
identity and define its corporate social responsibility that states what it brings for the
society. Its own business ethics and values should be communicated through its goals
and objectives. The end result is the establishment of vision, mission and hierarchy of
objectives according to the strategic intent.
2. In the strategy formulation phase, environmental appraisal and organisational
appraisal deal with finding out opportunities and threats operating in the environment.
The strengths and weaknesses of the organisation have to be identified to match the
opportunities and threats. This needs to be done in a manner that opportunities can be
availed of, and the impact of threats neutralised or defended -- to capitalise on the
organisational strengths and minimise the weaknesses.
3. Strategic alternatives and choice are required for evolving alternate strategies, out of
the many possible options, and choose the most appropriate strategy or strategies -- in
the light of environmental opportunities, and threats and corporate strengths and
weaknesses. The end result is the choice of strategy which the organisation is going to
execute.
4. To implement a strategy, the strategic plan is put into action through its various sub-
processes.
5. The last phase of strategic evaluation and control is basically tracking and monitoring
the process. Strategy may be reformulated, if required.

Unit 4: Strategy Formulation and Implementation 5

DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

2.2 Need Of Strategy Formulation

1) To achieve organisational goals effectively and efficiently

2) To become more competitive
3) To maximize profits
4) To make a large-scale market share

Unit 4: Strategy Formulation and Implementation 6

DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

Self-Assessment Questions - 1

1. Which of the following is not included in the strategic management process?

A. Formulating strategy
B. Implementing strategy
C. Evaluating strategy
D. Assigning administrative tasks
2. An organisation’s strategy
A. Has longer timeline than the mission and objectives.
B. Takes shape over a period of time.
C. Is formulated simultaneously with the mission and objectives are
formulated.
D. Is conceptualised at a single time keeping in view a thorough strategic
plan for the next three to five years.
3. The primary focus of strategic management is?
A. Strategic analysis
B. The total organisation
C. Strategy formulation
D. Strategy implementation
4. Strategy-formulation concepts and tools
A. Are different for different size and type of organisations.
B. Are not different for different size and type of organisations.
C. Do not differ greatly for profit or non-profit organisations but differ in
small and large organisations.
D. None of the above mentioned.

Unit 4: Strategy Formulation and Implementation 7

DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

3. PROCESS OF STRATEGY FORMULATION

Strategic formulation is primarily a decision-making process, where the organisation

decides which strategy or strategies it is going to follow. The formulation process has to look
into both, the external and internal, elements, so that a comprehensive strategy can be
decided upon. The various steps of strategic formulation are:

A. Establishing Objectives: The main element of a corporate strategy is the objectives of

the firm. These act as a foundation or base.
B. Analysing Organisational Environment: Both internal and external environments of
an organisation should be analysed. Assessment of external business environment
includes, political, economic, social, technological, ecological, legal and regulatory, and
global factors etc. Internal assessment includes identifying strengths and weaknesses
of an organisation. It includes identifying competencies and capabilities of an
organisation.
C. Organisational Appraisal: This will help the firm to assess its strengths and
weaknesses, especially in comparison with its competitors.
D. Setting Quantitative Targets: In this state a firm may set quantitative targets for some
of its objectives. These quantitative targets can be set as operational targets for the
various functional departments. This way, the functional heads can also receive timely
feedback.
E. Relating Targets to Divisional Plans: This step of strategy formulation identifies the
contribution that can be made by each division associated with a product or service
group within the corporation. For this purpose, a provisional strategic plan must be
developed for each sub-unit.
F. Strategic Alternatives and Choices: The process of strategic choice is essentially a
decision-making process. The strategic choice is based on various objective and
subjective factors. The objective factors include all the techniques used, and the
subjective factors include the management attitude towards risk, resource availability
and the organisational culture. Focusing on alternatives is to narrow down the choice
to a manageable number of feasible strategies. Focusing on alternatives can also be

Unit 4: Strategy Formulation and Implementation 8

DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

done by visualising the future state and analysing business definition. Gap analysis is
an important element of the choice making process.

Gap Analysis: Gap Analysis is the identification and analysis of the gap, for an organisation,
between its current position and where it wants to reach in the future. A company sets the
objective for a future period of time, say 3 to 5 years, and then works backwards to find out
how it can reach through the present level of efforts. By analysing the difference between the
projected and desired performance, a gap can be identified.

When an identified gap is not wide, the organisation has the stability strategy as an option.
If the gap is large, due expected environmental opportunities, expansion strategies are more
likely to be followed. However, if the gap is large due to past poor performance,
retrenchment strategies may be more suitable. By focusing on strategic alternatives, and
evaluation of strategic alternatives, suitable strategies can be chosen.

Now once the strategy has been decided in the strategic formulation phase, it has to be
implemented.

Organisatio Startegic
Establishing Environmen Setting
nal Alternatives
Objectives tal Scanning Targets
Appraisal and Choices

FIG.2 STEPS OF STRATEGIC FORMULATION

Unit 4: Strategy Formulation and Implementation 9

DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

Self-Assessment Questions -2
5. The strategic management process follows the following sequence:
_______.
A. Environmental scanning, Strategy formulation, Strategy
implementation, Strategy control and evaluation
B. Strategy formulation, Environmental scanning, Strategy
implementation, control and valuation
C. Environmental scanning, Strategy implementation, Strategy
formulation, Strategy control and evaluation
D. Strategy formulation, Strategy implementation, Strategy control
and evaluation, Environmental scanning
6. A strategy is _________.
A. Completely proactive and reactive
B. Partly proactive and partly reactive
C. Neither proactive nor reactive
D. Proactive
7. _________ is not one of the elements of strategic management.
A. Formulating strategy
B. Implementation of strategy
C. Evaluation of strategy
D. None of the above

Unit 4: Strategy Formulation and Implementation 10

DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

4. STRATEGY IMPLEMENTATION AND ITS STAGES

We can say that strategic formulation and strategic implementation are interlinked. Strategic
implementation is the execution of the strategies, which have been chosen in the strategic
formulation phase, to make operational strategies. Success of any strategy depends, to a large
extent, on its implementation. For the successful implementation of strategies, the
organisation has to be ready to change.

Strategies are meant for the growth and development of an organisation. Strategy
implementation is an actual effort in that direction. Successful strategic implementation
requires support, discipline, motivation from all managers and employees.

Strategic implementation is the process of allocation of activities to top executives and SBU
leaders. The leader communicates the strategy to the employees. Implementation also
involves the development of functional policies about the organisation structure. It also
requires development of the environment to support the strategy to achieve organisational
goals.

Thus, we can say, implementation involves actually accomplishing the strategic formula. This
includes setting policies, designing the organisation structure, and developing a corporate
culture to attain organisational objectives.

According to Straner, Mner and Gray: Implementation of strategies is concerned with the
design and management of a system to achieve the best integration of people, structures,
processes and resources in reaching organisational purposes.

4.1 McKinsey’s 7S FRAMEWORK:

A framework of 7S, given by McKinsey, shows the levers or aspects, which are important for
implementing a strategy. The7S framework highlights the important role of seven
interrelated and interconnected factors within an organisation. As per this theory, the
successful implementation of a strategy depends on the right alignment of these seven `S's'.
The seven factors that drive the change in an organization at a point of time, are not fixed or

Unit 4: Strategy Formulation and Implementation 11

DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

pre-decided. It depends upon the strategist to identify these seven factors for the successful
implementation of a strategy.

The 7S of McKinsey model are:

• Strategy: A set of decisions and plans aimed at gaining a supportable competitive

advantage.
• Structure: The organisation structure of the company based on who reports to whom
and how tasks are divided and integrated.
• System: The flow of activities involved in the daily operation of a business, including
its core processes and its support systems.
• Style: Indicates the type of leadership style and behaviour shown by the management.
• Staff: The employees who are involved in the strategic implementation should be
properly rewarded and motivated.
• Shared Values: Commonly held beliefs and assumptions with which an organisation
behaves; its corporate culture.
• Skills: An organisation’s dominant capabilities and competencies.

Source: expertprogrammanagement.com
FIG.3 MCKINSEY 7S FRAMEWORK

Unit 4: Strategy Formulation and Implementation 12

DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

Self-Assessment Questions -3

8. The7S framework of strategy implementation was given by _______________.

9. The linkage relationship between strategic formulation and strategic
implementation are forward and ______________ linkage.
10. McKinsey 7S framework does not include.
A. Skill
B. Science
C. Staff
D. Style

Unit 4: Strategy Formulation and Implementation 13

DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

5. REASONS FOR STRATEGY FAILURE AND METHODS TO OVERCOME

The practical application of strategic management, including formulation and

implementation, has a few limitations.

Strategic management can prove to be an expensive exercise in terms of time and resources.
Managers need to spend a lot of time away from their regular operational responsibilities.

Strategic management requires a thorough analysis of the external business environment.

Analysing a complex and dynamic environment is not an easy task. Information on the
environmental changes, including markets and competitors, are not easily available every
time it is required. Companies often have to deal with insufficient information databases.

Problems of Strategy Formulation and implementation, can be briefly listed as:

A. Lack of awareness or no insufficient information.

B. `Kidding themselves' syndrome -- no flow of any new information.
C. Conflict among managers -- where personal interest affects professional interest.
D. Excessive involvement in everyday operational problem -- no time for studying
information.
E. Resistance to change and lack of co-operation.

A strategy may be well conceived and formulated, yet poorly implemented. The problems in
implementation may arise because of clash of personal egos among staff members, lack of
coordination among different functional areas, and/or unhelpful top management. Often,
those associated with the formulation of strategies are not involved in the implementation
of the strategies. Participants whose contribution has been sought and appreciated in some
areas of decision-making, may unexpectedly be ignored later.

One of major pitfalls of strategic management is lack of appreciation by the management. If

a strategy succeeds, the planning and the executing teams may not get adequate
appreciations or reward from the top management.

Unit 4: Strategy Formulation and Implementation 14

DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

Strategic planning, which has been formulated and implemented after lot of analysis and
effort, may not bring in the required change overnight. There may be stiff resistance to
change. Moreover, it may reduce flexibility in the system and individual initiative.

5.1 Overcoming Limitations:

• Choose Carefully: Organisations should choose to apply strategies judiciously, and

have an organised, logical, and balanced approach.
• Be Prepared: Mangers should be proactive in case of any eventualities. The
organisation should be prepared for changes in the business environment as well as its
internal capabilities.
• Motivate Employees: Participation of employees, or their representatives, in strategy
formulation leads to a better understanding of the priorities. Different perspectives by
group members help in generating alternative strategies and better screening of
options. Rewards linked with the implementation of strategic plans, can help in
bringing about change in the organisation.
• Manage Change: Changes are accepted easily if there is maximum employee
participation in choosing strategic alternative. If awareness is created for choosing a
particular strategy, then there may be greater support and commitment on their part.
The uncertainly associated with change is eliminated in the process.
• Identify Gaps: Managers involved in strategic management should identify gaps or
weaknesses in their organization during strategy formulation. In order to make a
strategic fit, they should analyse the external business environment and internal
capabilities. This also helps identify their strengths and weaknesses, and where they
can lose out to their competitors. They should identify which areas to focus upon to
match the changes happening in the external business environment.
• Manage Time: Effective allocation of time and resources to planned activities and
efficient coordination and control of tasks also helps in overcoming the limitations.
• Integrated Approach: A cooperative and integrated approach to tackling issues and
opportunities by involving employees at all levels. The employee’s participation is
critical in implementation of change.

Unit 4: Strategy Formulation and Implementation 15

DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

• Positive Attitude: Encouraging a favourable attitude towards change and imparting a

degree of discipline, formality and positivity to employees.
• Communicate Effectively: Effective and strong communication of the new strategies
and policies to be implemented with a proper dialogue with employees will gain their
support and participation. Managers and employees thus become committed to
supporting the organization.

Self-Assessment Questions - 4

11. Which of the following is not an advantage of strategic management?

A. Provides organisations with a clear sense of direction and purpose.
B. Helps improve the political, economic, social and technological environment
of the organisation.
C. Helps orient management decisions to relevant environmental conditions.
D. Helps organisations become proactive rather than reactive.
12. One of the main reasons for having a vision is the motivational effect it is supposed
to produce on the workforce. (True/False)
13. ________________is an important basic tool to overcome resistance to change by
employees.

Unit 4: Strategy Formulation and Implementation 16

DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

6. STRATEGIC LEADERSHIP AND ITS IMPLEMENTATION

Implementation of strategies requires support, discipline, motivation and hard work from
all, managers and employees. The leadership plays an important role here.

The three important behavioural aspects, which have a direct link with the effective
implementation of a strategy -- that is, where implementation is carried out as the strategy
has been formulated -- are:

A. Leadership Style: Strategic leadership establishes a clear direction. Leaders develop

and communicate a vision of the future and inspire the organization to move in that
direction.
B. Power and Policies: Inter play of power and politics has an important role to play in
the successful implementation of strategy.
C. Organisational Culture: This reflects how everything and everybody works in an
organisation. It is, `The way things are done' in an organisation. It is simply the basis of
work done by employees to put anything in action.

6.1 Leadership Implementation:

Strategic leadership is the ability to anticipate, envision, and empower others to create
strategic change. Strategic leadership is the process of providing direction and inspiration,
necessary to create or sustain an organisation.

The position of strategic leadership in the success of strategy is highly substantial. It has
repeatedly been observed, that leadership plays a critical role in the success or failure of an
enterprise. In fact, it has been considered as one of the most important elements affecting
organisational performance.

Albert King traces the historical development of leadership theories and identifies nine
evolutionary eras. Each era focusing on a specific theme of leadership. These nine areas are
as follows:

1. Personality: Trait and qualities

2. Influence: Relationship between individuals

Unit 4: Strategy Formulation and Implementation 17

DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

3. Behaviour: Actions of leaders

4. Situation: Situation in which the leader is faced with problems and issues.
5. Contingency: Dependence on behaviour, personality influence exerted by leader on
subordinates and situation.
6. Transactional: Role differentiation and interaction between the leader and
subordinate.
7. Anti-Leadership: Absence of a real concept of leadership
8. Culture: Culture of the entire organisation
9. Transformational: Use of influence to create intrinsic motivation

In the strategic management process, the role of a leader is critical. The whole process is
linked to the strategic role of a leader, who, formulates, innovates, conceives, plans and is
also the implementer.

6.2 Characteristics Of A Leader

A leader who has to implement a strategy, should have the following characteristics:

(1) Be a Visionary: A leader should have a clear vision of where he or she wants to take
the organization and its standing in the market. The person should be willing to take
risks.
(2) Have Knowledge, Skill and Attitude: A leader should have thorough knowledge about
the ins and outs of an organisation and have excellent decision-making and conceptual
skills. Attitude matters a lot. Employees are greatly influenced by the attitude of their
leader.
(3) Be Well-informed: A leader should be clearly aware of the environment, internally
and externally -- about the market scenario both nationally and at the global level.
(4) Motivate Others: A leader should encourage strategic thinking and promote
intellectual activities in all. Participation of subordinates and employees is very
important.
(5) Empower Others: The person should lead the organisation by empowering
employees. People involved in execution and implementation of the strategies should
have power and authority to take decisions.

Unit 4: Strategy Formulation and Implementation 18

DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

(6) Change Agent: Leaders lead the employees by being an agent of change. They motivate,
support and guide employees to embrace change. Lead at the levels of the organisation,
so that subordinate becomes agents of change.
(7) Innovator: A leader should emphasise on innovation to implement any strategy. They
should have creative and unique ideas to lead.
(8) Foster Business Ethics: Values and culture of an organization affect the
implementation of a strategy. A major task of a leadership is to inculcate personal
values and business ethics in the organisation. Values and ethics shape the corporate
culture and influence politics, power and social responsibility of a business.

Here are a few examples of leaders and their leadership styles.

Examples:

(1) Ratan Tata: Democratic, delegate’s authority

(2) L. N. Mittal: Highly entrepreneurial and aggressive
(3) Aditya Birla: Participative with a family approach
(4) Azim Premji: Focuses on developing people
(5) N. R. Narayan Murthy: Professional and simplicity
Dimensions of Leadership Style Suitable Strategy
(1) Risk-taking: Willingness to take risky Entrepreneurial and expansionist.
decisions
(2) Technocracy: Use of planning, Expansion and growth strategy.
qualified personnel and techniques.
(3) Organicity: Extent of organisational Expansion and growth strategy.
structural flexibility
(4) Participation: Involvement of Expansion, growth , stability and
managers retrenchment strategy.
(5) Coercion: Domination by top Stability and retrenchment strategy.
management

Five dimensions of leadership styles have been developed as stated above. However, no
specific style of leadership or approach can be said to be the best fit for implementation of
strategies.

Unit 4: Strategy Formulation and Implementation 19

DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

The crux of the matter is that leaders should match their leadership style to the environment
in which their company exists, and the strategies adopted.

Risk Taking Technocracy Organicity

Participation Coercion

FIG.4 DIMENSIONS OF LEADERSHIP STYLE

Self-Assessment Questions - 5

14. A strategic leader needs to control every activity within the organization and does
not delegate any work to his subordinates. [True/False]
15. Good leaders are loyal to their organization and subordinates. [True/False]
16. Strategic leaders have a need to be motivated constantly. [True/False]
17. An effective leader has average intelligence and is emotional. [True/False]

Unit 4: Strategy Formulation and Implementation 20

DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

7. STRATEGIC BUSINESS UNITS (SBU'S)

Strategy, is like the game of chess. Where, we keep our eyes on the moves of our opponents.
So in business, we are to keep track of our competitors.

The word strategy, has been derived from the Greek work strategos. It means general ship.
As the general directs the military force, strategy gives direction to the whole company. So,
strategy is not simply planning. It is planning with an external orientation, keeping in mind
the direction the organisation should take, vis-a-vis the competition.

7.1 Levels Of Strategy

• In the strategic management process, to have a strategic fit between the organization
and the environment, a strategy is formulated and implemented at three different
levels. Corporate level
• SBU level
• Functional level

CORPORATE LEVEL STRATEGY:

At this level, the strategy is formulated for the company as a whole. Here, the vision emerges.
The corporate level strategy sets the business ethics, integrity, and social commitment. The
corporate level strategy requires conceptualization, creativity and innovation. To be
successfully implemented, it involves high risks and high costs.

BUSINESS LEVEL STRATEGY(SBU):

Business strategies of companies with multiple businesses and those of smaller companies
with a single business is similar. The business strategy sets goals for performance, evaluates
the actions of competitors and specifies actions the company must take to maintain and
improve its competitive advantages. Typical strategies are to become a low-price leader, to
achieve differentiation in quality or other desirable features, or, to focus on promotions.
Business level strategies are invariably action-oriented.

Unit 4: Strategy Formulation and Implementation 21

DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

When a company performs different businesses or has a portfolio of products, the company
organises itself in the form of strategic business units (SBU’s). This is done in order to
segregate different units, each unit performing similar activities. This way, many companies
are organised on the basis of operating units. These are known as strategic business units.

FUNCTIONAL LEVEL STRATEGY:

The corporate and SBU operate at different functional levels. Strategies for these levels have
to be aligned and integrated. The SBU level deals with a relatively smaller area that provides
objectives for a specific function, like marketing, finance, production, human resources, and
operations. These are more specific and have a defined scope for each functional area. All
the functional areas need to be interlinked to achieve organisational goals. The functional
strategies operate under the SBU Level. The operational level strategies originate from the
functional level strategies. Figure, explains these levels clearly.

FIG.5 LEVELS OF STRATEGY

Unit 4: Strategy Formulation and Implementation 22

DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

Self-Assessment Questions - 6

18. Large organizations develop ----------, which works like a separate company and
develop their own strategies and plans in order to achieve the overall goals of
the organization.
A. Business Development Unit
B. Marketing Unit
C. Strategic Business Unit
D. Product Development Unit
19. A Strategic Business unit is an autonomous business entity within a corporate.
(True/False)

Unit 4: Strategy Formulation and Implementation 23

DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

8. SUMMARY
• Strategy formulation is the route companies take to achieve their vision and mission.
• All employees of an organisation should be communicated about the strategic planning
of a company.
• A strategic plan facilitates a company to examine its resources, their allocation, and
maximize ROI (return on investment).
• The strategic plan helps an organisation to have direction and focus. Else, a company
will be reactive rather than proactive.
• The steps for strategy formulation are: define the strategic mission, analyse its external
as well as internal environment, evaluate its strategic alternatives and choices,
implement strategies, and evaluate and control the plan.
• Formulating the strategic mission ensures that the company is able to identify its core
ideology, the nature of its business, its competitive advantage, and its envisioned future.
• Strategic implementation is execution, putting into action, to make an operational,
strategy which has been chosen in the strategic formulation phase.
• A strategy may be well conceived and formulated, but there may be problems in
implementation. These problems may arise because of personal egos among
employees, lack of coordination among different functional areas or unhelpful top
management.
• In the strategic management process, or in implementing strategy, the role of a leader
is critical. The whole process of implementing a strategy is linked to the strategic role
of a leader.
• Strategies must be evaluated, and reformulated if required, on a regular basis as there
are changes business environment.
• Strategic leadership is the ability to anticipate, envision, and empower others to create
strategic change.

Unit 4: Strategy Formulation and Implementation 24

DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

9. GLOSSARY
Environmental Analysis: It is an analysis and evaluation of the strategic environment
facing the organisation.

Evaluation: It is the process of comparing and assessing a parameter against a specific

criterion (or criteria), that is, a norm, standard, regulation, or expectation.

Mission: It is a statement of purpose that provides the foundation for an organization’s

existence.

Vision: Vision is the statement prepared by every business to plan their activities and goals
for the coming years. Vision is set for the long-term, and the strategies and policies of the
company are framed according to it.

Strategic Objective: A defined outcome that an organization must achieve to make its
strategy succeed.

Organisation Culture: It is the value system and norms followed by employees in an

organisation. It reflects the way employees interact with each other and with stakeholders
outside an organisation.

Strategic Alternatives: Potentially actionable options for achieving the direction of the
organisation. Options should be consistent with the external and internal dimensions of an
organisation to leverage its strengths to exploit available opportunities.

Strategic Leadership is the ability to anticipate, envision, and empower others to create
strategic change.

Unit 4: Strategy Formulation and Implementation 25

DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

10. CASE STUDY

Strategic Management of DELL

Dell Technologies was founded by Michael Dell in1984. It was earlier known as PC's s
Limited.

Product Line: The company produces Software, Hardware, Workstations, Electronics,

Printers, Tablets, Mobile Devices Networking, Storage Devices, Servers, Security products
and Information Technology products.

Uniqueness: Dell delivered unmatched service for their customers in their first PC, Turbo
PC. Dell provided a `risk free returns and next day at home product assistance'. Dell’s growth
trajectory soared high as they provided a very specialized feature of the longest battery life
by providing a lithium-ion battery, which its competitors could not provide.

Strengths: Emphasises on customer intimacy (product differentiation and customer

relationship management) Used Direct Model Approach to provide customization to
customers, to get rid of distribution channels and retailers. They provided customers
payment options, and, a 24/7 tech support. They also provided warranty on the whole
package.

Weaknesses: Wait for their customisation. Dell did not do much innovation. The products
ready for sale were not thoroughly checked, which showed weak internal control.

Opportunities: Should get the loyalty of university students that are the biggest target
market for them. There are opportunities in markets such as Asia and Africa, where low-cost
products are of extreme importance.

Threats: New Technology Competition, No retail stores, Best differentiation strategy of

Apple other brands can compete by achieving low cost

SWOT Analysis: Looking at the strengths, weaknesses, opportunities and threats, it’s
obvious that Dell is not competitive anymore. Dell is slowly losing its competitive edge
because of its highly innovative competitors, and because competitors, such as Apple, are
able to capture the consumer’s attention by offering differentiated and innovated products.

Unit 4: Strategy Formulation and Implementation 26

DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

However, Dell has an advantage due to its direct selling strategy. The benefits it is giving to
its employees such as medical benefit, retired plan, saving plan & specific discounts on
computers & other products.

Discussion Questions:

1. Identify strengths, weaknesses, opportunities and threats for Dell.

2. What type of SBU's can be justifiable for Dell computers?

The advantages derived by implementing Strategic management principles are broadly

classified as ___ and ___ benefits.

Ans: Financial & non-financial

11. TERMINAL QUESTIONS

A. SHORT ANSWER QUESTIONS:

1. What does formulating a strategy reveal?

2. What is a business strategy?
3. What are the five dimensions of strategic leadership?

B. LONG ANSWER QUESTIONS:

1. Discuss the process of strategic management.

2. Write a note on strategic business unit (SBU).
3. What are the methods to overcome failure of strategies?

Unit 4: Strategy Formulation and Implementation 27

DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

12. ANSWERS
SELF ASSESSMENT QUESTIONS:

1. d
2. d
3. b
4. c
5. a
6. c
7. 7.d
8. McKinsey
9. backward
10. b
11. b
12. True
13. Communication
14. False
15. True
16. False
17. False
18. C
19. True

SHORT ANSWER QUESTIONS:

Answer 1.

Formulating a strategy reveals how the targeted results will be accomplished. It is the
process where an organisation tries to assess its strengths and weaknesses. The firm tries to
find a strategic fit between the opportunities in the business environment and its
capabilities, in strategic form in this phase, the organisation has to choose the right choice
from the strategic alternatives.

Unit 4: Strategy Formulation and Implementation 28

DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

Answer 2. Strategy is the determination of the basic long goals and objectives of an
enterprise. It is the adoption of the course of action and allocation of resources, necessary
for carrying out these goals. It is a game plan stating how the corporation will achieve its
mission and objectives to maximise the competitive advantage.

Answer 3.

The five dimensions of strategic leadership are:

(1) Risk-taking: Willingness to take risky decisions.

(2) Technocracy: Use of planning, qualified personnel and techniques.
(3) Organicity: Extent of organizational structural flexibility.
(4) Participation: Involvement of manager.
(5) Coercion: Domination by top management

LONG ANSWER QUESTIONS:

Answer 1. The process of strategic management has the following steps:

• Setting vision and mission. Forming a strategic vision of where the organization is
headed. To provide long-term direction, delineate what the company should be, and
infuse the organisation with a sense of purposeful action.
• Setting objectives for the company. Converting the strategic vision into specific
performance outcomes for the company to achieve.
• Formulating a strategy to achieve the desired result.
• Implementing and executing the chosen strategy efficiently and effectively.
• Evaluating performance and initiating corrective actions in accordance with the
strategic plan.

Answer 2. A strategic business unit (SBU) is a grouping of related businesses that can be
taken up for strategic planning, as distinct from the rest of the businesses. Grouping the
business on SBU lines helps a firm in strategic planning. It facilitates proper allocation of
resources.

Unit 4: Strategy Formulation and Implementation 29

DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

Each SBU has its own distinct set of competitors and its own distinct strategies. Each SBU
has a CEO, who is responsible for strategic planning for the SBU and its performance. The
person has control over most of the factors affecting the unit.

Answer 3.

Some of the ways to avoid or overcome failure of strategies are:

• Organisations should frame strategies with an organised, logical, and balanced

approach.
• The mangers should be proactive in case of any eventualities.
• Participation of employees, or their representatives, in strategy formulation leads to a
better implementation. Linking rewards and other initiatives can ensure minimum
resistance to change.
• The managers should identify gaps or weaknesses on the part of the organization
during the process of strategy formulation.
• Effective allocation of time and resources and improved coordination and control of
activities also helps in overcoming the limitations.
• A cooperative and integrated approach to tackling problems and opportunities is
essential.
• Communication of strategies and policies regarding strategy implementation can gain
the support and participation of employees.

Unit 4: Strategy Formulation and Implementation 30

DMBA401: Strategic Management & Business Policy Manipal University Jaipur (MUJ)

13. SUGGESTED BOOKS AND E-REFERENCES

BOOKS

• Strategic Management and Business Policy, Azhar Kazmi. 3rd Edition, Tata McGraw-
HillL, New Delhi
• Strategic Management: Text and Cases. . V. S. P. Rao, V. Hari Krishna. Excel Books, 2003
• Strategic Management 5th Edition (English, Paperback, L. M. Prasad) Publisher: Sultan
Chand & Sons

E-REFERENCES

• https://www.scribd.com/doc/92728063/Strategic-Management-Full-Notes
• http://nptel.ac.in/courses/110108047/module1/Course%20Lecture%20Notes.pdf
• https://www.scribd.com/document/324538944/5th-Sem-Strategic-Management-
Notes-byYatharth-Chauhan
• http://www.managementstudyguide.com/strategic-management.htm
• http://www.bms.co.in/strategic-management-question-bank/

Unit 4: Strategy Formulation and Implementation 31