RASHTRASANT TUKDOJI MAHARAJ NAGPUR UNIVERSITY

MBA
SEMESTER: 3

SUBJECT
STRATEGIC MANAGEMENT

MODULE NO : 2
STRATEGY INTENT & STRATEGY FORMULATION
- By Jayanti R Pande
DGICM College, Nagpur
Q1. What is Strategy formulation? Explain components in strategy formulation process.

Strategy formulation refers to the process of developing a plan or approach to achieve an organization's long-term
goals and objectives. It involves analysing internal and external factors, considering different strategic options, and
selecting the most suitable course of action

COMPONENTS OF STRATEGY FORMULATION

1. Mission & Objectives : Define organization's purpose and desired outcomes.

2. Environmental Analysis : Assess external factors: industry, market, competition.

3. Corporate Analysis : Evaluate internal strengths, weaknesses, resources.

4. Strategy Alternatives : Identify diverse strategic options.

5. Select Best Alternative : Evaluate options based on feasibility and risks.

6. Choice of Strategy: Formulate comprehensive strategy.

Q2 Explain the hierarchy of strategic intent in detail

Strategic Intent
Strategic intent represents the collective vision, mission, and purpose that drives the organization. It aligns the
organization's efforts and resources towards achieving the desired future state. Strategic intent fosters focus, motivation,
and strategic coherence throughout the organization.

HIERARCHY OF STRATEGIC INTENT

Vision: Desired future state or ultimate goal.

Mission: Purpose and reason for existence. Most Integrative Few in number
Business Definition: Scope of operations and focus areas. VISION
Goals: Broad statements reflecting strategic priorities.
Objectives: Specific, measurable targets supporting goals. MISSION

BUSINESS
DEFINITION

GOALS
Greatest in
Most Specific OBJECTIVES number
Q3 Describe the preparation of vision and mission statement.

VISION: The vision is a future-oriented statement defining the desired state.

DEFINITION OF VISION
Miller & Dess- “ Vision is the category of intensions that are broad, all inclusive, & forward thinking.”

Process of Envisioning:
1. Understanding the Organization: Gain insight into the organization's purpose, values, and aspirations.
2. Conduct an Audit: Assess internal and external factors influencing the organization.
3. Narrow Down the Vision: Refine and focus the vision based on audit findings.
4. Set up Context for Vision Statement: Consider market conditions and industry trends.
5. Create New Future Scenarios: Imagine potential future scenarios for the organization.
6. Formulate Alternative Vision Statement: Develop different versions of the vision.
7. Select Final Vision Statement: Choose the most compelling and aligned vision statement.

MISSION: The mission is a concise statement defining the organization's fundamental purpose.
DEFINITION OF MISSION
Hunger & Wheelen – “ Mission is the purpose or reason for the organisation’s existence.”

Process of Forming Mission:

1. Key Decision Maker's Policy: Identify the guiding principles and policies of key decision-makers.
2. Visionary Long-Term Concept: Develop a forward-thinking, long-term concept for the organization.
3. Organizational Mission: Craft a clear, concise, and purpose-driven mission statement.
Q4 Mention guidelines for effective vision & mission statements.

GUIDELINES FOR EFFECTIVE VISION STATEMENTS:

1.Based on Reality: Ensure the vision statement reflects the organization's current situation and potential future.
2.Believable: Create a vision that is credible and inspires confidence among stakeholders.
3.Flexibility and Adaptability: Design a vision that allows for adjustments and can withstand changing circumstances.
4.Time Frame: Specify a timeline for achieving the vision to provide a sense of urgency and focus.
5.Ability to Integrate and Incorporate Employee Opinions: Involve employees in the vision creation process to foster
ownership and commitment.

GUIDELINES FOR EFFECTIVE MISSION STATEMENTS:

1.Involve Employees: Engage employees at various levels to gather input and ensure their alignment with the mission
statement.
2.Careful Selection of Components: Select key elements that capture the organization's purpose, target audience, and
value proposition concisely.
3.Proper Length: Keep the mission statement concise and focused, avoiding excessive detail or ambiguity.
4.Periodical Updating: Review and update the mission statement periodically to align with changing organizational needs
and market conditions.
Q5 What is business definition? Explain Abell’s 3-dimensional model of business definition.

BUSINESS DEFINITION refers to the explicit description of an organization's scope of operations, including the
products or services it offers and the markets it serves. It clarifies the boundaries of the organization's activities and
provides a clear understanding of its core business.

ABELL'S 3-DIMENSIONAL MODEL of Business Definition, proposed by Derek F. Abell, provides a framework for
defining a business by considering three critical dimensions:

1. Customer Groups: Identification of specific customer segments.

2. Customer Functions: Understanding the functions or problems the organization addresses for customers.
3. Technology: Assessment of core technologies and capabilities to fulfill customer needs.

Customer Groups

Customer Functions

Technology

Abell’s 3-dimensional model

Q6 What factors affect external environment analysis? Give the process of external environment analysis.

ENVIRONMENTAL ANALYSIS: The systematic examination of external factors, such as customer needs, market trends,
competitor activities, and macro-environmental influences, to understand their impact on business decisions and
operations.
FACTORS AFFECTING ANALYSIS:
Customer Environment: Understanding customer needs, preferences, and behavior to align strategies and deliver value.
Competitive Environment: Assessing strengths, weaknesses, and strategies of competitors to identify market
opportunities and threats.
Industry Environment: Analysing industry structure, market trends, and regulatory influences to stay competitive.
Macro Environment: Considering economic conditions, political factors, socio-cultural changes, and technological
advancements that shape the business landscape.
PROCESS OF ANALYSIS:
1. Understand Environment: Gaining comprehensive insights into external factors by conducting research, collecting
data, and monitoring trends.
2. Analyse Past Influence: Studying historical data to identify patterns, lessons learned, and anticipate future trends.
3. Identify Critical Factors: Determining key factors that contribute to competitive advantages or disadvantages for
strategic decision-making.
4. Analyse Strategic Position: Assessing the organization's current position and its alignment with external
opportunities and threats.
5. Identify Opportunities and Threats: Identifying potential growth prospects, market gaps, and potential risks that
may impact the business.
Q7 What are goals? Give types and features of goals

GOALS : The desired outcomes that an individual or organization aims to achieve within a specified timeframe.
"Goals are the specific result or achievement toward which effort is directed. They define what is to be accomplished in
specific, measurable terms." - Peter Drucker.
TYPES OF GOALS:
 Official Goals: High-level goals established by top management that reflect the overall direction and purpose of the
organization.
 Operative Goals: Goals set by middle or lower-level managers to support the achievement of official goals and guide
departmental activities.
 Operational Goals: Specific, short-term goals created by individual employees or teams to accomplish tasks and
contribute to larger objectives.
FEATURES OF GOALS:
1. Realistic: Goals should be achievable and aligned with the available resources and capabilities of the individual or
organization.
2. Time Constraint: Goals should have a defined timeframe or deadline to provide a sense of urgency and enable
effective planning and progress tracking.
3. Specific: Goals should be clear and well-defined, stating precisely what needs to be accomplished to avoid ambiguity
or confusion.
4. Measurable: Goals should include measurable criteria or indicators that allow for objective assessment of progress
and success.
5. Commitment: Goals require commitment and dedication from individuals or teams to actively work towards their
achievement.
Q8 How goal is different from objectives?
Goals
Broader, long-term outcomes or targets
Provide overall direction and purpose
Less specific and more general
Define the desired end result
Less time-bound
Reflect the organization's vision
High-level and strategic in nature
Less measurable
Fewer in number
Subject to change over a longer period
Objectives
Specific, short-term milestones or targets
Support the achievement of goals
More specific and focused
Define the steps to reach the end result
More time-bound
Aligned with goals to achieve the vision
Operational and tactical in nature
More measurable
More in number
Subject to change more frequently
Q9 Explain the classification of objective & different process of setting objectives.

OBJECTIVE: A specific and measurable target that an individual or organization aims to achieve.

CLASSIFICATION OF OBJECTIVES:
1 Primary Objectives: Core objectives that directly contribute to the organization's mission and overall success.
2 Secondary Objectives: Supporting objectives that assist in achieving the primary objectives.
Short-term Objectives: Targets to be achieved in the near future, typically within one year.
3 Medium-term Objectives: Targets to be accomplished within a timeframe of one to three years.
4 Long-term Objectives: Goals set for a period of more than three years, often aligned with the organization's strategic
vision.
5 Financial Objectives: Objectives related to financial performance, such as revenue growth, profitability, or cost reduction.
6 Non-financial Objectives: Objectives that focus on non-financial aspects, such as customer satisfaction, employee
engagement, or social responsibility.

PROCESS OF SETTING OBJECTIVES:

1. Categorize Objectives: Classify objectives based on their nature and impact on different areas of the organization.
2. Review the Areas to Cover: Identify key areas or functions that need to be addressed by setting objectives.
3. Balance the Objectives: Ensure a balance between different objectives, considering both financial and non-financial
aspects.
4. Review the Formulated Objectives: Evaluate and refine the formulated objectives to ensure they are specific,
measurable, achievable, relevant, and time-bound (SMART).
Q10 What do you understand by Environment Scanning? Give various approaches to environmental scanning.

ENVIRONMENT SCANNING: The process of gathering, analyzing, and monitoring information about the external
environment to identify potential opportunities, threats, and trends that may impact an organization's strategic
decisions.
William F. Glueck- "Environmental scanning is the continuous monitoring of the external environment to identify and
interpret potential trends, threats, and opportunities that may impact an organization."

APPROACHES TO ENVIRONMENTAL SCANNING:

1. Systematic Approach: A structured and methodical approach that involves collecting data from diverse sources,
such as market research reports, industry publications, and government databases. It follows a predefined process
and uses various techniques, such as PESTEL analysis (Political, Economic, Social, Technological, Environmental, and
Legal) or SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats).
2. Process Information Approach: An approach that focuses on continuously monitoring and analyzing information
from internal and external sources, such as customer feedback, industry news, competitor activities, and emerging
trends. It involves setting up processes and systems to capture, filter, and disseminate relevant information to key
decision-makers in a timely manner.
3. Ad Hoc Approach: An informal and reactive approach where information is gathered as the need arises. It involves
monitoring specific events, incidents, or changes in the environment that have immediate or short-term
implications for the organization. This approach may rely on ad hoc research, expert opinions, or industry networks
to gather information quickly.
Q11 Why business environment is important? Describe the nature of business environment.

IMPORTANCE OF BUSINESS ENVIRONMENT

 The business environment plays a crucial role in shaping the success and survival of organizations.
 It provides a context in which businesses operate and influences their decision-making processes.
 Understanding and adapting to the business environment is vital for sustainable growth and competitiveness.

NATURE OF BUSINESS ENVIRONMENT

 Dynamic: The business environment is ever-changing and characterized by constant fluctuations, such as
technological advancements, shifts in consumer preferences, and market trends.
 Uncertain: The business environment is unpredictable, with various factors, including economic conditions,
regulatory changes, and competitive forces, creating uncertainties for organizations.
 Complex: The business environment is multifaceted, consisting of multiple interrelated elements, including
customers, competitors, suppliers, and societal factors, which influence business operations.
 Interconnected: Different components of the business environment are interconnected and mutually influence
one another. Changes in one aspect can have ripple effects throughout the entire business ecosystem.
 External: The business environment comprises external factors that are beyond the direct control of organizations
but can significantly impact their operations, strategies, and performance.
Q12 Describe the different components of business environment in detail

BUSINESS ENVIRONMENT

Keith Davis – “ Business environment is the aggregate of all conditions, events and influence that surrounds and
affect it.”

COMPONENTS OF BUSINESS ENVIRONMENT:

1 INTERNAL ENVIRONMENT

a) Financial Resources: The financial assets, capital structure, and funding sources available within the
organization.
b) Human Resources: The employees, their skills, capabilities, and the overall workforce within the organization.
c) Work Environment: The physical conditions, organizational culture, and workplace atmosphere that influence
employee productivity and well-being.
d) Labour Management Relationship: The relationship between management and employees, including aspects
like employee engagement, motivation, and labor unions.
e) Brand Image: The reputation, perception, and recognition of the organization's brand among customers,
stakeholders, and the general public.
2 EXTERNAL ENVIRONMENT:

a) Micro Environment:
 Suppliers: Entities providing goods or services to the organization.
 Customers: Individuals or organizations purchasing products or services from the organization.
 Competitors: Other organizations operating in the same industry and offering similar products or
services.
 Public: Stakeholders, such as local communities, media, and interest groups, who have an interest
in or are affected by the organization's activities.

b) Macro Environment:
 Economic: Factors related to the overall economic conditions, such as GDP, inflation rates,
employment levels, and consumer spending patterns.
 Political: Government policies, regulations, political stability, and legal frameworks that impact the
business operations.
 Demographic: Population characteristics, such as age, gender, income levels, and cultural diversity,
that influence consumer behavior and market trends.
 Socio-cultural: Social attitudes, values, beliefs, and cultural norms prevailing in the society, which
can shape consumer preferences and business practices.
Q13 What are methods & techniques used for external environment analysis.

METHODS AND TECHNIQUES FOR EXTERNAL ENVIRONMENT ANALYSIS:

1. ETOP Analysis (Environmental Threats, Opportunities, and Planning): This method identifies and evaluates the
major threats and opportunities in the external environment. It helps organizations proactively plan and
strategize based on the identified factors.

2. PESTEL Analysis: PESTEL stands for Political, Economic, Socio-cultural, Technological, Environmental, and
Legal factors. This analysis examines these factors to understand the broader external influences on the
business environment.

3. SWOT Analysis (Strengths, Weaknesses, Opportunities, and Threats): SWOT analysis evaluates both internal
and external factors. It helps identify an organization's strengths and weaknesses, as well as the opportunities
and threats present in the external environment.

4. QUEST Analysis (Questions, Understand, Evaluate, Select, and Track): QUEST analysis involves asking critical
questions, understanding the external environment, evaluating the implications, selecting appropriate
strategies, and tracking the outcomes.
Q14 Elaborate the different level of external environment analysis.

DIFFERENT LEVELS OF EXTERNAL ENVIRONMENT ANALYSIS:

1. Environmental Scanning: Environmental scanning involves systematically collecting and analyzing information
about the external environment. It aims to identify and monitor trends, events, and forces that could impact the
organization. By scanning the environment, organizations gain a broader understanding of the overall business
landscape and can detect potential opportunities and threats at an early stage.

2. Industry Analysis: Industry analysis delves deeper into the specific industry or sector in which the organization
operates. It examines the market structure, key players, competitive dynamics, and trends shaping the industry.
This analysis helps organizations understand the competitive forces at play, identify market opportunities, and
assess industry-specific risks.

3. Competitive Analysis: Competitive analysis focuses on assessing the organization's direct competitors. It involves
studying the strengths, weaknesses, strategies, and performance of competitors. By conducting a competitive
analysis, organizations can gain insights into their competitive advantages, position in the market, and areas for
improvement. This analysis helps in formulating effective strategies to gain a competitive edge.
Q15 Which sources of information is needed for collecting the data during environmental scanning?

SOURCES OF INFORMATION FOR ENVIRONMENTAL SCANNING:

1. Books and Periodicals: Books and relevant industry or academic publications provide in-depth knowledge and
insights into specific topics and trends.

2. Newspapers: Newspapers, both print and online, cover a wide range of news, including business, economic, political,
and social events that can impact the business environment.

3. Trade Journals: Trade journals are publications specific to an industry or sector. They provide industry-specific news,
analysis, and trends that are valuable for understanding the business environment.

4. Government Agencies: Government agencies at various levels provide data and reports related to economic
indicators, regulations, policy changes, and industry-specific information.

5. TV and Radio: Broadcast media, such as television and radio, often feature news programs, interviews, and
discussions on business and economic matters, providing valuable insights and updates.

6. Online Information: The internet is a vast source of information for environmental scanning. Online sources include
industry websites, industry-specific forums, research reports, blogs, and social media platforms.
 COMMON TERMS IN THIS MODULE

VISION
A vision is a forward-looking statement that encapsulates the long-term aspirations and desired future state of an
organization. It serves as a guiding beacon, inspiring stakeholders with a broad and inspirational outlook. A vision
statement is timeless, focusing on the organization's purpose and unique position in the market, while motivating
continuous growth and improvement.

MISSION
A mission statement is a concise statement that communicates the fundamental purpose and objectives of an
organization. It serves as a guiding principle for decision-making, highlighting the organization's core values and the
value it aims to deliver to its stakeholders. A well-crafted mission statement defines the organization's unique identity
and outlines its commitment to fulfilling its purpose.

BUSINESS ENVIRONMENT
It refers to the external factors and conditions that influence the operations, performance, and decision-making of an
organization. It encompasses various elements such as economic, social, political, technological, legal, and
competitive factors that impact the business environment. Understanding the business environment is crucial for
organizations as it helps them identify opportunities, assess risks, adapt to changes, and formulate effective strategies
to achieve their goals. The business environment is dynamic and constantly evolving, requiring organizations to stay
vigilant and responsive to the external forces that shape their operations and success.
INTERNAL ENVIRONMENT: The internal environment includes factors within the organization that directly impact
its operations. This encompasses the organizational culture, human resources, financial resources, work environment,
and internal systems. The organizational culture defines the values and norms guiding employee behavior. Human
resources refer to the skills and capabilities of the workforce. Financial resources relate to the organization's financial
assets and performance. The work environment involves the physical conditions and atmosphere within the
organization. Internal systems and processes govern daily operations.

EXTERNAL ENVIRONMENT: The external environment comprises factors beyond the organization's control that
influence its operations. This includes economic, social, political, technological, legal, and competitive factors.
Economic factors affect the organization's financial viability. Social factors shape customer preferences and behavior.
Political and legal factors include government policies and regulations. Technological factors pertain to industry
innovations. Competitive factors involve the strategies of rivals. Understanding the external environment helps
organizations identify opportunities, manage risks, and adapt to changing conditions

SWOT ANALYSIS
Strengths: Internal advantages (brand, workforce, technology).
Weaknesses: Internal limitations (resources, technology, operations).
Opportunities: External benefits (market trends, segments, technology).
Threats: External challenges (competition, economy, preferences).
STRATEGY FORMULATION
It is the process of developing a clear direction and plan for an organization to achieve its goals. It involves analyzing
the internal and external factors that can impact the organization's success, identifying strategic options, and
making decisions on how to allocate resources effectively. This process includes defining the organizational mission
and objectives, conducting a thorough analysis of the business environment, evaluating the organization's
strengths and weaknesses, and generating alternative strategies. Ultimately, strategy formulation aims to create a
competitive advantage and set the path for the organization's future growth and success.