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Segment 1 : Introduction to the Fundamentals of
Business, Strategy and Strategic

Management
Topic 1 : Introduction to the Fundamentals of
Strategy
Topic 2 : Fundamentals of Business
Introduction to the Fundamentals of Strategy
Fundamentals of Business
Table of Contents
1.1 Introduction
Learning Objectives
1.2 Definition of Strategy
1.3 The Conceptual Evolution of Strategy
1.4 Criteria for an Effective Strategy
1.5 Importance of a Strategy
1.6 Intended, Emergent, and Realised Strategies
1.7 Purpose of a Business
1.8 Goals and Objectives
Goals
Objectives
Difference between Goals and Objectives
1.9 Vision and Mission Statements
Vision Statements
Mission Statements
1.10 Core Competencies of a Business
1.11 Summary
1.12 Glossary
©COPYRIGHT 2023, ALL RIGHTS RESERVED. MANIPAL ACADEMY OF HIGHER EDUCATION Page No. 1
1.1 Introduction
Different organisations have similar opportunities. Yet, the resources of each

organisation perform differently. Therefore, some organisations succeed
while some fail. Modern-day organisations have realised that the practice of
strategic management helps achieve their objectives in a strong and
competitive environment. Today, a company strives constantly to use its
resources optimally. This aim to have a superior performance strategy has
become a comprehensive process. An analysis of the internal and external
environment helps a firm to form strategies to be successful. Strategies are
the broad goal that helps to achieve the vision of a firm. Strategic
management sets a framework for a firm to operate successfully.
This chapter will help you understand strategy, its fundamentals, conceptual
evolution, its importance to business in this modern era, and the business
goal. You will know the difference between the objectives and goals of an
organisation. The organisation needs to have a vision and mission statement
and lay down core competencies.
Learning Objectives:
After studying this topic, you will be able to:
• Explain the fundamentals of the strategy
• Restate the importance of strategies
• Describe the goal and the purpose of the organisation
• Explain the intention or need to have vision and mission statements
• Define the core competencies of a business
1.2 Definition of Strategy

Different organisations in the same business line, product line, or the same
customer segment perform differently. Few of them will succeed, but many of
them will fail. For example, How do Pepsi and Coca-Cola attract people of all
ages due to buying their soft drinks? How did Samsung overtake the market
of Nokia? How did Jio overtake the markets of Airtel and BSNL markets in
India? How was TATA able to rebuild its reputation in the automobile
industry? Strategic Management is the answer to all these questions. Hence,
strategies made by the management decide the growth of the organisation,
its longevity, and the efficiency and success of the organisation. High-level
decisions -- such as determinations of goals, setting organisational's
objectives, required resources, and interaction with the environment where it
operates -- will all be made and implemented -- based on the `strategy'
formulated by the organisation.
Definitions:
As per Henry Mintzberg, 1978: A strategy is a plan.
As per Henrik von Scheel: Strategy is defined as the activities which are
delivered with a unique mix of values compared with the competitors.
As per Dr Vladimir Kvint: A system of finding, formulating, and developing
a doctrine that will ensure long-term success if followed faithfully.
As per Alfred Chandler, 1962: Strategy is concerned with the determination
of the basic long-term goals and objectives of an enterprise and the adoption
of courses of action and allocation of resources necessary for carrying out
these goals.
As per the above definitions, it is clear that strategy is nothing but an action
taken by the managers to attain the organisation's goal. Strategy is an
integrated, organised activity for which available resources in the organisation
are allocated and utilised to meet the present objectives.
Based on the above definitions authors said that strategy is basically a plan.
Some authors view it as an integrated plan. In few cases, it is viewed that
strategy is not only a plan; sometimes, it arises as a situation or an incident
that happens in different companies.
Example
Invention of the Potato Chips: In 1853, George Crum invented the now
popular potato chips. He worked as a Native American Chef at Moon Lake
Lodge resort in Saratoga, New York, USA. In this restaurant, French fries
were very popular. One day, a customer complained that the French fries
served at the restaurant were too thick though Crum prepared them thin.
However, the customer was still unhappy. To annoy the extremely fussy
customer, Crum prepared very thin fries that could only be eaten with a
fork. But unexpectedly, the customer became veryhappy! This is how , the
potato chips were invented. Later on, they became famous as Saratoga
chips or potato crunches. They would be packed and sold all over England
as well. It is a classic example of a strategy which came up because of a
situation or an incident.
1.3 The Conceptual Evolution of Strategy

The evolution of strategy can be divided into three phases:
1. Strategy in Ancient Times
In the ancient period, 1491 B.C. Moses used hierarchical delegation of
authority. Based on this, he divided large sets of people into smaller
groups. This made it possible to create a command structure and made
it easy to implement strategies.
In 500 B.C., Sun Tzu, a Chinese philosopher, and strategist, provided a
book called The Art of War, which provides information on military and
business applications. For example, it says winning without battle is
best. Apple, the computer maker, is the classic case for this -- it
developed unique features in its products by which it created unique
markets and loyal customers.
The most classic example of strategy-making in ancient times is the
case of Trojan Horse, written by the Roman poet Virgil during 70 BC. As
we all know, the Greek force hid its soldiers inside a giant wooden horse
and planned to attack Troy City from inside. Unaware of this ploy, the
Trojan Army took the horse into the city and won the war. However, the
Greek soldiers stepped out and attacked the city to win the city and end
the war. A computer virus is a classic example of this strategy.
During 530 AD, Britain's King Arthur's approach is more famous than
the Greeks' approach. Here, he made his famed round table in that he
and his knights should not be seen as above the others while plotting
the group strategy. It shows the importance of the central mission to
guide an organisation-wide strategy.
2. Lessons Offered by the Military Strategy
During this era, the word strategy arrived from the word strategos, which
means general or army leader. In 1532, a book called The Prince,
written by Niccolo Machiavelli, provides clever formulas for success to
government leaders. In 1775, a revolutionary war started between Great
Britain and The United States. Here, the Americans used non-traditional
guerrilla warfare to win the war against the strategic targeting of the
British. The strategic alliance between the US and the French navy
worked well, and the Americans won the war.
In 1815, Napoleon was defeated at Waterloo because of his poor
decision. He spread his resources too thin without a proper strategy,
resulting in his defeat. The American Civil War is an example of the
failure of strategy. Even a good strategy won't work if it doesn't account
for greater resources. Around a century, Americans fought against one
another, the Confederate States (the South) and the United States (the
North). This war was fought over the moral issues of slavery. Where
southern states wanted to have their control over the federal
government. So that they could abolish the law that was against their
interest to keep slaves and take them wherever they wanted. Another
reason for the war was the territorial expansion of slavery. Confederates
had a good general who had experience in handling the American and
Mexican wars. But the United States possessed greater resources like
factories, railways, and roads. Modern companies were also discovered
in this part, which helped them to execute their strategy easily and win
the war against the Confederate. During 1944, a war between the
French and Germans was also a classic example of neglecting the
competitor's competencies and a blind assumption that led the
opponents to win the war. Classic military examples sometimes provide

a lesson for business decisions also.
3. Strategic Management in the Academic Field
Strategic Management has been considered as a distinct field of study
over the past century. During ancient times, Sun Taz made it clear that
strategic management was an art and also a science. However, a step
towards developing the scientific aspects of strategic management was
initiated by Frederick W. Taylor in 1911. He published his first scientific
Management book, The Principle of Scientific Management. This book
was the result of Taylor's observations. He believed that the task within
the organisation was organised haphasardly. Taylor believed that
management principles should be derived through a scientific
investigation which may lead to more efficiency in the organisation.
In the early 20th century, among the industrial leaders, Henry Ford
emerged as a pioneer of strategic management. A car was a luxury item
even for the richest people during this period. He boldly envisaged that
he could manufacture a car for the average family. With the help of
Taylor and others, Ford organised the assembly line for manufacturing.
It helped to reduce the costs dramatically. But in his flagship segment,
he offered only the black colour car, which became a big failure for Ford
as his competitors offered cars in different colours.
Later he was left with no choice and offered different colours for the
flagship segment. Harvard University was the first institution to offer a
Business Management course in 1912 for business executives. This
management course was developed mainly based on Taylor's
management principles.
In 1920 A&W Root Beer was the first restaurant that offered franchise
businesses to others. As we know today, franchising means offering a
company's brand name, product, and processes for a franchisee fee or
in the form of a percentage of franchisee revenue. Within a few decades,
this franchisee business became more successful. McDonald's is a
classic example of having more than 30,000 restaurants worldwide
carrying its brand.
In 1959, based on Ford Foundation's recommendations all business

schools started the capstone course. The main objective of this course
was to provide integrated knowledge across business fields such as
finance, accounting, and marketing to provide better ideas to address
complex business problems. This capstone course was different from
Taylor and Harvard's, one of the best solutions to business problems.
This course emphasised the critical thinking capacity of the students.
So that they can address the business problem in multiple ways. Ford
Foundation's suggestion was the key motivation to start a strategic
management course in business administration program by universities
in the US.
Alfred Chandler published the first strategic management book named,
Strategy and Structure: Chapters in the History of the Industrial
Enterprises, in 1962. In the same year, Sam Walton opened the first
Walmart store in Arkansas based on the low-price and high level of
customer service strategy. In 2010, Walmart became the largest
company in the world. Now it has changed its original strategy to sustain
itself in the business world and, debatably, downplayed customer
service in favour of cutting costs. In 1980, for the first time in history,
Strategic Management Society established Strategic Management
Journal. It publishes 13 issues of journal papers every year. In 1995 Jeff
Bezos launched Amazon.com, an online-based platform that has
changed the world market drastically.
1.4 Criteria for An Effective Strategy

1. Clear and well-laid-out objectives: Strategies defined by the
organisation must be clear, understandable, and attainable.
Organisations need not require writing all the formed strategies. But it
has to be defined chronologically so that all operational and tactical
decision-makers can follow them easily. The desired strategic plan must
be applicable and related to the problems that are faced by the
business. A strategy designed by the management should be so clear
that every employee can follow it in the company's interest.
2. The designed strategy must be flexible: An effective strategy should
be able to adapt to the internal and external changes in the organisation.
That means a prepared strategy should be able to withstand time,

markets, product trends, and competitors' strategies. It has to go along
with the real-time challenges during implementation.
3. A strategy should be prepared with information collated from
related diverse groups: All the stakeholders should thoroughly discuss
the strategy before preparing and implementing it. This will facilitate
fresh ideas and support the strategy's formulation and implementation
successfully. Therefore, all stakeholders must be involved from the
initial stages.
4. A strategy must consider the internal and external environment:
While preparing a strategy, it is important to consider external entities
like competitors, suppliers, strategic partners, regulators, and
customers. A detailed analysis of these external factors is critical to
understand the risks involved, avoiding any possible threats to the
organisation, and identifying new opportunities. Needless to say,
internal factors play a vital role while preparing strategies. Analysis of
the internal environment helps to identify the strength and weaknesses
of the organisation to leverage the strengths and work on its
weaknesses.
5. Identifying the competitive advantage: In business, you do not treat
your competitors as enemies. While formulating a strategy, it is essential
to observe competitors and their strategies so that you can make an
effective strategy and make sound decisions.
1.5 Importance of A Strategy

Preparing a strategy is hard work. It requires time and resources that may
disrupt day to day activities of the organisation. However, preparing strategies
at the organisational level is important for the following reasons.
1. It provides direction and an action plan: After analysing the internal
and external environment and the competitor's advantages, the
strategist is able to provide a clear action plan to accomplish the
organisation's objectives.
2. It helps prioritise and align activities: Strategies are all about making
choices. They help set priorities and consider appropriate alternate
resources, wherever possible, to accomplish the organisation's

objectives.
3. Define accountability: Strategies help set down accountabilities for
each stakeholder and l provide a detailed timeline for their activities.
4. It enhances communication and commitment: Strategies clarify
company vision and commitment. Since they provide a detailed action
plan after consideration with all stakeholders, they help communicate,
earn the stakeholders' commitment, and motivate all employees.
5. It provides a background for ongoing decision-making: Usually,
strategic decisions become a reference point for further decision-
making. It is essential to observe the changes happening in the
organisation. Along with micro strategies, long-term strategic planning
is essential -- as it guides daily activities, which in turn help meet long-
term goals.
1.6 Intended, Emergent, And Realised Strategies

In a stable environment, the organisation's strategic planning allows the
organisation to succeed. But in the real world, the environment may be both
predictable and unstable. Therefore, you need to understand the different
types of strategies that may be required.
1. Intended Strategy:
The intended strategy usually focuses on the intention of the organisation
itself. For example, a business plan prepared by a new firm to keep the
organisation together and lay down a path. An organisation may have a
strategy to increase its market share by 5% every year.
Example
In 1965, Frederick Smith, an undergraduate student at Yale University,
was preparing a startup business plan for a class project. His business
plan was on providing courier services. He planned to route packages
through a central hub and before moving them to their destinations. After
graduation, Smith started a company called FedEx, that is, Federal
Express based on the plan prepared by him during the project. In the year
2011, it was ranked top in the most admired company according to Fortune
Magazine.
2. Emergent Strategy:
A strategy that emerges with time is known as an emergent strategy. It is an
unplanned strategy that emerges while responding to various unexpected
challenges, threats, and opportunities. It may be successful or a failure based
on its effectiveness.
Example
FedEx was also a classic example of failure of an emergent strategy. In
the mid-1980s deviated from its original strategy to focus on emerging
technologies. It started a new service called Zapmail using a fax machine
-- where FedEx could deliver documents to customers through a fax
machine. This was started to reduce delivery time. But, due to technical
problems, customers were frustrated. Zapmail failed and FedEx lost
hundreds of millions of dollars.
3. Realised Strategy:
Realised strategy is the actual strategy followed by a company. It is the
product of the intended strategy. For example, the intended strategy of
FedEx, as planned by its founder many years ago -- delivering packages from
a centralised hub to various destinations-- became a primary driver for the
firm's realised strategy. On the other hand, in the case of Southern Bloomers
Manufacturing Company, both intended and emergent strategies became the
driver for the realised strategy.
However, sometimes firms deviate from their primary intended strategies and
run the business using only a part of the intended strategy. An abandoned
part of the intended strategy is called an Unrealised Strategy. For example,
an author, David McConnell, struggling to sell his book, thought of a sales
gimmick. He offered perfume as a complementary product. McConnell's
books were not able to escape from the failure, though. However, the
perfume, due to its sweet smell, became very successful. Soon after, the
California Perfume Company was formed to sell the perfume. Now it is very
famous in the name of Avon under personal care products. McConnell's
dream to become a successful author was an unrealised strategy. But
unexpectedly, it benefitted success from Avon through emergent strategy and

thus became a realised strategy.
Example
The Southern Bloomer Manufacturing Company was a successful case for
emerging strategy. The company started manufacturing innerwear for
mental hospitals and prisons. Many managers of these institutions thought
the innerwear prepared by this company would not work like those
manufactured by other companies, such as Calvin Klein and Hanes.
However, this company used heavy cotton fabrics. This created an
opportunity to go beyond its intended strategy -- that of serving the
institutional need for durable innerwear. While manufacturing, it was
producing a lot of waste materials. It was proving to be wasteful and
expensive. One day, Don Sonner, a cofounder, during a visit to a gun shop,
spotted a potential use of his waste material. He noticed, the material sold
to clean the gun at the shop was not of a good quality (gave off fine threads
or lint)compared to the material wasting in their units. Hence, he suggested
using up the wasted cloth pieces. Later, the waste patches quickly became
popular and sold phenomenally well.
1.7 Purpose of A Business

As per Milton Friedman, an economist, the primary purpose of a business is
to maximise profit for its owner if it's a private company or to the shareholders
if it's a public company. Strategists opposed his view on the purpose of
business. They said that a business's principal purpose is to serve a large
group of stakeholders. That includes not only the owner but also employees,
customers, and even society as a whole. Philosophers said this is why some
legal and social regulation is needed to abide by the business. The Ex-
chairman of Thermax Limited, Anu Aga, once said that breathing is very
important to survive, but we can't say that we live to breathe. In this sense, to
survive, making money is very important in the business, but money won't be
the only reason to exist in business. Many observers argue that Corporate
Social Responsibility could be the best option to balance the interest of
different stakeholders. It can add economic value and balance out profit-
making objectives. Former US President, Bill Clinton stated that multinational
companies need to consider their employee's and customers' interests before

the interests of their shareholders.
• Alan Weiss, an American entrepreneur, writer, and public speaker,
states that business aims to offer value to the customer. Money received
from the customer needs to be invested in the business to accomplish
day-to-day objectives as well as long-term objectives. After fulfilling the
business's needs, ' Excess' money should be invested in philanthropy
and the environment. As for him, the main purpose of business is to
offer value to the customer, not to offer employment.
• As per Peter Drucker, the purpose of business must lie outside the
business itself. That means business organisations are the organ of
society. Hence, the purpose must lie in society, and it has to create a
customer. Annette Franz, founder, and Chief Experience Officer of CX
Journey Inc., says people need to change the 1970s mindset that
focuses on maximising the shareholder's value. By focusing on the
customer and building values for the customer will increase profits
automatically. This, in turn, benefits the shareholders. The above
discussion concludes that the purpose of the business is to create value
for the stakeholders -- that includes employees, customers, and society.
1.8 Goals and Objectives

1.8.1 Goals
The goal of a company can be briefly defined as the long-term desired
outcome of a company. Goals are like abstracts of the business. A goal
provides a long-term overarching target for the company. It only explains the
general ambition of the business. These ambitions are often difficult to
measure.
For example, a person wants to be a successful cricketer. This is his goal, but
no proper action and time frame are attached to this to measure how he will
achieve this goal. A very generic projection of the desire in the form of a goal
is motivating but requires clear action on how to achieve this.
Following are some examples of business goals:
a. Growth in revenues
b. Increasing efficiency
c. Providing outstanding customer support

d. Becoming an industry leader
e. Becoming a brand in the industry
1.8.2 Objectives
After setting the goal, the organisation's next step is to provide a detailed
action plan for achieving it. This plan lays down specific actions or measurable
steps to reach the desired goal of the organisation. Goals and objectives
should always work in harmony to achieve the desired outcome.
For example, a business desires to double its revenue in two years. This is
its goal. Adding new products and providing the best services to its customers
become the objective of the business.
To increase revenue, the following are some of the objectives usually set by
a company:
a. In the fiscal year, earning a minimum of per cent return on investment.
b. Cutting down the operating cost by 8 per cent.
c. Reducing sales and service response time, etc.
1.8.3 Difference Between Goals And Objectives:
Goals Objectives
Goals are the long-term desire of Objectives are for immediate actions
the organisation. set to achieve the goals of the
organisation.
Goals are broader in scope Objectives are narrower in scope
Goals are difficult to measure Objectives can be measured
Goals are general statements Objectives are specified statements
and do not specify the task and specify the task required to
required to be accomplished accomplish
Goals are long-term desires to be As objectives are action plans of
accomplished over the years. goals, these are usually divided into
several parts that need to be
For example: Goal can be to accomplished individually within a
introduce a new product next short period.
year.
For example: Objective will give

detailed timely steps to develop the
new product.
1.9 Vision and Mission Statements

9.1 Vision Statement
A Vision describes the future desires of the organisation. It indicates what the
business is intended to do in the future. A clear vision of the organisation is
the basis for preparing the mission of the organisation.
Example for vision statements:
1. General Motors' vision is to provide eco-friendly, zero crashes (save
lives) and luxurious commodities to its customers.
2. Apple Computer's vision is to provide a great product to the customer.
3. Google's vision is to provide the required information in one click.
9.2 Mission Statement
The Mission statement declares the reason for running the business. That is
the purpose, the company's philosophy, its beliefs, and its principles. It is a
base for establishing company objectives, formulating strategies, creating
plans, and assigning work.
1. General Motor's focuses on providing superior quality products and
services to its customers, which will provide superior value to them.
From this, employees and business partners will share the success, and
investors receive sustainable returns.
2. Apple Computer's mission is to bring computers with innovative
hardware and software and provide the best services to customers,
giving them the best experience while using their product.
3. Google's mission is to systematically organise useful information so that
the user can access it easily.
Most companies have clear mission and vision statements. The vision
statement answers what the company wants to become in future. While the
mission statement answers how it will achieve its vision. Employees and
managers need to work together to shape the vision and mission of the
organisation that will create harmony.
1.10 Core Competencies of A Business

Core competencies are the capabilities and resources that allow companies
to have competitive advantages over competitors. Competencies are
advantages formed by companies by acquiring or multiplying resources,
transforming the abilities of the resources, and developing synergy in them.
Finally, converting these competencies into business activities.
Here are a few examples that will help you understand how the concept of
core competencies evolved.
During 2000, Dell's direct customer focus strategy helped the company build
its competitive advantage. Continuous interaction with the customer through
telephone and e-mails helped them to understand the needs of an individual
and customers in general.
Thus, it can be concluded that core competencies are nothing but the
capabilities and resources of the companies that allow the companies to
achieve their goals-- by adding or creating distinctive value to their products
or services in the long run. That means the company has to utilise its
resources and capabilities in such a way that it can build competitive
advantages for the company. Sometimes, a company's resources can
become a liability to the company and weaken it, giving competitors an upper
hand in that resource area. For example, during 2006, Deccan Airlines did
not use its seating capacity, compared with King Fisher. Similarly, when a
company is unable to convert its resources into core competencies, it needs
to find a different market or portfolio where these resources may become an
advantage. For example, Toyota introduced its outdated model and
technologies in India and other countries and gained in new markets.
Criteria for Core Competencies
There are four criteria for building core competencies:
1. Valuable Capabilities: Valuable capabilities mean forming or adding
value to its resources by taking advantage of the external
environment.
For example, Walmart, with its distribution capacity, exploited the
market by offering a low price for branded products when competitors
were charging high prices.
2. Rare Capabilities: Rare capabilities are those which are possessed

by competitors rarely. These might be innovative ideas of the
competitors.
For example: For Dell Technologies, the computer business model
of direct selling helped it successfully exploit the market.
3. Costly to Imitate Capabilities: Costly and complex capabilities that
are difficult to imitate are called costly and imitate capabilities.
For example, McDonald's taste of the food, customer loyalty, and the
brand name created by Tata Group's historical reasons.
4. Non-Substitutable: This capability of the company cannot be
strategically equated, such as relationships, trust, products,
knowledge, and expertise. Mahindra's tractors are the best example.
The four criteria or questions need to be answered while building core
competencies in an organisation. These are:
1) Does it provide significant value to the organisation?
2) Does it allow to increase or dominate market share?
3) Is it difficult for competitors to imitate?
4) Does it help the organisation in achieving a competitive advantage?
Example, Apple's main core competency is innovation. They have a long
history of developing unique and innovative technology products, including
the Mac computer, iPod, iPhone, iPad, Apple TV, and Apple Watch.
1.11 Summary
Let us recapitulate the important concepts discussed in this topic:

• Strategy is a plan developed, implemented, and evaluated in an
organisation to achieve its goal.
• The firm needs to work proactively rather than reactively to help the
business make the right decisions, leading to success.
• Strategy is developed with the intention to achieve success. Sometimes
strategy emerges while solving problems.
• The firm develops its vision and mission. On its basis, a strategy will be
developed to achieve goals.
• A statement that describes the desire of the organisation is vision, and

the reason for running the business is a mission. To achieve this, an
organisation formulates strategies.
• Strategy is a road map for the employees to work more efficiently and
effectively to help an organisation meet its objectives.
• Strategy helps to decentralise power, which increases the creativity of
the employees and motivates the employees to work more effectively.
• Strategies help to increase a firm's core competencies over its
competitors by allocating resources effectively.
1.12 Glossary
Let us have an overview of the important terms mentioned in the topic:
• Adaptability: It means how an individual or a group of people adapt to
new things, decisions, and other choices. It means the flexibility to adapt
to changes and make decisions quickly and easily.
• Core values: Core values in a leader help build respect, trust, and self-
confidence.
• Influence: Influence defines the ability to encourage, motivate and guide
others towards a single direction for achieving the mutual goals of the
group.
• Leadership: Leadership can be defined as a process where an individual
influences a group of followers or team towards common goals.
• Power: Power here means the capability to use one's thoughts to affect
others' behaviour.
• Qualities of a Leader: Understanding the qualities of a leader is an
inherent part of management. The art of leadership has four major
ingredients.
• Values: Values may be defined as actions that benefit individuals and
society at large.
• Vision: Vision is the statement prepared by a business to plan its
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.
References and Suggested Reading

• P. Subba Rao (2016), Business Policy and Strategic Management,
Himalaya Publishing House.
• Fred R. David (2011), Strategic Management concepts and cases,
Prentice Hall Publication 13th Edition.
• John A Pearce ll and Richard B Robinson, Jr (2005), Strategic
Management, McGraw-Hill Publication, 9th Edition.
• Reed Kennedy with others (2020), Strategic Management, Virginia Tech
Publishing, Virginia.
DOI: https://doi.org/10.21061/strategicmanagement.
E-References
• Management Science, Vol. 24, No. 9 (May 1978), pp. 934-948.
• Henrik von Scheel and Prof Mark von Rosing. Importance of a Business
Model (pp. 23–54) ISBN 978-1-59229-877-8.
• Kvint, Vladimir (2009). The Global Emerging Market: Strategic
Management and Economics. Routledge. ISBN 9780203882917.
• Open Libraries. Strategic Management.
https://open.lib.umn.edu/strategicmanagement/chapter/1-4-the-history-
of-strategic-management/ (cited on 30/3/2021).
Management
Topic 3 : Introduction to the Concepts of
Strategic Management
Introduction to the Concepts of Strategic Management
Table of Contents
2.1 Introduction
Learning Objectives
2.2 Concept of Strategic Management
Stages of Strategic Management
Need for Strategic Management
Features of Strategic Management
2.3 Role of Strategists in Decision Making
Different Strategist in Companies
Roles of Strategists
2.4 Strategists at Various Management Levels
2.5 Strategies at Various Levels
2.6 Benefits and Limitations of Strategic Management
Benefits of Strategic Management
Limitation of Strategic Management
2.7 Summary
2.8 Glossary
2.9 Case Study
2.1 Introduction
During the US President, Barack Obama's period, CEOs from three major
American automakers (Ford, General Motors, and Chrysler) appeared in front
of congressional leaders to ask for bailout money without a clear strategic
plan. They were sent home by congressional leaders with instructions to
prepare a clear strategic plan for the future. Austan Goolsbee, one of the top
economic advisers of President Obama, criticised CEOs for, “asking for a
bailout, without a convincing business plan, was crazy.” He also said, “If three
auto CEOs need a bridge, it has got to be a bridge to somewhere. Not a bridge
to nowhere.” These criticisms by Austan Goolsbee explain the importance of
strategic management.
This chapter provides an introduction to strategic management. It discusses
the scope, needs, features, and importance of strategic management. It
defines the basic role of the strategists at various levels during decision-
making. Furthermore, it discusses the types, benefits, and limitations of
strategic management.
• Explain the concept of strategic management
• Identify the scope, needs, and importance of strategic management
• Describe the role of strategists at various levels
• Discuss the benefits and limitations of strategic management
2.2 Concept of Strategic Management
Strategic management is the art and science of constructing, executing, and

evaluating cross-functional decisions that help the Organisation to achieve its
goals. It focuses on integrating different departments in the organisation to
achieve organisational goals. It is always associated with the term strategic
planning, which is used more often in business.
The word strategic planning originated in the 1950s and became popular
between the mid-1960s and mid-1970s. At this time, most of the corporates
in America were obsessed with strategic planning and developing different
models. However, during the 1980s, strategic planning was cast aside
because it did not yield a higher return. During the 1990s, the process of
strategic planning was revamped. This process is being practised even in
today’s business world.
Strategic planning is a game plan for an organisation to succeed. Profit
margins may shrink due to many reasons like recession, environmental crisis
or change in governmental regulations, etc. A proper strategic plan helps
organisations to achieve their goals. A good strategic plan is a result of
managerial choice within the available opportunities that focus on a particular
market, operations, policies, and procedures.
Some definitions of strategic management are:
Glueck and Jauch, 1984: Strategic management is a stream of decisions
and actions, which leads to the development of an effective strategy or
strategies, to help achieve corporate objectives.
Dess, Lumpkin and Taylor, 2005: Strategic management consists of the
analysis, decisions, and actions, an organisation undertakes to create and
sustain competitive advantages.
Johnson and Sholes, 2002: Strategic management includes understanding
the strategic position of an organisation, making strategic choices for the
future, and turning strategy into action.
The definition of strategic management includes planning, organising,
leading, and controlling organisational activities to achieve the purpose. It is
nothing but the decision-making process for the long-term performance of the
organisation. Also, it is formulating and implementing strategies, to align the
internal environment with the external environment to achieve business goals.

Therefore, strategic management does not replace traditional management
concepts of planning, organising, leading, and controlling., It integrates them
with a broader perspective.
2.2.1 Stages of Strategic Management
There are three stages in strategic management:
1. Strategy formulation
2. Strategy implementation
3. Strategy evaluation
1. Strategy Formulation
Formulation of strategy consists of developing a mission and vision for
the organisation, identification of external opportunities and threats, and
understanding internal strengths and weaknesses. Strategy formulation
helps businesses to achieve long-term objectives by developing suitable
strategies. Formulation of strategy focuses on the availability of different
opportunities in the market, resource allocation, expansion of the
operation or diversification, availability of new markets for business,
possibilities of a merger or joint venture, etc. Strategy formulation helps
the organisation to decide the specific product, market, technologies,
and resources. Also, it helps to define the long-term competitive
advantages of a business.
2. Strategy Implementation
Strategy implementation is the ‘action stage’ of strategic management.
Businesses need to establish objectives, develop policies, allocate
resources, and motivate employees. Strategy implementation requires
developing a supportive culture, preparation of budgets, effective
development of organisation structure, developing and utilising
information systems, redirecting marketing efforts, and connecting
employee compensation to organisational performance.
Implementation is a complex stage in strategic management, as it
requires personal discipline and commitment. The interpersonal skills of
the manager play a vital role in strategy implementation. It entirely
depends on the ability of the managers to motivate employees.
3. Strategy Evaluation
It is the last stage in strategic management. Managers should know
when implemented strategies are working or not and need to evaluate
them from time to time. External and internal factors affecting a business
are frequently changing. Therefore, strategies need to be modified
frequently. Strategies are measured by reviewing the internal and
external factors that act as a basis for formulating future strategies.
Measuring the performances of implemented strategies and taking
corrective measures as required are also needed in the evaluation
stage. The success of today does not guarantee the success of
tomorrow. Hence periodic evaluation of strategies is very important.
In large organisations, all the stages of strategic management are
followed at all hierarchical levels.
2.2.2 Need For Strategic Management
Many experts argue that strategic management is not needed. Without this,
the business can exist and develop. But others claim that strategic
management is essential in this competitive era. The following are the
reasons why strategic management is needed.
1. Changes in the Environment:
The business environment is dynamic and changing constantly. It
creates difficulties in the activities of the organisation. Hence, a firm
needs to anticipate the changes, rather than react to them, that is the
firm has to be proactive. Strategic management anticipates changes
and directs the business to overcome them. Correspondingly, it helps
firms to take advantage of the opportunities created by these changes.
Thus, strategic management is a base for the business to take
decisions.
2. Provides Guidelines:
The process of strategic management guides managers. These
processes are helpful to understand the weakness within an
organisation and minimise the conflict between managers and
employees to help a business run smoothly to accomplish its goals.
3. Develops Research: Helps to have a Depth Understanding of
Problems:
Earlier, case studies were the basis to study different problems.
Recently several models and methodologies have been developed in
this field of strategic management that are helpful to study the problems
in the organisation. More systematic knowledge made strategic
management generate a worthwhile area to implement in an
organisation.
4. Better Performance:
Many believe there is no evidence to suggest that strategic
management leads to higher performance. On the other hand, some
studies show that there is a relationship between formal planning and
better performance. It can be concluded that firms which plan formally
have a higher probability of achievement than those that do not.
5. Systematic Business Decision:
Strategic management provides information about business
opportunities and threats that help top management to make business
decisions accordingly.
6. Improve Communication:
Strategic management provides clear guidelines to all hierarchical
levels -- strategic levels, tactical levels, and business levels. This helps
with effective communication among managers at all levels.
7. Improves Coordination:
Guidelines provided by strategic management help delegate work from
managers to employees. It clarifies the responsibilities of all employees.
That helps improve coordination between managers and employees.
8. Allocation of Resources:
Strategic Management helps in analysing the internal and external
environment. This provides a clear picture of the requirements of
projects that improve the allocation of resources based on the analysis
and makes the project feasible.
9. Gives a Holistic Approach:
As we saw, strategic management helps in communication,
coordination, and allocation of resources. This provides management
with a holistic approach to business.
2.2.3 Features of Strategic Management:
1. Conscious Process:
Strategic Management is a consciously and intellectually developed
process and a cognisant process. Skilled and experienced people are
required to prepare the strategy. It needs the application of one’s
consciousness while developing a strategy.
2. Request Foresight:
A business needs to stay in tune with the times. It should be able to
assess risks and anticipate threats. For example, if a food product is
found to cause cancer, the management should anticipate that the food
item should be banned immediately. This means that the business
should not make any investment in this product.
3. Requires Good Skillsets
Skills and experience cannot be taught by training or coaching classes.
Practical exposure for an extended period helps a person gain skills in
strategies. Hence, strategic management always depends on the skill
sets of managers.
4. Result-oriented process:
Strategic management is a process developed to analyse various
factors, through SWOT analysis and other tools. Different factors are
analysed to develop strategies that allow businesses to thrive.
5. Facilitates decision-making:
Strategic management plays an essential role in making decisions.
Strategic management provides different management tools that direct
the organisational activities along the right path. Strategic management
practices help the organisation to take action early on any problem
which reduces the risk and losses.
6. Primary Process:
Strategic management acts as a base for the business. Every business
has to prepare strategies at the organisational level. Then, start another
process for effective implementation.
7. Pervasive Process:
Strategic management is an essential process for the business at all
levels. The top-level management formulates core strategies after
collecting the information from all its middle and lower business units.
8. Allows for risk management:
Risk means the probability of future loss. Management of risk is part of
strategic management. Risk management involves the formulation of
various strategies to fight against risk. Hence, strategic management
helps a business identify and minimise risks.
9. Drive Innovation:
Strategy is making choices in the available feasible option to achieve
desired goals out of the restrictive situation. Innovation is one of the
means to achieve a decided strategic goal. Hence, strategic
management forces the employees to think out of the box to find the
best solution which drives innovation.
Strategic management today is a complicated process. Hence it requires
experience and excellent skillsets. It is a discipline in itself and pervasive and
universal to any business.
2.3 Role of Strategists in Decision Making

Strategists are skilled individuals responsible for the overall success or failure
of an organisation. Strategists are named using different job titles such as
owner, president, chief executive officer, chair of the board, chancellor,
executive director, dean, or entrepreneur, etc. Jay Conger, author of Building

Leaders and professor of Organisational Behaviour at London Business
School, says, all strategists have to be chief learning officers. We are in an
extended period of change. If our leaders are not highly adaptive and create
great models during this period, then our companies won’t adopt either,
because ultimately, leadership is about being a role model.
2.3.1 Different Strategist in Companies
Individuals managing different jobs in an Organisation, who play a role in
strategic management are:
1. Board of Directors:
Elected group of individuals who represent the shareholders are called
the board of directors. Shareholders may select the representative
within them itself or from any financial institutions, controlling agencies,
government, etc. The board of directors guides top management in
framing strategies to accomplish organisational goals. They review and
analyse the performance of the Organisation. They are also empowered
to appoint senior executives. Hence, the success of the strategies
developed in the Organisation depends on the skills and competence of
these individuals.
2. Chief Executive Officer (CEO):
The CEO occupies a sensitive post next to the board of directors. In
some organisations, he is also called managing director or executive
director. He is responsible for formulating and evaluating the overall
strategies of an Organisation.
3. Senior Management:
They are the top management in the managerial hierarchy. Senior
management is responsible for new product development,
diversification, and expansion, technology upgrade, renovation in the
Organisation, etc. Hence, they can assist the board in formulating and
implementing strategies by providing base-level information.
4. SBU (Strategic Business Units) Level Executives:

Executives who work in the business units are called SBU-level
executives. All SBU heads form strategies to attain the predetermined
objectives of the divisional unit. Each divisional unit needs to work in
accordance with an organisation's goals. Hence, SBU heads have a
high degree of authoritative responsibility in an Organisation.
5. Corporate Planning Staff:
Corporate-level staff are responsible for conducting studies and
research related to strategic management. They assist the strategic
management in formulating and implementing a strategy, based on their
research. They are, however, not directly responsible for initiating
strategy. They are supportive staff who assist other departments in
policy and strategy implementation.
6. Middle-Level Managers:
Mid-level managers are operational planners in an Organisation. They
are directly involved in the implementation of strategies formulated by
the top management. They follow the guidelines and policies of the firm.
Usually, they are not directly involved in any strategic management
activities.
7. Executive Assistants:
Executive assistants assist the chief executive in fulfilling their duties.
They collect data from different sources, analyse it, and then provide
suggestions. They coordinate with internal staff and help maintain public
relations for the chief executive.
8. Consultants:
Many organisations that are small in size and have limited resources
may not be able to have a corporate planning department. These
organisations take the help of external consultants for strategic
management. Companies offering these services are A.F. Ferguson,
S.B. Billimoria, KPMG Peat Marwick, McKinsey, to name a few.
2.3.2 Roles Of Strategists:

Strategists gather, organise, and analyse the information required by the
organisation. They track the competitive trends of the industry. They use
scenario analysis and develop a forecasting model to evaluate the
performance of the organisation. These strategists are found in top-level
management. In recent years, the chief strategic officer has emerged as a
new position in the top management of the Organisation. It confirms the
importance of strategists in an organisation. The various roles they play are:
1. Forecaster
As a forecaster, the person helps the team to anticipate possible issues
related to the market and competition that can come up for a business.
A strategist identifies the strengths and weaknesses, its core
competencies, threats from competitors, and also possible
opportunities. Based on this, the strategist helps team members to
make assessments and operate accordingly.
2. Sculptor
A strategist is like an artist who shapes the Organisation based on an
assessment. A strategist prepares strategies and provides guidelines.
The person may suggest changes in the organisation structure, create
alliances, introduce new products or services, or upgrade the
technology, products, and services.
3. Legislators:
Legislators are the power players in the country or region. Similarly,
strategists are power players in an organisation. They know how to
coach and direct team leaders and motivate employees
4. Mentor:
The strategist demonstrates how an individual in the organisation can
contribute to the business goals. Strategists help employees identify
their purpose and capabilities. So that they can contribute to
accomplishing the objective of the organisation.
5. Supporter:
Strategists help employees to step out of their comfort zones and
support them to stretch their capabilities. This way, they can contribute
to achieving the objectives of the organisation.
Acquiring businesses that complement your own is a good way to
expand into new markets or capture an increased market share. With
its acquisition of Instagram in 2012 for $1 billion, Facebook cemented
its place as the market-leading social media platform. Similarly, Disney's
acquisition of Pixar and Marvel has helped it grow its audience
dramatically.
2.4 Strategists at Various Management Levels

Individuals managing different jobs in an Organisation, and playing a role in
strategic management are:
1. Board of Directors:
Elected group of individuals who represent the shareholders are called
the board of directors. Shareholders may select the representative
within them itself or from any financial institutions, controlling agencies,
government, etc. The board of directors guides top management in
framing strategies to accomplish organisational goals. They review and
analyse the performance of an Organisation. They are also empowered
to appoint senior executives. Hence, the success of the strategies
developed in the Organisation depends on the skills and competence of
these individuals.
2. Chief Executive Officer (CEO):
The CEO occupies a sensitive post next to the board of directors. In
some organisations, he is also called managing director or executive
director. He is responsible for formulating and evaluating the overall
strategies of an Organisation.
3. Senior Management:
They are the top management in the managerial hierarchy. Senior
management is responsible for new product development,
diversification, and expansion, technology upgrade, renovation in the
Organisation, etc. Hence, they can assist the board in formulating and
implementing strategies by providing base-level information.
4. SBU (Strategic Business Units) Level Executives:
Executives who work in the business units are called SBU-level
executives. All SBU heads form strategies to attain the predetermined
objectives of the divisional unit. Each divisional unit needs to work in
accordance with an organisation's goals. Hence, SBU heads have a
high degree of authoritative responsibility in an Organisation.
5. Middle-Level Managers:
Mid-level managers are operational planners in an Organisation. They
are directly involved in the implementation of strategies formulated by
the top management. They follow the guidelines and policies of the firm.
Usually, they are not directly involved in any strategic management
activities.
6. Consultants:
Many organisations that are small in size and have limited resources
may not have a corporate planning department. These organisations
take the help of external consultants for strategic management.
Companies offering these services are A.F. Ferguson, S.B. Billimoria,
KPMG Peat Marwick, McKinsey, etc. to name a few.
2.5 Strategies at Various Levels

Strategy is nothing but the foundation of an organisation. Alternative
strategies are developed to allocate resources optimally so that organisations
can achieve their goals efficiently. If a strategy is ineffective, it impacts on the
performance and morale of the employees. A strategy includes the
preparation of the mission statement, identification of long-term objectives,
allocation of resources, and methodologies to achieve determined objectives.
Hence, identifying objectives is a part of the strategy formulation. Developing
business policies is also part of a strategy. It provides a framework for
decision-making. Strategic management works at all three levels of an
organisation: corporate, business, and functional levels.
1. Corporate Level Strategy
The corporate-level strategy mainly focuses on the market and the

business in which it operates. It focuses on the opportunities and the
strength of the organisation to achieve predetermined goals. Top
management formulates corporate-level strategy. These strategies
include diversification, mergers, takeovers, joint ventures, entering into
new markets, vertical and horisontal integration, stability, retrenchment,
etc. Hence it affects business and functional units.
Examples:
1. A classic example of strategic acquisition in India is that of Sun
Pharmaceuticals acquiring Ranbaxy for $3.2 billion. . The main reason
for the acquisition was to fill the gaps in the US market, getting better
access to an emerging market. Also, gain holding in the Indian market.
(100% of acquisition completed in April 2014)
2. Samsung is a multinational corporation consisting of multiple business
units with diversified products. Samsung’s products are smartphones,
TVs, refrigerators, cameras, microwaves, laundry machines,
insurances, and chemicals. Diversity in the product portfolio is also one
of the corporate level strategies. But at the corporate level, Samsung
2. Business-Level Strategy
This can be described as a strategy formulated to compete and gain a
competitive advantage over rivals. While developing a business-level
strategy, strategists should have a good understanding of the business
Examples:
1. Apple Inc. is the best example of a business-level strategy. They
focus on the high-end product sector to give that wow factor. This
makes people strive for new products from Apple.
2. OnePlus is an example for cost leadership strategy: They built a
razor-thin margins strategy. Through this, OnePlus planned to provide
value back product at a lower cost. Also, their marketing strategy --
which involved no major advertisement and marketing, nor any major
celebrity involvement, in the beginning -- helped gain good profit.
and the external environment. In this strategy, for internal assessment

strategists use Value Chain analysis and VRIO (Value, Rarity,
Imitability, and Organisation) model. For the external analysis, Porter’s
five force model and PESTEL Analysis are used. After analysing the
internal and external environment, strategy is formulated using Value
disciplines, Blue Ocean Strategy, and Porter’s Generic Strategies.
Finally, organisations can gain a competitive advantage by offering a
unique product.
3. Functional-Level Strategy
This strategy is related to all functional levels, such as production,
research, marketing, human resources, etc. It focuses on supporting
business-level, as well as corporate-level strategies. This is aimed at
improving the effectiveness of a company's operations. For example,
managing cultural diversity in the human resource department.
Fig 1: Strategic Management Process at Different Levels

Source: P. Subba Rao (2016), Business Policy and Strategic
Management, Himalaya Publishing House.
Fig 2: Characteristics of Strategies at Different Levels

Sources: P. Subba Rao (2016), Business Policy and Strategic
Management, Himalaya Publishing House. Sub-sourced: Joe G. Thomas,
“Strategic Management,” Harper & Row, Publishers, New York, 1988, p. 46.
2.6 Benefits and Limitations of Strategic Management
Companies will prepare and implement strategies based on the internal and
external environment. After the implementation of strategies some of these
strategies will be beneficial to the organisation and some will become
limitations which will restrict the development of the Organisation.
2.6.1 Benefits of Strategic Management
Strategic management prepares an organisation to be proactive in its
responses to its environment. It helps an organisation manage and regulate
its performance. Many small businesses and non-profit organisations have
identified and understood the benefits of strategic management.
Financial Benefits:
• High-performance organisations do systematic planning for future

fluctuation in the internal and external environment. That reduces the
risk of loss.
• IT helps the organisation to increase sales, profitability, and productivity
through its systematic processes.
• It helps a firm to forecast short and long-term revenues and overall
financial performance.
Non-Financial Benefits:
• Strategic management helps us to communicate easily. It involves both
the employer and employee and wins their commitment to supporting
the organisation.
• It helps the employees to understand the organisation's objectives
clearly and makes them more committed to working towards the
company's goals.
• It boosts the morale of employees due to their participation in the
process of strategic management.
• Implementation of strategies by the employees motivates them if it is
linked to their compensation and performance.
• It empowers employees by encouraging them to participate in decision-
making.
• It helps an organisation decentralise, recognising the importance of
lower-level managers and employee participation.
• It helps to identify priorities and recognise available opportunities.
• It provides a framework to improve the performance of the organisation
and control activities.
• It helps to allocate time and resources effectively.
• It encourages the adoption of the changes.
• It provides a degree of discipline to the management and employees.
2.6.2 Limitation of Strategic Management
• It is a complex process that provides a framework rather than providing

a ready-to-use prescription for success.
• It is a time-consuming task for managers. It can become a bottleneck to
managing daily tasks for a manager.
• It is an expensive exercise that consumes many resources and time.
• It restricts flexibility in the process of the organisation.

• The top manager’s intuitive decision may conflict with the formal plan.
It does not yield immediate results.
2.7 Summary
• Strategic management is the art and science of formulating, executing, and
analysing cross-functional decisions.
• Strategic management focuses on the integrity of all the departments to
achieve organisational goals.
• Strategic management is like a game plan prepared to have success in its
mission.
• Strategic management provides general guidelines to the management by
preparing policies that help to achieve the goals of the organisation.
• Strategic management has three stages in its process: formulation,
implementation, and evaluation.
• Strategic management is essential in this changing environment to provide
guidelines. That helps take a systematic decision for better performance.
• Strategic management is a conscious process that requires skills and
knowledge, and experience to have foresight on the future.
• Leaders of all levels in the Organisation are responsible for preparing and
implementing a strategy.
• Strategists act as forecasters, sculpture, legislature, mentors, and
supporters.
• Strategy is nothing but the foundation for the organisation. Alternative
strategies are developed to allocate resources optimally.
• If a strategy is developed ineffectively, it impacts the performance and
motivation of the employees.
• Preparation of strategy considers all three levels of the organisation:
corporate, business, and functional levels.
2.8 Glossary
• Forecasting: Process of making a prediction using past and present data.
• Goals: Are the desired outcomes of an organisation, established by the
top management.
• Long-term: Doing things for long periods i.e., more than five years.
• Non-Financial Benefits: These are intangible benefits of an Organisation
associated with strategic management.
• Acquisition: When one company purchases another company’s most of
shares.
• Competitive Advantage: Factors which are able to provide a company
with the ability to produce goods and services better and cheaper than its
rivals.
• Evaluation: A systematic judgment about a subject’s value or
significance to gain insight into it.
• External Factors: Situation or circumstances that can’t be controlled by
the business and that affects the business decision.
• Internal Factors: Situation or the circumstances that are under the
control of the company whether it is tangible or intangible.
• Objectives: Objectives are clearly defined statements to achieve the
goals of the organisation.
• Planning: it is the process of looking into the future to achieve the desired
objectives.
• Strategic position: Distinguish business in a valuable way from its
competitors and delivering value to the specific customer segment.
• Uncertainty: impossible to describe future outcomes in the several

possible outcomes.
2.9 Case Study

Iridium: A Failed Strategy
This case is on the development and subsequent failure of Iridium. In the
1990s, cell phones had limited functions. Customers had difficulties in making
calls and paying heavy roaming charges while travelling, among others. Due
to these disadvantages, the need for a satellite phone emerged. Analysts
envisioned a single handset using satellite technology that could be used all
over the world. Investors invested billions of dollars in the satellite phone
network. Iridium was the first satellite phone network established in 1991.
Many companies such as Sony, Sprint, and Lockheed provided technical and
financial support. In 1997, Iridium launched its first satellites. After completing
its network launch, Iridium provided super services, but the consumer did not
show interest in buying satellite phones compared with the traditional system
(cell phone).
The cost of Iridium’s equipment and service fees outweighed those of satellite
phones. Instead of focusing on cost, it advertised satellite services
differentiating from conventional mobile phone services. Retail prices were
$3295 for a satellite phone, $695 for a pager, and airtime fees of up to $7. For
this, Iridium applied the services versus price dichotomy. Instead of a price
discrimination strategy, which focuses on different levels of price for different
services. With a billion-dollar debt, Iridium could not lower the costs. As we
all know, service or technology becomes more valuable when more people
use it and helps to reduce the cost. Meanwhile, mobile phone services such
as Version, AT&T, etc., expanded their infrastructure and services in different
areas through strategic alliances.
it became a disadvantage for Iridium. The new mobile companies addressed
many old complaints like roaming service charges, signal problems, cost of
service, etc., by addressing individual customers They started providing
additional access to their consumers by providing different offers, like
unlimited phone packages without roaming charges. The market strategy of
Iridium is also one of the reasons for its failure. Instead of focusing on
potential market niches, it focused only on large corporate customers such as
aviation or oil companies. Instead of this, it could have focused on small
businesses and residents of remote regions. Or applied size-based marketing
or geographically based marketing strategy. They could have gained
customer trust, which might have generated good word-of-mouth

advertisements.
Due to the weak response from the consumer, Iridium filed for bankruptcy in
the year 1999. As per the break-even analysis, Iridium needed 6, 00,000
customers around the world. But it had 55,000 customers by the time it filed
for bankruptcy. Similarly, several other companies that tried to enter the
satellite phone market are Odyssey worldwide service, ICO global
communication, Tele disc, and Global star. But one after another filed for
bankruptcy. Despite high-profile support and multi-billion investments Iridium,
as well as its competitors in the satellite phone business, failed.
Learning points from the case are: Focus is needed on the strategy under
high-level technological uncertainty. Risk of being the first mover. Trade-off
risk while developing a new product. Analyse the impact of changing
standards. Discussion Questions:
1. Analyse the role of poor strategic management in Iridium’s failure.
2. What steps worked, do you think, taken collectively by the different
companies who entered the satellite phone market?
___ is a general set of directions for the organisation to achieve a desirable
state in the future.
Ans: Strategy

Publishing, Virginia. DOI: https://doi.org/10.21061/strategicmanagement.
Neil Ritson (2011), Strategic Management, Ventus Publishing, ISBN 978-
87-7681-417-5.
E-References
• Sonia Kukreja, Strategic Management, Managementstudyhq.com,
accessed 15th April 2021, <https://www.managementstudyhq.com/what-
strategic-management-definition-features.html>
• MBA knowledge base, management concepts, sited on 16/4/2021,
<https://www.mbaknol.com/management-concepts/the-role-of-strategist-
in-a-business-organisation/>
Management
Topic 4 : Challenges in Strategic Management

Challenges in Strategic Management
Table of Contents
4.1 Introduction
Learning Objectives
4.2 Strategic Management as an Organisational Force
4.3 Dealing with Strategic Management in Various Situations
4.4 Strategic Management Implications and Challenges
4.5 Summary
4.6 Glossary
4.7 Case Study
4.1 Introduction
Strategic management is the continuous
STUDY NOTE
planning, monitoring, analysis, and
assessment of the needs of an organisation to
Strategic management
ensures the existence of meet its objectives and goals. The changes in
an organisation in a long the business environment require
run. organisations to continually evaluate their own
success strategies. Strategic management is a
process designed to help organisations assess their current situation and an
overview of the strategies for its implementation; the analysis of the
effectiveness of the management strategy is implemented. It is widely
believed that strategic management brings together financial and non-
financial benefits. The process of strategic management helps to ensure that
the organisation thinks and plans for its future existence. Unlike one-time
strategic planning, effective strategic management does continuous planning,
monitoring and assessment of the organisation's activities which increases
efficiency, market share, and profitability.
The strategic management model deals with planning, analysing, and

assessing different factors and inputs critical for production. It also entails the
evaluation, allocation, and exploitation of available resources to achieve
specified business objectives. The corporate culture, internal structure, and
skills of human resources influence the strategy development process of an
organisation.
This chapter will explain in detail the use of strategic management in various
situations in the organisation. From the formation to the implementation and
evaluation of the strategy, the organisation faces many challenges and
hurdles which need the strategic manager’s immediate attention. Strategic
management’s implications and challenges will be discussed in further detail.
Learning Objectives
After studying this chapter, you will be able to:
• Explain strategic management as an organisational force
• Analyse strategic management in various situations of the organisation
• Discuss the implications and challenges of strategic management
4.2 Strategic Management as An Organisational Force

Strategic Management:
Managers and strategists have a high degree of responsibility. There's a lot

at stake, from managing internal
STUDY NOTE
communication and managing the
A strategy is considered a expectations of the organisation to
long-term course of action that generating good exposure to the brand
combines the advantages of so that the customer is satisfied. Even
the organisation with the the best strategic management leaders
environmental challenges. struggle with the day-to-day challenges
they face in the management of their
teams and their problems; many people are not even aware that such
problems exist. This happens because such issues which are non-existent in
the beginning, but which can result in serious problems if they are not
identified and corrected, which completely negates the organisation's efforts.
Strategic management is essential to the development and growth of all

organisations. It represents the science of building and constructing short-
term and long-term plans aimed at achieving organisational goals. The
strategy is naturally linked to the company’s mission statement and vision;
these elements form the core concepts that allow a company to achieve its
goals. The company's strategy must be constantly edited and developed to
align with the needs of the external environment.
Because of its importance to the business or company, strategy is often seen

as the highest level of management responsibility. Strategies are usually
obtained from the company's senior management and are presented to the
board of directors to ensure that they meet the expectations of the company's
stakeholders. This is especially true of public companies, where profit and an

increase in the number of shareholders are the company's main goals.
The results of the chosen strategy are also very important. This is reflected in
achieving high levels of strategic alignment and consistency in relation to the
external and internal environment. In this way, the strategies enable the
company to maximise its internal efficiency while gaining the highest potential
in the external environment. Strategic management is the art and science of
making, implementing, and evaluating collaborative decisions that enable an
organisation to achieve its long-term goals. It includes clarifying the
organisation's purpose, vision, and objectives; developing policies and
programs to achieve these goals and allocating resources to implement these
policies and programs. Strategic management aims to coordinate and
integrate the activities of the various functional areas of the company to
achieve the long-term goals of the organisation.
Strategic management is the process by which managers make efforts to

ensure long-term familiarity with the organisation in its environment. Strategic
management is not an easy process; it is complicated.
Its severity can be caused mainly by three reasons:
• Strategic management involves making decisions about the future:

The future is uncertain. The manager cannot be sure about the future.
Therefore, strategic management involves a high level of uncertainty.
• Managers in different departments in the organisation have

different priorities: Managers must reach an agreement to ensure an
integrated approach. Strategic management requires an integrated
approach, which is difficult to achieve.
• Strategic management involves major changes in the organisation:

It adheres to changes in organisational culture, leadership, organisational
structure, reward system, etc. All of this makes strategic management
more complex.
Technology is the main external force that calls for the management of
organisational change.
The rate of technological change is better today than at any time in the past
and technological changes are responsible for changing the nature of jobs
working at all levels in the organisation. Example Google, Apple etc.
Strategic Management as an Organisational Force
Organisations operate in a dynamic environment. Social, political, economic,

and technical events that are external to the organisation influence the
organisation's products, markets, and technology-related choices.
Organisational responses to change that occurs in the external environment
are multifaceted. It covers the fields of marketing, finance, human relations,
operations, technology and innovation, leadership, motivation, organisation,
culture, composition, and systems. Organisational response is based on an
analysis of external environmental trends and organisational strengths.
Competition has become very fierce in almost all industries. As a result of free
trade and financial services, companies are expanding worldwide.
Competition, therefore, makes it mandatory for managers to think strategically
about the company’s status. They also need to think about strategies for the
impact of the changing environment. Managers need to monitor the external
environment closely to determine when to initiate changes to an existing
organisational strategy.
Strategic management works as an organisational force in the following ways:
• Ensures competitive advantage over competitors, as due to its proactive

approach the organisation will always be aware of the changing
environment of the market. Strategists always consider the internal and
external environment of the organisation so that a competitive edge can
be generated.
• Strategic management makes communication and goal implementation

organisation wide. A cohesive organisation which is working in unison
towards a goal is more likely to achieve that goal. It smoothens
communication and also brings clarity to the organisation about the
employee’s roles.
• It is all about looking forward towards the future of the organisation.

When managers do it consistently, they become more aware of the
industry challenges and trends. With the help of strategic management,

strategic planning and thinking, managers respond to future challenges
in a better way.
• Provides better leadership across the organisation by utilising the

strategy in the management of the employees. Strategic management
facilitates the organisation to execute effective strategies to achieve the
objective of the organisation.
• Makes managers more aware of the winds of change, new

opportunities, and emerging threats in the external environment of the
organisation. In strategic management, an analysis of the environment
and ecosystem of the organisation is being made; in that case, it helps
the organisation to be aware of the change, of its opportunities, threats,
strengths, and weaknesses.
• Provides the management with reasons for analysing conflicting budget

requests for investment funds and new employees. Money as a
resource is a big challenge for the organisation; in this case, strategic
management helps in providing a concrete way to analyse budget and
demand as per the requirement and also to utilise all the available
resources efficiently and rationally.
• Helps to coordinate multiple strategic decisions about management

across the organisation. When an organisation launches many
strategies at the same time, Strategic management plays a keen role in
coordinating multiple strategic decisions and allocating tasks to the
employees to maintain efficiency.
• Creates an effective proactive management environment. It is important

for the organisation to be aware of any kind of change or disruption
which can harm progress and growth. Strategic management helps the
organisation to be ready and to formulate strategies which can assist in
managing unwanted change or crisis.
4.3 Dealing with Strategic Management in Various Situations

Strategic management plays an important role in the functioning of the
organisation. In an organisation, the operation of these features includes
production/operations, marketing, finance, and human resources, commonly
Creating Higher
Performance and Adaptive to Change
Competitive Advantage
Managing Economic
Dealing with Crisis
Globalisation
Strategic
Management
in Various
Situations Creating a Learning
Considering the
Organisation
Mission of the
Organisation
Creating a Learning
Organisation
Considering the
Mission of the
Organisation
referred to as the functional areas of management. Strategic management

plays very important roles in an organisation in various situations, as shown
in Figure 1:
Fig 1: Dealing with Strategic Management in Various Situations
• Strategic vision: The strategic manager points out the organisation in

a certain direction. The manager plans an orderly strategic course to
follow. He then conveys the idea of a strategic plan down the line to
the senior management and staff. This has a dynamic value. When
strategic managers can identify an encouraging picture of a
company’s strategic vision, they can stimulate a dedicated
organisational effort.
• Strategic leader and decision-maker: Strategic leaders use the

strategic management process to help the company achieve its vision
and mission. They are determined and committed to nurturing those
around them. They create customer value and profits for shareholders
and other stakeholders. Changing external circumstances and
priorities for new strategies requires new leadership strategies. It is
necessary to use the information better to make good decisions.
• Creating higher performance and competitive advantage: In the

business sector, high performance is often considered as profitable
for one company compared to other companies in the same type of
business or industry. The company's profits can be compared to the
profits it makes in business capital. The return on investment earned
by the company is defined as its profit rather than the capital invested
in the firm.
• Adaptive to change: Strategic management believes that

organisations should continue to monitor internal and external events,
trends, and disasters in order to make changes in a timely manner
where necessary. The scale and magnitude of changes affecting
organisations are growing exponentially. This requires strategic
managers who allow organisations to adapt to changes over time.
• Managing economic crisis: In an economic crisis, strategic

management plays a huge role. Strategic managers develop
promising new strategies during recessions, business cycles or
economic downturns. Strategic managers develop strategies that can
survive today and compete tomorrow.
• Globalisation: Strategic management is constantly evolving with

global trends and changes. Globalisation increases opportunities and
challenges. One of the challenges for firms is to understand the need
for culturally sensitive decisions when implementing strategic
management processes and to anticipate ever-changing difficulties in
their decisions and activities. Globalisation also affects the
construction, production, distribution and supply of goods and
services.
• Creating a learning organisation: Strategic management plays a

crucial role in helping an organisation to operate successfully in a
complex and dynamic environment. It helps the firms to become less
bureaucratic and more flexible to be competitive in constantly
changing environments. Strategic management helps the
organisation to become a learning organisation by catering, acquiring,
and transferring skills and knowledge. By adapting to change,
fostering creativity, and remaining competitive, strategic managers
create a learning organisation.
• Considering the overall mission of the organisation: The primary role

of strategic management is thinking through the overall mission of the
organisation. This will help in setting the objective and developing
strategies. Managers consider the roadmap to achieve the objective
of the organisation in which strategic management helps.
4.4 Strategic Management Implications and Challenges

Strategic implications are major consequences from the non-tackling impact
of forces and dynamics of change, which can impact a business from various
angles like political, legal, economic, financial, cultural, social, technological,
environmental, and ecological. Strategic planning affects the performance of
managers because it directly influences the ability of the strategic plan in
getting the commitment and support of the organisation's staff to release
orders or implementation results for the system. The strategic plan is
important for the development of any business organisation. It provides the
basis for activities in business, thus having a significant impact on the
performance of these functions and the entire organisation. Some of the most
important aspects of strategic planning include vision, purpose, policies, and
strategy used in the interest of the organisation. In addition, other elements in
the organisational planning process include strategic time, business-like
variations status, and available course of action and desired results. The aim
is to develop a strategic plan that aligns with the established business
environment in an accurate assessment of internal and external factors to
influence the functioning of the organisation.
The challenges and implications of strategic management are as shown

in Figure 2:
Impact of E-
Technology
Commerce
Competition Globalisation
Strategic
Management
Implications
and
Challenges Poor Communication Lack of Individual
Channel for Ownership and Joint
Communicating Strategy Accountability
Time Consumption
Lack of Involvement
Environmental
Analysis
Fig 2: Strategic Management Implications and Challenges.
• Impact of e-commerce:
a) Increasing usage of the internet is forcing organisations to transform

their operating ideas. Conversion of networking with customers,
suppliers, investors, and partners is taking place electronically.
b) New channels are transforming marketing and branding styles,

which is leading to the disintermediation of traditional distribution
channels.
c) The balance of power is shifting to the side of the customers. As

customers have numerous options on the internet, they have
choices to switch from one product to another. This is a challenge
for strategic management as strategies are also supposed to be
strategic and need to be revised as and when required.
• Technology: Technology is one of the big challenges for strategic

management. There is a continuous change in technology and to adapt
that it always comes up with two-fold challenges: to upgrade employees
about it and financial expenses. The challenge is not only to integrate
the technology into the strategy but also to do it faster than one’s
competitors.
• Competition: Competition is huge in every single product. Firms are

technology-driven, and traditional firms are struggling with using the
Internet to become innovative and efficient. In this case, it emerges as
a challenge for an organisation to survive and at the same time to create
a competitive edge. Many times, strategists fail to understand the
expectations of the customers and to predict the move of their
competitors. As the only challenge is not just to survive and provide the
best services to customers but also to analyse the competitors.
• Globalisation: As organisations aim to offer their product in the

international market or globally, it is a challenge to frame a strategy in a
way which can suit the international markets. The challenge of
globalisation for an organisation is the global product structure, being
competent in working across cultures, in different working environments
and across countries, which challenges strategists to design a strategy
to cope with all such challenges.
• Poor communication channels for communication strategy: Even

when the strategy is good in all possible ways if it is not communicated
with the employees in the desired framework, the strategy will be a
waste. The challenge of not only framing the strategy but also
communicating it to the employees is also extremely important. Many
times, this creates issues in the organisation, and the organisation fails
to perform after bad communication and poor understanding.
• Lack of individual ownership and joint accountability: Until and

unless the employees own the goals and the strategies to achieve those
goals, the organisation will not survive. This is a big challenge for the
organisation.
• Time consumption: The time consumption, from strategy formulation

to strategy implementation is quite high. This negatively impacts the
operational responsibilities of managers.
• Lack of involvement: Ehen in the organisation and strategy makers

are not involved in the implementation of a strategy, it minimises the
responsibility for strategic decisions.
• Environmental analysis: The success of strategic management

depends on the right analysis of the internal and external environments.
It is a challenge for the organisation to analyse the environment in detail
and to always be precise. If the environment analysis goes wrong due
to any reason, one might get the entire strategy to be formulated and
implemented wrong.
4.5 Summary
• Strategic management is the planned use of business resources to
achieve the company's goals and objectives. Strategic management
requires ongoing evaluation of procedures and processes within the
organisation and external factors that may affect the performance of the
company.
• Strategic management requires setting company goals, analysing
performance by competitors, reviewing the internal structure of the
organisation, reviewing current strategies, and ensuring that strategies
are implemented across the company.
• Strategic management helps managers choose the best strategy option.
After that, it can be internal or external growth of the organisation.
• Strategic management helps the organisation to select the best possible

strategy to achieve the organisational goal.
• There are certain challenges for strategic management as it is based on
few assumptions; if these assumptions remain good, then the strategy will
work, otherwise, it will be a failure.
• Many times, organisations fail to analyse the environment; for the success
of strategic management, the right analysis of the internal as well as
external environment is important.
• As employees become comfortable in their working zone, they may resist
change or the level of commitment of the employees may decrease, which
is a challenge for the managers.
4.6 Glossary
• Globalisation: The spread of technology, information, products and
services across national borders and cultures.
• Implication: Something that is implied or suggested which is to be
understood or inferred naturally.
• Leadership: A process of social influence, which can maximise the efforts

of others or followers for the growth of the organisation.
• Learning: The acquisition of skills and knowledge through experience,
study or being taught.
• Operations: Activities that happen within a company to keep it running
and working.
• Proactive approach: A behaviour which involves acting in advance for a
future situation, rather than reacting after something happens.
4.7 Case Study

Strategic Manoeuvres at Bharti Enterprises
The Indian telecom market is one of the fastest growing for mobile
telecommunication services. Every three months, a few million subscribers
are added to the burgeoning base of telephone service users. For instance,
more than 14 million new subscribers were added during January–March

2006, taking the total number of subscribers in India to over 90 million. That
number, in a country with a billion-plus population, is less than 10% of the
total population, indicating the huge market potential that would exist for quite
some time.
The mobile telecom industry in India is highly competitive with one of the
lowest average revenues per unit in the world, thus making it a strategic
challenge for the best of companies to operate successfully. Among the
market leaders in Bharti Airtel, a company belonging to the Bharati Enterprise
group. In 2007, it is the market leader, having a slight edge over the
government telecom service provider BSNL and the private service provider
Reliance. Bharti's Airtel brand claims to have nearly 32 million subscribers.
The businesses at Bharti Airtel have been structured into three individual
strategic business units (SBUs): mobile services, broadband, and telephone
services, and enterprise services.
Sunil Bharti Mittal, Chairman of the Bharti Group of Industries, is a first-

generation entrepreneur from the state of Punjab, who has demonstrated his
ability to think big and put ambitious plans into action. His strategic intent for
Bharti Airtel is “to create a globally admired telecommunication company. /;
The stated vision of Bharti Airtel is /; to be the most admired brand in India by
2010” that will be loved by more customers, targeted by top talent, and
benchmarked by more businesses. In March 2006, Manoj Kohli was named
the president of the company, to lead the Airtel management board which will
have the overall responsibility of driving the strategy and the operational
performance. Three joint presidents looking after three SBUs and four
functional directors of finance and business integration, IT and innovation,
marketing and communication, and networks make up the top executive
management at Bharti Airtel.
The group corporate office of Bharti Airtel will focus on the overall business
strategy, provide support to the Airtel management board, and conduct
periodic reviews and governance. Four of the functional roles at the
president's office, i.e., finance, HR, legal, and networks, will be functionally
reporting to the corporate office. The corporate strategy of Bharti Enterprises
seems to be strategic alliances with global companies for rapid growth in

sunrise industries through access to finance and established market brands.
For instance, Bharti Airtel has strategic alliances with Singtel and Vodafone
as investors. Ericsson and Nokia are mobile networks equipment partners.
Other equipment suppliers include Siemens, Nortel, and Corning. There is an
information technology alliance for group-wide information technology
requirements with IBM and for call center technology requirements with
Nortel. In late 2006, Bharti Enterprises announced its foray into retailing in
Alliance with Walmart, where the latter will provide backend logistic support
involving sourcing and Bharati will handle the frontend retail aspect the setting
up stores across India
Q. Hierarchy of Strategic Intent:
i. Vision > Mission > Goals > Objectives > Plans
ii. Mission > Vision > Goals > Objectives > Plans
iii. Plans > Vision > Mission > Goals > Objectives
iv. Goals > Vision > Mission > Objectives > Plans
a. i)
b. iii)
c. iv)
d. ii)
Answer (a)
• Kazmi, A. (2009). Strategic management and business policy. The

McGraw-Hill Companies.
• Lawrence, R. J. (2005). Business policy and strategic management. Frank

Bros. & Co. Ltd.
E-Reference
• Strategic management.
https://www.bizeducator.com/benefits-of-strategic-management-to-
organisation(viewed on 23 June 2021).
• Strategic management.
https://searchcio.techtarget.com/definition/strategic-management(viewed
on 23 June 2021).
• Strategic management,
https://searchcio.techtarget.com/definition/strategic-
management#:~:text=Strategic%20management%20is%20the%20ongoi
ng,assess%20their%20strategies%20for%20success(viewed on 21 June
2021).
Management
Topic 5 : Recent Trends in Strategic Management

Recent Trends in Strategic Management
Table of Contents
5.1 Introduction
Learning Objectives
5.2 Strategic Thinking
5.3 Organisational Culture and Its Significance
5.4 Organisational Development and Change
5.5 Change Management
5.6 Models of Leadership Styles and Its Role
5.7 Strategic Management in a New Globalised Economy
5.8 Summary
5.9 Glossary
5.10 Case Study
5.1 Introduction
This chapter deals with the recent trends in
STUDY NOTE
strategic management; it starts with the
Strategic thinking is the concept of strategic thinking. Strategic
ability to think on a big thinking is the ability of strategic thinkers to
and small scale, short or plan for the future. It is the process of
long term, into the past
preparing strategies and ideas that help in
and for the present.
coping with the changing environment and
also dealing with future challenges. In this topic, the concept of organisational
culture and its significance to cope with emerging challenges have also been
discussed.
Strategic thinking is simply an intentional and rational thought process that
focuses on the analysis of critical factors and variables that will influence the
long-term success of a business, a team, or an individual.
Strategic thinking includes careful and deliberate anticipation of threats and
vulnerabilities to guard against and opportunities to pursue. Ultimately
strategic thinking and analysis lead to a clear set of goals, plans, and new
ideas required to survive and thrive in a competitive, changing environment.
This sort of thinking must account for economic realities, market forces, and
available resources.
Organisational culture is the belief, assumptions, values, and ways of
interacting which contribute to the social and psychological environment of
the organisation. It is an important area which requires being mold as per the
need and change in the internal and external environment. Change is
constant, and to be competent and workable, an organisation needs to adapt
to that change. Organisational development is an effort which focuses on
improving an organisation's capability through strategy, structure, people,
rewards, and management processes. It assists the organisation to adapt to
change.
In this topic, the concept of change management will be discussed. Change
management denotes the significance of managing human emotions and the
concerns of the employees when any change against their will happens in the
organisation. This brings the role of a good leader which will make all these
changes possible in the organisation. Leadership is the capability of an
individual or group or team to influence and guide the followers and team
members of the organisation. In this topic, strategic management in a

globalised economy is also discussed.
Learning Objectives
After studying this chapter, you will be able to:
• Define the significance of strategic thinking in an organisation
• Explain organisational culture and its significance in the growth
• Discuss the concept of organisational development and change
• Define the various leadership styles
5.2 Strategic Thinking

Strategic thinking is defined as the individual ability to think logically,
reasonably, systematically, and opportunistically in terms of attaining
success. It influences the long-term success of an individual, a team or a
business.
Strategic thinking includes careful and deliberate anticipation of threats and
weaknesses to guard against and opportunities to follow. Ultimately, strategic
thinking and analysis lead to setting new goals, strategies and ideas needed
to survive and thrive in a competitive, changing environment. This type of
thinking should address the realities of the economy, market forces and
available resources.
Strategic thinking requires research, critical thinking, innovation, problem-
solving skills, communication and leadership skills, and decision-making. The
competitive environment can change quickly in any organisation. New trends
may emerge quickly and require the managers to use them to their advantage
or lag behind. By incorporating daily thoughts into work and life activities, an
organisation will be able to forecast, anticipate and take advantage of
opportunities.
In the course of the organisation's annual strategic planning, managers are
often involved in the collection, analysis and synthesis of internal and external
information and ideas related to the development of their strategic plans, and
the construction of a strategic narrative. The steering committee should
periodically review their strategy in order to ensure that the work needs to be
implemented, tested, and supported in the organisation.
Strategic thinking is an approach to issue identification and resolution. It is a

way of thinking which utilises creativity and intuition, with the outcome being
an integrated perspective of the organisation. It contributes to general, broad,
and overarching concepts that focus on the future direction of an enterprise
based on anticipated environmental conditions.
Strategic thinking is vital in creating a strategy which is a coherent, unifying,
and integrative framework for decisions, especially regarding business
direction and resource utilisation. Strategy is a key outcome of a relevant
strategic thinking process. Strategic thinking is the combination of innovation,
strategy planning and operational planning.
Strategic Thinking Competencies
A system Thinking in time

perspective
Strategic
Intent focused thinking Hypothesis driven
competencies
Intelligent
opportunism
Fig 1: Strategic Thinking Competencies

• A system perspective: It is the ability to understand the challenges and
implications of strategic actions.
• Intent-focused: It is the ability to focus, leverage and take advantage
of all the energies with total commitment.
• Thinking in time: It is the ability to hold past, present and future to take
better decisions.
• Hypothesis-driven: It is the ability to ensure that creative and critical

thinking is incorporated while making the strategy.
• Intelligent opportunism: It is the ability of being responsive to better
opportunities.
Significance of Strategic Thinking

• Recognise opportunities: Strategic thinking helps to recognise and
take advantage of opportunities. If the managers think only about the
problems the organisation faces, they get less time to explore
opportunities. With the help of strategic thinking, the advantage of
windfall opportunities can be taken, which can result in rapid business
growth.
• Problem-solving: Strategic thinking encourages a broader view of the
organisation's business model. The organisation may have persistent
operational problems which resist it to maximise success. So,
employees are required to think critically to find out the root causes of
the problems.
• Strategy formation: A business strategy should clearly elaborate on
the role of employees in achieving the objective of the organisation. A
strategy needs to be formulated by analysing precisely and critically the
internal and external environment of the organisation. Strategic thinking
is significant in the formation of a strategy.
• Being proactive: When the organisation simultaneously plans and
addresses the present business conditions; it can choose appropriate
actions for the growth of the company. For this, a properly framed
strategy is required, which pertains to the role of strategic thinking.
5.3 Organisational Culture And Its Significance

Organisational culture guides how the employees in the organisation act, feel
and think. It is the social and psychological environment of the organisation.
It depicts the unique personality of the organisation and expresses the core
values, ethics, behaviours, and beliefs of the organisation. A productive
organisational culture is key to developing the traits which are necessary for
the success of business. It is the collection of values, expectations and
practices which guide and inform the necessary actions of the employees. A
great culture amplifies positive traits which lead to improved performance,
whereas if the culture of the organisation is dysfunctional, it will inculcate
those qualities in the personnel which will hinder even the most successful
organisations.
The culture of the organisations is greatly influenced by national cultures,

traditions, economic trends, and the size of the organisation, products, and
international trade. Every company develops and maintains a culture which
is unique, which provides boundaries and guidelines for the behaviour of the
employees of the organisation.
Significance of Organisational Culture
Organisational culture is important for the growth of the individual employee
as well as for the organisation. A good organisational culture is needed for
the following reasons:
• Organisational culture creates boundaries and premises beyond which
employees are not permitted to go. Employees automatically observe
the organisational norms and standards of behaviour.
• An organisation is recognised by its culture, and an organisation's
culture provides stability because of which employees prefer to continue
with the organisation. Other stakeholders like customers, investors,
distributors, and suppliers also prefer to remain with the organisation.
• The social recognition of the organisational culture makes the
organisation to develop and grow in all possible dimensions. It also
helps in creating a positive corporate image of the organisation.
STUDYNOTE • It acts as a motivator

which guides and controls
Corporate culture refers to the beliefs the performance of the
and behaviours which determine how employees. Because of this,
the employees of the organisation
and management interact. employees become
enthusiastic and
encouraged to perform their respective jobs.
• A sound culture makes the attitude and behaviour of the employees
directed towards the achievement of the goals.
• The implicit rules developed in a positive and concrete organisational

culture make people work in the organisation development oriented.
These rules are much more effective as compared to explicit or written
rules and instructions.
5.4 Organisational Development and Change
Organisational Development
Organisational development is the process of change in the culture of an
organisation with the utilisation of behavioral science technology, research,
and theory. It is a long-term effort to improve the problem capabilities of the
organisation and the ability to cope with changes in its external environment.
It is the field of study which addresses change and its impact on the individual
working in the organisation and the organisation as a whole. Effective
organisational development assists the organisation and its employees in
coping with change. Managers develop strategies to introduce planned
changes like team building efforts, by which organisational functioning can be
improved.
The organisational development technique is used to cope up with the
change. Every organisation needs to compete and survive in the long run in
which organisational development plays a vital role.
Benefits of organisational development are as follows:
• It gives more emphasis on the human element, i.e., human resources
rather than any other physical resources of the organisation.
• It assists in the development of human resources by initiating change.

• It provides opportunities and challenges for employees to use their skills
optimally.
• It helps the organisation to achieve its effectiveness.
Organisational Change
The only constant thing in the universe is change, which is depicted in our
personal and professional lives. Organisational change is a modification or
transformation of the structure, processes or goods and services of the
industry. Organisational changes can be in its structure, operations, size of
the workforce, working hours, roles carried out by employees and internal or
external environment. The term change is an alteration of the work
environment, and may have the following features:
• When change occurs in any one part of the organisation, it can disturb
the established and old equilibrium of the organisation.
• Any change in the organisation can affect either some part of the
organisation or the whole organisation.
• Organisational change is a continuous process.
Government policies Technology
Causes of
organisational
Change in customers’
change
Competition tastes and preferences
Change in managerial
personnel
Fig 2: Causes of Organisational Change
Organisational change is the alternation which occurs in the total environment

of the business. The following are the causes of organisational change:
• Government policies: Many a time, government policies change
because of this an organisation has to bring change. For example, when
the government changed the existing tax policy to GST, every
organisation needed to adopt that.
• Competition: There is cut-throat competition in the market; in order to
sustain itself in a market, every organisation has to be competitive in
nature. To survive and to gain a competitive edge, and organisation has
to be innovative and adapt to change as per the customers’
expectations.
• Technology: As new innovations and new technologies are emerging
day by day in this world. This is one of the major sources of change, and
to survive in the changing environment, organisations need to adopt
them.
• Change in customers’ tastes and preferences: In the market, the
customer is the king. Organisations need to produce the goods as per
the expectations of the customer. If organisations do not change their
products and other aspects as per the expectations of the customer,

then they will not survive in the market.
• Change in managerial personnel: Employees join and leave the
organisation whenever a new manager brings his or her new ideas and
makes employees change according to that. This is how change occurs
in the organisation.
5.5 Change Management

Change management refers to the task of managing change. Management of
change refers to the task of making changes in a managed and planned or
systematic fashion. It is defined as the manners and methods in which an
organisation describes and implements change. This includes preparing the
employees for the change, supporting them and taking necessary steps for
the change. It is the application of a structured process and method to lead
the change for the employees to achieve the respective outcome.
Change management helps the organisation to adapt to the changes and thus
helps the organisation to survive in the changing environment. With the help
of change management, easy integration in the case of merger and
acquisition with less effort and time is possible. It leads to efficiency and
increases productivity, which leads to lower costs of operations.
Planning Implementation and

management
Development of Change
tracking and management Tracking and
monitoring process monitoring
instruments
Fig 3: Change Management Process

The management of the change process involves the following stages:
A. Planning: In this stage of planning, the organisation determines the
need to change, develops a change management team and creates a
plan of action.
B. Implementation and management: In this stage, the plan of change is

executed and the main task is implementing, managing and maintaining
the change process so that the change is applied smoothly without
hiccups.
C. Development of tracking and monitoring instruments: In this stage,
tracking and monitoring instruments are developed to assess the
success or failure of the change, so that if any reframing is required, the
necessary adjustments can be made.
D. Tracking and monitoring: In this last stage, continuous tracking and
monitoring are done until the organisation has applied and adopted the
change.
Change Management Strategies

• Directive strategy: This strategy involves the use of authority to apply
the change. This strategy is undertaken by the top management with
less involvement from other employees. The managers exercise their
power and authority to manage the change. The applicability of change
is very fast with the help of this strategy. However, it also comes with
some disadvantages. As it does not consider the views and opinions of
those employees who will be involved or be affected by the change, this
can cause resentment among human resources.
• Expert strategy: In this approach, the management considers the

change as a problem-solving process and takes the help of experts to
resolve it. The experts are involved in the proper management of the
change process. With the help and guidance of experts, the change can
be implemented effectively and quickly.
• Negotiation strategy: In this strategy, the management discusses the
various issues involved in the change with those people who are getting
affected by the change. The top management negotiates and bargains
with the employees in order to implement the change. The change,
implementation methods and possible methods agreed upon are
discussed with the stakeholders. The challenge here is that it takes a
long period of time to implement the changes, and it is difficult to predict
all the possible outcomes of the exercise.
• Educative strategy: This strategy is based on redefining and

reinterpreting individuals’ norms and values by motivating them to
support the changes being made. The focus is on the employees who
are involved in the change process. Many activities like education,
training and selection by consultants, specialists and experts should be
undertaken in order to effect change properly. This strategy takes a
longer time to implement the change.
• Participative strategy: In this strategy, all the employees of the

organisations are involved fully in the change process. Discussions and
meetings are held, and the viewpoints of all individuals are considered
before the implementation of change. The suggestions of experts and
consultants are also sought to facilitate the change process.
5.6 Models of Leadership Styles and Its Role

Leadership is the art of motivating and encouraging a group of people to act
towards the achievement of a common objective. There are various types of
leadership styles, and each one of the styles is relevant depending upon the
situation. The basic types of leadership styles are as follows.
• Autocratic style: In this leadership style, leaders take decisions without
consulting their team members, even in situations where the input is
important. It is appropriate in situations where the decisions are required
to be made quickly, when the team input is not required or when the
team’s agreement is not required for a successful outcome. Though in
most situations, this style could be demoralising and it can lead to
absenteeism and staff turnover.
Dictators like Kim Jong-un (having the position of Supreme Leader of
North Korea) is the perfect example of autocracy and how they try to
manipulate everything around them to remain in power and cement their
status.
• Democratic style: In this leadership style, the leaders make the final
decisions but they do include their team members in the decision-
making process. This encourages the creativity and motivation of the
employees and also boosts their job satisfaction and productivity.
• Laissez-faire style: In this type of leadership, the leaders give a lot of

freedom to their employees in how they do their work and fulfil their
responsibilities. Leaders provide support and resources to their
employees and advise if needed, otherwise, they do not get involved.
This autonomy for the employees can lead to high job satisfaction.
However, it could be damaging if the team members do not manage
their time well.
• Affiliative style: This approach is applicable in cases when the leaders

have a very good relationship with the employees and are close with
them. In this style, the leader pays complete attention and supports the
emotional needs of the team members. This style encourages harmony
and forms collaborative relationships with teams.
• Bureaucratic style: In this leadership style, everything is done in the
organisation according to the procedure and policy. It is effective when
human resources perform routine tasks again and again. This style of
leadership also helps in situations where serious safety risks are
involved such as working with machinery, toxic substances, etc.
However, this style is not useful in organisations which believe in
practising flexibility, creativity or innovation.
Role of Leadership in an Organisation
• Initiating action: A leader is a person who communicates the plans and
policies to the subordinates so that the work can be started. The leader
initiates and starts the action.
• Provides motivation: A leader motivates the employees by providing
them with financial and non-financial incentives to get the work done
efficiently from the employees.
• Providing guidance: A leader does not only supervise the employees
but also guides the team to perform. A leader instructs the subordinates
so that they can perform effectively.
• Creating confidence: A leader appreciates the effort of the employee
and explains to them their roles and guides them to achieve their goals.
• Building work environment: A leader maintains a personal
relationship with the employees and pays attention to their problems
and solves them. Leaders listen to their employees and create a positive
and efficient work environment.
• Induces changes: A leader persuades and inspires the employees to
accept any changes in the organisation without resistance and
discontentment of employees.
5.7 Strategic Management In A New Globalised Economy
Strategic management is the process of strategic decision-making which sets
the long-term roadmap and direction for the organisation. Competition in one
country is independent of competition in other countries. The global strategy
of the industry is the sum of strategies developed by subsidiaries which are
operating in different countries. Global strategic management is the process
of evaluating the internal and external environment by Multi-National
Companies, through which they set their long-term and short-term goals, and
then they implement a specific plan into action to achieve those objectives.
Strategic management in the global context is the planning process which
determines the strategies and goals in an international setting. How to expand
abroad or compete internationally is considered in this process.
It is an ongoing management planning process which aims at developing
strategies to allow an organisation to expand internationally. Strategic
management is required in the global context as it helps in managing
businesses internationally through strategic planning, organising, directing
and controlling.
Strategic management in the globalised set-up tries to create value by
transferring valuable skills and products to international markets where local
competitors lack those skills and products. Most of international firms have
generated value by transferring different products developed in their home
country to new overseas markets. Such organisations tend to centralise
product development in the home country and establish only local
manufacturing and marketing in the overseas market.
It comes with the advantage that it gives the ability to explore the opportunities
available in the foreign market. It also assists in economising global supplies.
The challenge with this is a lack of local responsiveness. Many a time,
organisations fail to realise location economies.
5.8 Summary
• Strategic thinking is the mental process which is applied by an individual
for setting or achieving the goal of the organisation.
• Organisation culture is the way to behave in the organisation properly.
This consists of shared beliefs and values which are established by
managers and then communicated and reinforced to shape the
employees’ perception, behaviour and understanding.
• Organisational development is an objective-based methodology which is
used to initiate and bring a change in an organisation. IT is a broad range
of behavioural science strategies which are used to diagnose the need for
change in organisations and to implement changes.
• Change management comprises the methods and manners by which an
organisation describes and implements change within its internal and
external processes. It helps, prepares, and supports employees, teams,
and organisations in making and adapting to organisational change.
• Leadership is the ability of an individual or a group to influence and guide
its followers or other members of the organisation to do certain activities
or pursue their actions.
5.9 Glossary
• Globalisation: Globalisation is the spread of technology, information,
products and services across national borders and cultures.
• Leadership: It is a process of social influence, which can maximise the
efforts of others or of followers for the growth of the organisation.
• Market forces: These are the economic factors that affect the price,
demand, and availability of a commodity. It also includes the actions of
buyers and sellers which cause the prices of goods and services to
change.
• Hypothesis: A hypothesis is an idea which is being suggested as the
possible explanation for something which is not yet found to be true or
correct.
• Stakeholder: A stakeholder is any party who is interested in a company
and can either affect or get affected by the business.
5.10 Case Study
The Globalisation of Philip Morris's KGFI

Outside of its core Western markets, Kraft General Foods International's
(KGFI) food products have a growing presence in one of the most dynamic
business environments in the world—the Asia-Pacific region. Its operations
are expanding rapidly, often aided by links with local manufacturers and
distributors.
Japan and Korea are important examples. In both countries, local alliances
can be crucial to market entry and success. Realising this fact in the early
1970s, General Foods established joint ventures in both Japan and Korea.
These joint ventures combined with KGFI stand-alone operations generate
more than 1 billion dollars in revenues. In the aggregate, their combined food
operations in Japan and Korea are larger than many Fortune 500 companies.
Where soluble coffee accounts for just over 25% of the coffee consumed in
US homes, it fills more than 70% of the cups consumed in the homes of
convenience-minded Japan. Additionally, Japan is the origin of a unique form
of packaged liquid coffee and a unique distribution channel of vending
machines. Japanese consumers have purchased packaged liquid coffee for
years, and it amounts to a $5 billion category. Some 2 million vending
machines dispense 9 billion cans of liquid coffee annually—an average of 75
cans per person.
Japan offers a culturally unique distribution channel for coffee products—the
gift-set market. Many Japanese exchanges specially packaged food or
beverage assortments at least twice a year to commemorate holidays as well
as special personal or business occasions. The gift-set business has helped
Maxim products reinforce their quality image; it will also be a launching pad
and support vehicle for Carte Noire coffee.
Outside the Ajinomoto General Foods joint venture, KGFI is developing a
free-standing food business under the name of Kraft Japan. It is building a
cheese business with imported Philadelphia cream cheese, the leading
cream cheese in the Tokyo Metropolitan market, as well as locally
manufactured and licensed Kraft Milk Farm Cheese slices. This cheese
market is expected to grow by approximately 5% per year. This is a rapid
growth rate for a large food category. In addition to cheese, KGFI also imports
Oscar Mayer prepared meats and Jacobs Suchard chocolates.
KGFI's joint venture in Korea, Dong Suh. Foods Corporation is one of the top
10 food companies in the country. Dough Suh manufactures coffee and
cereals and has its own distribution network. One of Doug Suh's other
businesses in Korea, other than cereals, also holds a strong number two
position, with a 42% category share.
Korea's $400 million coffee market is the fastest-growing major coffee market
in the world, expanding at an average annual rate of 14%. Growing with the
market, Maxim, and Maxwell soluble coffee in both traditional “agglomerate”
and freeze-dried forms account for more than 70% of the country's soluble
coffee sales. The strength of these brands also brings the company to a
strong number one position in the coffee mix, a mixture of soluble coffee,
creamer, and sugar. In addition, its Frima brand leads the market in the non-
dairy creamer segment.
Beyond Japan and Korea, KGFI is targeting many other countries for
geographic expansion. In Indonesia, for instance, KGFI has established a
rapidly growing cheese business through a licence and introduced other KGFI
products. In Taiwan, the joint venture company, Premier Foods Corporation,
holds a 34% share of the soluble coffee market and is aggressively
developing Kraft Cheese and Jacobs Suchard import businesses. KGFI
Philippines, a wholly owned subsidiary, has a leading position in the cheese
and powdered soft drink market in the country. In the People's Republic of
China, the company produces and markets Maxwell House coffee and Tang
powdered soft drinks through two successful and rapidly growing joint
ventures.
Q. Match List-I (Leadership Type) with List-II (Main Idea/Model) and select
the correct answer using the code given below the lists:
List-I (Leadership Type) List-II (Main idea/Model)
A. Participative 1. Vroom and Yetton's Normative Model
B. Contingency 2. The Managerial Grid
C. Behavioural 3. Likert's Leadership Style
D. Situational 4. Fiedler's Least Preferred Co-worker (LPC)
Theory
Ans: A-3, B-4, C-2, D-1
• Cummings, T. G., & Worley, C. G. (2000). Organisation development and

change (7th ed.). South-Western Educational Publishing.
• Pearce, J., Robinson, R., & Mital, A. (2012). Strategic management (12th
ed.). Tata McGraw-Hill.
E-Reference
• Strategic management, viewed on 28 June 2021,
https://searchcio.techtarget.com/definition/strategic-
management#:~:text=Strategic%20management%20is%20the%20ongoi
ng,assess%20their%20strategies%20for%20success
• Change management, viewed on 27 June 2021,
https://blog.smarp.com/change-management-definition-best-practices-
examples#definition-of-change-management
• Globalisation on strategic management, on 26 June 2021,
https://sites.google.com/site/tribhuvansite/sm/impact-of-globalisation
Segment 2 : Strategic Analysis, Scanning and Strategic
Management Model (SMM)
Topic 1 : Environmental Analysis and Scanning

Topic 2 : Strategic Management Model
Strategic Analysis, Scanning and
Strategic Management Model (SMM)
Table of Contents
1.1 Introduction
Learning Objectives
1.2 Strategy Analysis
1.3 Importance of Strategic Analysis
1.4 Environment
Concept of Environment
Nature of Environment
Factors Affecting Environmental Appraisal
1.5 Environmental Scanning
Environmental Scanning Concept
Approaches to Environmental Scanning
Techniques of Environmental Scanning
1.6 Organisational Position
1.7 Strategic Advantage Profile
1.8 Strategic Management Model (SMM)
1.9 Summary
1.10 Glossary
1.1 Introduction
Strategic analysis is a process conducted by businesses to define future
actions to meet the needs of the business. By conducting strategic analysis,
business analysts study the business's environment in which it works and
define the needs, and recommend specific changes required for business
growth.
While defining the needs of the business, the business analyst works on
strategic analysis so that the persons involved in the business have better
information when deciding to address this need. The strategic analysis
addresses the changes required to meet business needs and provides any
new information required to make those strategic adjustments.
The method chosen to conduct strategic analysis depends on the changes
happening in the business environment. A business analyst can develop a
clear strategy in advance if they are well-defined and produce unpredictable
results. If the change is unclear and has unintended consequences, the
strategy will need to be developed by focusing on risks, testing, and trying to
reach a course that will provide the best possible results.
• Describe the Strategic Management Model

• Explain Environmental Assessment and Scanning Techniques
• Explain the analysis of strategies and their significance
1.2 Strategy Analysis

Strategic analysis refers to the process of doing research in a company and
its work environment to develop a strategy. Strategic Management Model The
definition of strategic analysis may differ from an academic or business
perspective. Strategic analysis can be defined as the process of researching
the business environment of an organisation in which the business is
conducted. Strategic analysis is required to carry out strategic planning and
organisational efficiency. The company's goals or objectives can be achieved
efficiently with the right strategic planning. To succeed in this competitive
world, business organisations occasionally conduct strategic analysis to
determine which components need improvement and which areas are
working well and try to keep track of external factors. For a business to be
successful, it is important to identify how to bring about a positive change,
better manage the value chain, and identify the business's strengths and
weaknesses.
Strategic analysis serves as an analytical tool for organisations with a clear
set of goals and activities. All highly successful organisations have years of
experience in strategic analysis and planning at various stages of operations.
Strategic analysis is a long-term investment that includes systematic and
continuous planning. Organisations should also conduct competitive analysis
and look at external factors when conducting a strategic analysis. This will
help them stay afloat in the market and gain a competitive advantage. One of
the most important factors in the strategic analysis is anticipating future
events and drawing up replacement strategies if a plan does not work as
expected. Such strategic decisions are part of an internal analysis and give
any organisation a clear picture.
In other words, strategic analysis is the process of researching the
environment of the organisation in which it operates. Strategic analysis uses
a less complex approach to achieve a goal. This process includes some
common features, namely:
• Evaluation and identification of information relevant to the business plan.
• A description of the company's external and internal environment.
• Implementation of other popular analytical methods such as ETOP
analysis and PEST analysis.
Organisations can obtain a real-time analysis of strategies designed to allow

managers to make informed decisions to manage their business operations
better. It assists managers in strengthening and gaining a competitive position
while providing alternative strategies.
1.3 Importance of Strategic Analysis

Strategic analysis is essential for a company to achieve its vision and mission.
It is important for every successful organisation. The strategic analysis
provides a guideline to the organisation at various stages. Strategic analysis
is a long-term process that involves continuous and systematic planning and
investment of time, money, and resources.
It is important for organisations to be aware of their competitors and thus be
able to define a strategy that will help them become an unbeatable player in
that market. One of the most important tasks in strategic analysis is predicting
future events and finding intervention strategies whenever required.
1.4 Environment
The business environment can be defined as the total surroundings with direct
or indirect control over the business functions. It includes customers,
competitors, suppliers, government, and the social, political, legal, and
technological elements etc.
1.4.1 Concept of Environment
Developing organisational mission and objectives include environmental

analysis and measurement. Managers must analyse the internal and external
environment to decide which policies and activities they can adopt and the
strategic options to choose. Therefore, in mutating a strategy, the acting
general manager makes decisions based on environmental factors.
Several factors affect the working of an organisation. The forces, conditions,

situations, events, and relationships over which the organisation has control
are collectively called the environment of the organisation.
In general, the environment can be divided into three sections:
• External Environment
• Operating Environment
• Internal Environment
External Environment: External environment refers to the outside of the

organisation. This environment has a direct impact on the business; there are
two types of external environment: micro and macro.
Microenvironment: It refers to the environment, including all the components

of an organisation which have a direct impact. These components, such as
Customers, Competitors, Employees, Suppliers, Shareholders, Media, and
social media, directly control the organisation's business performance. Small
environmental factors are more closely linked to the company than larger
factors.
Macro environment: The macro environment is also known as a natural and

remote environment. Macro features are usually less manageable than
smaller natural features. When big things are out of control, a company's
success depends on its adaptability to the environment. The macro-
environment, or the general environment (remote area), consists of the
country's economic, social, political, and legal systems.
• Operating Environment: It includes competitors, markets, customers,

regulatory bodies, and stakeholders. It refers to the particular external
stakeholders with whom the business has taken place.
• Internal environment: Internal environment refers to the
components/factors within the organisation and has a direct impact on
the business. These internal factors include the conditions, situations,
events, and relationships of the organisation. The internal environment
may alter or modify such factors as its staff, employees, managers,
unions, board directors, physical properties, and organisational
procedures.
1.4.2 Nature of Environment
Strategic management sets the business's overall direction, ensuring it

survives in the face of external environmental challenges. A business
environment includes all internal and external factors that may affect the
whole organisation or a part of it. External conditions have a significant impact
on the performance of small firms.
The business environment is constantly changing in different ways.

Therefore, the management must be aware of and respond to these changes.
Note that the nature of the environment is both complex and dynamic.
Complexity: The environment contains a number of elements and forces that

interact with each other. The larger the number of environmental changes,
the higher the degree of complexity. The range of environmental forces and
their heterogeneity has increased since globalisation.
Dynamism: The environment is dynamic as it changes continuously. The rate

of environmental change is fast and unpredictable. When the rate of change
is high and variable, the environment becomes volatile.
1.4.3 Factors Affecting Environmental Appraisal
Environmental appraisal is required to assess business opportunities and

risks. Environment appraisal is analysing all aspects of business areas. There
are many factors in the environment, but only some of them are relevant to
the organisation. Only those environmental factors that contribute to the
organisation's performance are considered here. Selection of environmental
factors also depends on the following factors:
• Organisation - related
• Strategist - related
• Environment-related
• Organisation-Related: The type, age, size, competitiveness,
complexity, etc., of an organisation contributes to environmental
analysis.
For example, new, large, and weak organisations need more data than
older, smaller, and more powerful organisations. Similarly,
organisations that work with multiple products or products that are not
related and have geographically dispersed functions need more
information than one product organisation.
• Strategist-Related: The strategists' experience and background affect
the strategic analysis outcomes. Therefore, their age, education,
knowledge, motivation level, attitudes, sense of responsibility and ability
to cope with the pressures of time have a profound impact on
environmental analysis. For example, forward looking and long- term
oriented managers want more information than those who believe in the
current status and in the short term.
• Environment-Related: It depends on how an organisation scans its
environment. Complete scanning is required when the environment is
complex, flexible, hostile, and diverse.
1.5 Environmental Scanning
Environmental scanning is the process of collecting information about events

and their relationships within an organisation and outside the organisation.
1.5.1 Environmental Scanning Concept
Environmental scanning, environmental analysis, and external analysis are

terms used for the process by which an organisation looks at the various
environmental forces to identify potential opportunities and threats to the
business. The main features of an environmental scan are the following:
• Holistic
• Exploratory
• Continuous
• Holistic: Environmental analysis is a complete process because it takes

a complete view rather than just studying the natural forces. The
analysis is divided into different parts for simplification, but at the end,
the analysis of these individual parts is combined to give a complete
view of the environment.
• Exploratory: Environmental scanning is an examination or heuristic

process. It tries to estimate the future on the basis of past and current
trends. The possible future alternatives are determined on the basis of
various assumptions. These future alternatives are estimated to reach
more logical conclusions.
• Continuous: Environmental analysis is a continuous process and not
an occasional exercise. Continuous environmental scanning is required
to identify trends. The most appropriate styles are analysed in detail to
understand their impact on the organisation.
Environmental analysis plays an important role in strategic planning. In the

absence of environmental analysis, no sound strategy can be developed. An
organisation that analyses its own environment is better prepared than one
that does not.
For example, companies like ITC, TCS, Reliance Industries Limited and
others that have prioritised environmental scanning have achieved higher
growth rates than others.
Example-
The PepsiCo company plans to shift its investment from producing beverages
to producing healthier and functional foods using environmental scanning and
market research knowledge.
They plan to collaborate with various food companies to produce healthy food
and beverages by following the demand of the time as more and more people
prefer healthy drinks and foods, not cold drinks, and fast food.
1.5.2 Approaches to Environmental Scanning
The following methods can be suggested to scan the environment:
• Systematic Method
• Ad Hoc Method
• Processed–form Method
• Systematic Method: Under this method, a more systematic process is

used to collect and interpret information about the environment. It takes
into account information related to the environment, markets,
customers, government policies and regulations, and other matters
affecting the organisation and the industry collected continuously.
Organisations that are more sensitive to the environment use this
approach. Data on the expected changes in the environment is collected
systematically.
• Ad Hoc Method: Under this approach, specialised research is
conducted into specific environmental problems. For example, an
organisation planning to do a special project could conduct a survey to
develop new strategies. The impact of unexpected environmental
changes can also be investigated. Operational organisations that are
less sensitive to the environment often use informal methods to scan
the environment.
Processed–Form Method: The data used from various internal and external
sources are used under this method. For example, data contained in
government documents (People Report, etc.) may be used. The approach
adopted by a particular organisation depends on the nature of the
environment (stable or strong), environmental concern (low or high), the
importance of the environment (the environment that is directly or indirectly
suitable), etc.
1.5.3 Techniques of Environmental Scanning
Many techniques are used in environmental scanning. Some of these are

described below:
• Environmental Threat and Opportunity (ETOP) Profile

• P.E.S.T. Analysis
• Environmental Threat and Opportunity (ETOP) Profile: ETOP is a

very useful way to analyse the results of an environmental analysis. The
ETOP, or environmental impact matrix, is a summary of environmental
factors and their impact on the organisation.
The preparation of ETOP includes the following steps:
1. Environment Selection: Firstly, the environment for each factor is

identified. Each major factor is divided into economic policies,
economic indicators, market environment, etc.
2. Assessment of Importance: The value of each selected item/factor
is assessed in terms of quality (high, medium, low) or quantity (3,
2,1).
3. Impact Measurement: The positive or negative impact of each
factor is measured as opportunities and threats, respectively
4. Combination of Importance and Impact: Each item's importance
and impact clearly reflect the situation. ETOP can be configured in
two ways: matrix form or descriptive form. In the form of a matrix,
the value and impact of each natural object are expressed in
quantity. In descriptive forms, the effect is shown to be positive or
negative. ETOP provides a clear picture of where the organisation
stands in relation to the environment. It shows the opportunities and
threats an organisation can face. Such insight is instrumental in
developing appropriate strategies that will help the organisation take
advantage of those opportunities and address the threats in its area.
• P.E.S.T. Analysis: P.E.S.T. represents the political, economic, social,

and technological environment. These natural forces create
opportunities and threats for the organisation. Some strategists
reorganise these dynamics, such as social, technical, economic, and
political, and use the S.T.E.P. analysis. Each of these categories
contains numerous items
The most common items are as follows:
• Political Analysis
o Political system and stability
o Business legal framework
o Political parties and their views
o Risk of military attacks
o International relations
o Law enforcement and red tape
o Political corruption
• Economic Analysis
o Economic plan
o Economic policies
o Economic indicators
o Economic markets
o Financial markets
o Industrial infrastructure
• Social Analysis
o Demographics
o Classroom structure
o Family plan
o Levels of education
o Cultures, customs, and interests
o Business spirit
• Technical Analysis
o Level of technological progress
o Technology spread rate
o External technology transfer
o Impact of Technology on Costs, quality, and value chain
1.6 Organisational Position

People recognise, interpret, and interact with their work environment in a
variety of ways, usually in relation to their organisational positions.
Designations, positions, roles, backgrounds, and behaviours of employees
affect their core functions and relationship with customers (Hasenfeld, 1983).
However, just as people from organisations create employees in terms of
assigning positions, roles, and responsibilities to enable them to engage with
fellow colleagues and customers.
1.7 Strategic Advantage Profile
The Strategic Advantage Profile (SAP) is a summary statement that offers an

overview of the upside and downside of important areas that may affect the
organisation's future performance. It is a tool for developing a systematic
evaluation of the important strategic elements of the organisation and its
environment. Formulating such a profile requires identifying and analysing

factors in functional areas such as finance, accounting, human resources,
research, and development, among others. Data from sensitive areas is
another important consideration here.
Every company has its distinct strong and weak areas. For example, large
firms are financially strong but tend to be slower compared to smaller firms
and are often less responsive to changes. No company is equally strong in all
its activities. A strategist should identify a company's advantages over its
competitors. When a firm is strong in the market, it has the advantage to
launch new products or services and increase its market share and revenues
significantly.
The following are some of the key areas of the organisation that get an
advantage over strategic management.
Marketing and Distribution
The following are some of the marketing areas of the organisation that get an
advantage in strategic management.
• Competitive structure and market share

• Effective and efficient market research program.
• Quality products and services.
• Copyright protection (or equivalent legal protection of services)
• Positive feelings about the firm and its products and services, on the
part of the end
• buyer.
Research and Development
The following are some of the R & D areas of the organisation that get an
advantage in strategic management.
• Basic research capacity is developed within the firm.

• Process design and development
• Advanced packaging development
• Well-equipped laboratories and testing facilities
• Trained and experienced professionals and scientists
Production or Operation
The following are some of an organisation's Production or Operation areas

that get an advantage in strategic management.
• Product design and development

• Product quality is maintained
• Removal of old plant and machine
Finance or Accounting
The following are some of an organisation's Finance or Accounting areas that

get an advantage in strategic management.
• Tax calculation
• Costing and Financing
• Effective Budget preparation and utilisation
Human Resource Planning and Corporate Planning
The following are some of an organisation's Human Resource and Corporate

Planning areas that get an advantage in strategic management.
• Motivation of the employees

• Maintaining employee, employer relationship
• Retention of employees
• Effective delegation of authority and responsibility.
1.8 Strategic Management Model (SMM)
The strategic management model identifies strategic ideas and the elements
needed to develop a strategy that enables the organisation to achieve its
goals. Historically, many frameworks and advanced models have proposed
various common methods of strategic decision-making. However, a review of
the major strategic management models shows that they all include the
following:
• Perform environmental analysis.

• Establish organisational direction.
• Develop organisational strategies.

• Implement the organisational strategies.
• Evaluate and control strategies.
The above five processes can be comprised of three heads, namely:
• strategic planning
• strategic implementation
• strategic evaluation and control
Figure 1 shows the components and elements of a strategic management

model. Building a strategic management model is important as it provides a
basic framework for understanding how strategic management can be
implemented in a robust way. In addition, the strategic management model
gives managers and strategists a greater understanding of the repetitive
approach to effective strategic management in the organisational structure.
Fig 1: Strategic Management Model
Source: https://ceopedia.org
Figure 1 shows that the strategic management model begins with the
formation of the vision and mission of the organisation. The organisation's
vision and mission will then be translated into the organisation's goals. These
indicate the direction and areas of concern to be attained by the organisation.
Once these have been identified, the role of the manager or strategist is to
analyse the organisation. This includes three major types of analysis, namely,
external environmental analysis, internal organisational analysis, and then
industry analysis. Each of these analyses will provide information on

opportunities and threats, strengths, and weaknesses, and help the
organisation position itself at the level of other competing organisations in the
industry.
Therefore, the results of this analysis will help managers and strategists align
with the niche areas to focus on and identify the organisation's unique
strengths. The analysis will help determine the steps the organisation should
take to maintain its competitiveness in the industry and, above all, select
appropriate strategies.
To implement the strategy, the organisation must ensure appropriate

resources are available. The goals of the organisation must be defined till the
lowest level of the organisation and translated into objectives, which are
clearer and more specific than the goals set initially by the organisation.
Organisational policies need to be developed and implemented. Thereafter,
specific plans or action plans should be put in place. The implementation of a
strategy needs the required key elements to be in place. This includes
ensuring that the organisation has the right structure, people and leadership
needed to manage the implementation of the chosen strategy.
Finally, implementation also requires managers or strategists to coordinate

and integrate the various functional areas in the organisation. This way, the
multi-skilled management systems and processes stay aligned with the
organisation's goals. The final part of the strategic management model
consists of strategic evaluation and control. Strategists must ensure that the
strategy used is properly reviewed and updated at fixed intervals. Say, half-
yearly or quarterly. The expected performance is measured based on the
industry or the business's standards to attain the objectives of the
organisation. Comparisons should be made with competitors and others.
Control measures should be put in place so that organisations can ensure
that the desired targets can be achieved in the next phase of implementation
as well.
1.9 Summary

• Strategic analysis refers to the process of doing research in a company
of its work environment to develop a strategy.
• Strategic analysis is important for a company to achieve its goals and
purpose.
• A business environment includes all external factors that may affect the
whole organisation or part of it.
• Systematic, ad hoc, and processed–form methods are various
approaches adopted for environmental scanning.
• Environmental analysis is a complete process because it requires a more
holistic view rather than those of natural forces.
• Environmental Threat and Opportunity (ETOP) Profile and P.E.S.T.
analysis are popular techniques used for environmental scanning.
• Strategic Advantage Profile (SAP) is a summary statement which
provides an overview of the pros and cons of key areas that may affect a
company's future performance.
• The strategic management model identifies strategic ideas and the
elements needed
• to develop a strategy that enables the organisation to achieve its goal.
• The strategic management model consists of three components, namely,
strategic planning, strategic implementation, and strategic evaluation and
control.
1.10 Glossary
• Economic Analysis: It refers to the analysis of economic plans,
economic policies, economic indicators, economic markets, financial
markets, and industrial infrastructure.
• ETOP: Environmental Threat and Opportunity (ETOP) is a technique to
analyse the results of an environmental analysis. The ETOP or
environmental impact matrix is a summary of environmental factors and
their impact on the organisation.
• Macro Environment: The macro environment is also known as a natural

and remote environment. Macro features are usually less manageable
than smaller natural features. A company's success depends on its
adaptability to the changes in its environment.
• Microenvironment: The microenvironment is the factor that directly
affects a company's operations and is more closely linked to the company
than bigger factors.
• P.E.S.T. Analysis: P.E.S.T. represents the political, economic, social,

and technological environment. These natural forces create opportunities
and threats to an organisation.
• Political Analysis: It is the analysis of the political system and stability,
business legal framework, political parties and their views, risk of military
attacks, international relations, law enforcement and red tape, and
political corruption.
• Social Analysis: It is the analysis of demographics, classroom structure,

family plan, levels of education, cultures, customs, and business spirit.
• Strategic Advantage Profile: Strategic Advantage Profile (SAP) is a
summary statement which provides an overview of the pros and cons of
key areas that may affect a company's future performance, and the five
functional areas are Research and Development, and Engineering,
Production or Operation, Finance or Accounting, Human Resource
Planning and Corporate Planning.
• Strategic Analysis: It can be defined as the process of researching the
business environment of an organisation in which business is conducted.
• Strategic Management Model: Identifies the strategic ideas and the
elements needed to develop a strategy that enables an organisation to
achieve its goals.
• Technical Analysis: It is the analysis of the levels of technological

progress, technology spread rate, external technology transfer, and the
impact of technology on costs, quality, and value chain.

Publishing, Virginia.
DOI: https://doi.org/10.21061/strategicmanagement.
Segment 3 : Strategy Formulation, Implementation,
Evaluation, and Control
Topic 1 : Strategy Formulation
Topic 2 : Strategy Implementation
Strategy Formulation and Implementation
Table of Contents
1.1 Introduction
Learning Objectives
1.2 Strategy Formulation
Strategic Management Process
Need of Strategy Formulation
1.3 Process in Strategy Formulation
1.4 Strategy Implementation and Its Stages
McKinsey's 7S Framework
1.5 Reasons for Strategy Failure and Methods to Overcome
Overcoming Limitations
1.6 Strategy Leadership and Strategy Implementations
Leadership Implementation
Characteristics of a Leader
1.7 Strategic Business Units (SBU's)
1.8 Summary
1.9 Glossary
1.10 Case Study
1.1 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.
Organisations follow this process to formulate and implement strategies,
plans and policies to counter competitors and external threats or 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 must be monitored and provided with feedback to
make changes -- if any deviation occurs in the strategy or the previous phase.
Defining
Business
Mission,
Purpose and
Objectives
Strategic
Strategic
Evaluation
Formulation
and Control
Strategic
Implementat
ion
Fig 1: Strategic Management Process
• Explain the concept of the strategic formulation
• Describe the personal characteristics of a leader that supports the
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
1.2 Strategy Formulation
Strategy Formulation is that phase of the strategic management process

where the organisation sets long-term goals to help the firm avail
opportunities identified in the external business environment by using its
internal capabilities.
1.2.1 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 to society. Its own business ethics and values
should be communicated through its goals and objectives. The end
result is the establishment of a 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 organisation's strengths and
weaknesses must 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 choices are required for evolving alternate
strategies out of the many possible options and choose the most
appropriate strategy or strategies -- in light of environmental
opportunities, 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.
1.2.2 Need Of Strategy Formulation
1) To achieve organisational goals effectively and efficiently

2) To become more competitive
3) To maximise profits
4) To make a large-scale market share
1.3 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
the 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 the internal and
external environments of an organisation should be analysed.
Assessment of the external business environment includes political,
economic, social, technological, ecological, legal, and regulatory, and
global factors etc. Internal assessment includes identifying the strengths
and weaknesses of an organisation. It includes identifying the
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 done by visualising the future state and

analysing the 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. A gap can be identified by analysing the difference
between the projected and desired performance.
When an identified gap is not wide, the organisation has the stability strategy
as an option. If the gap is large, expansion strategies are more likely to be
followed due to expected environmental opportunities. However,
retrenchment strategies may be more suitable if the gap is large due to past
poor performance. 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.
Startegic
Establishing Environment Organisation Setting
Alternatives
Objectives al Scanning al Appraisal Targets
and Choices
Fig 2: Steps of Strategic Formulation
1.4 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. To successfully implement strategies, the organisation must
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's structure. It also requires the 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.
1.4.1 McKinsey's 7S Framework:
A framework of 7S, given by McKinsey, shows the levers or aspects which

are important for implementing a strategy. The 7S 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 organisation at a point in time are not fixed or pre-
decided. It depends upon the strategist to identify these seven factors to

successfully implement a strategy.
The 7S of the McKinsey model are:

• Strategy: A set of decisions and plans aimed at gaining a supportable
competitive advantage.
• Structure: The organisation structure of the company is 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
1.5 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 environmental changes, including markets and
competitors, is 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 problems -- no time for
studying information.
E. Resistance to change and lack of cooperation.
A strategy may be well conceived and formulated yet poorly implemented.

The problems in implementation may arise because of a 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 decision-making areas may unexpectedly be ignored later.
One of the major pitfalls of strategic management is a lack of appreciation by

the management. If a strategy succeeds, the planning and the executing
teams may not get adequate appreciation or reward from the top
management.
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.
1.5.1 Overcoming Limitations:
• Choose Carefully: Organisations should choose to apply strategies

judiciously and have an organised, logical, and balanced approach.
• Be Prepared: Managers 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 alternatives. If awareness
is created for choosing a particular strategy, then there may be greater
support and commitment on their part. The uncertainty associated with
change is eliminated in the process.
• Identify Gaps: Managers involved in strategic management should
identify gaps or weaknesses in their organisation 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 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 the implementation of change.
• 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 organisation.
1.6 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
organisation to move in that direction.
B. Power and Policies: Interplay of power and politics has an important
role in successfully implementing 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 into action.
1.6.1 Leadership Implementation:
Strategic leadership is the ability to anticipate, envision, and empower others

to create strategic change. Strategic leadership is the process of providing
the direction and inspiration necessary to create or sustain an organisation.
Strategic leadership's position in the strategy's success 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 focuses on a specific theme of
leadership. These nine areas are as follows:
1. Personality: Traits and qualities

2. Influence: Relationship between individuals
3. Behaviour: Actions of leaders
4. Situation: A situation in which the leader is faced with problems and
issues.
5. Contingency: Dependence on behaviour, personality influence exerted
by the 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.
1.6.2 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 organisation 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. The
attitude of their leader greatly influences employees.
(3) Be Well-informed: A leader should be clearly aware of the
environment, internally and externally -- about the market scenario
nationally and globally.
(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 the execution and
implementation of the strategies should have the power and authority to
take decisions.
(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 subordinates
become 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 organisation affect
the implementation of a strategy. A major task of leadership is to
inculcate personal values and business ethics in the organisation.
Values and ethics shape the corporate culture and influence a
business's politics, power, and social responsibility.
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 Entrepreneurial and expansionist.
risky decisions
(2) Technocracy: Use of planning, Expansion and growth strategy.
qualified personnel, and
techniques.
(3) Organicity: Extent of Expansion and growth strategy.
organisational 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 the implementation of strategies.
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
1.7 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
generalship. As the general directs the military force, the 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, a strategy is formulated and

implemented at three different levels to have a strategic fit between the
organisation and the environment. 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
conceptualisation, 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 are similar. The business strategy
sets performance goals, evaluates competitors' actions and specifies actions
the company must take to maintain and improve its competitive advantages.
Typical strategies are to become a low-price leader, achieve differentiation in
quality or other desirable features, or focus on promotions. Business-level
strategies are invariably action-oriented.
When a company performs different businesses or has a portfolio of products,

the company organises itself in the form of strategic business units (SBUs).
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
1.8 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 maximise 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.
1.9 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
organisation's existence.
• Vision: Vision is the statement prepared by every business to plan its
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 organisation 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.
1.10 Case Study

Strategic Management of DELL
Dell Technologies was founded by Michael Dell in 1984. 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 it provided a very
specialised 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 the Direct Model Approach to
provide customisation to customers to get rid of distribution channels and
retailers. They provided customers with payment options and 24/7 tech
support. They also provided a 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, which is their
biggest target market. 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 innovative products.
However, Dell has an advantage due to its direct selling strategy. The benefits
it is giving to its employees include medical benefits, retirement plans, saving
plans & specific discounts on computers & other products.
Discussion Questions:
1. Identify strengths, weaknesses, opportunities, and threats for Dell.

2. What type of SBUs can be justifiable for Dell computers?
The advantages derived by implementing Strategic management principles

are broadly classified as ___ and ___ benefits.
Ans: Financial & non-financial

• 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://open.umn.edu/opentextbooks/textbooks/871
https://open.umn.edu/opentextbooks/textbooks/mastering-strategic-
management
Segment 3 : Strategy Formulation, Implementation,
Evaluation, and Control
Topic 3 : Strategy Evaluation
Topic 4 : Strategy Control
Strategy Evaluation and Control
Table of Contents
2.1 Introduction
Learning Objectives
2.2 Concept of Strategy Evaluation
Significance of Strategy Evaluation
Need for Strategy Evaluation
Basic Requirements of Strategy Evaluation
2.3 Process of Strategy Evaluation
Techniques of Strategy Evaluation
2.4 Strategy Control
Types of Strategic Control
Process of Strategic Control
2.5 Operational Control
Difference between Strategic Control and Operational Control
2.6 Concept of Synergy
2.7 Key Stakeholders Expectations
2.8 Summary
2.9 Glossary
2.10 Case Study
2.1 Introduction
In the earlier chapters, you learnt about formulating an organisational
strategy and implementing the same. How can an organisation ensure that
the strategy is working and will continue to do so? This can be solved with
the help of strategic evaluation.
The purpose of the strategic evaluation and control process is to test the
effectiveness of a strategy and take corrective action, when required, to keep
the strategy effective. After formulating and implementing a strategy, there
has to be a way of finding out whether or not the strategy is guiding the
organisation towards its intended objective. Strategic evaluation and control
process and performs the crucial task of keeping an organisation on the right
track. A strategist will be able to evaluate and assess any performance
issues. In the absence of such a mechanism, there would be no means to
find out whether or not the strategy is producing the desired output.
Evaluation of a strategy is a phase of the strategic management process in
which managers try to ensure that the chosen strategy is properly
implemented and meets the organisation's objectives.
A control system is also required, which will provide timely feedback to
managers so that they can take appropriate measures. These measures to
evaluate and control the strategic process will ensure that the strategy works.
You will now learn about the strategic evaluation and control framework and
related concepts.
• Explain the nature and significance of strategic evaluation and control
• Describe the process of strategic evaluation
• Review various techniques for exercising strategic evaluation
• Describe four types of strategic control
• Understand the concept of synergy in strategic management
2.2 Concept of Strategy Evaluation
Strategy evaluation is a process in which the effectiveness of a given strategy

in achieving the organisational objective is tested. Corrective action is taken
wherever required. Here, strategists assess how far the strategy has worked
in achieving the intended organisational objectives. Senior management
determines whether their selection of strategies has met the business
objectives. Thereafter, corrective actions are initiated, if necessary.
Again, to sum it up, strategic evaluation is a process in which the

effectiveness of a strategy is evaluated for its effectiveness in achieving the
objectives of an organisation and taking corrective action if required.
2.2.1 Significance of Strategy Evaluation
Strategy evaluation is required for various reasons:
• Getting Feedback: An organisation needs to receive feedback on the

current performance of the strategist so that good performance can be
rewarded.
• Check Validity: Strategy evaluation helps to check the validity of a
strategic choice made by an organisation. This is a continuous process.
It provides feedback on the relevance of the strategies chosen and
implemented.
• Checking Decisions: During the course of strategy implementation,
managers make several decisions. Evaluation of the strategy helps to
assess and check whether the decisions are matching with the intended
strategy.
• Concluding Implementation: Through its controls, feedback, rewards,
and reviews, the strategic evaluation process helps in a successful
culmination of the strategic management process.
• Creating Inputs: Lastly, the process of strategic evaluation provides
important information and experience to strategists that can be useful
for new strategic planning.
2.2.2 Need of Strategy Evaluation
• Strategy evaluation is required to keep a check on the validity of the

strategy chosen and implemented.
• It provides feedback on the continued relevance of the strategy

implemented.
• It helps managers assess whether or not the requirements are being
met.
• The process of strategic evaluation helps improve a strategy and gives
feedback and improves a strategy.
• Strategy evaluation provides information, feedback and experience to
strategists that can help in new strategic planning.
2.2.3 Basic Requirements of Strategy Evaluation
To be effective, strategy evaluation needs to meet certain basic requirements,

which are as follows:
• The activities involved should be in line with the company's objectives.

• It should provide the necessary information in a timely manner.
• It should be done with normal controls.
• It should be designed to give a realistic picture of what is happening in
the organisation.
• The process should not precede strategic decisions; it should promote
understanding, trust, and action.
2.3 Process of Strategy Formulation
The process of strategy evaluation consists of the following steps:
Setting Performance Benchmarks
Process of Measurement of Performance

Strategic
Evaluation
Analysing Variance in the Performance
Taking Corrective Action
Fig 1: Process of Strategy Evaluation
Step1. Setting Performance Benchmark:
While setting benchmarks, or business standards, in an organisation,

strategists are faced with questions, such as: what benchmarks should be
set, how can they be set, and how should they be presented? To determine
the performance of the required benchmarks, it is important to identify the
specific requirements for performing the tasks which are required to achieve
the objective of the organisation.
A performance indicator that identifies specific requirements may be

determined and used for testing and evaluation.
Step2. Measurement of Performance:
The actual performance of a strategy is measured against the standard

performance, which is a benchmark. To measure performance, reporting and
communication systems are used. Strategic testing and evaluation become
easier when the right methods of measuring performance are identified, and
standards are set correctly.
Step 3. Analysing Variance in Performance:
While measuring actual performance and comparing it to the standard

performance, variations may be found, which need to be analysed. Strategists
also have to state the level of tolerance - the extent to which the difference
between actual and standard performance can be accepted.
Step 4. Taking Corrective Actions:
If a performance deviation is detected, it is important to plan a corrective

action. If performance is less than the required performance, strategists
should carry out a detailed analysis of the factors that are affecting this
performance. Standards should be lowered if strategists find that the
organisational capacity does not meet operational requirements.
2.3.1 Techniques of Strategy Evaluation
As you learn, its performance must be measured to evaluate a strategy. This

measurement will help evaluate the effectiveness and efficiency of strategic
decisions made to achieve business objectives. To be followed by taking

corrective actions if the organisational goals have not been met.
Some of the most commonly used measurement tools and techniques are
listed below:
SWOT
GAP Analysis Analysis
Techniques
of Strategic
Evaluation
PEST
Benchmarking Analysis
Fig 2: Techniques of Strategic Evaluation
A. Benchmarking:
The organisation must set a standard performance as a measure of actual
performance measurement. Benchmarking is where the company's success
is measured against other similar companies to discover if there is a gap in
performance. It is a standard against which performance can be measured.
B. Gap Analysis:
As the name suggests, it identifies existing gaps between the actual

achievement and expected performance of an organisation. It is an evaluation
of the difference between a business endeavour's best possible outcome and
the actual outcome. It aims to determine what specific tasks an organisation
can take to achieve a particular objective.
C. SWOT Analysis:
The term SWOT stands for organisational strengths, weaknesses,

opportunities, and threats. This analysis reveals how and where a business
stands in the marketplace. A business environment contains internal and
external areas. The analysis provides the internal perspective -- of the

organisation's strengths and weaknesses. It provides the external perspective
with the potential opportunities and threats present in the external
environment.
SWOT analysis examples are this one from The Coca Cola Company.
Source: https://mktoolboxsuite.com/swot-analysis-examples/
D. PEST Analysis:
This technique is used for testing the strategic plan. A business environment
is critical and complex in nature. PEST stands for the political, economic,
social, and technological aspects that have a direct impact on business.
These factors -- important in developing a strategy – are also helpful in
assessing the strategy's performance. Political factors include laws and
regulations, legislatures, and environmental norms etc. Economic factors
reflect the economic conditions prevailing in the market – they help assess
opportunities and threats. Social factors show customer behaviour and value
patterns.
2.4 Strategic Control
Strategic controls are intended to guide a company in a rapidly changing

environment. In this process, the strategy – already implemented and
evaluated – needs to be assessed for problems and deviations from intended
objectives. Changes in structures and making necessary adjustments and

repairs may be required.
In contrast to post–control, strategic control is about controlling and directing

efforts before a strategy can be fully implemented. The controls are set up on
the basis of many assumptions, such as the business environmental
conditions, which are dynamic and eventful. Strategic control is a forward-
looking and preventive exercise.
2.4.1 Types of Strategic Control
The four basic types of strategic control are:
A. Premise Control
Basically, all strategies are based on certain premises or assumptions

about the business environment and the organisation's conditions.
Changes in some of these conditions can majorly affect a strategy.
Strategic control is needed to identify key assumptions and track them
to assess their impact on strategies. Factors that may affect a strategy
are as follows:
• External environmental factors, such as favourable/unfavourable

government policies
• Industrial factors, such as changes in competition
• Organisational resources, such as expected research initiatives
B. Implementation Control
Strategic implementation leads to a series of plans, programs, and

projects requiring significant resource allocation. Implementing
programs aims to evaluate an organisation's plans and projects that vis-
a-vis its stated goals.
C. Strategic Surveillance
Strategic surveillance has a wider approach, designed to monitor

broader events within and outside a company that may threaten the
company's strategic course. Strategic surveillance can be done through
a number of observations on the basis of selected sources of
information to identify events that may affect an organisation's

strategies.
D. Special Alert Control
The type of strategic control is based on alerting a rapid response and

reassessing strategies quickly due to sudden and unexpected events.
Special monitoring controls can be used to develop contingency
strategies. Responsibilities can be delegated for handling unforeseen
events for crisis management. The events may be: a sudden collapse
of the government, a fast change in the competitive environment, an
unfortunate industrial disaster, a breach of information security, or a
natural disaster.
2.4.2 Process of Strategic Control
Strategic controls are the process of monitoring and reviewing the
effectiveness of a strategy and ensure the strategy stays in control to meet
the desired objectives of an organisation. The control process entails problem
identification and remediation actions whenever needed. In other words, it
describes the control system for efficient and effective implementation.
The strategic process of controlling is as follows:

Step 1: Establish Performance Standards
Step 2: Measurement of Organisational Performance
Step 3: Analysing Variance
Step 4: Evaluating the deviation
Step 5: Taking Corrective Action
Step 1. Establish Performance Standards:
This is the first step in the control process. The organisation has to set
performance standards and levels against which actual performance can be
assessed. The standards should be set precisely, and these should be
realistic and achievable. Some important standards against which the
performance could be measured are as follows:
• Time: Here, it refers to the time taken to complete a goal, task, or

objective of the organisation. It can be measured as production or sales
per unit, or the number of sales made in a given time frame, etc.
• Cost: This refers to the expenditure involved per unit of activity. It can
be the cost of the material per unit, the cost of distribution, or the sales
cost per measure of the sales call.
• Revenue: This could be monthly sales, sales made by sales managers
annually etc.
• Market Share: Emphasis is placed on increasing market share. For
example, a company wants to increase its market share by 5% over the
next five years.
• Return on Investment: This indicator shows various business
operations, such as sales revenue, working capital, production costs,
and operating costs, in comparison with investments made. This will
bring out the return on investment.
Step 2. Measurement of Organisational Performance:
After the goals or objectives of an organisation are finalised, the next step in
the controlling process is of measuring the actual achieved performance vis-
a-vis the intended goals or objectives of the organisation.
It is one of the most difficult tasks to measure the actual performance of a

strategy. There are various ways to measure the efficiency and effectiveness
of a strategy. Strategists need to decide what to measure, how to measure,
when to measure, or whether to measure continuously or periodically, etc.
Some of the techniques of measurement are as follows:
• Financial Measures: Shows the financial position of a business

organisation. It includes various scales and the relationship of business
variables with each other.
• Production Methods: This refers to the effect of operations on
production. It includes pre controls, simultaneous controls, and post-
control measures.
• Marketing Measures: There are five categories to measure marketing
performance:
➢ Sales analysis
➢ Market share analysis

➢ Marketing expenses to sales ratio
➢ Customer attitude tracking
➢ Efficiency analysis
Step 3: Analysing Variance:
In this step, the variation in the performance is being realised. The

organisation tends to find out how the organisation has performed or is there
any gap between the actual and expected performance. Also, the reasons
and causes of variations are being identified.
Step 4. Evaluating Deviations:
It is important to take immediate action to correct identified deviations. The

reasons should be investigated. The aim is to find the cause of the errors or
problems to prevent these from reoccurring in future.
Deviations can be positive or negative. The positive deviations can be the

achievement of targets before schedule or on lesser budgets than planned.
Negative deviations can be of products or services turning out to be of lower
quality or quantity than standards, missing schedules of production, which
may have increased estimated costs.
Step 5. Taking Corrective Action:

After analysis and investigation, final steps need to be taken for corrective
actions or a remedy of the problem. The corrective action should consider the
internal and external environment of the business. It should be as per the
corporate culture, philosophy, trade unions, rules, and regulations, etc.
2.5 Operational Control
Evaluation and assessment work on two levels: strategic and operational.

Now, let's explore operational control. Operational control involves control
over daily operations and processes --but not business strategies.
Operational performance indicates the performance of organisational units,

such as divisions, strategic business entities, etc., in terms of their
contribution to achieving the organisation's goals. Therefore, an operational
control system is designed to ensure daily operations, or tasks, are consistent
with established plans and objectives. It focuses mainly on recent events. It

is based on the requirements of the management control system.
Unlike strategic control, operational efficiency focuses more on internal

sources of information and affects smaller units or organisational features,
such as production standards or equipment selection. Errors in operational
control may mean failure to complete projects on time. For example, if
retailers are not trained in time, sales revenue could fall.
2.5.1. Difference Between Strategic Control And Operational Control
Bases of Strategic Control Operational Control
Difference
Meaning Strategic control is the Operational control or
process of regularly task control is the
evaluating a strategy as it process of evaluating
is implemented and taking and adjusting the
the necessary remedial performance of various
measures. organisational units to
evaluate their
contribution to the
achievement of
organisational goals.
Basic Concern Are we moving in the right How are we
direction? performing?
Main Concern Steering an organisation's Action control
future direction.
Focus External organisational Internal organisational
environment environment
Time Horizon Long term Short term
Exercise of Control Exclusively by top Mainly by mid-level
management. They may management on the
take the lower-level direction of the top
support. management.
Main Techniques Environmental scanning, Budgets, schedules,
information gathering, and Management by
questioning, and review. Objective.
2.6 Concept of Synergy
Synergy defines the benefits for a business through organised planning to

increase collaboration and innovation. In simple terms, a collaborative
organisation gains more as a group as compared to individually. Increasing
collaboration requires a careful analysis of an organisation's current
strategies to identify the best ways to do business.
Many businesses around the world carry out partnerships. Boardrooms are
full of ideas about how to work together effectively. Groups of affiliated
businesses are set up to improve important account systems, coordinate
product development, and expand best practices. Synergy is the idea that the
value and performance of two combined companies will be greater than the
sum of the individual parts. Synergy is a term widely used in the context of
mergers, acquisitions, strategic partnerships, joint ventures, franchises, etc.
The reason for forming a strategic alliance is often given that two different
companies together make a higher value compared to each one on its own.
Synergy is also defined as 1 + 1 = 3, or it could be even more. Synergy is

when the total amount is more than the sum of its individual components. It is
broadly of three types:
A. Operating Synergy:
This is when the combined value of two firms is greater than the total
number of contributions of individual firms. When the combined firm
allows individual firms to increase their operating revenue and achieve
higher growth, it is called Operating Synergy. Operating synergies that
are acquired through mergers, acquisitions, or takeovers. A company is
acquired, especially when it has higher competencies in any or more
than one of the various fields such as manufacturing, research and
development, or marketing and finance – and can help achieve
operational efficiency.
B. Financial Synergy:
Financial cooperation is often the driving force behind mergers and

acquisitions and strategic partnerships. These types of synergies stem
from improvements in a combined business's financial metrics, such as
income, credit potential, financial costs, profits, etc. Examples of good

financial engagement include increased revenue on a large customer
base, lower costs through consistent performance, and compatibility of
talent and technology.
C. Marketing Synergy:
Marketing synergy means that integration of the markets of the

companies involved creates new opportunities, increases in revenue or
other benefits. For example, it is possible to increase sales revenue
without making extensive investments by taking advantage of the
opportunity to maximise the use of existing marketing and distribution
resources. Hero Honda Ltd. was a joint venture between India's Hero
Cycles and Japan's Honda Motor. Hero Cycle's long experience with
Indian road conditions, including Indian and urban customers, is fully
integrated with Honda Motor's high technology capabilities. This
resulted in producing the most economical and durable motorcycle for
Indian customers in 1985. The partnership lasted for 26 years.
2.7 Key Stakeholder Expectations
In any business, stakeholders are most concerned with two key aspects: profit
generated and capital invested.
• Profit:
Profit serves as oxygen to any organisation. The increase in profit

percentage is reflected in the company's continued growth. Profit
usually means annual profits in rupees to annual accounts, and the
company reports in its end-of-year data. Another important type of
benefit is economic gain. Economic profitability refers to the returns to
a company.
• Capital:
The core capital usually comes from two sources: lenders and
shareholders. The first source of capital funds comes from lenders like
financial institutions and banks. This has a fixed interest or return, so
there are no risks involved.
The other source of capital funds comes from investments from

preference shareholders and equity shareholders. The shareholders
are the owners of the company. Preference shareholders receive a pre-
determined dividend before allocating the dividend to equity
shareholders.
Expectations of Shareholders
Stakeholders not only expect growth of their investments in a company but

also expect the following from the company:
• Change of strategies as the market changes

• Transparency of functioning
• Good management practices across all levels
• Fair market practices
• A healthy and consistent bottom line
• Positive reputation, goodwill, and product image
• Appropriate testing, measurements, and management controls
• Following of social and environmental responsibilities
2.8 Summary

• To conduct strategy evaluation, strategists and managers should follow
the following steps sequentially: Setting Benchmarks, measuring
performance, analysing variance in performance, and taking corrective
action.
• There are various techniques available for the evaluation of a strategy.
Some commonly used are GAP analysis, SWOT analysis, PEST analysis,
and Benchmarking.
• Evaluation and assessment work on two levels: strategic and operational.
Strategic control is aimed at continuous assessment of the changing
environment to check that a strategy is working as planned. It can be
implemented through premise control, implementation control, strategic
surveillance control and special alert control.
• Operational control is focused on real-time action testing. The control
process consists of four steps: First, establishing standards against which

the performance will be measured. Second, measuring organisational
performance. Next, selecting the technique for analysing variances.
Lastly, compare current performance with strategy by comparing actual
performance with standards; (d) Evaluate the deviation and (d) take
corrective action by evaluating normal performance and performance and
reorganising strategies, plans and objectives.
• Synergy defines the benefits a business gains through organised
planning, innovation, and, more importantly, by increasing collaboration
with another firm. In simple terms, a collaborative organisation gains more
as a group as compared to individually. Increasing collaboration requires
a careful analysis of an organisation's current strategies to identify the
best ways to do business with another organisation to create synergy.
2.9 Glossary
• Earnings per share: Earnings per share (EPS) is calculated as the profits
of a company divided into outstanding shares in its common stock. The
emerging number serves as an indicator of the company's profitability.
• Market Share: The market share is the percentage of total sales in the
industry made by a particular company. It is calculated by taking the
company's sales over a period of time and then dividing them by total
industry sales at the same time.
• Operations: Operations refer to business practices and activities that

create the highest level of efficiency within an organisation. All these
activities are involved in converting raw materials into the final product for
customers.
• Return on Investment: Return on investment (ROI) is a method used to

assess the effectiveness and profitability of an investment made into a
business process or project. It may also be used to compare the efficiency
of a number of investments. An ROI attempts to accurately measure the
amount of financial return on a particular investment in relation to the

investment made.
• Stakeholders: A person or a group that has an interest in the company

and may be affected by or can affect a business. The main stakeholders
in a typical organisation are its investors, employees, customers, and
suppliers.
• Working Capital Management: Working capital management is a

business strategy designed to ensure that a company operates
efficiently by monitoring and using its current assets and liabilities to
the best effect.
2.10 Case Study

Clean Head Limited: Pricing Strategy
Companies today strive to make their products affordable to consumers
enmasse, as part of their growth strategy. Two years ago, Clean Head
Limited, a shampoo manufacturer, started selling their shampoo in a new
small-sized bottle at an affordable price of Rupees 10 for a 40 ml bottle. The
price of 100 ml and 200 ml bottles were retained at rupees 45 and 80,
respectively. The product was aggressively used in small and mofussil towns.
However, the company expected existing customers to continue buying their
bigger bottles. Finding these to be convenient. Contrary to their expectations,
big cities also witnessed a shift towards smaller-sized bottles. There was
some increase in the sales volumes, but the profit margins went low, and the
overall profits reduced tremendously. Moreover, the turnover did not
increase as forecasted.
Management Dilemma: The chairman of the company called a meeting of

all the functional heads and made the following observations:
"We have to chart out long-term strategies for our company. At this moment,
sustainable but profitable growth is sacrosanct for us. But may prove to be
elusive. We are not in a position to offer lower-priced shampoos with declining
profits. If we continue like this, gradually, the company may start incurring
losses. Our competitors have also followed us by reducing their prices. My
dilemma is, if we roll back our prices, our competitors may not do so."
Source: Strategic Management, The Institute of Chartered Accountant of

India
Discussion Questions:
1. What went wrong? Give your assessment of the situation.
2. How do competitors affect internal decisions?
3. What is the strategy used by Clean Head Limited?
SWOT analysis refers to the analysis of the organisation's ___.

a) Strength, Weakness, Opportunities, Threats

• Kazmi, A., Kazmi, A. (2015). Strategic Management, 4th Ed. : McGraw-Hill
Education (India) Pvt. Ltd.
• Lawrence R. Jauch, Rajiv Gupta & William F Glueck., (2004). Business
Policy and Strategic Management: Frank Bros. & Co. Ltd.
E-References
https://open.umn.edu/opentextbooks/textbooks/871
https://open.umn.edu/opentextbooks/textbooks/mastering-strategic-
management

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Segment 1 : Introduction to the Fundamentals of

Business, Strategy and Strategic

Different organisations have similar opportunities. Yet, the resources of each

1.2 Definition of Strategy

1.3 The Conceptual Evolution of Strategy

opponents to win the war. Classic military examples sometimes provide

In 1959, based on Ford Foundation's recommendations all business

1.4 Criteria for An Effective Strategy

That means a prepared strategy should be able to withstand time,

1.5 Importance of A Strategy

resources, wherever possible, to accomplish the organisation's

1.6 Intended, Emergent, And Realised Strategies

unexpectedly, it benefitted success from Avon through emergent strategy and

1.7 Purpose of A Business

companies need to consider their employee's and customers' interests before

1.8 Goals and Objectives

c. Providing outstanding customer support

For example: Objective will give

1.9 Vision and Mission Statements

1.10 Core Competencies of A Business

2. Rare Capabilities: Rare capabilities are those which are possessed

Let us recapitulate the important concepts discussed in this topic:

• A statement that describes the desire of the organisation is vision, and

References and Suggested Reading

2.2 Concept of Strategic Management

Strategic management is the art and science of constructing, executing, and

internal environment with the external environment to achieve business goals.

2.3 Role of Strategists in Decision Making

executive director, dean, or entrepreneur, etc. Jay Conger, author of Building

4. SBU (Strategic Business Units) Level Executives:

2.3.2 Roles Of Strategists:

2.4 Strategists at Various Management Levels

2.5 Strategies at Various Levels

The corporate-level strategy mainly focuses on the market and the

and the external environment. In this strategy, for internal assessment

Fig 1: Strategic Management Process at Different Levels

Fig 2: Characteristics of Strategies at Different Levels

• High-performance organisations do systematic planning for future

• It is a complex process that provides a framework rather than providing

• It restricts flexibility in the process of the organisation.

• Uncertainty: impossible to describe future outcomes in the several

2.9 Case Study

customer trust, which might have generated good word-of-mouth

References and Suggested Reading

• P. Subba Rao (2016), Business Policy and Strategic Management,

Topic 4 : Challenges in Strategic Management

The strategic management model deals with planning, analysing, and

4.2 Strategic Management as An Organisational Force

Managers and strategists have a high degree of responsibility. There's a lot

Strategic management is essential to the development and growth of all

Because of its importance to the business or company, strategy is often seen

stakeholders. This is especially true of public companies, where profit and an

Strategic management is the process by which managers make efforts to

Its severity can be caused mainly by three reasons:

• Strategic management involves making decisions about the future:

• Managers in different departments in the organisation have

• Strategic management involves major changes in the organisation:

Strategic Management as an Organisational Force

Organisations operate in a dynamic environment. Social, political, economic,

Strategic management works as an organisational force in the following ways:

• Ensures competitive advantage over competitors, as due to its proactive

• Strategic management makes communication and goal implementation

• It is all about looking forward towards the future of the organisation.

industry challenges and trends. With the help of strategic management,