UNIT I

Business Planning and Strategic Management

Stages of Planning

Business plans are often confused with strategic plans, but they’re not the same thing. Every
company should have both types of plan, and it’s important to know the differences between
them so your business to benefit from both.

“A business plan describes the foundations of a company, its owners, its capabilities, the industry
and market(s) in which it operates, how it generates revenues and its financial projections.

“A strategic plan assesses the current environment of a business, both internally and externally. It
establishes future goals and targets and describes the strategies it will implement to reach them.”

In other words, a business plan describes a current business or a specific new project. A strategic
plan talks about how you want to change your company to grow or be ready for the future.

Business Plan vs Strategic Plan

A business plan answers these questions:

 What is my idea?
 What will be my playground and market scope?
 What investment and financing do I need?
 When will I generate revenue and profit for my business?
 What do I need for my idea to succeed?
 What value will my idea bring to my business and shareholders?

A strategic plan answers these questions:

 What are my current capabilities, values, mission and vision?

 What are my goals, and what should I do to achieve them?

What is Strategic Planning?

Once there were two company presidents who competed in the same industry. These two
presidents decided to go on a camping trip to discuss a possible merger. They hiked deep into the
woods. Suddenly, they came upon a grizzly bear that rose up on its hind legs and snarled.
Instantly, the first president took off his knapsack and got out a pair of jogging shoes. The
second president said, “Hey, you can’t outrun that bear.” The first president responded, “Maybe I
can’t outrun that bear, but I surely can outrun you!” This story captures the notion of strategic
management, which is to achieve and maintain competitive advantage.

Stages of Planning:
Strategic planning is a process through which business leaders’ map out their vision for their
organization’s growth and how they’re going to get there. The strategic planning process informs
your organization’s decisions, growth, and goals.
Strategic planning helps you clearly define your company’s long-term objectives—and maps
how your short-term goals and work will help you achieve them. This, in turn, gives you a clear
sense of where your organization is going and allows you to ensure your teams are working on
projects that make the most impact. Think of it this way—if your goals and objectives are your
destination on a map, your strategic plan is your navigation system.
In this, we walk you through the 5-step strategic planning process and show you how to get
started developing your own strategic plan.
 What are the benefits of strategic planning?
Strategic planning can help with goal setting and decision-making by allowing you to map out
how your company will move toward your organization’s vision and mission statements in the
next three to five years. Let’s circle back to our map metaphor. If you think of your company
trajectory as a line on a map, a strategic plan can help you better quantify how you’ll get from
point A (where you are now) to point B (where you want to be in a few years).
When you create and share a clear strategic plan with your team, you can:
 Build a strong organizational culture by clearly defining and aligning on your organization’s
mission, vision, and goals.
 Align everyone around a shared purpose and ensure all departments and teams are working
toward a common objective.
 Proactively set objectives to help you get where you want to go and achieve desired outcomes.
 Promote a long-term vision for your company rather than focusing primarily on short-term gains.
 Ensure resources are allocated around the most high-impact priorities.
 Define long-term goals and set shorter-term goals to support them.
 Assess your current situation and identify any opportunities—or threats—allowing your
organization to mitigate potential risks.
 Create a proactive business culture that enables your organization to respond more swiftly to
emerging market changes and opportunities.

Step 1: Assess your current business strategy and business environment

Before you can define where you’re going, you first need to define where you are.
Understanding the external environment, including market trends and competitive landscape, is
crucial in the initial assessment phase of strategic planning.
To do this, your management committee should collect a variety of information from additional
stakeholders, like employees and customers. In particular, plan to gather:
 Relevant industry and market data to inform any market opportunities, as well as any potential
upcoming threats in the near future.
 Customer insights to understand what your customers want from your company—like product
improvements or additional services.
 Employee feedback that needs to be addressed—whether about the product, business practices,
or the day-to-day company culture.
Consider different types of strategic planning tools and analytical techniques to gather this
information, such as:
 A balanced scorecard to help you evaluate four major elements of a business: learning and
growth, business processes, customer satisfaction, and financial performance.
 A SWOT analysis to help you assess both current and future potential for the business (you’ll
return to this analysis periodically during the strategic planning process).
To fill out each letter in the SWOT acronym, your management committee will answer a series
of questions:
Strengths:
 What does your organization currently do well?
 What separates you from your competitors?
 What are your most valuable internal resources?
 What tangible assets do you have?
 What is your biggest strength?
Weaknesses:
 What does your organization do poorly?
 What do you currently lack (whether that’s a product, resource, or process)?
 What do your competitors do better than you?
 What, if any, limitations are holding your organization back?
 What processes or products need improvement?
Opportunities:
 What opportunities does your organization have?
 How can you leverage your unique company strengths?
 Are there any trends that you can take advantage of?
 How can you capitalize on marketing or press opportunities?
 Is there an emerging need for your product or service?
 Threats:
 What emerging competitors should you keep an eye on?
 Are there any weaknesses that expose your organization to risk?
 Have you or could you experience negative press that could reduce market share?
 Is there a chance of changing customer attitudes towards your company?

Step 2: Identify your company’s goals and objectives

To begin strategy development, take into account your current position, which is where you are
now. Then, draw inspiration from your vision, mission, and current position to identify and
define your goals—these are your final destination.
To develop your strategy, you’re essentially pulling out your compass and asking, “Where are
we going next?” “What’s the ideal future state of this company?” This can help you figure out
which path you need to take to get there.
During this phase of the planning process, take inspiration from important company documents,
such as:
 Your mission statement, to understand how you can continue moving towards your
organization’s core purpose.
 Your vision statement, to clarify how your strategic plan fits into your long-term vision.
 Your company values, to guide you towards what matters most towards your company.
 Your competitive advantages, to understand what unique benefit you offer to the market.
 Your long-term goals, to track where you want to be in five or 10 years.
 Your financial forecast and projection, to understand where you expect your financials to be in
the next three years, what your expected cash flow is, and what new opportunities you will likely
be able to invest in.

Step 3: Develop your strategic plan and determine performance metrics

Now that you understand where you are and where you want to go, it’s time to put pen to paper.
Take your current business position and strategy into account, as well as your organization’s
goals and objectives, and build out a strategic plan for the next three to five years. Keep in mind
that even though you’re creating a long-term plan, parts of your plan should be created or
revisited as the quarters and years go on.
 As you build your strategic plan, you should define:
 Company priorities for the next three to five years, based on your SWOT analysis and strategy.
 Yearly objectives for the first year. You don’t need to define your objectives for every year of
the strategic plan. As the years go on, create new yearly objectives that connect back to your
overall strategic goals.
 Related key results and KPIs. Some of these should be set by the management committee, and
some should be set by specific teams that are closer to the work. Make sure your key results and
KPIs are measurable and actionable. These KPIs will help you track progress and ensure you’re
moving in the right direction.
 Budget for the next year or few years. This should be based on your financial forecast as well as
your direction. Do you need to spend aggressively to develop your product? Build your team?
Make a dent with marketing? Clarify your most important initiatives and how you’ll budget for
those.
 A high-level project roadmap. A project roadmap is a tool in project management that helps you
visualize the timeline of a complex initiative, but you can also create a very high-level project
roadmap for your strategic plan. Outline what you expect to be working on in certain quarters or
years to make the plan more actionable and understandable.

Step 4: Implement and share your plan

Now it’s time to put your plan into action. Strategy implementation involves clear
communication across your entire organization to make sure everyone knows their
responsibilities and how to measure the plan’s success.
Make sure your team (especially senior leadership) has access to the strategic plan, so they can
understand how their work contributes to company priorities and the overall strategy map.
A few tips to make sure your plan will be executed without a hitch:
 Communicate clearly to your entire organization throughout the implementation process, to
ensure all team members understand the strategic plan and how to implement it effectively.
 Define what “success” looks like by mapping your strategic plan to key performance indicators.
 Ensure that the actions outlined in the strategic plan are integrated into the daily operations of the
organization, so that every team member's daily activities are aligned with the broader strategic
objectives.
 Utilize tools and software—like a work management platform—that can aid in implementing and
tracking the progress of your plan.
 Regularly monitor and share the progress of the strategic plan with the entire organization, to
keep everyone informed and reinforce the importance of the plan.
 Establish regular check-ins to monitor the progress of your strategic plan and make adjustments
as needed.

Step 5: Revise and restructure as needed

Once you’ve created and implemented your new strategic framework, the final step of the
planning process is to monitor and manage your plan.
Remember, your strategic plan isn’t set in stone. You’ll need to revisit and update the plan if
your company changes directions or makes new investments. As new market opportunities and
threats come up, you’ll likely want to tweak your strategic plan. Make sure to review your plan
regularly—meaning quarterly and annually—to ensure it’s still aligned with your organization’s
vision and goals.
Keep in mind that your plan won’t last forever, even if you do update it frequently. A successful
strategic plan evolves with your company’s long-term goals. When you’ve achieved most of
your strategic goals, or if your strategy has evolved significantly since you first made your plan,
it might be time to create a new one.

Defining Strategic Management

Strategic management can be defined as the art and science of formulating, implementing, and
evaluating cross-functional decisions that enable an organization to achieve its objectives. As
this definition implies, strategic management focuses on integrating management, marketing,
finance/accounting, production/operations, research and development, and information systems
to achieve organizational success. The term strategic management in this text is used
synonymously with the term strategic planning. The latter term is more often used in the business
world, whereas the former is often used in academia. Sometimes the term strategic management
is used to refer to strategy formulation, implementation, and evaluation, with strategic planning
referring only to strategy formulation. The purpose of strategic management is to exploit and
create new and different opportunities for tomorrow; long-range planning, in contrast, tries to
optimize for tomorrow the trends of today.
A strategic plan is, in essence, a company’s game plan. Just as a football team needs a good
game plan to have a chance for success, a company must have a good strategic plan to compete
successfully. Profit margins among firms in most industries have been so reduced by the global
economic recession that there is little room for error in the overall strategic plan. A strategic plan
results from tough managerial choices among numerous good alternatives, and it signals
commitment to specific markets, policies, procedures, and operations in lieu of other, “less
desirable” courses of action.

Stages of Strategic Management

The strategic-management process consists of three stages: strategy formulation, strategy
implementation, and strategy evaluation.
Strategy formulation includes developing a vision and mission, identifying an organization’s
external opportunities and threats, determining internal strengths and weaknesses, establishing
long-term objectives, generating alternative strategies, and choosing particular strategies to
pursue.
Strategy-formulation issues include deciding what new businesses to enter, what businesses to
abandon, how to allocate resources, whether to expand operations or diversify, whether to enter
international markets, whether to merge or form a joint venture, and how to avoid a hostile
takeover. Because no organization has unlimited resources, strategists must decide which
alternative strategies will benefit the firm most. Strategy-formulation decisions commit an
organization to specific products, markets, resources, and technologies over an extended period
of time. Strategies determine long-term competitive advantages. For better or worse, strategic
decisions have major multifunctional consequences and enduring effects on an organization. Top
managers have the best perspective to understand fully the ramifications of strategy-formulation
decisions; they have the authority to commit the resources necessary for implementation.
Strategy implementation requires a firm to establish annual objectives, devise policies, motivate
employees, and allocate resources so that formulated strategies can be executed. Strategy
implementation includes developing a strategy-supportive culture, creating an effective
organizational structure, redirecting marketing efforts, preparing budgets, developing and
utilizing information systems, and linking employee compensation to organizational
performance.
Strategy implementation often is called the “action stage” of strategic management.
Implementing strategy means mobilizing employees and managers to put formulated strategies
into action. Often considered to be the most difficult stage in strategic management, strategy
implementation requires personal discipline, commitment, and sacrifice. Successful strategy
implementation hinges upon managers’ ability to motivate employees, which is more an art than
a science. Strategies formulated but not implemented serve no useful purpose. Interpersonal
skills are especially critical for successful strategy implementation. Strategy-implementation
activities affect all employees and managers in an organization. Every division and department
must decide on answers to questions, such as “What must we do to implement our part of the
organization’s strategy?” and “How best can we get the job done?” The challenge of
implementation is to stimulate managers and employees throughout an organization to work with
pride and enthusiasm toward achieving stated objectives.
Strategy evaluation is the final stage in strategic management. Managers desperately need to
know when particular strategies are not working well; strategy evaluation is the primary means
for obtaining this information. All strategies are subject to future modification because external
and internal factors are constantly changing.
Three fundamental strategy-evaluation activities are
(1) Reviewing external and internal factors that are the bases for current strategies,
(2) Measuring performance, and
(3) Taking corrective actions.
Strategy evaluation is needed because success today is no guarantee of success tomorrow!
Success always creates new and different problems; complacent organizations experience
demise. Strategy formulation, implementation, and evaluation activities occur at three
hierarchical levels in a large organization: corporate, divisional or strategic business unit, and
functional. By fostering communication and interaction among managers and employees across
hierarchical levels, strategic management helps a firm function as a competitive team. Most
small businesses and some large businesses do not have divisions or strategic business units; they
have only the corporate and functional levels. Nevertheless, managers and employees at these
two levels should be actively involved in strategic-management activities. Peter Drucker says the
prime task of strategic management is thinking through the overall mission of a business: . . . that
is, of asking the question, “What is our business?” This leads to the setting of objectives, the
development of strategies, and the making of today’s decisions for tomorrow’s results. This
clearly must be done by a part of the organization that can see the entire business; that can
balance objectives and the needs of today against the needs of tomorrow; and that can allocate
resources of men and money to key results.
Levels of Strategy
Levels of Strategic Management It is believed that strategic decision making is the responsibility
of top management. However, it is considered useful to distinguish between the levels of
operation of the strategy. Typically, three broad levels can be identified as illustrated in Figure.
 Corporate Level  Business Level  Functional Level

There are basically two categories of companies- one, which have different businesses
organized as different directions or product groups known as profit centers or strategic
business units (SBUs) and other, which consists of companies which are single product
companies. The example of first category can be that of Reliance Industries Limited
which is a highly integrated company producing textiles, yarn, and a variety of petro
chemical products and the example of the second category could be Ashok Leyland
Limited which is engaged in the manufacturing and selling of heavy commercial
vehicles. The SBU concept was introduced by General Electric Company (GEC) of USA
to manage product business. The fundamental concept in the SBU is the identification of
discrete independent product/ market segments served by the organization. Because of
the different environments served by each product, a SBU is created for each independent
product/ segment. Each and every SBU is different from another SBU due to the distinct
business areas (DBAs) it is serving. Each SBU has a clearly defined product market
segment and strategy. It develops its strategy according to its own capabilities and needs
with overall organizations capabilities and needs. Each SBU allocates resources
according to its individual requirements for the achievement of organizational objectives.
As against the multi-product organizations, the single product organizations have single
Strategic Business Unit. In these organizations, corporate level strategy serves the whole
business. The strategy is implanted at the next lower level by functional strategies. In
multiple product company, a strategy is formulated for each SBU (known as business
level strategy) and such strategies lie between corporate and functional level strategies.

The three levels are explained as follows:

Corporate Level Strategy :

At the corporate level, strategies are formulated according to organization wise polices.
These are value oriented, conceptual and less concrete than decisions at the other two
levels. These are characterized by greater risk, cost and profit potential as well as
flexibility. Mostly, corporate level strategies are futuristic, innovative and pervasive in
nature. They occupy the highest level of strategic decision making and cover the actions
dealing with the objectives of the organization. Such decisions are made by top
management of the firm. The example of such strategies includes acquisition decisions,
diversification, structural redesigning etc. The board of Directors and the Chief Executive
Officer are the primary groups involved in this level of strategy making. In small and
family owned businesses, the entrepreneur is both the general manager and chief strategic
manager.

Business Level Strategy:

The strategies formulated by each SBU to make best use of its resources given the
environment it faces, come under the account of business level strategies. At such a level,
strategy is a comprehensive plan providing objectives for SBUs, allocation of resources
among functional areas and coordination between them for achievement of corporate
level objectives. These strategies operate within the overall organizational strategies i.e.
within the broad constraints and polices and long term objectives set by the corporate
strategy. The SBU managers are involved in this level of strategy. The strategies are
related with a unit within the organization. The SBU operates within the defined scope of
operations by the corporate level strategy and is limited by the assignment of resources
by the corporate level. However, corporate strategy is not the sum total of business
strategies of the organization. Business strategy relates with the "how" and the corporate
strategy relates with the "what"' Business strategy defines the choice of product or service
and market of individual business within the firm. The corporate strategy has impact on
business strategy.

Functional Level Strategy:

This strategy relates to a single functional operation and the activities involved therein.
This level is at the operating end of the organization. The decisions at this level within
the organization are described as tactical. The strategies are concerned with how different
functions of the enterprise like marketing, finance, manufacturing etc. contribute to the
strategy of other levels. Functional strategy deals with a relatively restricted plan
providing objectives for specific function, allocation of resources among different
operations within the functional area and coordination between them for achievement of
SBU and corporate level objectives.
Sometimes a fourth level of strategy also exists. This level is known as the operating
level. It comes below the functional level strategy and involves actions relating to various
sub functions of the major function. For example, the functional level strategy of
marketing function is divided into operating levels such as marketing research, sales
promotion etc.
Needs

Main reasons for need of strategic management for an organization are:

1. Increasing rate of changes

2. Higher motivation of employees

3. Strategic decision-making

4. Optimization of profits and

5. Miscellaneous!

1. Increasing Rate of Changes:

The environment in which the business operates’ is fast, changing. A business concern which

does not keep its policies up-to-date, cannot survive for a long time in the market. In turn, the

effective strategy optimizes profits over a long run.

2. Higher Motivation of Employees:

The employees (human resources) are assigned clear cut duties by the top management viz. what

is to be done, who is to do it, how to do it and when to do it. ? When strategic management is

followed in any organization, employees become loyal, sincere and goal oriented and their

efficiency is also increased. They also get rewards and promotions resulting in higher motivation

for the employees. A strategy must respect human values and duly consider the aspirations of

individual members.

3. Strategic Decision-Making:

Under strategic planning, the first step is to set the goals or objectives of a business concern.

Strategic decisions taken under strategic management help the smooth sailing of an enterprise.

Strategic planning is the overall planning of operations for effective implementation of policies.
4. Optimization of Profits:

An effective strategy should develop from policies of a concern. It takes into account actions of

competitors. It considers future operations in respect of market area and opportunity, executive

competence, available resources and limitations imposed by the Government. An effective

strategy should optimise profits over the long run.

5. Miscellaneous:

Mr. H.N Broom in his book on ‘Business Policy and Strategic Action’ has mentioned that a

strategy has a primary concern with the following:

(a) Marketing opportunity: Products, prices, sales potential and sales promotion.

(b) Available distribution channel and costs.

(c) The scale of company operations.

(d) The manufacturing process required to implement their scale of operations (with an optimal
production cost)

(e) The research and innovation programme.

(f) The type of organization.

g) The amounts and proportions of equity and credit capital available to the firm and their
combined adequacy.

(h) The planned rate of growth.

Thus, strategy is important because it makes possible the implementation of policies and long
range plans for attaining company goals, creation of effective business strategy requires a basic
knowledge of economic theory, management principles, accounting, statistics, finance and
administrative practice.

Dimensions
Before we further discuss strategic management, we should define nine key terms: competitive
advantage, strategists, vision and mission statements, external opportunities and threats, internal
strengths and weaknesses, long-term objectives, strategies, annual objectives, and policies.
Competitive Advantage
Strategic management is all about gaining and maintaining competitive advantage. This term can
be defined as “anything that a firm does especially well compared to rival firms.” When a firm
can do something that rival firms cannot do, or owns something that rival firm’s desire, that can
represent a competitive advantage. For example, in a global economic recession, simply having
ample cash on the firm’s balance sheet can provide a major competitive advantage. Some cash-
rich firms are buying distressed rivals. For example, BHP Billiton, the world’s largest miner, is
seeking to buy rival firms in Australia and South America. Freeport-McMoRan Copper & Gold
Inc. also desires to expand its portfolio by acquiring distressed rival companies. French drug
company Sanofi-Aventis SA also is acquiring distressed rival firms to boost its drug
development and diversification. Cash-rich Johnson & Johnson in the United States also is
acquiring distressed rival firms. This can be an excellent strategy in a global economic recession.
Having less fixed assets than rival firms also can provide major competitive advantages in a
global recession. For example, Apple has no manufacturing facilities of its own, and rival Sony
has 57 electronics factories. Apple relies exclusively on contract manufacturers for production of
all of its products, whereas Sony owns its own plants. Less fixed assets has enabled Apple to
remain financially lean with virtually no long-term debt. Pursuit of competitive advantage leads
to organizational success or failure. Strategic management researchers and practitioners alike
desire to better understand the nature and role of competitive advantage in various industries.
Normally, a firm can sustain a competitive advantage for only a certain period due to rival firms
imitating and undermining that advantage. Thus it is not adequate to simply obtain competitive
advantage. In total, e-commerce is minimizing the expense and cumbersomeness of time,
distance, and space in doing business, thus yielding better customer service, greater efficiency,
improved products, and higher profitability. The Internet has changed the way we organize our
lives; inhabit our homes; and relate to and interact with family, friends, neighbors, and even
ourselves. The Internet promotes endless comparison shopping, which thus enables consumers
worldwide to band together to demand discounts. The Internet has transferred power from
businesses to individuals. Buyers used to face big obstacles when attempting to get the best price
and service, such as limited time and data to compare, but now consumers can quickly scan
hundreds of vendor offerings. Both the number of people shopping online and the average
amount they spend is increasing dramatically. Digital communication has become the name of
the game in marketing. Consumers today are flocking to blogs, short-post forums such as
Twitter, video sites such as YouTube, and social networking sites such as Facebook, Myspace,
and LinkedIn instead of television, radio, newspapers, and magazines. Facebook and Myspace
recently unveiled features that further marry these social sites to the wider Internet. Users on
these social sites now can log on to many business shopping sites with their IDs from their social
site so their friends can see what items they have purchased on various shopping sites. Both of
these social sites want their members to use their IDs to manage all their online identities. Most
traditional retailers have learned that their online sales can boost in-store sales as they utilize
their Web sites to promote in-store promotions. Strategists are the individuals who are most
responsible for the success or failure of an organizations.
Dimensions of Strategic Management
Eight different dimensions of strategic management: • Leadership • Culture and values •
Strategic thinking and planning • Alignment • Performance measurement • Performance
management • Process improvement • Sustainability of strategic management The following is a
description of the aspects of strategic management included within each of these dimension..
Leadership
Effective strategic management starts with leadership. Leaders question assumptions look at
problems in new ways and create and articulate a vision for the future. In the context of strategic
management, leadership includes the following traits:
a) Leaders set a clear and consistent vision or “picture of the future” of the organization;
b) Leaders are pro-active in preparing the organization for the future;
c) Leaders are visible and engaged to ensure that staff understand the common vision and can
translate it into terms relevant to their roles;
d) Leaders “walk the talk” in exemplifying the values, ethics and policies of the organization;
e) Leaders don't micromanage, but trust and encourage employees to contribute their ideas and
grow in their careers;
f) Leaders “walk around” and work alongside staff to encourage teamwork. Many employees are
now considered "knowledge workers" – they are hired for their thinking skills. In this
environment employees want to know why they are being asked to do their assignments. Hence
strategic management leads to increased employee empowerment and less “command and
control” management.
Culture and values
“A leader leads by example, whether he intends to or not.” . This dimension refers to the culture
and values inside the organization, and it addresses leaders' and employees' shared understanding
and agreement with stated values. Most organizations post a values statement with a list of
virtuous words. What distinguishes maturity is the degree to which those values are
communicated, understood, and practiced – by the leader as well as by all employees.
Evidences of mature workforce culture and values include:
a) Thoughtful applications of change management principles and practices by the leadership;
b) The degree of ownership that employees feel for the vision and values of the organization;
c) Their degree of participation in shaping the organization's culture and ways of working;
d) The level of trust, transparency and freedom to communicate with candor, as opposed to a
culture of fear and denial;
e) The degree of flexibility and willingness to change to align to new strategic priorities;
f) The level of awareness and consistency of adherence to stated values and policies.

Strategic thinking and planning

“I think and think for months and years. Ninety-nine times, the conclusion is false. The
hundredth time I am right.” (Einstein). Strategy development is not a “cookbook” process. It is a
challenging, heuristic task that requires strategic thinking. Strategic thinking involves several
traits:
a) The ability to use consistent definitions of planning terms and to understand their distinctions;
b) awareness of the distinctions between project planning and strategic planning;
c) The ability to discuss and describe items in plans at the appropriate “strategic altitude”;
d) Awareness of the dynamic system effects in organizations, such as delays and feedback;
e) Openness to new ideas and encouragement of creativity and innovation;
f) Openness of the planning process to a team of employees of various ranks and functions;
g) Degree to which alternative strategies and scenarios are considered;
h) Linkage of strategic planning to budgeting;
i) Ability to write and speak with clarity and simplicity.
Evidence for the degree of strategic thinking can be found in the organization's strategic planning
documents.
Performance Measurement
“Without metrics, managers are only caretakers.” (Jac Fitz-Enz). Without performance metrics or
measures, managers are "flying blind". So, most organizations by now have learned to measure
some things, either for operational performance or for compliance with requirements of outside
stakeholders. But strategic performance measures or metrics are aligned to the strategic plan –
not just everyday operations and outputs, but strategic outcomes that tie to the vision of the
organization. Features to look for in strategic performance metrics are
a) Metrics derived from and aligned to the strategy, not just “KPI's” for operations;
b) Metrics that focus on outcomes and results, not just money spent, tasks accomplished, or
outputs delivered;
c) Metrics that use appropriate ratios, sample sizes and other features in order to be more
meaningful;
d) Metrics that are measured and reported frequently enough to drive decision making;
e) “Team” and “organization” performance, not only individual performance is being tracked;
f) A balanced set of metrics that cover a range of different dimensions including not only
financial data but also customer satisfaction, internal process performance and capacities of the
organization.
Performance measurement also includes an assessment of the use of technology in managing
performance information. Spreadsheets and paper documents for data collection are only
adequate for the very smallest, localized organizations. In most modern organizations the
collection and distribution of performance data requires an IT system on a network, set up to
allow appropriate users to see the data they need in time to make decisions. The degree to which
end users have fast, reliable access to relevant, high-quality data thus becomes another aspect of
maturity in strategic management
Performance Management
“Your most unhappy customers are your greatest source of learning.” (Bill Gates). It is one thing
to collect data, it is another to use it effectively. Performance management deals with the degree
to which performance metrics are use in decision making.
Features to look for are
a) Recognition of the organization as a dynamic system;
b) The use of feedback loops – so managers get to see the results of their decisions;
c) Managers are able to change things based on timely reporting;
d) Strategic performance measures are available to test the strategy;
e) Leaders have placed the entire organization into a “learning loop” so that they can validate
their vision;
f) Ultimately the organization is learning what works to satisfy customers and improve the
organization.
The degree to which leaders and managers feel they have the information they need to make
decisions defines the level of performance management.
Process Improvement
“The first rule of any technology used in a business is that automation applied to an efficient
operation will magnify the efficiency. The second is that automation applied to an inefficient
operation will magnify the inefficiency.” (Bill Gates). The role of strategic management is to
identify which processes out of our entire portfolio are most in need of improvement (doing the
right things). This requires input from the strategy, which informs the allocation of resources for
planning improvements of the most strategically important processes in the near term and long
term. Process improvement includes an assessment of
a) The organization's knowledge about its strategically important work processes;
b) How well these processes are being improved updated and documented;
c) How efficiently these processes perform compared to industry benchmarks;
d) Skills, practices and technologies used to improve process quality and efficiency;
e) Knowledge of core competencies and capacities of the organization and how well they are
employed in running the processes;
f) The level of employee awareness of customers and their expectations;
g) Existence of contingency plans for future risks, such as disasters, funding shortages, and
leadership succession.
Sustainability of Strategic Management
“Thought is the blossom; language the bud; action the fruit behind it.” (Ralph Waldo Emerson)
Sustainability of the strategic management of the organization is defined by:
a) How well the organization is maintaining its focus on its strategic vision, plans and initiatives;
b) People, systems, and communication activities are in place to maintain the momentum of
desired change;
c) A sense of urgency in the staff and workforce;
d) Reward and recognition systems that support efforts to motivate employees to do the right
things;
e) Presence of “champions” to keep the workforce informed about the strategic priorities and
levels of performance that are desired;
f) Presence of an “Office of Strategic Management” to deploy the strategy and track
performance;
g) Degree to which strategic management has been institutionalized, so that “strategy is
everyone's job”. When a high level of maturity is achieved, the organization is on a journey of
continuous learning and improvement.

Business planning
A business plan is one of the first things a fledgling business will draft. Alternatively, it can be
used to set business goals when launching a new product or service. The business plan will
usually look at short-term details and focus on how things should run for around a year or less.
This will include looking at concepts such as:

 What the business idea is

 Short-term goals
 Who your customers are
 What your customers need
 What investment or financing you will need to start your business
 How you make revenue
 What profitability to expect
 How you can appeal to potential shareholders
 What the short-term operational needs of the business are
 What the company’s values are
 What the budget is for different parts of the business

This means market analysis and research are vital when you are making a business plan.

What are the objectives of business planning? The primary objective of a business plan is to have
all the main details of your business worked out before you start. This will give you a roadmap to
use when you launch your business or when you start offering a different product or service.

A strategic plan is where you set out the company’s goals and define the steps you will need to
take to reach those goals.

A strategic plan would include:

 What current capabilities the company has

 Making measurable goals
 A full strategy for business growth
 How the company’s values, mission and vision tie in with the services and products the
company intends to offer
 Who in the organization will handle certain roles
 What the timeline is for reaching certain goals
 A SWOT analysis, looking at the strengths, weaknesses, opportunities and threats in the
company
 Examining the external environment for factors that will affect your company using a
PEST (political, economic, social and technological) analysis

Strategy planning
A strategic plan can be a long-term blueprint. You might find you use basically the same
strategic plan for several years.

What is the objective and strategy of planning?

The aim of a strategic plan is to provide a tool that allows you to improve your business, grow
the company, streamline processes or make other changes for the health of your business.
Strategy implementation and meeting strategic objectives should generally lead to growth.

Both of these activities will require some of the same analytical components, such as market
analysis, financial projections and setting objectives you can track. Of course, both also require
you to be highly organized and focused to ensure your business model or strategy development is
appropriate for your business.

Integrating strategic planning and business planning

Strategic management can be linked with a business plan in several ways:

1. Goal Alignment:

The strategic management process helps to ensure that the goals and objectives outlined in the
business plan are aligned with the overall vision and mission of the organization. This ensures
that the organization is working towards a common purpose and that all activities are focused on
achieving the desired outcomes.

2. Resource Allocation:

The strategic management process helps to identify the resources that are needed to achieve the
goals and objectives outlined in the business plan. This includes financial resources, human
resources, and other assets that are necessary to support the organization's activities. By
allocating resources strategically, the organization can ensure that they are being used efficiently
and effectively to achieve the desired outcomes.

3. Risk Management:

The strategic management process helps to identify potential risks and uncertainties that could
affect the organization's ability to achieve its goals and objectives. By analyzing these risks and
developing strategies to mitigate them, the organization can reduce the likelihood of negative
outcomes and increase the likelihood of success.

4. Performance Measurement:

The strategic management process helps to establish key performance indicators (KPIs) that can
be used to measure the organization's progress towards its goals and objectives. By regularly
monitoring these KPIs, the organization can identify areas where it is performing well and areas
where it needs to improve, and make adjustments to its strategy as needed.

Characteristics of strategic decisions:

Strategic decisions are high-level, long-term decisions made by top management that have a
significant impact on the organization's direction, goals, and competitive positioning. These
decisions are typically complex, involve a high level of uncertainty, and require a deep
understanding of the organization's internal and external environments. Here are some key
characteristics of strategic decisions, along with examples:

 Long-term Impact: Strategic decisions have a long-term impact on the organization, often
spanning several years or even decades. For example, deciding to enter a new market or
develop a new product line can have long-lasting effects on the organization's growth and
profitability.
 High Level of Uncertainty: Strategic decisions are made in an environment of high
uncertainty, where the outcomes of the decisions are difficult to predict. For example,
deciding to invest in a new technology or expand into a new geographic region involves a
high level of uncertainty about future market conditions and customer preferences.
 Cross-functional: Strategic decisions often involve multiple functions within the
organization, such as marketing, finance, operations, and human resources. For example,
deciding to implement a new customer relationship management (CRM) system may
require input from multiple departments to ensure that the system meets the needs of the
entire organization.
 Resource Allocation: Strategic decisions often involve allocating resources, such as
financial capital, human capital, and physical assets, to achieve the organization's goals.
For example, deciding to invest in research and development (R&D) to develop new
products requires allocating financial resources to fund the R&D activities.
 Risk and Return: Strategic decisions involve a trade-off between risk and return, where
higher-risk decisions may have the potential for higher returns. For example, deciding to
enter a new market with a high growth potential may involve higher risks, but also the
potential for higher returns.
 Alignment with Mission and Vision: Strategic decisions are aligned with the
organization's mission and vision, which define its purpose and long-term goals. For
example, a company with a mission to improve access to healthcare may make strategic
decisions to develop new medical devices or expand into underserved markets.
 Competitive Advantage: Strategic decisions are aimed at creating and sustaining a
competitive advantage for the organization. For example, a company may make strategic
decisions to invest in research and development (R&D) to develop innovative products
that differentiate it from competitors.
We can see few examples:
 Entering a New Market: A company decides to enter a new international market to
expand its customer base and increase revenue. This decision is characterized by its long-
term impact, high level of uncertainty regarding market conditions, cross-functional
involvement (e.g., marketing, operations, finance), resource allocation (e.g., capital for
market research, distribution networks), risk and return trade-offs, alignment with the
company's mission and vision, and the pursuit of competitive advantage.
 Developing a New Product Line: A technology company decides to develop a new line of
smart home devices. This decision is characterized by its long-term impact, high level of
uncertainty regarding customer preferences and technological advancements, cross-
functional involvement (e.g., R&D, marketing, operations), resource allocation (e.g.,
R&D budget, hiring of specialized talent), risk and return trade-offs, alignment with the
company's mission and vision, and the pursuit of competitive advantage through
innovation.
 Acquiring a Competitor: A large retail chain decides to acquire a smaller competitor in
order to increase market share and gain access to new geographic markets. This decision
is characterized by its long-term impact, high level of uncertainty regarding market
dynamics and regulatory approvals, cross-functional involvement (e.g., finance, legal,
operations), resource allocation (e.g., acquisition costs, integration expenses), risk and
return trade-offs, alignment with the company's mission and vision, and the pursuit of
competitive advantage through consolidation.
 Implementing a New Business Model: An established company decides to transition from
a traditional brick-and-mortar business model to an e-commerce model. This decision is
characterized by its long-term impact, high level of uncertainty regarding customer
adoption and technological requirements, cross-functional involvement (e.g., IT,
marketing, operations), resource allocation (e.g., technology infrastructure, digital
marketing), risk and return trade-offs, alignment with the company's mission and vision,
and the pursuit of competitive advantage through digital transformation.
 Restructuring the Organization: A multinational corporation decides to restructure its
operations by centralizing certain functions and decentralizing others. This decision is
characterized by its long-term impact, high level of uncertainty regarding organizational
culture and employee morale, cross-functional involvement (e.g., HR, finance,
operations), resource allocation (e.g., restructuring costs, training programs), risk and
return trade-offs, alignment with the company's mission and vision, and the pursuit of
competitive advantage through organizational efficiency.

Role of a Strategic Manager

A strategic manager plays a critical role in an organization by overseeing the development and
execution of the organization's strategic plan. This involves setting goals and objectives,
identifying opportunities and threats in the external environment, and allocating resources to
achieve the organization's long-term vision. The role of a strategic manager can vary depending
on the size and structure of the organization, but some common responsibilities include:
o Developing the Strategic Plan: The strategic manager is responsible for developing the
organization's strategic plan, which outlines the organization's long-term goals and
objectives, as well as the strategies and tactics to achieve them. This involves conducting
a thorough analysis of the organization's internal and external environment, identifying
opportunities and threats, and developing a plan to capitalize on opportunities and
mitigate threats.
o Setting Goals and Objectives: The strategic manager is responsible for setting clear and
measurable goals and objectives that align with the organization's strategic plan. This
involves working with other members of the management team to define key
performance indicators (KPIs) and develop a plan to track progress towards achieving
these goals.
o Allocating Resources: The strategic manager is responsible for allocating resources, such
as financial capital, human capital, and physical assets, to achieve the organization's
goals. This involves developing budgets, prioritizing projects and initiatives, and
ensuring that resources are allocated in a way that maximizes their impact on the
organization's strategic objectives.
o Monitoring and Evaluating Performance: The strategic manager is responsible for
monitoring and evaluating the organization's performance against its strategic goals and
objectives. This involves tracking key performance indicators (KPIs), analyzing trends
and patterns, and making adjustments to the strategic plan as needed.
o Communicating the Strategic Plan: The strategic manager is responsible for
communicating the organization's strategic plan to key stakeholders, including
employees, customers, investors, and the board of directors. This involves developing
clear and concise communication materials, such as presentations, reports, and
dashboards, and ensuring that all stakeholders understand the organization's strategic
direction.
o Leading Change: The strategic manager is responsible for leading change within the
organization to ensure that it remains competitive and adaptable in a rapidly changing
environment. This involves identifying areas for improvement, developing and
implementing change management plans, and ensuring that employees are engaged and
motivated to support the organization's strategic objectives.

The Strategic Management Process: Elements and Model

As discussed earlier that strategic management is a process of relating the organizational with its
environment by suitable course of action involving strategy formulation and ensuring that the
strategy has been implemented effectively.

1. Environmental Scanning- The first step of strategic management process is Environmental

scanning, refers to a process of collecting, scrutinizing and providing information for strategic
purposes. It helps in analyzing the internal and external factors influencing an organization. After
executing the environmental analysis process, management should evaluate it on a continuous
basis and strive to improve it.

2. The second step of strategic management process is environment analysis which helps in
finding out the opportunities and threats operating in the environment and strengths and
weaknesses of an organization. Since an organization is a social system, it operates within the
environment which consists of many factors (political, cultural, legal, social etc.) In this
interaction process, the organization has to relate itself with the environment. Environmental
analysis also includes organizational analysis, which brings strength and weakness of an
organization. It also helps in identifying the relevant environmental factors taken for detailed
analysis.
3. The third important step in strategic management process is related with strategic decision
(choice of a strategy). Since the particular strategy attempts to affect the organizational operation
in some predetermined manner, the choice process systematically considerers how each
alternative affects the various critical factors of the organization. The fourth step of strategic
management process is related with implementation of a strategy. Here the strategic plan is out
into action through project implementation, process implementation, resources allocation,
structural implementation, behavior implementation and functional and operational
implementation. In other words, various activities like organization structure, effective
leadership, allocation of resources etc., are designed for effective implementation of strategy in
this step.
4. Evaluation and control is the last of the strategic management process in which strategy is
reviewed and result of strategy implementation are monitored. In fact, it is ongoing process in
which implementation of strategy is monitored continuously and necessary action is taken
whenever required.
These components are steps that are carried, in chronological order, when creating a new
strategic management plan.

Present businesses that have already created a strategic management plan will revert to these
steps as per the situation’s requirement, so as to make essential changes.

Components of Strategic Management Process

Strategic management is an ongoing process. Therefore, it must be realized that each

component interacts with the other components and that this interaction often happens in chorus.

BUSINESS DEFINITION
It explains the business of an organization in terms of customer needs, customer groups and
alternative technologies. A clear business definition is helpful in identifying several strategic
choices. The choices regarding various customer groups, various customer functions and
alternative technologies give the strategists various strategic alternatives. The diversification,
mergers and turnaround depend upon the business definition. Customer oriented approach of
business makes the organization competitive. On the same lines, product/ service concept could
also give strategic alternatives from a different angle. Business can be defined at the corporate or
SBU levels. At the corporate level, it will concern itself with the wider meaning of customer
groups, customer functions and alternative technologies. If strategic alternatives are linked
through a business definition, it results in considerable amount of synergic advantage.
OBJECTIVES AND GOALS
Objectives refer to the ultimate end results which are to be accomplished by the overall plan over
a specified period of time. The vision, mission and business definition determine the business
philosophy to be adopted in the long run. The goals and objectives are set to achieve them.
Meaning:
l Objectives are open ended attributes denoting a future state or out come and are stated in
general terms.
l When the objectives are stated in specific terms, they become goals to be attained. l In strategic
management, sometimes, a different viewpoint is taken.
l Goals denote a broad category of financial and non-financial issues that a firm sets for itself.
l Objectives are the ends that state specifically how the goals shall be achieved.
l It is to be noted that objectives are the manifestation of goals whether specifically stated or not.
Difference between objectives and goals
The points of difference between the two are as follows:
l The goals are broad while objectives are specific.
l The goals are set for a relatively longer period of time.
l Goals are more influenced by external environment.
l Goals are not quantified while objectives are quantified.
Broadly, it is more convenient to use one term rather than both. The difference between the two
is simply a matter of degree and it may vary widely.
Need for Establishing Objectives
The following points specifically emphasize the need for establishing objectives:
l Objectives provide yardstick to measure performance of a department or SBU or organization.
l Objectives serve as a motivating force. All people work to achieve the objectives.
l Objectives help the organization to pursue its vision and mission. Long term perspective is
translated in short-term goals.
l Objectives define the relationship of organization with internal and external environment.
l Objectives provide a basis for decision-making. All decisions taken at all levels of management
are oriented towards accomplishment of objectives.

Thank You

-Harshita Sharma