Chapter-1

Strategic Management- Introduction

 Origin of the word

 Strategia means generalship in Greek.

 Stratos means “ army “. Ag means “ to

lead” .

 The concept of strategy was first given in

the ART OF WAR by SUN TZU in China
500 BC

STRATEGIC MANAGEMENT MBA IV SEMESTER 2

 Some definitions of strategy
 The art of war, especially the planning of movements of
troops and ships etc, into favourable positions ; plan of
action or policy in business or politics etc.( oxford dic.)

 The determination of the long-run goals and objectives of an

enterprise, and the adoption of courses of action and the
allocation of resources necessary for carrying out these
goals.( Alfred Chandler )

 A strategy is the pattern or plan that integrates an

organisations major goals, policies, and action sequences
into a cohesive whole. A well formulated strategy helps
marshal and allocate an organisations resources into a
unique and viable posture based upon its relative internal
competencies and shortcomings, anticipated changes in the
environment, and contingent moves by intelligent opponents

STRATEGIC MANAGEMENT MBA IV SEMESTER 3

 Definitions. ( cont.)
 Strategy is the pattern of objectives, purposes, or
goals, stated in such a way as to define what business
the company is in or is to be in and the kind of
company it is or is to be.( Kenneth Andrews.)

 What business strategy is all about is, in a word,

competitive advantage. The sole purpose of strategic
planning is to enable a company to gain , as efficiently,
a sustainable edge over its competitors. Corporate
strategy thus implies an attempt to alter a companies
strength relative to that of its competitors in the most
efficient way.( KENICHI OHMAE. )

STRATEGIC MANAGEMENT MBA IV SEMESTER 4

Why Are Strategies Needed?
To proactively To mold the
shape how a independent actions
company’s and decisions of
business will managers and
be conducted employees into a
coordinated,
company-wide
game plan
Strategic Management Concept
Competent execution of a well-
conceived strategy is the best test
of managerial excellence and a
proven recipe for organizational
success!

Good Strategy + Good Strategy Execution

= Good Management
Nature of Strategic Management
 Modern manager/executives always face challenges
posed by external environment

 He is compelled to subordinate the demands of firm’s

internal activities and external environment to the
multiple and inconsistent requirements of its various
stakeholders

 For this manager employ mgt. processes that they feel

will position it optimally in tits competitive envi. By
maximizing the anticipation of environmental changes
and unexpected internal and competitive demands
Definition

Strategic management is the set

of decisions and actions that result in
the formulation and implementation of
plans designed to achieve a company’s
objectives.
Nine critical tasks

 Formulate the company’s mission, including

broad statements about its purpose,
philosophy and goals
 Conduct an analysis that reflects the
company’s internal conditions and
capabilities
 Assess the company’s external envi. ,
including both the competitive and the
general contextual factors
 Analyze the company’s options by matching
its resources with the external environment
 Identify the most desirable options by
evaluating each option in light of the
company’s mission
 Select a set of long-term objectives and
grand strategies that will achieve the most
desirable options
 Develop annual objectives and short-term
strategies that are compatible with the
selected set of long-term objectives and
grand strategies
 Implement the strategic choices by means of
budgeted resources allocations in which the
matching of tasks, people, structures,
technologies and reward systems is
emphasized
 Evaluate the success of the strategic process
as an input for future decision making
Dimensions of Strategic Decisions
 Decisions that are strategic in nature and
requires strategic management
 Strategic issues:
 Require top mgt. decisions
 Require large amounts of the firm’s resources
 Require considering the firm’s external
environment
 Often affect the firm’s long term prosperity
 Are future oriented
 Usually have multifunctional or multibusiness
consequences
Level of strategy

 Single business firm

 Corporate/ business level
 Functional level
 Multibusiness firm
 Corporate level
 Business level
 Functional level
 Single Business Unit
Corporate/business level
Production/R & D Financial/accounting
Marketing strategies
strategies strategies

Multi Business Unit

Corporate strategies

SBU-1 SBU-2 SBU-3

Pro Stra. Mrkt. Stra. Fina. Stra. H R Stra.

Corporate level strategy

 Composed of BOD, chief executives and

administrative officers
 Responsible for
 Firms financial performance and achievement of
non financial goals like, enhancing the firms
image and fulfilling social responsibilities
 Concern for stockholders and society at large
Decisions taken by top management
 Appoint key officers
 Financial performance
 Long-term as well as short term goals
 Decision in relation to collection and allocation of
funds
 Decisions about profit, divi., plaughing back of profit,
 For multibusiness org., determine in which the
company should be involved
 Review of plans
 Evaluate the performance
Business/Unit level strategy

 Composed of managers of different business

or units
 What they do?
 They translate direction given by top mgt. in
to concrete objectives and strategies for
individual business units
 They strive to identify and secure most
promising market segment within area
Decisions at this level
 Operation planning for
 Method
 Procedure
 Rules
 Budget
 Schedule
 Controlling techniques
 Frame strategies from the broader plan given by
corporate level
 For types of strategy at this level
 Production
 Marketing
 Finance
 personnel
Production Finance Marketing Personnel

-Location of -source of fund -selection of 1) For employees

pro. Unit mkt. -procedure for
-utilization of recruitment,
-Layout of pro. funds -pricing promotion,
unit demotion,
-control over - transfer,
-Product finance transportation training etc.
design -invst. decision charges
2) For industrial
-Quality -tax planning -sales
relations
control -divi. Policy (cash/credit) -trade union, pay
-Product mix -advertising package,
-project working hrs.
-Inventory mgt. media
financing leave-holiday,
-Branding, (long- short) -customer indu. safety,
relation with
packaging etc. relationship govt.
Functional level strategy
 Composed of : managers of an individual dept.
 Responsibility : to implement or execute the firms
strategic plans
 Area covered :
 Programme
 Schedule
 Dispatch
 Follow-up
 Method
 Sequence
 Preparing work chart (human & machine)
Benefits of Strategic Management

 According to SM approach
 Managers at all level interact in planning and
implementing
 Thus, behavioural consequences of SM are
similar to those of participative decision making
 Promoting positive behavioural
consequences enables the firm to achieve its
financial goals as well as non financial goals
Benefits
 Strategy formulation enhance the ability to
prevent problems
 Group based strategic decisions from the best
available alternatives
 Involvement of employees in strategy formulation
improve understanding of the productivity-
reward relationship and provide motivation
 Gaps and overlaps among groups and individuals
are reduced through clarification of roles
 Resistance to change is reduced
Risk of Strategic Management
 Time spent on strategic management
process may have negative impact on
operational responsibility
 If formulators are not intimately involved in
implementation, they may shirk their
individual responsibility for the decision
reached
 Strategic managers must be trained to
anticipate and respond to the disappointment
of participants over unattained expectations.
Strategic Management Process
Company mission and social
responsibility
External envi. Possible?
Remote Internal
Industry (global analysis
and domestic Desired?

Strategic analysis and choice

Long term objectives Generic and grand strategies

Short term objectives

Reward system Functional tactics Policies that empower action

Restructuring, reengineering, and refocusing the org.

Strategic control and continuous improvement

 Company mission
 Its unique purpose which make firm different from
others
 It shows philosophy of the firm and describe
company’s product, market and technological
areas
 Social responsibility
 Mission statement should express how company
intend to contribute to the society
 Internal analysis
 Quality and quantity of human, physical and
financial resources
 Assess the strength & weaknesses of company’s
 Internal mgt. and org. structure
 Identify future capabilities by comparing past
success & tradition with current capabilities
 External environment
 Condition and forces affecting strategic options
 Segment like remote, industry (global and
domestic and operating envi.
 Strategic analysis and choice
 Simultaneous assessment of external and internal
envi. To identify range of possible opportunities
for invst.
 Considering such opportunities in light of
company mission one can get the set of possible
and desired opportunities
 Then choice is made that optimally achieve
company’s mission
 Long-term objectives
 Such objectives involve all or sum of areas like: profitability,
return on invst., competitive position, technological
leadership, productivity, employee development etc.

 Generic and grand strategies

 Firm can adopt one or more “generic strategies”
 Three fundamental options are available like: low cost,
differentiation, focus strategy
 Combination of these capabilities to achieve its long term
objectives in dynamic envi. Be the grand strategy
 14 different grand strategies are there like:
 Integration, joint venture, product development, market
development etc.
 Action plans and short term objectives
 Action plan translate strategy in to “action” by incorporating
four elements
 Functional tactics
 Clear time frame for completion
 Creation of accountability and responsibility
 Each action has one or more specific, immediate objectives

 Creating policy
 It guides and preauthorize the thinking, decisions and
actions of operating managers and their subordinates in
implementing strategy
 It is essential for establishing and controlling the ongoing
process
 Restructuring and reengineering and
refocusing the org.
 Shifting from market orientation to internal to get
work done effectively and efficiently
 Questions are asked like
 What is the best way to organize over selves to
accomplish the mission?
 Where should leadership come from?
 What values should guide our daily activities etc.
 Company’s structure, leadership and reward
system may change
 Strategic control and continuous
improvement
 Control is concerned with detecting problems or
changes and making necessary adjustment
 Continuous improvement is required as envi. Is
dynamic and affected by global market
 Strategic control allows manager to respond
proactively, timely to rapid development
Change in process

 Strategic mgt. process assessed and

updated continuously

 Although basic elements rarely change,

the relative imp. Very with the decision
makers.