UNDERSTANDING STRATEGY

CHARACTERISTICS OF STRATEGY

 1.Strategy is concerned with directing

and guiding the initiation and
growth of organizations, and the
changes that occur as they conduct their
activities.

Strategy is about decision making and

actions, which determine whether an
enterprise excels, survives or dies.
CHARACTERISTICS OF STRATEGY

 2.Strategy demands an integrated

approach to management, a sound
understanding of the dynamics of the
marketplace, perception, inspiration,
creativity, enthusiasm, commitment, energy,
vitality, drive and rationality.
 CHARACTERISTICS OF STRATEGY
 3. Strategy involves strategic positions: Strategic
competition can be thought of as the process of
perceiving new positions that woo customers from
established positions or draw new customers into the
market.
Strategic position is based on customer needs, customer
accessibility, or the variety of company`s products and
services.
If there were only one ideal position, there would be no
need for strategy. The essence of strategic positioning is
to choose a set of activities that is different from rivals.
 CHARACTERISTICS OF STRATEGY

4. Strategy is choosing what not to do-

strategy involves trade-off: A strategic position
is not sustainable, over the long term, unless there
Are tradeoffs with other positions, which means
That more of one thing necessitates less of another.

Without trade-offs , there would be no need for

choice and thus no need for strategy.
 CHARACTERISTICS OF STRATEGY
5. Strategic considerations involve deciding what a company
is to be (strategic thinking) and how it is to become what it is
to be (strategic planning)?

6. Strategy is intimately concerned with the long term

success(or failure) of the firm. Strategy is about range,
scale and scope of the organization`s activities.

7. Strategy operates in a competitive setting, and is

concerned about gaining a differential advantage vis-a vis the
competition- both present and potential. It deals with the
effective positioning of the organization in the competitive
environment.
 CHARACTERISTICS OF STRATEGY

8. Strategic Decisions must have internal

consistency, external fit, resource fit,
effective communication and
implementation: One of the prime
responsibilities of top management is to lead the
organization in developing a unified hierarchy of
strategic intent that incorporates a consistent and
mutually supporting set of vision, mission, goals
and objectives.
 CHARACTERISTICS OF STRATEGY

9. Strategy is the domain of top management:

Strategy formulation and implementation are
responsibilities of the top management.

10. Strategy determines the organization`s

scope of activities or businesses and influence
policy, procedures , plans, budgets etc. it lays down
effective boundaries for all the organizational
endeavors.
 CHARACTERISTICS OF STRATEGY
11. Strategy affects and is affected by the
external environment: The process of strategic
management deals with effective matching of
organizational strengths to take advantage of
environmental opportunities and minimize
weaknesses to overcome threats.

12. Proactive strategy: calls for stretching

organizational resources to make the impossible ,
possible. It builds effectively on organization`s
strengths to create competencies that outpace the
competition. (Dia.)
 CHARACTERISTICS OF STRATEGY

13. Strategy involves behavioral, ethical and

operational considerations: strategy is
concerned with creating direction and
understanding for all involved, so that each activity
is positive and effective.

14. Strategies may require a change in the

resources mix and their applications. It may also
necessitate a major change in the organization`s
culture, values, etc.
 CHARACTERISTICS OF STRATEGY

15. Strategy acts as a guide to the operational

decisions: for successful performance , managers
have to take care that the operational level
activities are in line with the strategic direction of
the firm. The real implementation of strategic
decisions is done at the operational level, which can
make the prospects of even the best- conceived
strategies.
 CHARACTERISTICS OF STRATEGY

16. Strategy of an organization has to take

care of all stakeholders and at times it may be a
hostage to the history of the organization, i.e, the
past strategy , the policies, the values , the culture,
the style, etc.

17. Strategic decisions are complex in nature:

The process is imperfect and is carried out in an
imperfect and changing world, by imperfect people.
 CHARACTERISTICS OF STRATEGY

18. Strategy is deliberate and unique:

Competitive strategy is about being different. It
means deliberately choosing a different set of
activities to deliver unique mix of value.

19. Strategic decisions may entail multiplicity

of time horizons. Strategy can focus on the short,
medium, and long term.
 CHARACTERISTICS OF STRATEGY

20. Strategic decisions have to aim at

efficiency as well as effectiveness : efficiency is
doing things right , effectiveness is doing the right
things. The short-term view is likely to lead to
efficiency, but managers may end up doing in a
right fashion the wrong task. Strategic decisions
must emphasize to balance both the perspectives.
 CHARACTERISTICS OF STRATEGY

21. Strategic decisions can and do involve a

high degree of uncertainty: they are concerned
with the long-term success, but always necessitate
keeping an eye on the short-term ramifications of
any action.
 STRATEGY
 Strategy may be defined as-
1. The long-term direction and scope of the
organization.
2. That aims at gaining a competitive advantage for the
organization,
3. in the competitive setting,
4. in the light of organization's resources and
constraints,
5. In order to generate customer delight and to meet and
exceed stakeholders needs.
TYPES OF STRATEGY
 1. Intended strategy: It refers to the plans or
future efforts of the managers. It presumes a
planned, deliberate, systematic and
thoughtful approach towards strategy. Plans
are the elements that deal with the actions to
be taken to achieve the ends where as policies
are the elements that elaborate on the
boundary condition i.e. limits or constraints of
each action.
TYPES OF STRATEGY
 2. Deliberate Strategy is that part of the
intended strategy that is actually
implemented.

 3. Realized strategy refers to the past. An

intended strategy when implemented
successfully becomes a realized strategy. It is
very rare that an intended strategy is
implemented in its original form , hence there
is hardly any intended strategy that moves in
its original form to be a realized strategy.
TYPES OF STRATEGY
 4. Unrealized Strategy refers to that part of
intended strategy which does not see the light
of the day due to changing environment ,
managerial incompetence, etc.

 5. Emergent strategy refers to the evolving

strategy in light of the environmental
realities. It may or may not be formally
developed.
TYPES OF STRATEGY
6. Imposed strategy refers to strategy
imposed upon by the powerful stakeholders in
the organization. E.g. the government by its
budgets, monetary policy, trade policy,
nationalization policy, delicensing policy, etc.
may dictate strategy to the firm.
LEVELS OF STRATEGY
 There are three levels of strategy
1. Corporate level strategy
2. Business Unit Level Strategy
3. Functional Level Strategy

1. Corporate level strategy : It is the strategy

formulated by top management to oversee interests
and operations of multiline corporations. It deals with
questions such as:
a. What kinds of businesses should the company be
engaged in?
b. What are the goals and expectations of each
business?
 LEVELS OF STRATEGY
2. Business Unit Level Strategy: Business unit
strategy is concerned with managing the interests
and operations of a specific line of business. It deals
with questions such as-

 How will the business compete within the market?

 What products/services should it offer?
 Which customers does it seek to serve?

This approach is suitable for corporations having many

businesses in diverse industries.
LEVELS OF STRATEGY
3. Functional Level Strategy: it is the strategy
chalked out by a functional specialists, in order to
further the SBU level strategy. Functional strategies
complete the hierarchy of strategies. Operational plans
flow from these strategies.
 STAKEHOLDERS IN BUSINESS
They are as follows:
1. The staff:

2. The communities: in which the staff live and works for and
in the organization and who is therefore dependent upon it
for their income and spending power.
3. Social customers: e.g charities, schools and hospitals
which may approach the organization for sopnsorship and
support for social causes.
4. Shareholders: the investors of maoney in an organization
in the expectation and anticipation of returns.
 STAKEHOLDERS IN BUSINESS
 5. Other financial interests: including backers,
contributors, bankers, educational, charitable , other loan
makers.
 6. suppliers: of components and raw materials

 7. the community: sectors and markets in which the

organization offers its products and services for sale.
 8. distributors and agents

 9. Government departments and agencies : with whom

the organization comes into contact.
 10. competitors and offers of alternative products:
 THE HIERARCHY OF STRATEGIC INTENT
 Strategic intent refers to the strategic ends the organization
strives to achieve in the future.

The various elements of a strategy must ideally

contain the next hierarchial elements.

Vision: a vividly descriptive image of what a

company wants to be or wants to be known for.

Mission: A statement of intent of what a company

wants to create, and through which lines of business.
 THE HIERARCHY OF STRATEGIC INTENT
 Purpose: an articulation of the functions that a company
intends to fulfil through its businesses.

 Goals:the business targets that a company's vision,

mission, and purpose are company makes.

 Values:
the set of cherished notions and beliefs that guide
every move that a company makes.

 Strategy:the methods that a company employees to

achieve the goal that its vision provides.
VISION
A vision refers to the category of intentions
And desires that are broad, all-inclusive and
Forward looking.

A vision statement is a concise word picture of the

organization at some future time which sets the
overall direction of the organization.
VISION STATEMENT

 A vision statement is something to be pursued.

 It is what the organization strives to be.

 An image of the desire future.

 A picture of the future you seek to create.

 Described in the present tense, as if it were

happening now.
 CHARACTERISTICS OF AN EFFECTIVE
VISION

Imaginable: a vision conveys a picture of what the future

will look like; even if a very distant future
Desirable: It will provide a set of expectations which will
satisfy and meet the needs of those who have a stake in
the situation.
Feasible: a vision must be realistic, attainable to be
effective .
Focused: is clear enough to provide guidance in decision
making.
Flexible: is general enough to allow individual initiative
and alternative responses in light of changing conditions.
Communicable: is easy to communicate ; can be
successfully explained within five minutes.
MISSION STATEMENT
 An effective mission statements describes the overall
purpose of the organization.
An effective mission statements answers the
following three questions raised by none other than
Peter Drucker-
a. What is our business?

b. What should our business be?

c. What will our business be?

 A mission statement typically describes an organization in

terms of its:

1. Purpose: Why organization exists.

2. Business: The main method or activity through which the

organization tries it fulfill this purpose.

3. Values: the principles or beliefs that guide an organization`s

members.
UTILITY OF MISSION STATEMENT
1. It provide a guide for living by reminding
organizations of fundamental ideas about their existence
and purpose.

2. It provides the boundary for strategy formulation.

3. It formally acknowledge responsibilities towards

various stakeholders.

4. It outlines norms for individual behaviour.

 QUALITIES OF MISSION STATEMENT

 1. Simple and short, easy to memorize.

 2. clear, but broadly written.

 3. reasonably stable, but also flexible.

 4. not limited quantitatively or qualitatively

 5. a statement of where you want to be, not necessarily

where you are.
 6. Values you hold precious.
WHAT IS EFFECTIVE MISSION
STATEMENT?
 1. format: what should it look like.
 2. Length: Long enough to reach the target audience:

one sentence to one page.

 3. Life: It should be long lasting and can last many

years.
 4. Tone: the language selected depends on the

company, target audience and originator.

 Title: it is most commonly used title, but the title

itself can help set a tone.

 Key words: such as service, mission, customers,

quality, employees, shareholders, growth, values, etc.

 OBJECTIVES
 Objectives are operational definition of the goals
and help managers to take specific action.

 Characteristics :
 1. it have the dimensions of multiplicity, clarity,

specificity, quality and periodicity.

 2. they are measurable.

 3. they have a time dimension.

 4. they can be official and operative.

 5. they should not be confused with strategies.

 6. they have a social responsibilities.

 WHY OBJECTIVES ?

 Objectives define the role of the organization in the

larger environment.

 They set the standard for performance monitoring

remedial actions.

 They act as a link between the vision, mission and

goals on one hand and policies, procedures and rules on
the other.

 They reduce conflict-they coordinate decisions and

decision makers.
E.G. OBJECTIVES OF INDIAN OIL
CORPORATION
 To earn a reasonable rate of return on investment.

 To further enhance marketing infrastructure and reseller

network for providing assured service to customers
throughout the country.

 To ensure maximum economy in the expenditure.

 To complete all planned projects within the schedule

time and approved cost.
ROLE OF OBJECTIVES

1. Objectives define the organization's Relationship with its

Environment.

2. Objectives help an organization pursue its

vision(defining the long-term position) and
Mission(short-term targets to be achieved).

3. Objectives provide the basis for strategic Decision-

making.

4. Objectives provide the standards for performance

Appraisal.
CHARACTERISTICS OF OBJECTIVES

1. Objectives should be understandable.

2. It should be real and specific.

3. It should be related to a time frame.

4. It should be measurable and controllable.

5. It should be challenging which after setting should

reachable.

6. Difficult objectives should correlate with each other e.g

they should be within one area.
 ISSUES IN OBJECTIVE -SETTING

1. Specificity- objectives may be stated at different levels of

specificity. This issue is solved by stating objectives at different
levels and prefixing terms such as corporate, general and
particular so it becomes easy for their evaluation.

2. Multiplicity- No organization operates on the basis of a single

or a few objectives. This issue deals with different types of
objectives with respect to organizational levels(e.g. higher or
lower levels),importance(e.g. primary or secondary),etc.
 ISSUES IN OBJECTIVE -SETTING

3. Periodicity- objectives are formulated for different time

periods. It is possible to set long –term , medium-term and short-
term objectives. E.g. a long-term objective may be continual
profitability. Short term objectives which support continual
profitability may be return on investment, profit margin, etc.
calculated on an yearly basis.
 ISSUES IN OBJECTIVE -SETTING

4. Quality- objectives are both may be good as well bad. E.g. a

bad objective is: “to be market leader in our industry.”

To restate the same objective as: “to increase market share to a

minimum level of 40 % of the total with respect to product A, over
a period of the next two years and to maintain it thereafter” is a
good objective.
 ISSUES IN OBJECTIVE -SETTING
5. Reality- Organization tend to have two sets of objectives : official
and operative.

Official- Those which the organisations agree to attain.

Operative- those which they seek to attain in reality.

E.g. Many organisations state one of their official objectives as the

development of human resource. But whether it is also an operative
objective depends on the amount of resources allocated to HRD.
 ISSUES IN OBJECTIVE -SETTING

6. Verifiability- each objective has to be tested on the basis of its

verifiability. E.g. a qualitative objective stated as: to create a
congenial working environment within the factory. To make
such objective verifiable, value judgment of informal experts-
both insiders and outsiders could be used.

Few quantifiable objectives measures are accidental rates, staff

turnover, absenteeism, etc.
FACTORS CONSIDERED WHILE OBJECTIVE-SETTING

1. The forces in the environment

2. Realities of enterprise resources and internal power

relationships

3. The value system of the top executive

4. Awareness by the management about previous

experiences of the objectives.
GOALS
 The term goal signifies a general statement of
direction in line with the mission. It may well be
qualitative in nature.

Features:
1. Goals address both financial and non-financial issues.

2. Goals facilitate reasoned trade-offs.

3. Goals call for stretching the limits.

4. Goals cut across functional areas.

 POLICIES
Policies are rules or guidelines to action.

Policies are plans in the sense that they are

general statements or understandings that guide or
channel thinking in decision making.

They help in delegation of authority and still maintain

control over subordinates.
EXAMPLES OF POLICIES
 “We will not question any products returned by
the customers.

 “we will follow a policy of filling top vacancies by

promotional within the ranks.

 We will not go for any joint ventures, apart from

those for procuring technology.

 We will never go for price discounts on our

products.
 TACTICS

 Means by which a strategy is carried out; planned and ad hoc

activities meant to deal with the demands of the moment, and to
move from one milestone to other in pursuit of the overall
goal(s). In an organization, strategy is decided by the board of
directors, and tactics by the department heads for
implementation by the junior officers and employees.
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