Strategic Management

Unit 1
Strategy
Derived from the Greek word “stratagos”;
stratus (meaning army) and “agos” (meaning
leading/moving).

Action that managers take to attain one or more of

the organization’s goals

A plan of action designed to achieve a long-term

or overall aim.
What is it?
Strategy is about finding a unique way to
put the organization’s activities (buying,
selling, producing, hiring, firing, etc.)
together that is hard or impossible for
competitors to replicate and is valuable
to customers.
So,
Strategy is the unified,
comprehensive and integrated
plan designed to achieve the
objectives of the organization
Also,
 A stream of decisions focused on a purpose.
 Looking long term.
 Capitalizing on change.
 The creation of a unique and valuable
position in your industry.
 Choosing what not to do.
 Creating a fit among an organization’s
activities.
Strategic Management
Strategic Management is the
analysis of the internal
capabilities and the external
environment of a firm to
efficiently use resources to meet
organizational objectives
Nature of Strategic Management
Looks internally and externally
Gives an organization a competitive
advantage
Has long term implications
Creates a framework for planning
Deals with uncertainty
Strategic Management Process:
Strategic Intent
Strategy Formulation
Strategy Implementation
Strategy Evaluation
Process of Strategic Management
Strategic Intent:
Vision
Mission
Values
Objectives
Plans
A vision looks forward and creates a
mental image of the ideal state that the
organization wishes to achieve.
It needs to be inspiring and should
challenge all those involved
A mission is an explanation of the
organization's reason for existence, and
intention by supporting the vision
It needs to be able to explain the vision to
all stakeholders by further breaking it down.
Goals or objectives are the results that the
organization tries to achieve. 
A prerequisite for planning
A goal is an achievable outcome that is
generally broad and longer term while an
objective is shorter term and defines
measurable actions to achieve an overall
goal
SMART
Specific
Measurable
Achievable
Relevant
Time bound
Company values (also called corporate values
or core values) are the set of guiding
principles and fundamental beliefs that help a
group of people function together as a team
and work toward a common business goal
A vision statement should
inspire people to dream;
A mission statement should
inspire people to act
Tesla
Vision statement: To accelerate the
world’s transition to sustainable energy.

Mission statement: To create the most

compelling car company of the 21st century
by driving the world’s transition to electric
vehicles.
IKEA
Vision statement: To create a better everyday life for the
many people.

Mission statement: Offer a wide range of well-designed,

functional home furnishing products at prices so low that
as many people as possible will be able to afford them.
Amazon
Vision statement: To be Earth’s most customer-
centric company, where customers can find and
discover anything they might want to buy online.

Mission statement: We strive to offer our

customers the lowest possible prices, the best
available selection, and the utmost convenience.
Vision
Mission
Goals / Objectives
Strategies
Departmental Goals
Personal goals
Continued..
Strategy Formulation:
Environmental Scanning
Organizational Appraisal
SWOT Analysis
Continued..
Strategy Implementation:
Processes
Procedures
Resource Allocation
Systems
Policies
Levels of strategies:
Corporate:
Corporate level strategy involves the decisions that
top managers make to enter and gain competitive
advantage in multiple industries or markets
Corporate level strategy ensures that all business
units are working towards a main goal.
Also responsible for directing different business
strategies across multiple business units. 
This top-level strategy is concerned with how the
corporate parent can add value to its business
units across multiple dimensions, such as the
product or market scope, vertical scope, and
geographical scope
Diversification, entering businesses upstream /
downstream, acquisitions, mergers,
internationalization, growth
Business:
Business strategy is how a firm creates value for a
defined activity on its market.
It shows the way a firm competes, positions, and
masters its rivalry interactions and industrial
structure.
Configuring its value chain and manage its
resources and capabilities to create a sustainable
competitive advantage
Decisions about what business are done at corporate
level.
Business decisions about who customers are going
to be, how to attract them, and then encourage them
to buy the product or service within an environment
where other companies may be looking to capture
those same customers’ attention, commitment, and
money
How to build and strengthen the business’s long
term competitive position in the market place
Focusing on customers – asking what they need or
want
Taking stock of resources and capabilities - asking
whether they can innovate and reliably produce a high
quality good or service and whether they can do this at
scale.
Scope out the competition and continue to provide a
product or service that consumers choose over other
similar products
Functional:
Each functional area of a business should
implement a functional level strategy to achieve its
own goals, enhance operations, and support the
wider business level strategy.
Department managers or heads are usually
responsible for functional strategies. Their
formulation and implementation should connect
to the business level strategy.
Managers need to ensure the daily
operations within each department
align with the defined corporate
outcomes.
This involves implementing specific
measures to track whether each area is
meeting broader objectives. 
E.g. - Marketing Strategy, Human
Resource Strategy etc.
If the business strategy is aimed at offering
products to students and young adults, the
marketing department should target these
people as accurately as possible through
their marketing campaigns by choosing the
right (social) media channels.
HR Strategy:
Are the basic courses of action that the
company’s recruiting, selecting, training,
appraising and compensation systems
producing the competencies and behaviors
that the company needs to execute the
strategic plans?
You don’t want to:
Constantly hire wrong people
Have high attrition
Have a disengaged workforce
Get sued
Be under or over trained
Constantly have your staff compare compensation with
their friends
Have separated employees badmouth you
Strategy and Tactics
All men can see the tactics
whereby I conquer, but what
none can see is the strategy
out of which victory is
evolved.
Strategy and Tactics
Strategy Tactics

Integrated action Plan Organized actions

Larger umbrella Subordinate to or subset of strategy

Forward looking Current

Formed by top management Formed and executed by middle

management
Relatively stable Can keep changing
Stakeholders & Strategic Mgmt.
Stakeholders – individuals and
groups who can affect and get
affected by an organization, and
the strategic decisions it takes
Internal / external
Direct / indirect
Apart from that:
Competition
Interest Groups

(shared in class – watch a movie titled Erin Brockovich)

Also watch – for strategic management -
https://www.youtube.com/watch?v=sU3FLxnDv_A
Stakeholders brought into any decision
or project development from the get-go
are able to help provide ideas and help
create potential solutions
Stakeholders come from varying
backgrounds, and so they look at issues
from differing perspectives
Effective engagement with
stakeholders allows organizations to identify
groups who may not support the project.
Knowing who does and does not support the
project allows for an opportunity to better
understand the motivations, influences and
behaviours of those who are in opposition
Stakeholder interest in an
organization can relate to
productivity, environment, quality,
technology, as well as financial,
regulatory, welfare, or ethical issues
Prioritizing your stakeholders is
important because it helps you understand
where to invest your resources.
It helps organizations to identify who the
key decision makers are at any given
moment, so that it can be ensured that the
organization is engaging with the right
people, at the right time
Stakeholder engagement helps
organizations to proactively consider
the needs and desires of anyone who
has a stake in their organization,
which can foster connections, trust,
confidence, and buy-in for your
organization's key initiatives
Key stakeholders affecting decision making and
strategic planning are:
Customers – internal, external, direct and
indirect.
Suppliers and vendors
Government
Competition
Interest groups
Shareholders and Board
Abell’s Business Definition:
A framework that proposes that a
business can be defined by using three
dimensions: 
 Customer groups (whom to serve),
 Customer needs (what customer needs to
meet),
 Technology or distinctive competencies
(how to meet that need).
Customer Groups (the WHO)
Customer Groups refers to who the
business is targeting.
It’s important a business knows
who their audience is, as without
this they won’t be able to segment,
target, or construct the right
messages
Customer Needs (The WHAT)
Customer Needs is the dimension
focusing on the problems the
business is solving for customers.
What they need, want, desire,
require, are noted in this dimension
Reasons customers buy from a
company
Technology – (The HOW)
The technology dimension
describes everything that is used
when developing and selling a
product or service to the customers
in order to meet those needs
Components of a Strategic Plan:
Vision
Mission
Goals
Objectives
Strategies
Tactics
KRA, KPI, CSF
KRAs, CSF, KPIs
KRAs – What to achieve, or objectives -
success of individual employee, department,
project or organization
Key Result Areas
Set of goals to accomplish
Customer base, revenue, profits, attrition
CSFs
• What do we need to have / become better
at in order to be successful?
• CSFs are critical factors required for
ensuring the success of a company or a
product – cause of success
• Service – speed, reliability
• Product – quality, cost
KPIs
KPIs are metrics that show a business's
progress
Key performance Indicators
Measures in terms of which CSFs are evaluated
If high quality is a CSF, then
 Product recall rate
 Customer complaints
 Rejection rate etc. are KPIs
Functional Strategies:
Primary Functional Strategies:
Marketing and Sales
HR
Finance
Production
Allied Functional Strategies:
R & D, Materials & Inventory, Technology etc.
Objectives:
Profitability
Market share
Financial health
Human talent
Cost efficiency
Product quality
Innovation
Social responsibility
Marketing Strategy:
A practice that allows an organization to focus
on the available resources and turn the
opportunities into productivity to increase
sales and achieve competitive lead.
Capturing larger share of existing market, new
markets, new products, improvisation, pricing
Dominate, innovate, be proactive / reactive
Product, price, place, promotion
Financial Strategy:
Deals with the availability of
funds, sources, usage, and
management of funds.
How much, when, for how long,
how should it be raised, how to use
and manage
HR Strategy
Ensuring that all practices from planning for
manpower to exits, align with organization’s corporate
and business strategy
Talent acquisition
Training and development
Performance management
Compensation
Organizational culture
Ensuring retention by lowering attrition
R & D:
Product innovation
Process improvement
Production:
Make to stock
Assemble to order
Level production
Materials / inventory:
Raw material, WIP, Finished goods, MRO
JIT
Quality, productivity systems and
certifications
ISO, Six Sigma, Lean management,
KanBan (TPS), Kaizen, Poka Yoke etc.
Porter – 5 Forces
Michael Porter - five competitive forces that
shape every industry and every market.
These forces determine the intensity of
competition and hence the profitability and
attractiveness of an industry.
The objective of corporate strategy should
be to modify these competitive forces in a
way that improves the position of the
organization
Porter’s 5 Forces Model
Bargaining power of suppliers
Threat of new entrants
Rivalry amongst competitors
Threat of substitutes
Bargaining power of customers
Bargaining Power of Suppliers

The market is dominated by a few large suppliers
rather than a fragmented source of supply / supplier
concentration.

There are no substitutes for the particular input

Impact of inputs on cost or differentiation

The switching costs from one supplier to another
are high.

Forward / backward integration

Cost relative to total purchase of the industry
Threat of new entrants
Entry barriers
Scarcity of resources
Access / distribution of raw materials
controlled by existing players
Long term service contracts
Barriers to Entry
Economies of size
Capital intensive
IPR
Governmental regulations and licenses
High switching costs
Established strong brands
Lock up of distribution channels
Threat of substitutes
Switching costs
Price for performance of substitute
Buyer propensity to substitute
Substitutes:
A threat from substitutes exists if there are
alternative products with comparable
pricing and performance parameters for the
same purpose.
They could attract a significant proportion
of market volume and hence reduce the
potential sales volume for existing players.
Rivalry among Competitors:
Multiple players
Similar strategies
Not much differentiation
High exit barriers
Competitive rivalry is a measure of the
extent of competition among existing firms.
Intense rivalry can limit profits and lead to
competitive moves, like price cutting,
increased advertising expenditures, or
spending on service/product improvements
and innovation.
Barriers to exit:
High investment in specialized
equipment
High fixed costs
Specialized skills
Bargaining Power of Customers:
Buyer concentration
High number of suppliers
Undifferentiated products
Backward integration possible
Customer self manufacturing is possible
Simple switching possible
Buyer information
Switching Costs:
Exit fees (when breaking contract)
Equipment costs (when changing service provider)
Installation costs
Learning costs (time and effort, training)
Lock in period, contracts
Convenience (location)
Risk
Emotional costs
Scenario Planning:

A story with
many possible
endings
Scenario planning was popularized in
the 1970s by Royal Dutch/Shell, which
created an entire department dedicated
to crafting narratives about how
potential issues in the oil industry
could affect their business planning,
innovation, personnel, and public
affairs.
Scenario planning is a strategic planning
process in which organizations envision
different futures that may play out
Scenario planning is used to prepare for worst-
case scenarios (like data breaches or natural
disasters) as well as best-case scenarios (sudden
demand spikes).
It is more creative than forecasting, which
involves more numerical analysis
Scenario planning is identifying a specific
set of uncertainties, different “realities” of
what might happen in the future of a
business.
If not done, there is a risk of opening the
door to increased costs, increased risks,
and missed opportunities.
Scenario planning helps decision-
makers identify ranges of potential
outcomes and impacts, evaluate
responses and manage for both positive
and negative possibilities
Helps businesses become proactive
rather than reactive by visualizing risks
and threats
What issues are we trying to address?
Over what time frame?
Major external factors
Internal factors
How to mitigate?
Can we entirely avoid?
Types:
Operational
Quantitative
Normative
Overall
Best case (optimistic)
Worst case (pessimistic)