STRATEGIC

MANAGEMENT

Ms. Kalpana Mohanty

Strategy

• The word “strategy” is derived from the Greek word

“stratagos”; stratus (meaning army) and “ago” (meaning
leading/moving).
• Strategy is an action that managers take to attain one or more of
the organization’s goals.

• “A general direction set for the company and its various

components to achieve a desired state in the future. Strategy
results from the detailed strategic planning process”.

• A strategy is all about integrating organizational activities and

utilizing and allocating the scarce resources within the
organizational environment so as to meet the present objectives.

• Strategy can also be defined as knowledge of the goals, the

uncertainty of events and the need to take into consideration the
likely or actual behavior of others.
• Strategy is the blueprint of decisions in an organization that
shows its objectives and goals, reduces the key policies, and
plans for achieving these goals, and defines the business the
company is to carry on, the type of economic and human
organization it wants to be, and the contribution it plans to
make to its shareholders, customers and society at large

• While planning a strategy it is essential to consider that

decisions are not taken in a vaccum and that any act taken by a
firm is likely to be met by a reaction from those affected,
competitors, customers, employees or suppliers.
Difference Between Planning and
Strategy

• Planning is “Thinking before the action takes place”. It decides

beforehand, what, when, how the task is to be accomplished.

• The strategy is all about using a trick to gain success in a

particular purpose. It is the skill of managing affairs of the
enterprise or “a comprehensive plan.”
 BASIS FOR
PLANNING STRATEGY
COMPARISON
Meaning Planning is thinking in advance, for the Best plan opted for achieving
actions which are going to take place in the desired outcome.
the future.
What is it? Planning is a road map for Strategy is the path chosen for
accomplishing any task. achieving the objectives.

Related to Thinking Action

Basis Assumptions Practical considerations

Term Depending upon the circumstances. Long Term

Nature Preventive Competitive

Part of Management Yes Sub-part of Decision Making

Functions

Sequence Second First

How is strategy different from tactics?
• A strategy refers to an organization’s long-term goals and how
it plans to reach them. In other words, it shows the path to
achieve the defined vision.
• A tactic refers to the specific actions taken to reach the set
goals in line with the strategy.
For example, company A’s strategy might be to become the cheapest
provider in the smartphone market. Their managers then need to
negotiate with suppliers to reduce the costs of the electronic components
used in production. This is a tactic to achieve the set strategy.
“Strategy is buying a bottle of fine wine when you take someone
out for dinner. Tactics is getting them to drink it.”
-FRANK MUIR-
Strategic Management

Strategic Management is all about identification and

description of the strategies that managers can carry so as
to achieve better performance and a competitive
advantage for their organization.
*An organization is said to have competitive advantage if its
profitability is higher than the average profitability for all companies
in its industry.
Strategic management can also be defined as a bundle of
decisions and acts which a manager undertakes and which
decides the result of the firm’s performance.
The manager must have a thorough knowledge and
analysis of the general and competitive organizational
environment so as to take right decisions.
• Strategy is a well defined roadmap of an organization. It defines
the overall mission, vision and direction of an organization. The
objective of a strategy is to maximize an organization’s strengths
and to minimize the strengths of the competitors.
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Functional level

Balmer & Lawrei, a public sector undertaking, has a diversified portfolio of businesses in the field of grease
and lubricant, leather and functional chemical, packeging, turnkey projects, Tea exports, Travel and tourism
etc.
Corporate level strategy
• Corporate level strategy is the uppermost level of strategy
made by top-level management which sets the overall direction
of the organization.
• attempts to obtain synergy among employees, product lines,
business units, and other components of the organization
believing that the whole is greater than the aggregate of
individuals.
• The corporate strategy works based on what the organization
wants to achieve overall and sets strategies following the
overall goals and objectives.
• Corporate-level strategies are set deriving ideas from vision
and mission statements.
Effective corporate strategy leads to
four different types such as :
STABILITY STRATEGY.

Maintaining existing products, markets, and operations is a priority.

The stability strategy is a strategy that tries to keep an organization’s existing
activities going without making any significant changes in direction.

EXPANSION STRATEGY.

 The growth strategy aims to increase sales, assets, profits, or a combination

of the three.
 It allows businesses to take advantage of the growth curve and lower the per-
unit cost of products sold, resulting in higher profitability.
 Due to the increased availability of financial resources, organizational
procedures, and external links, larger organizations tend to endure longer
than smaller companies.
RETRENCHMENT STRATEGY
 stability and expansion strategies are in aggressive nature but retrenchment
is a defensive nature of strategy.
 A retrenchment strategy is a business approach that tries to diminish a
company’s size or diversity.
 A retrenchment plan entails exiting specific markets or discontinuing
specific products or services.
MIXED STRATEGY.
 When an organization operates in a variety of environments, separate
strategic business units and products follow a combination strategy.
 In other words, a firm is said to be implementing a combination strategy if
it uses stability, expansion, and retrenchment strategies in its many
strategic business units at the same time.
 Primarily used to solve a variety of environmental issues
Business level strategy

• Business level strategy is the which is designed to use the best

use of organizational competencies to gain a long-term
competitive advantage over competitors.

• A strategic business unit is a division of an organization that

has a separate district external market for goods and services
from the other strategic business units.

• It could be a distinct business or product such as Samsung

selling smartphones, cameras, TVs, microwaves, refrigerators,
etc. The corporate strategy is followed by a business-level
strategy. As a result, there should be a clear link between SBU
and business strategy.
Effective Business strategy leads to four
different types such as :
Cost Leadership/Cost Reduction Strategy
• The cost leadership/cost reduction strategy is a step in producing goods or services
with attributes that customers find acceptable at a lower cost than competitors.
• This strategy typically involves selling standardized goods or services to the industry’s
cost-conscious clients. Cost leaders focus on lowering their costs in comparison to their
rivals.
Differentiation Strategy
• The differentiation strategy is an endeavor to produce goods or services that buyers
perceive as unique (at a reasonable cost).
• Differentiators, unlike cost leaders, target clients for whom value is created in a way
that sets the firm’s offerings apart from the competition. As a result, product innovation
is crucial to a differentiation strategy’s success.
Focus/Niche Strategy
• The focus/niche strategy entails producing goods or services that cater to the needs of a
specific competitive segment. Firms use their core capabilities to fulfill the demands of
a certain industry segment, a different segment of a product line, a different geographic
market, or a specific customer group when they use a focus strategy.
Functional/Operational level strategy

• The functional level strategy also called operational level strategy is

developed to run effectively the day-to-day activities of the
organization.
• A number of functions are carried out regularly to effectively run the
business as different functional departmental are created – production
department, HR department, marketing department, customer service
department, etc.
• functional strategy aims to bring effectiveness in such functional areas.
• resources, work pressure, information, and manpower are integrated
to bring effectiveness to the business and corporate-level strategies.
• Functional strategies are for short time usually less than one year. These
strategies are related to capability, efficiency, customer service,
product quality, and marketing.
 1.What business are we in?
2. How do we compete?
(It aims to how to best successfully compete with competitors so that competitive advantage will
be gained.)
3. How do we support the business-level strategy?

Hence…

All these three levels of strategy are crucial to set appropriately

considering the organizational capability and desired goals. While
developing strategic decisions or different strategies a manager
should not forget each level of strategy helps other levels otherwise
desired goals will be difficult to achieve.
Strategic Decision Making
Strategic Decision Making
•Rare,
•Consequential,
Decision •Directive.
Decisions made according to a company’s
Making goal or mission and relates to the
responsibility of the top management.
Example:1.To enter into new market.
2.New technology.
3.New product line.
4. Major changes in policies.
5.Corporate restructuring.
Approaches
Strategic decision making is the core of strategic
management and it is complex and intriguing
Henry Mintzberg’s approaches to strategic decision making.
• Entrepreneurial Approach:
• Adaptive Approach
• Planning Approach
Other most widely used approaches are:
• Rational-analytical approach
• Intuitive-emotional approach,
• Political-behavioural approach,
• Administrative approach
Rational-analytical approach

• Assumes that the decision maker is a ‘unique actor who behaves

intelligently and rationally’.
• This approach follows the process as:
(a) Decision makers have complete information about the decision situation
and possible alternatives.
(b) They can effectively eliminate uncertainty to achieve a decision condition
of certainty.
(c) They evaluate all aspects of the decision situation logically and rationally.
Exception:
*Managers at Coca-Cola decided to change Coke’s formula after four years
of extensive marketing research, taste tests, and rational deliberation- but the
decision was still wrong.
*NOKIA
Intuitive-emotional approach
• Intuition is an innate belief about
something without conscious
consideration.
• decision taken to do something because it
feels “right”.
• This feeling is not arbitrary but based on
habit or experience, gut feeling, reflective
thinking, and instinct, using the
unconscious mental processes.
Political-Behavioural approach
• This approach suggests that real decision makers
must consider a variety of pressures from other
people who are affected by their decisions.
• An organization interacts with different
stakeholders in interdependent exchange
relationships.
• More powerful stakeholders have more influence
over decisions because the organization is more
dependent on these stakeholders.
Henry Mintzberg’s approaches to strategic decision making.

1. Entrepreneurial Approach:
As the caption suggests, this approach is followed in
strategic decision-making by the organisations headed by
family heads where by the organisation is moulded to- face
the environmental changes.
Features of Entrepreneurial Approach:
i. Capitalizing on the Opportunities: Entrepreneurial
approach warrants constant search for opportunities that
changing environment makes available. This searching may
be formal or informal. Seeking the possible and viable
opportunities and encashing them, i.e., it is not a problem
solving process.
Administrative approach

Herbert A Simon was one of the first person to recognize

that decisions are not always made with rationality and
logic.
His administrative model holds that managers-
(i) have incomplete and imperfect information,
(ii) are constrained by bounded rationality, and
(iii) tried to satisfice when making decision.
*Decide on and pursue a course of action that will satisfy
the minimum requirements to achieve a particular goal.
*Focuses on adequate result rather than perfect result.
(For example: A manager looking for a site for a new plant, for example, may select the first site he
find that meets basic requirements for transportation, utilities, and price, even though further search
might yield a better location .)
ii. Centralized Decision-Making Power :The family head is the person who has
the exclusive power of making bold and unusual decision. It is founded on rich
experience of past and sound judgment that play vital role in making the head as
competent authority to make decisions.

iii. Growth and Expansion Orientation: This approach is growth and expansion-
oriented. That is, there is an all-out attempt to increase the wealth, assets,
turnover and market share. Growth and expansion oriented approach keeps the
family of entrepreneurs on the toes, always alert and agile and keen observation
of business situations is the key to their success.

iv. Efforts and Rewards are Well Balanced: The entrepreneurial approach believes
in making unusual and very bold decision in the environment of uncertainty.
They keep the organisation adaptive to the changing needs of business world .
AdaptiveApproach:

This adaptive approach is reactive rather than proactive and tries to collect and mix the variant factors
influencing the strategic decisions.
This approach is very common in case of public sector enterprises where decision-making power is divided
amongst different constituents.
It is a matter of governing and managing these enterprises where the objectives are social service orientation
hinged by profit making. That is, though the aim is to meet the social needs the government enterprises not
barred from making profit.

Features of Adaptive Approach:

i. It is an Exercise of Problem-Solving: Such an approach is to solve the problem encountered which are more
of survival and maintenance or continuation of existing situation rather hunting new opportunities and
encashing on them.
ii. Dominance of Decision Making Process by Constituents: These constituents we mean here the ‘publics’
that have stake in business. The decision-making process is shared by the owners, managers, government
agencies, trade unions, financers and the like. The decision reflects the interests of these stake-holders.
iii. Priority Based Decisions: This approach believes in solving one problem at a time. The most urgent
problem gets the priority over others. The idea behind this is to attain and maintain highest degree of
flexibility to adapt the decision to more pressing needs. Logic behind this is to use all the vigour and strength
in solving effectively the most pressing problem so that they need not look back again.
3.PlanningApproach:

This approach calls for making decisions in anticipation of the

future state of affairs where the organisation is prepared to face it
boldly.
It is widely used by multi-nationals which have formalised and
structured strategic decision-making process.
Features of Planning Approach:
i. Analysis of Factors Influencing a Strategy:
The process of strategy making is founded on analysis of various
factors that influence the strategy. These factors are both external
and internal. External factors are economic, technological, socio-
cultural, political, and ecological and the internal are related with
firm’s strengths and weaknesses.
ii. Systematic and Structured Approach:
Planning approach to strategic decision making involves systematic and structured
approach to the solution of problems. It is more a task of assessing the cost benefit
pay-offs of the possible alternatives. It is a systems approach in that the structure of
organisation and its parts are geared to make possible the payoffs in terms of costs
and benefits.

iii. It is a Comprehensive Process:

It is comprehensive process in that it is capable of producing a set of integrated
decisions and strategies. That is, all the decisions and strategies that are inter-
departmental and inter level of the organisation are supporting one another rather
than supplanting.

Thus, the goal of profit maximisation or wealth maximisation is having the

organisational level support and the inter departmental and inter sections support
where each is limited, balanced and integrated. It is a coordinative approach.
Issues in strategic Decision Making:

1. Criteria for decision making ( OBJECTIVE)

• Concept of Maximization
• Concept of satisfying
• Concept of Incrementalism
2. Rationality in Decision-making.
• Achievement of objective in a best possible manner.
3. Creativity in Decision-making
• Innovation and an add on feature must be there.
4. Variability in Decision-making.
• Different descission makers may arrive at a different conclussion.
5. Person- related factors in decision making.
• Education, Knowledge, intellectual, risk taking potential
6. Individual Vs. Group Decision making.
Components of a Strategy
Statement
• The strategy statement of a
firm sets the firm’s long-
term strategic direction
and broad policy
directions.
• It gives the firm a clear
sense of direction and a
blueprint for the firm’s
activities for the upcoming
years.
• The main constituents of a
strategic statement are as
follows:
Strategic Statements Definition
• A strategy statement defines the strategic actions of a
company. It acts as a blueprint of the company’s movement
for years to come. It also sets the company’s long-term
strategic plan.
• A strategy statement appears at the beginning of a business
plan and follows the vision and mission statements of the
company.

strategy statement consists of six main elements:

VISSION (represents what we want to be)
MISSION (explains the reason we exist)
VALUES (defining the things we believe in and our behavior)
GOAL
OBJECTIVE.
Vision
• To fully visualize your project at the moment and in the future
(something like 5 to ten years), you need to create a vision.
• It contributes to effective decision-making and effective
business planning.
• Vision statements are about the future. Mission statements, to
be effective, should create an urgency in the present.

For instance,
• Microsoft’s vision is to empower people through great
software, any place, any time, or any device.
• Wal-Mart’s vision is to become a worldwide leader in
retailing.
Mission
This explains the reasons why your company or project exists. It
describes
• what the organization does (present capabilities),
• who it serves (stakeholders) and
• what makes an organization unique (the reason for existence).
For instance,
• Microsoft’s mission is to help businesses and people
throughout the world to realize their full potential.
• Wal-Mart’s mission is To provide ordinary people with a chance
to buy the same thing as rich people.
The mission is about time-bound goals.
(Mission = Clear Goals + How + Time Limit + Tools for building
clarity and humor)
Goals
refer to the ideal situations to be achieved in undefined time-duration
in future which direct the daily activities and decisions.
However, goals do not essentially lead to the quantifiable outcomes.
These statements are related to the vision and mission statements.
Goals can be followed for day-to-day operational activities and
decisions, not essentially tied up with quantifiable results.

Types of Goals :
1) Official Goals :
Official goals are the common objectives of the organisation. These
goals validate the activities of the organisation and stabilise the
organisation in its environment. These goals are mentioned in the
documents published in the organisation periodically, such
memorandum of association, annual performance report, etc. The top
level management addresses these goals in their public statement.
2) Operative Goals :
Operative goals indicate the actual targets that an organisation
wishes to achieve. These can be considered as the operating
policies. These goals help the managers in reducing the
possibilities of uncertainty while remaining attentive. The
operating goals help in selecting the alternative designs for
organisation.
3) Operational Goals :
These goals are set by the middle level managers for supervising
or controlling the subordinates. These goals help in measuring
the performance of the employees.
Values
• This represents a set of beliefs of your organization with
how the organization will behave.
• This involves decision-making processes with some core
principles to maintain the organization’s culture

Strategic Objective
• Strategic objectives are those aims that are formulated
to bring major changes in response to the changes,
competition, and issues in the environment.
• These objectives are formulated to address various
internal and external issues such as target customers,
target markets, product, and changes in technology, etc.
• The objectives identify the activities of the organisation