Strategic Management

Unit I: Strategic Management Process and

Components
STRATEGIC MANAGEMENT –
DEFINITION

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Introduction to Strategic Management
Process
• Businesses vary in the processes they use to formulate and direct
their strategic management activities.
• Sophisticated planners, such as General Electric, Procter and Gamble
and IBM have developed more detailed processes than less formal
planners of similar size
• Small businesses that rely on strategy formulation skills and limited
time of entrepreneur.
• Firms with multiple products, markets or technologies tend to use
more complex strategic management systems.
• But the basic components of the models used to analyze strategic
management operations are similar.
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What is strategy management process?
• It is also defined as the process by which managers make
a choice of a set of strategies for the organization that will
enable it to achieve better performance.
• This process involves making and
implementing strategic decisions to meet your objectives.
• It defines the steps you need to go through to bring your
vision to life and ignite business growth

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Strategic Management Process.
• Strategic Management Process :
• It is a method in place by strategic leaders to
formulate an implement a strategy, which can lay the
foundation for sustainable cooperative advantage.
• Strategic leadership:
• Executive’s use of power and influence to direct and
the activities of others when pursuing an
organizational goals.
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 Strategic Management process
• An effective strategic management process lies the foundation for
sustainable competitive advantage
• Strategic leaders design a process to formulate and implement strategy
• The first step in the process is to define firm’s vision, mission and values.
• To define these basic principles, strategic leaders can ask these
questions
• Vision- What do we want to accomplish ultimately?
• Mission- How do we accomplish our goals?
• Values- What commitments do we make? And what guardrails do we
put in place, to act both legally and ethically as we pursue our vision
and mission.
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Vision
• A statement about what an organization ultimately wants to
accomplish; It captures the companies aspiration.
• An effective vision prevails the organization with a sense of winning
and motivates employees at all levels to aim for the same target,
While leaving room for individual and team contributions
• Marissa Mayer developed a new vision for Yahoo - to make the
World’s daily habits more inspiring and entertaining.- to help
reinvigorate.
• Mayor’s vision attempts to inspire Yahoo’s employees to resume
leadership in online advertising.
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Vision
• Inspiring vision helps employees find meaning in the work.
Beyond monetary rewards, employees experience a greater
sense of purpose.
• The greater individual purpose can in turn lead to higher
organizational performance.
• Basing actions on its vision, a firm will build the necessary
resources and capabilities through continuous organizational
learning, including learning from failure to translate its
reality what begins as a stretch goal or strategic intent

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Vision statements

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Mission
• Description of what an organization.
• Actually does the products and services it plans to provide and the
markets in which it will compete.

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Values

• Statement of principles to guide an organization

as it works to achieve its vision and fulfill its
mission., for both internal conduct and external
interactions; it often includes explicit ethical
considerations

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STRATEGIC MANAGEMENT
MODEL

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 18

Company mission
Strategic Management Process
and social
responsibility

Possible?
External
Internal analysis
environment
Desired?
Feedback

Feedback
Strategic analysis and choice

Long-term
Generic and grand strategies
objectives
Short-term objectives; Policies that
Functional tactics
reward systems empower action

Restructuring, reengineering
and refocusing the organization
Legend Strategic control and
Major impact continuous improvement
Minor
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Strategic Management Process :
Components
• Company mission
• Internal analysis
• External environment
• Strategic analysis and choice
• Long term objectives
• Generic and grand strategies
• Action Plans and short term objectives
• Functional tactics
• Policies
• Restructuring, reengineering, and refocusing the organization
• Strategic control and continuous improvement
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Mission
• Company mission : the unique purpose that sets a company apart
from others of its type and identifies the scope of its operations
• Define the purpose of the organisation

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• Mission of Bank of Baroda

the Mission Statement of Nike, “to bring

inspiration and innovation to every athlete in
the world” (*If you have a body, you are an
athlete.) Nike aims at inspiring you to better
your lives, whether you are a premium athlete
or a regular person.
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Vision
• Amazon ‘s Vision :
• Our vision is to be earth’s most customer-centric company; to build a place
where people can come to find and discover anything they might want to buy
online
• Disney :
• To make people happy.
• Instagram :
• Capture and Share the World’s Moments.
• Facebook :
• To give people the power to share and make the world more open and
connected.

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Components of Strategic Management
Process
• Company Mission
• Specifies unique purpose of
company
• Identifies scope of operations
• Describes product, market, and
technological areas of emphasis
• Reflects values and priorities of decision
makers Expresses approach to social
responsibility efforts

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Internal Analysis
• The company analyzes the quantity and quality of the company’s
financial human and Physical resources
• Assess the company’s strengths and weakness of company’s
management and organizational structure
• Contrast the company’s past success, traditional, concerns with the
current capabilities to identify the future capabilities

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External Environment
• Consists of all the conditions and forces that affect the strategic
options and define its competitive situation
• The 3 interactive segments : the remote , the industry, and the
operating environments

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Strategic Analysis and choice
• Strategic analysis refers to the process of conducting research on a
company and its operating environment to formulate a strategy.
• The screening process results in selection of options from which
strategic choice is made
• Find out possible avenues of investment
• Involves simultaneous assessment of external environment and
company profile
• Incorporates screening process based on mission to generate possible
and desired opportunities
• Results in selection of options from which a strategic choice is
made
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Long term objectives
• The results that an organization seeks to achieve over a muliti-year
period
• Concentrate on profitability,
• return on investment ,
• competitive position,
• technological leadership,
• productivity,
• employee relations,
• public responsibility and
• employee development

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Generic strategies
• Fundamental philosophical options for the design of strategies
• According to Porter's Generic Strategies model, there are three basic
strategic options available to organizations for gaining competitive
advantage.
• These are: Cost Leadership, Differentiation and Focus.
• A company chooses to pursue one of two types of competitive
advantage, either via lower costs than its competition or by
differentiating itself along dimensions valued by customers to
command a higher price.

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Grand strategies
• The means by which strategies are achieved
• A grand strategy states the means that will be used to achieve long-
term objectives.
• Three common grand strategies are growth, stability, and defensive
• 15 basic approaches are identified
Comprehensive, general plan of major actions through which the firm
intends to achieve its long-term objectives in a dynamic environment

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Ex: Market Development
• Consists of marketing present products, often with only cosmetic
modifications to customers in related market areas by
Adding channels of distribution or
Changing content of advertising or promotion

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Ex: Turnaround
• Involves a concerted effort over a period of time to fortify a firm's
distinctive competencies, returning it to profitability.
• A turnaround situation represents absolute and relative-to-industry
declining performance of a sufficient magnitude to warrant explicit
turnaround actions
• The immediacy of the resulting threat to company survival posed by
the turnaround situation is known as situation severity
• Turnaround responses typically include two stages of strategic
activities: Retrenchment and Recovery response

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Short term objectives
• Desired results that provide specific guidance for action during a
period of one year or less
• Short term marketing activity, raw material usage, employee turnover
and sales objectives
• Translate generic and grand strategies into “action”
• Identify specific functional tactics to be taken in the near term
• Establish a clear time frame for completion
• Creates accountability
• Specify one or more immediate objectives as outcomes of the action

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Functional Tactics

• Involve identifying activities unique to the

function to help build competitive
advantage
• Specify detailed statements of “means” to be
used to achieve short-term objectives

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Policies that Empower Action

• Include broad, precedent-setting decisions that

substitute for repetitive or time-sensitive
decision making
• Often increase managerial effectiveness by
empowering discretion of subordinates in
implementing strategies

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Restructuring, Reengineering, and Refocusing the Organization

• Involves an internal focus – getting work done

efficiently and effectively to make the strategy
work
• Downsizing, restructuring and reengineering reflect
the critical stage in strategy implementation wherein
managers attempt to recast their organization.

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Strategic Control and Continuous Improvement

• Strategic Control
• Tracks a strategy during implementation
• Detects problems
• Involves making necessary adjustments
• Continuous Improvement
• Provides another approach to strategic control
• Allows an organization to respond more proactively and timely to rapid
developments

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Implications of Viewing Strategic
Management as a Process
 Changes in any one component will affect other components
 Strategy formulation and implementation are sequential
 Necessity of feedback from institutionalization, review, and
evaluation to early stages of process
 Need to regard it as dynamic, involving constant changes in
interdependent strategic activities

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