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Chapter – 1
Introduction to Strategic Management
Meaning and Nature of Strategic Management
• In-charge of organisational affairs. Making
Management as key
group
organisation a purposeful and productive entity.
Brings together/integrates the resources.
• The functions include Planning, Organising, Directing,
Management as set
of functions
Staffing & Control. Determine goals & activities
Helps in allocation of tasks and resources
• Management is an influence process to make things
happen, to gain command over phenomena, to induce
Management and direct events and people in a particular manner.
• It is backed by power, knowledge, competence and
resources.
Concept of Strategy
♦It is a long term blueprint of desired image, direction and destination i.e. what
it wants to be and where it wants to be.
♦It is used to take market position, conducts its operations, attract and satisfy
customer, compete successfully.
♦It is game plan or ways to respond to dynamic and hostile external forces by top
level to pursue vision, mission and objectives.
♦It is no substitute for sound, alert and responsible management.
♦It can never be perfect, flawless and optimal.
♦As per William F. Glueck, ‘A unified, comprehensive and integrated plan designed
to assure that the basic objectives of the enterprise are achieved’.
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Strategy is Partly Proactive and Partly Reactive
A company’s strategy is typically a blend of:
♦Proactive actions on the part of managers to improve the company’s market
position and financial performance.
♦Reactions to unanticipated developments and fresh market conditions in the
dynamic business environment.
In other words, a company uses both proactive and reactive strategies to cope up
the uncertain business environment. Proactive strategy is planned strategy
whereas reactive strategy is adaptive reaction to changing circumstances.
Strategic Management
► It refers to the managerial process of
ü developing a strategic vision,
ü setting objectives,
ü crafting a strategy,
ü implementing and evaluating the strategy, and
ü finally initiating corrective adjustments were deemed appropriate.
The process does not end, it keeps going on in a cyclic manner.
►Strategic management emphasizes the monitoring and evaluation of external
opportunities and threats in the light of a company’s strengths and weaknesses
and designing strategies for the survival and growth of the company.
►It has two fold objectives:
• To create competitive advantage (unique and valued by customer) so that
company can outperform competitors.
• To guide the company successfully through all changes in the environment
i.e. to reach in the right manner.
Importance/Advantages of Strategic Management
►Charles Darwin:- 'Survival of the fittest', the only principle of survival for all
organizations, where 'fittest' are not the 'largest' or ‘strongest’ organizations
but those who can change and adapt successfully to the changes in business
environment.
►Many business giants have followed the path of extinction failing to manage
drastic changes in the business environment.
Thus, it becomes imperative to study Business Strategy.
►The major benefits of strategic management are:
• Gives direction to define goal, mission and objectives
• Proactive instead of just being reactive
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• Framework for major decisions
• To face the future
• Defence mechanism against mistakes and pitfalls
• Develop core competencies
• Enhance the longevity
Limitations Of Strategic Management
(a) Complex and turbulent environment
(b) Time consuming process
(c) Costly process
(d) Difficult to estimate competitor reaction or response
Strategic Intent (Vision, Mission, Goals, Objectives &
Values)
►It refers to purposes of what the organisation strives for
►Senior managers must define "what they want to do" and "why they want to do".
►It provides the framework within which the firm would operate to achieve
strategic objectives.
►Clarity in strategic intent is extremely important for the future success and
growth of the enterprise, irrespective of its nature and size.
►It could be in the form of vision and mission statements for the organisation
at the corporate level.
►It is generally stated in broad terms but when stated in precise terms it is an
expression of aims to be achieved operationally, i.e., goals and objectives.
►Component of Strategic Intent
Values/Value System Strategic Intent
Vision
Mission
Goals and Objective
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Vision:
›»By the top management.
›»It tells us “where we want to be”
›»It is the blueprint of future position.
›»It communicates management aspirations to stakeholders.
›»It define directional path, company should take in product, customer, market,
technology.
›»Essentials of a strategic vision
ü Think creatively about how to prepare a company for the future.
ü Vision involves exercise in intelligent entrepreneurship.
ü Vision creates enthusiasm among the members of the organisation.
ü Vision statement clearly illuminates the direction.
Mission:
›»It tells us 'what business are we in and what we do'.
›»It states what customer it serves, what need it satisfies and what type of
product it offers.
›»It is the way to get to the vision.
›»Many firms fail to articulate mission with clarity.
›»Things to be kept in mind while writing mission
• Gives organisation its own special identity
• Defines needs to satisfy, target customer group, technologies and
competencies it uses.
• Unique to the organisation.
›»Why should an organisation have a mission?
ü To ensure unanimity of purpose within the organisation.
ü To develop a basis, or standard, for allocating organisational resources.
ü To provide a basis for motivating the use of the organisation's resources.
ü To establish a general tone or organisational climate, to suggest a business-
like operation.
ü To serve as a focal point for those who can identify with the organisation's
purpose and direction.
ü To facilitate the translation of objective and goals into a work structure
involving the assignment of tasks to responsible elements within the
organisation.
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ü To specify organisational purposes and the translation of these purposes
into goals in such a way that cost, time, and performance parameters can
be assessed and controlled.
›»What is our mission and what business are we in?
ü As per Peter Drucker and Theodore Levitt, company should raise basic
questions and get correct & meaningful answer:
• What is our mission?
• What is out ultimate purpose?
• What do we want to become?
• What kind of growth do we seek?
• What business are we in?
• Do we understand our business correctly?
• Whom do we intent to serve?
• What human need do we intend to serve?
• What brings us to this particular business?
• What would be the nature of business in future?
• In what business would we like to be in future?
For example: Lakme – what business are we in?
Production oriented answer: In the factory we make cosmetics
Marketing oriented answer: In the retail outlet, we sell hope
Vision Mission
It describes future identity It is an ongoing and time independent
guide
It is success It is a key to success
It tells us “where we want to be” It tells us, “what we are and what we do”
It is specific in terms of future and time Mission if crafted well can remain in
frame existence for a very long time
It motivates the people to achieve defined It provides a path to realise the vision.
objectives
Goals and Objectives:
›»Goals are open-ended attributes that denote the future states or outcomes.
›»Objectives are close-ended attributes which are precise and expressed in
specific terms.
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›»Accordingly, we will also use the term interchangeably.
›»Objectives are organisation’s performance targets.
›»Objectives serves as yardsticks for tracking an organisation’s performance and
progress.
›» Thus, the Objectives are more specific and translate the goals to both long
term and short-term perspective.
›»Objectives must possess the following characteristics:
ü They should be concrete and specific.
ü They should be measurable and controllable.
ü They should be challenging.
ü They should provide standards for performance appraisal.
ü They should be related to a time frame.
ü Different objectives should correlate with each other.
ü They should define the organisation's relationship with its environment.
ü They should be facilitative towards achievement of mission and purpose.
ü They should provide the basis for strategic decision-making.
ü Objectives should be set within the constraints of organisational resources
and external environment.
›»Long-term objectives: To achieve long-term prosperity, strategic planners
commonly establish long-term objectives in seven areas.
ü Profitability
ü Productivity
ü Public Responsibility
ü Competitive Position
ü Employee Development
ü Employee Relations
ü Technological Leadership
Values:
›»E.g. Integrity, trust, accountability, innovation and diversity
›»It sets the tone for how the people think and behave, especially in situations
of dilemma.
›»It creates a sense of shared purpose to build a strong foundation and focus on
longevity of the company's success.
›»It have both internal as well as external implications.
›»It remain the core of vision, mission, goals and objectives and putting them all
into action.
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Intent Vs Values:
›»Intent is the purpose of doing business.
›»Values are the principles that guides decision making of business.
›»They both go hand in hand, while the intent is driven by values.
›»So, values are more broader than intent.
Strategic Levels In Organisations
CORPORATE LEVEL
CEO, other senior
executives, Board of Head office
directors, and Corporate
staff
BUSINESS LEVEL
Division A Division B Division C
Divisional managers & staff
FUNCTIONAL LEVEL
Business Business Business
Functional managers Function Function Function
(marketing, finance, etc....)
›»Corporate Level
›It consists of the Chief Executive Officer (CEO), other senior executives, the
board of directors, and corporate staff.
›They participate in strategic decision making and oversee development of
strategies for whole organization.
›For this his task includes:
a) Defining mission and goals of Organization
b) Determining what businesses, it should be in
c) Allocating resources among different divisions
d) Formulating and implementing strategies that span individual businesses
e) Providing leadership for Organization
f) Acts as a linkage between Management and Shareholders
›Corporate level managers, especially CEO is viewed as guardian of shareholder
welfare and must make strategies to maximize the wealth of shareholders.
›»Business or Divisional Level
›A Principle General Manager or Business level manager is head of a division.
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›They are responsible for working of Division and overseeing all functions of the
Division or a particular business.
›They are responsible to translate general statements of direction of Corporate
Level into concrete business plans.
›They should listen to the functional level managers.
›»Functional Level
›They are responsible for specific business functions in a division or company like
marketing, Research & Development, Human Resource, Finance etc.
›Thus, a functional manager’s sphere of responsibility is generally confined to one
organizational activity or area.
›Functional managers are also responsible for
a) developing functional strategies in their area to fulfil strategic objectives
set by corporate and business level managers; and
b) implementing/ executing strategies of corporate level and business level
managers.
›They are closer to customers and provide most of information that enable
corporate level and business level managers to formulate realistic and attainable
strategies.
Network of relationship between the three levels
The corporate level decides what the business want to achieve while the business
level draws ideas and plan to execute the same, which eventually flow down to
functional level to execute and achieve results. There are many ways in which all
the 3 levels of management are interlinked.
There are 3 major types of networks of relationship between the levels and also
amongst the same levels of a business;
Functional and - It is an independent relationship, where each function or a division
Divisional is run independently headed by the function/division head, reporting
Relationship directly to the business head, who is a corporate level manager.
- Functions maybe like Finance, Human Resources, Marketing, etc.
while Divisions may depend on the products like for a toys
manufacturer - kid’s toys, teenager toys, etc. could be divisions.
Horizontal - All positions, from top management to staff-level employees, are
Relationship in the same hierarchical position.
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- It is a flat structure where everyone is considered at same level.
- This leads to openness and transparency
- It focus more on idea sharing and innovation.
- This type of relationship between levels is more suitable for
startups where the need to share ideas with speed is more desirable.
Matrix - It features a grid-like structure of levels in an organisation, with
Relationship teams formed with people from various departments that are built
for temporary task-based projects.
- This relationship helps manage huge conglomerates with ease
where it is nearly impossible to track and manage every single team
independently.
- In Matrix relationship - there are more than one business level
managers for each functional level teams.
- It is complex for smaller organisations, but extremely useful for
large organisations.
