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MODULE 1
Unit 1
Introduction to Strategic Management
Concept and process of Strategic
Management, Benefits and Risks of
Strategic Management, Vision and
Mission,
Functional Strategies: Human Resource
Strategy, Marketing Strategy, Financial
Strategy, Levels of Strategies: Corporate,
Business and Operational Level Strategy
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
1
• Strategic management is the concept of
identification, implementation, and
management of the strategies that managers
carry out to achieve the goals and objectives
of their organization.
• It can also be defined as a bundle of
decisions that a manager has to undertake
which directly contributes to the firm’s
performance.
• The manager responsible for Strategic
management must have a thorough
knowledge of the internal and external
organizational environment to make the right
decisions.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
2
• The basic concept of strategic
management consists of a continuous
process of planning, monitoring, analysing
and assessing everything that is necessary
for an organization to meet its goals and
objectives.
• In simple words, it is a management
technique used to prepare the organization
for the unforeseeable future.
• Strategy management helps create a vision
for an organization that helps to identify
both predictable as well as unpredictable
contingencies.
• It involves formulating and implementing
appropriate strategies so the organization
can attain sustainable competitive
advantage.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
3
Components of
Strategy Management
• Strategic Intent
• Strategic Intent of an organization clarifies the
purpose of its existence and why it will continue
to exist. It helps paint a picture of what an
organization should immediately do to achieve
the company’s vision.
• Mission
• Mission component of strategy management
states the role by which an organization intends to
serve its stakeholders. It describes why an
organization is operating that helps provide a
framework within which the strategies to achieve
its goals are formulated.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
4
• Vision
• The visual component of strategy
management helps identify where
the organization intends to be in
the future. It describes the
stakeholder dreams and
aspirations for the organization.
• Goals and Objectives
• Goals help specify in particular
what must be done in order to
attain an organization’s mission or
vision. Goals make the mission
component of strategy
management more prominent.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
5
Process of Strategy
Management
• Setting the Goal – The first and foremost
stage in the process of strategic
management requires the organization to set
the short term and long-term goals it wants
to achieve.
• Initial Assessment – The second stages says
to gathers as much data and information as
possible to help state the mission and vision
of the organization.
• Situation Analysis – It refers to the process of
collecting, scrutinizing and providing
information for strategic purposes. It helps in
analyzing the internal and external
environment that is influencing an
organization.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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• Strategy Formulation – Strategy formulation is
the process of deciding the best course of action
to be taken to achieve the goals and objectives
of the organization.
• Strategy Implementation – Executing the
formulated strategy in such a way that it
successfully creates a competitive advantage for
the company. In simple words, putting the
chosen plan into action.
• Strategy Monitoring – Strategy Monitoring
involves the key evaluation strategies like
considering the internal and external factors that
are the root of the present strategies and
measuring the team performance.
• SWOT Analysis – It helps in determining the
Strengths, Weaknesses, Opportunities and
Threats (SWOT) of an organization and taking
remedial/corrective courses of actions to fight
these weaknesses and threats.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
7
BENEFITS OF STRATEGIC
MANAGEMENT
1. Improved decision-making: Strategic management
provides a framework for better decision-making by
allowing leadership to assess the potential impact of
their decisions on the overall strategic objectives of
the organization.
2. Enhanced collaboration: Strategy management
encourages collaboration between departments and
functions ensuring that everyone is working toward
the same goals and objectives.
3. Better organizational performance: Strategy
management also helps organizations to focus on
the areas that need improvement, identify the best
ways to achieve their goals and objectives, and
measure progress.
•
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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Effective resource
allocation: Strategic management
encourages organizations to utilise
their resources more efficiently by
ensuring that resources are allocated
to the most important areas.
Increased customer
satisfaction: Strategy management
helps organizations to better
understand their customers and
develop strategies to meet their
needs.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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Financial
Benefits of
Strategic
Management
Financial Liquidity Monitoring
Strategic management enables businesses to keep an eye on cash flow and make
sure that the money they have available is aligned with long-term objectives.
Also, it enables business leaders to raise money when necessary for ongoing
operations.
Better Revenue Generation
Senior executives might modify their strategic vision to consider local reality by
soliciting candid, diverse viewpoints from business-unit chiefs. This cooperative,
back-and-forth method aids a business in understanding its clientele and
ultimately increases sales, thus making revenue generation one of the biggest
benefits of strategic management.
Increasing market share and profitability
This is one of the important benefits of strategic management. One can
approach the proper target market with the aid of strategic management skills.
All industries can investigate better consumer segments, products, and services,
as well as comprehend the market circumstances of the sector in which they are
engaged, if they have a highly concentrated plan and strategic thinking.
Prevents Legal Risks
One of the major benefits of strategic management is that it enables businesses
to include employee policies. Additionally, it enables the organisation to develop
internal procedures and checks to address board member and shareholder
conflicts of interest.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
10
Non-Financial
Benefits of
Strategic
Management
Discharges Board Responsibility
The primary justification given by most organisations for having a
strategic management process is that it relieves the Board of Directors of
responsibilities.
Forces An Objective Assessment
The discipline of strategic management gives the board and senior
management the ability to truly stand back from day-to-day operations
and consider the organization's future.
Make Better business decisions
One of the key benefits of strategic management is that it makes a
framework Every member of the workforce within which they can make
daily operational decisions from business perspective and know that they
are all leading the company in the same direction.
Supports Understanding & Buy-In
The board and employees can better comprehend the direction, the
rationale behind it, and the advantages it brings if they are allowed to
participate in the strategic conversation. While some people only need to
know, many people need to comprehend in order to have their complete
support.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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Enables Measurement of Progress
Enabling measurement of progress is one of the many benefits of
strategic management. An organisation must create goals and
success criteria as part of a strategic management process. In
order to develop targets and keep these crucial metrics in front of
the board and senior management, the business must first
identify the factors that are essential to its continued success.
Rejuvenate human resources
One of the benefits of strategic management is to make strategic
decisions on developing a hiring strategy based on comprehensive
feedback which attracts the most capable professionals to ensure
the company
Provides an Organizational Perspective
Handling operational challenges rarely takes into account the
interdependence of the organization's many parts as a whole. In
order to create a strategy that is best for the entire company, not
just a single component, strategic management adopts an
organisational viewpoint and examines all the components and
their interactions.
Creating a better future
The effectiveness of your organisation is increased when strategic
decisions are put into practise, which is one of their most
outstanding advantages. Setting the tone for the entire
organisation begins with the decisions you make today. A
proactive strategy reduces potential dangers.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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Risks of
Strategic
Management
1.Limitation of Assumption
2.Problem in Analyzing Environment
3.Unrealistic Mission and Objectives
4.Problem of Setting Target
5.Lack of Commitment of Lower Level
6.Problem of Resistance
7.More theoretical in Nature
8.Problem of Internal Politics
9.Problem of Traditional Management
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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Risks involved in Strategic
Management
• Strategic management is an intricate and
complex process that takes an organisation into
unchartered territory.
• It does not provide a ready-to-use prescription
for success. Instead, it takes the organisation
through a journey and offers a framework for
addressing questions and solving problems.
• Strategic management is not, therefore, a
guarantee for success; it can be dysfunctional if
conducted haphazardly
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
14
• It is a costly exercise in terms of the time that
needs to be devoted to it by managers.
• The negative effect of managers spending
time away from their normal tasks may be
quite serious.
• A negative effect may arise due to the non-
fulfilment of the expectations of the
participating managers, leading to frustration
and disappointment.
• Another negative effect of strategic
management may arise if those associated
with the formulation of strategy are not
intimately involved in the implementation of
strategies.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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VISION
“Good business leaders
create a vision, articulate
the vision, passionately
own the vision, and
relentlessly drive it to
completion.”
–Jack Welch, former CEO
of General Electric
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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• Many skills and abilities separate effective
strategic leaders like Howard Schultz from
poor strategic leaders.
• One of them is the ability to inspire
employees to work hard to improve their
organization’s performance.
• Effective strategic leaders can convince
employees to embrace lofty ambitions and
move the organization forward.
• In contrast, poor strategic leaders struggle
to rally their people and channel their
collective energy in a positive direction.
• An organization’s vision describes what
the organization hopes to become in the
future.
• Well-constructed visions clearly articulate
an organization’s aspirations.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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Company Vision
Alcoa
To be the best company in the world–in the eyes of our
customers, shareholders, communities and people.
Avon
To be the company that best understands and satisfies
the product, service and self-fulfillment needs women–
globally.
Chevron
To be the global energy company most admired for its
people, partnership and performance.
Google To develop a perfect search engine.
Kraft Foods Helping people around the world eat and live better.
Proctor and Gamble
Be, and be recognized as, the best consumer products
and services company in the world.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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•FIND OUT VISION STATEMENTS OF
ANY 5 COMPANIES……..
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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MISSION
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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• In working to turnaround Starbucks, Howard Schultz sought to renew
Starbucks’s commitment to its mission statement: “to inspire and
nurture the human spirit—one person, one cup and one neighborhood
at a time.”
• A mission such as Starbucks’s states the reasons for an organization’s
existence.
• Well-written mission statements effectively capture an organization’s
identity and provide answers to the fundamental question “Who are
we?” While a vision looks to the future, a mission captures the key
elements of the organization’s past and present
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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Ranboxy Petrochemicals: To become a research based global company.
Reliance Industries: To become a major player in the global chemicals business and
simultaneously grow in other growth industries like infrastructure.
ONGC: To stimulate, continue and accelerate efforts to develop and maximize the
contribution of the energy sector to the economy of the country.
Cadbury India: To attain leadership position in the confectionery market and
achieve a strong national presence in the food drinks sector.
Hindustan Lever: Our purpose is to meet everyday needs of people everywhere – to
anticipate the aspirations of our consumers and customers, and to respond
creatively and competitively with branded products and services which raise the
quality of life.
McDonald: To offer the customer fast food prepared in the same high quality
worldwide, tasty and reasonably priced, delivered in a consistent low key décor and
friendly manner.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
23
• It helps to ensure unanimity of purpose within the organisation.
• It provides a basis or standard for allocating organisational resources.
• It establishes a general tone or organisational climate.
• It serves as a focal point for individuals to identify with the organisation’s
purpose and direction.
• It facilitates the translation of objectives into tasks assigned to responsible
people within the organisation.
• It specifies organisational purpose and then helps to translate this purpose
into objectives in such a way that cost, time and performance parameters
can be assessed and controlled
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
24
•FIND OUT MISSION STATEMENTS OF
ANY 5 COMPANIES……..
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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Functional Strategy
According to Gareth R. Jones,
“Functional strategy is a plan of
action to strengthen an
organization’s Functional and
organizational resources, as well
as its coordination abilities, in
order to create core
competencies.”
Corporate and Business
strategies give birth to
functional strategies, which
are implemented in the
organization through
functional and operational
implementation.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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• According to Thompson and Strickland, “The
term functional strategy refers to the managerial game
plan for a particular functional activity, business
process, or key department within a business.
• A company’s marketing strategy, for example,
represents the managerial game plan for running the
marketing part of the business.
• A company’s new product development strategy
represents the managerial game plan for keeping the
company’s product lineup fresh and in tune with what
buyers are looking for.”
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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• Each functional department carries out its own functional
responsibility by executing short- and medium-term
plans to play its role in meeting overall corporate
objectives.
• For example, in marketing strategy; the process may
focus on selecting the target market, developing a market
plan that may satisfy the overall needs of the target
customers.
• In human resource strategy, the functions may deal with
recruitment and selection of the employees, their
retention, training and development, evaluation, and
remuneration part.
• Financial strategy may go with issues of funding, shares,
debt financing, depreciation etc.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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• The functional strategies relate to the
operating divisions and thus connect to
business processes and value chain.
• Higher-level strategies depend upon
these strategies as they provide input to
the business level and corporate level
strategies.
• Once the higher-level strategies are
formulated, the functional units
translate them into the course of action
plan, which each department is
supposed to complete within a due
course of time for the success of the
strategy.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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An organization with multi-units
dealing in several businesses at a
same time, create a business
strategy for each business and each
business with separate sets of
departments constitute their own
functional strategies for each
department.
For example, if an
organization decides to go
for differentiation strategy,
all the activities of each
department, must be
focused on fulfilling that
purpose only.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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FEATURES OF FUNCTIONAL STRATEGY
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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• It acts to achieve corporate and business unit
objectives by maximizing resource productivity.
• It is the game plan to manage a principal
subordinate activity within a business.
• Functional strategy is concerned with
developing and nurturing a distinctive
competence to provide a company or business
unit with a competitive advantage.
• The orientation of the functional strategy is
dictated by its parent business unit’s strategy.
• Functional strategy is narrower in scope than
business strategy. It contains relevant details of
the overall business game plan by setting out
the actions, approaches and practices which are
to be employed in managing a particular
function.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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Functional Strategies
• Human Resource Strategy
• Marketing Strategy
• Financial Strategy
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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Marketing Strategy
• A marketing strategy for a service-oriented
organization would be to create a lasting,
long-term link between the organization
and the customers. Their functional
strategy will include social media
marketing, lead generations and SWOT
(Strength, Weakness, Opportunity &
Threats) Analysis to study the competition.
• These strategies focus on identifying target
audiences, understanding market
dynamics, creating value propositions, and
developing marketing campaigns to reach
customers effectively.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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• Apple has a clear marketing strategy
focusing on creating a powerful
brand image associated with
innovation, quality, and luxury.
• This is done through high-impact
product launches, minimalist and
creative advertising, and cultivating
a sense of exclusivity around its
products.
• They also meticulously control their
retail environments (both physical
and online) to ensure the buying
experience is aligned with their
brand image.
• Marketing & Advertising Strategy of Apple: A critical lens
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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• A company like Coca-Cola might
have a marketing strategy to
strengthen its brand image by
associating it with happiness and
fun.
• This could involve launching a global
advertising campaign focusing on
these themes, local events, and
experiences that resonate with this
message.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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Finance Strategy
• When you have your corporate
strategies down pat, you must raise
the required finances. For a startup,
it can be seed funding, investor
money or bank financing. Other
financial strategies include capital
budgeting and dividend strategies for
equity shareholders.
• This strategy involves financial
planning and management, such as
budgeting, cost control, cash flow
management, capital structure, risk
management, and investment
decisions.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
37
• Apple maintains a very large cash reserve,
which gives them significant flexibility in
strategic investments, acquisitions, and
R&D.
• Despite their cash holdings, they also use
debt financing strategically, taking
advantage of low-interest rates.
• A startup might have a financial strategy of
securing additional capital to fuel its rapid
growth.
• This could involve pursuing venture capital
funding, maintaining a lean operational
budget to extend their financial runway, and
planning for a future initial public offering
(IPO).
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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Human
Resource
Strategy:
•HR strategies include
decisions about recruitment,
selection, training,
performance management,
compensation, and employee
retention.
•The aim is to attract,
develop, and retain a
workforce that can effectively
execute business strategies.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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• Apple works hard to attract and retain top
talent, offering competitive compensation
packages, opportunities for career
development, and a work environment that is
both challenging and rewarding.
• They also foster a culture of secrecy and
urgency around their product development,
which helps drive innovation.
• Google has a human resource strategy of
attracting and retaining the best talent in the
industry.
• They do this by providing a great work
environment, excellent compensation
packages, opportunities for career growth,
and other perks like free meals and employee
wellness programs.
• Talent Management Strategy & Practices
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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Three levels of strategy are the
different levels of strategic
management that run across the
organization from the highest
corporate level to the bottom
functional level.
The three levels of strategy include the
• Corporate-level Strategy,
• Business-level Strategy, and
• Functional-level Strategy.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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• The difference between the three
levels of strategy is who to
implement the strategy. Since they
are affecting in the different levels;
• Corporate level strategy involves
top-level management.
• Business level strategy involves the
ability to compete of each business
unit.
• Functional level strategy involves
every single function in every
business unit.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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Corporate Level Strategy
• Corporate level strategy is the
highest level of all three levels of
strategy.
• The corporate level strategies are
used to define and guideline the
direction for the company in the big
picture.
• To put it simply, the corporate
strategy is the main theme of all
strategies within an organization.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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• There are three main themes of the corporate
level strategy includes growth strategy, stability
strategy, and retrenchment strategy.
• Growth strategy is a strategy that focused on
expanding the business to increase the revenue
in various ways: find new customers, selling
existing products to the new market, merger,
acquisition, and diversification. The growth
strategies are simply found in the Ansoff
Product-market matrix.
• Stability strategy is a strategy that focused on
stable the business (as its name) to improve the
current business without investment or
divestment.
• Retrenchment strategy is a strategy that focused
on stable the company’s financial position by
stop unprofitable operations to cut the
company’s expenses.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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Business Level
Strategy
• Business level strategy is how the company competes
with others in the market with its products or services.
• For the business level strategy, the company needs to
determine what is the competitive advantage for each
business unit.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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• There are 4 types of competitive
advantages for the business level
strategy following the Porter’s generic
model: cost leadership, differentiation,
cost focus, and focus differentiation.
• Cost leadership is a strategy that the
company produce products in huge
amounts or with low-cost labor to
compete.
• Differentiation is a strategy that seeks
advantage from the different by
developing brands that stand out from
the competitor.
• Cost focus is like the cost leadership
strategy but focused on the niche
market instead of the mass market.
• Focus differentiation is like
differentiation strategy but focused on
the niche market instead of the mass
market.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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Functional Level Strategy
• The functional level strategy is a strategy that is
implemented by each function in a business to
support the business-level strategy. Functional
level strategies typically are developed by
functional area executives.
• A business’s functional are include accounting,
finance, production, marketing, procurement,
service, research and development (R&D), human
resources, and logistics.
• To put it simply, the functional level strategy is
a strategy that uses in each department of a
single business unit.
• Additionally, if you ever heard about the Value
Chain (by Michael E. Porter), the functional level
strategy is strategies that are implemented in
each element of the Value Chain.
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DR VIJAY VISHWAKARMA
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M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
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Unit 2 Strategy Formulation, Implementation
and Evaluation
a) Strategic Formulation: Issues of strategic Choice, Stages and
Importance of strategic Formulation, Formulation of Alternative
Strategies: Mergers and Acquisitions, Joint Ventures, Diversification,
Turnaround, Divestment and Liquidation.
b) Corporate Portfolio Analysis- SWOT Analysis, BCG Matrix, GE Nine
Cell Matrix, Hofer’s Matrix, Importance and Problems of Strategic
Implementation, Importance, and Techniques of Strategic Evaluation
and Control
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DR VIJAY VISHWAKARMA
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Issues of
strategic
Choice
M.COM I SEM I STRATEGIC MANAGEMENT DR
VIJAY VISHWAKARMA 51
Strategic choice is the mental process of selecting the
best or most appropriate strategy from the stock of
alternatives that serves the enterprise objectives.
‘Strategic choice’ involves selecting from among
several alternatives the most appropriate strategy
which will best serve the enterprise objectives.
To choose a good strategic option, past data, current
data, forecasted data, and various other factors
should be examined carefully.
The selection process becomes a complex job
because it is influenced by various factors.
Environmental
Constraints
• The dynamic elements of environment affect
the way in which choice of strategy is made.
• The survival and prosperity of a firm depend
largely on the interaction of the elements of
environment—such as shareholders, customers,
suppliers, competitors, the government and the
community.
• These elements constitute the external
constraints.
• The flexibility in the choice of strategy is often
governed by the extent and degree of the firm’s
dependence on the environment.
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VIJAY VISHWAKARMA 52
Dynamism
of Market
Sector:
• Glueck has said, “The strategic choice is
affected by the relatively volatility of market
sector the firm chooses to operate in.”
Market forces vehemently influence the
choice of strategy.
• For example, a firm which obtains bulk
supply of its raw materials or components in
a competitive market will have greater
flexibility in its strategic choice than another
firm which must depend for its supplies on
an oligopolistic market.
M.COM I SEM I STRATEGIC MANAGEMENT DR
VIJAY VISHWAKARMA 53
Intra-
Organisational
Factors:
• Organisational factors also affect the
strategic choice.
• These include organisational mission,
strategic intent, goals, organisation’s
business definition, resources, policies,
etc.
• Besides these factors, organisational
strengths, weaknesses, and capability to
implement strategic alternatives also
affect the strategic choice
M.COM I SEM I STRATEGIC MANAGEMENT DR
VIJAY VISHWAKARMA 54
Corporate
Culture:
• In choosing a strategic alternative, strategy
makers must consider pressures from the
corporate culture.
• They must assess a strategy’s compatibility with
that culture. Every organisation has its own
corporate culture.
• It is made of a set of shared values, beliefs,
attitudes, customs, norms, etc.
• The successful functioning of an organisation
depends on ‘strategy-culture fit’.
M.COM I SEM I STRATEGIC MANAGEMENT DR
VIJAY VISHWAKARMA 55
Industry and
Cultural
Backgrounds:
• Industry and cultural backgrounds
affect strategic choice.
• For example, executives with strong
ties within an industry tend to choose
strategies commonly used in that
industry.
• Other executives who have come to
the firm from another industry and
have strong ties outside the industry
tend to choose different strategies
from what is being currently used in
their industry.
M.COM I SEM I STRATEGIC MANAGEMENT DR
VIJAY VISHWAKARMA 56
Pressures
from
Stakeholders:
• The attractiveness of a strategic alternative is
affected by its perceived compatibility with
the key stakeholders in a corporation’s task
environment.
• Creditors want to be paid on time. Unions
exert pressure for comparable wage and
employment security.
• Governments and interest groups demand
social responsibility. Shareholders want
dividends.
• All these pressures must be given some
consideration in the selection of the best
alternative.
M.COM I SEM I STRATEGIC MANAGEMENT DR
VIJAY VISHWAKARMA 57
Impact of
Past
Strategies:
• It has been noticed that the choice of
current strategy may be influenced by
what type of strategies have been
used or followed in the past.
• Pearce and Robinson have said, “A
review of past strategy is the point at
which the process of strategic choice
begins. As such past strategy exerts
considerable influence on the final
strategic choice.”
M.COM I SEM I STRATEGIC MANAGEMENT DR
VIJAY VISHWAKARMA 58
Personal
Characteristics:
• Personal factors like own perception,
views, interests, preferences, needs,
aspirations, personal disposition,
ambitions, etc., are important and
play a vital role in affecting strategic
choice.
• Even the most attractive alternative
might not be selected if it is contrary
to the attitude, mindset, needs,
desires and personality of the
selector/strategist himself.
M.COM I SEM I STRATEGIC MANAGEMENT DR
VIJAY VISHWAKARMA 59
Value
System:
• The role of value system in choosing a
strategic alternative is well recognized.
• While evaluating the strategic
alternatives, different executives may
take different positions because of
differences in their personal values.
• Guth and Tagiuri found that personal
values were important determinants of
the choice of corporate strategy.
• Similarly, value system to top
management affects the types of strategy
that an executive chooses.
M.COM I SEM I STRATEGIC MANAGEMENT DR
VIJAY VISHWAKARMA 60
Managerial
Attitude
towards
Risk:
• Managerial attitude towards
risk is an important factor that
influences the choice of strategy.
• Individuals differ considerably
in their attitude towards risk
taking. Some are risk prone,
others are risk averse.
M.COM I SEM I STRATEGIC MANAGEMENT DR
VIJAY VISHWAKARMA 61
Managerial
Power
Relations:
• Choice of strategy is also influenced
by the power play among different
interest groups.
• William Guth in his study found that
strategic choice is significantly
affected by interpersonal relations
and power relationship among
members of the top management
team.
• Power politics is a crucial factor
determining the choice of strategy.
M.COM I SEM I STRATEGIC MANAGEMENT DR
VIJAY VISHWAKARMA 62
https://www.businessmanagementideas.com/strategic-management/factors-affecting-strategic-choice/21044
Stages of strategic Formulation
• Strategy Formulation is an analytical
process of selection of the best
suitable course of action to meet the
organizational objectives and vision.
• It is one of the steps of the strategic
management process.
• The strategic plan allows an
organization to examine its resources,
provides a financial plan and
establishes the most appropriate
action plan for increasing profits.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA 63
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
64
Establishing Organizational Objectives:
This involves establishing long-term goals of
an organization. Strategic decisions can be taken once
the organizational objectives are determined.
Analysis of Organizational Environment:
This involves SWOT analysis, meaning identifying the
company’s strengths and weaknesses and keeping
vigilance over competitors’ actions to understand
opportunities and threats.
Strengths and weaknesses are internal factors which
the company has control over. Opportunities and
threats, on the other hand, are external factors over
which the company has no control. A successful
organization builds on its strengths, overcomes its
weakness, identifies new opportunities and protects
against external threats.
M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY
VISHWAKARMA 65
Forming quantitative goals: Defining targets so as to meet the company’s short-term
and long-term objectives. Example, 30% increase in revenue this year of a company.
Objectives in context with divisional plans: This involves setting up targets for every
department so that they work in coherence with the organization as a whole.
Performance Analysis: This is done to estimate the degree of variation between the
actual and the standard performance of an organization.
Selection of Strategy: This is the final step of strategy formulation. It involves
evaluation of the alternatives and selection of the best strategy amongst them to be
the strategy of the organization.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
66
https://businessjargons.com/strategy-formulation.html
Importance
of strategic
Formulation
M.COM I SEM I STRATEGIC MANAGEMENT DR
VIJAY VISHWAKARMA 67
Formulation of Alternative Strategies
• Mergers and Acquisitions
• Joint Ventures
• Diversification
• Turnaround
• Divestment and Liquidation.
M.COM I SEM I STRATEGIC MANAGEMENT
DR VIJAY VISHWAKARMA
68
https://www.ihmnotes.in/assets/Docs/Sem-5/Strategic%20Management/Ch-3%20STRATEGY%20FORMULATION.pdf

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STRATEGIC MANAGEMENT MODULE 1_UNIT1 _UNIT2.pdf

  • 1. MODULE 1 Unit 1 Introduction to Strategic Management Concept and process of Strategic Management, Benefits and Risks of Strategic Management, Vision and Mission, Functional Strategies: Human Resource Strategy, Marketing Strategy, Financial Strategy, Levels of Strategies: Corporate, Business and Operational Level Strategy M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 1
  • 2. • Strategic management is the concept of identification, implementation, and management of the strategies that managers carry out to achieve the goals and objectives of their organization. • It can also be defined as a bundle of decisions that a manager has to undertake which directly contributes to the firm’s performance. • The manager responsible for Strategic management must have a thorough knowledge of the internal and external organizational environment to make the right decisions. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 2
  • 3. • The basic concept of strategic management consists of a continuous process of planning, monitoring, analysing and assessing everything that is necessary for an organization to meet its goals and objectives. • In simple words, it is a management technique used to prepare the organization for the unforeseeable future. • Strategy management helps create a vision for an organization that helps to identify both predictable as well as unpredictable contingencies. • It involves formulating and implementing appropriate strategies so the organization can attain sustainable competitive advantage. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 3
  • 4. Components of Strategy Management • Strategic Intent • Strategic Intent of an organization clarifies the purpose of its existence and why it will continue to exist. It helps paint a picture of what an organization should immediately do to achieve the company’s vision. • Mission • Mission component of strategy management states the role by which an organization intends to serve its stakeholders. It describes why an organization is operating that helps provide a framework within which the strategies to achieve its goals are formulated. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 4
  • 5. • Vision • The visual component of strategy management helps identify where the organization intends to be in the future. It describes the stakeholder dreams and aspirations for the organization. • Goals and Objectives • Goals help specify in particular what must be done in order to attain an organization’s mission or vision. Goals make the mission component of strategy management more prominent. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 5
  • 6. Process of Strategy Management • Setting the Goal – The first and foremost stage in the process of strategic management requires the organization to set the short term and long-term goals it wants to achieve. • Initial Assessment – The second stages says to gathers as much data and information as possible to help state the mission and vision of the organization. • Situation Analysis – It refers to the process of collecting, scrutinizing and providing information for strategic purposes. It helps in analyzing the internal and external environment that is influencing an organization. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 6
  • 7. • Strategy Formulation – Strategy formulation is the process of deciding the best course of action to be taken to achieve the goals and objectives of the organization. • Strategy Implementation – Executing the formulated strategy in such a way that it successfully creates a competitive advantage for the company. In simple words, putting the chosen plan into action. • Strategy Monitoring – Strategy Monitoring involves the key evaluation strategies like considering the internal and external factors that are the root of the present strategies and measuring the team performance. • SWOT Analysis – It helps in determining the Strengths, Weaknesses, Opportunities and Threats (SWOT) of an organization and taking remedial/corrective courses of actions to fight these weaknesses and threats. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 7
  • 8. BENEFITS OF STRATEGIC MANAGEMENT 1. Improved decision-making: Strategic management provides a framework for better decision-making by allowing leadership to assess the potential impact of their decisions on the overall strategic objectives of the organization. 2. Enhanced collaboration: Strategy management encourages collaboration between departments and functions ensuring that everyone is working toward the same goals and objectives. 3. Better organizational performance: Strategy management also helps organizations to focus on the areas that need improvement, identify the best ways to achieve their goals and objectives, and measure progress. • M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 8
  • 9. Effective resource allocation: Strategic management encourages organizations to utilise their resources more efficiently by ensuring that resources are allocated to the most important areas. Increased customer satisfaction: Strategy management helps organizations to better understand their customers and develop strategies to meet their needs. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 9
  • 10. Financial Benefits of Strategic Management Financial Liquidity Monitoring Strategic management enables businesses to keep an eye on cash flow and make sure that the money they have available is aligned with long-term objectives. Also, it enables business leaders to raise money when necessary for ongoing operations. Better Revenue Generation Senior executives might modify their strategic vision to consider local reality by soliciting candid, diverse viewpoints from business-unit chiefs. This cooperative, back-and-forth method aids a business in understanding its clientele and ultimately increases sales, thus making revenue generation one of the biggest benefits of strategic management. Increasing market share and profitability This is one of the important benefits of strategic management. One can approach the proper target market with the aid of strategic management skills. All industries can investigate better consumer segments, products, and services, as well as comprehend the market circumstances of the sector in which they are engaged, if they have a highly concentrated plan and strategic thinking. Prevents Legal Risks One of the major benefits of strategic management is that it enables businesses to include employee policies. Additionally, it enables the organisation to develop internal procedures and checks to address board member and shareholder conflicts of interest. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 10
  • 11. Non-Financial Benefits of Strategic Management Discharges Board Responsibility The primary justification given by most organisations for having a strategic management process is that it relieves the Board of Directors of responsibilities. Forces An Objective Assessment The discipline of strategic management gives the board and senior management the ability to truly stand back from day-to-day operations and consider the organization's future. Make Better business decisions One of the key benefits of strategic management is that it makes a framework Every member of the workforce within which they can make daily operational decisions from business perspective and know that they are all leading the company in the same direction. Supports Understanding & Buy-In The board and employees can better comprehend the direction, the rationale behind it, and the advantages it brings if they are allowed to participate in the strategic conversation. While some people only need to know, many people need to comprehend in order to have their complete support. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 11
  • 12. Enables Measurement of Progress Enabling measurement of progress is one of the many benefits of strategic management. An organisation must create goals and success criteria as part of a strategic management process. In order to develop targets and keep these crucial metrics in front of the board and senior management, the business must first identify the factors that are essential to its continued success. Rejuvenate human resources One of the benefits of strategic management is to make strategic decisions on developing a hiring strategy based on comprehensive feedback which attracts the most capable professionals to ensure the company Provides an Organizational Perspective Handling operational challenges rarely takes into account the interdependence of the organization's many parts as a whole. In order to create a strategy that is best for the entire company, not just a single component, strategic management adopts an organisational viewpoint and examines all the components and their interactions. Creating a better future The effectiveness of your organisation is increased when strategic decisions are put into practise, which is one of their most outstanding advantages. Setting the tone for the entire organisation begins with the decisions you make today. A proactive strategy reduces potential dangers. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 12
  • 13. Risks of Strategic Management 1.Limitation of Assumption 2.Problem in Analyzing Environment 3.Unrealistic Mission and Objectives 4.Problem of Setting Target 5.Lack of Commitment of Lower Level 6.Problem of Resistance 7.More theoretical in Nature 8.Problem of Internal Politics 9.Problem of Traditional Management M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 13
  • 14. Risks involved in Strategic Management • Strategic management is an intricate and complex process that takes an organisation into unchartered territory. • It does not provide a ready-to-use prescription for success. Instead, it takes the organisation through a journey and offers a framework for addressing questions and solving problems. • Strategic management is not, therefore, a guarantee for success; it can be dysfunctional if conducted haphazardly M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 14
  • 15. • It is a costly exercise in terms of the time that needs to be devoted to it by managers. • The negative effect of managers spending time away from their normal tasks may be quite serious. • A negative effect may arise due to the non- fulfilment of the expectations of the participating managers, leading to frustration and disappointment. • Another negative effect of strategic management may arise if those associated with the formulation of strategy are not intimately involved in the implementation of strategies. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 15
  • 16. VISION “Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion.” –Jack Welch, former CEO of General Electric M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 16
  • 17. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 17
  • 18. • Many skills and abilities separate effective strategic leaders like Howard Schultz from poor strategic leaders. • One of them is the ability to inspire employees to work hard to improve their organization’s performance. • Effective strategic leaders can convince employees to embrace lofty ambitions and move the organization forward. • In contrast, poor strategic leaders struggle to rally their people and channel their collective energy in a positive direction. • An organization’s vision describes what the organization hopes to become in the future. • Well-constructed visions clearly articulate an organization’s aspirations. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 18
  • 19. Company Vision Alcoa To be the best company in the world–in the eyes of our customers, shareholders, communities and people. Avon To be the company that best understands and satisfies the product, service and self-fulfillment needs women– globally. Chevron To be the global energy company most admired for its people, partnership and performance. Google To develop a perfect search engine. Kraft Foods Helping people around the world eat and live better. Proctor and Gamble Be, and be recognized as, the best consumer products and services company in the world. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 19
  • 20. •FIND OUT VISION STATEMENTS OF ANY 5 COMPANIES…….. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 20
  • 21. MISSION M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 21
  • 22. • In working to turnaround Starbucks, Howard Schultz sought to renew Starbucks’s commitment to its mission statement: “to inspire and nurture the human spirit—one person, one cup and one neighborhood at a time.” • A mission such as Starbucks’s states the reasons for an organization’s existence. • Well-written mission statements effectively capture an organization’s identity and provide answers to the fundamental question “Who are we?” While a vision looks to the future, a mission captures the key elements of the organization’s past and present M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 22
  • 23. Ranboxy Petrochemicals: To become a research based global company. Reliance Industries: To become a major player in the global chemicals business and simultaneously grow in other growth industries like infrastructure. ONGC: To stimulate, continue and accelerate efforts to develop and maximize the contribution of the energy sector to the economy of the country. Cadbury India: To attain leadership position in the confectionery market and achieve a strong national presence in the food drinks sector. Hindustan Lever: Our purpose is to meet everyday needs of people everywhere – to anticipate the aspirations of our consumers and customers, and to respond creatively and competitively with branded products and services which raise the quality of life. McDonald: To offer the customer fast food prepared in the same high quality worldwide, tasty and reasonably priced, delivered in a consistent low key décor and friendly manner. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 23
  • 24. • It helps to ensure unanimity of purpose within the organisation. • It provides a basis or standard for allocating organisational resources. • It establishes a general tone or organisational climate. • It serves as a focal point for individuals to identify with the organisation’s purpose and direction. • It facilitates the translation of objectives into tasks assigned to responsible people within the organisation. • It specifies organisational purpose and then helps to translate this purpose into objectives in such a way that cost, time and performance parameters can be assessed and controlled M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 24
  • 25. •FIND OUT MISSION STATEMENTS OF ANY 5 COMPANIES…….. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 25
  • 26. Functional Strategy According to Gareth R. Jones, “Functional strategy is a plan of action to strengthen an organization’s Functional and organizational resources, as well as its coordination abilities, in order to create core competencies.” Corporate and Business strategies give birth to functional strategies, which are implemented in the organization through functional and operational implementation. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 26
  • 27. • According to Thompson and Strickland, “The term functional strategy refers to the managerial game plan for a particular functional activity, business process, or key department within a business. • A company’s marketing strategy, for example, represents the managerial game plan for running the marketing part of the business. • A company’s new product development strategy represents the managerial game plan for keeping the company’s product lineup fresh and in tune with what buyers are looking for.” M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 27
  • 28. • Each functional department carries out its own functional responsibility by executing short- and medium-term plans to play its role in meeting overall corporate objectives. • For example, in marketing strategy; the process may focus on selecting the target market, developing a market plan that may satisfy the overall needs of the target customers. • In human resource strategy, the functions may deal with recruitment and selection of the employees, their retention, training and development, evaluation, and remuneration part. • Financial strategy may go with issues of funding, shares, debt financing, depreciation etc. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 28
  • 29. • The functional strategies relate to the operating divisions and thus connect to business processes and value chain. • Higher-level strategies depend upon these strategies as they provide input to the business level and corporate level strategies. • Once the higher-level strategies are formulated, the functional units translate them into the course of action plan, which each department is supposed to complete within a due course of time for the success of the strategy. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 29
  • 30. An organization with multi-units dealing in several businesses at a same time, create a business strategy for each business and each business with separate sets of departments constitute their own functional strategies for each department. For example, if an organization decides to go for differentiation strategy, all the activities of each department, must be focused on fulfilling that purpose only. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 30
  • 31. FEATURES OF FUNCTIONAL STRATEGY M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 31
  • 32. • It acts to achieve corporate and business unit objectives by maximizing resource productivity. • It is the game plan to manage a principal subordinate activity within a business. • Functional strategy is concerned with developing and nurturing a distinctive competence to provide a company or business unit with a competitive advantage. • The orientation of the functional strategy is dictated by its parent business unit’s strategy. • Functional strategy is narrower in scope than business strategy. It contains relevant details of the overall business game plan by setting out the actions, approaches and practices which are to be employed in managing a particular function. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 32
  • 33. Functional Strategies • Human Resource Strategy • Marketing Strategy • Financial Strategy M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 33
  • 34. Marketing Strategy • A marketing strategy for a service-oriented organization would be to create a lasting, long-term link between the organization and the customers. Their functional strategy will include social media marketing, lead generations and SWOT (Strength, Weakness, Opportunity & Threats) Analysis to study the competition. • These strategies focus on identifying target audiences, understanding market dynamics, creating value propositions, and developing marketing campaigns to reach customers effectively. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 34
  • 35. • Apple has a clear marketing strategy focusing on creating a powerful brand image associated with innovation, quality, and luxury. • This is done through high-impact product launches, minimalist and creative advertising, and cultivating a sense of exclusivity around its products. • They also meticulously control their retail environments (both physical and online) to ensure the buying experience is aligned with their brand image. • Marketing & Advertising Strategy of Apple: A critical lens M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 35
  • 36. • A company like Coca-Cola might have a marketing strategy to strengthen its brand image by associating it with happiness and fun. • This could involve launching a global advertising campaign focusing on these themes, local events, and experiences that resonate with this message. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 36
  • 37. Finance Strategy • When you have your corporate strategies down pat, you must raise the required finances. For a startup, it can be seed funding, investor money or bank financing. Other financial strategies include capital budgeting and dividend strategies for equity shareholders. • This strategy involves financial planning and management, such as budgeting, cost control, cash flow management, capital structure, risk management, and investment decisions. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 37
  • 38. • Apple maintains a very large cash reserve, which gives them significant flexibility in strategic investments, acquisitions, and R&D. • Despite their cash holdings, they also use debt financing strategically, taking advantage of low-interest rates. • A startup might have a financial strategy of securing additional capital to fuel its rapid growth. • This could involve pursuing venture capital funding, maintaining a lean operational budget to extend their financial runway, and planning for a future initial public offering (IPO). M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 38
  • 39. Human Resource Strategy: •HR strategies include decisions about recruitment, selection, training, performance management, compensation, and employee retention. •The aim is to attract, develop, and retain a workforce that can effectively execute business strategies. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 39
  • 40. • Apple works hard to attract and retain top talent, offering competitive compensation packages, opportunities for career development, and a work environment that is both challenging and rewarding. • They also foster a culture of secrecy and urgency around their product development, which helps drive innovation. • Google has a human resource strategy of attracting and retaining the best talent in the industry. • They do this by providing a great work environment, excellent compensation packages, opportunities for career growth, and other perks like free meals and employee wellness programs. • Talent Management Strategy & Practices M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 40
  • 41. Three levels of strategy are the different levels of strategic management that run across the organization from the highest corporate level to the bottom functional level. The three levels of strategy include the • Corporate-level Strategy, • Business-level Strategy, and • Functional-level Strategy. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 41
  • 42. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 42
  • 43. • The difference between the three levels of strategy is who to implement the strategy. Since they are affecting in the different levels; • Corporate level strategy involves top-level management. • Business level strategy involves the ability to compete of each business unit. • Functional level strategy involves every single function in every business unit. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 43
  • 44. Corporate Level Strategy • Corporate level strategy is the highest level of all three levels of strategy. • The corporate level strategies are used to define and guideline the direction for the company in the big picture. • To put it simply, the corporate strategy is the main theme of all strategies within an organization. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 44
  • 45. • There are three main themes of the corporate level strategy includes growth strategy, stability strategy, and retrenchment strategy. • Growth strategy is a strategy that focused on expanding the business to increase the revenue in various ways: find new customers, selling existing products to the new market, merger, acquisition, and diversification. The growth strategies are simply found in the Ansoff Product-market matrix. • Stability strategy is a strategy that focused on stable the business (as its name) to improve the current business without investment or divestment. • Retrenchment strategy is a strategy that focused on stable the company’s financial position by stop unprofitable operations to cut the company’s expenses. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 45
  • 46. Business Level Strategy • Business level strategy is how the company competes with others in the market with its products or services. • For the business level strategy, the company needs to determine what is the competitive advantage for each business unit. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 46
  • 47. • There are 4 types of competitive advantages for the business level strategy following the Porter’s generic model: cost leadership, differentiation, cost focus, and focus differentiation. • Cost leadership is a strategy that the company produce products in huge amounts or with low-cost labor to compete. • Differentiation is a strategy that seeks advantage from the different by developing brands that stand out from the competitor. • Cost focus is like the cost leadership strategy but focused on the niche market instead of the mass market. • Focus differentiation is like differentiation strategy but focused on the niche market instead of the mass market. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 47
  • 48. Functional Level Strategy • The functional level strategy is a strategy that is implemented by each function in a business to support the business-level strategy. Functional level strategies typically are developed by functional area executives. • A business’s functional are include accounting, finance, production, marketing, procurement, service, research and development (R&D), human resources, and logistics. • To put it simply, the functional level strategy is a strategy that uses in each department of a single business unit. • Additionally, if you ever heard about the Value Chain (by Michael E. Porter), the functional level strategy is strategies that are implemented in each element of the Value Chain. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 48
  • 49. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 49
  • 50. Unit 2 Strategy Formulation, Implementation and Evaluation a) Strategic Formulation: Issues of strategic Choice, Stages and Importance of strategic Formulation, Formulation of Alternative Strategies: Mergers and Acquisitions, Joint Ventures, Diversification, Turnaround, Divestment and Liquidation. b) Corporate Portfolio Analysis- SWOT Analysis, BCG Matrix, GE Nine Cell Matrix, Hofer’s Matrix, Importance and Problems of Strategic Implementation, Importance, and Techniques of Strategic Evaluation and Control M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 50
  • 51. Issues of strategic Choice M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 51 Strategic choice is the mental process of selecting the best or most appropriate strategy from the stock of alternatives that serves the enterprise objectives. ‘Strategic choice’ involves selecting from among several alternatives the most appropriate strategy which will best serve the enterprise objectives. To choose a good strategic option, past data, current data, forecasted data, and various other factors should be examined carefully. The selection process becomes a complex job because it is influenced by various factors.
  • 52. Environmental Constraints • The dynamic elements of environment affect the way in which choice of strategy is made. • The survival and prosperity of a firm depend largely on the interaction of the elements of environment—such as shareholders, customers, suppliers, competitors, the government and the community. • These elements constitute the external constraints. • The flexibility in the choice of strategy is often governed by the extent and degree of the firm’s dependence on the environment. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 52
  • 53. Dynamism of Market Sector: • Glueck has said, “The strategic choice is affected by the relatively volatility of market sector the firm chooses to operate in.” Market forces vehemently influence the choice of strategy. • For example, a firm which obtains bulk supply of its raw materials or components in a competitive market will have greater flexibility in its strategic choice than another firm which must depend for its supplies on an oligopolistic market. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 53
  • 54. Intra- Organisational Factors: • Organisational factors also affect the strategic choice. • These include organisational mission, strategic intent, goals, organisation’s business definition, resources, policies, etc. • Besides these factors, organisational strengths, weaknesses, and capability to implement strategic alternatives also affect the strategic choice M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 54
  • 55. Corporate Culture: • In choosing a strategic alternative, strategy makers must consider pressures from the corporate culture. • They must assess a strategy’s compatibility with that culture. Every organisation has its own corporate culture. • It is made of a set of shared values, beliefs, attitudes, customs, norms, etc. • The successful functioning of an organisation depends on ‘strategy-culture fit’. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 55
  • 56. Industry and Cultural Backgrounds: • Industry and cultural backgrounds affect strategic choice. • For example, executives with strong ties within an industry tend to choose strategies commonly used in that industry. • Other executives who have come to the firm from another industry and have strong ties outside the industry tend to choose different strategies from what is being currently used in their industry. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 56
  • 57. Pressures from Stakeholders: • The attractiveness of a strategic alternative is affected by its perceived compatibility with the key stakeholders in a corporation’s task environment. • Creditors want to be paid on time. Unions exert pressure for comparable wage and employment security. • Governments and interest groups demand social responsibility. Shareholders want dividends. • All these pressures must be given some consideration in the selection of the best alternative. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 57
  • 58. Impact of Past Strategies: • It has been noticed that the choice of current strategy may be influenced by what type of strategies have been used or followed in the past. • Pearce and Robinson have said, “A review of past strategy is the point at which the process of strategic choice begins. As such past strategy exerts considerable influence on the final strategic choice.” M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 58
  • 59. Personal Characteristics: • Personal factors like own perception, views, interests, preferences, needs, aspirations, personal disposition, ambitions, etc., are important and play a vital role in affecting strategic choice. • Even the most attractive alternative might not be selected if it is contrary to the attitude, mindset, needs, desires and personality of the selector/strategist himself. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 59
  • 60. Value System: • The role of value system in choosing a strategic alternative is well recognized. • While evaluating the strategic alternatives, different executives may take different positions because of differences in their personal values. • Guth and Tagiuri found that personal values were important determinants of the choice of corporate strategy. • Similarly, value system to top management affects the types of strategy that an executive chooses. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 60
  • 61. Managerial Attitude towards Risk: • Managerial attitude towards risk is an important factor that influences the choice of strategy. • Individuals differ considerably in their attitude towards risk taking. Some are risk prone, others are risk averse. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 61
  • 62. Managerial Power Relations: • Choice of strategy is also influenced by the power play among different interest groups. • William Guth in his study found that strategic choice is significantly affected by interpersonal relations and power relationship among members of the top management team. • Power politics is a crucial factor determining the choice of strategy. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 62 https://www.businessmanagementideas.com/strategic-management/factors-affecting-strategic-choice/21044
  • 63. Stages of strategic Formulation • Strategy Formulation is an analytical process of selection of the best suitable course of action to meet the organizational objectives and vision. • It is one of the steps of the strategic management process. • The strategic plan allows an organization to examine its resources, provides a financial plan and establishes the most appropriate action plan for increasing profits. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 63
  • 64. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 64
  • 65. Establishing Organizational Objectives: This involves establishing long-term goals of an organization. Strategic decisions can be taken once the organizational objectives are determined. Analysis of Organizational Environment: This involves SWOT analysis, meaning identifying the company’s strengths and weaknesses and keeping vigilance over competitors’ actions to understand opportunities and threats. Strengths and weaknesses are internal factors which the company has control over. Opportunities and threats, on the other hand, are external factors over which the company has no control. A successful organization builds on its strengths, overcomes its weakness, identifies new opportunities and protects against external threats. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 65
  • 66. Forming quantitative goals: Defining targets so as to meet the company’s short-term and long-term objectives. Example, 30% increase in revenue this year of a company. Objectives in context with divisional plans: This involves setting up targets for every department so that they work in coherence with the organization as a whole. Performance Analysis: This is done to estimate the degree of variation between the actual and the standard performance of an organization. Selection of Strategy: This is the final step of strategy formulation. It involves evaluation of the alternatives and selection of the best strategy amongst them to be the strategy of the organization. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 66 https://businessjargons.com/strategy-formulation.html
  • 67. Importance of strategic Formulation M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 67
  • 68. Formulation of Alternative Strategies • Mergers and Acquisitions • Joint Ventures • Diversification • Turnaround • Divestment and Liquidation. M.COM I SEM I STRATEGIC MANAGEMENT DR VIJAY VISHWAKARMA 68 https://www.ihmnotes.in/assets/Docs/Sem-5/Strategic%20Management/Ch-3%20STRATEGY%20FORMULATION.pdf