Strategic Management

1. UNIT 1: Introduction

2. • Strategic Management is a stream of decisions and actions which lead to
the development of an effective strategy or strategies to help achieve
corporate objectives.
• Strategic management is an on-going process that evaluates and controls
the business and the industries in which the company is involved; assesses
its competitors and sets goals and strategies to meet all existing and
potential competitors; and then reassesses each strategy annually or
quarterly [i.e., regularly] to determine how it has been implemented and
whether it has succeeded or needs replacement by a new strategy to meet
changed circumstances, new technology, new competitors, a new
economic environment, or a new social, financial, or political environment.

3. Nature of SM
• Strategic Issues Warrant Top Management Decisions: Strategic
decisions have far-reaching impact on several areas of firms
operations. Hence, top management involvement in decision
making is imperative. These decisions must be made by top
management as these are the pillars of the organisation. Let us
take the example of a pharmaceutical firm.
• The quality of the product and the price you are charging they
are most important. These decisions will not be left to business
level or functional level. Only at the top level there is perfect
perspective understanding, anticipating broad implications and
the branching out and ramifications and the power to authorise
the resource allocation that is needed for implementation of
what is contemplated.

4. Strategic Issues Involve the Allocation of
Large Amounts and Resources:
• By very nature, strategic issues call for
allocation of large amounts and resource
deployment. The strategic issue is one of
expansion or expanding the production
capacity, or entering into new market or
modernisation to cut cost (technological up-
gradations).

5. Strategic Issues are Likely to have Impact
on the Long Term Prosperity of the Firm:
• The strategic decisions are such that their impact
good or bad will be known in the long-run. When
a company sticks to a particular strategic option,
its competitive image and merits are tied to that
strategy option only.
• A firm which is spending huge amount on
building company’s image which is dependent on
its position in product market, capital market and
labour market will be known in due course of
time but not immediately.

6. Strategic Issues Warrant due Weightage to
the Firm’s External Environment:
• Each business unit is a sub-system that exists in an
environment. A firm as a sub-system has great influence of
the environmental forces on it and it has its own impact on
environment. However, the environmental forces are so
powerful that it is very difficult to exert control on them.
• To survive each firm has to adjust to these external forces
in future because these forces are constantly changing.
That is why, the strategic managers have to look beyond the
limits of firm’s operations.

7. Strategic Management is a Process
• Strategic management has emerged out of management in
other areas where the concept of management is taken as
a process for achieving certain objectives of the
organisation for which it is brought into existence. As a
process, it has logical steps namely, formulation of
objectives of the organisation; keen observation and
monitoring of environment-both external and internal so as
to identify the opportunities and threats; evaluation of
firm’s strengths and weaknesses.

8. Strategic Management Stresses both
Efficiency and Effectiveness:
• This is very important point because many people do not
differentiate “efficiency” from “effectiveness.” The
professors Alex Miller and George Dess have pinpointed the
difference between ‘efficiency’ and effectiveness. Many a
times what is efficient may not be effective but other way
round not normally may not be true.
• “Doing things right” is efficiency and “doing the right
things” is effectiveness. Generally, a manager who takes the
word in narrow sense concentrates on efficiency or
improving on his efficiency level yet he may not be
successful all the time because he is concentrating on his
functional or divisional area than overall business.

9. Framework of strategic management(Strategic
Decision Making Process)
• Stage One – (Planning and Analysis) Where
are we Now? (Beginning):This is the starting
point of strategic planning. It consists of doing
a situational analysis of the firm in the
environmental context. At this stage, the firm
finds out its relative market position,
corporate image, its strength and weakness
and also environmental threats and
opportunities. This is also known as SWOT
analysis.

10. Stage Two – (Strategy Formulation) where do we
want to be? (Ends):
• This is a process of goal setting for the
organization after it has finalized its vision and
mission.
• Stage Three – (Alternative Selection) How
Might we Get There? (Means):Here the
organization deals with the various strategic
alternatives it has.

11. Stage Four – (Evaluation) Which
Way is the Best?
• Out of all the alternatives generated in the earlier stage,
the organization selects the best suitable alternative in line
with its SWOT analysis.
• Stage Five – (Implementation and Control) How Can we
Ensure Arrival? This is an implementation and control stage
of a suitable strategy. Here again the organization
continuously does situational analysis and repeats the
stages as required.

12. Levels of Strategic Decision Making
• Business-level strategy
• Functional-level strategy
• Corporate-level strategy

13. Business-level strategy
• The Business-level strategy is what most people are familiar with and is
about the question “How do we compete?”, “How do we gain (a
sustainable) competitive advantage over rivals?”. In order to answer these
questions it is important to first have a good understanding of a business
and its external environment. At this level, we can use internal analysis
frameworks like the Value Chain Analysis and the VRIO Model and external
analysis frameworks like Porter’s Five Forces and PESTEL Analysis. In the
end, the business-level strategy is aimed at gaining a competitive
advantage by offering true value for customers while being a unique and
hard-to-imitate player within the competitive landscape.

14. Functional-level strategy
• Functional-level strategy is concerned with the question “How do we
support the business-level strategy within functional departments, such as
Marketing, HR, Production and R&D?”. These strategies are often aimed at
improving the effectiveness of a company’s operations within
departments. Within these department, workers often refer to their
‘Marketing Strategy’, ‘Human Resource Strategy’ or ‘R&D Strategy’. The
goal is to align these strategies as much as possible with the greater
business strategy. If the business strategy is for example aimed at offering
products to students and young adults, the marketing department should
target these people as accurately as possible through their marketing
campaigns by choosing the right (social) media channels. Technically,
these decisions are very operational in nature and are therefore NOT part
of strategy. As a consequence, it is better to call them tactics instead of
strategies.

15. Corporate-level strategy
• At the corporate level strategy however, management must not only
consider how to gain a competitive advantage in each of the line of
businesses the firm is operating in, but also which businesses they should
be in in the first place. It is about selecting an optimal set of businesses
and determining how they should be integrated into a corporate whole: a
portfolio. Typically, major investment and divestment decisions are made
at this level by top management. Mergers and Acquisitions (M&A) is also
an important part of corporate strategy. This level of strategy is only
necessary when the company operates in two or more business areas
through different business units with different business-level strategies
that need to be aligned to form an internally consistent corporate-level
strategy. That is why corporate strategy is often not seen in small-medium
enterprises (SME’s), but in multinational enterprises (MNE’s) or
conglomerates.

16. Example Samsung
• Let’s use Samsung as an example. Samsung is
a conglomerate consisting of multiple strategic business units
(SBU’s) with a diverse set of products. Samsung sells
smartphones, cameras, TVs, microwaves, refrigerators,
laundry machines, and even chemicals and insurances. Each
product or strategic business unit needs a business strategy in
order to compete successfully within its own industry.
However, at the corporate level Samsung has to decide on
more fundamental questions like: “Are we going to pursue the
camera business in the first place?” or “Is it perhaps better to
invest more into the smartphone business or should we focus
on the television screen business instead?”.

18. What is Strategic Intent ?
• According to Prahalad and Doz :
• “ StrategicIntent is long-term goals and aims, rather than
detached plans. Strategic intent is crucial for a firm to aim
for goals for which one cannot plan. It is important to
separate that orientation (strategic intent) from strategic
planning or strategies. Strategic intent allows for a firm to
build layers of competitive advantage painstakingly, to
accomplish long-term goals".

19. Hierarchy of Strategic Intent :

20. Vision
• Vision is a mental perception of the kind of environment
and individual or an organisation aspires to create within a
board time horizone and the underlying conditions for the
actualisation of this perception.
• Vision statement can be referred as the statement defining
company's long term goals. A vision statement can exceed
from one line to a few paragraphs highlighting what the
organisation want to achieve in future.
• For example : Infosys vision is "To be a globally respected
corporation that provide best of breed business solutions,
leveraging, technology, delivered by best-in-class people".

21. Mission
• A mission provides the basis of our awareness of a sense of
purpose, the competitive environment degree to which the
firms mission hit its capabilities and the opportunity which
the government offers.
• For example : Infosys mission statement is "To achieve our
objectives in an environment of fairness, honesty and
courtesy towards our clients, employees, vendors and
society at large".

22. Business Definition
• Business definition refers to the description of products,
services, activities, functions, and markets in which an
organisation deals. It is a component of mission statement
which forms the foundation for all the strategic
planning processes and shows the organisation a way to
achieve success. It also helps the organisation in estimating
the changes as well as their effects. Business definition
outlines the current position and the desired future
positions. It discusses the operations of the business but
does not exactly specify the reasons behind particular
operation.
•

23. Goals
• Organisational goals refer to the ideal situations to be
achieved in undefined time-duration in future. These goals
direct the daily activities and decisions. However, goals do
not essentially lead to the quantifiable outcomes. These
statements are related to the vision and mission
statements. Goals can be followed for day-to-day
operational activities and decisions, not essentially tied up
with quantifiable results.

24. Objectives
• Objectives are states or outcomes of behavior that are
desired. An organisation may desire either to obtain
something that it does not currently have or to retain
something it already has. Hence, objectives may be either
acquisitive or retentive.
• Strategic objectives are those aims that are formulated to
bring major changes in response to the changes,
competition, and issues in the environment. These
objectives are formulated to address various internal and
external issues such as target customers, target markets,
product, and changes in technology, etc.