Top management is responsible for strategic leadership, vision, and managing the strategic planning process. They articulate a strategic vision for the long-term direction of the company. As part of managing the planning process, top management initiates environmental scanning, formulates strategies, implements programs and budgets, and evaluates performance through feedback and control systems. The board of directors provides governance and oversight of the strategic management process, monitoring developments, evaluating strategies, and influencing strategic decisions. Strategic management aims to achieve competitive advantage and long-term success through this strategic planning process.

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MOD I: Strategy Management
Basic Concepts of Strategic Management
In its broadest sense, strategy is the means by which individuals or
organizations achieve their objectives.
Strategy: a plan, method or series of actions designed to achieve a specific
goal or effect.
Strategy is the pattern or plan that integrates an organizations major goals,
policies and action sequences into a cohesive whole.
Strategic Management is a set of manegerial decisions and actions that
determines the long run performance of a corporation. It includes
enviornmental scanning (external & Internal), strategy formulation , strategy
implementation and evaluation & control.
Phases of Strategic Management
4 Phases
 Phase 1 – Basic Financial Planning : Managers initiate serious
planning when they are asked to propose the following year’s budget.
Very little external environmentt scanning happens; scanning is limited
to internal environment. Financial planning usually is for one year
 Phase 2 – Forecast Based Planning : As annual budgets become
less useful at simulating long term planning, managers attempt to
propose five year plans, by extrapolation. Internal and external
environmental scanning is done. However, the scanning process is
adhoc and time consuming. Time horizon is 3 to 5 years
 Phase 3 – Externally oriented strategic planning : In this phase, top
management takes control of the strategic planning process. They
engage external consultants to help them develop with the plan, and
avoid low level managers in the strategic management process.
Consultants ofetn provide sophisticated and innovative techniques that
the planning staff uses to gather information and forecast trends. Top
management typically develps 5 year plans, with minimal input from
lowel level management. Upper level managers meet once in a year,
along with planning staff, to evaluate and update the current strategic
plan. Such top down planning emphasizes formal startegy formulation
and leaves the implementation issues to lower management levels.
 Phase 4 – Strategic Mangement :
Top management creates planning group consisting of managers and
employees from different departments and from all levels to create
work groups. Plans are detailed, to include implementation, evaluation

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and control issues. The sophisticated 5 year plan is replaced with
strategic thinking at all levels of the organization throughout the year.
Planning is interactive and people at all levels are involved.
Benefits of strategic planning
 Clearer sense of strategic vision for the firm
 Sharper focus on what is strategically important
 Improved understanding of a rapidly changing environment
 Emphasizes long term performance. To be successful in the long run
companies must not only be able to execute currenta ctivities to satisfy
an existing market, but they must also adapt those activities to satisfy
new and changing markets.
 Research reveals that organizations that engage in strategic
management generally outperform those that do not.
Challenges to Strategic Management
 Impact of globalization
 Environmental sustainability
o Regulatory risks
o Supply chain risks
o Products and technology risk
o Litigation risk
o Reputational risk
o Physical risk
Basic Model of Stratgic Management
4 basic components
 Environmental Scanning
 Strategy formulation
 Strategy Implementation
 Evaluation & Control
Environmental Scanning
 Monitoring,evaluting and dissemenating of information from the
external and inetrnal envirnment to key people within the corporation.
 Purpose is to identify strategic factors – those external and internal
elements that will determine the future of the organization

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 SWOT Analysis
 External Environment  Opportunities and threats
 Internal environment  Strengths and weakness
 External Analysis
o SWOT
o PESTLE
o Porters 5 forces model
o Task Environment
o Industry Matrix
 Strategy Formulation
o Development of long range plans for the effective management
of environmental opportunities and threats, in light of corporate
strengths and weaknesses.
o Defining corporate mission, specifying achievable objectives,
developing strategies and setting policy guidelines
 Strategy Implementation
o Strategy implementation is the process by which strategies and
policies are put into action through the development of
programs, budgets and procedures.
o Sometimes referred as operational planning, strategy
implementation often involves day-to-day decisions in resource
allocation
 Evaluation & Control
o Process in which corporate activities and performance results

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are monitored, so that actual performance can be compared
with desired performance.
Environmental Variables
Strategy Formulation
 Mission
o Purpose or Reason for organization’s existence
o It tells what the company is giving to the society as a service or
a product
o Defines the fundamental, unique purpose that sets a company
apart from other firms of its type and identifies the scope or
domain of the company’s operation in terms of products offered
and markets served.
o May also include a firms values and philosophy about how it
does business and treats its employees.
o It includes what the company is now, and also the
management’s strategic vision of the firm’s future.

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o E.g.: Google  To organize the world’s information and make it
universally accessible and useful.
 Objectives
o End results of the planned activity
o What is to be accomplished, by when and quantified if possible
o Achievement of objectives should result in the fulfillment of the
mission
o E.g.: Increase sales by 4-6% each year; Increase profit margins
by 10% next year
 Goal
o Is an open ended statement of what one wants to accomplish,
with no qualification of what is to be achieved and no time
criteria for completion
o E.g.: Increase profitability
 Strategy
o Forms a comprehensive master plan that states how the
corporation will achieve its mission and objectives
o Maximizes competitive advantage and minimize competitive
disadvantage
o
Levels of Strategy
 3 levels – Corporate strategy, business strategy and functional
strategy
 Corporate Strategy
o Describes a company’s overall direction in terms of its
general attitude towards growth and the management of its
various businesses and product lines
o Fit in 3 main categories of stability, growth and
retrenchment
 Diversification management - acquisitions and
divestitures
 Stability strategies
 Retrenchment Strategies
 Market penetration, market expansion, product expansion
 Business Strategy
o Usually at the business unit level or product level
o Emphasizes improvement of the competitive position of a
corporations products or services in the specific industry or
market segment served by that business unit
o Fits in two categories – Competitive and corporative
strategies

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 Generate sustainable competitive advantages
 Develop and nurture valuable capabilities
 Respond to environmental changes
 Approval of functional level strategies
o Competitive Strategy --
 Low cost , Cost leadership
 Differentiation
 Direct competition
 Focus on niche
o E.g. : Kingfisher airlines, strategic alliance with PayMate ,
introducing FlyBuySMSTM, enabling sms based flight
booking
 Functional Strategy
o Approach taken by functional area to achieve corporate
and business unit objectives and strategies by maximizing
resource productivity
o Concerned with developing and nurturing a distinctive
competence to provide a company or business unit with a
competitive advantage.
o E.g.: technological leadership – pioneering an innovation
 Marketing To attract and retain customers
 Production To produce products at lowest cost
 Finance To keep within budgets
 Accounting To standardize financial reports
 Purchasing To purchase products at lowest
cost
 R&D To develop newest technologies
 Engineering To design product
specifications

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 Marketing Strategy
o Deals with pricing, selling and distributing a product
o Market development strategy - Capture a larger share of
an existing market for current products through market
saturation and market penetration; develop new uses
and/or markets for current products
o Product Development Strategy - Develop new products for
existing markets; Develop new products for new markets
o Distribution Strategy
o Pricing Strategy - Skimming, penetration pricing, dynamic
pricing
 Financial Strategy
 Examines the financial implications of corporate & business
level strategic options and identifies the best financial course of
action
 Provide competitive advantage through a lower cost of funds
and a flexible ability to raise capital to support business strategy
 Attempts to maximize the financial value of the firm

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 Key issue - Trade off between achieving the desired debt-to-
equity ratio and relying on internal long-term financing via cash
flow
 Financial ratio analysis plays a key role; Debt-equity ratio,
leveraged vs unleveraged analysis
 Research & Development Strategy
 Deals with product and process innovation and
improvement
 Deals with appropriate mix of different types of R&D and
with the question of how new technology should be
accessed - through internal development, external
acquisitions or strategic alliances
 Can be a technology leader by pioneering an innovation,
or a technology follower imitating the products of the
competitor
o New concept of open innovation - where firms uses
alliances and connections with corporate, government,
academic labs, and even consumers to develop new
products and processes
 Operations Strategy
 Determines how and where a product or service is to be
manufactures, the level of vertical integration in the
production process, the deployment of physical resources,
and relationships with suppliers
 Deal with the optimum level of technology the firm should
use in its operations process
o JIT, Flexible manufacturing systems etc.
 Purchasing Strategy
o Deals with obtaining the raw materials, parts and supplies
needed to perform the operations function
o Multiple sourcing - purchasing company orders a particular
part from multiple vendors; and choice based on best bid
o Sole Sourcing - from a single vendor
o Parallel Sourcing - Two suppliers are the sole suppliers of
two different parts, but they are also backup suppliers for
each other’s parts
 Logistics Strategy
o Deals with the flow of products into and out of the
manufacturing process
o Trends - Centralization, Outsourcing, and Internet based

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 Human Resource Management Strategy
o Addresses the issue of whether a company or business unit
should hire a large number of low skilled employees who
receive low pay, perform repetitive jobs, and are most likely to
quit after a short time, or hire skilled employees who receive
relatively high pay and are cross trained to participate in self
managing work teams
o Appraisal, training, getting diverse work force etc
 Information Technology Strategy
o IT strategy for competitive advantage
Strategy Implementation
 Process by which strategies and policies are put into action through
the development of programs, budgets and procedures
 Might involve changes within the overall culture, structure and/or
management system of the entire organization
 Programs
o A program is a statement of the activities or steps needed to
accomplish a single use plan
o Makes a strategy action oriented
o May involve restructuring the corporation, changing the
company’s internal culture, or beginning a new research
effort.
o E.g.: Boeing’s Strategy – to increase efficiency, they decided
to cut costs: Implemented a program to outsource
approximately 70% of manufacturing activities.
 Budgets
o A budget is a statement of corporations programs in terms of
dollars
o Lists the detailed cost of each program
o Serves as a detailed plan of the new strategy in action, and it
specifies through pro forma financial statement the expected
impact on firm’s financial future
o E.g.: GM budgeted $4.3 billion to update and expand its
Cadillac Line of Automobiles
 Procedures
o Also known as standard operating procedures (SOP)

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o Typically details the various activities that must be carried out
to complete the corporate’s program
Strategic Decision Making Process
 Evaluate current performance results
 Review corporate governance
 Scan and assess external environment
 Scan and assess internal environment
 Analyze SWOT factors to pin point problem areas, and review and
revise the corporate mission, objectives etc
 Generate, evaluate and select the best alternative strategy
 Implement selected strategies via programs, budgets and
procedures
 Evaluate implemented strategies via feedback systems and the
control of activities to ensure minimum deviation from plans
Strategic Audit: provides a checklist of questions, that enables a
systematic analysis to be made of various corporate functions and
activities.

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Constitution of Board
 Every incorporated company must have directors, who are
collectively referred as board of directors or board
 Directors fall under different categories
o Executive & Non executive
o Independent or not, or nominees or appointees

 Executive directors
o Managing directors, functional directors and other such
persons, who hold a full time appointment in their
company fall into this category
o Shareholders elected by shareholders to manage the
business of the company.
o Manage the company on behalf of shareholders
o Get involved in day-to-day running of the business

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o Executive directors perform operational and strategic
business functions such as managing people, looking
after assets, hiring and firing and entering into contracts
o Work full time; and receive a salary
o Director must be an individual; any person competent to
contract
 Appointment: First set of directors, usually
founders, are mentioned in AOA. Subsequent
directors are appointed by shareholders in AGM
 Non Executive Directors
o All board members who are not employed full time by
the company
o Includes independent or not, nominees, ex-officio and
constituency directors
o As responsible for the company’s progress and success
as their executive colleagues
o Appointed for a specific term
o Do not get involved in day-to-day matters
o Use their experience and expertise to provide
independent advice and objectivity; and they usually
have a role in monitoring executive management
o Work part time, attending meetings and spending time
on specific projects
o
 Nominee and Ex-Officio Directors
o Form a distinct sub group of the non executive director
category
o Nominated by third party, such as Govt, foreign
collaborators, holding companies, financial institutions
etc , in order to ensure safety of their interest
 Constituency Directors /Representative Directors
o Appointed to the board by a particular constituency, such
as workmen, or small shareholders of the company
o His responsibility extends to all the shareholders and not
limited to the particular constituency he represents
 Shadow Director /Deemed Director
o A person who is not named or appointed as a director,
but gives instructions to the board
o Remains in the background and exercise powers over
the board decisions
 Associate Director
o Title given to senior managers even though they are not
on the board.
o Sometimes this designation is given as a sign of

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appreciation and recognition for the work done
 Inside Directors are officers or executives employed by the board’s
corporation
 Outside Directors are executives of other firms but are not employees of
the board’s corporation
 Affiliated directors- not employed by the corporation, handle legal or
insurance work
 Retired executive directors- used to work for the corporation, partly
responsible for past decisions affecting current strategy
 Family directors- descendents of the founder and own significant blocks
of stock
Responsibilities of the Board of Directors
• Sets corporate strategy, overall direction, mission, or vision
• Hires and fires the CEO and top management
• Controls, monitors, or supervises top management
• Reviews and approves the use of resources
• Cares for shareholders’ interests
• Assures that the corporation is managed in accordance with state laws,
security regulations and conflict of interest situations
Role of Board in Strategic Management
3 basic tasks
 Monitor: developments inside and outside the corporation, bringing to
managements attention developments it might have overlooked
 Evaluate & influence: A board can examine management’s proposals,
decisions and actions; agree or disagree with them; give advice and
offer suggestions; and outline alternatives.
 Initiate & determine : A board can delineate a corporations mission and
specify strategic options to the management.

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Responsibilities of Top Management
 Executive leadership & Strategic Vision
o Executive leadership is the directing of activities toward the
accomplishment of corporate objectives. Sets the tone for the
entire corporation
o Strategic vision- description of what the company is capable of
becoming
o Transformational Leaders provide change and movement in an
organization by providing a vision for that change.
o CEO articulates a strategic vision for the corporation
 CEO envisions how the company can become
 The new perspective that the CEO’s vision brings to
activities gives a new renewed meaning to everyone’s
working and enables employees to see beyond the
details of their own jobs to the functioning of the total
corporation
o CEO presents a role for others to identify with and to follow
 The leader empathizes with followers and sets an
example in terms of behavior, dress and actions. The
CEO’s attitude and values concerning the corporation’s
purpose and activities are clear cut and constantly
communicated in words and deeds
 Researches indicate that business in which the top
management is trusted by its employees, generate more
sales and profits
o CEO communicates high performance standards and also show
confidence in the followers’ abilities to meet these standards
 The leader empowers followers by raising their beliefs in
their own capabilities.

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 Communicating high expectations to others often can
lead to better performance
 Managing the strategic planning process
o Top management initiates and manages the strategic planning
process; so that the plans for all units and functional areas fit
together into an overall corporate plan
o Many large orgs have planning staff charged with supporting top
management and the business units in strategic planning
process
o Major responsibility of planning staff includes
 Identify and analyze company wide strategic issues, and
suggest corporate strategic alternatives to top
management
 Work as facilitators with business units to guide them
through the strategic planning process
Contents of Strategic Plan
 Introduction – Cover letter
 Executive summary
 Mission & vision statement
 Organizational Profile & History
 Critical Issues & Strategies
 Program goals and objectives
 Management goals & objectives
 Appendices