You are on page 1of 10

STRATEGIC MANAGEMENT

Module – I

Strategy : Is a blueprint indicating the courses of action to achieve the desired


objectives

1) Dictionary meaning is, - a plan for achieving a major goal, planning & directing the
whole operation of an event. The planning & directing of military activity in a war. A
plan for achieving Major Goal.

2) Strategy is a “Plan of Action/Course of Action ” to achieve a specific objective.. It is


also an integrated approach to reach a goal.

3) Top management’s plans to attain outcomes consistent with the organization’s mission
and goals.

Strategic Management:

Managing for Future or Competing for Future.

1) Is also known as Business Policy or Corporate Strategy, Corporate Planning (used


interchangeably) refers to those set of perspective (understanding of a relative
advantage) management measures taken with a view to ensuring the survival and success
of an enterprise in a Competitive Environment

2) That set of decisions and actions which leads to the development of an effective
strategy or strategies to help achieve corporate objectives. It is designed to ensure that
the basic objectives of the enterprise are achieved.

3) Determination of the basic long-term goals and objectives of an enterprise and


adoption of course of action and allocation of resources necessary to carryout these goals.

4) It is continuous process of determining the mission and goals of an organization


within the context of its external environment and it’s internal strengths and weaknesses,
formulating and implementing strategies, and exerting strategic control to ensure that the
organization’s strategies are successful in attaining its goals.

Strategic Management involves the decision-making and activities in an organization


which (1) have wider ramifications (form branches) (2) have a long time perspective
(importance) and (3) use critical resources towards perceived opportunities or threats in a
changing environment.

Importance & Relevance

1
1 As the environment changes, companies may change their vision and objectives,
structure, portfolio of business, markets and competitive strategies. The economic
liberalization and the concomitant (associated) wide opening up of business opportunities
and increase in competition have in fact made strategic management a buzz word among
the Indian corporate.

2. The task of Strategic Management is to identify the new and different businesses,
technologies and markets which the company should try to create long range It always
reminds us the present business, should we abandon?

3. Without competitors, there would be no need for strategy, for the sole purpose of
strategic planning to enable the company to gain, as efficiently as possible, a sustainable
edge over it’s competitors (rivals)

4. Changes in one stage of the strategic management process will inevitably affect other
stages as well. After a planned strategy is implemented, for example often requires
modification as environmental or organizational conditions change, or as top
management’s ability to interpret these changes improve. Hence, these steps are
interrelated; they should be treated as an integrated, ongoing process.

Benefits and Relevance of Strategic Management

1. Strategic management helps to envision an organization’s future , formulate


mission and make objectives clear. This is clear from the fact that determination
of mission and objectives is the first step in the strategic management process. It
may be noted that the new growth and competitive environment created by the
liberalization prompted many Indian companies to evaluate and modify their
mission and objectives or to ponder over a mission for the company where one
did not exist.
2. The articulation of the mission and objectives and the formulation of a strategy
for their accomplishment help people in the organization understand what the
organization stands for, what is the development path charted out, what are the
planned results over a period of time etc.
3. It makes people realize what are they working for, what is expected of each SBU,
division, functional department and, or some extent, individuals.
4. Strategic management facilitates better delegation, co-ordination monitoring,
performance evaluation and control.
5. The identification of the strengths and weaknesses may help an organization to
take measures to overcome/minimize the weakness and reinforce the strengths.
6. The SWOT analysis, which is a part of the strategic management, helps a
company to adopt suitable strategies for exploiting opportunities and combating
threats. It will also help the company to drop those businesses where it would
not be successful or which do not meet the objectives.
7. a company with strategic management will constantly monitoring the
environment and making modifications of the strategy as and when required so
that the plans are made more realistic and effective.

2
8. Strategic management would enable a company to meet competition more
effectively.
9. Strategic management makes the management dynamic, appropriate to the
environment and result and future oriented.
10. Studies show that companies with strategic management are more effective than
others, generally.

Intended Strategy: The original strategy, the top management plans and intends to
implement

Realized Strategy: The strategy that top management actually implements.

Hence,, the original strategy may be realized with desirable or undesirable results, or it
may be modified as changes in the firm or environment become known.

Features of Strategic Management

Is basically a Process. It is a Top Management function. Since the environment of the


organization is always changing proving new opportunities and threats, top management
must spend more and more time on this aspect. It embodies all General Management
principles and practices devoted to strategy formulation and implementation in the
Organization. The focus is on relating the Organization to External environment taking
an open system approach. The steps are,

1. Formulation of objectives of the organization.


2. Surveillance of environment both external and internal, and identification of various
opportunities offered by the and threats presented.
3. Evaluation of the organization’s opportunities and threats.
4. Formulation of various strategies for achieving these objectives.
5. Implementation of these strategies.
6. Evaluation and monitoring of the outcome of these strategies to ensure that
organizational objectives are being achieved.

Characteristics of a Winning Strategy Factors to be taken.

1. Strategic managers thoroughly understand the competitive environment in which


the organization competes.
2. The mission and goals of the organization are simple and consistent with the
strategy.
3. Strategic managers understand the organization’s resources and how they translate
into strengths and weaknesses.
4. Plans for putting the strategy into action are designed with specificity before
implementation.

3
5. Possible future changes in the proposed strategy (i.e. strategic control) are
evaluated before the strategy is adopted.

This is done through Corporate Planners who are,

1. Keeping track of the latest developments in the field of strategic management and
disseminating such information to the strategists.
2. Supplying data inputs and analytical support needed for strategic management.
3. Environmental analysis.
4. Identifying new business opportunities.
5. Helping to establish a planning system.
6. Formulating guidelines for preparing plans.
7. Coordinating divisional plans.
8. Assisting to evaluate and control strategies.

Strategic Management Consultants

Strategic Management requires huge data of external world to plan accurately. Hence
Consultants are approached such as McKinsey, Anderson Consulting, Price Water
Cooper, Deloite, Tata Consultancy Services, Arthur D Little, Earnest & Young etc.

What influences the Strategic Management?

1. Industrial Organization : A view based in microeconomic theory which states that


firm profitability is most closely associated within the industry structure.
2. Resource-based theory : The perspective that views performance primarily as a
function of a firm’s ability to utilize its resources.
3. Distinctive competence: Unique resources, skills and capabilities that enable a
firm to distinguish itself from its competitors and create competitive advantage.
4. Contingency theory: A view which states that the most profitable firms are likely
to be the ones that develop the best fit with their environment.
5. Sustained Competitive advantage: A firm’s ability to enjoy strategic benefits over
an extended period of time.

Strategic Management Process:

The strategic management is a broader term than strategy and is a process that includes
top management’s analysis of the environment in which the organization operates prior to
formulating a strategy, as well as the plan for implementation and control of the strategy.

1. External Analysis Analyze the opportunities and threats or constraints that exist in
the organization’s external environment, including industry and macro-
environmental forces. (external world)
2. Internal Analysis: Analyze the organization’s strengths and weakness in its
internal environment. (within the organization)

4
3. Mission & Direction: Reassess the organization’s mission and it’s goal in the
light of the previous two steps. (review)
4. Strategy Formulation: Formulate strategies that build and sustain competitive
advantage by; matching the organization’s strengths and weaknesses with the
environment’s opportunities and threats.
5. Strategy Implementation: Implement the strategies that have been developed.
6. Strategic Control: Engage in strategic control activities when the strategies are
not producing the desired outcomes.

Changes in one stage of the strategic management process will inevitably affect other
stages as well. After a planned strategy is implemented, for example often requires
modification as environmental or organization conditions change, or as top management’s
ability to interpret these changes improve. Hence because these steps are interrelated,
they should be treated as n integrated ongoing process.

Basically the process involves three phases (1) Formulation (2) Implementation and (3)
Evaluation & Control.

Strategic Planning

Is defined as an orderly process by which top management determines organizational


objectives, strategies needed to reach these objectives, and short-range, top level actions
necessary to implement the strategy properly. It is a top level long range planning.
An orderly process by which Top Management determines organizational objectives,
strategies needed to reach these objectives, and short- range, top level actions necessary
to implement the strategy properly.

Tactical Planning

Refers to short-range planning that is oriented towards operations and is concerned with
specific and short-range details.

Formal Planning

Systematic & Regular Planning department/cells manned by people with knowledge and
experience in “different aspects and dimensions of planning” at organizational level.

Informal Planning:

Is common with small enterprises, and sometime with one man dominated not so small
enterprises, is often done in a casual way.

Policy:

5
Is a broad, general guide to action which compels or directs goal attainment. Policies do
not normally dictate what action should be taken, but they do provide the boundaries
within the objectives must be pursued. Thus, policies serve to channel and guide the
implementation of strategies. Actions should be in line with the policy and not vice-
versa.

Approaches to Strategy Making

1. Prescriptive Approach Strategic management has long been viewed as a


sequential process forming a prescriptive model based on predictive environment.
It recognizes the three core components of strategic management process i.e.
strategic analysis (consisting of SWOT analysis and determination of mission and
objectives), strategy development (evaluation of strategic alternatives and choice
of strategy) and implementation. In prescriptive strategy, strategic analysis leads
to the determination (i.e. prescription) of the long term strategy which is then
implemented. In other words, the different components are different phases of
strategic management and they are neatly linked together sequentially.
The prescriptive approach provides a clear master plan for the development of the
entire organization. It makes the future direction and goals very clear and thereby
forms the basis for action and evaluation. It gives advance indication of the major
demands on the resources like technological, physical, human and financial – at
different points of time.
2. Emergent Approach; There is no final, agreed strategy but rather a series of
experimental approaches that are considered by those involved and then
developed further. Strategies emerge during a process of crafting and testing.
The major merit of the component and its flexibility to adapt to the changing
environment. Another important merit claimed for the emergent strategy is the
advantage of experimentation and the resultant evolution for a sound strategy.

LEVELS OF STRATEGY

1. Corporate/Enterprise Strategy

Is the organization’s plan for establishing the desired relationship with other social
institutions and stockholder group and maintaining the overall character of the
organization. The mission statement may reflect the enterprise strategy. It seeks to
answer the question “what do we stand for?”

2. Strategic Business Unit:

Is sometimes called Business Strategy or Competitive Strategy. Is an operating division


of a firm which serves a distinct product/market segment or a well defined set of
customers or a geographic area. The SBUs The unit level decisions on planning is taken
in accordance with the corporate guidelines as per Corporate Objectives.

6
3. Functional Strategy

For different functional areas like production, finance, personnel, marketing etc. In other
words, the functional-level strategic management is the management of relatively narrow
areas of activity which are of vital, pervasive, or continuing importance to the total
organization.

Core Competence

According to Prahalad and Hamel, Core Competencies are the collective learning in an
organization especially how to co-ordinate diverse production schemes and integrate
multiple streams of technologies.

Core competence is also communication, involvement and a deep commitment to


working across organizational boundaries. It involves many levels of people and all
functions. It represents accumulated knowledge and skills in an organization, can be
converted into competitive advantage only if the several constituent skills and
technologies are creatively harmonized and quickly reconfigured to respond to new
opportunities.

The firm’s key capabilities and collective learning skills that are fundamental to its
strategy, performance and long term profitability. Are those where it outperforms
competitors and that are difficult to imitate.

Relationship between Company’s Strategy and its Business Model:

The Mission statement reflects on the Company’s Strategy which is nothing but the
organization’s plan for establishing the desired relationship with other social institutions
and stockholder group and maintaining the overall character of the organization. The
Business Model is the translation of the strategy into the operational procedure to achieve
the objective.

Business model is evolved through consultations and brain storming with a matured
experience. A plan thus drawn covering every intricate details is called as Business
Model. The business model is to be implemented through operational group and closely
monitored. Business Model is also a means of communication to stake holders. It is the
economic mechanism by which a business hopes to sell in goods or services and generate
profit. The business model changes due to Time, Technology and quality of foreseeing.
As such, some business models may not prove successful at first, but with minor changes
may become successful in a future period.

Significance of crafting and execution of Strategy .

7
Crafting Strategy helps to understand the idea at the point of execution. . As the
execution of Strategy in process, different hurdles are coming in the way due to change in
environment expected and happening. During such occasions, Crafting Strategy is the
right approach. It helps to understand the situation and arrives with solutions to
overcome the hurdles. Sometimes, you have to discontinue a product or service to face
the threat. May be to get the best advantage of the given situation also. The Crafting
Strategy works as a safe-guard at the point of execution. It offers,

1. Manage stability.
2. Detect discontinuity – Environments do not change regularly, nor are they always
turbulent. Some changes are more important than others.

3. Know the business. - This has to include an awareness and understanding of


operations.
4. Manage Patterns – Direct emerging patterns and help them to take shape if
appropriate.
5. Reconcile change and continuity – Avoid concentrating on one or the other.

Rational Model

Is a comprehensive approach to strategy. It suggests a logical sequence which involves


analyzing the current situation, generating choices (relating to competitors, products and
markets) strategies and implementing the chosen strategies.

To develop a Business strategy, an organization has to decide the following.

1. What it is good at.


2. How the market might Change.
3. How customer satisfaction can be delivered.
4. What might constrain realization of the plan.
5. What should be done to minimize risk.
6. What actions should be put in place.

Strategic Decisions

Strategic Decisions and decision making are the core of strategic management. Strategic
decisions rules over the operational decisions. A decision is a choice of course of action
out of the several alternatives. A decision represents a judgment: a final resolution of a
conflict of needs, means or goals, and a commitment of action in face of uncertainty,
complexity and even irrationality

8
Strategic decisions pertain to the fundamental questions in what business the firm should
be in and how it should be in, considering the strengths and weaknesses of the firm and
the environmental threats and opportunities.

Strategic decisions have a long term horizon and are non repetitive, centralized, taken by
top level management and are concerned with the allocation of the total resources among
product – market opportunities. It comprises of,

(1). A systematic, comprehensive analysis of internal attributes and factors external to the
organization. (2) It is long-term and future-oriented. – based on past and present. (3) It is
opportunistic always seeking to take advantage of favorable situation that occur outside
the organization. (4) Out of the choices, go for a “win-win” situation as far as possible.

HDFC BANK

Our mission is to be “a World Class Indian Bank”, benchmarking ourselves against


international standards and best practices in terms of product offerings, technology,
service levels, risk management and audit & compliance.

The objective is to build sound customer franchises across distinct businesses so as


to be a preferred provider of banking services for target retail and wholesale
customer segments, and to achieve a healthy growth in profitability, consistent with
the Bank’s risk appetite. We are committed to do this while ensuring the highest
levels of ethical standards, professional integrity, corporate governance and
regulatory compliance.

TCS

Vision - Global Top 10 by 2010


Mission - To help Customers achieve their business objectives by providing
innovative, best-in-class consulting IT solutions and services.
Values - Leading change. Integrity. Respect for the individual. Excellence.
Learning and sharing.

GODREJ

Vision; Deliver superior stakeholder value, Household and Personal care, Enduring
Trust and Relentless Innovation, Passion and Entrepreneurial Spirit.

DABUR

Vision: Dedicated to Health & Wellbeing of Every Household.

9
M-1

ADDITIONAL INFORMATION

1. Corporate Mission

The mission spells out what the ambitions of the firm are, where exactly it seeks to reach
and what it would like to be in the future. It is a blue print of firm’s business, products
and markets. It offers clarity for strategic planning It is an expression of the growth
ambition of the firm as it visualizes the future. Mission amplifies what brings the firm to
this business or why it is there, what existence it seeks and what purpose it seeks to
achieve as business firm. It is a open document although made by the Management. It
visualizes the ambition, visionary zeal, value, beliefs, specification to the business. It
directs the entire planning, guides formulation of all objectives, communicates the
corporate vision to everyone. Firms gain useful insights by agitating the mission afresh

Example:

a) Uniliver: Is to make cleanliness commonplace, to lessen work for women,


to foster health, and to contribute to personal attractiveness that life may
be more enjoyable for people who use our products.
b) Merck - To preserve and improve human life.
c) McKinsey & Co: To help business corporations and governments to be
more successful.
d) Cadbury India: To attain leadership position in the confectionery market
and achieve a strong national presence in the food drinks section.
e) Tata Info: To be India’s most successful and most respected IT Company.
f) Reliance: To become a major player in global chemicals business and
simultaneously grow in other growth industries like infrastructure.
g) Ranbaxy: To become a $1 billion research-based global pharmaceuticals
Co.

3.Corporate Objectives

The objective defines the main task here is to decide the extent of growth the firm wants
to achieve. The firm examines its present level of performance, its achievable level of
performance over the planning period, say 5 years and its aspiration level of performance.
It addresses the question: given its strengths, competitive advantage, resources on one
hand and the business opportunities emerging in the environment on the other, what level
of growth it should aim at. In addition to growth, there are certain other key determinants
of corporate success which apply to all firms: profitability, productivity, technology,
competitive positions, human resources, technology leadership, social responsibility and
corporate image. The objectives are measurable and time bound manner.

10