Unit I

INTRODUCTION TO STRATEGIES

INTRODUCTION
The word strategy has entered the field of management more recently. At first, the word was used in
terms of Military Science to mean what a manager does to offset actual or potential actions of
competitors. The word is still being used in the same sense, though by few only. Originally, the word
strategy has been derived from Greek ‘Strategos’, which means generalship. The word strategy,
therefore, means the art of the general.

It is an action that managers take to attain one or more of the organization‘s goals. Strategy is a general
direction set for the company and its various components to achieve a desired state in the future.
Strategy results from the detailed strategic planning process.

A strategy is all about integrating organizational activities and utilizing and allocating the scarce resources
within the organizational environment so as to meet the present objectives. While planning a strategy it is
essential to consider that decisions are not taken in a vacuum and that any act taken by a firm is likely to
be met by a reaction from those affected, competitors, customers, employees or suppliers.

Strategy can also be considered as knowledge of the goals, the uncertainty of events and the need to
take into consideration the likely or actual behavior of others. Strategy is the blueprint of decisions in an
organization that shows its objectives and goals, reduces the key policies, and plans for achieving these
goals, and defines the business the company is to carry on, the type of economic and human
organization it wants to be, and the contribution it plans to make to its shareholders, customers and
society at large

The very injection of the idea of strategy into business organizations is intended to unravel complexity
and to reduce uncertainty caused by changes in the environment. Strategy seeks to relate the goals of
the organization to the means of achieving them. Strategy is the game plan that the management of a
business uses to take market position, conduct its operations, attract and satisfy customers, compete
successfully, and achieve organizational objectives.

To the extent the term strategy is associated with unified design and action for achieving major goals,
gaining command over the situation with a long-range perspective and securing a critically advantageous
position, its implications for corporate functioning are obvious.
 DEFINITION AND MEANING
Strategy is the determination of the basic long-term goals and objectives of an enterprise and the
adoption of the course of action and the allocation of resources necessary for carrying out these goals.
William Glueck, defined strategy as:”A unified, comprehensive and integrated plan designed to assure
that the basic objectives of the enterprise are achieved”.

The three adjectives, which Glueck has used to define a plan, make the definition quite adequate.
‘Unified’ means that the plan joins all the parts of an enterprise together; ‘comprehensive’ means it covers
all the major aspects of the enterprise, and ‘integrated’ means that all parts of the plan are compatible
with each other.

Mintzberg of McGill University is a noted management thinker and prolific writer on strategy. He
advocates the idea that strategies are not always the outcome of rational planning. They can emerge
from what an organization does without any formal plan. He defines strategy as: “a pattern in a stream of
decisions and actions”.

Mintzberg distinguishes between intended strategies and emergent strategies. Intended strategies refer
to the plans that managers develop, while emergent strategies are the actions that actually take place
over a period of time. In this manner, an organization may start with a deliberate design of strategy and
end up with another form of strategy that is actually realized.

Igor H. ansoff defined strategy as “the common thread among the organization’s activities and product-
markets that defines the essential nature of business that the organization has or planned to be in future”.

Ciocîrlan Doinița defined strategy as “strategy represents a coherent assembly of objectives and actual
activities for their achieving, the result of an extensive and thoughtful process of scientific analysis of the
internal and external environment, with the purpose of ensuring the performance and competitiveness of
an economical type structural organizational entity”;

Porter Michael states that strategy (“generic strategy”) represents those essential specifications
regarding the means through which the organization can gain the desired competitive advantage, that
offers each functional field, the situation for developing the necessary actions;

Nicolescu Ovidiu strategy implies “the assembly of the organization’s major long time objectives, the
main means of achievement, together with the allotted resources, in view of obtaining the desired
competitive advantage suitable with the organization’s goal.

Strategy is consciously considered and flexibly designed scheme of corporate intent and action to
mobilise resources, to direct human effort and behaviour, to handle events and problems, to perceive and
 utilise opportunities, and to meet challenges and threats for corporate survival and success.

Strategy is meant to fill in the need of organizations for a sense of dynamic direction, focus and
cohesiveness. Objectives and goals alone do not fill in the need. Strategy provides an integrated
framework for the top management to search for, evaluate and exploit beneficial opportunities, to perceive
and meet potential threats and crises, to make full use of resources and strengths, to offset corporate
weaknesses.

However, strategy is no substitute for sound, alert and responsible management. Strategy can never be
perfect, flawless and optimal. It is in the very nature of strategy that it is flexible and pragmatic; it is art of
the possible; it does not preclude second-best choices, trade-offs, sudden emergencies, pervasive
pressures, failures and frustrations. That is why in a sound strategy, allowances are made for possible
miscalculations and unanticipated events.

In large organizations, strategies are formulated at the corporate, divisional and functional levels.
Corporate strategies are formulated by the top managers. Such strategies include the determination of
the plans for expansion and growth, vertical and horizontal integration, diversification, takeovers and
mergers, new investment and divestment areas, R & D projects, and so on. these corporate wide
strategies need to be operatonailsed by divisional and functional strategies regarding product lines,
production volumes, quality ranges, prices, product promotion, market penetration, purchasing sources,
personnel development and like.

Strategy is partly proactive and partly reactive:

Planned Strategy
New initiatives plus ongoing
companystrategy features continued Actual company Strategy

from prior periods

nces, Know- how, resource Strength & weaknesses, and competitive capabilities

Reactive Strategy

A company’s strategy is typically a blend of (1) proactive actions on the part of managers to improve the
company’s market position and financial performance and (2) reactions to unanticipated developments
and fresh market conditions. In other words, a company uses both proactive and reactive strategies to
cope up the uncertain business environment. Proactive strategy is planned strategy whereas reactive
strategy is adaptive reaction to changing circumstances.

The biggest portion of a company’s current strategy flows from previously initiated actions and business
approaches that are working well enough to merit continuation and newly launched managerial initiatives
to strengthen the company’s overall position and performance. This part of management’s game plan is
deliberate and proactive, standing as the product of management’s analysis and strategic thinking about
the company’s situation and its conclusions about how to position the company in the marketplace and
tackle the task of competing for buyer’s patronage.

But not every strategic move is the result of proactive planning and deliberate management design.
Things happen that cannot be fully anticipated or planned for. When market and competitive conditions
take an unexpected turn or some aspect of a company’s strategy hits a stone wall, some kind of strategic
reaction or adjustment is required. Hence, a portion of a company’s strategy is always developed as a
reasoned response to unforeseen developments. But apart from adapting strategy to changes in the
market, there is also a need to adapt strategy as new learning emerges about which pieces of the
strategy are working well and which aren’t and as management hits upon new ideas for improving the
strategy. Crafting a strategy thus involves stitching together a proactive/intended strategy and then
adapting first one piece and then another as circumstances surrounding the company’s situation change
or better options emerge-a reactive/adaptive strategy.

Features of Strategy:
Based on the above definitions, we can understand the nature of strategy. A few aspects regarding
nature of strategy are as follows:
1. Strategy is a major course of action through which an organization relates itself to its environment
particularly the external factors to facilitate all actions involved in meeting the objectives of the
organisation.
2. Strategy is the blend of internal and external factors. To meet the opportunities and threats
provided by the external factors, internal factors are matched with them.
3. Strategy is the combination of actions aimed to meet a particular condition, to solve certain
problems or to achieve a desirable end. The actions are different for different situations.
4. Due to its dependence on environmental variables, strategy may involve a contradictory action.
An organization may take contradictory actions either simultaneously or with a gap of time. For
example, a firm is engaged in closing down of some of its business and at the same time
expanding some.
5. Strategy is future oriented. Strategic actions are required for new situations which have not arisen
before in the past.
6. Strategy requires some systems and norms for its efficient adoption in any organization.
7. Strategy provides overall framework for guiding enterprise thinking and action.

The purpose of strategy is to determine and communicate a picture of enterprise through a system of
major objectives and policies. Strategy is concerned with a unified direction and efficient allocation of an
organization’s resources. A well-made strategy guides managerial action and thought. It provides an
integrated approach for the organization and aids in meeting the challenges posed by environment.

Levels of Strategy:
A typical business firm should consider levels of strategies, which form a hierarchy as shown below

1. Mission and Vision level:

A company’s vision and mission are the core values of the organization which are central to the firm.
These are the core purposes, that is, the reason that why the firm exists. The vision is quite simply the
desired future for the business put over in such a way that motivates the other people.

To develop an effective business strategy at the vision and mission level, the higher authorities of the
organization are required to have a strategic intent. Strategic intent in visions is a desired leadership
position to establish the criterion the organization will chart its progress.  The management is required to
keep on invoking challenges to reach the desired outcome. Business strategy at this level is required to
capture the essence of winning.

2. Corporate Strategy:
This describes a company’s overall direction towards growth by managing business and product lines.
These include stability, growth and retrenchment. For example, Coco cola, Inc., has followed the growth
strategy by acquisition. It has acquired local bottling units to emerge as the market leader. Business
Strategy Usually occurs at business unit or product level emphasizing the improvement of competitive
position of a firm’s products or services in an industry or market segment served by that business unit.
Business strategy falls in the in the realm of corporate strategy. For example, Apple Computers uses a
differentiation competitive strategy that emphasizes innovative product with creative design.

The corporate strategies a firm can adopt may be classified into four broad categories:

a. Stability strategy
b. Expansion strategy
c. Retrenchment strategy
 d. Combinations strategy

a. Stability Strategy

One of the important goals of a business enterprise is stability - to safeguard its existing
interests and strengths, to pursue well established and tested objectives, to continue in the
chosen business path, to maintain operational efficiency on a sustained basis, to consolidate
the commanding position already reached, and to optimise returns on the resources committed
in the business.

A stability strategy is pursued by a firm when:

 It continues to serve in the same or similar markets and deals in same or similar products and
services.
 The strategic decisions focus on incremental improvement of functional performance

Stability strategy is not a ‘does nothing’ strategy. It involves keeping track of new developments to ensure
that the strategy continues to make sense. This strategy is typical for those firms whose products have
reached the maturity stage of product life cycle. Small organizations may also follow stability strategy to
consolidate their market position and prepare for the launch of growth strategies.

Characteristics of Stability Strategy

A firm opting for stability strategy stays with the same business, same product market posture and
functions, maintaining same level of effort as at present.

The endeavor is to enhance functional efficiencies in an incremental way, through better deployment and
utilization of resources. The assessment of the firm is that the desired income and profits would be
forthcoming through such incremental improvements in functional efficiencies.

Stability strategy does not involve a redefinition of the business of the corporation.

a. It is basically a safety-oriented, status quo oriented strategy.

b. It does not warrant much of fresh investments.
c. It involves minor improvements in the product and its packaging.
d. The risk is also less.
e. With the stability strategy, the firm has the benefit of concentrating its resources and attention on
the existing businesses/products and markets.
f. The growth objective of firms employing this strategy is quite modest. Conversely, only firms with
modest growth objective choose for this strategy.

Major Reasons for Stability Strategy

 A product has reached the maturity stage of the product life cycle.
 It is less risky as it involves less changes and the staff feels comfortable with things as they are.
 The environment faced is relatively stable.
 Expansion may lead to greater control over the market vis-a-vis competitors.
 Advantages from the experience curve and scale of operations may accrue
 Expansion may be perceived as being threatening.
  Consolidation is sought through stabilizing after a period of rapid expansion.

b. Growth and Expansion Strategy

Growth and Expansion strategy is implemented by redefining the business by enlarging the scope of
business and substantially increasing investment in the business. It is a popular strategy that tends to
be equated with dynamism, vigor, promise and success. An enterprise on the move is more agreeable
stereotype than a steady-state enterprise. It is often characterized by significant reformulation of goals
and directions, major initiatives and moves involving investments, exploration and onslaught into new
products, new technology and new markets, innovative decisions and action programmes and so on.
Expansion also includes diversifying, acquiring and merging businesses. This strategy may take the
enterprise along relatively unknown and risky paths, full of promises and pitfalls.

Characteristics of Growth and Expansion Strategy

a. Expansion strategy involves a redefinition of the business of the corporation.

b. Expansion strategy is the opposite of stability strategy. While in stability strategy, rewards are
limited; in expansion strategy they are very high. In the matter of risks, too, the two are the
opposites of each other.
c. Expansion strategy leads to business growth. A firm with a mammoth growth ambition can
meet its objective only through the expansion strategy.
d. The process of renewal of the firm through fresh investments and new
businesses/products/markets is facilitated only by expansion strategy.
e. Expansion strategy is a highly versatile strategy; it offers several permutations and combinations
for growth. A firm opting for the expansion strategy can generate many alternatives within the
strategy by altering its propositions regarding products, markets and functions and pick the one
that suits it most.
f. Expansion strategy holds within its fold two major strategy routes: Intensification Diversification.
Both of them are growth strategies; the difference lies in the way in which the firm actually
pursues the growth.

Major Reasons for Growth and Expansion Strategy

 It may become imperative when environment demands increase in pace of activity.

 Strategists may feel more satisfied with the prospects of growth from expansion; chief executives
may take pride in presiding over organizations perceived to be growth-oriented.

 Expansion may lead to greater control over the market vis-a-vis competitors.

 Advantages from the experience curve and scale of operations may accrue

 Types of expansion:

Expansion through Diversification

Diversification is defined as entry into new products or product lines, new services or new markets,
involving substantially different skills, technology and knowledge. When an established firm introduces a
new product, which has little or no affinity with its present product line and which is meant for a new class
of customers different from the firm’s existing customer groups, the process is known as conglomerate
diversification. Both the technology of the product and the market are different from the firm’s present
experience.

Innovative and creative firms always look for opportunities and challenges to grow, to venture into new
areas of activity and to break new frontiers with the zeal of entrepreneurship. They feel that diversification
offers greater prospects of growth and profitability than expansion.

For some firms, diversification is a means of utilising their existing facilities and capabilities in a more
effective and efficient manner. They may have excess capacity or capability in manufacturing facilities,
investible funds, marketing channels, competitive standing, market prestige, managerial and other
manpower, research and development, raw material sources and so forth. Another reason for
diversification lies in its synergistic advantage. It may be possible to improve the sales and profits of
existing products by adding suitably related or new products, because of linkages in technology and/or in
markets.

Diversification endeavors can be related or unrelated to existing businesses of the firm. Based on the
nature and extent of their relationship to existing businesses, diversification endeavors have been
classified into four broad categories:
1. Vertically integrated diversification
2. Horizontally integrated diversification
3. Concentric diversification
4. Conglomerate diversification

1. Vertically Integrated Diversification: In vertically integrated diversification, firms opt to engage

in businesses that are related to the existing business of the firm. The firm remains vertically
within the same process sequence moves forward or backward in the chain and enters specific
product/process steps with the intention of making them into new businesses for the firm. The
characteristic feature of vertically integrated diversification is that here, the firm does not jump
outside the vertically linked product-process chain.
Forward and Backward Integration: Forward and backward integration forms part of vertically
integrated diversification. In vertically integrated diversification, firms opt to engage in
businesses that are vertically related to the existing business of the firm. The firm remains
vertically within the same process. While diversifying, firms opt to engage in businesses that are
linked forward or backward in the chain and enter specific product/process steps with the
intention of making them into new businesses for the firm.

Backward integration is a step towards, creation of effective supply by entering business of input
providers. Strategy employed to expand profits and gain greater control over production of a
product whereby a company will purchase or build a business that will increase its own supply
 capability or lessen its cost of production. For example, A large supermarket chain considers to
purchase a number of farms that would provide it a significant amount of fresh produce.
On the other hand, forward integration is moving forward in the value chain and entering
business lines that use existing products. Forward integration will also take place where
organizations enter into businesses of distribution channels.

2. Horizontal Integrated Diversification: Through the acquisition of one or more similar business
operating at the same stage of the production-marketing chain that is going into complementary
products, by-products or taking over competitors’ products.

3. Concentric Diversification: Concentric diversification too amounts to related diversification. In

concentric diversification, the new business is linked to the existing businesses through process,
technology or marketing. The new product is a spin-off from the existing facilities and
products/processes. This means that in concentric diversification too, there are benefits of
synergy with the current operations. However, concentric diversification differs from vertically
integrated diversification in the nature of the linkage the new product has with the existing ones.
While in vertically integrated diversification, the new product falls within the firm’s current process-
product chain, in concentric diversification, there is a departure from this vertical linkage. The new
product is only connected in a loop-like manner at one or more points in the firm’s existing
process/technology/ product chain.
4. Conglomerate Diversification: In conglomerate diversification, no such linkages exist; the new
businesses/ products are disjointed from the existing businesses/products in every way; it is a
totally unrelated diversification. In process/technology/function, there is no connection between
the new products and the existing ones. Conglomerate diversification has no common thread at
all with the firm’s present position. For example, A cement manufacturer diversifies into the
manufacture of steel and rubber products.

Expansion through Mergers and Acquisitions

Acquisition or merger with an existing concern is an instant means of achieving the expansion. It
is an attractive and tempting proposition in the sense that it circumvents the time, risks and skills
involved in screening internal growth opportunities, seizing them and building up the necessary
resource base required to materialize growth. Organizations consider merger and acquisition
proposals in a systematic manner, so that the marriage will be mutually beneficial, a happy and
lasting affair.

Apart from the urge to grow, acquisitions and mergers are resorted to for purposes of achieving a
measure of synergy between the parent and the acquired enterprises. Synergy may result from
such bases as physical facilities, technical and managerial skills, distribution channels, general
administration, research and development and so on. Only positive synergistic effects are
relevant in this connection which denotes that the positive effects of the merged resources are
greater than the sum of the effects of the individual resources before merger or acquisition.
 Merger and acquisition in simple words are defined as a process of combining two or more
organizations together. There is a thin line of difference between the two terms but the impact of
combination is completely different in both the cases. Some organizations prefer to grow
through mergers. Merger is considered to be a process when two or more companies come
together to expand their business operations. In such a case the deal gets finalized on friendly
terms and both the organizations share profits in the newly created entity. In a merger two
organizations combine to increase their strength and financial gains along with breaking the
trade barriers.

When one organization takes over the other organization and controls all its business
operations, it is known as acquisitions. In this process of acquisition, one financially strong
organization overpowers the weaker one. Acquisitions often happen during recession in
economy or during declining profit margins. In this process, one that is financially stronger and
bigger establishes it power. The combined operations then run under the name of the powerful
entity. A deal in case of an acquisition is often done in an unfriendly manner, it is more or less a
forced association where the powerful organization either consumes the operation or a
company in a weaker position is forced to sell its entity.

Expansion through Strategic Alliance

A strategic alliance is a relationship between two or more businesses that enables each to
achieve certain strategic objectives which neither would be able to achieve on its own. The
strategic partners maintain their status as independent and separate entities, share the benefits
and control over the partnership, and continue to make contributions to the alliance until it is
terminated. Strategic alliances are often formed in the global marketplace between businesses
that are based in different regions of the world.

Retrenchment or Turnaround Strategy

Retrenchment Strategy: It is followed when an organization substantially reduces the scope of its
activity. This is done through an attempt to find out the problem areas and diagnose the causes of the
problems. Next, steps are taken to solve the problems. These steps result in different kinds of
retrenchment strategies. If the organization chooses to focus on ways and means to reverse the process
of decline, it adopts at turnaround strategy. If it cuts off the loss- making units, divisions, or SBUs, curtails
its product line, or reduces the functions performed, it adopts a divestment (or divestiture) strategy. If none
of these actions work, then it may choose to abandon the activities totally, resulting in a liquidation
strategy. We deal with each of these strategies below.

Turnaround Strategy: Retrenchment may be done either internally or externally. For internal
retrenchment to take place, emphasis is laid on improving internal efficiency, known as turnaround
strategy.
There are certain conditions or indicators which point out that a turnaround is needed if the company has
to survive. These danger signals are:
 Persistent negative cash flow from business(es)
 Uncompetitive products or services
 Declining market share
 Deterioration in physical facilities
 Over-staffing, high turnover of employees, and low morale
 Mismanagement
Divestment Strategy: Divestment strategy involves the sale or liquidation of a portion of business, or a
major division, profit centre or SBU. Divestment is usually a part of rehabilitation or restructuring plan and
is adopted when a turnaround has been attempted but has proved to be unsuccessful. The option of a
turnaround may even be ignored if it is obvious that divestment is the only answer.
A divestment strategy may be adopted due to various reasons:
A business that had been acquired proves to be a mismatch and cannot be integrated within the
company. Persistent negative cash flows from a particular business create financial problems for the
whole company, creating the need for divestment of that business. Severity of competition and the
inability of a firm to cope with it may cause it to divest. Technological up gradation is required if the
business is to survive but where it is not possible for the firm to invest in it, a preferable option would be to
divest. A better alternative may be available for investment, causing a firm to divest a part of its
unprofitable businesses.

Liquidation Strategy: A retrenchment strategy considered the most extreme and unattractive is
liquidation strategy, which involves closing down a firm and selling its assets. It is considered as the last
resort because it leads to serious consequences such as loss of employment for workers and other
employees, termination of opportunities where a firm could pursue any future activities, and the stigma of
failure. Many small-scale units, proprietorship firms, and partnership ventures liquidate frequently but
medium-and large-sized companies rarely liquidate in India. The company management, government,
banks and financial institutions, trade unions, suppliers and creditors, and other agencies are extremely
reluctant to take a decision, or ask, for liquidation.

Selling assets for implementing a liquidation strategy may also be difficult as buyers are difficult to find.
Moreover, the firm cannot expect adequate compensation as most assets, being unusable, are
considered as scrap.

Liquidation strategy may be unpleasant as a strategic alternative but when a “dead business is worth
more than alive”, it is a good proposition. For instance, the real estate owned by a firm may fetch it more
money than the actual returns of doing business. When liquidation is evident (though it is difficult to say
exactly when), an abandonment plan is desirable. Planned liquidation would involve a systematic plan to
reap the maximum benefits for the firm and its shareholders through the process of liquidation.
Characteristics of Retrenchment or Turnaround Strategy
 This strategy involves retrenchment/divestment of some of the activities in a given business of
 the firm or sell-out of some of the businesses as such.
 Divestment is to be viewed as an integral part of corporate strategy without any stigma attached.
 Like expansion strategy, divestment strategy, too, involves a redefinition of the business of the
corporation.
 Compulsions for divestment can be many and varied, such as a). Obsolescence of
product/process
 Business becoming unprofitable and unviable
 Inability to cope up with cut throat competition
 Industry overcapacity
 Failure of existing strategy

Major Reasons for Retrenchment or Turnaround Strategy

 The management no longer wishes to remain in business either partly or wholly due to
continuous losses and unavailability.
 The management feels that business could be made viable by divesting some of the activities
or liquidation of unprofitable activities.
 A business that had been acquired proves to be a mismatch and cannot be integrated
within the company.
 Persistent negative cash flows from a particular business create financial problems for the whole
company, creating the need for divestment of that business.
 Severity of competition and the inability of a firm to cope with it may cause it to divest.
 Technological up gradation is required if the business is to survive but where it is not possible for
the firm to invest in it, a preferable option would be to divest.
 A better alternative may be available for investment, causing a firm to divest a part of its
unprofitable businesses.

Combination Strategy
The above strategies are not mutually exclusive. It is possible to adopt a mix of the above to suit
particular situations. An enterprise may seek stability in some areas of activity, expansion in some and
retrenchment in the others. Retrenchment of ailing products followed by stability and capped by
expansion in some situations may be thought of. For some organizations, a strategy by diversification
and/or acquisition may call for a retrenchment in some obsolete product lines, production facilities and
plant locations.

3. Functional Strategy:
It is the approach taken by a functional area to achieve corporate and business unit objectives
and strategies by maximizing resource productivity. It is concerned with developing and
nurturing a distinctive competence to provide the firm with a competitive advantage.

Functional strategies are designed to help in the implementation of corporate and business unit
level strategies. For effective implementation, the strategists have to provide direction to the
 functional managers regarding the plans and policies to be adopted. In fact, the effectiveness of
strategic management depends critically on the manner in which strategies are implemented.
Functional strategies provide details to business strategy and govern as to how key activities
of the business are to be managed.

Functional strategies play two important roles. Firstly, they provide support to the overall
business strategy. Secondly, they spell out as to how functional managers will work so as to
ensure better performance in their respective functional areas.

Strategies in functional areas including marketing, financial, production, R & D and human
resource management are based on the functional capabilities of an organisation. For each
functional area, first the major sub areas are identified and then for each of these sub areas,
content of functional strategies, important factors, and their importance in the process of
strategy implementation are identified.

The reasons why functional strategies are needed can be enumerated as follows:

 Functional strategies lay down clearly what is to be done at the functional level. They provide a
sense of direction to the functional staff.

 They are aimed at facilitating the implementation of corporate strategies and the business
strategies formulation at the business level.

 They act as basis for controlling activities in the different functional areas of business.

 They help in bringing harmony and coordination as they are formulated to achieve major
strategies.

 Similar situations occurring in different functional areas are handled in a consistent manner by the
functional managers.

Thus, strategies need to be segregated into viable functional plans and policies that are compatible with
each other. In this way, strategies can be implemented by the functional managers. Environmental factors
relevant to each functional area have an impact on the choice of functional strategies. Corporate
strategies influence the formulation of functional strategies.

Marketing Strategy
Marketing is an activity performed by all business organizations. It is an activity that creates and sustains
exchange relationships among those who are willing and able to buy and sell products, services,
satisfaction and even ideas. In the present day business, marketing encompasses all the activities related
to identifying the needs of customers and taking such actions to satisfy them in return of some
consideration. In marketing it is more important to do what is strategically right than what is immediately
profitable.

The term marketing constitutes different processes, functions, exchanges and activities that create
perceived value by satisfying needs of individuals. Marketing induces or helps in moving people closer to
making a decision to purchase and facilitate a sale.

Marketing in recent decades has gained a lot of importance because of a number of factors. Rapid
economic growth, globalization, technological up gradation, ever- increasing human needs and wants
and increasing purchasing power of people are some of the factors which have made marketing as a
central activity for every business.

A business organization faces countless marketing variables that affect the success or failure of strategy
implementation. Some examples of marketing decisions that may require special attention are as follows:

 The amount and the extent of advertising. Whether to use heavy or light advertising. What should
be the amount of advertising in print media, television or internet?

 The kind of distribution network to be used. Whether to use exclusive dealerships or multiple
channels of distribution.

 Whether to be a price leader or a price follower?

 Whether to offer a complete or limited warranty?

 Whether to limit or enhance the share of business done with a single or a few customers?

 Whether to reward sales people based on straight salary, straight commission, or on a

combination of salary and commission?

Marketing mix forms an important part of overall competitive marketing strategy. The marketing mix is
the set of controllable marketing variables that the firm blends to produce the response it wants in the
target market. The marketing mix consists of everything that the firm can do to influence the demand for
its product. These variables are often referred to as the “4 Ps.” The 4 Ps stand for product, price, place
and promotion. An effective marketing program blends all of the marketing mix elements into a
coordinated program designed to achieve the company’s marketing objectives by delivering value to
consumers. The 4 Ps are from a marketer’s angle. When translated to the perspective of customers, they
may be termed as 4 Cs. Product may be referred as customer solution, price as customer cost, place as
convenience and promotion as communication.

Formulation of marketing strategy:

Marketing analysis: It involves a complete analysis of the company’s situation. A company performs
analysis by identifying environmental opportunities and threats. It also analyzes its strengths and
weaknesses to determine which opportunities the company can best pursue. Marketing has three
components as planning, implementation and control. Through analyses organization feed information
and other inputs to each of the other marketing management functions.

A company must carefully analyze its environment in order to avoid the threats and take advantage of the
opportunities. Areas to be analyzed in the environment normally include:

 Forces close to the company such as its ability to serve customers, other company departments,
channel members, suppliers, competitors, and publics.

 Broader forces such as demographic and economic forces, political and legal forces,
 technological and ecological forces, and social and cultural forces.

Strategic marketing planning involves deciding on marketing strategies that will help the
company attain its overall strategic objectives. A detailed plan is needed for each business,
product, or brand. A product or brand plan may contain different sections: executive summary,
current marketing situation, threats and opportunity analysis, objectives and issues, marketing
strategies, action programs, budgets, and controls.

Strategic Marketing Techniques

Over the years, a number of marketing strategies have been evolved, which are given below:

Social Marketing: It refers to the design, implementation, and control of programs seeking to increase
the acceptability of a social ideas, cause, or practice among a target group. For instance, the publicity
campaign for prohibition of smoking in Delhi explained the place where one can and can’t smoke.

Augmented Marketing: It is provision of additional customer services and benefits built around the core
and actual products that relate to introduction of hi-tech services like movies on demand, online
computer repair services, secretarial services, etc. Such innovative offerings provide a set of benefits that
promise to elevate customer service to unprecedented levels.

Direct Marketing: Marketing through various advertising media that interact directly with consumers,
generally calling for the consumer to make a direct response. Direct marketing includes catalogue selling,
e-mail, tele computing, electronic marketing, shopping, and TV shopping.

Relationship Marketing: The process of creating, maintaining, and enhancing strong, value-laden
relationships with customers and other stakeholders. For example, Airlines offer special lounges at major
airports for frequent flyers. Thus, providing special benefits to select customers to strengthen bonds will
go a long way in building relationships.

Services Marketing: It is applying the concepts, tools, and techniques, of marketing to services.
Services is any activity or benefit that one party can offer to another that is essentially intangible and does
not result in the banking, savings, retailing, educational or utilities.

Person Marketing: People are also marketed. Person marketing consists of activities undertaken to
create, maintain or change attitudes and behaviour towards particular person. For example, politicians,
sports stars, film stars, etc. i.e., market themselves to get votes, or to promote their careers.

Organization Marketing: It consists of activities undertaken to create, maintain, or change attitudes and
behaviour of target audiences towards an organization. Both profit and non-profit organizations practice
organization marketing.
Place Marketing: Place marketing involves activities undertaken to create, maintain, or change attitudes
and behaviour towards particular places say, business sites marketing, tourism marketing.

Enlightened Marketing: It is a marketing philosophy holding that a company’s marketing should support
the best long-run performance of the marketing system; its five principles include customer-oriented
marketing, innovative marketing, value marketing, sense-of-mission marketing, and societal marketing.

Differential Marketing: It is a market-coverage strategy in which a firm decides to target several market
segments and designs separate offer for each. For example, Hindustan Unilever Limited has Lifebuoy,
Lux and Rexona in popular segment and Dove and Pears in premium segment.

Synchro-marketing: When the demand for a product is irregular due to season, some parts of the day,
or an hour basis, causing idle capacity or overworked capacities, synchro-marketing can be used to find
ways to alter the pattern of demand through flexible pricing, promotion, and other incentives. For
example, products such as movie tickets can be sold at lower price over week days to generate demand.

Concentrated Marketing: It is a market-coverage strategy in which a firm goes after a large share of one
or few sub-markets.

De marketing: It includes marketing strategies to reduce demand temporarily or permanently. The aim is
not to destroy demand, but only to reduce or shift it. This happens when there is overfull demand. For
example, buses are overloaded in the morning and evening, roads are busy for most of times, zoological
parks are over-crowded on Saturdays, Sundays and holidays. Here de marketing can be applied to
regulate demand.

Financial Strategy

The financial strategies of an organization are related to several areas of financial management
considered central to strategy implementation. These include: acquiring needed capital/sources of fund,
developing projected financial statements/budgets, management/ usage of funds, and evaluating the
worth of a business. Strategists need to formulate strategies in these areas so that they are implemented.
Some examples of decisions that may require financial and accounting policies are:

1. To raise capital with short-term debt, long-term debt, preferred stock, or

common stock.

2. To lease or buy fixed assets.

 3. To determine an appropriate dividend payout ratio.

4. To extend the time of accounts receivable.

5. To establish a certain percentage discount on accounts within a specified

period
6. of time.

7. To determine the amount of cash that should be kept on hand.

Acquiring capital to implement strategies (sources of funds): Successful strategy implementation

often requires additional capital. Besides net profit from operations and the sale of assets, two basic
sources of capital for an organization are debt and equity. Determining an appropriate mix of debt and
equity in a firm’s capital structure can be vital to successful strategy implementation. Theoretically, an
enterprise should have enough debt in its capital structure to boost its return on investment by applying
debt to products and projects earning more than the cost of the debt. In low earning periods, too much
debt in the capital structure of an organization can endanger stockholders’ return and jeopardize
company survival. Many debt ridden real estate companies find things very difficult at time of recession.
Fixed debt obligations generally must be met, regardless of circumstances. This does not mean that stock
issuances are always better than debt for raising capital. Some special stock is issued to finance strategy
implementation; ownership and control of the enterprise are diluted. This can be a serious concern in
today’s business environment of hostile takeovers, mergers, and acquisitions.

The major factors regarding which strategies have to be made includes capital structure; procurement of
capital and working capital borrowings; reserves and surplus as sources of funds; and relationship with
lenders, banks and financial institutions. Strategies related to the sources of funds are important since
they determine how financial resources will be made available for the implementation of strategies.
Organizations have a range of alternatives regarding the sources of funds. While one company may rely
on external borrowings, another may follow a policy of internal financing.

Projected financial statements / budgets: Projected financial statement analysis is a central strategy-
implementation technique because it allows an organization to examine the expected results of various
actions and approaches. This type of analysis can be used to forecast the impact of various
implementation decisions (for example, to increase promotion expenditures by 50 percent to support a
market-development strategy, to increase salaries by 25 percent to support a market-penetration
strategy, to increase research and development expenditures by 70 percent to support product
development, or to sell common stock to raise capital for diversification). Nearly all financial institutions
require a projected financial statement whenever a business seeks capital. A pro forma income statement
and balance sheet allow an organization to compute projected financial ratios under various strategy-
implementation scenarios. When compared to prior years and to industry averages, financial ratios
provide valuable insights into the feasibility of various strategy-implementation approaches.
Primarily as a result of the governance challenges companies today are being much more diligent in
preparing projected financial statements to “reasonably rather than too optimistically” project future
expenses and earnings.

A financial budget is also a document that details how funds will be obtained and spent for a specified
period of time. Annual budgets are most common, although the period of time for a budget can range
from one day to more than ten years. Fundamentally, financial budgeting is a method for specifying what
must be done to complete strategy implementation successfully. Financial budgeting should not be
thought of as a tool for limiting expenditures but rather as a method for obtaining the most productive and
profitable use of an organization’s resources. Financial budgets can be viewed as the planned allocation
of a firm’s resources based on forecasts of the future.

There are several types of financial budgets used by different organizations. Some common types of
budgets include cash budgets, operating budgets, sales budgets, profit budgets, factory budgets, capital
budgets, expense budgets, divisional budgets, variable budgets, flexible budgets, and fixed budgets.
When an organization is experiencing financial difficulties, budgets are especially important in guiding
strategy implementation.

Financial budgets have some limitations also. First, budgetary programs can become so detailed that
they are cumbersome and overly expensive. Over budgeting or under budgeting can cause problems.
Second, financial budgets can become a substitute for objectives. A budget is a tool and not an end in
itself. Third, budgets can hide inefficiencies if based solely on precedent rather than on periodic
evaluation of circumstances and standards. Finally, budgets are sometimes used as instruments of
tyranny that result in frustration, resentment, absenteeism, and high turnover. To minimize the effect of
this last concern, managers should increase the participation of subordinates in preparing budgets.

Utilization of funds: Plans and policies for the usage of funds deal with investment or asset-mix
decisions. The important factors regarding which plans and policies are to be made are: capital
investment; fixed asset acquisition; current assets; loans and advances; dividend decisions; and
relationship with shareholders. Usage of funds is important since it relates to the efficiency and
effectiveness of resource utilization in the process of strategy implementation.

Implementation of projects in pursuance of expansion strategies typically results in increase in capital

work in progress and current assets. If plans and policies are not clear, the usage of funds would be
inefficient, leading to less than an optimum utilization of resources.

The management of funds is an important area of financial strategies. It basically deals with decisions
related to the systemic aspects of financial management. The major factors regarding which plans and
policies related to the management of funds have to be made are: the systems of finance, accounting,
and budgeting; management control system; cash, credit, and risk management; cost control and
reduction; and tax planning and advantages.

The management of funds can play a pivotal role in strategy implementation as it aims at the
conservation and optimum utilization of funds objectives which are central to any strategic action.
Organizations that implement strategies of stability, growth or retrenchment cannot escape the rigours of
a proper management of funds. In fact, good management of funds often creates the difference between
a strategically successful and unsuccessful company. For instance, Gujarat Ambuja Cements, currently a
highly profitable cement company in the country, has achieved tremendous financial success primarily on
the basis of its policies of cost control. This company has been particularly successful in maintaining a
low cost for power, which is a major input in cement manufacturing.

Financial plans and policies, however, present a dilemma before management. The priorities of
management may often conflict with those of shareholders. It is the responsibility of the strategists to
minimize the conflict of interest between the management and the shareholders.

Evaluating the worth of a business: Evaluating the worth of a business is central to strategy
implementation because integrative, intensive, and diversification strategies are often implemented by
acquiring other firms. Other strategies, such as retrenchment may result in the sale of a division of a firm
itself. Thousands of transactions occur each year in which businesses are bought or sold. In all these
cases, it is necessary to establish the financial worth or cash value of a business to successfully
implement strategies.

4. Production/Operations Strategy

The production/operations strategy is related to the production system, operational planning and
control and logistics management. It affects the nature of product/ service, the markets to be served,
and the manner in which the markets are to be served. All these collectively influence the operations
system structure and objectives which are used to determine the operations plans and policies. Thus,
a strategy of expansion through related diversification, for instance, will affect what products are
offered to which market and how these markets are served. The operations system structure, which is
concerned with the manufacturing/ service and supply/delivery system, and operations system
objectives, which are related to customer service and resource utilization, both determine what
operations, plans and policies are set.

Production System

The production system is concerned with the capacity, location, layout, product or service design, work
systems, degree of automation, extent of vertical integration, andsuch factors. Strategies related to
production system are significant as they deal with vital issues affecting the capability of the organisation
to achieve its objectives.

Strategy implementation would have to take into account the production system factors as they involve
decisions which are long-term in nature and influence not only the operations capability of an organisation
but also its ability to implement strategies and achieve objectives. For example, Excel Industries, a
pioneering company in the area of industrial and agro chemicals, adopted a policy of successive vertical
integration for import substitution. It starts with the end product and then integrates backward to make raw
materials for it.

Production/Operations Planning and Control

Strategies related to operations planning and control are concerned with aggregate production planning;
materials supply; inventory, cost, and quality management; and maintenance of plant and equipment.
Here, the aim of strategy implementation is to see how efficiently resources are utilized and in what
manner the day-to-day operations can be managed in the light of long-term objectives. Operations
planning and control provides an example of an organizational activity that is aimed at translating the
objectives into reality.

Some companies use quality as a strategic tool. The operations policies at KSB Pumps Ltd lay a great
emphasis on quality aspects. In implementing its strategy of stable growth, KSB Pumps has built a solid
reputation for its quality products. Structurally, it has a separate department of quality assurance having
two groups of quality inspection and quality engineering. Thus, quality is a consideration not only at the
inspection stage but is built into the design itself.

Logistics Management

Management of logistics is a process which integrates the flow of supplies into, through and out of an
organization to achieve a level of service which ensures that the right materials are available at the right
place, at the right time, of the right quality, and at the right cost. Organizations try to keep the cost of
transporting materials as low as possible consistent with safe and reliable delivery.
Supply chain management helps in logistics and enables a company to have constant contact with its
distribution team, which could consist of trucks, trains, or any other mode of transportation. Given the
changes that affect logistics operations such as emerging technologies and industry initiatives,
developing and using a formal logistics strategy is very important.

Supply Chain Management

The term supply chain refers to the linkages between suppliers, manufacturers and customers. Supply
chains involve all activities like sourcing and procurement of material, conversion, and logistics. Planning
and control of supply chains are important components of its management. Naturally, management of
supply chains include closely working with channel partners – suppliers, intermediaries, other service
providers and customers. Technological changes and reduction in information communication costs with
increase in its speed has led to changes in coordination among the members of the supply chain network.

Supply chain management is defined as the process of planning, implementing, and controlling the supply
chain operations. It is a cross-functional approach to managing the movement of raw materials into an
organization and the movement of finished goods out of the organization toward the end-consumer who
are to be satisfied as efficiently as possible. It encompasses all movement and storage of raw materials,
work-in-process inventory, and finished goods from point-of-origin to point-of- consumption. Organizations
are finding that they must rely on the chain to successfully compete in the global market.

Modern organizations are striving to focus on core competencies and reduce their ownership of sources
of raw materials and distribution channels. These functions can be outsourced to other business
organizations that specialize in those activities and can perform in better and cost effective manner. In a
way organizations in the supply chain do tasks according to their core-competencies. Working in the
supply chain improves trust and collaboration amongst partners and thus improve flow and management
of inventory.

Supply chain management is an extension of logistic management. However, there is difference between
the two. Logistical activities typically include management of inbound and outbound goods, transportation,
warehousing, handling of material, fulfillment of orders, inventory management, supply/demand planning.
Although these activities also form part of Supply chain management, the latter has different components.
Logistic management can be termed as one of its part that is related to planning, implementing, and
controlling the movement and storage of goods, services and related information between the point of
origin and the point of consumption.

Supply chain management includes more aspects apart from the logistics function. It is a tool of business
transformation and involves delivering the right product at the right time to the right place and at the right
price. It reduces costs of organizations and enhances customer service

Research and Development Strategy

Research and development (R&D) personnel can play an integral part in strategy implementation. These
individuals are generally charged with developing new products and improving old products in a way that
will allow effective strategy implementation. R&D employees and managers perform tasks that include
transferring complex technology, adjusting processes to local raw materials, adapting processes to local
markets, and altering products to particular tastes and specifications. Strategies such as product
development, market penetration, and concentric diversification require that new products be successfully
developed and that old products be significantly improved. But the level of management support for R&D
is often constrained by resource availability.

Technological improvements that affect consumer and industrial products and services shorten product
life cycles. Companies in virtually, every industry are relying on the development of new products and
services to fuel profitability and growth. Surveys suggest that the most successful organizations use an
R&D strategy that ties external opportunities to internal strengths and is linked with objectives. Well
formulated R&D policies match market opportunities with internal capabilities. R&D policies can enhance
strategy implementation efforts to:

1. Emphasize product or process improvements.

2. Stress basic or applied research.

3. Be leaders or followers in R&D.

4. Develop robotics or manual-type processes.

 5. Spend a high, average, or low amount of money on R&D.

6. Perform R&D within the firm or to contract R&D to outside firms.

Use university researchers or private sector researcher here must be effective interactions between R&D
departments and other functional departments in implementing different types of generic business
strategies. Conflicts between marketing, finance/accounting, R&D, and information systems departments
can be minimized with clear policies and objectives

Human Resource Strategy

Role of Human Resources in Strategic Management

Strategic responsibilities of the human resource manager include assessing the staffing needs and costs
for alternative strategies proposed during strategy formulation and developing a staffing plan for
effectively implementing strategies. The plan must also include how to motivate managers and
employees.

The human resource department must develop performance incentives that clearly link performance and
pay to strategies. The process of empowering managers and employees through their involvement in
strategic management activities yields the greatest benefits when all organizational members understand
clearly how they will benefit personally if the firm does well. Linking company and personal benefits is a
major new strategic responsibility of human resource managers. Other new responsibilities for human
resource managers may include establishing and administering an employee to have conductive work
environment, maintain life work balance, synchronize individual with organisation goals..

A well-designed strategic-management system can fail if insufficient attention is given to the human
resource dimension. Human resource problems that arise when a business implements strategies can
usually be traced to one of three causes: (1) disruption of social and political structures, (2) failure to
match individuals’ aptitudes with implementation tasks, and (3) inadequate top management support for
implementation activities.

Strategy implementation poses a threat to many managers and employees in an organization. New power
and status relationships are anticipated and realized. New formal and informal groups’ values, beliefs,
and priorities may be largely unknown. Managers and employees may become engaged in resistance
behaviour as their roles, prerogatives, and power in the firm change. Disruption of social and political
structures that accompany strategy execution must be anticipated and considered during strategy
formulation and managed during strategy implementation.

A concern in matching managers with strategy is that jobs have specific and relatively static
responsibilities, although people are dynamic in their personal development. Commonly used methods
that match managers with strategies to be implemented include transferring managers, developing
leadership workshops, offering career development activities, promotions, job enlargement, and job
enrichment.

A number of other guidelines can help ensure that human relationships facilitate rather than disrupt
strategy-implementation efforts. Specifically, managers should do a form of chatting and informal
questioning to stay abreast of how things are progressing and to know when to intervene. Managers can
build support for strategy-implementation efforts by giving few orders, announcing few decisions,
depending heavily on informal questioning, and seeking to probe and clarify until a consensus emerges.
Key thrusts that needed should be rewarded generously and visibly.

It is surprising that so often during strategy formulation, individual values, skills, and abilities needed for
successful strategy implementation are not considered. It is rare that a firm selecting new strategies or
significantly altering existing strategies possesses the right line and staff personnel in the tight positions
for successful strategy implementation. The need to match individual aptitudes with strategy-
implementation tasks should be considered in strategy choice.

Inadequate support from strategists for implementation activities often undermines organizational
success. Chief executive officers, small business owners, and government agency heads must be
personally committed to strategy implementation and express this commitment in highly visible ways.
Strategists’ formal statements about the Importance of strategic management must be consistent with
actual support and rewards given for activities completed and objectives reached. Otherwise, stress
created by inconsistency can cause uncertainty among managers and employees at all levels.

Perhaps the best method for preventing and overcoming human resource problems in strategic
management is to actively involve as many managers and employees’ as possible in the process.
Although time-consuming, this approach builds understanding, trust, commitment and ownership and
reduces resentment and hostility. The true potential of strategy formulation and implementation resides in
people.

SCOPE AND IMPORTANCE OF STRATEGY

Scope: the scope of the strategy can be understood by the views of different approaches:

1. Strategy as design
A good strategy is designed to fit organizational capability with environmental opportunity. It is
best summarized by the SWOC approach and has very close links with the case study approach
pioneered by the Harvard Business School. This school sees strategy as based on the classical
approach. It is the rational product of a senior manager, usually the chief executive officer,
consciously and deliberately finding a fit between the internal strengths and weaknesses of an
enterprise and the external challenges and opportunities it faces. A strategy is viewed as an
explicit, simple and unique conception. Formulation precedes implementation and is separate
from it. There is often a range of options from which the strategy to be implemented is chosen.
The one which provides the best fit or best design is chosen. This was the dominant school until
the 1970s but still has enormous influence.
2. Strategy as planning
The strategy as plan is a detailed scheme for allocating resources to achieve the objectives
specified according to a prescribed timetable. In the view of this school specialist staff planners
 take over the strategy role. Strategy becomes a highly formalized process, divided into easily
decomposable steps, delineated by checklists of necessary actions, and supported by techniques
relating to the specification of objectives, the establishment of budgets, the spelling out of
programmes and operating plans. This school’s view of strategy is again fully consistent with the
classical approach. By the mid-1970s this was the predominant school.
3. Strategy as positioning Strategy
It has been seen by this school as a matter of choosing an appropriate industry or sector to be in,
finding the best market segments and focusing on the preferred value adding activities. This
requires detailed analysis of the data relating to the industrial situations in which the enterprise
has to operate. Such positioning is consistent with either the classical or the evolutionary
approach. By the 1980s this had become the dominant school.
4. Strategy as entrepreneurship
The strategist, seen by this school as the leader, usually the founder and chief executive officer,
is concerned with closely controlling the enterprise in order to realize his or her vision. The leader
is an innovator who often works by intuition or imagination to create something new. This shifts
the definition of a strategy from a precise design, plan or position to an imprecise vision or even a
broad perspective which has to be realized. However, the maintenance of an entrepreneurial
orientation continues to be important even beyond the period during which the founder is
dominant, if the enterprise is to continue to be successful. This school has strong classical
elements. This interpretation is not new and has never been absent from strategy making.
5. Strategy as the reflection of an organizational culture or social web Strategy
The nature of an organization and its culture constrains what is possible, predisposing the
strategic process to certain channels and certain outcomes. Strategy is about integrating
disparate elements of the ‘social web’ and finding common interests among those elements. It is
about conserving what the enterprise already has and using its resources to its best ability. It
stresses the dangers of dissipating resources which are embedded in the organization itself. This
approach is consistent with both the processual and systemic approaches. The debate in the
1960s, which widened the view that economists had of the firm, first introduced such issues.
During the 1980s, comparison between the prominent capitalist models and the Japanese variant
also promoted this kind of approach among the commentators on management.
6. Strategy as a political process
Here the emphasis is on the exercise of power, whether within the enterprise or outside it,
specifically as it relates to the making of strategy. The various interests or stakeholder groups,
often fragmented and divided, who share power within an enterprise have to persuade and be
persuaded, to confront and be confronted. The enterprise itself has to negotiate its way through
strategic alliances, joint ventures and other network relationships in order to make a strategy.
Strategy results from bargaining, compromise and the exercise of power by the relevant groups.
This school is unashamedly processual.
7. Strategy as a learning process
In this conception strategy is seen as a process of exploration and incremental discovery.
Strategic knowledge emerges gradually as the result of the interaction of a large number of
strategists, possibly all the employees of an organization but certainly key individuals spread
 throughout that enterprise. There is no difference between strategy formulation and
implementation; they occur simultaneously. Strategy emerges from a process of discovery and
learning. The views of this school are consistent with the evolutionary and the processual
approaches.
8. Strategy as an episodic or transformative process
This school sees strategy as contingent on particular circumstances and moments in the life of an
organization. It is a matter of the unfolding in real time of different situations, all heavily contingent
on different circumstances, and the temporary emergence of specific configurations. This school
emphasizes for different situations the elements highlighted by other schools. It puts the stress on
the same enterprise in different circumstances and its ability to handle the relevant transitions. In
particular it analyses the quantum leaps from one situation to another, the so-called
transformation situation, for example during the start-up of new enterprises or turnarounds of
enterprises in trouble. Strategy is a matter of dealing with the demands of these different
episodes in an appropriate way. In such an unfolding context, strategy is sometimes classical,
sometimes evolutionary and sometimes processual.
9. Strategy as an expression of cognitive psychology
This school concentrates on what goes on in the mind of the strategist, the mental or
psychological processes involved in strategy making. It focuses on the cognitive biases 18
Introducing Strategic Management of strategists and, even more importantly, on the process of
cognition itself, including the way in which information is filtered, knowledge is mapped and
conceptualization itself occurs. It emphasizes the subjective element of interpretation rather than
the objective reading of reality, but considers both. It takes account of motivation as well as the
different ways in which a mind works, using reason, intuition or any other faculty which is
relevant. This is present in all types of strategy making.
10. Strategy as consisting in rhetoric or a language game
This school sees strategy as concerned with the way in which strategy is talked about, the kinds
of conversations or discussions, both formal and informal, which take place in organizations
making a strategy. These are usually aimed at achieving a consensus and encouraging certain
kinds of strategic actions. It is about the language required to persuade employees to think
strategically or to act to promote a particular strategy. This interpretation of strategy is closely
linked with the cognitive interpretation. This occurs in all strategy making.
11. Strategy as a reactive adaptation to environmental circumstances
Strategy is seen by this school as similar to ecological adaptation, leaving little room for the
strategic plan usually associated with a strategy. Strategic action is reactive rather than proactive.
This is a variant of the evolutionary approach. Circumstances largely dictate what a strategist
should do, although there may be a number of different possible contingencies. Often all the
strategist can do is reinforcing behaviour which is adaptive to whatever new environment
appears. Adaptation is the key to success and strategy is understood as comprising this
adaptation. There is an element of this in all strategies.
12. Strategy as an expression of ethics or as moral philosophy
This school sees the strategist as a moral agent, engaging in ethical conduct. The strategy
embodies the values of the strategists. Strategy is as much about the nature of the ends and
 goals of all stakeholders and how they are reconciled. It is also about what strategic action is
acceptable. The concern with values might be for good reasons, since a failure to behave
ethically can have disastrous results. Strategy is as much about the reputation of the enterprise,
particularly in the eyes of its stakeholders, as it is about profit, although in many cases being
ethical may not be incompatible with being profitable. The stress is on the content of the strategy.
13. Strategy as the systematic application of rationality
Strategy is applied reason, the application of reason to the leadership and conduct of
management within any organization. This school sees equivalence between strategy and its
many elements and an attempt by a strategist to use the differing kinds of rationality. It interprets
strategy as only qualifying as strategy if it is an attempt to apply reason to the organization of
business activity. The school is concerned with excluding the irrational from strategy making, that
is, elements such as whim or intuition. This interpretation of strategy is only consistent with the
classical view.
14. Strategy as the use of simple rules
This school interprets strategy in a highly practical way as the application of a limited number of
simple rules derived from both general experience and the experience of particular industries.
The rules exist because of the degree to which behavior is repeated and particular types of
problem recur. Through these rules, strategy enables enterprises to successfully seize
opportunities in fast-moving markets and environments of rapid change when there is not enough
time for following more elaborate procedures. The rules can apply to a whole range of decision-
making areas – notably the ‘how to’ of business behaviour, setting the boundaries of various
types of business activity, fixing priorities for the achievement of objectives and the timing of key
decisions, such as when to exit from certain business areas. Such a view is consistent with the
processual approach.

Importance of strategy: The following are the importance of strategy

 Strategy is a contingent plan as it is designed to meet the demands of a difficult situation.
 Strategy provides direction in which human and physical resources will be deployed for achieving
organizational goals in the face of environmental pressure and constraints.
 Strategy relates an organization to its external environment. Strategic decisions are primarily
concerned with expected trends in the market, changes in government policy, technological
developments etc.
  Strategy is an interpretative plan formulated to give meaning to other plans in the light of specific
situations.
 Strategy determines the direction in which the organization is going in relation to its environment.
It is the process of defining intentions and allocating or matching resources to opportunities and
needs, thus achieving a strategic fit between them. Business strategy is concerned with achieving
competitive advantage.
 The effective development and implementation of strategy depends on the strategic capability of
the organization, which will include the ability not only to formulate strategic goals but also to
develop and implement strategic plans through the process of strategic management.
 A strategy gives direction to diverse activities, even though the conditions under which the
activities are carried out are rapidly changing.
 The strategy describes the way that the organization will pursue its goals, given the changing
environment and the resource capabilities of the organization.
 It provides an understanding of how the organization plans to compete.
 It is the determination and evaluation of alternatives available to an organization in achieving its
objectives and mission and the selection of appropriate alternatives to be pursued.
 It is the fundamental pattern of present and planned objectives, resource deployments, and
interactions of a firm with markets, competitors and other environmental factors.

Strategic Formation Process

Following are the process of strategic formation;
1. Setting Organizations’ objectives - The key component of any strategy statement is to set the
long-term objectives of the organization. It is known that strategy is generally a medium for realization of
organizational objectives. Objectives stress the state of being there whereas Strategy stresses upon the
process of reaching there. Strategy includes both the fixation of objectives as well the medium to be used
to realize those objectives. Thus, strategy is a wider term which believes in the manner of deployment of
resources so as to achieve the objectives.
While fixing the organizational objectives, it is essential that the factors which influence the selection of
objectives must be analyzed before the selection of objectives. Once the objectives and the factors
influencing strategic decisions have been determined, it is easy to take strategic decisions
2. Evaluating the Organizational Environment - The next step is to evaluate the general
economic and industrial environment in which the organization operates. This includes a review of the
organizations competitive position. It is essential to conduct a qualitative and quantitative review of an
organizations existing product line. The purpose of such a review is to make sure that the factors
important for competitive success in the market can be discovered so that the management can identify
their own strengths and weaknesses as well as their competitors ‘strengths and weaknesses. After
identifying its strengths and weaknesses, an organization must keep a track of competitors‘ moves and
actions so as to discover probable opportunities of threats to its market or supply sources
3. Setting Quantitative Targets - In this step, an organization must practically fix the quantitative
target values for some of the organizational objectives. The idea behind this is to compare with long term
customers, so as to evaluate the contribution that might be made by various product zones or operating
departments.
4. Performance Analysis - Performance analysis includes discovering and analyzing the gap
between the planned or desired performance. A critical evaluation of the organizations past performance,
present condition and the desired future conditions must be done by the organization. This critical
evaluation identifies the degree of gap that persists between the actual reality and the long-term
aspirations of the organization. An attempt is made by the organization to estimate its probable future
condition if the current trends persist.
5. Choice of Strategy - This is the ultimate step in Strategy Formulation. The best course of action
is actually chosen after considering organizational goals, organizational strengths, potential and
limitations as well as the external opportunities

Goals and objectives:

A goal is a desired future state or objective that an organization tries to achieve. Goals specify in
particular what must be done if an organization is to attain mission or vision. Goals make mission more
prominent and concrete. They co-ordinate and integrate various functional and departmental areas in an
organization. Well made goals have following features
 These are precise and measurable.
 These look after critical and significant issues.
 These are realistic and challenging.
 These must be achieved within a specific time frame.
 These include both financial as well as non-financial components.

Objectives are defined as goals that organization wants to achieve over a period of time. These are the
foundation of planning. Policies are developed in an organization so as to achieve these objectives.
Formulation of objectives is the task of top level management.
Features of Business Objectives:
1. Ultimate goals: Objectives are the aims; goals and the destination where the organization wants
to go Objectives differentiate one company from others. Every organization must have a clearly defined
objective, e.g. a marketing objective of an organization may be to increase its profits by 5% or increase its
market share by 3%.
2. Future Oriented: Objectives are future destinations which the organization wants to reach.
However these objectives are finalized after considering the past trends and the past performance of the
organization. This is necessary in order to formulate realistic objectives.
3. Guides principles: Whether economic, social or human objectives guide the organization in
taking relevant and quick decisions. Objectives guide in formulating the policies, the programmes and the
plans which in turn guide the employees while implementing the plans in order to achieve the objectives
4. Complex: Business environment is very complex. Change in one environment may have different
impacts on the other environmental factors. Moreover these environmental factors are uncontrollable.
Objectives have to be modified continuously in order to suit the changed environment. Thus dynamic
environment makes setting of objectives difficult.
5. Qualitative/Quantitative: There are certain objectives which are of qualitative nature, especially
advertising objectives. Advertising objectives can be creating awareness, changing attitudes, perceptions,
enabling recognition of the brand etc. Qualitative objectives are therefore difficult to measure. Quantitative
objectives are those which can be measured in volume or value terms. Marketing objectives are generally
of quantitative in nature. Some of the common marketing objectives are increasing sales, increasing
market share, increasing profits etc.
6. Hierarchical: All objectives may not be equally important at a given moment of time, for instance
if the organization is new, its objective generally is survival, rather than growth or achieving prestige and
recognition. However since many groups are involved like shareholders, creditors, employees etc.
identifying proper hierarchy is difficult.

Importance of Business Objectives:

1. Identity to the organization: Every organization must have an objective. In fact it is the
objectives that justify an organization’s existence. Outwardly all organizations may be similar but what
differentiate one organization from another are its objectives.
2. Facilitates co-ordination: Success of any organization depends upon the achievements of each
department, which in turn depends upon the proper co-ordination between people and functions of
different departments. This would enable the different department to work as a cohesive unit.
3. Guides decision-making: The top management has to take number of decisions in different
areas every day. Decisions can be relating to extending the product line or changing the pricing structure
or the place of sale. Decisions depend entirely upon the objectives of the organization. So, it is the
objectives that guide individual as well as group decision making.
4. Motivation: Motivation is the simulation to work with zeal and enthusiasm. When objectives are
clear, the employees know what is expected of them and the reward which they would earn on achieving
those objectives. Clear definition of business objectives motivates employees to put in their best efforts as
they are aware as to what to achieve.
5. Ensures planning: It is said that most people don’t succeed in life because they don’t know what
they want to achieve. One can plan properly only when one knows what one wants to achieve. Moreover
implementation would be effective only if it is planned properly. Therefore objectives ensure proper
planning.
6. Reduces wastage: Objectives facilitate preparing programmes and schedules for achieving the
predetermined goals. Men, money, materials etc. are scare. Success of a business organization depends
upon the effective utilization of the resources. So to the extent possible wastage of resources should be
avoided.

Importance of business goals:

Businesses should not fear setting goals because there is absolutely no downside to the process. Goals
give a business direction and help measure results. There are four detailed and important reasons why a
business should have goals.
a. Measure success - Good organizations should always be trying to improve, grow, and become
more efficient. Setting goals provides the clearest way to measure the success of the company.
b. Leadership cohesion - Setting goals ensures that everyone understands what the organization
is trying to achieve. When the leadership team clearly understands what the business is trying to
accomplish, it provides greater rationale for the decisions management might make regarding hiring,
acquisitions, incentives, sales programs, etc.
c. Knowledge is power - If an employee knows and understands the goals, it becomes easier for
him or her to make daily decisions based on the long- and short-term goals that were established.
d. Reassess goals - When goals are set, they can be monitored on a regular basis to verify the
business is headed in the right direction. If the business is not achieving or moving towards
accomplishing its goals, then changes or adjustments need to be made.

Key Differences between Goals and Objectives:

The major differences between goals and objectives are provided below:
a. The goals are the broad targets, which can be achieved through continuous actions taken in the
particular direction. Objectives are the aims that you want to achieve in a short span of time.
b. The goals are the result i.e. a primary outcome, but if we talk about objective, it is a stepping
stone for achieving the goal.
c. The goals are based on ideas, whereas objectives are facts based.
d. When it is about the time limit, it is difficult to determine correctly that in how much time it can be
achieved, but objectives can be time bound, in essence, they can be attained in a given period.
e. It is hard to measure goals, i.e. how much distance you have covered till now, while chasing your
goal and how much is left to be achieved. On the other hand, objectives are easy to measure.
f. A goal can be an ongoing motivation used to help inspire corporate planning. Objectives, by
contrast, have specific time frames that include launch dates and ending dates. Milestones can be
included in scheduling objectives, which will help you measure progress. Changes can be made at each
objective milestone to help improve company performance in the effort to achieve the defined results of
the objective.
 STRATEGIC INTENT

Strategic Intent can be understood as the philosophical base of strategic management process. It implies
the purpose, which an organization endeavors of achieving. It is a statement, which provides a
perspective of the means, which will lead the organization, reach the vision in the long run.

Strategic intent gives an idea of what the organization desires to attain in future. It answers the question
what the organization strives or stands for? It indicates the long-term market position, which the
organization desires to create or occupy and the opportunity for exploring new possibilities.

Strategic intent is the planned direction to be pursued by the organization. It is a short, succinct, and
inspiring statement of what the organization intends to become and to achieve at some point in the future,
often stated in competitive terms. It refers to the category of intentions that are broad, all-inclusive and
forward thinking. It is the image that an organization must have of its goals before it sets out to reach
them. It describes aspirations for the future, without specifying the means that will be used to achieve
those desired ends. It is stable over time, and set goals that deserve personal effort and commitment. It is
a vision that defines the desired leadership position for the organization and grounds the objectives by
which success will be assessed. It is the heart of all strategy.

Strategic Intent is very important concept of management that is explained as a high level statement of
the means by which an organisation achieves its vision. In present business scenario, management team
makes extreme efforts to go with the competitive advantage of their international competitors. But most of
them are imitating the activities of rivals. Imitation does not really produce the Strategic Intent as
competitors have already implemented those techniques and get advantage. Imitation is not a solution of
competitive revival. Strategic Intent drives organisations, individuals and groups to overcome the
challenge of change in business. Strategic Intent is a notion that emerged in Post-World war as world
leader in economy. Japanese Organizations had set goals for themselves that might have been
considered by most of the Western Organizations of that time as highly impractical. But with very few
resources and highly committed labour force, Japan was then able to lay the foundation for 10-15 years
of leadership in terms of economy. From Japan, all international business leaders learnt how to surpass
when there are limited resources and company face huge challenges.

Strategic intent represents a crystallized vision of an organization’s aspired direction of growth and plays
a pivotal role in shaping organizational resource allocation and capability development conversely; firms
with low levels of strategic intent have a “scarcity of ambition” and frequently have trouble with effective
goal setting. Strategic intent is about defeating competition and winning the market. It symbolizes and
expresses a process of achieving competitive advantage. This is so because for an organization to win it
should posses certain capability that others do not have or cannot easily and promptly imitate. To realize
strategic intent, some level of activities (strategic action) and behaviour is required. Such activities
comprise management focusing the attention of the organization on the essence of winning, motivating
people by communicating the value of the target , leaving room for individual and team contribution ,
sustaining enthusiasm by providing new operational definition as circumstances changes and using intent
consistently to guide resources allocation

Strategic Intent Model, Hamel and Prahalad, 1994

Hamel and Prahalad (1994) developed a strategic intent model that links the various components of
strategy to the desired future. In their model, Hamel and Prahalad discuss four strategic components that
together provide stepping stones to the desired future. These are foresight, strategic architecture,
strategic intent and core competencies. According to this model, the duo envisions leaders developing the
future of their industry, new markets, new values, from their stand point. This challenges the status quo or
improving present products or markets. They state “first of all, having a good ‘Foresight,’ secondly,
designing a ‘Strategic architecture’; and finally creating ‘Strategic intent’ and rebuilding ‘Core
competencies’, which will pull a corporation to the future”

Foresight is the prescience about the shape of tomorrow’s opportunities defined by the manager such as
the type of customer benefit, and new ways of delivering customer benefit. This is explained forgetting the
current market situation and having the future in mind. The fact that the manager temporarily forgets
about the current situation helps him to develop a structure that Hamel and Prahalad called strategic
Architecture. They define Strategic Architecture as the real future from the foresight. They argue that
instead of organizations engaging in strategic planning the organization benefits greatly by crafting a
strategic Architecture which new benefits or functionalities (not present products) will be offered for the
future. The strategic architecture fits into the strategic intent which is defined as something ambitious and
compelling, comparing the strategic architecture to the head and the strategic intent to the heart of a
body. Strategic intent defines without precision the future of the organization

This gives way for the organization to develop core competencies that will lead to the future. They stated
that, “core competencies are the collective learning in the organization, especially how to coordinate
diverse production skills and integrate multiple streams of technologies.” They emphasize that core
competence should provide potential access to a wide variety of markets; make a significant contribution
to the perceived customer benefits of the end product, and be difficult for competitors to imitate. The
success of companies’ strategic intent depends on the Chief Executive Officer and top management who
must appreciate the managerial responsibility to initiate the “future” thinking process and designs the
architecture that inspires the organizations members to higher levels of achievement .

Classification of Strategic Intent

Strategic Intent broadly divided into three parts, namely, Stretch, Leverage and Fit. Stretch stresses
on the basic definition of Strategic Intent as to stretch the resources and capabilities to the extent that
achievement of end is ensured. Here the basic stands the same there is always a misfit between the
resources and aspirations but equating this out-proportioned equation is what refers to the Stretch.
Second is Leverage, which refers to the scenario where resources are leveraged by accelerating the
pace of organization learning so as to attain impossible goals. Here key success factors are may,
namely, Concentration, Accumulation, Complementing and Conservation and Recovering. And third is
Fit which refers to the case where ideally resources have been made available in such a manner so that
high level of Aspirations may still be easily achieved with help of resources available.

Attributes of Strategic Intent

There are three major attributes of Strategic Intent, namely Sense of Direction, Sense of Discovery
and Sense of Destiny. Here the first attribute, Sense of Direction, refers to the “Long-Term Market or
Competitive Position”. Second attribute which is the Sense of Discovery refers to “the competitively
unique point of view about future. It says that Strategic Intent is differentiated because here in this case
the employees are affiliated and they are convinced about the concept of Strategic Intent”. For instance,
employees of a company are taught about the concept and they are in a position to promise higher
personal and professional goals to them. Last but not the least attribute is the Sense of Destiny refers to
the emotional edge that is involved with the Strategic Intent. This takes Strategic Intent to an all-together
new level by including the employee’s emotions with the organization aspirations. This leads to an all
over harmonic progress for everyone.

Strategic Intent Hierarchy:

a. Vision: Vision implies the blueprint of the company’s future position. It describes where the
organization wants to land. It is the dream of the business and an inspiration, base for the planning
process. It depicts the company’s aspirations for the business and provides a peep of what the
organization would like to become in future. Every single component of the organization is required to
follow its vision.
b. Mission: Mission delineates the firm’s business, its goals and ways to reach the goals. It explains
the reason for the existence of business. It is designed to help potential shareholders and investors
understand the purpose of the company. A mission statement helps to identify, ‘what business the
company undertakes.’ It defines the present capabilities, activities, customer focus and business makeup.
c. Business Definition: It seeks to explain the business undertaken by the firm, with respect to the
customer needs, target audience, and alternative technologies. With the help of business definition, one
can ascertain the strategic business choices. The corporate restructuring also depends upon the
business definition.
d. Business Model: Business model, as the name implies is a strategy for the effective operation of
the business, ascertaining sources of income, desired customer base, and financing details. Rival firms,
operating in the same industry relies on the different business model due to their strategic choice.
e. Goals and Objectives: These are the base of measurement. Goals are the end results, that the
organization attempts to achieve. On the other hand, objectives are time-based measurable actions,
which help in the accomplishment of goals. These are the end results which are to be attained with the
help of an overall plan, over the particular period.
The vision, mission, business definition, and business model explains the philosophy of business but the
goals and objectives are established with the purpose of achieving them.
Strategic Intent is extremely important for the future growth and success of the enterprise, irrespective of
its size and nature.

Mission Statement:
Mission statement is the statement of the role by which an organization intends to serve its stakeholders.
It describes why an organization is operating and thus provides a framework within which strategies are
formulated. It describes what the organization does (i.e., present capabilities), who all it serves (i.e.,
stakeholders) and what makes an organization unique (i.e., reason for existence). A mission statement
differentiates an organization from others by explaining its broad scope of activities, its products, and
technologies it uses to achieve its goals and objectives. It talks about an organization‘s present (i.e.,
―about where we are‖)

A mission statement is the purpose or reason for the organization’s existence. A well-conceived
mission statement defines the fundamental, unique purpose that sets it apart from other
companies of its type and identifies the scope of its operations in terms of products offered and
markets served. It also includes the firm’s philosophy about how it does business and treats its
employees. In short, the mission describes the company’s product, market and technological
areas of emphasis in a way that reflects the values and priorities of the strategic decision makers.

Definition of mission

Thompson defines mission as “The essential purpose of the organisation, concerning particularly why it
is in existence, the nature of the business it is in, and the customers it seeks to serve and satisfy”.
Hunger and Wheelen simply call the mission as the “purpose or reason for the organization’s existence”.

A mission can be defined as a sentence describing a company’s function, markets and competitive
advantages. It is a short written statement of your business goals and philosophies. It defines what an
organisation is, why it exists and its reason for being. At a minimum, a mission statement should define
who are the primary customers of the company, identify the products and services it produces, and
describe the geographical location in which it operates.

Features of a Mission: following are the features of mission of an organisation

1. Mission must be feasible and attainable. It should be possible to achieve it.
2. Mission should be clear enough so that any action can be taken.
3. It should be inspiring for the management, staff and society at large.
4. It should be precise enough, i.e., it should be neither too broad nor too narrow.
5. It should be unique and distinctive to leave an impact in everyone‘s mind.
6. It should be analytical, i.e., it should analyze the key components of the strategy.
7. It should be credible, i.e., all stakeholders should be able to believe it.

Vision statement:
A vision statement identifies where the organization wants or intends to be in future or where it should be
to best meet the needs of the stakeholders. It describes dreams and aspirations for future. For instance,
Microsoft‘s vision is ―to empower people through great software, any time, any place, or any device.‖
Wal-Mart‘s vision is to become worldwide leader in retailing. A vision is the potential to view things ahead
of themselves. It answers the question ―where we want to be‖. It gives us a reminder about what we
attempt to develop.
A vision statement is for the organization and its members, unlike the mission statement which is for the
customers. It contributes in effective decision making as well as effective business planning. It
incorporates a shared understanding about the nature and aim of the organization and utilizes this
understanding to direct and guide the organization towards a better purpose. It describes that on
achieving the mission, how the organizational future would appear to be. An effective vision statement
must have following features.
a. It must be unambiguous.
b. It must be clear.
c. It must harmonize with organization‘s culture and values.
d. The dreams and aspirations must be rational and realistic.
e. Vision statements should be shorter so that they are easier to memorize.

Definitions of vision
The following are the definitions of vision

Johnson defined Vision as “clear mental picture of a future goal created jointly by a group for the
benefit of other people, which is capable of inspiring and motivating those whose support is necessary for
its achievement”.
Kanter et. al defined Vision as “a picture of a destination aspired to, an end state to be achieved via the
change. It reflects the larger goal needed to keep in mind while concentrating on concrete daily activities”.
Thornberry defined Vision as “a picture or view of the future. Something not yet real but imagined what
the organisation could and should look like. Part analytical and part emotional”.

Some of the benefits of having a vision and mission statement are:

 Vision and mission statements provide unanimity of purpose to organizations and imbue the
employees with a sense of belonging and identity. Indeed, vision and mission statements are
embodiments of organizational identity and carry the organizations creed and motto. For this
purpose, they are also called as statements of creed.
  Vision and mission statements spell out the context in which the organization operates and
provides the employees with a tone that is to be followed in the organizational climate. Since they
define the reason for existence of the organization, they are indicators of the direction in which
the organization must move to actualize the goals in the vision and mission statements.
 The vision and mission statements serve as focal points for individuals to identify themselves with
the organizational processes and to give them a sense of direction while at the same time
deterring those who do not wish to follow them from participating in the organization’s activities.
 The vision and mission statements help to translate the objectives of the organization into work
structures and to assign tasks to the elements in the organization that are responsible for
actualizing them in practice.
 To specify the core structure on which the organizational edifice stands and to help in the
translation of objectives into actionable cost, performance, and time related measures.
 Finally, vision and mission statements provide a philosophy of existence to the employees, which
is very crucial because as humans, we need meaning from the work to do and the vision and
mission statements provide the necessary meaning for working in a particular organization.

As can be seen from the above, articulate, coherent, and meaningful vision and mission statements go a
long way in setting the base performance and actionable parameters and embody the spirit of the
organization. In other words, vision and mission statements are as important as the various identities that
individuals have in their everyday lives.

It is for this reason that organizations spend a lot of time in defining their vision and mission statements
and ensure that they come up with the statements that provide meaning instead of being mere sentences
that are devoid of any meaning.

Types of strategies
The various types of strategies are explained below;
1. Competitive Strategy:
Competitive strategy is the first of the types of strategies in strategic management Competitive strategy
refers to a plan that combines the influence of external situation along with the integrative apprehensions
of the inner situation of an organization. The competitive strategy aims at gaining competitive advantage
in the marketplace against the competitors. And competitive advantage comes from strategies that lead to
some uniqueness in the marketplace. Winning competitive strategies are grounded in sustainable
competitive advantage. Examples of the competitive strategy include differentiation strategy, low-cost
strategy, and focus or market-niche strategy.
The competitive strategy consists of the business approaches and initiatives undertaken by a company to
attract customers and to deliver superior value to them through fulfilling their expectations as well as to
strengthen its market position. The competitive strategy includes those tactics that prescribe various ways
to build the sustainable competitive advantage. Management’s action plan is the focus of the competitive
strategy. The objective of the competitive strategy is to win the customer’s heart by satisfying their needs,
and finally to outcompete the competitors and attain competitive advantages.

2. Corporate Strategy:
Corporate strategy is formulated at the top level by the top management of a diversified company. Such
strategy describes the company’s overall corporate strategy defines the long-term objectives and
generally affects all the business-nits under its umbrella.

3. Business Strategy:
Business strategy is formulated at the business-unit level. It is popularly known as ‘business-unit
strategy’. This strategy emphasizes the strengthening of the company’s competitive position of products
or services. Business strategies are composed of competitive and cooperative strategies.
The business strategy covers all the activities and tactics for competing in contradiction of the competitors
and the behaviours management addresses numerous strategic matters. As Hill and Jones have
remarked, the business strategy consists of plans of action that strategic managers adapt to use a
company’s resources and distinctive competencies to gain a competitive advantage over its rivals in a
market. Business strategy is usually formulated in line with the corporate strategy. The main focus of the
business strategy is on product development, innovation, integration, market development, diversification
and the like.
In doing business, companies confront a lot of strategic issues. Management has to address all these
issues effectively to survive in the marketplace. Business strategy deals with these issues, in addition to
‘how to compete’.

4. Functional Strategy:
Functional strategy refers to a strategy that emphasizes a particular functional area of an organization. It
is formulated to achieve some objectives of a business unit by maximizing resource productivity.
Occasionally functional strategy is named departmental strategy since each business function is
frequently devolved with a section. Examples of functional strategy comprise production strategy,
marketing strategy, human resource strategy and financial strategy.
The functional strategy is concerned with developing distinctive competence to provide a business unit
with a competitive advantage. Each business unit or company has its own set of departments and every
department has its own functional strategy. Functional strategies are adapted to support the competitive
strategy. For example, a company following a low-cost competitive strategy needs a production strategy
that emphasizes on reduction cost operation and also a human resource strategy that emphasizes on
retaining the lowest possible number of employees who are highly qualified to work for the organization.
Other functional strategies such as marketing strategy, advertising strategy, and financial strategy are
also to be formulated appropriately to support the business-level competitive strategy.
The organizational plans become more and more detailed and specific when managers move from
corporate business to functional-level strategies.
5. Operating Strategy:
Types of strategies in strategic management‘s fifth strategy are operating strategy. Operating strategy is
formulated as the operating units of an organization. A company may develop operating strategy. An
operating strategy is formulated at the field level usually to achieve immediate objectives. In some
companies, managers develop an operating strategy for each set of annual objectives in the departments
or divisions.

GENERIC STRATEGIES
Michael Porter developed three generic strategies that a company could use to gain competitive
advantage, back in 1980. These three are: cost leadership, differentiation and focus. 
The cost leadership strategy advocates gaining competitive advantage due to the lowest cost of
production of a product or service. Lowest cost need not mean lowest price. Costs are removed from
every link of the value chain- including production, marketing, and wastages and so on. The product could
still be priced at competitive parity (same prices as others), but because of the lower cost of production,
the company would be able to sustain itself even through lean times and invest more into the business all
throughout.
Basically, strategy is about two things: deciding where you want your business to go, and deciding how to
get there. A more complete definition is based on competitive advantage, the object of most corporate
strategy:
Competitive advantage grows out of value a firm is able to create for its buyers that exceeds
the firm's cost of creating it. Value is what buyers are willing to pay, and superior value stems from
offering lower prices than competitors for equivalent benefits or providing unique benefits that more than
offset a higher price. There are two basic types of competitive advantage: cost leadership and
differentiation.
The figure below defines the choices of "generic strategy" a firm can follow. A firm's relative position
within an industry is given by its choice of competitive advantage (cost leadership vs. differentiation) and
its choice of competitive scope. Competitive scope distinguishes between firms targeting broad industry
segments and firms focusing on a narrow segment. Generic strategies are useful because they
characterize strategic positions at the simplest and broadest level. Porter maintains that achieving
competitive advantage requires a firm to make a choice about the type and scope of its competitive
advantage. There are different risks inherent in each generic strategy, but being "all things to all people"
is a sure recipe for mediocrity - getting "stuck in the middle".
 Porter's Generic Strategies (source: Porter, 1985, p.12)

Porter's generic strategies describe how a company pursues competitive advantage across its chosen

market scope. There are three/four generic strategies, either lower cost, differentiated, or focus. A
company chooses to pursue one of two types of competitive advantage, either via lower costs than its
competition or by differentiating itself along dimensions valued by customers to command a higher price.
A company also chooses one of two types of scope, either focus (offering its products to selected
segments of the market) or industry-wide, offering its product across many market segments. The generic
strategy reflects the choices made regarding both the type of competitive advantage and the scope.

Cost Leadership strategy;

In cost leadership, a firm sets out to become the low cost producer in its industry. The sources of cost
advantage are varied and depend on the structure of the industry. They may include the pursuit of
economies of scale, proprietary technology, preferential access to raw materials and other factors. A low
cost producer must find and exploit all sources of cost advantage. if a firm can achieve and sustain
overall cost leadership, then it will be an above average performer in its industry, provided it can
command prices at or near the industry average.

This strategy involves the firm winning market share by appealing to cost-conscious or price-sensitive
customers. This is achieved by having the lowest prices in the target market segment, or at least the
lowest price to value ratio (price compared to what customers receive). To succeed at offering the lowest
price while still achieving profitability and a high return on investment, the firm must be able to operate at
a lower cost than its rivals. There are three main ways to achieve this.

The first approach is achieving high asset utilization. In service industries, this may mean for example a
restaurant that turns tables around very quickly, or an airline that turns around flights very fast. In
manufacturing, it will involve production of high volumes of output. These approaches mean fixed costs
are spread over a larger number of units of the product or service, resulting in a lower unit cost, i.e. the
firm hopes to take advantage of economies of scale and experience curve effects. For industrial firms,
mass production becomes both a strategy and an end in itself. Higher levels of output both require and
result in high market share, and create an entry barrier to potential competitors, who may be unable to
achieve the scale necessary to match the firms’ low costs and prices.

The second dimension is achieving low direct and indirect operating costs. This is achieved by offering
high volumes of standardized products, offering basic no-frills products and limiting customization and
personalization of service. Production costs are kept low by using fewer components, using standard
components, and limiting the number of models produced to ensure larger production runs. Overheads
are kept low by paying low wages, locating premises in low rent areas, establishing a cost-conscious
culture, etc. Maintaining this strategy requires a continuous search for cost reductions in all aspects of the
business. This will include outsourcing, controlling production costs, increasing asset capacity utilization,
and minimizing other costs including distribution, R&D and advertising. The associated distribution
strategy is to obtain the most extensive distribution possible. Promotional strategy often involves trying to
make a virtue out of low cost product features.

The third dimension is control over the value chain encompassing all functional groups (finance,
supply/procurement, marketing, inventory, information technology etc..) to ensure low costs. [5] For
supply/procurement chain this could be achieved by bulk buying to enjoy quantity discounts, squeezing
suppliers on price, instituting competitive bidding for contracts, working with vendors to keep inventories
low using methods such as Just-in-Time purchasing or Vendor-Managed Inventory. Wal-Mart is famous
for squeezing its suppliers to ensure low prices for its goods. Other procurement advantages could come
from preferential access to raw materials, or backward integration. Keep in mind that if you are in control
of all functional groups this is suitable for cost leadership; if you are only in control of one functional group
this is differentiation.

Cost leadership strategies are only viable for large firms with the opportunity to enjoy economies of scale
and large production volumes and big market share. Small businesses can be "cost focused" not "cost
leaders" if they enjoy any advantages conducive to low costs. For example, a local restaurant in a low
rent location can attract price-sensitive customers if it offers a limited menu, rapid table turnover and
employs staff on minimum wage. Innovation of products or processes may also enable a startup or small
company to offer a cheaper product or service where incumbents' costs and prices have become too
high. An example is the success of low-cost budget airlines who, despite having fewer planes than the
major airlines, were able to achieve market share growth by offering cheap, no-frills services at prices
much cheaper than those of the larger incumbents. At the beginning low-cost budget airlines chose "cost
focused" strategies but later when the market grow, big airlines started to offer the same low-cost
attributes, and so cost focus became cost leadership. 

A cost leadership strategy may have the disadvantage of lower customer loyalty, as price-sensitive
customers will switch once a lower-priced substitute is available. A reputation as a cost leader may also
result in a reputation for low quality, which may make it difficult for a firm to rebrand itself or its products if
it chooses to shift to a differentiation strategy in future.

Differentiation strategy:
In a differentiation strategy a firm seeks to be unique in its industry along some dimensions that are
widely valued by buyers. It selects one or more attributes that many buyers in an industry perceive as
important, and uniquely positions it to meet those needs. It is rewarded for its uniqueness with a premium
price.
 Differentiate the products/services in some way in order to compete successfully. Examples of the
successful use of a differentiation strategy are Hero, Asian Paints, HUL, Nike athletic shoes (image and
brand mark), BMW Group Automobiles, Apple Computer (product's design), and Mercedes-Benz
automobiles.

A differentiation strategy is appropriate where the target customer segment is not price-sensitive, the
market is competitive or saturated, customers have very specific needs which are possibly under-served,
and the firm has unique resources and capabilities which enable it to satisfy these needs in ways that are
difficult to copy. These could include patents or other Intellectual Property (IP), unique technical
expertise, talented personnel or innovative processes. Successful differentiation is displayed when a
company accomplishes either a premium price for the product or service, increased revenue per unit, or
the consumers' loyalty to purchase the company's product or service (brand loyalty). Differentiation drives
profitability when the added price of the product outweighs the added expense to acquire the product or
service but is ineffective when its uniqueness is easily replicated by its competitors. Successful brand
management also results in perceived uniqueness even when the physical product is the same as
competitors.. Fashion brands rely heavily on this form of image differentiation.

Differentiation strategy is not suitable for small companies. It is more appropriate for big companies. To
apply differentiation with attributes throughout predominant intensity in any one or several of the
functional groups (finance, purchase, marketing, inventory etc.).

Focus strategy (stuck n the middle) strategy:

The generic strategy of focus rests on the choice of a narrow competitive scope within an industry. The
focuser selects a segment or group of segments in the industry and tailors its strategy to serving them to
the exclusion of others.
The focus strategy has two variants.
(a) In cost focus a firm seeks a cost advantage in its target segment, while in 
(b) Differentiation focus a firm seeks differentiation in its target segment. Both variants of the focus
strategy rest on differences between a focuser's target segment and other segments in the industry. The
target segments must either have buyers with unusual needs or else the production and delivery system
that best serves the target segment must differ from that of other industry segments. Cost focus exploits
differences in cost behaviour in some segments, while differentiation focus exploits the special needs of
buyers in certain segments.
The third of the generic strategies identified by Porter involves the organization in concentrating its efforts
upon one or more narrow market segments, rather than pursuing a broader-based strategy. By doing this
the firm is able to build a greater in-depth knowledge of each of the segments, as well as creating barriers
to entry by virtue of its specialist reputation. Having established itself, the firm will typically then,
depending upon the specific demands of the market develops either a cost-based or differentiated
strategy.

One of the biggest problems faced by companies adopting this approach stems paradoxically from its
potential for success since, as the organization increases in size, there is a tendency both to outgrow the
market and to lose the immediacy of contact that is often needed. As a general rule, therefore, a focused
strategy is often best suited to smaller firms, since it is typically these that have the flexibility to respond
quickly to the specialized needs of small segments

Specializing in this way also enables the organization to achieve at least some of the benefits of the other
two strategies since, although in absolute terms the scale of operations may be limited, the organization
may well have the largest economies of scale within the chosen segment. Equally, the greater the degree
of concentration upon a target market, the more specialized is the firm’s reputation and hence the greater
the degree of perceived product differentiation.
Although Porter presents competitive strategies in this way, many companies succeed not by a blind
adherence to any one approach, but rather by a combination of ideas.

Questions
Section- A

1. Define strategy. What are the features?

2. What are the levels of strategy?
3. Explain vision and mission
4. What is corporate strategy? Explain
5. What is mission statement? What are the features?
6. What are the features of vision?
7. Distinguish between goals and objective
8. What is strategic intent? Explain
9. Write a note on strategic intent hierarchy
10. Write a note on functional strategy
11. Write a note on competitive strategy.
 Section- B

1. Define the term strategy and explain its features

2. Elucidate the levels of strategy a firm should consider
3. Explain the features of business objectives
4. Explain the concept of strategic intent and strategic intent hierarchy
5. Elucidate Michael porters generic strategy
6.

Section –C
1. Explain the process of strategic formation
2. Explain the features and importance of business objectives
3. Critically evaluate different types of strategies
4. Describe the features and levels of strategy
5. Elucidate the scope and importance of strategy
6. Explain in detail the Michael porters generic strategy