STRATEGIC MANAGEMENT 18MBA25

STRATEGIC MANAGEMENT

Subject Code: 18MBA25 IA Marks: 50

No. of Lecture Hours / Week: 04 Exam Hours: 03
Total Number of Lecture Hours: 52 Exam Marks: 60
Practical Component: 01 Hour / Week
Objectives:
• To explain core concepts in strategic management and provide examples
of their relevance and use by actual companies
• To focus on what every student needs to know about formulating, implementing and executing business
strategies in today’s market environments
• To teach the subject using value-adding cases that features interesting products and companies, illustrate the
important kinds of strategic challenges managers face, embrace valuable teaching points and spark student’s
interest.
Unit 1
Meaning and Nature of Strategic Management, its importance and relevance. Characteristics of Strategic
Management. The Strategic Management Process. Relationship between a Companies’s Strategy and its Business
Model.
Unit 2
Strategy Formulation – Developing Strategic Vision and Mission for a Company – Setting Objectives – Strategic
Objectives and Financial Objectives – Balanced Scorecard. Company Goals and Company Philosophy. The
hierarchy of Strategic Intent – Merging the Strategic Vision, Objectives and Strategy into a Strategic Plan.
Unit 3
Analyzing a Company’s External Environment – The Strategically relevant components of a Company’s External
Environment – Industry Analysis – Industry Analysis – Porter’s dominant Economic features – Competitive
Environment Analysis – Porter’s Five Forces model – Industry diving forces – Key Success Factors – concept
and implementation.
Unit 4
Analyzing a company’s resources and competitive position – Analysis of a Company’s present strategies –
SWOT analysis – Value Chain Analysis – Benchmarking Generic Competitive Strategies – Low cost provider
Strategy – Differentiation Strategy – Best cost provider Strategy – Focused Strategy – Strategic Alliances and
Collaborative Partnerships –Mergers and Acquisition Strategies – Outsourcing Strategies –International Business
level Strategies.
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STRATEGIC MANAGEMENT 18MBA25

Unit 5
Business Planning in different environments – Entrepreneurial Level Business planning – Multistage wealth
creation model for entrepreneurs– Planning for large and diversified companies –brief overview of Innovation,
integration, Diversification, Turnaround Strategies - GE nine cell planning grid and BCG matrix.
Unit 6
Strategy Implementation – Operationalizing strategy, Annual Objectives, Developing Functional Strategies,
Developing and communicating concise policies. Institutionalizing Strategy, Leadership and Culture. Ethical
Process and Corporate Social Responsibility.
RECOMMENDED BOOKS:
• Crafting and Executing Strategy, Arthur A. Thompson Jr., AJ Strickland III, John E
Gamble, 18/e, Tata McGraw Hill, 2012.
• Strategic Management, Alex Miller, Irwin McGraw Hill
• Strategic Management - Analysis, Implementation, Control, Nag A, 1/e, Vikas, 2011.
• Strategic Management - An Integrated Approach, Charles W. L. Hill, Gareth R. Jones, Cengage Learning.
• Business Policy and Strategic Management, Subba Rao P, HPH.
• Strategic Management, Kachru U, Excel BOOKS, 2009.
REFERENCE BOOKS:
• Strategic Management: Concepts and Cases, David R, 14/e, PHI.
• Strategic Management: Building and Sustaining Competitive Advantage, Robert A. Pitts & David Lei, 4/e,
Cengage Learning.
• Competitive Advantage, Michael E Porter, Free Press NY
• Essentials of Strategic Management, Hunger, J. David, 5/e, Pearson.
• Strategic Management, Saroj Datta, jaico Publishing House, 2011.
• Business Environment for Strategic Management, Ashwathappa, HPH.
• Contemporary Strategic Management, Grant, 7/e, Wiley India, 2012
• Strategic Management-The Indian Context, R. Srinivasan, 4 th edition, PHI

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CONTENTS

Unit No. Particulars Page No.

1 Introduction to strategic
Management
2 The Strategy Formulation
3 Analyzing a Company’s
External
Environment
4 Analyzing a company’s
resources & Generic
Competitive Strategies
5 Business Planning in different
environments
6 Strategy Implementation

UNIT – I

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MEANING AND NATURE OF STRATEGIC MANAGEMENT

“Without a strategy, an organization is like a ship without a rudder, going around in circles. It’s like a tramp;
it has no place to go.”-
Meaning and Nature of Strategic Management
According to Wheelen and Hungers
Strategic management is a set of managerial decisions and actions that determines the long-term performance of
a corporation. It involves environmental scanning (both external and internal), strategy formulation (strategic or
long range planning), strategy implementation, and evaluation and control.

Strategic management is a process that combines three major interrelated activities: strategic analysis, strategy
formulation and strategy implementation.

In other words, strategy is about:

How:
 How to outcompete rivals.
 How to respond to economic and market conditions and growth opportunities.

 How to manage functional pieces of the business.

 How to improve the firm’s financial and market performance.

Characteristics of SM
1. uncertain: SM deals with future oriented ,non routine situation. They create uncertainly. Managers are
unaware about consequences of their decision.
2. Long term issue: It deals with long term issue that may or may not have an immediate effect
3. Complex: Uncertainty brings complexity for SM.managers face environment which is difficult to
comprehend. External and internal environment is analyzed
4. Fundamental: SM is fundamental for improving the long term performance of the organization
5. Long term implication: SM is not concerned with day to day operation. It has long term implications. It
deals with vision, mission and objective. It ensures that strategic is put into action.
6. Organisation wide: SM had wide implication. It is not operation specific. It is system approach .It involves
strategic choice

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7. Competitive Advantage: It helps manager find new sources of sustainable competitive advantage.
Executives apply the principles of SM in their work continuously try to deliver products or service.
8. Effect of operation :always has a sizable effect on operational issues.

Nature of Strategic Management

Strategic management is an ongoing and continuous process

 Strategic management is a process which determines whether an organization excels, survives, or dies.
 All organizations engage in the strategic management process either formally or informally. Strategic
management is equally applicable to public, private, not-for-profit, and religious organizations.
 Strategic management focuses on integrating management, marketing, finance/accounting,
production/operations, research and development, and computer information systems to achieve
organizational success
 Strategic management aids to exploit and create new and different opportunities for tomorrow; long-range
planning, in contrast, tries to optimize for tomorrow the trends of today.

Strategic management is both an Art and science

Strategic management is both an Art and science of formulating, implementing, and evaluating, cross-functional
decisions that facilitate an organization to accomplish its objectives. The purpose of strategic management is to
use and create new and different opportunities for future. The nature of Strategic Management is dissimilar form
other facets of management as it demands awareness to the "big picture" and a rational assessment of the future
options. It offers a strategic direction endorsed by the team and stakeholders, a clear business strategy and vision
for the future, a method for accountability, and a structure for governance at the different levels, a logical
framework to handle risk in order to guarantee business continuity, the capability to exploit opportunities and
react to external change by taking ongoing strategic decisions.
Importance Of Strategic Mgt
 Analyzing stakeholder views
 Formulating a strategy
 Implementing the strategy
 Set up monitoring and reporting
 Setting detailed goals
 Analyzing all our internal and external resources
 Analyzing our external environment - the marketplace

Benefits and Relevance of Strategic Management

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 Financial Benefits-profits, sales, and return on assets

 Non financial Benefits

1. It provides a way to anticipate future problems and opportunities.

2. It provides employees with clear objectives and directions for the future of the organization.

3. It results in more effective and better performance compared to non-strategic management

organizations.

4. It increases employee satisfaction and motivation.

5. It results in faster and better decision making and

6. It results on cost savings.

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

Realized Strategy: The strategy that top management actually implements.

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

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

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

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

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STRATEGY AND TATICS:

Strategy:
Defined as a game plan, which can help organization to achieve its mission and objectives.
Long-range details, unstructured in nature
Tactical Planning
Refers to short-range planning that is oriented towards operations and is concerned with specific and short-range
details
Short-range details, structured in nature
BASIS FOR TACTICS STRATEGY
COMPARISON

Meaning A carefully planned action made to A long range blue print

achieve a specific objective is of an organization's
Tactics. expected image and
destination is known as
Strategy.

Concept Determining how the strategy be An organized set of

executed. activities that can lead
the company to
differentiation.

Nature Preventive Competitive

What is it? Action Action plan

Focus on Task Purpose

Formulated at Middle level Top level

Risk involved Low High

Approach Reactive Proactive

Flexibility High Comparatively less

Orientation Towards the present conditions Future oriented

The Strategic management Process

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Environmental Scanning- Environmental scanning refers to a process of collecting, scrutinizing and providing
information for strategic purposes. It helps in analyzing the internal and external factors influencing an
organization. After executing the environmental analysis process, management should evaluate it on a continuous
basis and strive to improve it.
Strategy Formulation- Strategy formulation is the process of deciding best course of action for accomplishing
organizational objectives and hence achieving organizational purpose. After conducting environment scanning,
managers formulate corporate, business and functional strategies
Strategy Implementation- Strategy implementation implies making the strategy work as intended or putting the
organization’s chosen strategy into action. Strategy implementation includes designing the organization’s
structure, distributing resources, developing decision making process, and managing human resources.
Strategy Evaluation- Strategy evaluation is the final step of strategy management process. The key strategy
evaluation activities are: appraising internal and external factors that are the root of present strategies, measuring
performance, and taking remedial / corrective actions. Evaluation makes sure that the organizational strategy as
well as it’s implementation meets the organizational objectives

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DEVELOPING A STRATEGIC VISION: PHASE 1

A strategic vision describes the route a company intends to take in developing and strengthening its business. It
lays out the company’s strategic course in preparing for the future

A clearly articulated strategic vision communicates management’s aspirations to stakeholders and helps steer the
energies of company personnel in a common direction.
A strategic vision proclaiming management’s quest “to be the market leader” or “to be the first choice of
customers” or “to be the most innovative” or “to be recognized as the best company in the industry”
Strategic vision to function as a valuable managerial tool, it must
(1) Provide understanding of what management wants its business to look like
(2)Provide managers with a reference point to
Make strategic decisions
Translate the vision into hard-edged objectives and strategies
Prepare the company for the future
Key Elements of a Strategic Vision
 Delineate management’s aspirations for the business.
 Provides a panoramic view of “where we are going”.
 Charts a strategic path .
 Is distinctive and specific to a particular organization.
 Avoids use of generic language that is dull and boring and that could apply to most any company.
 Captures the emotions of employees and steers them in a common direction.
 Are challenging and a bit beyond a company’s immediate reach.
 Purpose of setting objectives
 Converts vision into specific performance targets
 Creates yardsticks to track performance
Understanding the Payoffs of a Clear Vision Statement In sum, a well conceived ,forcefully communicated
strategic vision pays off in several respects:
(1) it crystallizes senior executives’ own views about the firm’s long-term direction
(2) it reduces the risk of rudderless decision making
(3) it is a tool for winning the support of organizational members for internal changes that will help make the
vision a reality

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(4) it provides a beacon for lower-level managers in forming departmental missions, setting departmental
objectives, and crafting functional and departmental strategies that are in sync with the company’s overall
strategy
(5) it helps an organization prepare for the future

Characteristics of an Effectively Worded Strategic Vision

Graphic: Paints a picture of the kind of company that management is trying to create and the market position(s)
the company is striving to stake out.

Directional: Is forward-looking; describes the strategic course that management has charted and the kinds of
product/market/customer/technology changes that will help the company prepare for the future.
Focused: Is specific enough to provide managers with guidance in making decisions and allocating resources.

Flexible: Is not a once-and-for-all-time statement—the directional course that management has charted may have
to be adjusted as product/market/ customer/technology circumstances change.

Feasible: Is within the realm of what the company can reasonably expect to achieve in due time.

Desirable: Indicates why the chosen path makes good business sense and is in the long-term interests of
stakeholders (especially share owners, employees, and customers).

Easy to communicate: Is explainable in 5–10 minutes and, ideally, can be reduced to a simple, memorable
slogan (like Henry Ford’s famous vision of “a car in every garage”).

SETTING OBJECTIVES: PHASE 2

The managerial purpose of setting objectives is to convert the strategic vision into specific Performance targets—
results and outcomes the company’s management wants to achieve.
Well-stated objectives are
1. Quantifiable
2. Measurable: measurable objectives are managerially valuable because they serve as yardsticks for tracking a
company’s performance and progress .
3. contain a deadline for achievement
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 Spell-out how much of what kind of performance by when

Importance of Setting Stretch Objectives
 Objectives should be set at levels that stretch an organization to
 Perform at its full potential, delivering the best possible results
 Push firm to be more inventive
 Exhibit more urgency to improve its business position
 Be intentional and focused in its actions
Both Short-Term and Long-Term Objectives Are Needed
 Short-term objectives
 Targets to be achieved soon
 Milestones or stair steps for reaching long-range performance targets
 Long-term objectives
 Targets to be achieved within 3 to 5 years
 Calls for actions now that will permit reaching targeted long-range performance later
Objectives Are Needed at All Levels
The objective-setting process is more top-down than bottom up
1. First, set organization-wide objectives and performance targets
2. Next, set business and product line objectives
3. Then, establish functional and departmental objectives
4. Individual objectives are established last.

CRAFTING A STRATEGY: PHASE 3

The task of crafting a strategy entails answering a series of how’s
How to grow the business
How to please customers
How to outcompete rivals
How to respond to changing market conditions,
How to manage each functional piece of the business and develop needed competencies and capabilities.
How to achieve strategic and financial objectives.
Strategy-making involves astute entrepreneurship
 Actively searching for opportunities to do new things
or

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 Actively searching for opportunities to do existing things in new or better ways

Strategizing involves
 Developing timely responses to happenings in the external environment
and
 Steering company activities in new directions dictated by shifting market conditions
Crafting a Good Strategy Requires Good Business Entrepreneurship
Developing a winning strategy involves
 Diagnosing the direction and force of the market changes underway and making timely strategic
adjustments
 Spotting new or better ways to satisfy customer needs
 Figuring out how to outwit and out maneuver competitors
 Pursuing ways to strengthen the firm’s competitive capabilities
 Proactively trying to out-innovate rivals
Who Is Involved in Strategy Making
 CEO (chief executive officer)
 Has ultimate responsibility for leading the strategy-making process
 Functions as strategic visionary and chief architect of strategy
 Senior executives
 Typically have influential roles in fashioning those strategy components involving their areas of
responsibility
 Managers of subsidiaries, divisions, geographic regions, plants, and other important operating units (and,
often, key employees with specialized expertise)

IMPLEMENTING AND EXECUTING STRATEGY: PHASE 4

Managing the implementation and execution of strategy is an operations-oriented, make-things-happen activity
aimed at performing core business activities in a strategy supportive manner.
It is easily the most demanding and time-consuming part of the strategy.
Converting strategic plans into actions and results tests a manager’s ability to direct organizational change,
motivate people, build and strengthen company competencies and competitive capabilities, create and nurture a
strategy-supportive work climate, and meet or beat performance targets.
Each company manager has to think through the answer to
 What has to be done in my area to execute my piece of the strategic plan

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 What actions should I take to get the process under way?”

 How much internal change is needed depends on how much of the strategy is new,
 How far internal practices and competencies deviate from what the strategy requires
 how well the present work climate/culture supports good strategy
Execution process includes the following principal aspects:

 Building a capable organization

 Allocating resources to strategy-critical activities
 Establishing strategy-supportive policies
 Instituting best practices and programs for continuous improvement
 Installing information, communication and operating systems
 Motivating people to pursue the target objectives
 Tying rewards to achievement of results
 Creating a strategy-supportive corporate culture
 Exerting the leadership necessary to drive the process forward and keep improving.

EVALUATING PERFORMANCE AND MAKING CORRECTIVE ADJUSTMENTS :PHASE 5

The fifth phase of the strategy management process—monitoring new external developments, evaluating the
company’s progress, and making corrective adjustments—is the trigger point for deciding whether to continue or
change the company’s vision, objectives, strategy, or strategy execution methods. So long as the company’s
direction and strategy seem well matched to industry
And competitive conditions, and performance targets are being met, company executives may well decide to stay
the course.
If a company experiences a downturn in its market position or persistent short falls in performance, then
company managers are obligated to ferret out the causes—do they relate to poor strategy, poor strategy execution,
or both?—and take timely corrective action.

LEVELS OF STRATEGY

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Corporate strategy: Consists of the kinds of initiatives the company uses to establish business positions in
different industries, the approaches corporate executives pursue to boost the combined performance of the set of
businesses the company has diversified into, and the means of capturing cross-business synergies and turning
them into competitive advantage Senior corporate executives normally have lead responsibility for devising
corporate strategy.Major strategic decisions are usually reviewed and approved by the company’s board of
directors.
Business strategy: concerns the actions and the approaches crafted to produce successful performance in one
specific line of business.
The key focus is crafting responses to changing market circumstances and initiating actions to strengthen
market position, build competitive advantage, and develop strong competitive Capabilities.
The business head has at least two other strategy-related roles:
(a) Seeing that lower-level strategies are well conceived, consistent, and adequately matched to the
overall business strategy,
(b) Getting major business-level strategic moves approved by corporate-level officers (and sometimes the
board of directors) and keeping them informed of emerging strategic issues.

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.
3. Functional-area strategies: concern the actions, approaches, and practices to be employed in
managing particular functions or business processes or key activities within a business.
A company’s marketing strategy, for example, represents the managerial game plan for running the sales
and marketing part of the business.

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. Functional strategies add specifics to the hows of business level strategy; they aim at establishing or
strengthening a business unit’s competencies and capabilities in performing strategy-critical activities so
as to enhance the business’s market position and standing with customers.
The primary role of a functional strategy is to support the company’s overall business strategy and
competitive approach.

Strategic Plan: A Strategic Vision + Objectives + Strategy

Strategic planning is a process in which organizational leaders determine their vision for the future as
well as identify their goals and objectives for the organization.
A strategic plan lays out the company’s future direction, performance ,targets, and strategy.
WHAT IS A BUSINESS MODEL?
A business model addresses “How do we make money in this business?”
 Is the strategy capable of delivering good bottom-line results?
Do the revenue-cost-profit economics of the strategy make good business sense?
 Look at revenue streams the strategy is expected to produce
 Look at associated cost structure and potential profit margins
 Do resulting earnings streams and ROI indicate the strategy makes sense and the company has a
viable business model for making money?

Examples of Business Model

 Magazine and news paper employ a business model based on generating sufficient subscription and
advertising to cover the cost of delivering their product to readers.
 Wall-mart has perfected the business model for big-box discounts.
 Gillette’s business model in razor blades involves selling the razors at low price
 Example: Business Model for Dominos Pizza
– Infrastructure (larger presence, fast delivery)
– Offerings (Pizza at Rs. 99/-)
– Customers (Lower and middle income group, franchisees, good services)
– Finances (Reduction in Cost through innovative practices, Economies of Scale

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COMPANY’S STRATEGY:
Relates broadly to its competitive initiatives and action plan for running the business (but it may or may not lead
to profitability)
How to grow the business
How to please customers
How to outcompete rivals
How to respond to changing market condition
How to achieve targeted levels of performance

RELATIONSHIP BETWEEN STRATEGY AND BUSINESS MODEL

A company’s business model is management’s story line for how the strategy will be a moneymaker. The story
line sets forth the key components of the enterprise’s business approach, indicates how revenues will be generated
and makes a case for why the strategy can deliver value to customers in a profitable manner.

A company’s business model thus explains why its business approach and strategy will generate ample revenues
to cover costs and capture a profit.
Deals with a company’s competitive initiatives and business approaches.

Business Model . . . Concerns whether revenues and costs flowing from the strategy demonstrate a business can
be profitable and viable

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UNIT – II
STRATEGY FORMULATION

STRATEGY FORMULATION
Strategy formulation is the process by which an organization chooses the most. appropriate courses of action to
achieve its defined goals. Strategy formulation includes the planning and decision making that lead to the
establishment of the firm’s goals and the development of a specific strategic
plan.
Strategy formulation may include assessing the external environment and internal problems and integrating the
results into goals and strategy.
F
O
M
Developing Vision and U
mission statement L
A
T
Establishing objectives
I
O
generate and evaluate N
strategy

Developing a strategic vision

A strategic vision describes the route a company intends to take in developing and strengthening its business. It
lays out the company’s strategic course in preparing for the future.

“where we are going”

Well-conceived visions are distinctive and specific.

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For a strategic vision to function as a valuable managerial tool, it must

(1) Provide understanding of what management wants its business to look like and
(2) Provide managers with a reference point in making strategic decisions and preparing the company for the
future

Characteristics of an Effectively Worded Strategic Vision

1. Graphic: Paints a picture of the kind of company that management is trying to create and the market
position(s) the company is striving to stake out.
2. Directional: Is forward-looking; describes the strategic course that management has charted and the kinds of
product/market/customer/technology changes that will help the company prepare for the future.
3. Focused: Is specific enough to provide managers with guidance in making decisions and allocating resources.
4. Flexible: Is not a once-and-for-all-time statement—the directional course that management has charted may
have to be adjusted as product/market/customer/technology circumstances change.
5. Feasible: Is within the realm of what the company can reasonably expect to achieve in due time.
6. Desirable: Indicates why the chosen path makes good business sense and is in the long-term interests of
stakeholders (especially share owners, employees, and customers).
8. Easy to communicate: Is explainable in 5–10 minutes and, ideally, can be reduced to simple, memorable
slogan
EX: CATERPILLAR
Be the global leader in customer value.
Key Elements of a Strategic Vision
 Delineate management’s aspirations for the business.
 Provides a panoramic view of “where we are going”.
 Charts a strategic path .
 Avoids use of generic language that is dull and boring and that could apply to most any company.
 Captures the emotions of employees and steers them in a common direction.
 Are challenging and a bit beyond a company’s immediate reach.
 Purpose of setting objectives
 Converts vision into specific performance targets
 Creates yardsticks to track performance
Communicating the Strategic Vision:

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1. Expressing the Essence of the Vision in a Slogan: Nike: Creating a short slogan to illuminate an
organization’s direction and purpose and then using it repeatedly as a reminder of “where we are headed
and why” helps rally organization members to hurdle whatever obstacles lie in the company’s path and
maintain their focus.
Ex. NIKE “To bring innovation and inspiration to every athlete in the world.”
2.Breaking Down Resistance to a New Strategic Vision
3.Recognizing Strategic Inflection Points :Sometimes there’s an order-of magnitude change in a company’s
environment that dramatically alters its prospects and mandates radical revision of its strategic course.
4.Understanding the Payoffs of a Clear Vision Statement In sum, a well conceived forcefully communicated
strategic vision pays off in several respects:
(1) it crystallizes senior executives’ own views about the firm’s long-term direction
(2) it reduces the risk of rudderless decision making
(3) it is a tool for winning the support of organizational members for internal changes that will help make the
vision a reality
(4) it provides a beacon for lower-level managers in forming departmental missions, setting departmental
objectives, and crafting functional and departmental strategies that are in sync with the company’s overall
strategy
(5) it helps an organization prepare for the future
Linking the Vision/Mission with Company Values
Company Values: A company’s values are the beliefs, traits, and behavioral norms that company personnel are
expected to display in conducting the company’s business and pursuing its strategic vision and strategy.
The following points are to be noted to arrive a vision statement.
1. Vision should be clear, both in terms of intentions and words used.
2. It should be feasible, neither too high to be unachievable, nor too low to demotivate the people for work.
3. It should be precise but explanatory, neither too narrow so as to restrict the organization’s activities, nor too
broad to make itself meaningless.
4. It should be distinctive, both in terms of the organization’s contributions to the society and how these
contributions can be made.

Mission Statement:
A mission statement typically describes its present business and purpose (“who we are, what we do, and why
we are here”)
Elements of a mission statement,
1. Clearly articulated. – easy to understand the values and purpose.

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2. Relevant – in terms of its history, culture and shared values.

3. Current – not outdated
4. Written in a Positive (Inspiring) Tone – capable of inspiring and stimulating Commitment towards fulfilling the
mission.
5. Unique – not copied from similar units.
6. Enduring – Should guide, inspire and challenging.
7. Adapted to the Target Audience – stock holders, consumers, employees through shared values and standards of
behavior.
EX: McDonald’s :To offer the fast food customer food prepared in the same high-quality manner world-wide,
tasty and reasonably priced, delivered in a consistent, low-key decor and friendly atmosphere.
To arrive at a Mission Statement, following questions are answered.

1. What is the basic purpose of your organizations?

2. What is unique about your organization?
3. What is likely to be different about your business five years down the road?
4. What is in your company that will make it stand out in a crowd?
5. Who are, and who should be, your principal customers?
6. What, and what should be, your principal economic concerns?
7. What are the basic beliefs, values and philosophical priorities of your firm?

SETTING OBJECTIVES:
The managerial purpose of setting objectives is to convert the strategic vision into specific Performance targets—
results and outcomes the company’s management wants to achieve.
Definition: Objectives are an organization’s performance targets—the results and outcomes management wants
to achieve.
Well-stated objectives are
1. Quantifiable
2. Measurable: measurable objectives are managerially valuable because they serve as yardsticks for tracking a
company’s performance and progres .
3. Contain a deadline for achievement
 Spell-out how much of what kind of performance by when
Importance of Setting Stretch Objectives
 Objectives should be set at levels that stretch an organization to

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 Perform at its full potential, delivering the best possible results

 Push firm to be more inventive
 Exhibit more urgency to improve its business position
 Be intentional and focused in its actions
Both Short-Term and Long-Term Objectives Are Needed
 Short-term objectives
 Targets to be achieved soon
 Milestones or stair steps for reaching long-range performance targets
 Long-term objectives
 Targets to be achieved within 3 to 5 years
 Calls for actions now that will permit reaching targeted long-range performance later
Objectives Are Needed at All Levels
The objective-setting process is more top-down than bottom up
1. First, set organization-wide objectives and performance targets
2. Next, set business and product line objectives
3. Then, establish functional and departmental objectives
4. Individual objectives are established last.

Importance of objective

1. Justify the organization – indicates the purpose and aims and thereby the social justification for the existence of
the organization.
2. Provide direction – direction for the functioning of the organization. When objectives are clear, the aims of the
activities of different people in the organization converge for the achievement of the common purpose.
3. Basis for Management by Objectives - Management for results.
4. Help strategic planning/management; a means to achieve objectives, thus help effective function of the
organization in a given environment.
5. Help coordination – the attention of the employees to desirable standards of behavior
6. Provide standards for assessment and control - . Making clear what the results should be, provide the basis for
control and assessment of organizational performance.
7. Help decentralization – by assigning decision-making to lower level personnel, given a subordinate executive
or operator considerable leeway in deciding how to perform his work.

Strategic objectives : relate to target outcomes that indicate a company is strengthening its market standing,
competitive vitality, and future business prospects. Or

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Outcomes that will result in greater competitiveness & stronger long-term market position
• Winning an x percent market share
• Achieving lower overall costs than rivals
• Overtaking key competitors on product performance or quality or
Customer service
• Deriving x percent of revenues from the sale of new products introduced within the past five years
• Achieving technological leadership
• Having better product selection than rivals
• Strengthening the company’s brand name appeal
• Having stronger national or global sales and distribution capabilities than rivals
• Consistently getting new or improved products to market ahead of rivals

Financial objectives: relate to the financial performance targets management has established for the
organization to achieve.

• An x percent increase in annual revenues

• Annual increases in after-tax profits of x percent
• Annual increases in earnings per share of x percent
• Annual dividend increases
• Larger profit margins
• An x percent return on capital employed(ROCE) or return on equity (ROE)
• Increased shareholder value—in the form of an upward trending stock price and annual dividend increases
• Strong bond and credit ratings
• Sufficient internal cash flows to fund new capital investment
• Stable earnings during periods of recession
Difference between goals and
objectiv

Comparsion Objective Goal

Meaning Achievements which Is a long term purpose which a person

can be attained only if strives to achieve
the attempts are made

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in a particular direction

Basis Facts Ideas

Time frame Medium to short term Long term

Measurement Easy Comparatively difficult

Action Specific generic

Scope Narrow Broad

Materiality Concrete Abstract

Balanced Scorecard:
 Was first published in 1992 by Kaplan and Norton

 Balanced Scorecard measures the Company performance

 Balanced Scorecard

“The Balanced Scorecard provides executives with a comprehensive framework that translates a
company’s vision and strategy into a coherent set of performance measures.

 Definition:

The Balanced Scorecard is a management tool that provides stakeholders with a comprehensive measure of how
the organization is progressing towards the achievement of its strategic goals.

or
Balanced scorecard methodology is an analysis technique designed to translate an organization's mission
statement and overall business strategy into specific, quantifiable goals and to monitor the organization's
performance in terms of achieving these goals .

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The four perspectives are:

 Financial perspective - how does the firm look to shareholders?
 Customer perspective - how do customers see the firm?
 Internal perspective - how well does it manage its operational processes?
 Innovation and learning perspective – can the firm continue to improve and create value? This
perspective also examines how an organization learns and grows.

Balanced Scorecard

From the financial perspective: Shareholders are concerned with many aspects of financial performance:
Amongst the measures of success are:
It covers the revenue and profit targets
 Market share
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 Revenue growth
 Profit ratio
 Return on investment
 Economic value added
 Return on capital employed
 Operating cost management
 Operating ratios and loss ratios
 Corporate goals
 Survival
 Profitability
 Growth
 Process cost savings
 Increased return on assets
 Profit growth
 Measures
 Cash flow
 Net profitability ratio
 Sales revenue
 Growth in sales revenue
 Cost reduction
 ROCE
 Share price
 Return on shareholder funds
From the customer perspective: This focuses on the analysis of different types of customers, their degree of
satisfaction and the processes used to deliver products and services to customers.
Focus on customer growth and service
Particular areas of focus would include:
 Customer service
 New products
 New markets
 Customer retention

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 Customer satisfaction
 What does the organization need to do to remain that customer’s valued supplier?
 Potential goals for the customer perspective could include:
 Customer satisfaction
 New customer acquisition
 Customer retention
 Customer loyalty
 Fast response
 Responsiveness
 Efficiency
 Reliability
From the internal perspective:
This seeks to identify
 How well the business is performing.
 Whether the products and services offered meet customer expectations.
 The critical processes for satisfying both customers and shareholders.
 Activities in which the firm excels?
 And in what must it excel in the future?
 The internal processes that the company must be improved if it is to achieve its objectives.
This perspective is concerned with assessing the quality of people and processes.
Potential goals for the internal perspective include:
 Improve core competencies
 Improvements in technology
 Streamline processes
 Manufacturing excellence
 Quality performance
 Inventory management
 Quality
 Motivated workforce
 The following metrics could be used to measure success in relation to the internal perspective:
 Efficiency improvements

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 Reduction in unit costs

 Reduced waste
 Improvements in morale
 Increase in capacity utilisation
 Increased productivity
 % defective output
 Amount of recycled waste
 Amount of reworking

The innovation and learning perspective

Focuses on intangible drivers of future
1.Human Capital
2.Information capital
3.Organisational capital
 This perspective is concerned with issues such as:
 Can we continue to improve and create value?
 In which areas must the organisation improve?
 How can the company continue to improve and create value in the future?
 What should it be doing to make this happen?
 Potential goals for the innovation and learning perspective include:
 New product development
 Continuous improvement
 Technological leadership
 HR development
 Product diversification
 The following metrics could be used to measure success in relation to the innovation and learning
perspective:
 Number of new products
 % sales from new products
 Amount of training

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 Number of strategic skills learned.

 Value of new product in sales
 R&D as % of sales
 Number of employee suggestions.
 Extent of employee empowerment \
Importance of balanced scorecard
1. The Balanced Scorecard balances the financial perspective with the organizational, customer and
innovation perspectives which are crucial for the future of an organization

2. The balanced scorecard methodology is a comprehensive approach that analyzes an organization's overall
performance in four ways, based on the idea that assessing performance through financial returns only
provides information about how well the organization did prior to the assessment, so that future
performance can be predicted and proper actions taken to create the desired future.

3. Allows managers to look at the business from four important perspectives.

4. Provides a balanced picture of overall performance highlighting activities that need to be improved.

5. Combines both qualitative and quantitative measures.

6. Relates assessment of performance to the choice of strategy.

7. Includes measures of efficiency and effectiveness.

8. Assists business in clarifying their vision and strategies and provides a means to translate these into
action.

Benefits of using the balanced scorecard

1. Helps companies focus on what has to be done in order to create a breakthrough performance
2. Acts as an integrating device for a variety of corporate programmes
3. Makes strategy operational by translating it into performance measures and targets
4. Helps break down corporate level measures so that local managers and employees can see what they need
to do well if they want to improve organizational effectiveness
5. Provides a comprehensive view that overturns the traditional idea of the organization as a collection of
isolated, independent functions and departments

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6. It is used to align the business activities of vision and strategy

7. It provides strategic feed back
8. It improves decisions & better solutions
Disadvantages
1. It doesn’t provide Recommendations
2. It is not fully efficient
3. It takes time
4. It is High Implementation of cost
5. Use external experts
6. Pay attention to the availability of information of performance indicators

Strategic Plan: A Strategic Vision + Objectives + Strategy

Strategic planning is a process in which organizational leaders determine their vision for the future as well as
identify their goals and objectives for the organization.
A strategic plan lays out the company’s future direction, performance ,targets, and strategy.

Company Philosophy
It is in the form of a Slogan or Statement. It projects the ethical and value based concept (philosophy) a Company
contributes to public.
This is more related to the Social Responsibility& Public Good. The corporation is a creation of society whose
purpose is the production and distribution of needed goods and services, for profit of society and itself. The
Company in it’s own interest has to promote the public welfare in a positive way. Indeed, the corporate interest
broadly defined by management can support involvement in helping to solve virtually any social problem,
because people who have good environment, education and opportunity make better employees, customers and
neighbors for business than those who are poor, ignorant and oppressed. Pollution control, contributing to public
cause in the areas of health, education & poverty. Payment of taxes genuinely, fair wages to employees, quality
products/services to consumers, all actions are based on legal and moral foundation etc

HIERARCHY OF STRATEGIC INTENT

Strategic intent refers to the purpose for which the organization strives for. It is the philosophical framework of
strategic management process.

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A company exhibits strategic intent when it relentlessly pursues an ambitious strategic objective, concentrating
the full force of its resources and competitive actions on achieving that objective.

Hamel and Prahalad coined the term strategic intent

• “strategic" is mainly used with long term
• "Intent" is basically related to "intentions" that is "a plan to do something" is an intention
 Strategic intent is about clarity, focus and inspiration
 Strategic intent provides a particular point of view about the long term vision or aspiration of the company

A company’s strategic intent can entail unseating the existing industry leader, becoming the dominant market
share leader, delivering the best customer service of any company in the industry (or the world), or turning a new
technology into products capable of changing the way people work and live.
ex. Nike’s strategic intent during the 1960s was to overtake Adidas

It involves the following:

– Creating and Communicating a vision
– Designing a mission statement
– Defining the business
– Setting objectives
Merging the Strategic Vision, Objective and Strategy into a Strategic Plan

Dept of MBA/AIT
STRATEGIC MANAGEMENT 18MBA25

Strategic Plan: A Strategic Vision + Objectives + Strategy

Strategic planning is a process in which organizational leaders determine their vision for the future as well as
identify their goals and objectives for the organization.

A strategic plan lays out the company’s future direction, performance ,targets, and strategy

 The strategic plan projects a prescriptive model based on predictive environment which is a road map for
execution.

 Strategic plan is translated into the operations planning.

 Any deviation required is to be directed by strategic plan which takes care of the corporate objective and
factors commanding the change

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