Strategic Management

402 – Strategic Management

UNIT - 1
1. Strategic Management - Meaning and Important Concepts
2. Compone nts of Strategy Management
UNIT – 2
3. Steps / Components of Strategy Formulation
4. External and Internal Environment Analysis / Assessment of a firm
UNIT – 3
5. SWOT Analysis
6. Mc KINSEY’S 7 S Frame Wo rk
UNIT – 4
7. Role of Structure, Leadership and Culture in institutionalizing the Strategy
UNIT – 5
8. Corporate Soc ial Responsibility
9. Change Manage ment
Society for Triggering and Employability and Professional Skills – STEPS 1

* Mob: 9246 99 1888 * E-mail: stepstpt@gmail.com
UNIT - 1
Strategic Management - Meaning a nd Importa nt Concepts
Strategic Manage ment is a ll about identification and description of the strategies
that managers can carry so as to ac hieve better performance and a competitive
advantage for their organization. An organization is said to have competitive advantage
if its profitability is higher than the average profitability for all companies in its industry.
Strategic management can also be def ined as a bundle of dec isions and ac ts
which a manager undertakes and which decides the result of the firm’s performance. The
manager must have a thorough know ledge and analysis of the general and competitive
organizational environment so as to take right dec isions. They should conduct a SWOT
Analysis (Strengths, Weaknesses, Opportunities, and Threats), i.e., they should ma ke
best possible utilization of stre ngths, minimize the organizational weaknesses, make use
of arising opportunities from the business environme nt and shouldn’t ignore the threats.
Strategic manage ment is nothing but planning for both predictable as well as unfeasible
contingencies. It is applicable to both small as well as large organizations as even the
smallest organization fac e competition and, by formulating and implementing
appropriate strategies, they can attain sustainable competitive advantage.
It is a way in which strategists set the objectives and proc eed about attaining
them. It deals w ith making and implementing dec isions about future direction of an
organization. It helps us to identify the direction in which an organization is mov ing.
Strategic management is a continuous proc ess that evaluates and controls the
business and the industries in which an organization is involved; evaluates its
competitors and sets goa ls and strategies to meet all existing and potentia l competitors;
and then re-evaluates strategies on a regular bas is to determine how it has been
implemented and whether it was successful or does it needs replac ement.
Strategic Manage ment gives a broa der perspec tive to the employees of an
organization and they can better understand how their job fits into the entire
organizational pla n and how it is co-related to other organizational members. It is
nothing but the art of managing employees in a manner w hich ma ximizes the ability of
ac hieving business objectives. The employees bec ome more trustworthy, more
committed and more satisfied as they can co-relate themselves very well w ith eac h
organizational task. They can understand the reac tion of environmental changes on the
organization and the probable response of the organization with the help of strategic
management.
One of the ma jor role of strategic manage ment is to incorporate various
functional areas of the organization completely, as well as, to ensure these func tional

areas harmonize and get together we ll. Another role of strategic ma nagement is to keep
a continuous eye on the goals and objectives of the organization.
Strategy - Definition
The word “strategy” is derived from the Greek word “stratçgos”; stratus (meaning
army) and “ago” (mea ning leading/mov ing).
Strategy is an ac tion that manage rs take to attain one or more of the
organization’s goals. Strategy can also be defined as “A general direction set for the
company and its various components to ac hieve a desired state in the future. Strategy
results from the detailed strategic planning proc ess”.
A strategy is all about integrating organizational ac tivities and utilizing and
alloc ating the scarce resources within the organizational environment so as to meet t he
present objectives. While planning a strategy it is essential to consider that dec isions are
not taken in a vac cum and that any ac t taken by a firm is likely to be met by a reac tion
from those affected, competitors, customers, employees or suppliers.
Strategy can also be def ined as knowledge of the goals, the uncertainty of events
and the need to take into consideration the likely or ac tual behavior of others. Strategy
is the blueprint of dec isions in an organization that shows its objectives and goals,
reduces the key policies, and pla ns for ac hieving 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 soc iety at large.
Nature of strategy
In 1985, Professor Ellen Earle-Chaffee summa rized what she thought were the
main e lements of strategic ma nagement theory w here consensus genera lly existed as of
the 1970s, writing that strategic mana gement:
∑ Involves adapting the organization to its business environment;
∑ Is fluid and comple x. Change creates novel combinations of circumstances
requiring unstructured non-repetitive responses;
∑ Affects the entire organization by providing direction;
∑ Involves both strategy formulation proc esses and a lso implementation of the
content of the strategy;
∑ May be planned (intended) and unplanned (e mergent);
∑ Is done at severa l levels: overall corporate strategy, and indiv idua l business
strategies; and
∑ Involves both c onceptual and analytical thought proc esses.

Features of Strategy
∑ Strategy is Significant bec ause it is not possible to foresee the future, without
a perfect foresight, the firms must be ready to deal with the uncertain events
which c onstitute the business environment.
∑ Strategy deals with long term deve lopments rather than routine ope rations,
i.e. it deals with probability of innovations or new products, new methods of
productions, or new markets to be developed in future.
∑ Strategy is created to take into account the probable behavior of customers
and competitors. Strategies dealing with e mployees will predict the employee
behavior.
Im portance of Strategy
Strategic manage ment is critical to the development and expansion of all
organizations, as it aligns the mission and vision with operations.
∑ The initial task in strategic manage ment is typically the compilation and
disse mination of the vision and the mission stateme nt.
∑ Strategies are usually derived by the top executives of the company, and
presented to the board of directors in order to ensure it is parallel w ith the
expec tations of stakeholders of the company.

∑ Also of high importance is the implication of the selected strategy, which is
illustrated through ac hieving high levels of strategic alignment and
consistency, both relative to the external and internal environment.
∑ Strategic management seeks to coordinate and integrate the activities of the

various functional areas of a business in order to ac hieve long-term
organizational objectives.
∑ All strategic planning dea ls w ith at least one of three key questions: "What do
we do?" "For whom do we do it?" and "How do we excel?" In business

strategic planning, the third question is better phrased, "How can we beat or
avoid competition?"
Strategy is a well defined roa dmap of an organization. It defines the overall
mission, vision and direction of an organization. The objective of a strategy is to
maximize an organization’s strengths and to minimize the strengths of the competitors.
Strategy, in s hort, bridges the gap between “w here we are” a nd “where we want
to be”.

Components of Strategy Ma nagement

A business model converts innovation to economic values for the business. It
describes how a business positions itself w ithin the value chain of its industry and how it
intends to sustain itself, that is, to generate revenue.
Business value is closely related to innovation as a business model converts new
technology to ec onomic value. The technical experts know their domain and the business
experts know theirs. The business model serves to contact these two domains as shown
in figure.
Technical Business Economic

Innovation model value
In the most basic sense, a business model is the method of doing business by
which a company sustains itself, that is generates revenue.
Components of a business mode l
∑ Value propos ition – A description of the customer’s problems, the solution that
address the problems and the value of this solution form the customer’s
perspec tive.
∑ Market segment – The group to target, recognizing that different ma rket
segments have different needs. So metimes the potential of an innovation is
unloc ked only when a different market segment is targeted.
∑ Value chain structure – The firm’s pos ition a nd ac tivities in the value chain and
how the firm w ill capture part of the value that it creates in the chain.
∑ Revenue generation and margins – How revenue is ge nerated (sales, leasing,
subsc ription, support, etc) the cost structure and target profit margins.
∑ Pos ition in the value network – Identification of competitors, comple mentary
firms and any network effects that can be utilized to deliver more value to the
customer.
∑ Competitive strategy – How the company w ill attempt to develop a sustainable
competitive adva ntage and use it to improve the enterprise’s competitive pos ition
in the market.
∑ Network partners – The key partners and their motivations to participate in the
business model.
∑ Client relationship – The relationship established w ith clients. According to
Osterwalde r the components of a business model are

∑ Core capabilities – The capabilities and competencies nec essary to execute a

company’s business model.
∑ Partner network – The business alliance with complement other aspec ts of the
business model.
∑ Value configuration – The rationale which makes a business mutually benef icial
for a business and its customers.
Offering
∑ Value propos ition – The production and se rvices a business offers, a value
proposition is an overa ll view of productions and services that together represent
value for a spec ific custome r segment.
Customers
∑ Target customer – The target audience for a business products and services
∑ Distribution channel – The means by which a company delivers products and
services to custome rs. This includes the company’s marketing and distribution
strategy.
∑ Customer relationship – The links a company established between itself and its
different customer segments. The proc ess of managing customer relationship is
referred to as customer relationship ma nagement.
Finance
∑ Cost structure – The monetary consequence of the means employed in the
business model.
∑ Revenue – The way a company ma kes money through a variety of revenue flows.
UNIT – 2
Steps / Components of Strategy Form ulation
Strategy formulation refe rs to the proc ess of choosing the most appropriate
course of action for the realization of organizational goals and objectives and thereby
ac hieving the organizational vision. The proc ess of strategy formulation bas ically
involves six main steps. Though these steps do not follow a rigid chronological order,
however they are very rational and can be easily followed in this order.
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 w hereas Strategy
stresses upon the proc ess of reac hing there. Strategy includes both the fixation of
objectives as well the medium to be used to realize those objectives. Thus, strategy is a

wide r term which believes in the manner of deploy ment of resources so as to achieve the
objectives.
Evaluating the Organizational Env ironment
The next step is to evaluate the general economic and industrial e nvironment in
which the organization o perates. 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 disc overed so that
the ma nagement can identify their ow n strengths and weaknesses as well as their
competitors’ strengths and weaknesses.
After identifying its strengths and wea knesses, an organization must keep a trac k
of competitors’ moves and ac tions so as to discover probable opportunities of threats to
its market or supply sources.
Setting Quantitative Targets
In this step, an organization must prac tically fix the quantitative target values for
some of the organizational objectives. The idea behind this is to compare w ith long term
customers, so as to evaluate the contribution that might be made by va rious product
zones or operating depart ments.
Aiming in context with the divisional plans
In this step, the contributions ma de by eac h depart ment or division or product
category within the organization is identif ied and ac cordingly strategic planning is done
for eac h sub-unit. This requires a careful analysis of mac roeconomic trends.
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.
Choice of Strategy
This is the ultimate step in Strategy Formulation. The best course of ac tion is
actually chosen after considering organizational goals, organizational strengths, potential
and limitations as well as the external opportunities.
Strategy Implementat ion
Strategy implementation is the translation of chosen strategy into organizational
action so as to ac hieve strategic goals and objectives. Strategy implementation is also

defined as the manne r in w hich an organization should develop, utilize, and a malgamate
organizational structure, control systems, and culture to follow strategies that lead to
competitive a dvantage and a better performance. Organizational structure alloc ates
spec ial value developing tasks and roles to the employees and states how these tasks
and roles can be correlated so as maximize efficiency, quality, and customer sat isfac tion-
the pillars of competitive advantage. But, organizational structure is not sufficient in
itself to motivate the employees.
Follow ing are the main steps in implementing a strategy:
∑ Deve loping an organization having potential of carrying out strat egy
succ essfully.
∑ Disburse ment of abundant resources to strategy-essential activities.
∑ Creating strategy-encouraging policies.
∑ Employ ing best policies and programs for constant improvement.
∑ Linking reward structure to accomplishme nt of results.
∑ Making use of strategic leadership.
Strategy Evaluation Process and its Significance
Strategy Evaluation is as significant as strategy formulation bec ause it throws
light on the efficiency and effectiveness of the comprehensive plans in ac hieving the
desired results. The managers can also assess the appropriateness of the current
strategy in today’s dy namic world with soc io-economic, political and technological
innovations. Strategic Evaluation is the final phase of strategic management.
The signif icance of strategy evaluation lies in its capacity to co-ordinate the task
performed by manage rs, groups, depart ments etc, through control of performance.
Strategic Evaluation is signif icant because of various factors such as - developing inputs
for new strategic planning, the urge for feedbac k, appraisal and reward, development of
the strategic manage ment proc ess, judging the validity of strategic choice etc.
The proc ess of Strategy Evaluation consists of following steps:
Fixing benchmark of performance
While f ixing the benchmark, strategists encounter questions such as - what
benchmarks to set, how to set them and how to express them. In order to determine the
benchmark performance to be set, it is essential to discover the spec ial requirements for
performing the main task. The performance indicator that best identify and express the
spec ial requirements might then be determined to be used for evaluation. The
organization can use both quantitative and qualitative criteria for comprehensive
assessment of pe rformance. Quantitative criteria include determination of net profit,
ROI, earning per share, cost of production, rate of employee turnove r etc. Among the

Qualitative factors are subjective evaluation of fac tors such as - skills and competencies,
risk taking potential, flexibility etc.
Measurement of performance
The standard performance is a bench mark with which the actual performance is
to be compare d. The reporting and communication system help in measuring the
performance. If appropriate means a re available for meas uring the performance and if
the standards are set in the right manner, strategy evaluation bec omes easier. But
various fac tors such as managers contribution are difficult to measure. Similarly
divisional performance is sometimes difficult to meas ure as compared to individual
performance. Thus, variable objectives must be created against which meas urement of
performance can be done. The meas ure ment must be done at right time else evaluation
will not meet its purpose. For measuring the performance, financial statements like -
balance sheet, profit and loss account must be prepared on an annua l basis.
Analyzing Variance
While measuring the ac tual performance and comparing it with standard
performance there may be variances which must be analyze d. The strategists must
mention the degree of tolerance limits between which the variance between actual and
standard performance may be ac cepted. The positive dev iation indicates a better
performance but it is quite unusual exceeding the target always. The negative deviation
is an issue of concern bec ause it indicates a shortfall in performa nce. Thus in this case
the strategists must discover the causes of deviation and must take corrective action to
overcome it.
Taking Corrective Action
Once the deviation in performa nce is identif ied, it is essentia l to plan for a
corrective action. If the performance is consistently less than the desired performance,
the strategists must carry a detailed analysis of the factors responsible for such
performance. If the strategists discover that the organizational potential does not match
with the performance requirements, then the standards must be lowered. Another rare
and drastic corrective action is reformulating the strategy which requires going bac k to
the proc ess of strategic management, reframing of plans ac cording to new resource
alloc ation trend and consequent means going to the beginning point of strategic
management proc ess.
Exte rnal and Inte rnal Environment Analysis / Assessment of a firm
Assessing External Environme nt
The main purpose of environment survey is to lea rn a bout events and trends in
the environment and to identify the opportunities and threat in it.

Environme nt fa ctors
1. Macro environment factors
2. Factors which are spec ific to the given business
In a w ider sense the given business environment is generally examined in three
segments
a. Macro or mega environment
b. Operating or relevant environment
c. Industry or competitive or mac ro environme nt
The external environment encompasses a variety of factors like.
i. Political system
ii. Economic factors
iii. Demogra phic factors
iv. Technological factors
v. Ecological factors
vi. Globa l fac tors
He re mac ro environment is also called remote environment or mega environment
or gene ral. So me authors call this soc ietal environment.
Remote environment:
Remote environment affects all firms and is generally beyond the control of any
single firm.
Economic factors:
These are probably things that we are a ll more familiar w ith that we were six
months ago they include
∑ Interest rates on personal savings
∑ Inflation rates
∑ Une mploy ment
∑ Rate of economic growth
∑ Money supply
After libe ralisation the corporate sector and capital markets grew substantially in
India and paved way for foreign invest ment in a big way.
Soc io-c ultural fac tors
In consists of culture traditions beliefs, values and lifestyles of people in a soc iety.
For example Diwa li celebrations in India create a tremendous market for sweet and
candy just as Christ mas provides increased ma rket for flowers.
So me of the factors are
∑ Highe r percentage of women in workforce

∑ Greater concern for physical fitness healthy diets

∑ Postponeme nt of having children
Technological factors
Developing in technology create new products, new production techniques. But
there are a number of examples of companies failing bec ause of delay in adapting to
new technologies.
∑ Satellite communication
∑ Bio-technology
∑ Robotics
To avoid obsolescence and promote innovation firm must be aware of
technological changes that might influence its industry.
Ecological factors
Global warming and greenhouse effect can have disastrous consequences for
human life.
∑ Air pollution, water pollution, and land pollution caused by industries.
∑ Businesses are now be ing held responsible for eliminating the toxic by
products and cleaning up the environment damage.
∑ Steel company have to invest crores of rupees in pollution c ontrol equipment.
∑ Automobile industry has bee n asked to install e xpensive emission control in
cars.
Global fac tors
Organisations which operate in more than one country fac e an even more
complex e xternal environment. A multinational company has to consider a number of
environme nt factors.
∑ Economic conditions in the host country
∑ Cultural fac tors of countries
∑ Availability of material and man power
∑ Laws of host country
∑ Political stability of host country
∑ Regulatory mechanisms.

Internal Analysis of the Firm

Definition
A system and methodical analysis of the strength and weakness of firm’s internal
resources and capabilities and also its function areas are called internal ana lysis. Interna l
analysis is also referred to as “internal appraisal or organisational audit”.
Managers perform internal ana lysis to identify strength and weakness of a firm’s
resources and capabilities.
Importance
∑ To assess capability gaps and steps to enhance it
∑ To define against threats
∑ Organisational resources and capabilities bec ome a lynchpin over which
hinges the success and survival
∑ To find where it stands in terms of its strengths and weakness.
Strategists rely on three basic perspec tives to evaluate how their firms stoc k up
on internal capabilities
Compariso n with past performance

Strategists use the firm’s historical experience as basis manage rs are most
familiar w ith internal capabilities and problems of their firms bec ause they have been
immersed in the financial, marketing, production and R & D ac tivities.
Benchmarking c omparison with c ompetitors
The benchma rking mea ns evaluating the sustainab ility of advantages against key
competitors. A major foc us in determining a firms resources and competencies is
comparison with e xisting competitors.
Compariso n with success factors in the industry
The key determinants of succ ess in an industry may be used to identify a firms
internal strength and weakness.
UNIT – 3
SWOT Analysis
SWOT is an ac ronym for Strengths, Wea knesses, Opportunities and Threats. By
definition, Strengths (S) and Weaknesses (W) are considered to be internal factors over
which you have some measure of control. Also, by definition, Opportunities (O) and
Threats (T) are considered to be external fac tors over which you have essentia lly no
control.
SWOT Analysis is the most renow ned tool for a udit and analysis of the overall
strategic position of the business and its environment. Its key purpose is to identify the
strategies that will create a firm spec ific business model that will best align an
organization’s resources and capabilities to the requirements of the environme nt in
which the firm operates. In other words, it is the foundation for evaluating the internal
potential and limitations and the probable/likely opportunities and threats from the
external environment. It views all pos itive and negative factors inside and outside the
firm that affect the success.
A consistent study of the environment in which the firm operates helps in
forecasting/predicting the changing trends and a lso helps in including them in the
dec ision- making proc ess of the organization.
An overview of the four factors (Strengths, Weaknesses, Opportunities and Threats) is
given be low
∑ Strengths – Strengths are the qualities that enable us to accomplish the
organization’s mission. These are the basis on which c ontinued success can be
made a nd continued/sustained. Strengths can be either tangible or intangible.
These are what you are well-versed in or what you have expe rtise in, the
traits and qualities your e mployees possess (individually and as a team) and

the distinct features that give your organization its consistency. Strengths are
the beneficial aspec ts of the organization or the capabilities of an
organization, which includes human competencies, proc ess capabilities,
financial resources, products and services, customer goodwill and brand
loyalty. Exa mples of organizational strengths are huge financial resources,
broad product line, no debt, committed e mployees, etc.
∑ Wea knesses – Weaknesses are the qualities that prevent us from
accomplishing our mission and ac hieving our full potential. These weaknesses
deteriorate influences on the organizational success and growth. Weaknesses
are the factors which do not meet the standards we feel they should meet.
Weaknesses in an organization may be depreciating mac hinery, insufficient
research and development fac ilities, narrow p roduct range, poor dec ision-
ma king, etc. Weaknesses are controllable. They must be minimized and
eliminated. For instance - to overcome obso lete mac hinery, new mac hinery
can be purchased. Other examples of organizational wea knesses are huge
debts, high employee turnover, complex dec ision making proc ess, narrow
product range, large wastage of raw materials, etc.
∑ Opportunities – Opportunities are presented by the environme nt within which
our organization operates. These arise when an organization can take benefit
of conditions in its environment to plan and execute strategies that enable it
to become more profitable. Organizations can gain competitive advantage by
ma king use of opportunities. Organization should be careful and recognize the
opportunities and grasp them w henever they arise. Selecting the targets that
will best serve the clients while getting desired results is a difficult task.
Opportunities may arise from ma rket, competition, industry/gove rnment and
technology. Increasing demand for telecommunications accompanied by
deregulation is a great opportunity for new firms to enter telecom sector and
compete with existing firms for revenue.
∑ Threats – Threats arise when conditions in external environment jeopardize
the reliability and profitability of the organization’s business. They compound
the vulnerability when they relate to the weaknesses. Threats are
uncontrollable. When a threat comes, the stability and survival can be at
stake. Examples of threats are - unrest a mong employees; ever changing
technology; increasing competition leading to excess capacity, price wars and
reducing industry profits; etc.

Advantages of SW OT Analysis
SWOT Analys is is instrumental in strategy formulation and selection. It is a strong
tool, but it involves a great subjective element. It is best when used as a guide, a nd not
as a prescription. Successful businesses build on their strengths, correct their weakness
and protect against internal weaknesses and external threats. They also keep a watc h on
their overall bus iness environment and recognize and exploit new opportunities faster
than its competitors.
SWOT Analysis helps in strategic planning in following manner-
a. It is a source of information for strategic planning.
b. Builds organization’s strengths.
c. Reverse its weaknesses.
d. Maximize its response to opportunities.
e. Overcome organization’s threats.
f. It helps in identifying core competencies of the firm.
g. It helps in setting of objectives for strategic planning.
h. It helps in know ing past, present and future so that by using past and current
data, future plans can be chalked out.
SWOT Analysis prov ide information that helps in synchronizing the firm’s
resources and capabilities with the competitive environment in which the firm operates.
SWOT Analysis Frame work
Lim itations of SW OT Ana lysis

SWOT Analys is is not free from its limitations. It may cause organizations to view
circumstances as very simple bec ause of which the organizations might overloo k certain
key strategic contact which may occur. Moreover, categorizing as pec ts as strengths,
weaknesses, opportunities a nd threats might be ve ry subjective as there is great degree

of uncertainty in market. SWOT Analysis does stress upon the signif icance of these four
aspects, but it does not tell how an organization c an identify these aspects for itself.
There are certain limitations of SWOT Analysis which are not in control of manage me nt.
These include
a. Price increase;
b. Inputs/raw materia ls;
c. Gove rnme nt legislation;
d. Economic environment;
e. Searching a new market for the product which is not having overseas market
due to import restrictions; etc.
Internal limitations may include-
a. Insufficient research and development facilities;
b. Faulty products due to poor quality control;
c. Poor industrial relations;
d. Lack of skille d and efficient labour; etc
Mc KINSEY ’S 7 S Frame Work
The 7-s frame work was developme nt in 1970s by the well- known consultancy
firm the Mc Kinsey Company of the United States. The purpose of the model is to slow
the interre lationship between different ele me nts of an organisation.
Bac k in the 1970s the well known US consultancy company Boston consulting
group was highly successful with its launch of the BCG matrix that is the product
portfolio matrix.
The purpose of the mode l was however not to do portfolio analysis but to show
the inter relationships between different ele ment of an organization.

Structure
Strategy Systems
Super
ordinate
goals
Skills Style
Staff
7 – S Frame work
This fra mework bas ically deals with organizational change. It has to be
understood by the complex relationship that exists between strategy, structure, system,
style, staff, skills and super – ordinate goals.
Super–ordinate goals
Super–ordinate goa ls means the goals of a higher order w hich e xpress the
values, brings to the organization.
These can be conside red as the fundamental ideas around which a business is
built. They are the broad of future direction for exa mple the super–ordinate goal of IBM
has been customer serv ice which that of HP was innovative people at all levels in the
organization.
Structure
Structure means the organizational structure of the company. The des ign of
structure is a critical task of top manage me nt. It prescribes the formal relationships
among various position and ac tivities, communication channels, roles to be performed by
various members of an organization.
∑ It reduces external uncertainty
∑ It reduces internal uncertainty due to variable unpredictable and random
human behaviour.
∑ It prov ides a w ide variety of devices like depart mentalization, spec ialization,
division of labour, de legation of authority etc.

∑ It helps in co-ordinating various ac tivities of the organization a nd foc us on its

objectives.
Systems
A system means the procedures that make the organization work. They include
the rules regulations and proc edures both formal and informal that complement the
organizational structure. Systems include production planning and control systems cost
accounting proc edure, capital budgeting systems, performance evaluation systems etc.
Style
Style means the way the company conduct its business. Top manage rs in
organization can use style to bring about change organization differ f rom eac h other in
their styles of working. The style of an organization, accounting to the Mc Kinsey
fra mework bec ome evident through the pattern of ac tions taken by the top manage ment
team ove r a period of time.
Thus an important part of ma naging change is establishing and nurturing a good
fit between culture and strategy.
Staff
Staff refers to the pool of people w ho need to be developed challenged and
encouraged. It should ensure that the staff has the potential to contribute to the
ac hievement of goals. Three important aspects about staff are :-
∑ Selecting meritorious people for spec ific organizational positions
∑ Deve loping abilities and skills in them to take up challenging assignments.
∑ Motivating them to give their best to achieve
Skills
Skills are the most crucial attributes or capabilities of an organization. Skills in
the 7-S framework can be considere d as an equivalent of distinctive competencies. For
example, Hindustan leve r is known for its ma rketing skills, TELCO for its enginee ring
skills, IBM for its customer’s service. Dupont for its research and deve lopme nt skills and
Sony for its new product development skills.
Skills are development over a period of time and are a result of a number of
factors. Hence to implement a new strategy. It is nec essary to build new skills.
Strategy
Strategy is the long term direction and scope of an organization. It is the route
that the company has chosen to achieve competitive succ ess.

The Mc Kinsey consultants call strategy structure and system as the hard elements of
the organization and the other 4Ss, i,e, skills , staff, and super ordinate goals as the soft
elements.
UNIT – 4
Role of Structure, Leadership and Culture in institutionalizing the Strategy
Structure
Any operating organization should have its own structure in orde r to ope rate
efficiently. For an organization, the organizational structure is a hierarchy of people and
its functions. The organizational structure of an organization tells you the character of an
organization and the values it believes in.
Organizational structure is a tool that manage rs use to harness resources for
getting things done. It is defined as:
∑ The set of formal tasks assigned to individuals and depa rt me nts.
∑ Form a reporting relationship including line of authority responsibility, numbe r
of hierarchical levels and span employees ac ross depart ment.
∑ The design of systems to ensure effective co-ordination of employees ac ross
depart ment.
The design of organizational structure is a critical task of the top management of
an organization. It is the selection of the whole organization. It prov ides relatively more
durable organizational structure fulf ils two fundamental and opposing requirements.
∑ Division of labour into various tasks
∑ Co-ordination of these tasks to accomplish effective control of an organization
Types of Organization Structure
De pending on the organizational values and the nature of the business,
organizations tend to adopt one of the following structures for ma nagement purposes.
Although the organization follows a particular structure, there can be depart ments and
teams follow ing so me other organizational structure in e xceptional cases.
So metimes, some organizations may follow a combination of the following
organizational structures as well.
1. Simple structure
2. Functional structure
3. Divisional structure
4. SBU structure
5. Matrix structure
6. Network structure

7. Virtual structure
Simple Structure
In this structure the owner manager controls all ac tivities and makes all the
dec isions. This structure may be appropriate for small and young organizations. Co-
ordination of tasks is done through direct supervision. There is little spec ialization of
tasks few rules and regulations and communication is informal.
Owner - Manager
Employees
Functional Structure
Functional structures are grouped based on major functions performed. Each
function is led by a functional spec ialist. Functional structures are formed in
organizations in which there is a single or closely related product.
The organization is divided into segme nts based on the functions when managing.
This allows the organization to enhance the efficiencies of these functional groups.
Functional structures appear to be succ essful in large organization that produces
high volumes of products at low costs. The low cost can be ac hieved by such c ompanies
due to the efficiencies within functional groups.
CEO
Manufacturing Marketing Finance HR R& D
Divisional Structure
In a divisional structure, div isions a re related as self contained units with
separate functional depart ment for eac h division. Each division is equipped w ith its own
resources in order to function independently. Divisions may be organized around
geographic area, products, services, consumers etc.
Each division is responsible for product, market, financial objectives for the
division as well as their division’s contribution to overall corporate performance.
As an example, take a company such as General Electric’s, it has microwave
division, turbine division, etc., and these divisions have their ow n marketing teams,

finance teams, etc. In that sense, each division can be conside red as a micro-company
with the main o rganization.
CEO
Division 1 Division 2 Division 3
Manufacturing Manuf acturing Manuf acturing
Marketing Marketing Marketing
HR HR HR
Finance Finance Finance
Strategic Business Unit (SBU) Structure

The strategic business unit (S BU) is an adaptation of the divisional structure
whereby various divisions or parts of divisions are grouped together based on some
common strategic elements, usually linked to distinct product/market differences
As It is difficult for corporate office to co-ordinance ac tivities of various divisions,
the diverse business are grouped into SBUs (Strategic Business Unit)
CEO
SBU1 SBU 2 SBU 3
Division 1
Division 2
Holding Company Structure

A final form of the divisional organization is the holding company structure, where
the corporate entity is a broad collection of often unrelated businesses (more
conglomerately diverse) and divisions such that it (the corporate entity) acts as financial
overseer “holding” the ownership interest in the various parts of the company but has
little direct manage rial involvement.

Indiv idual businesses operate as autonomous subsidiaries and the corporate

office acts as the holding company for financial control and incentives to obtain high
level performance.
Holding
company
Subsidiary 1 subsidiary 2 subsidiary 3
Network Structure
A network organization outsources any of its major functions to separate
companies and co-ordinates activities like design, manufac turing, marketing, distribution
etc. Example: Nike a nd Reebok ma nufac turing oc cur in other countries bec ause labour
cost is low.
Account
Receivable
(USA)
Design Distribution
Company Company
(Canada) (Europe)
Company
Core
Transportati Manuf acturi

on ng
Company Company
(Korea) (Asia)
Matrix Structure
The matrix structure gives the best of the both worlds of functional and divisional
structures. In this type of an organization, the company uses teams to complete tasks.
The teams are formed based on the functions they belong to (ex: software
engineers) and product they are involved in (ex: Project A).
This way, there are many teams in this organization such as software enginee rs
of project A, software engineers of project B, QA engineers of project A, etc.

Virtual Structure
This is an e xtension of the network structure. The term virtual means being in
effect but not actually so, the virtual organizations consist of a network of independent
companies – suppliers, custome rs or even competitors, linked together to share skills,
costs, markets and rewards.
The virtual organization will have few full-time employees (or) may tempora rily
hire outside specialists to complete a spec ific project, such as new software application.
Most virtual organizations use electronic media for sharing of information and data.
Leaders hip
Leadership is the art and process of influencing people, so that they will strive
willingly a nd enthusiastically towards ac hieve ment of the organizations purpose. The top
management has to encourage ma nagers and employees to implement the strat egy,
through proper leade rship.
Analysing Leadership
In order to unde rstand the link between strategic implementation and leade rship,
it is useful to analyse leade rship role.
∑ Trait theory
∑ Behavioural theory
∑ Contingency theory
∑ Best fit approach
Trait Theory
Trait theory argue that individuals with certain characteristics (traits) can be
identif ied who will prov ide leadership in virtually any situation.
Behav ioural Theory

Behavioura l theories suggest that indiv idua l with c ertain behav iours can be
identif ied who will prov ide leadership appropriate to the organization.
Contingency Theory
Contingency theory suggests that leaders emerge ac cording to the needs of the
organization at a particular point of time. The choice is contingent on the strategic issues
fac ing the organization at that time and leade rs need to be changed as the situation
itself changes. From a strategic perspective the contingency theory approaches holds
good.
Role of Strategic Leader
Leaders play a central role in performing six critical and interdependent ac tivities
in implementation of strategies.
∑ Cla rifying Strategic Intent
∑ Setting the Direction
∑ Building an Organization
∑ Shaping Organization Culture
∑ Creating a Learning Organization
∑ Instilling Ethical Behaviour
Clarify ing Strategic Intent
Leaders motivate e mployees to e mbrac e change by setting forth a clear vision of
where the business strategy needs to take the organization.
Setting the Direction
Leaders set the direction and scope of the organization through formulating
appropriate corporate and business strategies.
Building an Organization
Leaders are attempting to embrac e change they are often t o rebuild their
organization to align it problems like
∑ Ensuring a common understanding about organizational priorities.
∑ Gaining personal commit ment from manage rs to a share vision.
∑ Cla rifying responsibilities a mong mange rs and organizational unit.
∑ Keeping closely connected with what’s going on in the organization.
Shaping Organization Culture
Leaders play a key role in developing and sustaining a strategy supportive
culture. Leaders know well that the values and beliefs shared throughout their
organization will shape how the work of the organization is done.
Creating a Learning Organization

Leaders must also play a central role in c reating a learning organization. It is one
that quickly adapts to change. The five ele ments central to a learning organization are:
∑ Inspiring and motivating people with a mission
∑ Empowering people at all leve ls throughout the organization
∑ Accumulating and sharing internal knowledge.
∑ Challenging the status quo to stimulate creativity.
Instilling Ethical Behav iour
Business ethics is the application of general ethical standards to comme rcial
enterprises. A leade r plays a central role in instilling ethical behav iour in the
organization. The ethical orientation of a leade r is generally considered to be a key factor
in promoting ethical behaviour among employees.
Leaders hip Approaches
Three types of leadership that can have a substantial impac t
∑ Transactional Leadership – Lea ders clarify the role and tas k require ment of
subordinates, initiate structure and meet the social needs of subordinates.
∑ Transformational Leadership – Transformational leade rs have a spec ial ability
to bring about innovation and change.
∑ Charismatic and Visionary Leadership – Charismatic leade rs a re often having
ability to inspire and motivate people. Visionary leaders see beyond current
realities and help followers believe in brighter future.
Three interdepende nt activities of leadership
Nurturing of Culture
dedicated to Excellence
and Ethical Behaviour
Designing he
Determing a Direction
Organization
Culture
Culture is defined as set of beliefs values a nd assumptions that me mbers of an
organization shares in common. A company’s culture is manifested in the vales and

business principles that management preac hes and prac tices. For example, culture is
manifested in
∑ Corporate Stories
∑ Attitudes and Behaviour of Employees
∑ Core Va lues
∑ Organizations Politics
∑ Approaches to People Management and Proble m Solving
∑ Relationship with Stoc kholders
An organization culture is similar to an individual’s pe rsonality. Just as an
individual’s personality, influence the behav iour of an individual. Culture thus consists of
layers of values, beliefs and taken for granted assumption and ways of doing things in
organization.
Values
Values are bas ic convictions abo ut what is right good (or) des irable. They contain
a judge mental ele ment, self-respect; honesty, obedience etc are employees. Values are
easy to identify in an organization. They are often written down as statements in the
organization mission, objectives (or) strategies. However, they tend to be va gue, such
as customer satisfaction (or) service to the community.
Beliefs
Beliefs a re more specific but aga in they are issues w hich people in the
organization can surfac e and take about. They might include a belief that company
should not trade with particula r countries (or) that action of professional staff should not
be appra ised by manage rs.
Assum ptions
Assumptions a re the taken for granted ways of doing things in the organization.
They are the core of an organization culture. They are the aspects of organization life
which people find difficult to identify and explain.
Types of Culture
∑ Strong Vs Weak Cultures
∑ Unhealthy Vs Adaptive Cultures
∑ Dominant Vs Sub-Cultures
Strong Vs Weak Cultures
So me cultures are strongly embedded, which others are weak (or) f ragmented
cultures. Strong- culture companies have a well–def ined corporate characters, values
and behavioural norms which are so deeply rooted in them that it is hard to change
them.

In contrast to strong culture companies, wea k culture companies are f ragmented

in the sense that no one set of values is consistently preac hed (or) widely sha red. They
typically lac k any deeply felt sense of identity (or) corporate character.
Unhealthy Vs Adaptive Cultures

Unhealthy cultures a re charac terized by self–se rving politics, resistance to change
and inward foc us. They are often precursors to dec lining company performance.
Adaptive cultures, work climate is receptive to new ideas, experimentation,
innovation, new strategies a nd prac tices. An adaptive culture is a n adva ntage, especially
in fast–changing business environment, bec ause employees are receptive to risk ta king
experimentation, innovation etc.
Dom inant Vs Sub-Cultures
In seeking to understand the relationship between culture and strategy. It may
be possible to identify some aspec ts of culture that provide the whole organization which
we call the dominant culture. However, there may also be important sub-culture within
organization. For example there may be sub-cultures in differe nt geographical divisions
of a multi-national company or in different functional groups such as finance, marketing
and operations.
Characteristics of Culture
Handy charac terized culture in terms of the relationship between the organization
and individuals.
Power Culture
An organization having power culture revolves a round and is dominated by one
individual or a small group. For example, small companies w ith do minant proprietors. In
a power culture the CEO would personally and ac tively issues instructions indicating who
does what and how it is done.
Role Culture
The organization hav ing role culture relies on committees, structures, schedules,
logic and analysis. A small group of senior officers ma ke the final dec isions but they rely
on proc edures, systems. Examples are civil service, retail banks etc.
UNIT – 5
Corporate Social Responsibility
Corporate soc ial respo nsibility is seriously considering the impac t of the
company’s ac tions on soc iety.

According to Keith Dav is, “social responsibilities refe r to the business man’s
dec isions and ac tions taken for reasons at least partially beyond the firm’s direct
economic or technical interest.”
Observe
Ethical
Principal
Make
Charitable
Com m unity
Prom ote
Service
Workforce
Activities,
Divesity
Im pact
Corporate
Quality of
Social
Work Life
Responsibility
Em ployee
Minimize
well being
adverse
Healthy and
effets on
Safe-Work
Evnironm ent
Environm ent
Soc ial responsibility contends that management is responsible to the organization

itself and to all the interest groups w ith which it interest. Action and behav iours that
demonstrate corporate social responsibility are:
1. Observing ethical principles in operating the business
2. Making charitable contributions
3. Protecting or enhancing the environment
4. Creating good work environment
5. Employ ing a diverse workforce
6. Enhancing the quality of life for employees
7. Investing money and time in c ommunity services
8. Helping the under privileged and weaker sections of the society.
Respons ibilities of Business Orga nizations
A business organization has four responsibilities.
1. Economic Responsibilities
2. Legal Responsibilities
3. Ethical Responsibilities
4. Discretionary Responsibilities

Economic Responsibilities
This involves the essential responsibility of business to provide goods and service
to soc iety at a reasonable cost. In discharging that economic responsibility the company
prov ides productive jobs to its workforce pays taxes to central, state and loc al Govt.
Legal Responsibilities
It reflects the firm’s obligation to comply with the laws that re gulate business
activities, espec ially in the areas of consumer safety and pollution control.
Ethical Responsibilities:
It reflects the company’s nation of right or proper business behav iour. Ethical
responsibilities go beyond legal requirements. Firms are expec ted though not legally
bound to behave ethically.
Discretionary Responsibilities
These are voluntarily assumed by business organizations that adopt the
citizenship approach. They support ongoing charities, public service advertisement
campaigns, donations, medical camps, public welfare ac tivities etc. A commit ment to full
corporate responsibility requires strategic managers to attack soc ial proble ms with the
same zeal in which they tackle business proble ms.
Corporate soc ial responsibility is the continuing commit ment by business
organizations to behave ethically and contribute to economic development.
∑ Soc ial responsibility bec omes an integral part of the wealth creation proc ess,
which if ma naged properly should enhance the competitiveness of business
and ma ximize the value of wealth c reation of society.
∑ when times get hard, there is the incentive to practice CSR more and better, if
it is a philanthropic exercise w hich is periphe ral to the main business, it w ill
always be the first thing to go when push comes to show.
Change Management
Managing organizational change will be more successful by using simple
principles. Ac hieving personal change will be more successful too if you use the same
approach where re levant. Change mana gement entails thoughtful planning and sensitive
implementation and above all consultation with and involvement of people affected by
the changes.
Change must be realistic achieve me nt and meas urable. These aspec ts are
espec ially re levant to managing perso nal change.
Respons ibility for Managing Change
The employee does not have a responsibility to manage change, the e mployee’s
responsibility is no other than to do their best which is different for every person and

depends on a wide va riety of factors (health, maturity, experience, personality).

Increasingly it is the ma nager’s role to interpret, communicate and enable not to instruc t
and impose which nobody really responds to well.
Change must involve the people – change must not be imposed upon the people
He re the expressions like mindset change and changing people’s mindsets having
lot of variations between them. If people a re not approaching their tasks as the
organization effectively then the organization has to w rong mindset not the people.
Change such as new structures policies, targets, ac quisitions all create new systems and
environme nt which need to be explained involvement in validating and refining the
changes themselves can be obtained.
Whenever an organization imposes new things on people there will be difficulties
workshops, staff surveys. Management trainings are important factors.
Wor kshops
Workshops are very useful proc esses to develop collective understanding,
approaches, policies, methods, systems, and ideas etc.
Staff Surveys
Staff surveys are a helpful way to repair damage and mistrust among staff
prov ided you allow people to complete them anonymously, and provided you public and
act on the findings.
Management Trainings
He re it provides empathy and fac ilitative capacity are priority areas managers are
crucial to the change proc ess. They must enable and fac ilitate, convey and imple ment
policy.
Kotter’s eight step c hange mode l can be summarize d as:
1. Increase Urgency – Inspire people to move make objectives real and relevant.
2. Build the Guiding Team – Get the right people in plac e with the right
e motional commit ment and the right mix of skills and levels.
3. Get the vision right – Get the team to establish a simple vision and strategy
focus on emotional and creative aspects nec essary to drive service and
efficiency.
4. Communicate – Involve as many people as possible, communicate the
essentials, simply, and to appeal and respo nd to people’s nee ds make
technology work for you rather than against.
5. Empower Action – Remove obstac les, enable constructive feedbac k and lots of
support from leaders reward and recognise progress and ac hieve me nts.

6. Create Short-term Wins – Set aims that are easy to ac hieve in bite size
chunks. Managea ble numbers of initiatives f inish current stages before
starting new ones.
7. Don’t Let Up – Foster and encourage determination and persistence - ongoing
change – encourage ongoing progress reporting – highlight ac hieved and
future milestones.
8. Make Change Stick - Reinfo rce the value of successful change via recreation.


Strategic Management

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Strategic Management

Uploaded by

Copyright:

Available Formats

402 – Strategic Management

402 – Strategic Management

Society for Triggering and Employability and Professional Skills – STEPS 1

Society for Triggering and Employability and Professional Skills – STEPS 2

Society for Triggering and Employability and Professional Skills – STEPS 3

expec tations of stakeholders of the company.

consistency, both relative to the external and internal environment.

∑ Strategic management seeks to coordinate and integrate the activities of the

we do?" "For whom do we do it?" and "How do we excel?" In business

Society for Triggering and Employability and Professional Skills – STEPS 4

Components of Strategy Ma nagement

Technical Business Economic

Society for Triggering and Employability and Professional Skills – STEPS 5

∑ Core capabilities – The capabilities and competencies nec essary to execute a

Society for Triggering and Employability and Professional Skills – STEPS 6

Society for Triggering and Employability and Professional Skills – STEPS 7

Society for Triggering and Employability and Professional Skills – STEPS 8

Society for Triggering and Employability and Professional Skills – STEPS 9

Society for Triggering and Employability and Professional Skills – STEPS 10

∑ Greater concern for physical fitness healthy diets

Society for Triggering and Employability and Professional Skills – STEPS 11

Internal Analysis of the Firm

Society for Triggering and Employability and Professional Skills – STEPS 12

Society for Triggering and Employability and Professional Skills – STEPS 13

Society for Triggering and Employability and Professional Skills – STEPS 14

Lim itations of SW OT Ana lysis

Society for Triggering and Employability and Professional Skills – STEPS 15

Society for Triggering and Employability and Professional Skills – STEPS 16

Society for Triggering and Employability and Professional Skills – STEPS 17

∑ It helps in co-ordinating various ac tivities of the organization a nd foc us on its

Society for Triggering and Employability and Professional Skills – STEPS 18

Society for Triggering and Employability and Professional Skills – STEPS 19

Manufacturing Marketing Finance HR R& D

Society for Triggering and Employability and Professional Skills – STEPS 20

Division 1 Division 2 Division 3

Manufacturing Manuf acturing Manuf acturing

Marketing Marketing Marketing

Finance Finance Finance

Strategic Business Unit (SBU) Structure

SBU1 SBU 2 SBU 3

Holding Company Structure

Society for Triggering and Employability and Professional Skills – STEPS 21

Indiv idual businesses operate as autonomous subsidiaries and the corporate

Subsidiary 1 subsidiary 2 subsidiary 3

Transportati Manuf acturi

Society for Triggering and Employability and Professional Skills – STEPS 22

Society for Triggering and Employability and Professional Skills – STEPS 23

Society for Triggering and Employability and Professional Skills – STEPS 24

Society for Triggering and Employability and Professional Skills – STEPS 25

Society for Triggering and Employability and Professional Skills – STEPS 26

In contrast to strong culture companies, wea k culture companies are f ragmented

Unhealthy Vs Adaptive Cultures

Society for Triggering and Employability and Professional Skills – STEPS 27

Soc ial responsibility contends that management is responsible to the organization

Society for Triggering and Employability and Professional Skills – STEPS 28

Society for Triggering and Employability and Professional Skills – STEPS 29

depends on a wide va riety of factors (health, maturity, experience, personality).

Society for Triggering and Employability and Professional Skills – STEPS 30

Society for Triggering and Employability and Professional Skills – STEPS 31

You might also like