BUS 414 : INTRODUCTION TO STRATEGIC MANAGEMENT

1.1. ORIGINS OF STRATEGIC MANAGEMENT

Globalization of economy has brought about revolutionary changes in the policy framework
of both developed and underdeveloped countries. Liberalization has removed artificial trade
barriers and businesses have, now truly become international and the competition has become
very severe. These developments gave rise to new paradigms in business policies and strategic
thinking. Due to this there are drastic changes in the conventional concept of business. The
survival and success of the firm is influenced significantly by superior strategies. For instance
businesses have started focusing on customers and their satisfaction rather than focusing on
products and sales. In the early 1960’s corporate planning was popular but after 1980’s its
place was taken by strategic management to enable firms face the stiff competition brought
about by globalization.
There are several examples of firms that have prospered and others that perished. A keen study
of these cases reveals that the basic reasons for their success and failure are the types of
policies that the firms pursue. These policies are based on a firm’s business strategy.
Business strategy refers to decisions about the future taken by top management. It consists of
guidelines given to employees by senior management for functioning. It shapes an
organization’s identity and character and continuously guides actions to attain goals.

Normally the business strategy consists of:

1. Study of the functions and responsibilities of senior management related to the
organizational problems affecting on the success of total enterprise.
2. It determines the future course of action which organizations have to adopt.
3. Choosing the purpose and defining the problem or need of the organization.
4. Lastly, it is concerned with the proper mobilization of resources so that the Organization
can attain its goal easily.

1.2 MEANING AND DEFINITION OF STRATEGY

Strategy”, narrowly defined, means “the art of the general” (the Greek stratos, meaning ‘field,
spread out as in ‘structure’; and agos, meaning ‘leader’). The term first gained currency at the
end of the 18th century, and had to do with stratagems by which a general sought to deceive
an enemy, with plans the general made for a campaign, and with the way the general moved
and disposed his forces in war. Also was the first to focus on the fact that strategy of war was
a means to enforce policy and not an end in itself. Strategy is a set of key decisions made to
meet objectives. A strategy of a business organization is a comprehensive master plan stating
how the organization will achieve its mission and objectives through strategic management.
The concept of strategy is derived from military principles. In military context, the strategy is a
plan of action to win a war. Here military identify the quality and quantity of resources to be

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mobilized and used at the most appropriate time in a suitable and convenient manner to win
a war.
In business parlance, there is no definite meaning of strategy and it is used to mean a number
of things. It is related to pursuing those activities which move an organization from its current
position to a desired future state. It also relates to resources necessary for implementing a
plan or following a course of action.
Strategy literal meaning is “In anticipation of opponents move, designing one’s own way of
action”. So we can conclude that it is the means to achieve organizational goals.
Definitions:-
1. “Strategy is the determination of the basic long term goals and objectives of an
enterprise and the adoption of the course of action and the allocation of resources
necessary for carrying out these goals.” - Alfred D. Chandler.
2. “A strategy is a unified, comprehensive, and integrated plan that relates the strategic
advantages of the firm to the challenges of the environment. It is designed to ensure that
the basic objectives of the enterprise are achieved through proper execution by the
organization.” - Lawrence R. Jauch & William F. Glueck.
3. Strategy is a mediating force between the organization and its environment: consistent
patterns in streams of organizational decisions to deal with the environment. - Mintzberg
4. Strategy is more than just fit and allocation of resources. It is stretch and leveraging of
resources - Prahlad
5. Strategy is about being different. It means deliberately choosing a different set of
activities to deliver a unique mix of value - Porter

Mintzberg has identified the 5 P’s of strategy. Strategy could be a plan, a pattern, a position,
a ploy, or a perspective.
1. A plan, a “how do I get there”
2. A pattern, in consistent actions over time
3. A position that is, it reflects the decision of the firm to offer particular products or
services in particular markets.
4. A ploy, a manoeuvre intended to outwit a competitor
5. A perspective that is, a vision and direction, a view of what the company or
organization is to become.

1.3 NATURE AND CHARACTERISTICS OF BUSINESS STRATEGY

Following are the features of strategic management.
1. Objective.
2. Future oriented.
3. Availability and allocation of resources.
4. Influences of Environment.
5. Universal applicability.
6. Levels of strategy.
7. Review.

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1. Objective Oriented:
The business strategies are objectives oriented and are directed towards organizational
goals. To formulate strategies the business should know the objectives that are to be
pursued. For example if a business wants to achieve growth then it may set the following
objectives.
a) To increase market share.
b) To increase customers satisfaction.
c) To enhance the goodwill of the firm.

2. Future Oriented:
Strategy is a future oriented plan and is formulated to attain a future desired position of the
organization. Therefore strategy enables management to study the present position of the
organization and make decisions on how to attain the desired future position of the
organization. This is possible because strategy answers question relating to the following
aspects.
a) Prosperity of the business in future.
b) The profitability of the business in future.
c) The scope to develop and grow in future in different businesses.

3. Availability and Allocation of Resources:

To implement strategy properly there is need of adequate resources and proper allocation of
resources. If it is done then the business can attain its objectives. There are three types of
resources required by business namely physical resources, i.e plant and machinery, financial
resources i.e capital, and human resources i.e manpower. If these resources are properly
audited/evaluated and find out the organizational strengths and weaknesses and coordinate
well then management can do better strategy implementation.

4. Influence of Environment:
The environmental factors affect the formulation and implementation of strategy. The
business unit by analyzing the environment can find out its internal strengths and
weaknesses as well as eternal opportunities and threats and can then formulate its strategy
properly.

5. Universally Applicable:
Strategies are universally applicable and accepted irrespective of the nature and size of a
business. Every business unit designs an appropriate strategy for its survival and growth. The
presence of strategy keeps a business moving in the right direction.

6. Levels of strategy:
There are companies that are working in different business lines with regards to products
/services, markets or technologies and are managed by the same top management. In this

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case such companies need to frame different strategies. The strategies are executed at three
different levels such as –
a) Corporate level
b) Business level
c) Functional/operational level

Corporate level strategies refer to the overarching plan of action covering the various
functions that are performed by different SBUs (strategic business unit, which involved in a
signal line of business) the plan deals with the objectives of the company, allocation of
resources and co-ordination of SBUs for best performance.

A Business level strategy is comprehensive plan directed to attain SBUs objectives, allocation
of resources among functional areas and coordination between them to enable each SBU to
contribute effectively to the achievement of corporate level objectives.

A Functional level strategy is restricted to a specific function. It deals with the allocation of
resources among different operations within that functional area and coordinating them for
better contribution to SBU and corporate level achievement.

7. Revision of strategy:
Strategies are to be reviewed periodically as in the process of implementation certain
changes may take place. For example while implementing a growth strategy there could be
shortage of resources because of limited sources or an economic recession during the period
so the management may switch to a retrenchment strategy.

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