Course Title Strategic Management

Unit I - Overview of Strategic Management:

[1] Strategy-Meaning,
[2] Levels of Strategy – corporate, business and functional.
[3] Strategic Planning and
[4] Strategic Management- Meaning &
[5] Strategic Management Process;
[6] Stakeholders in business.

[1] STRATEGY
Definition
Strategy can also be defined as -
:A plan of action designed to achieve a long-term or overall aim.”
“The art of planning and directing overall military operations and movements in a war or
battle.”
“A general direction set for the company and its various components to achieve a desired
state in the future. Strategy results from the detailed strategic planning process”.
The American Heritage Dictionary defines strategy as “the science and art of military
command as applied to the overall planning and conduct of large-scale combat
operations.”
The planning theme remains an important component of most management definitions of strategy.
Alfred Chandler defines strategy as “the determination of the basic long-term goals and
objectives of an enterprise, and the adoption of courses of action and the allocation of
resources necessary for carrying out these goals.”
James D. Quinn defined strategy as “the pattern or plan that integrates an organization’s
major goals, policies and action sequences into a cohesive whole.”
William F. Glueck defined strategy as “a unified, comprehensive, and integrated plan
designed to ensure that the basic objectives of the enterprise are achieved.”
MEANING/CONCEPT
The word ‘strategy’ is derived from the Greek word ‘Strategtia’ which was first used around 400
BC. This connotes the art and science of directing military forces. Simply put, strategy outlines
how management plans to achieve its objectives. Strategy is the means to achieve the
organizational ends. A strategy is a route to the destination, viz., the ‘objectives of the firm’.
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Picking a destination means choosing an objective. Objectives and strategies evolve as problems
and opportunities are identified, resolved and exploited. The interlocking of objectives and
strategies characterize the effective management of an organization. The process binds, co-
ordinates, and integrates the parts into a whole. Effective organizations are tied by ‘means-ends’
chain into a purposeful whole. The strategies to achieve corporate goals at higher levels often
provides strategies for managers at lower levels.
Three Levels of Strategy for an Organization
Strategy can be formulated at three levels, namely,
1. The corporate level,
2. The business level, and
3. The functional level.

1. At the corporate level, strategy is formulated for organization as a whole. Corporate

strategy deals with decisions related to various business areas in which the firm operates
and competes.
2. At the business unit level, strategy is formulated to convert the corporate vision into reality.
3. At the functional level, strategy is formulated to realize the business unit level goals and
objectives using the strengths and capabilities of your organization. There is a clear
hierarchy in levels of strategy, with corporate level strategy at the top, business level
strategy being derived from the corporate level, and the functional level strategy being
formulated out of the business level strategy.
In a single business scenario, the corporate and business level responsibilities are clubbed together
and undertaken by a single group, that is, the top management, whereas in a multi business
scenario, there are three fully operative levels.
1. Corporate Level Strategy:
 Defines the business areas in which your firm will operate.
 Involves integrating and managing the diverse businesses and realizing synergy at the
corporate level.
 Top management team is responsible.
2. Business Level Strategy:
 Involves defining the competitive position of a strategic business unit.
 Decided upon by the heads of strategic business units and their teams.
3. Functional Level Strategy:
 Formulated by the functional heads along with their teams.
 Involve setting up short-term functional objectives.
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Intended versus Realized Strategies

Intended strategy: strategy in which organizational decisions are determined only by analysis.
Realized strategy: strategy in which organizational decisions are determined by both analysis
and unforeseen environmental developments, unanticipated resource constraints, and/or
changes in managerial preferences.

STRATEGIC PLANNING
It is important to note that strategic planning goes far beyond the planning process. Unlike
traditional planning, strategic planning involves a long-range planning under conditions of
uncertainty and complexity Such a planning involves:
a. Strategic thinking
b. Strategic decision-making
c. Strategic approach
A structured approach to strategy planning brings several benefits -
 It reduces uncertainty: Planning forces managers to look ahead, anticipate change and develop
appropriate responses. It also encourages managers to consider the risks associated with
alternative responses or options.
 It provides a link between long and short terms: Planning establishes a means of coordination
between strategic objectives and the operational activities that support the objectives.
 It facilitates control: By setting out the organisation’s overall strategic objectives and ensuring
that these are replicated at operational level, planning helps departments to move in the same
direction towards the same set of goals.
 It facilitates measurement: By setting out objectives and standards, planning provides a basis
for measuring actual performance.
Strategy is the product of the strategic management process.
STRATEGIC MANAGEMENT:
Strategic management is a stream of decisions and actions which lead to the development of an
effective strategy or strategies to help achieve corporate objectives. The strategic management
process is the way in which strategists determine objectives and make strategic decision. Strategic
management can be found in various types of organizations, businesses, services, co-operatives,
governments, etc.
 Meaning of Strategic management
 Strategic management is the set of managerial decision and action that determines the long-
run performance of a corporation. It includes environmental scanning (both external and
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internal), strategy formulation (strategic or long range planning), strategy implementation,

and evaluation and control.
 The study of strategic management therefore emphasizes the monitoring and evaluating of
external opportunities and threats in lights of a corporation’s strengths and weaknesses.
 Definition of Strategic Management
 Strategic Management can be defined as “the art and science of formulating, implementing
and evaluating cross-functional decisions that enable an organization to achieve its
objective.”
 “The on-going process of formulating, implementing and controlling broad plans guide
the organizational in achieving the strategic goods given its internal and external
environment”.
 “A stream of decisions and actions which leads to the development of an effective strategies
to help achieve corporate objectives”.
 "Strategic management is defined as the art and science of formulating, implementing, and
evaluating cross-functional decisions that enable the organization to achieve its
objectives."

Strategic management consists of the analyses, decisions, and actions an organization undertakes
in order to create and sustain competitive advantages. This definition captures two main elements
that go to the heart of the field of strategic management.
First, the strategic management of an organization entails three ongoing processes: analyses,
decisions, and actions. Strategic management is concerned with the analysis of strategic goals
(vision, mission, and strategic objectives) along with the analysis of the internal and external
environment of the organization.
Next, leaders must make strategic decisions. These decisions, broadly speaking, address two basic
questions:
 What industries should we compete in?
 How should we compete in those industries?
These questions also often involve an organization’s domestic and international operations. And
last are the actions that must be taken. Decisions are of little use, of course, unless they are acted
on. Firms must take the necessary actions to implement their strategies. This requires leaders to
allocate the necessary resources and to design the organization to bring the intended strategies to
reality.
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Second, the essence of strategic management is the study of why some firms outperform others.
Thus, managers need to determine how a firm is to compete so that it can obtain advantages that
are sustainable over a lengthy period of time. That means focusing on two fundamental questions:
• How should we compete in order to create competitive advantages in the marketplace?
Managers need to determine if the firm should position itself as the low-cost producer or
develop products and services that are unique and will enable the firm to charge premium
prices. Or should they do some combination of both?
• How can we create competitive advantages in the marketplace that are unique, valuable,
and difficult for rivals to copy or substitute? That is, managers need to make such
advantages sustainable, instead of temporary.
Sustainable competitive advantage cannot be achieved through operational effectiveness alone.
The popular management innovations of the last two decades—total quality, just-in-time,
benchmarking, business process reengineering, outsourcing—are all about operational
effectiveness.
Operational effectiveness means performing similar activities better than rivals.
Each of these is important, but none lead to sustainable competitive advantage because everyone
is doing them. Strategy is all about being different.
Sustainable competitive advantage is possible only by performing different activities from rivals
or performing similar activities in different ways.
Companies such as Walmart, Southwest Airlines, and IKEA have developed unique, internally
consistent, and difficult-to-imitate activity systems that have provided them with sustained
competitive advantages. A company with a good strategy must make clear choices about what it
wants to accomplish. Trying to do everything that company rivals do eventually leads to mutually
destructive price competition, not long-term advantage.
Definition: Strategic management consists of the analyses, decisions, and actions an
organization undertakes in order to create and sustain competitive advantages.
KEY ATTRIBUTES OF STRATEGIC MANAGEMENT
• Directs the organization toward overall goals and objectives.
• Includes multiple stakeholders in decision making.
• Needs to incorporate short-term and long-term perspectives.
• Recognizes trade-offs between efficiency and effectiveness.
THE STRATEGIC MANAGEMENT PROCESS
Course Title Strategic Management

The three ongoing processes—analyses, decisions, and actions—that are central to strategic
management. In practice, these three processes—often referred to as strategy analysis, strategy
formulation, and strategy implementation—are highly interdependent and do not take place one
after the other in a sequential fashion in most companies.
Significance / Importance of Strategic Management Process
The primary purpose of strategic management process is to help the organization achieve a
sustainable strategic competition in the market. When properly conceived and implemented, SMP
creates value for the organization by focusing on and assessing opportunities and threats, then
leveraging its strengths and weaknesses to help it survive, grow, and expand as well as. Strategic
management process can help a business achieve this by:
1. Acting as the reference for any major decisions of the organization.
2. Guiding the business to chart its future and move in that direction. SMP involves formulating
the organization’s goals, fixing realistic and achievable objectives, and ensuring that they are
all aligned with the company’s vision.
3. Assisting the business to become proactive, not reactive. With the SMP, the business can
analyze the competitor’s actions vis-à-vis market trends and come up with the steps that must
be taken to compete and succeed in the market.
4. Preparing the organization for any potential challenges and explore possible opportunities that
the business must pioneer in. The strategic management process steps also involve identifying
the best ways to overcome the challenges and exploiting new opportunities.
5. Ensuring that the organizations copes with the competition in a dynamic environment and
survives in an uncertain market.
6. Helping in the identification and maximization of the organization’s competitive advantages
and core competencies. These are responsible for the business’ survival and future growth.

FINANCIAL AND NON-FINANCIAL BENEFITS FOR BUSINESS:

Strategic management has thus both financial and non-financial benefits for business:
1. Financial Benefits:
Research indicates that organisations that engage in strategic management are more profitable
and successful than those that do not. Businesses that followed strategic management concepts
have shown significant improvements in sales, profitability and productivity compared to firms
without systematic planning activities.
2. Non-financial benefits:
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Besides financial benefits, strategic management offers other intangible benefits to a firm.
They are;
(a) Enhanced awareness of external threats
(b) Improved understanding of competitors’ strategies
(c) Reduced resistance to change
(d) Clearer understanding of performance-reward relationship
(e) Enhanced problem-prevention capabilities of organisation
(f) Increased interaction among managers at all divisional and functional levels
(g) Increased order and discipline.
According to Gordon Greenley, strategic management offers the following benefits:
 It allows for identification, prioritization and exploitation of opportunities.
 It provides objective view of management problems.
 It provides a framework for improved coordination and control of activities.
 It minimizes the effects of adverse conditions and changes.
 It allows decision-making to support established objectives.
 It allows more effective allocation of time and resources to identified opportunities.
 It allows fewer resources and less time to be devoted to correcting erroneous and ad hoc
decisions.
 It creates a framework for internal communication among personnel.
 It helps integrate the behaviour of individuals into a total effort.
 It provides a basis for clarifying individual responsibilities.
 It encourages forward thinking.
 It provides a cooperative, integrated enthusiastic approach to tackling problems and
opportunities.
 It encourages a favourable attitude towards change.
 It gives a degree of discipline and formality to the management of a business.

Developing an organisational strategy involves four main elements –

[1] Strategic analysis,
[2] Strategic choice,
[3] Strategy implementation and
[4] Strategy evaluation and control.
Each of these contains further steps, corresponding to a series of decisions and actions, that form
the basis of strategic management process.
[1] Strategic Analysis: The foundation of strategy is a definition of organisational purpose. This
defines the business of an organisation and what type of organisation it wants to be. Many
organisations develop broad statements of purpose, in the form of vision and mission
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statements. These form the spring – boards for the development of more specific objectives
and the choice of strategies to achieve them.
Environmental analysis – assessing both the external and internal environments is the next
step in the strategy process. Managers need to assess the opportunities and threats of the
external environment in the light of the organisation’s strengths and weaknesses keeping in
view the expectations of the stakeholders. This analysis allows the organisation to set more
specific goals or objectives which might specify where people are expected to focus their
efforts. With a more specific set of objectives in hand, managers can then plan how to achieve
them.
[2] Strategic Choice: The analysis stage provides the basis for strategic choice. It allows
managers to consider what the organisation could do given the mission, environment and
capabilities – a choice which also reflects the values of managers and other stakeholders. These
choices are about the overall scope and direction of the business. Since managers usually face
several strategic options, they often need to analyze these in terms of their feasibility,
suitability and acceptability before finally deciding on their direction.
[3] Strategy Implementation: Implementation depends on ensuring that the organisation has a
suitable structure, the right resources and competencies (skills, finance, technology etc.), right
leadership and culture. Strategy implementation depends on operational factors being put into
place.
[4] Strategy Evaluation and Control: Organisations set up appropriate monitoring and control
systems, develop standards and targets to judge performance

Fig.: Strategic Management Process

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Fig.: Strategic Management Process

Steps in Strategic Management Process

Process # 1. Strategy Formulation:

Strategy formulation is the first phase in the strategic management process. It is concerned with
devising a suitable plan of action after studying the external business environment, analysing the
industry and assessing the internal capabilities of the business concern. It involves six important
steps.
They are:
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i. Defining the company mission,

ii. Analysis of the external business environment,
iii. Industry analysis,
iv. Internal analysis of the firm,
v. Strategic alternatives, and
vi. Strategic choice.
The steps to be followed for the formulation of a strategy are explained below:
i. Defining the Company Mission:
The first step in the formulation of a strategy is a clear definition of the mission of the company.
This is necessary to formulate an ideal strategy. Otherwise, the strategy will not produce the
desired results. An ideal strategy is one which reflects the mission of the company. A mission is
the long-term vision of what an organisation wants to be and to whom it wants to serve and what
impact on the society. The mission is, thus, the basic, unique purpose that differentiates a business
from others.
ii. Analysis of the External Business Environment:
The second step in the formulation of a strategy is an analysis of the external business environment.
It is concerned with studying or observing what is prevailing in the external business environment
and what changes have taken place. Such an assessment is necessary because every incident or
change will have either positive or negative impact on the business.
It involves – (a) analysis of remote environment and (b) analysis of operating environment. The
external business environment thus provides opportunities or threats to the business concerns. The
business concern must formulate a suitable strategy to exploit the opportunities or manage threats
depending up on its strengths or weaknesses.
iii. Analysis of the Industry:
The third step in the formulation of a strategy is an analysis of the industry. It involves the
examination of certain forces operating in an industry to understand the nature and the degree of
competition in that industry. The level of competition in an industry depends on five basic forces
which determine the profit potential of an industry. They are (a) the threat of new entrants, (b) The
bargaining power of buyers, (c) The bargaining power of suppliers, (d) The threat of substitute
products, and (e) Rivalry among the existing firms.
The study of these forces indicates the trend of industry, the strength and weakness of the company
in the industry. Such a study will be useful to formulate a suitable strategy to utilise the
opportunities or threats.
iv. Internal Analysis of the Firm:
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The fourth step in the formulation a strategy is a thorough internal analysis of the firm. It is
concerned with a systematic appraisal or examination of the internal capabilities of a firm. Such
an appraisal is necessary to know the strengths and weaknesses of the firm in the areas of finance,
production, marketing, technology, research and development, and human resource management.
A systematic internal analysis of the firm involves (a) identification of strategic internal factors
and (b) evaluation of the strategic internal factors to identify the key strategic strength and
weakness. A factor is considered a strength only when a firm has a distinct competency in it than
the competitors in the industry.
A factor is considered a weakness only when a firm performs it poorly than the competitors in the
industry. A new strategy therefore has been formulated after considering the internal strategic
strengths and weaknesses of the firm to utilise the external opportunities or minimise its activities
to overcome threats.
v. Strategic Alternatives:
The fifth step in the formulation of a strategy is developing strategic alternatives. They are
concerned with identifying other possible ways of achieving the same strategy formulated to utilise
external business opportunities or minimise the firm’s activities to overcome threats.

For example, growth strategy may be achieved by intensive growth strategy of market penetration,
market development, and product development or integrative growth strategy of horizontal
integration and vertical integration or diversification strategy depending upon the internal strengths
and weaknesses provided the external business environment is favorable.
vi. Strategic Analysis and Choice:
The last step in the formulation of a strategy is strategic analysis and choice. Strategic analysis
involves a systematic evaluation of strategic alternatives with reference to certain criteria. Each
alternative has its own merits and demerits but all alternatives cannot be equally appropriate.
Each alternative should be examined to determine its:
a. Relevancy,
b. Feasibility and
c. Acceptability.
a. Relevancy:
Relevancy of a strategy refers to the examination of the appropriateness of a strategy with reference
to certain aspects. So, the strategists should examine whether –
(i) The strategy is relevant to the mission of the company or not
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(ii) The strategy is helpful to accomplish the long-term objectives or not

(iii) The strategy is fit to the strategic strengths and weaknesses of the company or not
(iv) The strategy exploits the external business opportunities or minimises its activities to
overcome the threats or not.
b. Feasibility:
Feasibility of a strategy refers to the possibility of achieving the strategy. For testing the feasibility
of a strategy, the strategists should examine before the selection of a strategy whether –
(i) The availability of resources are sufficient or not
(ii) The availability of the technology is appropriate or not
(iii) The availability of inputs are sufficient or not
(iv) The organisation’s structure is suitable or not.
c. Acceptability:
Acceptability of a strategy refers to the examination of the agreeableness of a strategy to certain
interested parties in an organisation. So, the strategists should examine whether –
(i) The strategy satisfies the criterion of ROI to the management or not
(ii) The strategy is acceptable to the shareholders or not
(iii) The strategy will affect the present employees or not
(iv) The strategy will affect the relationship with the existing customers and suppliers or not
vii. Strategic Choice:
Strategic Choice is concerned with the selection of the best strategy among alternatives. The
process of strategy formulation, thus, comes to an end with the choice of an appropriate strategy.
Process # 2. Strategy Implementation:
Strategy implementation is the second phase in the strategic management process. It is concerned
with putting the strategy into operation or translating the strategy into strategic action. It
necessitates three interrelated activities of (i) Determination of annul objectives, (ii) Development
of specific functional strategies, and (iii) Development of policies. For the successful
implementation, the strategy must be also institutionalised through structure, leadership, and
culture.
Process # 3. Strategy Evaluation and Control:
Strategy evaluation and control is the last phase in the strategic management process. Strategy
evaluation is concerned with examining whether the strategy implemented is working or producing
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results or accomplishing its objectives or not. Strategic control is concerned with continuous
monitoring and tracking the strategy— putting the strategy in the right path or direction.
Strategies don’t always succeed. So it becomes necessary to evaluate the performance after the
strategy implementation. Strategy control keeps the company’s strategy up to date. It is the process
of assessing progress towards strategic goals and taking corrective action as needed. Management
monitors the extent to which the firm is meeting its strategic goals and asks why deviations exist.

These steps in the above model of strategy process fall into three broad phases – formulation,
implementation and evaluation – though in practice the three phases interact closely.
Good strategists know that formulation and implementation of strategy rarely proceed according
to plan, partly because the constantly changing external environment brings new opportunities or
threats, and partly because there may also be inadequate internal competence. Since these may
lead the management to change the plan, there will be frequent interaction between the activities
of formulating and implementing strategy, and management may need to return and reformulate
the plan.

STAKEHOLDERS AND STRATEGY

A firm’s stakeholders are the individuals, groups, or other organisations that are affected by and
also affect the firm’s decisions and actions. Depending on the specific firm, stakeholders may
include government, employees, shareholders, suppliers, distributors, the media and even the
community in which the firm is located among many others.
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1. When it comes to corporate mission values stakeholders will maximise the value for all
stakeholders, as opposed to shareholders who only maximise the value for themselves.
2. Stakeholders also play a role in the decision making process in a business. Although s ince
employees and customers are included in being stakeholders they too are considered when it comes
to decision making.
3. When it comes to accountability it does not just come down to being accountable to themselves.
Accountability lies with the customer, suppliers, government, community and employee
stakeholders.
Key stakeholders to be involved in strategic planning are those having a vested interest in the
success of the organization. They include employees, unions, customers, vendors, shareholders,
regulatory agencies, owners, supply chain partners, community members, and others who
depend on and/or serve the organization.
Stakeholder Management
An organisation needs to have an effective stakeholder management system in place, which
provides a great support in achieving its strategic objectives. It interprets and influences both the
external and internal environments and creates positive relationships with stakeholders through the
appropriate management of their expectations and agreed objectives. Stakeholder Management is
a process and control that must be planned and guided by underlying principles.
Stakeholder Management, within business or projects, prepares a strategy that utilises information
or intelligence collected during the following common processes:
1. Stakeholder Identification: identify the parties, either internal or external to organisation, that
are affected by the business. For this purpose, a stakeholder map can be used.
2. Stakeholder Analysis: identify and acknowledge stakeholder’s needs, concerns, wants,
authority, common relationships, interfaces, and put this information in line within the Stakeholder
Matrix.
3. Stakeholder Matrix: position the stakeholders on a matrix based on their level of influence,
impact or enhancement they may provide to the business or its projects.
4. Stakeholder engagement: engaging stakeholders does not seek to develop the project/ business
requirements, solution or problem creation, or establishing roles and responsibilities. The process
focuses on knowing and understanding each other, at the Executive level. It gives an opportunity
to discuss and agree expectations of communication and, primarily, agree a set of Values and
Principles that all stakeholders will abide by.
5. Communicating Information: expectations are established and agreed for the manner in which
communications are managed between stakeholders - who receives communications, when, how
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and to what level of detail. Protocols may be established including security and confidentiality
classifications.
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The ‘strategic management process’ is the full set of commitments, decisions, and actions required
for a firm to achieve strategic competitiveness and earn above-average returns. The aim of the
process is the formulation and implementation of strategies that work, achieving the company’s
long-term mission and near-term objectives.
The gist or heart of strategic management is the formulation and implementation of strategies
designed to achieve the objectives of an organisation. The strategists determine objectives and
make strategic decision; to implement them effectively. According to Thompson and Strickland,
there are five tasks of strategic management which are centred on strategy making and strategy-
implementing process.
These are discussed below:
1. Developing a Strategic Vision and Business Mission
2. Setting Objectives
3. Crafting a Strategy
4. Implementing and Executing the Strategy
5. Evaluating Performance, Monitoring New Developments, and Initiating Corrective
Adjustments.

1. Developing a Strategic Vision and Business Mission:

First, the company managers need to consider a set of questions – “What is our vision for the
company—where should the company be headed, what kind of enterprise we want to become?” It
is important to determine about what the company’s long-term direction should be and whether
and how its present business needs will change over the next five years and beyond. Managers
must constitute a strategic vision for the company.
A Strategic Vision:
i. Reflects management’s aspirations for the organisation and its business.
ii. Provides a panoramic view of “where we are going”.
iii. Gives specifics about its future business plans.
iv. Spells out long-term business purpose and molds organisational identify.
v. Points an organisation in a particular direction and charts a strategic path for it to follow.
A strategic vision has a chief concern with “where we are going”, the term “mission statement”
tends to deal with a company’s present business scope – “Who we are and what we do.” It also
indicates where the company is headed and what its business will become in the years ahead. A
strategic vision and mission have direction-setting and strategy-making value.
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Thomson and Strickland write, “Companies whose managers neglect the task of thinking
strategically about the company’s future business path or who are indecisive in committing the
company to one direction instead of another are prone to drift aimlessly and lose any claim to being
an industry leader.”
2. Setting Objectives:
It is said that “if you want to have zero results, decide no objectives.” Objectives convert
managerial statements of strategic vision and business mission into “specific performance target”
—the results and outcomes the organisation wants to achieve. Setting objectives and then
measuring whether they are achieved or not help managers track an organisation’s progress.
Objective setting is required of all managers.
Every unit in a company needs concrete, measurable performance targets that contribute towards
achieving company objectives. Companywide objectives are broken down into specific targets for
each organisational unit and lower-level managers are held accountable for achieving them.
Objectives build a result-oriented climate throughout the enterprise.
Strategic managers should set two types of objectives for good performance:
(i.) Financial Objectives:
These are related to the financial results and outcomes that the management wants the
organisation to achieve.
(ii.) Strategic Objectives:
These aim at results that reflect:
a. Increased competitiveness and stronger business position,
b. Winning additional market share,
c. Overtaking key competitors on product quality or customer service or product
innovation,
d. Achieving lower overall costs than rivals,
e. Boosting the company’s reputation with customers,
f. Winning a stronger foothold in international markets,
g. Exercising technological leadership,
h. Gaining a sustainable competitive advantage, and
i. Capturing attractive growth opportunities.
3. Crafting a Strategy:
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A ‘Strategy’ reflects managerial choices among alternatives. It signals organisational commitment

to particular products, markets, competitive approaches, and ways of operating the enterprise.
Strategy making brings into play the critical managerial issue of how to achieve the targeted results
in the light of the organisation’s situation and prospects. Objectives are the “ends”, and strategy is
the “means” of achieving them.
The ‘hows’ of a company’s strategy are typically a blend of:
i. Deliberate and purposeful actions,
ii. As needed reactions to unanticipated developments and fresh market conditions and
competitive pressures, and
iii. The collective learning of the organisation over time.
Company strategies concern ‘how’:
i. How to grow the business,
ii. How to satisfy customers,
iii. How to outcompete rivals,
iv. How to respond to changing market conditions,
v. How to manage each functional piece of the business and develop needed organisational
capabilities,
vi. How to achieve strategic and financial objectives.
The ‘hows’ of strategy tend to be company specific.
Now, we should consider, how is strategy made?’
i. A strategy is the result of managers engaging in deliberate, rational analysis.
ii. However, strategy may also emerge through adaptation to circumstances.
iii. In fact, a company’s actual strategy is partly planned and partly reactive.
The strategy-making task thus involves – (a) developing an intended strategy, (b) adapting it as
events unfold (adaptive/reactive strategy), and (c) linking the firm’s business approaches, actions,
and competitive initiatives closely to its competences and capabilities. In short, a company’s actual
strategy is something managers shape and reshape as events transpire outside the company and as
the company’s competitive assets and liabilities evolve in ways that enhance or diminish its
competitiveness.
Crafting strategy is partly an exercise in entrepreneurship because it is actively searching for
opportunities to do new things or to do existing things in new ways. Good strategy making is
inseparable from good business entrepreneurship. One cannot exist without the other.
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4. Implementing and Executing the Strategy:

To implement the chosen strategy, managers will have to develop the needed organisational
capabilities.
To carry out and execute it proficiently, and to produce good results, the following administrative
tasks are to be performed:
i. Building an organisation capable of carrying out the strategy successfully.
ii. Allocating company resources so that organisational units have sufficient people and funds to
do their work successfully.
iii. Establishing strategy-supportive policies and operating procedures.
iv. Putting a freshly chosen strategy into place.
v. Motivating people in ways that induce them to pursue the target objectives.
vi. Tying the reward structure to the achievement of targeted results.
vii. Creating a company culture and work climate conducive to successful strategy implementation
and execution.
viii. Installing information, communication, and operating systems that enable company personnel
to carry out their strategic roles effectively day in, day out.
ix. Instituting best practices and programmes for continuous improvement.
x. Exerting the internal leadership needed to drive implementation.

Thompson and Strickland suggest, “Good strategy execution involves creating a strong “fit”
between the way things are done internally and what it will take for the strategy to succeed.”
Strategy executing task is much complicated as it cuts across virtually all facets of managing and
it must be initiated from many points inside the organisation.
5. Evaluating Performance, Monitoring New Developments and Initiating Corrective
Adjustments:
It is management’s duty to evaluate the organisation’s performance and progress, to decide
whether things are going well internally, and to monitor outside developments closely. Subpar
performance or too little progress, as well as important new external conditions, will require
corrective actions and adjustments in a company’s long-term direction, objectives, and strategy.
If one or more aspects of executing the strategy may not be going as well as needed, the following
actions may be taken:
i. Revising budgets,
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ii. Changing policies,

iii. Reorganizing,
iv. Making personnel changes,
v. Building new competencies and capabilities,
vi. Revamping activities and work processes,
vii. Making efforts to change the culture,
viii. Revising compensation practices, and
ix. Improving organisational learning, ongoing researches, and progress reviews.
What is Strategic Management Process – 4 Major Steps: Strategic Analysis and Inputs, Strategy
Formulation, Strategy Implementation & Strategic Evaluation and Control
The major steps involved in the strategic management process are as follows:
1. Strategic Analysis and Inputs
2. Strategy Formulation
3. Strategy Implementation
4. Strategic Evaluation and Control.
These steps are discussed below:
Step # 1. Strategic Analysis and Inputs:
Strategy analysis may be looked upon as the starting point of the strategic management process. It
consists of the “advance work” that must be done in order to effectively formulate and implement
strategies. Many strategies fail because managers proceed without a careful analysis of firm’s
external and internal environment. Understanding of strategic position is essential. It is concerned
with identifying the impact on strategy of the external environment.
It also analyses an organisation’s strategic capability (resources and competencies) and
stakeholders’ expectations.
This step includes the following types of analyses:
i. Analysis of Organisational Goals and Objectives:
A firm’s vision, mission, and strategic objectives must be analysed to get competitive advantages.
ii. Analysis of Industry and External Environment:
Managers must monitor and scan:
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(a) The general environment consisting of several elements such as demographic, technological,
economic and social segments;
(b) The industry environment consisting of competitors; and
(c) Other organisations that may threaten the success of a firm’s products.
(d) The significant opportunities and threats facing the business.
Scholar Michael Porter believes that the critical issue in respect to the external environment is how
it impacts competition within the industry. He offers the five forces model as a way of adding
sophistication to a strategic analysis of the environment.
His framework for competitive industry analysis directs attention towards understanding the
following forces:
(a) New Entrants – Threat of potential new competitors
(b) Suppliers – Bargaining power of suppliers
(c) Industry Competition – Rivalry among competing firms
(d) Customers – Bargaining power of buyers
(e) Substitute Products – Threat of substitute products or services
iii. Valuing Stakeholders (Strategic Constituencies Analysis):
Behaviour in and by organisations will be affected in part by values. Through organisational
cultures, the values of managers and other members are shaped and pointed in common directions.
In strategic management, the presence of strong core values for an organisation helps build
institutional identify. It gives character to an organisation in the eyes of its employees and external
stakeholders.
In the strategic management process, the stakeholders test can be done as a strategic constituencies
analysis. Here, the specific interests of each stakeholder are assessed along with the organisation’s
record in responding to them.
iv. Analysis of Organisational Resources and Capabilities and Firm’s Internal Environment:
The strategic management process always involves careful analysis of organisational resources
and capabilities. This can be approached by a technique known as SWOT analysis – the internal
analysis of organisational Strengths and Weaknesses as well as the external analysis of
environmental Opportunities and Threats.
A SWOT analysis begins with a systematic evaluation of the organisation’s resources and
capabilities. A major goal is to identify core competencies in the form of special strengths that the
organisation has or does exceptionally well in comparison with competitors.
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The firm must analyse its strengths and weaknesses. Strengths are positive internal factors that a
firm can use to accomplish its goals. Weaknesses are negative internal factors that inhibit a firm’s
ability to accomplish its mission and goals.
v. Assessing a Firm’s Internal Assets:
These include knowledge workers, patents, trademarks, networks, technology, relationships, etc.
These must be assessed to enhance wealth creation and collaboration.
vi. Identifying the Key Factors for Success in the Business:
Key success factors come in a variety of different patterns depending on the industry. These may
be controllable variables that determine the relative success of market participants. They determine
a company’s ability to compete successfully. These may be factors like cost, distribution, product
quality supplier relationships, number of services offered, prime store locations, available
customer credit, and many other factors.
vii. Developing and Defining a Clear Vision and Translating it into Meaningful Mission
Statement:
Creating meaningful goals and objectives is an important part of strategic management process.
Before entrepreneurs can build a set of strategies, they must first establish business goals and
objectives, which give them targets to aim for and provide a basis for evaluating their companies’
performance. Without them, it is impossible to know where a business is going or how well it is
performing.
Step # 2. Making Choices and Strategy Formulation:
Strategy formulation (strategic planning) involves making strategic decisions concerning the
organisation’s mission, philosophy, objectives, policies, and methods of achieving organisational
objectives. Formulating a strategy is an important step to enhancing organisational position and
building competitive advantages not only in the national but also in the global arena.
Crafting or formulating a strategy involves the following points:
i. ‘How’ to Achieve the Targeted Results:
Thompson and Strickland state, “Strategy making brings into play the critical managerial issue of
how to achieve the targeted results in light of the organisation’s situation and prospects. Objectives
are the “ends,” and strategy is the “means” of achieving them.
The hows of a company’s strategy are typically a blend of (a) deliberate and purposeful actions,
(b) as-needed reactions to unanticipated developments and fresh market conditions and
competitive pressures, and (c) the collective learning of the organisation over time — not just the
insights gained from its experiences but, more important, the internal activities it has learned to
perform quite well and the competitive capabilities it has developed”.
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ii. ‘Making Choices’ is the Essence:

M. E. Porter says, The essence of strategy is making choices.
Strategic choices can be distilled to two basic questions:
a. Where to compete?
b. How to compete?
The answers to these questions also define the major areas of a firm’s strategy – corporate strategy
and business strategy.
Strategy describes the way in which the firm will accomplish the vision it has established and, is
the theme incorporated in a set of strategic decisions. These decisions affect the long-term well-
being of the organisation but are made in the present. As Drucker puts it – “One cannot make
decisions for the future. Decisions are commitments to action. And actions are always in the
present, and in the present only. But actions in the present are also the one and only way to make
the future.”
These same two questions “Where is the firm competing?” and “How is it competing?” also
provide the basis upon which we can describe the strategy that a firm is pursuing. The where
question has multiple dimensions. It relates to the industry or industries in which the firm is
located, the products it supplies, the customer groups it targets, the countries and localities in which
it operates and the vertical range of activities it undertakes.
With regard to how, a company can pursue a differentiation strategy. It seeks market share
leadership. Strategy is not simply about “competing for today”; it is also concerned with
“competing for tomorrow.” This dynamic concept of strategy involves establishing objectives for
the future and determining how they will be achieved. Future objectives relate to the overall
purpose of the firm (mission), what it seeks to become (vision) and specific performance targets.
iii. Design versus Emergence:
One view is that strategy is the result of managers engaging in deliberate, rational analysis.
However, strategy may also emerge through adaptation to circumstances. In practice, strategy
making almost always involves a combination of centrally driven rational design and decentralised
adaptation.
iv. Strategic Options:
The number of strategies from which the business owner can choose is infinite.
Three basic strategies are:
(a) Cost Leadership – A company pursuing this strategy strives to be the lowest-cost producer
relative to its competitors in the industry.
Course Title Strategic Management

(b) Differentiation – A company following this strategy seeks to build customer loyalty by
positioning its goods in a unique or different fashion. That in turn, enables the business to
command a higher price for its products than competitors.
(c) Focus – A focus strategy recognizes that not all markets are homogeneous. It is a strategy in
which a company selects one or more market segments, identifies customers’ special needs, wants,
and interests, and approaches them with a good or service designed to excel in meeting those needs,
wants, and interests.
The strategies a company selects depend on its competitive advantages in the market segments in
which it competes.
v. Developed at Various Levels:
A firm’s strategy formulation is developed at several levels. First, business- level strategy
addresses the issue of how to compete in a given business to attain competitive advantage. Second,
corporate-level strategy focuses on two issues – (a) what businesses to compete in and (b) how
businesses can be managed to achieve synergy; that is, they create more value by working together
than if they operate as stand-alone businesses.
Third, a firm must determine the best method to develop international strategies as it ventures
beyond its national boundaries. Fourth, managers must formulate effective entrepreneurial
initiatives.
Step # 3. Strategy Implementation:
G. H. Neilson says, “Sound strategies are of no value if they are not properly implemented.”
According to Kaplan and Martin, “Strategy implementation involves ensuring proper strategic
controls and organisational designs, which includes establishing effective means to coordinate and
integrate activities within the firm as well as with its suppliers, customers, and alliance partners.
Thus, strategy implementation is concerned with making a variety of managerial decisions such as
the type of organisational structure, the type and source of information systems, leadership “fit,”
and the type of control mechanism that should be employed.”
Leadership plays a central role, including ensuring that the organisation is committed to excellence
and ethical behaviour. It also promotes learning and continuous improvement and acts
entrepreneurially in creating and taking advantage of new opportunities. Charles W. L. Hill and
Gareth Jones state, “Strategy implementation refers to how a company should create, use, and
combine organisational structure, control systems, and culture to pursue strategies that lead to a
competitive advantage and superior performance.”
For many firms, the challenge is ‘implementation’ rather than generating a strategy. Thompson
and Strickland point out that, “The managerial task of implementing and executing the chosen
strategy entails assessing what it will take to develop the needed organisational capabilities and to
Course Title Strategic Management

reach the targeted objectives on schedule. The managerial skill here is figuring out what must be
done to put the strategy in place, carry it out proficiently, and produce good result.”
Managing the strategy execution process is primarily a hands-on, close-to-the-scene administrative
task that includes the following activities:
i. Building an organisation structure capable of carrying out the strategy successfully. It assigns
employees to specific value creation tasks and roles. It coordinates the efforts of employees at all
levels.
ii. Building a control system is essential. The purpose of a control system is to provide managers
with (a) a set of incentives to motivate employees to work towards increasing efficiency, quality,
innovation, and responsiveness to customers and (b) specific feedback on how well an organisation
and its members are performing and building competitive advantage.
iii. Creating an organisational culture is the third element of strategy implementation. It is the
specific collection of values, norms, beliefs, and attitudes shared by people and groups in an
organisation.
Organisational structure, control, and culture are the means by which an organisation motivates,
coordinates, and “incentivizes” its members to work towards achieving the building blocks of
competitive advantage.
Other Elements of Strategy Implementation:
Some other principal aspects of implementing strategy are as follows:
i. Allocating company resources so that organisational units charged with performing strategy-
critical activities and implementing new strategic initiatives have sufficient people and funds to do
their work successfully.
ii. Establishing strategy-supportive policies and operating procedures.
iii. Putting a freshly chosen strategy into place.
iv. Motivating people in ways that induce them to pursue the target objectives.
v. Tying the reward structure to the achievement of targeted results.
vi. Installing information, communication, and operating systems that enable company personnel
to carry out their strategic roles effectively day in, day out.
vii. Instituting best practices and programmes for continuous improvement.
viii. Exerting the internal leadership needed to drive implementation forward and to keep
improving on how the strategy is being executed.
ix. Strategic managers need to decide what staff are used, and whether external consultants will be
utilized.
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x. Leaders must create a “learning organisation” to ensure that the entire organisation can benefit
from individual and collective talents.
To make the strategy plan workplace, the business owner should divide the strategy into projects,
carefully defining each one by the following:
i. Purpose – What is the project designed to accomplish?
ii. Scope – Which areas of the company will be involved in the project?
iii. Contribution – How does the project relate to other projects and to the overall strategic plan?
iv. Resource requirements – What human and financial resources are needed to complete the
project successfully?
v. Timing – Which schedules and deadlines will ensure project completion?
Step # 4. Strategy Evaluation and Control:
Planning without control has little operational value. Hence, managers should quickly realize the
need to control results that deviate from plans. Strategic management process requires a practical
control system.
It is always incumbent on management to evaluate the organisation’s performance and progress.
It is management’s duty to stay on top of the company’s situation, deciding whether things are
going well internally, and monitoring outside developments closely. Subpar performance or too
little progress, as well as important new external circumstances, will require corrective actions and
adjustments in a company’s long-term direction, objectives, business model, and/or strategy.
Evaluation and control is concerned with the evaluation systems that are to be used to ensure the
operation of strategic planning to effectively achieve the organisation’s objectives. Evaluation
consists of comparing the predicted results to the actual results. Strategic management is a process
of appraising the corporation as a whole, taking the environment into consideration. It usually
focuses on opportunities and problems related to the achievement of corporate objectives in the
long run.
R. Simmons has pointed out, “Strategic control is not just about monitoring how well an
organisation and its members are performing currently or about how well the firm is using its
existing resources. It is also about how to create the incentives to keep employees motivated and
focused on the important problems that may confront an organisation in the future so that they
work together to find solutions that can help an organisation perform better over time.”
Strategic control systems are developed to measure performance at four levels in a company –
Corporate, divisional, functional, and individual. Managers at all levels must develop the most
appropriate set of measures to evaluate corporate, business, and functional-level performance.
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Strategic control helps managers to obtain super efficiency, quality, innovation, and
responsiveness to customers.

What is Strategic Management Process – 6 Step Process: From Defining Business Mission to
Performance Evaluation
Strategic planning is a part of the firm’s strategic management process. Strategic planning includes
the first four strategic management tasks. It includes evaluating the firm’s internal and external
situation, defining the business and developing a mission, translating the mission into strategic
goals, and drafting the strategy or the course of action.
Strategic management includes the implementation phase. It is the process of identifying and
executing the mission of the organisation by comparing the company’s capabilities with the
demands of its environment.
The following steps are included in the strategic management process:
1. Definition of the Business and its Mission:
The fundamental strategic decisions which the managers face are, “Where are we now in terms of
the business we’re in, and what business we want to be in?” Then the managers have to choose the
strategies – courses of action such as buying competitors or expanding overseas – to get the
company from where it is today to where it wants to be tomorrow. Management experts use the
terms vision and mission to help define a company’s current and future business.
The company’s vision is a “general statement of its intended direction that evokes emotional
feelings in organisation members”. The form’s mission is more specific and shorter term. It
communicates ‘who we are, what we do, and where we are headed’.
2. Perform External and Internal Audits:
The strategic plans of the managers are based on the methodical analysis of their external and
internal situations. The basic point of the strategic plan should be to choose a direction for the firm
that makes sense in terms of the external opportunities and threats it faces and the internal strengths
and weaknesses it possesses. For this purpose managers use the SWOT analysis. The managers by
using the SWOT analysis identify the company’s Strengths, Weaknesses, Opportunities, and
Threats.
3. Translate the Mission into Strategic Goals:
The Company’s mission is then translated into the specific goals. For example if the Company’s
mission is “to access and act through public/private partnerships to improve energy systems” is
one thing; operationalising that mission for your managers is another. The firm’s managers need
long term strategic goals.
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4. Formulate a Strategy to Achieve the Strategic Goals:

The firm’s strategy is a bridge connecting where the company is today with where it wants to be
tomorrow. A strategy is a course of action. It shows how the enterprise will move from the business
it is in now to the business it wants to be in, given its opportunities and threats and its internal
strengths and weaknesses. A knowledge of and commitment to the strategy helps to ensure that
employees make decisions consistent with the company’s needs.
5. Implement the Strategy:
Strategy implementation means translating the strategies into actions and results – by actually
hiring people, building or closing the plants, and adding or eliminating product or product line. In
other words, strategy implementation involves drawing on and applying all the management
functions.
6. Evaluate Performance:
Strategies don’t always succeed. So it becomes necessary to evaluate the performance after the
strategy implementation. Strategy control keeps the company’s strategy up to date. It is the process
of assessing progress towards strategic goals and taking corrective action as needed. Management
monitors the extent to which the firm is meeting its strategic goals and asks why deviations exist.

Questions:
1. Discuss the various elements of strategic management.
2. Examine the significance of strategic management.
3. "Strategic management process is the way in which strategists determine objectives and
strategic decisions". Discuss.
4. Bring out the distinguishing features of strategic management.
5. Can the process of strategic management really be depicted in a given model or it is a
prompt and dynamic process? Give reasons.