SM CHAP -1

May / Nov 22
INTRODUCTION TO STRATEGIC
MANAGEMENT

C
CHHA
ALLI
ISSA
A

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BY KISHAN KUMAR
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THINK TAX, THINK KISHAN

CA KISHAN KUMAR
ALL INDIA RANKHOLER

9540365625
www.cakishankumar.com
 Introduction to Strategic Management

Introduction to Strategic Management

C HAPTER 1

I NTRODUCTION TO S TRATEGIC M ANAGEMENT

1. B U S I N E S S P O L I C Y

▪ Business policy is defined as study of

➢ functions and responsibilities of Senior Management;
➢ crucial problems affecting success of Entity; and
➢ decisions that determine the direction of Organization and shapes its future.
▪ Business Policy tends to emphasize on rational-analytical aspects of strategic management.
▪ Examples
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1.1. E V O L U T I O N O F B U S I N ES S P O L I C Y

1911 1959 1969

Harvard Business School introduced
interactive course in Management with
objective of creation of general
management capabilities among
business executives.
BP formally introduced in It was made mandatory to include
Academics. course in BP in all US business
management institutes.

As per “William F. Gluek”

“Business policy evolved further as managers started using long term planning and strategic planning from
short term and medium-term planning.
Phase I Phase II Phase III
Business used to be Concept of B.P. arises and B.P. was replaced by strategic
conducted on ad-hoc basis Entities started using short management as managers started using
with little or no formal term, medium term and finally strategic planning.
planning. long-term planning. Long term + short term+ Growth +
competition

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2. S TR A T EG I C M A N A G EM EN T

Strategy Management

3. S T R A T E G Y

▪ Refers to long term blueprint of Organization’s

➢ desired image i.e., what it wants to be
➢ desired direction i.e., what it wants to do
➢ desired destination i.e. where it wants to go.
▪ It is flexibly designed and provides integrated framework for Top Management to
➢ search, evaluate and exploit opportunities External
➢ perceive threats and meet it
➢ make full use of strength/ resources; and Internal
➢ offset corporate weaknesses.
▪ In large organizations, strategies are formulated at corporate, divisional and functional leveḷ.

3.1. I S S T R A T E G Y P R O A C T I V E O R R E A C T I V E ?

▪ Proactive strategy is Planned strategy. It involves

➢ Previously initiated business approach that are working well enough to continue it; and
➢ Newly launched business approach to strengthen Co’s overall position and performance.
▪ Reactive strategy is adaptive strategy.
▪ Strategy is formulated on based on business environment. As business environment is dynamic, it can’t
be predicted with absolute certainty.
▪ Hence, when market and competitive conditions take unexpected change or some aspect of Co’s strategy
hit a stonewall, entity has to take strategic reaction known as reactive strategy.
▪ Further there is a need to adapt strategy to new learnings and ideas.
▪ Thus, strategy is a mix of both proactive strategy and reactive strategy. Ideally, strategy should be more
proactive and less reactive.

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3.2. P O L I C Y & S T R A T E G Y

▪ Policy and Strategy are quite interrelated, but the interesting thing to study is how they differ.
▪ Policy is a thought process, it talks about what should be done in a particular situation, or what should
be the reaction to a given circumstance.
▪ Strategy part of it explains the real actions. Strategy talks about how the policy would be followed.
▪ For example, the policy of an organisation could be to not drop their prices to fight competition. The
strategy could be to give more quantity for the same price, or give some other product as a freebie to
attract customers without dropping their price.

4. M A N A G E M E N T

It is an influence process backed by power, knowledge, competence & resources

➢ to make things happen;
➢ to gain command over situation/ phenomena; and
➢ to direct person and events in particular manner.
Management is used in two senses:
a) With reference to key group in Organization in- b) With reference to set of inter related functions
charge of its affairs like BOD, CEO, CFO, etc. and processes carried out by Management to
Survival & success of an Organization depends on achieve its objectives.
competence and character of its management. Functions include Planning, Organizing, Staffing,
Directing & Control.
Is strategy substitute for management?
No, strategy is not substitute for sound and responsible management.
Due to dynamic and changing environment, strategy can never be perfect, flawless and optimal.
In sound strategy, allowances are made for possible miscalculations and unexpected events.

5. STRATEGIC MANAGEMENT

It refers to managerial process of

➢ Developing strategic vision,
➢ Setting objectives,
➢ Crafting strategy,
➢ Implementing and evaluating strategy, and
➢ Initiating corrective adjustments, where deemed appropriate.
• The process does not end, it keeps going on in a cyclic manner.
• It involves
➢ Strategy formulation
➢ Strategy implementation and
➢ Strategy evaluation.
Originally called business policy, it monitors and evaluates external threats and opportunities in light of
Company’s strengths and weaknesses for survival and growth of Company.

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Objectives of strategic Management

a) To create competitive advantage so that Company can outperform its competitors.
b) To guide the Company successfully through changes in environment.

5.1. I M P O R T A N C E / B E N E F I T S / A D V A N T A G ES O F S TR A T EG I C M A N A G EM EN T

Darwin propagated “Survival of the fittest”. It is the only principle of survival of organization.
Fittest is not the largest or strongest but one which can change and adapt to changing business conditions.
Many business giants have followed the path of extinction failing to manage drastic changes in the
business environment.
For example, Bajaj Scooters, LML Scooters, Murphy Radio, BPL Television, Nokia, kodak and so on. Thus, it
becomes imperative to study Business Strategy.
Business follows the war principle of “Win or lose’. Only in rare cases, win–win situation arises. Hence, each
organization needs to build competitive edge over rivals.
a) Direction to company It gives direction to Company to move ahead. It defines objectives & goals
which are in line with Company’s vision.
b) Proactive instead of It helps company to adopt proactive strategies instead of reactive strategies.
reactive Organizations are able to analyse and take decisions in advance.
c) Future ready It prepares organization to face the future, seize business opportunities and
deal with threats.
d) Develop core It helps Organization to develop core competencies and competitive
competencies & advantages.
competitive advantage This facilitates its fight for growth and survival.
e) Corporate Defence It acts as corporate defence mechanism against mistakes and pitfalls.
mechanism Helps organization to avoid costly mistakes.
f) Framework for decision It provides framework to management for major decision making.
making
g) Enhance Longevity of It helps Organisation to face competition and dynamic market. It makes sure
Business that it is not just surviving on luck.

5.2. L I M I T A T I O N S O F S T R A T E G I C M A N A G E M EN T

SM cannot counter all hindrances/ obstacles/ roadblocks/ bottlenecks/ problems and ensure success.
a) Environment is highly Organization’s estimate about future may drastically go wrong & jeopardize/
complex and turbulent endanger all strategic plans.
b) Time consuming Organizations spend a lot of time in preparing and communicating strategies
process that may affect daily routine operations.
c) Costly process It adds lot of expenses to Org as expert strategic planners needs to be engaged.
d) Response to Competition is unpredictable. Since all Organizations are trying to move
competitors strategically, it is difficult to estimate competitive response to Firm’s strategy.

6. S T R A T E G I C L E V E L S I N A N O R G A N I Z A T I O N

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1) Corporate Corporate Level managers participate in strategic decision making like Merger/
Level acquisition, new product launch etc.
They oversee development of strategies for whole organization. For this his task includes:
a) Defining vision, mission and objectives of Organization
b) Determining what businesses it should be in
c) Allocating resources among different divisions
d) formulating and implementing strategies that span individual businesses
e) Providing leadership for Organization
f) Acts as a linkage between Management and Shareholders i.e., owner of business.
[Corporate level managers, especially CEO is viewed as guardian of shareholder
welfare and must make strategies to maximize the wealth of shareholders]
2) Business level Strategic Business Units (SBUs) is self-contained Division with its own business
functions like Finance, Human Resource, Sale & Marketing, Research & Development etc.
A Principle General Manager or Business level manager is head of a division.
They are responsible for working of Division and overseeing all functions of the Division.
They are responsible to translate general statements of direction of Corporate Level into
concrete business plans.
Thus, whereas corporate-level managers are concerned with strategies that span
individual businesses, business- level managers are concerned with strategies that are
specific to a particular business.
3) Functional Responsible for specific business functions in a division or company like marketing,
level Research & Development, Human Resource, Finance etc.
Thus, a functional manager’s sphere of responsibility is generally confined to one
organizational activity.
Functional managers are also responsible for
a) developing functional strategies in their area to fulfill strategic objectives set by
corporate and business level managers; and
b) implementing/ executing strategies of corporate level and business level managers.
They are closer to customers and provide most of information that enable corporate
level and business level managers to formulate realistic and attainable strategies.
Thus, it is important for general managers to listen closely to the ideas of their
functional managers.
General Managers are found at first two levels but their strategic roles differ.

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7. S T R A T E G I C M A N A G E M E N T I N G O V E R N M EN T D E P A R TM EN TS A N D N O T - F O R -P R O F I T O R G A N I Z A T I O N S

▪ Organizations can be classified, on the basis of interest they have, into

a) Commercial organization - Where profit is main objective.
b) Non-commercial organization - Where Profit is not the main objective. It exists for charitable, social
or educational purposes. Main objective is to provide service to members or public at large.
▪ Eg:- ICAI, NGOs ,Hospital, Educational Institutions etc.
▪ While an Organization may have social or charitable existence, still it has to generate revenue and use
them wisely to meet their expenses and attain their objectives.
▪ Organization needs to be managed strategically irrespective of whether they are profit motive or not.
▪ SM process is being used by countless non-profit and Government Organizations & many NGOs & Govt.
organizations outperform commercial firms on innovation, productivity & human relations.
▪ These organization often function as a monopoly and are dependent on outside financing. For such
Organizations, SM provides excellent reasons for justifying the request for needed financial support.

7.1. E D U C A T I O N A L I N S T I T U T I O N S

▪ Educational Institutions are frequently using strategic management techniques for

a) Creating better name and recognition
b) Attracting talented students
c) Designing better curriculum; and
d) Appointing & retaining good faculties.
▪ They have joined hands with Industries to deliver education to make Graduates more employable.
▪ Education delivery system has also changed due to computer internet and technology.
▪ Educational Institutions are now providing online classes and online degrees. This represents threat to
traditional schools and colleges.
▪ Thus, finding right strategy to sustain the changes is what these educational institutes are working on.

7.2 . M E D I C A L O R G A N I Z A T I O N S

▪ Modern hospitals are creating new strategies to bring services to the patient as much as bringing the
patient to the hospital. The whole strategic landscape of healthcare is changing because of the Internet.
▪ These strategies include
a. Deep collaboration with physicians and doctors
b. Backward integration strategies like acquiring ambulance services, diagnostics services, waste
disposal services etc.
c. Online delivery of secured medical services using internet.
▪ Others successful hospital strategies are
a) Home health services like collecting blood samples by pathological labs.
b) Outpatient surgery
c) Psychiatric services

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d) Preferred provider services

Introduction to Strategic Management

e) Women’s medical services
f) Skilled nursing units.

7.3. G O V E R N M E N T A G E N C I E S A N D D E P A R T M E N T

▪ PSUs, Central, State and Municipal organizations use taxpayer’s money to provide services to general
public. Hence, they need to formulate, implement & evaluate strategies that enable them to be more
effective & efficient.
▪ However, strategists in Government Organizations operate with less autonomy. They cannot diversify or
merge with other company without Government approval9.
▪ Politician have direct or indirect control over major decisions. Strategy gets debated in parliament and
Media resulting in fewer strategic alternatives.
▪ But, nowadays employees of these organizations are excited about the opportunity to participate in the
strategic management process & this has an effect on the mission, objectives, strategies, and policies.
▪ They are also using SM to develop and substantiate formal request for additional funding.

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THINK TAX, THINK KISHAN

CA KISHAN KUMAR
ALL INDIA RANKHOLER

9540365625
www.cakishankumar.com
 About CA Kishan Kumar

THE ONLY
    

Kishan Kumar is an Associate member of The Institute of Chartered Accountants of India.

 

  He is a throughout Rankholder in CA examinations.

 

BAD WORKOUT
     He himself scored Exemption in Taxation [76] in his CA Inter Exam..
 

     He has been awarded by Nitish Kumar, Hon’ble Chief Minister of Bihar for his
excellence in the field of education.
 

     Internationally renowned University of South Wales has also felicitated him for his

IS THE ONE THAT

aptitude and achievements during his academic life.
 

  Kishan has worked with Ernst & Young and PwC (Big 4 Firms) and uses his practical
corporate experience to make the subject more interesting and engaging.
 

DIDN'T HAPPEN
     His students have secured marks as high as 85 and hundreds have scored exemptions.
 

  He is committed to make meaningful contribution to the life of promising CA aspirants.

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