STRATEGIC MANAGEMENT

growth of the organizational goals and objectives.

businesses get involved in strategic management to cope
ORIGIN AND NATURE OF STRATEGY
with the technological advancements and globalization.
 Strategy – originated from the greek word stratego
referring to a general w/c traces its root from the
THE CORE OF STRATEGIC MANAGEMENT CONCEPT
words army & lead.
 The central focal point or core of the concept of
 Stratego – means to plan a distruction of one’s
strategic management procedure is setting goals,
enemies through effective use of resources.
developing a mission statement, organizational
 In management: Business strategy could mean the
values, and objectives. Organizations or companies
application of military strategy.
chase for strategic opportunities with the direction
got from their set goals, the mission statements,
Strategic Management
values, and objectives. Goal setting helps managers
Set of managerial decisions and actions that determine
make strategic decisions regarding achieving sales
the long-run performance. It includes environmental
targets and generating higher revenue.
scanning, strategy formulation & implementation,
Organizations develop plans and implement those
evaluation and control. (Wheelen & Hunger, 2004)
plans to keep pace with the increased competition
Determining the mission and goals of an organization
and globalization of the modern business world
w/in the context of external and internal environment.
through goal setting.
(Wright, Kroll, & Parnell, 1996)
It involves continuous and dynamic process that is
STRATEGIC CHALLENGES
externally-oriented and driven by macro and micro
 The term “strategic challenges” refers to those
environmental conditions.
pressures that exert a decisive influence on an
organization’s likelihood of future success. These
BASIC CONCEPTS OF STRATEGIC MANAGEMENT
challenges frequently are driven by an
 The basic concept of strategic management consists
organization’s future competitive position relative
of a continuous process of planning, monitoring,
to other providers of similar products. While not
analysing and assessing everything that is necessary
exclusively so, strategic challenges generally are
for an organization to meet its goals and objectives.
externally driven. However, in responding to
in simple words, it is a management technique used
externally driven strategic challenges, an
to prepare the organization for the unforeseeable
organization may face internal strategic challenges.
future.
 The term “strategic challenges” refers to those
 Strategic management is the set of managerial
pressures that exert a decisive influence on an
decision and action that determines the long-run
organization’s likelihood of future success. These
performance of a corporation. It includes
challenges frequently are driven by an
environmental scanning (both external and
organization’s future competitive position relative
internal), strategy formulation (strategic or long
to other providers of similar products. While not
range planning), strategy implementation, and
exclusively so, strategic challenges generally are
evaluation and control. The study of strategic
externally driven. However, in responding to
management therefore emphasizes the monitoring
externally driven strategic challenges, an
and evaluating of external opportunities and threats
organization may face internal strategic challenges.
in lights of a corporation’s strengths and
weaknesses.
BASIC MODEL OF STRATEGIC MANAGEMENT
 The first step in strategic management procedure is
Definition & Introduction
goal setting. after goal setting, strategic
Strategic management is the procedure where an
management includes four basic elements:
organization sets goals and objectives and starts
 Environmental scanning
planning and implementing the planning which
helps to achieve these goals and objectives. This  Strategy formulation
procedure is ever-changing which changes with the  Strategy implementation and
 Evaluation and control
 ENVIRONMENTAL SCANNING
Environmental scanning includes the comparison of
the threats and opportunities of the organization in the
external business environment. Environmental scanning can
be affected by factors like government rules and regulations,
the economy, social changes, changes in customer
preferences, technological advancement, competition and
other environmental factors. at this stage, a SWOT (i.e.
strengths, weaknesses, opportunities, and threats)
analysis is performed to contrast the internal assets and
flaws of the trade with the external prospects and dangers.
STRATEGY FORMULATION
 STRATEGY FORMULATION is the generation of long-
term plans for the proper management of
environmental openings and fears considering the
fortes and faintness of the business or the company.
it consists of defining the mission, attainable
objectives, forming strategies and setting policies.
 MISSION: an organization’s purpose or the reason
for its survival is called mission. It mentions how it is
serving the society. An ideal mission statement
specifies the unique purpose that differs the
company from other similar companies and defines
the scope of its functions in the form of the products
and services served to the market.
 EXAMPLE: max’s group mission – our passion “we
build loved brands”.
Jollibee “to serve great tasting food, bringing the joy
of eating to everyone”.
 OBJECTIVES: The outcomes of the planned functions
are called objectives. Objectives mention what is to
be attained by when. The attainment of the
objectives should lead to the fulfillment of the
company’s mission.
 STRATEGIES: A strategy is a broad master plan
expressing how a company will accomplish its
mission and objectives, maximizing competitive
advantages and minimizing competitive
disadvantages. Generally, a company or business
takes into consideration three kinds of strategy: ORGANIZATIONAL ADAPTATION
corporate, business and functional.
 POLICIES: A policy is a comprehensive guideline for
making decisions linking the formation and
implementation of a strategy. Companies set
policies to ensure that its employees’ decisions and
actions support the company’s mission, its
objectives, and strategies.
STRATEGY IMPLEMENTATION
Strategy implementation is taking action in order to
attain the goals of the organization. It requires organizing all
the available and necessary resources to put the strategy
into action. The higher management will pass the strategy to
the managers and they will communicate the roles and
responsibilities of their team members to implement the
strategy. There are contributions of different members of
different departments in the implementation of a strategy.
A perfect coordination and cooperation between the
management and other departments are absolutely
necessary to implement a strategy successfully.
EVALUATION AND CONTROL
The fourth and final basic element of the
strategic management is evaluation and control. it
requires an evaluation of the strategy to ascertain
whether the actual outcome matches the expected
outcome of the organizational goals. At this stage,
the organization decides which area of planning
should be evaluated and the method of evaluation
to be used and after the evaluation makes a
comparison between the expected result and the
existing result. Through this evaluation, the
company can decide to take different corrective
actions to control the shortcomings (if any) and help
the strategy to meet the desired organizational
goals and objectives. For example, if a company fails
to achieve the desired sales target, it can take many
corrective actions such as providing discounts,
adding extra attractive features to the product or
service, giving attractive gifts with the product or
service, etc.
 Managers should have a complete understanding of
strategic management to set the organizational
goals properly and develop and implement effective
strategies to achieve those goals increasing
profitability and competitive advantage of the
business or organization.
 Organizational adaptation (sometimes referred to
as strategic fit and organizational congruence) is a
concept in organization theory and strategic
management that is used to describe the
relationship between an organization and its
environment.
 Organizational adaptation theory states that
organizations adjust their operations and strategies
to adapt to changing environments.
HOW ORGANIZATIONS ADAPT TO THEIR ENVIRONMENTS?  Organizations need to maintain knowledge about
The components of the environment affect the new products and processes. Understand what is
functioning of a business organization. The management happening in the outside environment. Produce
should develop some alternative strategies to adapt to creative solutions using the knowledge and skills of
environmental influence. The following points for how all within the organization.
organizations adapt to their environments:
1. Information management- organizations can adapt BENEFITS OF STRATEGIC MANAGEMENT
to their environment through information 1. Clearer sense of strategic vision for the firm;
management. They can apply many techniques for 2. Sharper focus on what is strategically important; and
information management. These consist of 3. Improved understanding of a rapidly changing
boundary spanners, environmental scanning, and environment.
information system. There must be a proper
information system within the organization.
2. Strategic response- strategic response is the process
of applying existing plans and policies if successfully
functioning, or developing new plans and policies to
cope with environmental change. The common
approaches of strategic response are at least
resistance; proceeding with caution and dynamic
response.
3. Mergers, takeover, acquisition and alliances - in a
competitive environment, a business organization
may face threats and challenges due to
environmental changes. To adapt to environmental
changes, a business organization may implement
different strategies consisting of mergers, takeover,
acquisition and alliances.
4. Organization design and flexibility- in a dynamic
environment, it is essential to choose a few standard
operating procedures. The management should
consider the organic design and should be flexible in
decision making on the basis of time and situation.
5. The direct influence of the environment- when
organizations are able to anticipate or forecast
environmental changes, they may influence the
environment directly in many ways like lobbying and
bargaining and assigning long term contracts.

LEARNING ORGANIZATION
 A learning organization is the term given to a
company that facilitates the learning of its members
and continuously transforms itself. Learning
organizations develop as a result of the pressures
facing modern organizations and enables them to
remain competitive in the business environment.
 Module 3-4 5. Public - Group of people who can buy or who can
Environmental Scanning/External Assessment show their interest to buy products of company.
6. Financial intermediaries - Are those institutions
What is business environment? who provide loan, credit and advance to company.
 Environment of any organization is the “aggregate
of all conditions, events and influences that Macro Environment
surround and affect it” Refers to the external factors which affects company
 The combination of internal and external factors and its business and there is no control of company on these
that influence a company’s or business operating factors.
situation.
Types of Factors
Types of Environment  Economic
 Internal Environment  Non-economic
 External Environment  Political
 Micro environment  Demographic
 Macro environment  Socio-cultural
 Technological
External Environment  Natural
 Factors outside the organization which provide
opportunities or pose threats to the organization.  Economic – The economic environment constitutes
 Factors that can impact the ability of a business or of economic conditions, economic policies, and the
investment to achieve its strategic goals and economic system that is important to external
objectives. factors of business.
 Uncontrollable factors Economic environment refers to the nature
 Classified into two categories and direction of the economy within which business
 Micro organization are to operate.
 Macro
 Non-Economic
Micro Environment  Political and legal forces – Refers to the
Refers to the environment which is in direct contact political, government and legal
with the business organization and can affect the routine environment. It has close relationship with
activities of business straight away. the economic system and economic policy.
This refers to set of laws, regulations,
Types of factors which influence the business organizations
 Suppliers and their operations.
 Customers
 Marketing intermediaries  Demographic Forces – Demography refers
 Competitors to study of the population. Demographic
 Publics factors are as below:
 Financial intermediaries  Size of population
 Growth rate
1. Suppliers - Suppliers are the persons who supply  Family size
raw material to company.  Educational level
2. Customers - Customers are the persons who buy  Age composition
goods from the company.  Sex composition
3. Marketing Intermediaries - Marketing
Intermediaries are the person who helps company  Socio – Cultural Forces – Socio-cultural
to sell its products. environment is an important factor that
4. Competitors - Competitors are those who also sell should be analyzed while formulating
same product as the company or business. company business strategies. These
includes people’s attitude to work and
wealth, ethical issues, role of family,
 marriage, religion and education and the
social responsibilities of business.
 Technological Forces – Technological forces or
factors could be said to be the most pervasive in the
environment. Technology refers to the application
of knowledge base which science provides. It is a
well established fact that information and
communication technology has revolutionized
business operations.
 Natural Forces – The natural environment includes
geographical and ecological factors that influence
the business operations. These factors include the
availability of natural resources, weather, and
climatic condition, location aspect, topographical
factors, etc.
1. Political – These include government regulations
such as employment laws, environmental
organizations, and tax policy. Other political factors
are trade restrictions and political stability.
2. Economic – These affect the cost of capital and
purchasing power of an organization. Economic
factors include economic growth, interest rates,
inflation and currency exchange rates.
3. Social - These impact on customer’s need and the
potential market size for an organization’s goods
and services. Social factors include population
growth, age demographics and attitude towards
health.
4. Technological – These influence barriers to entry,
make or buy decisions and investment incentives
and the rate of technological change.
5. Legal – This factor has both external and internal
sides. These are certain laws that affect the
business/organization environment in a certain
country while there are certain policies that
companies maintain for themselves.
6. Environmental – This factor include all those that
influence or are determined by more the
surrounding environment.

What is Environmental Analysis?

Environmental Analysis is a strategic tool. It is a process
to identify all the external and internal elements which can
affect the organization’s performance. The analysis entails
assessing the level of threat or opportunity the factors might
present.

Strategic analytical tools

It is a process of conducting research on the business
environment within which an organization operates and on
the organization itself, in order to formulate strategy.

Example of Analytical Method used in Strategic Analysis

 PEST Analysis
 PESTLE Analysis
 STEEP Analysis
 STEEPLE Analysis

PESTLE ANALYSIS
This is a framework used to analyze the external
environment analysis. The process entails learning about
various external factors which affect the organization.