Strategic Management

MBA Semester III

Basic concepts of
Strategic Management

Dr. Sivaji Ganesh. K

Learning outcomes
After completing this session you should be able to:
 Understand what is a strategy and strategic decision
 Discuss the concept of strategic management and its
evolutionary phases
 Realize the benefits of strategic management
 Recognize the basic model of strategic management
 Discuss the levels of strategic management
 Identify the role of vision, mission, and objectives
 Evaluate strategy as a competitive advantage
Introduction to Strategy….

“the determination of the long-run goals and objectives of an

enterprise, and the allocation of resources necessary for
carrying out these goals” (Chandler, 1962)

“a firm’s theory about how to gain competitive advantage”

(Drucker, 1994)

According to Porter (1996) strategy is about being different

What is strategy?

Markides (1999) strategy answers 3 questions:

1. Who are the company’s target customers?

2. What products should the company offer the target customers?

3. How can the company do this efficiently?

What is strategy?

Strategy is a coordinated set of commitments and actions

matching the company’s internal resources to

External competitive environment

What questions does Strategy answer?

Where do we compete?

What unique value do we bring?

What resources/capabilities do we utilize?

How do we sustain unique value?

Competitive Advantage

• Competitive Advantage - occurs when an organisation is

able to meet consumer needs better than its rivals

• Sustainable Competitive Advantage – the competitive

advantage must be difficult for competitors to imitate (e.g.
manufacturing process; patent that others cannot use)
Business example

• Apple, 1997, two months from bankruptcy

• Steve Jobs brought back as interim CEO

• Observers expected him to develop advanced products

• Instead, he shrunk Apple to the scale and scope suitable to

the reality of being a niche producer in the highly
competitive personal computer business
Business example
Steve Jobs did the following – he cut
1. all of the desktop models – there were 15 – to one
2. all portable models back to one laptop
3. out all printers and peripherals
4. He cut development engineers
5. He cut software engineers
6. all manufacturing, moving it offshore Taiwan

Result:
• Inventory was cut by more than 80%
• A new web store sold Apple products direct to consumers,
cutting distributors and dealers
What is strategy…what is it for?
• Generating value

• Survival, Apple, Intel

• Competitive advantage

• Being better or different to competitors

• Unique or distinctive
• Beware of the ‘urge to converge’

• First mover advantage

• Experience curve
• Recognition, brand awareness

• Sustainable
• Doing the above over the long term
Strategic Decisions
• Strategic decisions are those, that are taken after integrating
the organization with its environment in order to achieve the
long-term objectives.

• Effective strategies are those that achieves a superior fit

between the organization and its environment. (Andrews)
Strategic Decisions
• Major dimensions of strategic decisions are:
1. Problems calling for strategic decisions should be
considered by top management
2. Strategic issues involve a commitment of resources
3. Strategic decisions have an impact on long-term
prosperity
4. They affect different sections of the organization with
varying degrees
5. It involves matching the internal environment to the
changes of external environment
Strategic Management

• The term ‘strategic management’ is used to denote a

branch of management that is concerned with the
development of strategic vision, setting out objectives,
formulating and implementing strategies, and introducing
corrective measures for the deviations (if any) to reach the
organization’s strategic intent.
Evolutionary Phases of Strategic Management
Strategic Management

• The process of bringing about a strategy is called strategic

management

• Strategic management is:

1. Analyse the situation facing your organisation

2. Use this analysis to formulate different strategies

3. Finally, implement a strategy

What is strategic management?

Strategic management involves:

• understanding your strategic position
• making strategic choices for the future
• managing strategic action

Strategic Strategic Strategic

analysis choices implementation
What is strategic management?

 Strategic management is not about predicting the future but

preparing for it.
 It is about what exact steps the company will have to take
(implement) for competitive advantage.
 In essence, it answers the following three questions:
 Where is the organization at the moment?
 Where does it want to go?
 How will it get there?
Benefits of Strategic Management

 Aims at formulating and implementing effective strategies.

 Business follows the war principle of ‘win or lose’, and is not
necessarily a win-win situation.
 It become a must for all organizations for their survival and
growth.
 Helps organizations to be more proactive instead of reactive
in shaping their future.
 Serves as a corporate defense mechanism against mistakes
and pitfalls.
 Helps to develop core competencies and competitive
advantage
Basic Model of Strategic Management
Emergent and deliberate strategies

Deliberate strategy
Planned Realised
strategy strategy

Unpredicted
change
Unplanned shift by
Unrealized Emergent
top-level managers
strategy strategy

Autonomous
action by lower-
Serendipity level managers

Source: Based on Mintzberg & McGugh 1985 in Jones & Hill 2010
Pitfalls of Strategic Planning

Some pitfalls to watch for and avoid in strategic planning

are these:
 Using strategic planning to gain control over decisions
and resources
 Too hastily moving from mission development to
strategy formulation
 Failing to communicate the plan to employees, who
continue working in the dark
 Viewing planning as unnecessary or unimportant
 Top managers not actively supporting the strategic-
planning process
Pitfalls of Strategic Planning

Some pitfalls to watch for and avoid in strategic planning

are these:
 Failing to involve key employees in all phases of
planning
 Failing to create a collaborative climate supportive of
change
 Becoming so engrossed in current problems that
insufficient or no planning is done
 Being so formal in planning that flexibility and creativity
are stifle
 Levels of strategy

Corporate Where to compete

Whole to
Markets and industries
Part strategy

Business-level How to compete

Generic strategies
strategy Strategic position

Doing it
Part to Operational strategy Delivering key
Whole performance goals
Vision
“Description of something in the future” -
Kotter
 Mental perception of the kind of
environment an organization aspires to
create within a broad time horizon
 A Strategic vision is a road map of a
company’s future – providing specifics about
• technology and customer focus
• the geographic and product markets to
be pursued
• the capabilities it plans to develop
• and the kind of company that
management is trying to create.
Characteristics of Vision
 It is a road map for the future of the company
 Specific and provide guidelines to managers for
making decisions and allocating resources
 Flexible to changing environment
 Within the realm of companies hope to
achieve
 Appeal to emotions and motivate employees
 A clearly articulated vision can excite people
and steer them in a common direction
 Presents a panoramic view of where we are
going
Need of Vision
 The entrepreneurial challenge in
developing a strategic vision is to think
creatively about how to prepare a
company for the future.
 Forming a strategic vision is an exercise
in intelligent entrepreneurship.
 A well-articulated strategic vision creates
enthusiasm among the members of the
organization.
 The best-worded vision statement
illuminates the direction in which the
organization is headed.
Benefits of Vision
 Good visions are inspiring and exciting.
 Help the organization prepare for the future.
 Clarifies and crystallizes the senior
executives’ views.
 Good vision reduces risk-taking and
experimentation.
 Good vision help to motivate and enhance
the morale of employees.
 Good visions are competitive, original, and
unique.
 Good visions represent integrity; they are
truly genuine and can benefit the people.
Some Examples of Vision

Our Vision is to be the world’s mobile

communication leader enriching
customers’ lives and helping individuals,
businesses and communities be more
connected in a mobile world.

To be a globally respected corporation

that provides best-of-breed business
solutions, leveraging technology,
delivered by best-in-class people.
Mission
 A mission is an answer to the fundamental
question ‘what business are we in and what do
we do?
 It is the purpose or reason for the organization’s
existence.
 Mission is an enduring statement of purpose
that distinguishes one firm from other similar
firms
 A company’s mission statement is typically
focused on its present business scope – broadly
describing an organization’s present capabilities,
customer focus, activities, and business makeup.
Need for Mission Statement
 To ensure unanimity of purpose within the
organization.
 To develop a basis, or standard, for
allocating organizational resources.
 To provide a basis for motivating the use of
the organization’s resources.
 To establish a general tone or organizational
climate.
 To serve as a focal point for those who can
identify with the organization’s purpose and
direction.
Examples of Mission Statement
Our mission is to add Vitality to life. We
meet everyday needs for nutrition,
hygiene, and personal care with brands
that help people feel good, look good
and get more out of life.

Hero MotoCorp's mission is to become a

global enterprise fulfilling its customers'
needs and aspirations for mobility,
setting benchmarks in technology,
styling, and quality to convert its
customers into its brand advocates.
Points to consider while writing Mission Statement
 Mission statement should reflect the
philosophy of the organization.
 A good mission statement should be
precise, clear, feasible, distinctive, and
motivating.
 One of the roles of a mission statement
is to give the organization its own
special identity.
 Good mission statements are – unique
to the organization for which they are
developed
Goals and Objectives
 Business organization translates their vision
and mission into goals and objectives.
 Goals are open-ended attributes that denote
future states or outcomes.
 Objectives are close-ended attributes that are
precise and expressed in specific terms.
 Thus, the Objectives are more specific and
translate the goals to long-term and short-
term perspectives.
 Objectives are the organization’s performance
targets – the results and outcomes it wants to
achieve.
Characteristics of Objectives
 Define the organization’s relationship with its environment.
 Facilitative towards the achievement of mission and
purpose.
 Provide the basis for strategic decision-making.
 Provide standards for performance appraisal.
 Should be concrete and specific.
 Related to a time frame.
 Measurable and controllable.
 Should be challenging.
 Different objectives should correlate with each other.
 Set within the constraints of organizational resources and
external environment.
Kinds of objectives to set
 Financial Objectives vs Strategic Objectives
 Short-Term and Long-Term Objectives
 Objectives at All Organizational Levels