Professional Documents
Culture Documents
STRATEGY
A unified, comprehensive and integrated plan designed to assure that the basic objective of the
enterprise is achieved.
A strategy is a unified comprehensive and integrated plan that relates the strategic advantages of the
firm to the challenges of the environment. It is designed to ensure that the basic objectives of the
enterprise are best achieved through proper execution by the organisation
“A company’s strategy consists of the combination of competitive moves and business approaches
that managers employ to please customers, compete successfully and achieve organisational
objectives.”- Thompson &Strickland
Derived from Greek word ‘Strategoes’ (Stratos- Army + Ago- Leading/Guiding) which means
generalship- the actual direction of military force as distinct from the policy governing the
deployment.
A plan or course of action or a set of decision rules forming a pattern or creating a common
thread.
The pattern or common thread is related to the organization’s activities which are derived from
its policies, objectives & goals.
It is related to pursuing those activities which move an organisation from its current position to
a desired future state.
Concerned with the resources necessary for implementing a plan or following a course of action.
Connected to the strategic positioning of a firm, making trade offs between its different
activities.
STRATEGIC MANAGEMENT
“Strategic Management is a stream of decisions and actions which leads to the development of an
effective strategy or strategies, which help to achieve corporate objectives”. William F. Glueck
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“The process which deals with the fundamental organizational renewal and growth with the
development of strategies, structures and systems necessary to achieve such renewal and growth,
and with the organizational systems needed to effectively manage the strategy formulation &
implementation processes.” Hofer & Other
BUSINESS POLICY:
It is the study of the function and responsibilities of senior management, the crucial problems that
affect success in the total enterprise and the decisions that determine the direction of the
organization and shape its future.
Business policy is the term traditionally associated with the course in business schools devoted to
integrating the educational programme of these schools and understanding what today is called
strategic management.
2. It deals with the determination of future course of action that an organization has to adopt.
3. It involves choosing the purpose & defining what needs to be done in order to mould the
character & identity of an organization.
4. It is also concerned with the mobilization of resources which will help the organization to
achieve its goals.
For learning the course: - Integration of knowledge & experience gained in various functional
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areas of management.
- Business policy cuts across the narrow functional boundaries and draws
upon a variety of sources like economics, sociology, political science,
psychology etc. to develop a theoretical structure of its own.
For understanding the business environment: - It helps to create an understanding of how policies
are formulated.
For understanding the organization: - It presents a basic framework for understanding strategic
Decisions making while a person is at the middle level of
management.
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- Leads to an improvement in job performance. This has far-reaching
implications for managerial functions like coordination and
communication and also for avoidance of interdepartmental conflicts
For Personal development: - It is beneficial for an executive to understand the impact of policy shifts on
the position one occupies.
- An understanding of business policy enable executives to avail an
opportunity or avoid risk with regard to career planning and
development
- It provides an adequate grounding for understanding the macro factors
and their impact at the micro level.
- It offers a unique perspective to executive to understand the senior
management’s viewpoint.
- It provides the organization a theoretical framework in the form of the
strategic management model, which provides powerful insights for
dealing with policy making at the macro level as well as at an individual
level through self analysis.
1. Strategy may or may not involve explicit formulation of what the organization intends to do i.e.
whether or not an organization formulates a strategy, it is presumed to have established a
relationship with its environment &hence there is a strategy which can be examined and
described even though it is not spelt out in so many words.
2. While shaping the future, strategic decisions often mould the organizational identity and
character deciding whether the enterprise will continue to be in the same line of business or
combine new lines of activity with the existing business, enter new market segments or seek to
acquire a dominant position in the same market and so on.
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3. Strategic decisions are primarily concerned with external rather than internal problems and
more specifically with the selection of the product mix which will be produced and the markets
to which the products will be sold, thus establishing, what Ansoff calls “ an impedance match”
between the organization and its environment.
It can also create awareness about the repercussions that an action taken in one area of management
can have on other areas individually and on the organization as a whole.
3. To understand the complex interlinkages operating within an organization through the use of a
systems approach to decision making and relating these to the changes taking place in the
external environment.
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In terms of skills:
1. Developing skills & Apply what has been learnt (by analyzing case studies and their
interpretations.
2. To develop analytical ability and use it to understand the situation in a given case or
incident
3. Identifying factors relevant in decision making, identifying SWOT for an organization
4. Increasing mental ability of learners and making them use this ability while taking
appropriate action.
5. Development of oral as well as written communication skills through case analysis.
In terms of attitude:
1. To develop a ‘generalist’ attitude that enables the learners to approach and assess a
situation from all possible angles.
4. To develop a creative and innovative attitude is the hallmark of a general manager who
refuses to be bound by precedents and stereotyped decisions.
Genesis of Business Policy: 1911, Harvard Business School introduced an integrative course in
management capability. The course aimed at improving the general management capabilities of
students. It was intended to tie together and give proper focus to the first year courses by showing how
the functions of business both internally and as between businesses, were closely interrelated in
practice and how a chief executive had to recognize and deal with those relationships.
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short term planning tools were the only tools with organization to rely on for future estimation &
decision making.
Around 1930s systematic attempts were made to go deep into future and prepare the organizations for
likely changes in future. Budgets control systems management by objectives and capital budgeting
techniques were pressed into service with a view to predict future impacts based on current trends.
These techniques unfortunately failed to capture the essence of future conditions in an appropriate
way.
Corporate plans, prepared by people at various levels based on current practices and likely changes in
future, were often pushed upwards for approval by top management. Top management’s participation
in such lopsided exercises was minimal and there was always the danger of the recommendations not
being followed. This process is called as first generation planning. First generation planning puts lot of
emphasis on picking up an appropriate course of action (generally a single plan) based on environmental
challenges and organizational strengths and weaknesses. The came the second generation planning in
the form of strategic management which came to occupy the center stage in the business
world ,emphasizing interaction by managers at all levels of the organizational hierarchy in planning and
implementation .
Hofer - et- al called this evolution a paradigm shift. They have summarized the developments in this
regard thus:
First Phase: Paradigm of Adhoc Policy (till mid 1930s): Adhoc policy making necessitated by the
expansion of American firms in terms of product markets and customers and the consequent need to
replace informal controls and coordination by farming functional policies to guide managers.
Second Phase: Paradigm of planned Policy (1930s – 1940s): Replacement of adhoc policy making by
planned policy formulation and shifting attention towards integration of functional areas, in line with
environmental requirements.
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Third Phase Strategy Paradigm ( 1960s): Rapid force of environmental changes and increasing
complexity of managerial functions demanding a critical look at the concept of business in relation to its
environment hence the need for strategic decisions.
Fourth Phase: Paradigm of Strategic Management (1980s): shifting of focus to the strategic
management process and the responsibility of general management in resolving strategic issues.
Resolution of strategic issues that affect a business firm has been a continual endeavor in the
subject of business policy.
The general principles undergirding strategic thinking have been the focus of the efforts of
researchers and academicians in the field of business policy
Now there is an emerging trend to have several courses, such as the theory of strategy,
competitive strategy industry dynamics, hyper competition and global strategy in the
curriculum.
INDIAN SCENARIO:
AICTE: Regulatory agency for Management education in India, prescribed Business Policy as a
subject in curriculum- 1990s
AIMA includes course on BPSM in its curriculum in all of their management programmes.
There is now a professional association, strategic Management Forum of India, which is exclusively
devoted to the development and propagation of the theory & practice of strategic management.
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Indian companies are now acutely aware of the need for strategic management & have been hiring
consultants to advise them on strategic matters.
1. Identifying trends
3. Extrapolation – simple
II. Long Range Planning: Forecasting helped organizations a lot, but still there existed a gap
between what organizations needed and what they were getting out from forecasting.
Forecasts are never error free, so planning in either case is mandatory. So organizations
started planning for long term. Day to day planning techniques were unable to emphasize
the role of future adequately. Looking into the matters with an objective of dealing through
future aspects and taking into consideration the impact of future on today’s position.
Long Range Planning means analyzing the future prospects and threats to make plans and
policies for current use and implementation.
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III. Strategic Planning: Strategic Planning is concerned with the selection of the product mix
which a company may produce and the markets in which it may sell its products.
Strategic planning is defined as, “The process of deciding on objectives, on the changes in
the objectives, on the resources used to attain the objectives and on the policies that are to
govern acquisition, use and deposition of these resources.”
It is the determination of the basic long goals and objectives in an enterprise and the
adoption of courses of action and the allocation of resources necessary for carrying out
these goals.
FORECASTING
Forecasting is the process of making statements about events whose actual outcomes have
not yet been observed. A commonplace example might be estimation for some variable of
interest at some specified future date.
Forecasting can be described as predicting what the future will look like, whereas planning
predicts what the future should look like.
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STRATEGIC PLANNING
Strategic Planning is the managerial process of developing and maintaining a strategic fit between the
organization's objectives and resources and its changing market opportunities.
Corporate Level Strategy: Strategic decisions relate to organizations wide policies and are most
useful in the case of multi divisional companies or firms having wide ranging business interests.
The nature of strategic decisions at the corporate level tend to be value oriented, conceptual
and less concrete than decisions at business or functional level. There is also greater risk, cost
and profit potential as well as greater need for flexibility associated with corporate level
strategic activities.
Business Level Strategy: Decision makers are primarily concerned with the immediate industry
or product- market issues and with policies bearing on the integration of the functional units.
Business level strategic decisions translate the general statements of direction and intent
generated at corporate level into concrete functional objectives and strategies for divisions or
strategic business units (SBUs).
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Strategic decisions at business level should include policies including new product
development, marketing mix, research & development, personnel, etc.
Functional level strategy: It involves decision making with respect to specific functional areas-
production, marketing, personnel, finance, etc. Decisions at functional levels stress on ‘doing
things right’.
Operating level strategies are concerned with initiatives for managing frontline operating units
(like plants, sales districts, etc.) and for handling day to day tasks of strategic significance.
Although of limited scope, operating strategies add further detail and completeness to
functional strategies as also to the overall business plan.
Strategic Decision Making means moulding the organizational identity and character deciding
whether the enterprise will continue to be in the same line of business or combine new lines of
activity with the existing business, etc.
It means choosing the best strategic alternative from a variety of available options which would
affect the strategic positioning of the firm.
Strategic Decisions: Strategic Decisions are mainly concerned with external rather than internal
problems.
Operating decisions: Decisions related to the day to day activities or current operations
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Decisions concerned with the authority & responsibility relationships, work flows,
communication, developing sources of raw material supply.
1. Top Management Involvement: Strategic decisions are very crucial for organization, so
involvement of top management is mandatory. Even if top management does not
involve in the actual practice & implementation process but it supports each and every
phase of strategy formulation, implementation & control.
2. Allocation of large amount of resources: All the strategic decisions involve a
requirement of large amount of resources to be allocated. A firm may use a large
amount of manpower, machinery, money, materials in the strategic implementation, so
organization needs to allocate a large amount of resources.
3. Impact on long term prosperity of the firm: All the strategic decisions are crucial for the
firm. They affect long term prosperity of the firm. These decisions either make them
worst or better.
6. Readiness to make ‘non- self generative’ decisions: Strategic decisions are non-
frequent decisions. These are contingent decisions to be made any time when required
and thus are non- self generative decisions.
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1. Criteria: ‘Criteria’ refers to the long term orientation of organization towards objectives
& achievement of objectives. Different organizations may have different viewpoints
towards the achievement of their organizational objectives. Some organizations may
wish to achieve their objectives up to a satisfactory level; others may wish to maximize
their achievement of objectives. A few others may look at it in incremental approach,
i.e. movement toward objectives in small, logical & incremental steps.
B. Satisfaction
C. Incrementalism
2. Rationality: Rationality refers to the decision making without any biasness, with the
help of complete information of all the alternative strategies & evaluation techniques.
Rationality means exercising a choice from among various alternative courses of action
in such a way that it may lead to the achievement of the objectives in the best possible
manner. Different firms, on the basis of their approach towards achievement of
objectives may have different rationalities. For example, those who support the
maximizing criterion consider a decision to be rational if it leads to profit maximization.
3. Creativity: To be creative, a decision must be original and different. A creative strategic
decision making process may considerably affect the search for alternatives where novel
and untried means may be overlooked for and adopted to achieve objectives in
exceptional manner. Develop the ability to go beyond and think and use creativity in
strategic decision making.
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CORPORATE PLANNING
1. Project Planning
2. Operational Planning
3. Strategic Planning
Project Planning:
These are short term exercises, less risk is involved. It is a simpler decision making than
other two components of corporate planning.
Project Planning: It is a forward looking exercise, concerned with new markets, new
products, and new facilities. Any new plan, task organization is starting with, is to be
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covered under projects of the organization. Most of the projects are long term, and are of
vital importance for the organization.
STRATEGIC MANAGEMENT
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“The process through which organizations analyze and learn from their internal &
external environments, establish strategic direction, create strategies that are intended to help
achieve established goals and execute strategies all in an effort to satisfy key organisational
stake holders.”
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Figure 1: Strategic Management Process
PERFORMING
ESTABLISHING
STRATEGIC
STRATEGIC
EVALUATION &
INTENT
CONTROL
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IMPLEMENTATI
FORMULATION
ON OF
OF STRATEGIES
STRATEGIES
FORMULATION OF STRATEGIES
IMPLEMENTAION OF STRATEGIES
Project Implementation
Activating Strategies Procedural
Designing Structures & systems Implementation
Managing behavioral implementation Resource Allocation
Managing functional implementation Structural
Implementation
Operationalising strategies
Behavioral
Implementation
Functional
PERFORMING STRATEGIC EVALUATION & CONTROL Implementation
Evaluation &
Performing strategic Evaluation reformulation of
Exercising strategic control strategies
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Reformulating strategies
Figure 2: Strategic Management Process
Strategic Control
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Business definition explains the business of an organization in terms of
customers’ needs, customer groups, and alternative technologies
Find out opportunities and threats operating in the environment and the
strengths & weaknesses of an organization in order to create a match
between them.
End result of strategic analysis and choice is “strategic plan” which can b
implemented in the organization
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- Structural Implementation: Designing organization structure,
redesigning, re organizing.
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HIERARCHY OF STRATEGIC INTENT/ STRATEGIC VISION, CORPORATE MISSION,
OBJECTIVES & GOALS
STRATEGIC INTENT:
Intents normally go out of the present capabilities and market positions. They show a deep seated
commitment to winning even against odds.
This concept entails keeping in mind the idea of winning by virtue of motivating people, leaving room for
team contributions, maintaining their enthusiasm and guiding resource allocation keeping in view the
intent.
VISION:
To inspire members to work for the ultimate purpose with clarity of purpose, hope and unity of
purpose even with diversity of personal causes. It gives a sense of direction in which to go on
without ever reaching it.
It is rather imaginary or lacking substance. It is more than defining its future products.
It is the basic principle on which organization will work regardless of what happens inside the
organization and its environment.
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It is the binding force for different parts of an organization to have shared values and not to go
in different directions even if they may be following different strategies.
Strategic Vision: A mental perception of the kind of environment that an organization aspires to create
with a broad time frame.
Good visions represent discontinuity, a step function and a jump ahead so that the company
knows what it is to be.
A good vision is competitive, original and unique. It makes sense in market place as it is
practical.
It represents integrity. It is truly genuine and can be used for the benefit of people.
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MISSION:
It is the statement which defines the role that an organization plays in a society.
Mission may be described as the scope of operation in terms of products and markets or of service and
client.
An organization’s mission statement tells what it is, why it exists and the unique contribution it can
make to the society.
It is defined as the fundamental, unique purpose that sets it apart from other firms of its type. It
indicates the nature and scope of business operations in terms of products, markets & technologies.
Components of Mission:
Managerial Philosophy/ Company’s philosophy in terms of basic beliefs, values, aspirations &
philosophical priorities (what the company stands for )
‘Self concept’ that people affiliated should have of the firm, which may include management
style and work ethics.
2. Precise: It should not be so narrow as to restrict the organization’s activities, nor should it be
too broad to make itself meaningless.
3. Clear: It should be clear enough to lead to action. Neither should it be a high sounding set of
platitudes meant for publicity purposes.
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5. Distinctive: It should create an important distinction in the public mind.
7. Indicator of objectives: It should indicate how objectives are to be accomplished, i.e. clues
regarding the manner in which the objectives are to be accomplished. It should deal with the
objectives to be achieved within a given time period.
VISION MISSION
2. It relates to the long term view of an 2. It deals with the firm’s present
image that the company will like to business scope- products, services,
have. customers, present business capability
and technologies.
3. It states where we are going?
3. It states who we are and what we do?
4. It portrays the future business scope
of the company & involves the 4. It focuses on the organisation’s
strategic path to take. present capabilities, its products and
services, customers and business
5. It focuses on deciding ‘Which way are
makeup
we going?’
5. It answers ’What business are we in?’
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BUSINESS DEFIINITION:
‘It is a description of the products, activities or functions and markets that the firm presently pursues.’
Markets: - Classes/ types of customers or geographic regions where the product/ service is sold.
1. Customer groups
2. Customer functions
3. Alternative technologies
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Business could either be defined at the corporate level or SBU (Strategic business unit level) level. A
single business firm is active in just one area so its business definition is simple
A large conglomerate, operating in several businesses, would have a separate business definition for
each of its businesses.
Corporate level: Business definition concerns itself with the functions & alternative technologies
SBU level: Each division have more accurate business definitions covering all the three dimensions.
GOALS: goals denote what an organization hopes to accomplish in a future period of time. They
represent a future state or an outcome of the effort put in now. A broad category of financial & non-
financial issues are addressed by the goals that a firm sets for it.
OBJECTIVES: these are the ends that state specifically how the goals shall be achieved. They are
concrete and specific in contrast to goals which are generalized. In this manner, objectives make the
goals operational.
While goals may be qualitative, objectives tend to be mainly quantitative in specification. In this way,
they are measurable & comparable.
1. They define the organisation’s relationship with its environment. With employees, customers &
society.
3. They provide the basis for strategic decision making by directing the attention of strategists to
those areas where strategic decisions need to be taken. They lead to desired standards & help
to coordinate strategic decision making.
4. They provide the standards for performance appraisal. As objectives to be achieved in given
time, clear definite basis for evaluating its performance.
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Characteristics of Goals & Objectives:
1. Understandable
5. Challenging
Need of Objectives:
They provide organization with more tangible targets than mission statements
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