MBA 3rd Sem

RTMNU SYLLABUS

STRATEGIC MANAGEMENT

MODULE NUMBER 2

STRATEGY INTENT & STRATEGY FORMULATION

STRATEGIC INTENT
Strategic Intent is the basis on which organizations provide products and services for consumers, profits for investors
and jobs for employees, taxes for governments, and economic stability for communities. Strategic intent also
identifies the commitment of the organization to contribute to the welfare of society by setting standards on being
economically productive and socially responsibilities. The goals identified through the strategic intent of the
organization represent a synthesis of goals and demands placed on the organization by its stakeholders. These
choices, collectively, set apart the organization from others.

Definition: Strategic Intent can be understood as the philosophical base of the strategic management process. It
implies the purpose, which an organization endeavors of achieving. It is a statement that provides a perspective of
the means, which will lead the organization, reach the vision in the long run.

Vision, Mission and Values

The first task of Strategic Management is formulating the organization’s vision, mission, and value statements. These
statements are primarily based on internal processes within the organization. They have the greatest impact on the
identity and the future of the organization and reflect the strategic intent of the organization. Vision, mission, and
values have their distinct characteristic and play distinct roles in the subsistence of the organization:
VISION is what keeps the organization moving forward. Vision is the motivator in an organization. It needs to be
meaningful with a long term perspective so that it can motivate people even when the organization is facing discouraging
odds.

MISSION is the founders intentions at the outset of the organization- what they wanted to achieve. In the dynamic
environment of today, it must be re-examined and refreshed periodically.

VALUES manifest in what the organization does as a group and how it operates. An explicit depiction of values is a guide to
ways of choosing among competing priorities and about how to work together.

STRATEGIC INTENT HIERARCHY

Strategic Intent Hierarchy

1. Vision: Vision implies the blueprint of the company’s future position. It describes where the organization wants to land. It
is the dream of the business and inspiration, base for the planning process. It depicts the company’s aspirations for the
business and provides a peep of what the organization would like to become in future. Every single component of the
organization is required to follow its vision.
2. Mission: Mission delineates the firm’s business, its goals and ways to reach the goals. It explains the reason for the
existence of the business. It is designed to help potential shareholders and investors understand the purpose of the
company. A mission statement helps to identify, ‘what business the company undertakes.’ It defines the present
capabilities, activities, and customer focus and business makeup.
3. Business Definition: It seeks to explain the business undertaken by the firm, with respect to customer needs, target
audience, and alternative technologies. With the help of business definition, one can ascertain the strategic business
choices. The corporate restructuring also depends upon the business definition.
4. Business Model: Business model, as the name implies is a strategy for the effective operation of the business, ascertaining
sources of income, desired customer base, and financing details. Rival firms, operating in the same industry relies on the
different business model due to their strategic choice.
5. Goals and Objectives: These are the base of measurement. Goals are the end results, that the organization attempts to
achieve. On the other hand, objectives are time-based measurable actions, which help in the accomplishment of goals.
These are the end results which are to be attained with the help of an overall plan, over the particular period.
Preparation of Vision and Mission Statement

In a competitive economy driven by the cruel logic of markets, a company with a determined management can transform
an organization much more quickly and much effectively than in the past. Vision, Mission and Values hold an organization
together. They are linked in people’s heart and minds. Most people can relate to a personal vision, their personal mission in
life, but they often find it difficult to arrive at a consensus on issue concerning mission, values and vision of the group. The
senior management team defines the broad parameters of what business we’re in and which direction we’re heading. They
can prepare a rough vision for input and refinement or leave things wide open for the rest of the organization to fill in.

Different ways of defining a group’s vision, mission and values may seem foolish or even alarming; but organization are
strongest when many aptitudes, interests, and points-of-view can be worked out together. Team or organizations need a
shared vision, something that only a few people own. The vision and mission statements should provide clarity to the issues
of governance. There are many ways in which the Vision Statement can be prepared. It depends on the nature and type of
organization as well as the philosophy and management style of the top management. We may brainstorm with our staff or
our board what we would like to accomplish in the future, using the “guided fantasy” method. We bring the participants
together and ask them to imagine and create a vision of what the group’s activities will be five or ten years down the line.
For some people, it will be most comfortable to focus on the purpose of the organization itself-its mission. An exercise like
this encourages people to develop their vision and missions, loosening their imaginative powers. Keep the process as open
as possible. Then have a working group prepare a draft after the meeting, summarizing the results and harvest what is
needed to formulate mission and vision statements.
Business Process Objectives

The corporate objectives of the organization form the basis of Business Process Objectives. Business Process Objectives
are specific, measureable Objectives that are developed at all levels of the enterprise or company. These are generally
short term objectives with a one to three year range. Companies develop strategic plans with annual five-year
Objectives. Establishing strategic objectives converts the firm’s mission into concrete performance outcomes. The
Objectives represent managerial commitment to achieve specific and measureable performance targets in a
measurable time frame. Objectives of one group might be the strategy of another group. For example, top management
sets the objective of launching new products; though it is a Strategic Objective for the firm, this will be the strategy of
the production department. The Business Process Objectives normally form a network of desired results and events. If
the objectives are not interconnected and do not support each other, groups or people may often pursue paths that are
good for their own function but may be detrimental to the organization as a whole. And when developing specific,
measurable objectives, we generally have got these six categories to consider: Financial: We can set your financial
objectives to measure profitability, like gross profit; or operating profit; or net profit, either before or after tax. Or we
can write our financial objective in terms of return on assets, return on investment or cash on hand. 1. Marketing/Sales:
Our marketing or sales objective could be in terms of sales volume, sales growth rate, market dominance, market share
or number of market segment effectively served. 2. Product/Services: Products and services objective could be the
quality of products and services, new products and services introduced, or customer satisfaction. 3. Operations: Our
operational objective might measure efficiency, productivity or cost reduction. 4. Human Resources: Our objectives
dealing with human resources can measure employee benefits, employee satisfaction, and employee training or
employee turnover. 5. Community: Our non-economic or community-related objective might deal with the non-
pollution of air and water; or Community member employment.
Strategy Formulation
Strategy Formulation is an analytical process of selection of the best suitable course of action to meet the organizational
objectives and vision. It is one of the steps of the strategic management process. The strategic plan allows an organization to
examine its resources, provides a financial plan and establishes the most appropriate action plan for increasing profits. It is
examined through SWOT analysis. SWOT is an acronym for strength, weakness, opportunity and threat. The strategic plan
should be informed to all the employees so that they know the company’s objectives, mission and vision. It provides direction
and focus to the employees.

Environmental Appraisal
Environment literally means the surroundings, external objects, influences or circumstances under which someone or
something exists. The environment of any organization is ‘the aggregate of all conditions, events and influences that surround
and affect it.’ Since the environment influences an organization in multitudinous ways, it understanding is of crucial
importance. The concept of environment can be understood by looking at some of its characteristics. Six mega trends that is
likely to shape the Indian economy, industry and markets in the near future. Industries and companies are quite interested in
knowing about such trends as these affect their businesses in multifarious ways.

Environmental Scanning
We have seen how organization can comprehend the environment in which they exist, identify their environment and classify
it into different sectors. In this section, we turn to the methods and techniques employed by the organizations to monitor
their environment and to gather data to derive information about the opportunities and threats that affect their business.
Environment to identify opportunities and threats affecting their business for the purpose of taking strategic decision.
Characteristics of Environment Business environment (or simple environment) exhibits many characteristics. Some of
the important and obvious characteristics are briefly described here.

Environment is Complex: - The environment consists of a number of factors, events, conditions and influences arising
from different sources. All these do not exist in isolation, but interact with each other to create entirely new sets of
influences. It is difficult to comprehend at once what factors constitute a given environment. All in all, environment is a
complex phenomenon-relatively easier to understand in parts but difficult to grasp in its totality.

Environment is Dynamic: - The environment is constantly changing in nature. Due to the many and varied influence
operating, there is dynamism in the environment causing it to continuously change its shape and character.

Environment is Multi-faceted: - What shape and character an environment assumes depends on the perception of the
observer. A particular change in the environment, or a new development, may be viewed differently by different
observers. This is frequently seen when the same development is welcomed as an opportunity by one company while
another company perceives it as a threat.

Environment has a Far-reaching Impact: - The environment has a far-reaching impact on organizations. The growth and
profitability of an organization depends critically on the environment in which it exists. Any environmental change has
an impact on the organization in several different ways
SWOT Analysis
SWOT Analysis, is a very popular strategic planning technique having applications in many areas including
management. Organizations perform a SWOT analysis to understand their internal and external environments. SWOT,
which is the acronym for strengths, weakness, opportunities and threats, is also known as WOTS-UP or TOWS analysis.
Through such an analysis, the strength and weaknesses existing within an organization can be matched with the
opportunities and threats operating in the environment so that an effective strategy can be formulated. An effective
organizational strategy, therefore, is one that capitalizes on the opportunities through the use of strengths and
neutralizes the threats by minimizing the impact of weaknesses, to achieve predetermined objectives. A simple
application of the SWOT analysis technique involves these steps:

1. Setting the objectives of the organization or its unit

2. Identifying its strengths, weaknesses, opportunities and threats
3. Asking four questions
4. How do we maximize our strengths?
5. How do we minimize our weaknesses?
6. How do we capitalize on the opportunities our external environment?
7. How do we protect ourselves from threats in our external environment?
8. Recommending strategies that will optimize the answers from the four questions from the four questions
The SWOT analysis is usually done with the help of a template in the form of a four-cell matrix, each cell of the matrix
representing the strengths, weaknesses, opportunities and threats. The analysis for preparing the SWOT matrix could
be done by a group of managers in a workshop session. The session could use the brainstorming technique for
generating ideas about the SWOT factors.
Approaches to Environmental Scanning

1. Systematic Approach: - Under this approach, information for environmental scanning is collected systematically.
Information related to markets and customers, changes in legislation and regulations that have a direct impact
on an organization’s activities, government policy statements pertaining to the organization’s business and
industry, etc. could be collected continuously to monitor changes and take the relevant factors into account.
Continuously updating such information is necessary not only for strategic management but also for
operational activities.

2. Ad hoc Approach: - Using this approach, an organization may conduct special surveys and studies to deal with
specific environmental issues from time to time. Such studies may be conducted, for instance, when an
organization has to undertake special projects, evaluate existing strategies or devise new strategies. Changes and
unforeseen developments may also be investigated with regard to their impact on the organization.

3. Processed-form Approach: - For adopting this approach, the organization uses information in a processed form,
available from different sources both inside and outside the organization. When an organization uses information
supplied by government agencies or private institutions, it uses secondary sources of data and the information is
available in a processed form.