STRATEGIC MANAGEMENT (KMBN-301)

UNIT-1
MEANING AND DEFINITION OF STRATEGY

STRATEGY- The term “strategy” is derived from the Greek word “strategia” which means
generalship.

“A plan of action designed to achieve a long- term or overall aim.”

According to Alfred D Chandler “The determination of the basic long- term goals and
objectives of an enterprise and the adoption of the courses of action and the allocation of
resources necessary for carrying out these goals.”

According to Mintzberg “A pattern in a stream of decisions and actions.”

Strategy is also known as master plan.

Simply we can say that strategy is the direction and scope of an organization over the long-
term. It helps achieve an advantage for the organization through its configuration of resources
within a challenging environment to meet the needs of markets and fulfill stakeholders
expectations.

Strategy generally involves setting goals and priorities, determining actions to achieve the goals
and mobilizing resources to execute the actions.

NATURE OF STRATEGY
1. Strategy is a major course of action through which an organization relates itself to its
environment particularly the external factors to facilitate all actions involved in meeting the
objectives of the organization.

2. Strategy is the blend of external and internal factors.

3. Strategy is goal oriented.

4. Strategy is future oriented.

5. Strategy is the combination of action aimed to meet a particular condition, to solve certain
problems or to achieve a desirable end.

6. Strategy requires some system and norms for its efficient adoption in any organization.

7. Strategy provides overall framework for guiding enterprise thinking and action.

Compiled by- Mr. Manish (Assistant Professor, Page 1

 STRATEGIC MANAGEMENT (KMBN-301)
IMPORANCE OF STRATEGY
A business strategy creates a vision and direction for the whole organization. It is important
that all people within a company have clear goals and are following the direction or vision and
prevent individuals from losing sight from their company’s aims. A successful strategic plan
does the following –

1: Provides direction and action plans.

2: Defines accountabilities.

3: Enhances communication and commitment.

4: Provides a frame work for ongoing decision-making.

Strategic Management
“Strategic management is that set of managerial decisions and actions that determine the long-
run performance of a corporation.”

It includes environmental scanning (both external and internal), strategy formulation (strategic
or long-run planning), strategy implementation and evaluation and control.
The study of strategic management emphasizes the monitoring and evaluating of external
opportunities and threats in light of a corporation’s strength and weaknesses.
Simply we can say that strategic management is the process of setting goals, procedures and
objectives in order to make a company or organization more competitive.
Often strategic management includes strategy evaluation, internal organization analysis and
strategy execution throughout the company.

Nature and scope of strategic management

Strategic management is both an art and science of formulating, implementing and evaluating
cross functions decisions that facilitates an organization to accomplish its objectives.
The purpose of strategic management is to use and create new and different opportunities for
future.
The nature of strategic management is dissimilar from other facts of management as it
demands awareness to the “big picture” and rational assessment of the future options.
It offers a strategic direction endorsed by the team and stake holders, a clear business strategy
and vision for the future, a method for accountability and a structure for governance at the

Compiled by- Mr. Manish (Assistant Professor, Page 2

 STRATEGIC MANAGEMENT (KMBN-301)
different levels, a logical framework to handle risk in order to guarantee business continuity,
the capacity to exploit opportunities and react to external change by taking ongoing strategic
decisions.

Importance of strategic management

1: To shape the future of business.

2: Effective strategic ideas.
3: Managers and employer are innovative and creative.
4: Decentralized management.
5: It helps to increase the productivity.
6: To make discipline.
7: To make control.

Basic Model of strategic management

(Strategic management process)

Strategic management process is defined as the way of organization defines its strategy. It is a
continuous process in which the organization decides to implement a selected few strategies,
details the implementation plans and keeps on appraising the progress and success of
implementation through regular assessment.

Environm Strategy Strategy Evaluatio

en tal Formulati Implemen n and
Scanning on ta tion control

Compiled by- Mr. Manish (Assistant Professor, Page 3

 STRATEGIC MANAGEMENT (KMBN-301)

Strategic management consist of four basic elements:

1: Environmental Scanning

2: Strategy Formulation

3: Strategy Implementation

4:Evaluation and Control

Environmental Scanning
Environmental scanning is the monitoring, evaluating and disseminating of information from
the external and internal environment to key people within the organization. Its purpose is to

Compiled by- Mr. Manish (Assistant Professor, Page 4

 STRATEGIC MANAGEMENT (KMBN-301)
identify strategic factors- those external and internal elements that will determine the future of
the corporation. There are various methods of environmental scanning. We can scan the
environment with the help of SWOT analysis.

SWOT Analysis-

S – Strengths

W- Weaknesses

O – Opportunities Positive Negative

T – Threats

Internal

Strengths Weaknesses

External
Opportunities Threats
SWOT MATRIX

The external environment consist of variables opportunities and threats that are outside the
organization. These factors are not controllable by the organization.

The internal environment of the organization consists of variables strengths and weaknesses
that are within the organization. These factors are controllable by the organization.

Strategy Formulation
Strategy formulation is the development of long- range plans for the effective management of
environmental opportunities and threats, in light of corporate strengths and weaknesses.

(A) Mission-An organization’s mission is the purpose or reason for the organization’s
existence. Mission include the firm’s philosophy about how it does business and treats
its employees.

Compiled by- Mr. Manish (Assistant Professor, Page 5

 STRATEGIC MANAGEMENT (KMBN-301)
Its defined as a fundamental unique purpose that sets a business apart from other firms
of its type and identifies its scope of its operations in product and market terms. It is a
statement which defines the role that organization plays in society.
(B) Objectives- Objectives are the end results of planned activity. The achievement
of corporate objectives should result in the fulfillment of a corporation’s mission.
Objectives provides direction for decision- making.
(C) Strategies- A strategy of a corporation forms a comprehensive master plan
stating how the corporation will achieve its mission and objectives. A typical business
firm usually considers three types of strategy-
* Corporate Strategy
* Business Strategy
* Functional strategy
(D) Policies- A policy is a broad guidelines for decision- making that links the
formulation of strategy with its implementations.
Strategy Implementation
(A) Programs- A program is a statement of the activities or steps needed to
accomplish a single – use plan. It makes the strategy action oriented. It may involve
re- structuring the corporation, changing the company’s internal culture.
(B) Budgets- Budget is the cost of program. A budget is an estimation of revenue
and expenses for a particular program.
(C) Procedures- Procedures are a system of sequential steps or techniques that
describes in detail how a particular task or job is to be done. Procedures means
various activities that must be carried out in order to complete the corporation’s
programs.
Evaluation and Control
Evaluation and control is the process in which corporate activities and performance results are
monitored so that actual performance can be compared with desired performance.
Performance is the end result of activities.

Compiled by- Mr. Manish (Assistant Professor, Page 6

 STRATEGIC MANAGEMENT (KMBN-301)

Strategic Decision- Making Process

Compiled by- Mr. Manish (Assistant Professor, Page 7

 STRATEGIC MANAGEMENT (KMBN-301)
Strategic decision- making is about choosing the best path to success. Strategic
decision- making should start with a clear idea of your company’s mission and
vision- the reasons you exist as a business.

Simply we can say that strategic decisions are the decisions that are concerned
with whole environment in which the firm operates, the entire resources and the
people who form the company and the interface between the two.

There are several systematic steps involves in strategic decision- making process.

1. Evaluate Current Performance Results- Evaluate current

performance results in terms of (a) return on investment, profitability (b)
the current mission, objectives, strategies and policies.
2. Review Corporate Governance- Review corporate governance is the
performance of the firm’s board of directors and top management.
3. Scan and Assess The External Environment- Scan and assess the
external environment to determine the strategic factors that pose
opportunities and threats.
4. Scan and Assess The Internal Corporate Environment- Scan and
assess internal corporate environment to determine the strategic factors
that are strengths and weaknesses.
5. Analyze Strategic SWOT) Factors- (a) Pinpoint problem areas and (b)
review and revise the corporate mission and objectives as necessary.
6. Generate, Evaluate and Select The best Alternative Strategy- In
this step we will generate, evaluate and select the best alternative strategy
in light of the SWOT analysis.
7. Selection and Implementation of best Strategies- Implement, select
strategies via programs, budgets and procedures.
8. Evaluation and Control of Implemented Strategies- Evaluate
implemented strategies via feedback systems and the control of activities
to ensure their minimum deviation from plans.

Compiled by- Mr. Manish (Assistant Professor, Page 8

 STRATEGIC MANAGEMENT (KMBN-301)
Corporate Governance:
“ Corporate governance is the system of rules, practices and processes by which
a company is directed and controlled.”

“Corporate governance refers to the way in which companies are governed and
to what purpose. It identifies who has power and accountability, and who
makes decision.”

“ Corporate governance essentially involves balancing the interests of a

company’s many stakeholders, such as shareholders, senior management
executives, customers, suppliers, distributors, financiers, the government and
the community.”

A company board of directors is the primary force influencing corporate

governance. The basic principles of corporate governance are accountability,
fairness and responsibility.

Composition of the Board

Section 149 of the companies Act, 1956 states that every company’s board of
directors must necessarily have a minimum of 3 directors if it is public company, 2
directors if it is a private company and one director in a one person company.

The maximum number of members of a company can assign as directors is

fifteen.

The maximum number of companies that an individual can become a director of,
is 20 companies.

At least, one women director must be appointed by the company.

The companies Act, 1956 defines a “director” as including “any person occupying
the position of a director by whatever name called.”

Compiled by- Mr. Manish (Assistant Professor, Page 9

 STRATEGIC MANAGEMENT (KMBN-301)
As long as person is duty appointed by the company to control the company’s
business and authorized by the article to contract in the company’s name and on
its behalf , the functions as directors.

APPOINTMENT OF DIRECTORS
According to the companies Act, 1956 only individual can be appointed as a
member of the board of directors. Usually the appointment of directors is done
by shareholders.

In case of private company, their article of association can prescribe the method
to appoint any and all directors.

Role and Responsibilities of the Board of Directors

Board of directors are shareholders of the company. Mostly, the directors are
elected by the shareholders and they in turn elect the managing director. The role
and responsibilities of the board of directors are as follows-

1. Trusteeship- The board of directors act as trustees to the property and

welfare of the company. Hence, the board must use the company’s property for
the long- run gain of the company, but not for their personal use.

2. Formulation of mission, objectives, strategies and policies.

3. Designing organizational structure.

4. Selection of top executives.

5. Financial sanctions like- sanctioning of finances to various projects, reserve

distribution of profit to shareholders, repayment of loans ect.

6. Link between the company and external environment.

7. Governance (establish a policy based governance system).

8. Strategic direction (provide direction for the organization.

9. Accountability.

Compiled by- Mr. Manish (Assistant Professor, Page

 STRATEGIC MANAGEMENT (KMBN-301)
10. Recruit, select, supervise, retain, evaluate and compensate the manager.

11. Monitor and control functions.

12. To promote the success of the company.

13. To exercise independent judgment.

14. To avoid conflicts.

Duties of Directors
1. Duty not to misapply company assets.
2. Duty not to make secret profits.
3. Duty to not permit conflict of interest.
4. Duty to attend meetings.
5. Duty not to exceed power.

Trends in Corporate Governance

Corporate governance is a set of business factors that consists of processes, rules
and practices through which the authorities run the system. It is an important
part of the daily administration of the companies through which companies
function successfully.

This year, as in the previous five years, Russell Reynolds associates interviewed
over 40 global institutional and activist investors, pension fund managers, proxy
advisors and other corporate governance professionals to identify the corporate
governance trends that will impact boards and directors in 2021.

Global Trend Predicted for 2021

1. Climate Change Risks- Environmental, social and governance factors
(ESG).

Compiled by- Mr. Manish (Assistant Professor, Page

 STRATEGIC MANAGEMENT (KMBN-301)
Corporate responsibility for managing climate change as a long- term,
material financial risk has gained traction in market that have previously
resisted it.
2. Diversity, equity and inclusion
3. Human Capital Management- The largest institutional investors
continue to increase their expectations around broad oversight of human
capital management (HCM) and corporate culture.
4. Return of Activism and Increased Capital Markets-
Board will have to stay focused on capital allocation and key business
metrics given the significant capital available and quest for deals.
5. Virtual Board and Shareholders Meeting-
The current trends of corporate governance is of virtual and shareholders
meetings. In this method board of directors and shareholders meet virtually
through the means of internet or video conferencing.

Corporate Social Responsibility

Corporate social responsibility is a management concept where by companies
integrate social and environmental concerns in their business operations and
interactions with their stakeholders. Corporate social responsibility (CSR) is a self
regulating business model that helps a company be socially accountable- to itself,
its stakeholders and the public. CSR helps both society and the brand image of
companies.

Corporate social responsibility is a form of management that considers ethical

issues in all aspects of the business. Strategic decisions of a company have both
social and economic consequences. Social responsibility of a company is main
element of the strategy formulation process.

Integrating social responsibility in strategic management requires sound

knowledge of the types of social responsibilities a company deals with.

Compiled by- Mr. Manish (Assistant Professor, Page

 STRATEGIC MANAGEMENT (KMBN-301)
Economic responsibilities are the most basic type of social responsibilities. The
company is expected to provide goods to the society as reasonable prices, create
jobs and pay due taxes.

Corporate social responsibility is traditionally broken into four categories-

1. Environmental Responsibility- It refers to the belief that organizations

should behave in as environmentally friendly as way as possible.
 Reducing pollution, greenhouse gas emissions, the use of single- use
plastics, water consumption and general waste.
 Increasing reliance on renewable energy, sustainable resources and
recycled or partially recycled materials.
 Offsetting negative environmental impact.
2. Ethical Responsibility- Ethical responsibility is concerned with ensuring
an organization is operating in a fair and ethical manner. Ethical
responsibility aim to achieve fair treatment of all stakeholders, including
leadership, investors, employees, suppliers and customers.
3. Philanthropic Responsibility- It refers to a business aim to actively
make the world and society a better place.
4. Economic Responsibility- The end goal is not to simply maximize
profits, but positively impact the environment, people and society.

Compiled by- Mr. Manish (Assistant Professor, Page