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UNIT 1
Strategic Management

CONCEPT OF STRATEGIC MANAGEMENT

Strategic management is the process of formulating and implementing the major
goals and initiatives taken by a company's top management on behalf of owners,
based on consideration of resources and an assessment of the internal and external
environments in which the organization competes. It involves the analysis of the
company's mission, vision, and values, setting objectives and goals, developing
strategies and tactics to achieve those goals, and monitoring progress and making
adjustments as necessary.

Strategic management involves a series of steps, including environmental analysis,

strategy formulation, strategy implementation, and evaluation and control.
Environmental analysis involves assessing the internal and external factors that
affect the organization's ability to achieve its objectives, while strategy formulation
involves developing strategies that align with the organization's goals and resources.
Strategy implementation involves putting the plans into action, and evaluation and
control involve monitoring progress and making adjustments to ensure that the
organization is on track to achieve its goals.

Effective strategic management can help organizations to adapt to changing market

conditions, make informed decisions, allocate resources effectively, and gain a
competitive advantage in the marketplace.

The following are some important concepts in strategic management:

1. Mission and Vision: The mission statement defines the organization's purpose
and goals, while the vision statement outlines what the organization aims to
achieve in the future.
2. SWOT Analysis: SWOT analysis involves analyzing an organization's
strengths, weaknesses, opportunities, and threats to identify areas where it can
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improve and develop strategies to take advantage of opportunities and

mitigate threats.
3. Strategy Formulation: This involves developing a plan to achieve the
organization's objectives, including identifying the resources required,
defining the tasks that need to be accomplished, and establishing a timeline
for achieving them.
4. Implementation: Implementation involves putting the strategies developed in
the previous step into action. This involves assigning tasks, setting deadlines,
and monitoring progress.
5. Evaluation and Control: This involves monitoring and measuring the success
of the strategies implemented and making adjustments where necessary. It is
important to evaluate and control the implementation process to ensure that
the strategies are effective and aligned with the organization's objectives.
6. Competitive Advantage: This refers to the unique advantage that an
organization has over its competitors. It could be through cost leadership,
differentiation, or a combination of both.
7. Strategic Planning: This involves creating a roadmap that outlines the steps
required to achieve the organization's objectives over a specific period of time.
8. Corporate Social Responsibility: This refers to the responsibility of an
organization to act in the best interests of society and the environment.

Overall, strategic management is a critical process that helps organizations achieve

their objectives in an ever-changing business environment. It involves a thorough
analysis of an organization's internal and external factors and the development and
implementation of strategies that align with the organization's objectives.

There are several factors that influence strategic management, including:

1. External environment: The external environment, including economic,

political, social, and technological factors, can greatly influence an
organization's strategic management decisions. For example, changes in
government policies or economic conditions can impact an organization's
growth prospects and require adjustments to its strategies.
2. Industry competition: The level of competition within an industry can impact
an organization's strategic decisions. For example, in a highly competitive
industry, an organization may need to focus on differentiation or cost-cutting
strategies to maintain a competitive edge.
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3. Organizational culture: An organization's culture can impact its strategic

management decisions. For example, an organization with a strong culture of
innovation may prioritize R&D spending to develop new products or services.
4. Leadership: The leadership of an organization can greatly influence its
strategic management decisions. For example, a CEO with a strong vision for
the organization's future may drive strategic initiatives to achieve that vision.
5. Resources: An organization's resources, including financial and human
resources, can impact its strategic management decisions. For example, an
organization with limited financial resources may need to prioritize cost-
cutting initiatives over growth initiatives.
6. Stakeholder expectations: The expectations of stakeholders, including
shareholders, customers, employees, and the broader community, can impact
an organization's strategic decisions. For example, an organization with a
strong commitment to sustainability may prioritize environmentally friendly
initiatives.
7. Organizational structure: An organization's structure can impact its strategic
management decisions. For example, a decentralized organization may have
more flexibility to pursue local market opportunities, while a centralized
organization may be better positioned to leverage economies of scale.
8. Technology: Advances in technology can greatly influence an organization's
strategic management decisions. For example, the rise of digital technology
has created new opportunities for organizations to connect with customers and
operate more efficiently.

STRATEGIC MANAGEMENT AS A PROCESS

Strategic management is a process that organizations use to develop and implement
their strategies in order to achieve their goals and objectives. It involves a set of
activities that help organizations analyze their current situation, develop strategies
for success, and implement those strategies effectively. Here are some key notes on
the strategic management process:

1. Strategic analysis: This is the first step in the strategic management process,
which involves assessing the internal and external environment of the
organization. It includes analyzing the strengths and weaknesses of the
organization, as well as the opportunities and threats in the external
environment.
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2. Strategy formulation: Based on the strategic analysis, the organization

develops its strategies to achieve its goals and objectives. This involves
identifying the organization's vision and mission, setting strategic objectives,
and selecting appropriate strategies to achieve those objectives.
3. Strategy implementation: Once the strategies have been developed, the
organization must implement them effectively. This involves allocating
resources, designing organizational structures, and establishing policies and
procedures to support the strategies.
4. Strategy evaluation and control: The final step in the strategic management
process is to evaluate the success of the strategies and make any necessary
adjustments. This involves measuring performance, comparing actual results
to expected results, and taking corrective action if necessary.

Overall, the strategic management process is an ongoing, iterative process that

requires continuous assessment and adjustment to ensure that the organization is
effectively achieving its goals and objectives in a constantly changing business
environment.

DEVELOPING A STRATEGIC VISION

Developing a strategic vision is an important step in the strategic management
process. It involves identifying where the organization wants to be in the future,
typically three to five years out, and creating a long-term plan to get there.

Strategic vision refers to the long-term direction and purpose of an organization. It

is a statement that outlines what the organization aims to achieve in the future and
the overall strategy it will use to accomplish these goals. A strategic vision is
typically developed by senior leaders and serves as a guide for decision-making and
resource allocation within the organization.

Here are some key characteristics of a strategic vision:

1. Future-focused: A strategic vision should look ahead and articulate where the
organization wants to be in the long term.
2. Inspirational: A strategic vision should inspire and motivate employees to
work towards achieving the organization's goals.
3. Clear and concise: A strategic vision should be easy to understand and
communicate, both internally and externally.
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4. Unique: A strategic vision should differentiate the organization from its

competitors and reflect its unique strengths and capabilities.
5. Measurable: A strategic vision should include specific, measurable objectives
that can be tracked and monitored over time.

Developing a strategic vision requires careful consideration of the organization's

mission, values, and strategic goals. It should also take into account the external
environment, including market trends, customer needs, and competitive pressures.
A well-crafted strategic vision can help an organization stay focused on its long-
term goals and guide its decision-making and resource allocation to achieve those
goals.

Example: Tata Group's Vision 2025

The Tata Group is a leading conglomerate in India with a presence in various

industries such as automobiles, steel, hospitality, telecommunications, and more.
The group's strategic vision, known as Vision 2025, was developed in 2008 to guide
its growth and expansion plans for the next two decades.

The Vision 2025 plan is centered on the concept of "Building Better Lives," which
aims to create sustainable value for all stakeholders, including customers,
employees, shareholders, and society at large. The plan is based on four pillars:

1. Ethics and values: Tata Group aims to uphold the highest standards of ethics
and corporate governance in all its businesses.
2. Globalization: The group plans to expand its global footprint and become a
truly global organization.
3. Innovation: Tata Group aims to foster a culture of innovation and create
cutting-edge products and services that meet the evolving needs of customers.
4. Sustainability: The group is committed to creating sustainable value for all
stakeholders and contributing to the sustainable development of society.

The Vision 2025 plan has guided the Tata Group's strategic decisions and
investments over the past decade. The group has made significant progress in areas
such as sustainability, innovation, and global expansion. For example, the group's
automotive arm, Tata Motors, has launched several innovative products, such as the
Tata Nano, the world's cheapest car, and the Tata Nexon, India's first indigenous
electric SUV. The group has also made strategic investments in global companies
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such as Jaguar Land Rover and Corus Steel, which have helped it expand its global
footprint.

Overall, the Tata Group's Vision 2025 provides a clear and inspiring strategic vision
that has helped the group navigate the rapidly changing business landscape in India
and globally.

Here are some important points on the process of developing a strategic vision:

1. Understanding the organization's mission: The mission statement should

provide a clear understanding of the organization's purpose and values. This
is an important foundation for developing a strategic vision that is aligned
with the organization's overall goals.
2. Conducting a SWOT analysis: SWOT stands for strengths, weaknesses,
opportunities, and threats. This analysis helps to identify internal and external
factors that may impact the organization's ability to achieve its goals. This
information can be used to inform the strategic vision.
3. Assessing the competitive environment: It's important to understand the
competitive landscape in which the organization operates. This involves
analyzing the strengths and weaknesses of competitors and identifying
potential opportunities and threats.
4. Identifying strategic goals: Based on the information gathered in the previous
steps, strategic goals can be identified. These goals should be specific,
measurable, achievable, relevant, and time-bound (SMART).
5. Developing a strategic plan: Once the strategic goals are identified, a plan can
be developed to achieve them. This plan should include specific actions and
timelines for achieving each goal.
6. Communicating the strategic vision: The strategic vision and plan should be
communicated to all stakeholders, including employees, customers, and
investors. This helps to ensure that everyone is aligned with the organization's
goals and understands their role in achieving them.
7. Monitoring and adjusting the plan: The strategic plan should be regularly
monitored and adjusted as needed. This helps to ensure that the organization
stays on track and adapts to changes in the internal and external environment.
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DEVELOPING A STRATEGIC MISSION AS A PART OF THE

STRATEGIC MANAGEMENT PROCESS:

A strategic mission refers to the core purpose and direction of an organization,

outlining what it aims to achieve, who it serves, and how it plans to operate in the
long term. It encompasses the organization's values, vision, and goals and serves as
a guide for decision-making, resource allocation, and performance evaluation.

An example of a strategic mission might be the mission statement of a company like

Apple, which is to "design innovative products and bring them to market with a focus
on the customer experience." This mission statement defines the company's overall
purpose and serves as a guide for its product development, marketing, and
operational decisions.

Another example of a strategic mission might be the mission of a nonprofit

organization like the Red Cross, which is to "prevent and alleviate human suffering
in the face of emergencies by mobilizing the power of volunteers and the generosity
of donors." This mission statement guides the organization's efforts to respond to
disasters, provide humanitarian aid, and promote preparedness and safety.

Understanding an organization's strategic mission is crucial for developing effective

business strategies and aligning the company's operations with its long-term
objectives. It helps in identifying the strengths and weaknesses of the organization,
assessing market opportunities, and creating a competitive advantage.

1. Understand the Purpose: Developing a strategic mission begins with

understanding the purpose of the organization. This includes identifying the
key values, beliefs, and goals that drive the organization.
2. Analyze the External Environment: The next step is to analyze the external
environment in which the organization operates. This involves identifying the
opportunities and threats that exist in the market and understanding how they
might impact the organization.
3. Analyze the Internal Environment: It is also important to analyze the internal
environment of the organization. This involves understanding the strengths
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and weaknesses of the organization and identifying areas where it can

improve.
4. Define the Mission: Once the external and internal environments have been
analyzed, the organization can define its mission. The mission statement
should clearly state the purpose of the organization and what it aims to
achieve.
5. Communicate the Mission: It is important to communicate the mission
statement to all stakeholders, including employees, customers, and investors.
This ensures that everyone understands the purpose of the organization and
what it is working to achieve.
6. Review and Revise the Mission: Finally, it is important to regularly review
and revise the mission statement to ensure that it remains relevant and aligned
with the goals of the organization.

Overall, developing a strategic mission is an important part of the strategic

management process as it helps to provide a clear sense of purpose and direction for
the organization.

DEVELOPING STRATEGIC OBJECTIVES:

Strategic management is the process of defining and implementing an organization's
strategy to achieve its goals and objectives.

Strategic objectives refer to the specific, measurable goals and targets that a
company or organization aims to achieve as part of its long-term strategy. These
objectives are the building blocks of a strategic plan and help to guide decision-
making and resource allocation at all levels of the organization.

Strategic objectives should be:

1. Specific: clearly defined and measurable, so progress towards achieving them

can be tracked and evaluated.
2. Aligned with the organization's vision and mission: they should be directly
tied to the overall strategic direction of the organization and contribute to its
long-term success.
3. Realistic: achievable within the constraints of the organization's resources and
capabilities.
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4. Time-bound: with a clear deadline or timeframe for achieving the objective.

Examples of strategic objectives may include:

1. Increasing market share by a certain percentage within a defined timeframe.

2. Expanding into new markets or product lines.
3. Developing new partnerships or collaborations to enhance the organization's
competitive position.
4. Improving customer satisfaction ratings by a specific amount within a set
timeframe.
5. Reducing costs or increasing efficiency through process improvements or
technology implementation.

Overall, strategic objectives are critical to the success of an organization as they help
to align activities and resources towards a common goal, providing a roadmap for
achieving long-term success.

Developing strategic objectives is a critical step in this process, as it sets the direction
for the organization and establishes what it wants to achieve in the long term.

Here are some key notes on developing strategic objectives:

1. Vision: Developing strategic objectives starts with defining the organization's

vision, which is a statement of what it aspires to be in the future. The vision
should be inspiring and provide a sense of direction for the organization.
2. Mission: The next step is to define the organization's mission, which is a
statement of its purpose, values, and scope of operations. The mission should
align with the vision and guide the organization's decision-making.
3. Goals: Once the vision and mission are defined, the organization needs to set
specific, measurable, achievable, relevant, and time-bound (SMART) goals.
These goals should be aligned with the vision and mission and help the
organization move closer to achieving them.
4. Strategies: After setting goals, the organization needs to develop strategies to
achieve them. Strategies are the action plans that outline how the organization
will allocate resources and leverage its capabilities to achieve its goals.
5. Key performance indicators (KPIs): To monitor progress towards achieving
its goals, the organization needs to define KPIs that measure its performance.
KPIs should be aligned with the goals and provide a clear picture of whether
the organization is moving in the right direction.
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6. Communication: Developing strategic objectives is a collaborative process

that involves stakeholders across the organization. Effective communication
is critical to ensure that everyone understands the objectives and their role in
achieving them.
7. Evaluation and feedback: Finally, the organization needs to continuously
evaluate its progress towards achieving its strategic objectives and seek
feedback from stakeholders. This feedback can help the organization make
adjustments to its strategies and ensure that it stays on track towards achieving
its goals.

STRATEGIC POLICIES
Strategic policies are high-level, long-term plans that guide an organization's actions
and decisions. They define the overall direction, goals, and priorities of an
organization and provide a framework for decision-making at all levels. Strategic
policies typically cover a wide range of areas, such as finance, human resources,
marketing, operations, and technology.

Developing strategic policies involves a number of steps, including:

1. Conducting a SWOT analysis: This involves identifying an organization's

strengths, weaknesses, opportunities, and threats. A SWOT analysis helps to
identify areas where the organization needs to improve or focus its efforts.
2. Defining the mission and vision: The mission statement defines the purpose
of the organization and the vision statement outlines the long-term goals and
aspirations.
3. Setting goals and objectives: This involves defining specific, measurable,
achievable, relevant, and time-bound (SMART) goals and objectives that
align with the mission and vision.
4. Formulating strategies: This involves developing strategies and action plans
that enable the organization to achieve its goals and objectives.
5. Communicating and implementing policies: The policies must be
communicated to all stakeholders, and their buy-in must be obtained. They
must also be integrated into the organization's operations and monitored
regularly to ensure they are being followed.
6. Reviewing and revising policies: Strategic policies must be reviewed
regularly to ensure they remain relevant and effective. Revisions may be
required in response to changes in the internal or external environment.
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Overall, developing strategic policies requires a collaborative and iterative approach

that involves input from various stakeholders, including senior management,
employees, customers, suppliers, and other external parties. Effective strategic
policies provide a clear direction for the organization and enable it to adapt to
changing circumstances and achieve its long-term goals.

FACTORS THAT SHAPE A COMPANY'S STRATEGY

A company's strategy is a comprehensive plan that outlines the long-term goals and
objectives of the organization, as well as the actions it will take to achieve those
goals. There are a number of factors that shape a company's strategy, and it is
important for to understand these factors in order to develop effective strategies for
their own organizations.

1. Industry Analysis: The industry in which a company operates is a critical

factor in shaping its strategy. A company's strategy must be aligned with the
characteristics of the industry in which it competes. Factors such as
competition, market demand, regulatory environment, technological
advancements, and economic conditions within the industry can significantly
influence the company's strategy.
2. Competitive Analysis: A company's competitive environment is another
important factor that shapes its strategy. It is essential for companies to
analyze their competitors' strengths and weaknesses, and to identify their own
competitive advantages. This helps the company to develop a strategy that
will allow it to differentiate itself from its competitors and achieve a
sustainable competitive advantage.
3. Customer Analysis: Understanding the needs and preferences of customers is
critical in shaping a company's strategy. Companies must analyze their target
customers and determine what they value most. This can help the company to
develop products and services that meet the needs of its customers and create
a competitive advantage.
4. Resource Analysis: The resources that a company has at its disposal can
significantly shape its strategy. Resources include not only financial resources
but also human capital, technology, and physical assets. A company's strategy
must be aligned with its available resources in order to achieve its goals.
5. Organizational Culture: A company's culture can also influence its strategy.
The values, beliefs, and norms that define a company's culture can impact the
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way it operates and make it more or less adaptable to change. A strong culture
can help a company to develop a clear and effective strategy, while a weak
culture can hinder its ability to execute its strategy.
6. Leadership: The leadership of a company plays a crucial role in shaping its
strategy. Leaders must have a clear vision of the company's goals and be able
to communicate that vision to the organization. They must also be able to
adapt to changes in the environment and make decisions that are in the best
interests of the company.
7. External Environment: Finally, the external environment can also shape a
company's strategy. This includes factors such as political, economic, social,
and technological changes that can impact the company's operations.
Companies must be able to anticipate and adapt to changes in the external
environment in order to develop effective strategies.

In conclusion, a company's strategy is shaped by a complex set of factors, including

its industry, competitive environment, customers, resources, organizational culture,
leadership, and the external environment.

CRAFTING A STRATEGY
Crafting a strategy requires a deep understanding of the industry and the competitive
landscape. It is essential to develop a sound knowledge of industry analysis and
competitive analysis to craft effective strategies.

Industry Analysis: Industry analysis is a critical component of crafting a strategy.

It is the process of evaluating the characteristics and dynamics of an industry to
identify opportunities and threats. A comprehensive industry analysis involves
examining several factors, such as the industry's structure, the competitive forces,
and the key success factors.

The following are the steps involved in industry analysis:

1. Define the industry: The first step in industry analysis is to define the industry
that you want to analyze. It is essential to define the industry accurately to
ensure that you are analyzing the right market.
2. Understand the industry structure: Industry structure refers to the
characteristics and dynamics of an industry, such as the number of players,
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their size, and market share. Understanding the industry structure is critical in
determining the level of competition in the industry.
3. Identify the competitive forces: Porter's five forces model is a widely used
tool to identify the competitive forces that impact an industry. The five forces
include the threat of new entrants, the bargaining power of suppliers, the
bargaining power of buyers, the threat of substitutes, and the intensity of
competitive rivalry.
4. Analyze key success factors: Key success factors are the critical factors that
determine the success of firms in an industry. Identifying and analyzing these
factors can help firms craft effective strategies.
5. Evaluate industry trends: Industry trends such as technological advancements,
changes in customer preferences, and changes in regulations can impact the
industry's future. Evaluating these trends can help firms prepare for the future
and craft strategies accordingly.

Competitive Analysis: Competitive analysis is the process of evaluating the

strengths and weaknesses of the firm's competitors to identify opportunities and
threats. A comprehensive competitive analysis involves examining several factors,
such as the competitor's strategy, market share, and customer base.

The following are the steps involved in competitive analysis:

1. Identify the competitors: The first step in competitive analysis is to identify

the firm's competitors. Competitors can be direct or indirect, and it is essential
to identify all the players in the market.
2. Analyze the competitor's strategy: Analyzing the competitor's strategy can
help firms understand their strengths and weaknesses. This analysis involves
examining factors such as their product offerings, pricing strategy, and
marketing strategy.
3. Evaluate the competitor's market share: Evaluating the competitor's market
share can provide insights into their strength in the market. It is essential to
analyze their market share by segment to get a better understanding of their
position.
4. Analyze the competitor's customer base: Analyzing the competitor's customer
base can provide insights into their target market and customer preferences.
This analysis involves examining factors such as their customer
demographics, customer behavior, and customer satisfaction levels.
5. Evaluate the competitor's strengths and weaknesses: Identifying the
competitor's strengths and weaknesses can help firms identify opportunities
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and threats. This analysis involves examining factors such as their financial
position, operational efficiency, and brand equity.

In conclusion, crafting a strategy requires a sound understanding of industry and

competitive analysis. Industry analysis involves evaluating the characteristics and
dynamics of an industry, while competitive analysis involves evaluating the
strengths and weaknesses of the firm's competitors.