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STRATEGIC MANAGEMENT

Meaning and Nature of Strategic Management

CONTENTS

01. Importance and Relevance

02. Characteristics of Strategic Management

03. The Strategic Management Process

04. Relationship between Corporate Strategy and Business Model

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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

1. Importance and Relevance

DEFINITION:

Strategy

- is a blueprint indicating an organization’s courses of action to

achieve the desired objectives.

- a plan for achieving a major goal, planning & directing the whole

operation of an event.

- an integrated approach to reach a goal.

- top management’s long term plans to attain outcomes consistent

with the organization’s mission and goals.

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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

1. Importance and Relevance

DEFINITION:

Strategic Management (managing or competing for future)


is also known as Business Policy or Corporate Strategy or
Corporate Planning. It refers to those set of management
measures taken with a view to ensuring the survival and success
of an enterprise in a competitive environment.

It is that set of decisions and actions which leads to the


development of an effective strategy or strategies to help
achieve corporate objectives. It is designed to ensure that the
basic objectives of the enterprise are achieved.
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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

1. Importance and Relevance

Strategic Management (managing or competing for future)


Determination of the basic long-term goals and objectives of an
enterprise and adoption of course of action and allocation of
resources necessary to carry out these goals.

It is a continuous process of determining the mission and goals


of an organization within the context of its external environment
and it’s internal strengths and weaknesses, formulating and
implementing strategies, and exerting strategic control to
ensure that the organization’s strategies are successful in
attaining its goals.

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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

1. Importance and Relevance

Strategic Management (managing or competing for future)


is a continuous, iterative, and cross-functional process of
matching an organization’s goals and resources with the
opportunities presented by its environment to gain competitive
advantage.

Since it involves long term, future-oriented, complex decision


making, and requires considerable resources, top management’s
active participation is absolutely essential.

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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

1. Importance and Relevance

Level of Management Management Function Nature of Function

Top Strategic broad and creative

Middle somewhat detailed


somewhat creative

Supervisor specific, detailed


Operational

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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

1. Importance and Relevance

Strategic Management (managing or competing for future)

Strategic Management involves effective decision-making and

activities in an organization that:

(1) have wide ramifications,

(2) have a long time perspective, and

(3) use critical resources towards perceived opportunities

or threats in a changing environment.

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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

1. Importance and Relevance

• As the environment changes, companies may change their


vision and objectives, structure, portfolio of business, markets
and competitive strategies. The economic liberalization and the
simultaneous wide opening up of business opportunities and
increase in competition have made SM a buzz word in the Indian
corporate world.

• The task of Strategic Management is to identify new and


different businesses, technologies and markets which the
company should try to create in the long term.

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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

1. Importance and Relevance

• Without competitors, there would be no need for strategy, for


the sole purpose of strategic planning is to enable the company
to gain, as efficiently as possible, a sustainable edge over its
competitors.

• Changes in one stage of the strategic management process will


inevitably affect other. After a planned strategy is implemented,
it could require modification as environmental or organizational
conditions change, or as top management’s ability to interpret
these changes improve. Hence, these steps are interrelated;
they should be treated as an integrated, ongoing process.

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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

1. Importance and Relevance

• SM provides clear objectives and direction for employees.

• It helps systemize business decision and improves


communication, coordination, and allocation of resources and
helps managers to have complete understanding of the
organization and to have a holistic approach to business
problems/issues.
• SM allows organizations to anticipate changing environmental
conditions.
• Businesses that perform SM are found to be more effective.

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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

1. Importance and Relevance

Intended Strategy

Un-realized Strategy
Divergent Strategy
Emergent Strategy

Realized Strategy

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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

1. Importance and Relevance

Benefits and Relevance of SM


1. Strategic management helps to envision an organization’s
future, formulate mission and make objectives clear. This is
clear from the fact that determination of mission and objectives
is the first step in the strategic management process.

2. It may be noted that the new growth and competitive


environment created by liberalization prompted many Indian
companies to evaluate and modify their mission and objectives
or to ponder over a mission for the company where one did not
exist.
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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

1. Importance and Relevance

Benefits and Relevance of SM


3. The articulation of the mission and objectives and the
formulation of a strategy for their accomplishment help people
in the organization understand what the organization stands for,
what is the development path charted out, what are the planned
results over a period of time, etc.

4. It makes people realize what are they working for, what is


expected of each SBU, division, functional department and
the employees.

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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

1. Importance and Relevance

Benefits and Relevance of SM


5. Strategic Management facilitates better delegation, co-
ordination, monitoring, performance evaluation, and control.

6. The identification of the strengths and weaknesses may help an


organization to take measures to overcome/minimize the
weaknesses and reinforce the strengths.

7. The SWOT analysis, which is a part of the strategic


management, helps a company to adopt suitable strategies for
exploiting opportunities and combating threats. It also helps
the company to drop those businesses where it would not be
successful or which do not meet the objectives.
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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

1. Importance and Relevance

Benefits and Relevance of SM


8. It constantly monitors the environment and makes modifications
of the strategy as and when required so that the plans are made
more realistic and effective.

9. It enables a company to be proactive rather than reactive in


order to meet its competition more effectively and efficiently.

10. It makes the management dynamic, appropriate to the


environment and result- and future-oriented.

11. Studies show that companies with SM are effective than


others, generally.
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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

1. Importance and Relevance

Benefits and Relevance of SM


12. It enhances problem-preventing capabilities as it promotes
interaction between at all levels.

13. It leads to increased employee productivity, reduced resistance


to change, and a clear understanding of performance-reward
relationship.

14. It allows for identification, prioritization, and exploitation of


opportunities.

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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

1. Importance and Relevance

Risks of SM
1. Conditions may vary so fast that managers are unable to do any
planning, especially long term planning.

2. The time spent by managers on the SM process may have a


negative impact on their operational responsibilities.

3. If the formulators of strategy are not involved in its


implementation, they may shirk their responsibility for the
decisions reached.

4. Strategic managers must be trained to anticipate and respond to


the disappointment of participating subordinates over unattained
expectations.
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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

1. Importance and Relevance

Challenges of SM

1. Technological Advances and Obsolescence

2. Product/Service Innovation and Development

3. Global Issues (due to economic liberation/expansion/contraction)

4. Quality Issues (TQM)

5. Social Issues

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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

1. Importance and Relevance

Hierarchy of Objectives

Promoters’ Vision and Value

Stock Holders’ Expectations Environmental Factors

Mission
Corporate
Objectives
SBU Objectives
Departmental
Objectives
Divisional Objectives
Individual Objectives

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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

1. Importance and Relevance

Corporate Strategy

SBU 1 SBU 1 SBU 1


Strategy Strategy Strategy

Operation Marketing Financial Personnel


Strategies Strategies Strategies Strategies

Corporate, Business, and Functional Level Strategies


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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

1. Importance and Relevance

Corporate Strategy

Operation Marketing Financial Personnel


Strategies Strategies Strategies Strategies

Corporate and Functional Level Strategies in a single business


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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

Corporate-level Strategy
- framed by BoD, CxOs
- responsible for the firm’s financial performance, enhancing brand
image, and fulfilling of CSRs
- develops strategies for the entire organization
- enhances the organization’s image and fulfills its overall social
responsibilities
- defines the vision, mission, and goals of the organization;
determines what business it should be in; allocates resources
among different businesses; and promotes leadership for the
organization.
- provides a link between strategic managers and share holders.
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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

Corporate-level Strategy (contd…)

- exploits the firm’s distinctive competencies by adopting a

portfolio approach to the management of its business.

- are more value oriented, more conceptual, and less concrete

than decisions at business/functional levels.

- characterized by greater risk, cost, and profit potential; greater

need for flexibility; and longer time horizons.

Examples: choice of businesses, dividend policies, sources of LT

financing, priorities for growth, etc.

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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

Business-level Strategy

- framed by business and corporate managers

- translates the directions generated at the corporate level into

concrete objectives and strategies for the SBU or individual

business divisions

- determines how the organization will compete in the selected

product-market arena; and, identifies and secures the most

promising market segment within that arena

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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

Business-level Strategy (contd…)

- bridges decisions at the corporate and functional levels

- less costly, risky, and profitable than corporate-level decisions

but are more costly, risky, and profitable than functional-level

decisions

Examples: plant location decisions, market segmentation,

geographic coverage, distribution channels, etc.

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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

Functional-level Strategy

- framed by finance, production, HR, product development, etc.

- directed at improving the effectiveness of operations within the

organization

- develops annual objectives and ST strategies in related functions

- implements and executes the organization’s strategic plans

- addresses issues such as the efficiency and effectiveness of

production, product development, manufacturing, HR, marketing

systems, quality of customer service, etc.

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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

Functional-level Strategy (contd…)

- ensures the success of products and services in increasing the

organization’s market share and share holders’ wealth

- implements the overall strategy of the organization taken at the

corporate and business levels

- involve action-oriented operational issues and are relatively

short term and low risk

- incur moderate costs (being dependent on available resources),

are adaptable to ongoing activities, and can be implemented

with minimal cooperation

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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

Functional-level Strategy (contd…)

- decisions are relatively concrete and quantifiable; therefore,


they receive critical attention and analysis even though their
comparative profit potential is low

Examples: decisions on generic vs brand name labelling, basic vs


applied R&D, high vs low inventory levels, close or open or loose
supervision

Global-level Strategy: addresses how the organization can expand


its operations outside the home country to grow and prosper in a
world where competitive advantage is determined at global levels.
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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

1. Importance and Relevance

Dimensions of Strategic Decisions

1. Strategic issues require top management decisions.

2. Require considerable amounts of the organization’s resources.

3. Affects the organization’s LT prosperity.

4. Are future oriented

5. Usually have multi-functional or multi-business consequences.

6. Require considering the organization’s environment.

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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

2. Characteristics of Strategic Management

1. Formulation of the organization’s vision, mission, goals,


objectives, and targets.

2. Analysis of its internal conditions and capabilities (strengths and


weaknesses).

3. Assessment of its external environment, including competitive


and general contextual factors (opportunities and threats).

4. Analysis of its options by matching its goals and resources with


the external environment.

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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

2. Characteristics of Strategic Management

5. Determination of its LT objectives and grand strategies.

6. Identification of the most desirable/alternative strategies and


their evaluation in the light of the LT objectives and grand
strategy.

7. Choice of the strategy.

8. Development of annual objectives and ST strategies that are


compatible with the selected strategy.

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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

2. Characteristics of Strategic Management

9. Implementation of the strategic choices by means of budgeted


resource allocation.

10. Evaluation of the success of the strategic process as an input for


further decision making.

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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

1. Importance and Relevance

Characteristics of a Winning Strategy

1. A thorough understanding of the organization’s competitive


environment in which it competes.

2. Simple vision, mission, and goals consistent with the


organization’s strategy.

3. Complete understanding of the organization’s resources and how


they translate into strengths and weaknesses.

4. Good planning for implementing the chosen strategy with


complete specifications.

5. Proper evaluation and control of possible future changes in the


proposed strategy.
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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

1. Importance and Relevance

Strategic Leaders:

1. Use their knowledge, enthusiasm, and energy in proving strategic

leadership for their team members in order to develop a high-

performing organization.

2. Strategic leadership represents the ability of a manager to

articulate a strategic vision and motivate people to buy into that

vision.

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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

1. Importance and Relevance

Good Strategic Leaders:

1. possess vision, eloquence, and consistency

2. actively participate and are continuously committed

3. use power astutely

4. are well-informed

5. have willingness to delegate and empower

6. possess high levels of EI.

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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

Techniques for improving decision making

1. Devil’s Advocacy

Generate an Devil’s Advocate


Final Plan
Expert Plan criticizes

2. Dialectic Enquiry

Expert Plan 1

(thesis)
Debate
Final Plan
(synthesis)
Expert Plan 2
- Definitions
- Recommended courses of action
(anti-thesis)
- Assumptions

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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

Developing a winning strategy requires:

1. keeping track of the latest developments in the field and

disseminating this information to the strategists.

2. supplying data inputs and analytical support needed for SM.

3. environmental analysis

4. identifying new business opportunities

5. helping to establish an efficient and effective planning system.

6. coordinating divisional plans.

7. assisting to evaluate and control strategies.

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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

3. The SM Process
Defining Organizational Vision, Mission, Goals, Objectives, & Targets

External Environment Analysis (OT) SWOT Internal Environment Analysis (SW)

Setting LT Objectives

Identifying Alternate Strategies

Choice of Strategy
Strategy Formulation

Strategy Implementation
Implementation of Strategy
and Control

Strategy Evaluation and Control

Feedback

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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

Business Model
- is the basic profit-generating idea of an organization.
- is the economic mechanism by which a business hopes to sell its
goods and services and generate profit.
- is evolved through consultations and brain storming and covers
all intricate details of the business. It is implemented by the
operational group.
- is the translation of strategies into an operational procedure to
achieve organizational goals and objectives.
- can change due to time, technology, and perceptions of the
future.
- some business models may prove successful at first but with
minor changes can become successful in future.
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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

4. Relationship between company’s strategy & its business model

Connect the Corporate Strategy to the Business Model

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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

Definitions

Competitive Advantage – The firm’s ability to enjoy strategy benefits


as compared to its competitors in the market due to a match
between its distinctive competencies and CSFs within its industry
(that enables it to outperform its competitors).

Sustained Competitive Advantage – The firm’s ability to enjoy


continuous strategic benefits over an extended period of time.

Comparative Advantage – The idea that certain products can be


produced more cheaply or at a higher quality in particular countries
due to advantages in labour costs and/or technology.
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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

Definitions (contd…)

Core Competence
- The firm’s key capabilities and collective learning skills that
are fundamental to its strategy, performance, and LT profitability.
- Unique and enduring strength of a firm for generating
competitive advantage; this strength cannot be easily emulated
by its competitors.
- It represents accumulated knowledge and skills that are difficult
to imitate and by which it outperforms its competitors.
- It can lead to competitive advantage only if the constituent
knowledge, skills, and technologies are creatively harmonized and
quickly reconfigured to respond to new opportunities.
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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

Questions
1. What are the strengths & weaknesses of formal strategic planning?
2. Discuss the accuracy of the statement: “Formal strategic planning
systems are irrelevant for firms competing in high-technology
industries where the pace of change is so rapid that plans are
routinely made obsolete by unforeseen events.”
3. What is the difference between intended strategy and realized
strategy? Why is this distinction important?
4. Does the CEO alone make strategic decisions for a firm? Explain.
5. What are the pitfalls in the strategic management process?
6. What is strategic management? Explain.
7. Explain the (six) identifiable dimensions in strategic decisions?
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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

Questions (contd…)

8. The decision making hierarchy of business firms typically contains


3 levels. What are they? Discuss.
9. What are the major limitations of a strategic model?
10.With the help of a strategic model, briefly explain the steps in
strategic management planning.
11.What is meant by competitive advantage?
12.Distinguish between business strategy and business model.
13.Write a note on the techniques of improving the strategic
management process.
14.How do you explain the success of a firm that does not use a
formal strategic planning process?
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STRATEGIC MANAGEMENT
Meaning and Nature of Strategic Management

Questions (contd…)

15. What are the components of a strategic management model?


16. Discuss the statement, ”Businesses that perform strategic
management are found to be more effective.”

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