Unit 1

Strategic Management: overview

 Business policy
 It is related with the organizational problems
which affects the success of the organization
as whole.
 It is the study of functions & responsibilities of
senior management.
 It deals with the determination of the future
course of action by the organization.
 It involves what needs to be done to achieve
the final objective.
 It also concern with the mobilization of resources
by the help of which organization can achieve it’s
goals.
Strategy
 The term strategy is derived from a Greek
word strategos which means a generalship,
the actual direction of military force.
 A strategy means to achieve an objective.
 It is a blueprint indicating an organization’s
courses of action
 Top management’s long term plans to attain
outcomes consistent with the organization’s
mission and goals.
 It is related to pursuing those activities
which moves an organization from its
current position to desire future state.
Types of strategy
 Competitive Advantage.
 Cost advantage.
 New product development.
 Expansion.
 Reengineering.
 Restructuring.
Levels of strategy
LEVELS OF MANAGEMENT LEVELS OF STRATEGY

CORPORATE CORPARATE-LEVEL
Corporate Office

SBU SBU BUSINESS-LEVEL

SBU SBU
1 2 3

FUCTIONAL FUNCTIONAL-LEVEL

FINANCE Marketing Operations HRM Information

characteristics Corporate level Business level Operational level
Nature Conceptual Conceptual but Totally operational
related to business
Measurability Non measurable Measurable to Quantifiable
some extent
Frequency Large span 5-10 Periodic Annually
yrs.
Adaptability Poor Average High
Character Innovative & Action oriented Totally action
creative oriented
Risk High Moderate Low
Profit Large Moderate Low
Flexibility High Moderate Low
Time Long range Medium range Short range
Cost involved High Medium Low
Cooperation High Medium Low
Business strategy
Strategic Intent
Vision:-
Meaning:-
 What the firm / person would ultimately like to
become.
 It is a set of round map of co’s future, it is result of
institutive capability, new idea, without detail
search for cause & effect.
 It is a powerful motivator of action & it is from
action that vision could often be derived.
 Definition:-
Kotler defines it as “a description of something
(business, corporate culture, technology etc.) in
future.”
Benefits
 Good vision are inspiring & exhilarating.
 Vision represent a discontinuity, step

function & a jump ahead so that the company

knows what it is to be.
 Good vision help in the creation of common

identity & a shared sense of purpose.

 Good vision are competitive, original &

unique.
 Good visions foster risk taking &

experimentation.
 Good vision foster long term thinking.
 Good vision represents integrity, they are

truly genuine & can be used for benefits of

people.
Vision statements:-
 Sony:-
Sony is a leading manufacturer of audio, video,
Communications & information technology
products for consumer & professional markets.
Its motion picture, television, computer
entertainment, music & online business make
Sony one of the most comprehensive
entertainment companies in the world.
 Hero Honda:-

To become a company that our shareholders,

customers & society want.
 Ford:-

To become the world’s leading consumer company

for automotive products & services.
Mission:-
Meaning:-
 Mission is what an organization is & why it exists.
 Mission statement which is defines the role of an
organization plays in society.
 A mission statement could be formulated on the basis of
vision of entrepreneur.
 Usually following 9 components are included in mission
statement-
1. Customers
2. Product & services
3. Markets
4. Technology
5. Concern for growth, survival, profitability
6. Philosophy
7. Self concept
8. Concern for public image
9. Concern for employee
Characteristics
 It should be feasible
 It should be precise
 It should be clear
 It should be motivating
 It should be distinctive
 It should indicate major components of

strategy
 It should indicate how objectives are to be

accomplished.
Mission statements:-
 Marico industries:- The 3 P’s of Marico-
People, Product, Profit.

 Ford:- Quality is job no. 1.

 Bajaj:- Inspiring confidence.

 Hero Honda:- Desh ki dhadkan.

Goals & Objectives:-
Meaning:-
Goals:-
 Goals denotes what an organization hopes to

accomplish in a future period of time.

 They represents a future state or an outcome

of the effort put in now.

Characteristics:-
1. It must be challenging.
2. It must be attainable.
3. It must be specific & measurable.
4. It must be time bound.
5. It must be relevant.
Cont..
Levels/ Types:-
 Strategic goals
 Tactical goals
 Operational goals

Benefits:-
 Goals can increase the performance.
 It helps in clarifying the expectation.
 It also facilitating the controlling function.
 It may help in increasing the motivation.
Objective:-
 Objectives are the ends that state specifically how
goals shall be achieved.
 Objectives are form to the key result areas.

 Objectives are formed by following key result

areas-
1. Market standing
2. Innovations
3. Productivity
4. Physical & financial resources
5. Profitability
6. Manager’s performance & development
7. Worker’s performance & attitude.
8. Public response
Characteristics-

 Objectives should be understandable.

 Objectives should be concrete & specific.
 Objectives should be related to time frame.
 Objectives should be measurable &

controllable.
 Objectives should be challenging.
 Different objectives should correlate with

each other.
Environmental appraisal
 Broadly divided into 2 parts

ExternalInternal
 Environment means surroundings, external objects,

influence or circumstances under which someone or

something exists.
 The environment of organization is “the aggregate of all

conditions, events & influences that surround & affect it”.

 Characteristics:-

1. Environment is complex.
2. Environment is dynamic.
3. Environment is multi-faceted.
4. Environment has a far reaching impact.
Various environmental components.
 Market environment: Client’s needs,
preferences, perceptions, attitudes, values,
buying behavior, satisfaction.
Product factors like demand, image,
features, utility, design, life cycle, price,
promotion, distribution, differentiation etc
Competitor factors like different types of
competitors, nature of competition.
 Technological Environment:
1. Sources of technology.
2. Technological development, R&D, cost of
technology.
3. Effects of technology on environment,
human beings.
Cont..
 Supplier environment:

1. Cost, availability, and continuity of supply of

raw material, components, parts.
2. Infrastructural support and ease of availability
of the different factors of production.
 Economic environment:

1. The economic stage at which the country

exists at a given point of time.
2. The economic structure adopted, capitalistic,
socialistic or mixed.
3. Economic policies, industrial, fiscal.
4. Per capita income, balance of payments etc.
Cont..
 Regulatory environment:
1. Policies related licensing, monopolies, FDI,
2. Policies related to distribution and pricing.
3. Policies related to sick industries, public
sector, backward areas, consumer
protection etc.
 Political environment:

1. The political system and its features,

ideological forces, coalition compulsions.
2. Political stability.
3. Political funding of elections.
4. Government’s role in business.
Cont..
 Socio-cultural environment:
1. Demographics like population, its density and
distribution, age composition, inter state
migration, income distribution etc.
2. Socio-cultural concerns like environmental
pollution, consumerism, corruption etc.
3. Family structure changes.
 International environment:
1. Globalization process.
2. Global economic forces.
3. Global trade and commerce.
4. Global financial system.
5. Global markets and competitiveness.
6. Global communication
7. Global technology and quality systems
Environmental scanning
 It is a process by which organizations can monitor
their relevant environment to identify the
opportunities & threats affecting their business.

 Factors to be considered for environmental

scanning:-
1. Events.
2. Trends.
3. Issues.
4. Expectations.
Characteristics of Environment:-
 It is complex.
 It is dynamic.
 It is multi-faceted.
 It has a far-reaching impact.

Approaches to environmental scanning:-

1. Systematic Approach.
2. Ad-hoc Approach.
3. Processed form Approach.
Methods & Techniques
 Strategists may choose those methods &
techniques from among these which suits
their needs in terms of the quantity, quality,
availability, timeliness, relevance, & cost of
environmental information.
 Lebell & Krasner have out lined 9 groups of

techniques- single variable extrapolation,

theoretical limits envelopes, dynamic modes,
mapping multi-variable interaction analysis,
unstructured expert opinion, structured
expert opinion, structured inexpert opinion,
unstructured inexpert speculation.
Organizational Appraisal
 It deals with the internal environment of the
organization.
 Internal environment constitutes of behavior,

strengths, weaknesses, synergy and

competencies, all these put together
determine the “ Organizational capability”
 Capabilities are most often developed in

specific functional areas such as finance,

marketing, HRD, R&D, operations etc.
Organizational capability factors
 Financial capability:-
1. Factors related to sources of funds

2. Factors related to usage of funds

3. Factors related to the management of funds

Typical strengths that supports financial capability

4. Access to financial resources.

5. Amicable relationship with financial institution.

6. Efficient capital budgeting system.

7. Low cost of capital as compared to competitors.

8. High level of shareholder’s confidence.

9. Effective management control system

10. Tax benefit due to government policies.

 Marketing capability:-
1. Product related factors
2. Price related factors
3. Place related factors
4. Promotion related factors
Typical strengths that supports financial Capability
5. Wide variety of products
6. Better quality
7. Sharply focus positioning
8. Low price as compared to competitors.
9. Price protection due to govt. policies.
10. High quality customer services.
11. Effective distribution system.
12. Effective sales promotion.
13. High profile advertising.
14. Favorable company & product image.
15. Effective marketing MIS.
 Operations capability:-
1. Factors related to production system
2. Factors related the operations & control system.
3. Factors related to the R&D system.
Typical strengths that supports operations Capability
4. High level of capacity utilization.
5. Favorable plant location.
6. High degree of vertical integration.
7. Reliable sources of supply.
8. Effective control of operational costs.
9. Existence of good inventory control system.
10. Availability of high caliber R&D personnel.
11. Technical collaboration with reputed firms abroad.
 Personnel capability:-
1. Factors related to personnel system.

2. Factors related to organization & employee.

3. Factors related to industrial relations.

Typical strengths that supports final personnel Capability

4. Genuine concern for human resources management &
development.
5. Efficient & effective personnel system.

6. The organization perceived as a fair & model

employer.
7. Excellent training opportunities & facilities.

8. Working environment.

9. Highly satisfied & motivated workforce.

10. High level of organizational loyalty.

11. Low level of absenteeism.

12. Safe working conditions.

 Information management capability:-
1. Factors related to acquisition & retention of
information.
2. Factors related to processing of information.
3. Factors related to retrieval & usage of information.
4. Factors related to transmission & dissemination.
5. Integrative, systematic & supportive factors.
Typical strengths that supports final information
management Capability:-
6. Ease & convenience of access to information sources.
7. Widespread use of computerized information system.
8. Availability & operability of high tech equipment.
9. Positive attitude to sharing & disseminating
information.
10. Wide coverage of networking of computer system.
11. Presence of foolproof information security system.
 General management capability:-
1. Factors related to general management system.

2. Factors related to general manager.

3. Factors related to external relationship.

4. Factors related to organizational climate.

Typical strengths that supports final general

management Capability:-
5. Effective system for corporate planning.

6. Control, rewards & incentive system for top managers

geared to the achievement of objectives.
7. Entrepreneurial orientation & high propensity for risk
taking.
8. Favorable corporate image.

9. Commonly being perceived as a good organization to

work for.
10. Development oriented organizational culture.

11. Effective management of organizational change.

Methods & techniques:-
Methods

Internal comparative comprehensive

analysis analysis analysis

Value chain analysis Historical analysis Balanced scorecard

Quantitative analysis Industry norms key factor rating
-Financial analysis Benchmarking
-Non financial
quantitative analysis