Strategic

Management
 Importance of Strategic Management
• It guides the company to move in a specific direction.
• It assists the firm in becoming proactive, rather than
reactive.
• It acts as a foundation for all key decisions of the firm.
• It attempts to prepare the organization for future
challenges and play the role of pioneer in exploring
opportunities.
• It ensures the long-term survival of the firm.
• It assists in the development of core competencies and
competitive advantage, that helps in the business
survival and growth.
Strategic Management
Concept
• Components of a Strategy Statement
 Strategic Intent - Strategic intent gives a picture about
what an organization must get into immediately in
order to achieve the company’s vision.
Mission Statement - It describes why an organization is
operating and thus provides a framework within which
strategies are formulated.
Vision Statement - identifies where the organization
wants or intends to be in future or where it should be
to best meet the needs of the stakeholders
Goals and Objectives – a goal is a desired future state
or objective that an organization tries to achieve.
- Objectives are defined as goals that organization wants
to achieve over a period of time and are the foundation
of planning.
• Strategic Management Process
Environmental Scanning
• Internal analysis
• external analysis
Strategy Formulation
• Setting Organizations’ objectives
• Evaluating the Organizational Environment
• Setting Quantitative Targets
• Aiming in context with the divisional plans
• Performance Analysis
• Choice of Strategy
Strategy Implementation
• Developing an organization having potential of
carrying out strategy successfully.
• Disbursement of abundant resources to strategy-
essential activities.
• Creating strategy-encouraging policies.
• Employing best policies and programs for
constant improvement.
• Linking reward structure to accomplishment of
results.
• Making use of strategic leadership.
 Strategy Formulation vs. Strategy Implementation
Strategy Strategy
Formulation Implementation

• Involves all means

• Planning and Decision
related to executing the
making
strategic plans.
• Placing the forces
• Managing forces during
before the action
the action.
• Emphasizes on
• Emphasizes on
effectiveness.
efficiency.
• Rational process
• Operational process.
• Strategic Formulation
• Strategy
precedes Strategy
Implementation follows
Implementation.
Strategy Formulation.
Strategy Evaluation
• Fixing benchmark of performance

• Measurement of performance

• Analysing Variance

• Taking Corrective Action

 Strategic Decisions
• Strategic decisions have major resource propositions for an
organization.
• deal with harmonizing organizational resource capabilities
with the threats and opportunities.
• deal with the range of organizational activities.
• Strategic decisions involve a change of major kind since an
organization operates in ever-changing environment.
• Strategic decisions are complex in nature.
• Strategic decisions are at the top most level, are uncertain
as they deal with the future, and involve a lot of risk.
• It is different from administrative and operational
decisions.
 Strategic Administrative Operational
Decisions Decisions Decisions

• Long-term • Administrative
decisions. decisions are • Operational
• Considered where taken daily. decisions are not
the future • Short-term based frequently taken.
planning is Decisions. • Medium-period
concerned. • Taken according to based decisions.
• Taken in strategic and • Taken in
accordance with operational
accordance with
organizational decisions.
mission and vision. • Related to working strategic and
• Related to overall of employees in administrative
Counter planning an organization decision.
of all Organization. and are in welfare • Related to
• Deals with of employees production and
organizational working in an factory growth.
Growth. organization.
• Business Policy - guidelines developed by an
organization to govern its actions.
Specific
Clear
Reliable/Uniform
Appropriate
Simple
Inclusive/Comprehensive
Flexible
Stable
 POLICY
• Policy is a blueprint of the
organizational activities
which are
repetitive/routine in
nature.
• responsibility of top level
management
• deals with routine/daily
activities essential for
effective and efficient
running of an organization.
• concerned with both
thought and actions.
STRATEGY
• Strategy is concerned with
those organizational
decisions which have not
been dealt/faced before in
same form.
• basically done by middle
level management.
• deals with strategic
decisions.
• concerned mostly with
action.
 BCG Matrix
• Boston Consulting Group (BCG) Matrix is a four celled
matrix (a 2 * 2 matrix) developed by BCG, USA.
• It is the most renowned corporate portfolio analysis
tool.
• It is a comparative analysis of business potential and
the evaluation of environment.

Relative Market Share = SBU(Strategic Business Units)

Sales this year leading competitors sales this year.
Market Growth Rate = Industry sales this year - Industry
Sales last year.
• Stars- Stars represent business units having large
market share in a fast growing industry.
• Cash Cows- Cash Cows represents business units
having a large market share in a mature, slow
growing industry.
• Question Marks- Question marks represent
business units having low relative market share and
located in a high growth industry.
• Dogs- Dogs represent businesses having weak
market shares in low-growth markets.
 Limitations of BCG Matrix
• BCG matrix classifies businesses as low and high,
but generally businesses can be medium also.
• Market is not clearly defined in this model.
• High market share does not always leads to high
profits.
• Growth rate and relative market share are not the
only indicators of profitability.
• At times, dogs may help other businesses in gaining
competitive advantage. They can earn even more
than cash cows sometimes.
 SWOT Analysis
• Strengths – are the qualities that enable us to
accomplish the organization’s mission.
• Weaknesses – are the qualities that prevent us
from accomplishing our mission and achieving our
full potential.
• Opportunities – are presented by the
environment within which our organization
operates.
• Threats – arise when conditions in external
environment jeopardize the reliability and
profitability of the organization’s business.
Advantages of SWOT Analysis
• understand your business better
• reverse weaknesses
• maximize its response to opportunities
• take advantage of your strengths
• develop business goals and strategies for
achieving them.
SWOT ANALYSIS FRAMEWORK
Environmental Scanning

External Analysis

• Opportunities
• Threats
Limitations of SWOT Analysis
• doesn't prioritise issues
• doesn't provide solutions or offer
alternative decisions
• can generate too many ideas but not help
you choose which one is best
• can produce a lot of information, but not all
of it is useful.
 Competitor Analysis
• Competitor analysis begins with identifying present
as well as potential competitors.
• While formulating an organization’s strategy,
managers must consider the strategies of
organization’s competitors.
• Competitor analysis is a driver of an organization’s
strategy and effects on how firms act or react in
their sectors.
 The main objectives of doing competitor analysis can be
summarized as follows:
• To study the market;
• To predict and forecast organization’s demand and
supply;
• To formulate strategy;
• To increase the market share;
• To study the market trend and pattern;
• To develop strategy for organizational growth;
• To study forthcoming trends in the industry;
• To current strategy strengths and weaknesses of a
competitor;
• Insight into future competitor strategies.
Porter’s Five Forces Model of Competition
Rivalry among current
Risk of entry by competitors
Potential competitors

Bargaining power
INTENSITY OF RIVALRY Bargaining Power
Of suppliers
AMONG ESTABLISHED FIRMS Of buyers

Threat of Substitutes
Risk of entry by potential competitors:
Potential competitors refer to the firms which
are not currently competing in the industry
but have the potential to do so if given a
choice.
Rivalry among current competitors: Rivalry
refers to the competitive struggle for market
share between firms in an industry.
Bargaining Power of Buyers: Buyers refer to
the customers who finally consume the
product or the firms who distribute the
industry’s product to the final consumers.
Bargaining Power of Suppliers: Suppliers
refer to the firms that provide inputs to
the industry.
Threat of Substitute products: Substitute
products refer to the products having
ability of satisfying customers needs
effectively.
 Strategic Leadership
• refers to a manager’s potential to express a
strategic vision for the organization and to motivate
and persuade others to acquire that vision.
• It is the potential to influence organizational
members and to execute organizational change.
• create organizational structure, allocate resources
and express strategic vision.
• Strategic leaders work in an ambiguous
environment on very difficult issues that influence
and are influenced by occasions and organizations
external to their own.
 A few main traits / characteristics / features /
qualities of effective strategic leaders :
• Loyalty
• Keeping them updated
• Judicious use of power
• Have wider perspective/outlook
• Motivation
• Compassion
• Self-control
• Social skills
• Self-awareness
• Readiness to delegate and authorize
• Articulacy
• Constancy/ Reliability
 Corporate Governance
• refers to the way a corporation is governed.
• the interaction between various participants
(shareholders, board of directors, and company’s
management) in shaping corporation’s performance and
the way it is proceeding towards.
• deals with the manner the providers of finance guarantee
themselves of getting a fair return on their investment.
• deals with determining ways to take effective strategic
decisions.
• ensures transparency which ensures strong and balanced
economic development.
 Benefits of Corporate Governance
• Good corporate governance ensures corporate
success and economic growth.
• Strong corporate governance maintains investors’
confidence.
• It lowers the capital cost.
• There is a positive impact on the share price.
• It provides proper inducement to the owners as
well as managers to achieve objectives.
• Good corporate governance also minimizes
wastages, corruption, risks and mismanagement.
• It helps in brand formation and development.
 Business Ethics
• refers to carrying business as per self-
acknowledged moral standards.
• not only talk about the code of conduct at
workplace but also with the clients and
associates.
• Every strategic decision has a moral
consequence. The main aim of business ethics
is to provide people with the means for
dealing with the moral complications.
 Significant ethical principles to be followed for a
successful business:
• Protect the basic rights of the employees/workers.
• Follow health, safety and environmental standards.
• Continuously improvise the products, operations and
production facilities to optimize the resource
consumption
• Do not replicate the packaging style so as to mislead
the consumers.
• Indulge in truthful and reliable advertising.
• Strictly adhere to the product safety standards.
• Accept new ideas. Encourage feedback from both
employees as well as customers.
• Present factual information. Maintain accurate and true
business records.
• Treat everyone with respect and integrity.
• The mission and vision of the company should be very
clear to it.
• Do not get engaged in business relationships that lead
to conflicts of interest.
• Meet all the commitments and obligations timely.
• Encourage free and open competition.
• The policies and procedures of the Company should be
updated regularly.
• Maintain confidentiality of personal data and
proprietary records held by the company.
• Do not accept child labour, forced labour or any other
human right abuses
 Core Competencies
– Core competency is a unique skill or technology that creates
distinct customer value.
RESOURCES (Input to CORE COMPITENCE
firm’s production
process) A strategic capability

Does it meet
Yes
Criteria of

CAPABILITY (Integration Sustainable

of a team of resources)
Competitive
No
Advantage?

CAPABILITY (A non
strategic Team of
Figure: Core Competence Decision resources)
• Resources are inputs to a firm in the production
process. These can be human, financial,
technological, physical or organizational.
• Organizational capabilities are generally a result
of organizational system, processes and control
mechanisms.
• Core competencies help an organization to
distinguish its products from it’s rivals as well as to
reduce its costs than its competitors and thereby
attain a competitive advantage.
THANK YOU!
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