What Is Strategy?

Operational effectiveness means performing these activities better

that is, faster, or with fewer inputs and defects—than rivals.

Is Operational Effectiveness a Strategy

A company can outperform rivals only if it can establish a difference

that it can preserve.
Strategy is an action that managers take to attain one or more of the
organization’s goals. Strategy can also be defined as “A general
direction set for the company and its various components to achieve a
desired state in the future. Strategy results from the detailed strategic
planning process”.
Features of Strategy
• Strategy is Significant because it is not possible to foresee the future. Without a
perfect foresight, the firms must be ready to deal with the uncertain events
which constitute the business environment.
• Strategy deals with long term developments rather than routine operations, i.e.
it deals with probability of innovations or new products, new methods of
productions, or new markets to be developed in future.
• Strategy is created to take into account the probable behavior of customers and
competitors. Strategies dealing with employees will predict the employee
behavior.

Strategy is a well defined roadmap of an organization. It defines the overall

mission, vision and direction of an organization. The objective of a strategy is to
maximize an organization’s strengths and to minimize the strengths of the
competitors.
The concept and role of strategy
A strategy could be:
• plan or course of action or a set of decision rules making a pattern or creating a common thread;
• the pattern or common thread related to the organisation's activities which are derived from the
policies, objectives and goals;
• related to pursuing those activities which move an organisation from its current position to a
desired future state;
• concerned with the resources necessary for implementing a plan or following a course of action;
and
• connected to the strategic positioning of a firm, making trade-offs between its different activities,
and creating a fit among these activities.
• the planned or actual coordination of the firm's major goals and actions, in time and space that
continuously co-align the firm with its environment.

6
The Strategic Management Process

Establishment of
strategic Formulation of Implementation of Strategic
intent strategies strategies evaluation

7
The Strategic Management Process

Strategic Intent Strategy Formulation Strategy Strategic Evaluation

Implementation
Vision Environmental Organisational
Mission Appraisal Appraisal Project
Business definition SWOT Analysis Procedural
Business model Corporate-level Strategies Resource allocation
Objectives Business-level Strategies Structural
Strategic analysis and choice Behavioural
Strategic plan Functional &
Operational

8
Issues in strategic decision-making

• Criteria for decision-making

• Rationality in decision-making
• Creativity in decision-making
• Variability in decision-making
• Person-related factors in decision-making
• Individual versus group decision-making.

9
Approaches to Strategic Decision Making
1. Rational-analytical approach,
2. Intuitive-emotional approach,
3. Political-behavioural approach

Three approaches as given by Mr. Henry Mintzberg:

1. Entrepreneurial Approach
2. Adaptive Approach
3. Planning Approach
1. Rational-analytical approach

Rational-analytical approach assumes that the decision maker is a

‘unique actor who behaves intelligently and rationally’. He is fully aware
of all available feasible alternatives and considers all the alternatives as
well as the consequences and chooses the alternative that secures the
maximum gain.
Most managers like to think of themselves as rational decision-makers.
And indeed, many experts argue that managers should try to be as
rational as possible in making decisions. It rests on the assumption that
managers are logical and rational and they make decisions that are in
the best interests of the organization.
This approach follows the process as:
(a) Decision makers have complete information about the decision
situation and possible alternatives.
(b) They can effectively eliminate uncertainty to achieve a decision
condition of certainty.
(c) They evaluate all aspects of the decision situation logically and
rationally.
2. Intuitive-Emotional:
• Intuition is an innate belief about something without conscious
consideration. Intuitive- emotional approach is opposed to rational
decision-making. Managers sometimes decide to do something because
it feels “right”
• This feeling is not arbitrary but based on habit or experience, gut feeling,
reflective thinking, and instinct, using the unconscious mental processes.
An inner sense or emotion may help managers make an occasional
decision without going through a full- blown rational-sequence of steps.
Intuitive decision maker considers a number of alternatives and options
• Proponents of this approach point out that, in many cases, judgment
may lead to “better” decisions than “optimizing” techniques. In fact, the
timing of when to implement a decision based on the analysis may
require an intuitive feel for what the data are telling you
3. Political-Behavioural:
• A third model suggests that real decision makers must consider a
variety of pressures from other people affected by their decisions. An
organisation interacts with a variety of shareholders in series of
interdependent exchange relationships. Unions exchange labour for
decent wages and job security.
• Decisions are made when the coalitions involved in the process agree
to find a solution by mutual adjustment and negotiation in the way
decisions have been made in the past. The decision maker must
consider the political implementation of the decision outcome.
1. Entrepreneurial Approach:
As the caption suggests, this approach is followed in strategic decision-making
by the organisations headed by family heads where by the organisation is
moulded to- face the environmental changes.
Example: Reliance
Features of Entrepreneurial Approach:

i. Capitalising on the Opportunities

ii. Centralized Decision-Making Power
iii. Growth and Expansion Orientation
iv. Efforts and Rewards are Well Balanced
2. Adaptive Approach:
This adaptive approach is reactive rather than proactive and tries to collect
and mix the variant factors influencing the strategic decisions. It touches the
every root of changing context of decision-making. This approach is very
common in case of public sector enterprises where decision-making power is
divided amongst different constituents.
It is a matter of governing and managing these enterprises where the
objectives are social service orientation hinged by profit making. That is,
though the aim is to meet the social needs the government enterprises not
barred from making profit.
Features of Adaptive Approach:
i. It is an Exercise of Problem-Solving
ii. Dominance of Decision Making Process by Constituents
iii. Priority Based Decisions
3. Planning Approach:
• This approach calls for making decisions in anticipation of the future state of affairs where
the organisation is prepared to face it boldly. That is, strategic decisions are based on socio-
economic purposes of the organisation, value of top management, external opportunities
and problems on one hand and organisations strength and weaknesses on the other.
• It is widely used by multi-nationals which have formalised and structured strategic decision-
making process.
Features of Planning Approach:
i. Analysis of Factors Influencing a Strategy
ii. Systematic and Structured Approach
iii. It is a Comprehensive Process
It is comprehensive process in that it is capable of producing a set of integrated decisions and
strategies. That is, all the decisions and strategies that are inter-departmental and inter level
of the organisation are supporting one another rather than supplanting.Thus, the goal of
profit maximisation or wealth maximisation is having the organisational level support and the
inter departmental and inter sections support where each is limited, balanced and integrated.
It is a coordinative approach.
It is evident that above three approaches are having contrasting ways
for strategic decision making. It is not mandatory to follow a particular
approach. In practice, to its advantage, it may select one of these or
combine them to get the best results provided the combination works
within the internal constraints on resources and compatibilities and
external uncontrollable factors that provide threats and opportunities.
Strategic Intent

An organization’s strategic intent is the purpose that it exists and why it will continue to exist,
providing it maintains a competitive advantage. Strategic intent gives a picture about what an
organization must get into immediately in order to achieve the company’s vision.

Strategic intent helps management to emphasize and concentrate on the priorities. Strategic
intent is, nothing but, the influencing of an organization’s resource potential and core
competencies to achieve what at first may seem to be unachievable goals in the competitive
environment.

A well expressed strategic intent should guide/steer the development of strategic intent or the
setting of goals and objectives that require that all of organization’s competencies be
controlled to maximum value.
What is Mission Statement
Mission Statement
Mission statement is the statement of the role by which an organization intends to serve it’s
stakeholders. It describes why an organization is operating and thus provides a framework within
which strategies are formulated. It describes what the organization does (i.e., present capabilities),
who all it serves (i.e., stakeholders) and what makes an organization unique (i.e., reason for
existence).

A mission statement differentiates an organization from others by explaining its broad scope of
activities, its products, and technologies it uses to achieve its goals and objectives. It talks about an
organization’s present (i.e., “about where we are”).

For instance, Microsoft’s mission is to empower every person and every organization on the planet to
achieve more.

Chief executive plays a significant role in formulation of mission statement. Once the mission
statement is formulated, it serves the organization in long run, but it may become ambiguous with
organizational growth and innovations.
In today’s dynamic and competitive environment, mission may need to be redefined. However, care
must be taken that the redefined mission statement should have original
fundamentals/components. Mission statement has three main components-a statement of mission
or vision of the company, a statement of the core values that shape the acts and behaviour of the
employees, and a statement of the goals and objectives.
Features of a Mission
a.Mission must be feasible and attainable. It should be possible to achieve it.
b.Mission should be clear enough so that any action can be taken.
c. It should be inspiring for the management, staff and society at large.
d.It should be precise enough, i.e., it should be neither too broad nor too narrow.
e.It should be unique and distinctive to leave an impact in everyone’s mind.
f. It should be analytical,i.e., it should analyze the key components of the strategy.
g.It should be credible, i.e., all stakeholders should be able to believe
Vision

A 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. It describes dreams and aspirations for
future.
For instance, Microsoft’s corporate vision is “to help people and businesses throughout the world realize their
full potential.” 

A vision is the potential to view things ahead of themselves. It answers the question “where we
want to be”.

It gives us a reminder about what we attempt to develop. A vision statement is for the organization
and it’s members, unlike the mission statement which is for the customers/clients. It contributes in
effective decision making as well as effective business planning. It incorporates a shared
understanding about the nature and aim of the organization and utilizes this understanding to
direct and guide the organization towards a better purpose. It describes that on achieving the
mission, how the organizational future would appear to be.
.
• An effective vision statement must have following features-
a.It must be unambiguous.
b.It must be clear.
c.It must harmonize with organization’s culture and values.
d.The dreams and aspirations must be rational/realistic.
e.Vision statements should be shorter so that they are easier
to memorize.
• In order to realize the vision, it must be deeply instilled in the
organization, being owned and shared by everyone involved
in the organization
Goals and Objectives

A goal is a desired future state or objective that an organization tries to achieve. Goals specify
in particular what must be done if an organization is to attain mission or vision. Goals make
mission more prominent and concrete. They co-ordinate and integrate various functional and
departmental areas in an organization. Well made goals have following features-
a.These are precise and measurable.
b.These look after critical and significant issues.
c.These are realistic and challenging.
d.These must be achieved within a specific time frame.
e.These include both financial as well as non-financial components.

Objectives are defined as goals that organization wants to achieve over a period of time.
These are the foundation of planning. Policies are developed in an organization so as to
achieve these objectives.
Formulation of objectives is the task of top level management.
Effective objectives have following features-
a.These are not single for an organization, but multiple.
b.Objectives should be both short-term as well as long-term.
c.Objectives must respond and react to changes in environment, i.e.,
they must be flexible.
d.These must be feasible, realistic and operational
Importance of Vision and Mission Statements
• Vision and Mission statements provide unanimity of purpose to organizations and imbue the
employees with a sense of belonging and identity. Indeed, vision and mission statements are
embodiments of organizational identity and carry the organization motto.
• Vision and mission statements spell out the context in which the organization operates and
provides the employees with a tone that is to be followed in the organizational climate. Since
they define the reason for existence of the organization, they are indicators of the direction in
which the organization must move to actualize the goals in the vision and mission statements.
• The vision and mission statements help to translate the objectives of the organization into work
structures and to assign tasks to the elements in the organization that are responsible for
actualizing them in practice.
• To specify the core structure on which the organizational edifice stands and to help in the
translation of objectives into actionable cost, performance, and time related measures.
• Finally, vision and mission statements provide a philosophy of existence to the employees, which
is very crucial because as humans, we need meaning from the work to do and the vision and
mission statements provide the necessary meaning for working in a particular organization.
Strategic FIT
• Strategic fit expresses the degree to which an organization is matching its
resources and capabilities with the opportunities in the external environment.
• In addition, strategic fit also examines the resource base of the organization and
explores how they can be utilized to achieve maximum benefits.
• Resources relate to the inputs to production owned by the company, whereas
capabilities describe the accumulation of learning the company possesses.
• Resources can be classified both as tangible and intangible:
Tangible: ▪ Financial (Cash, securities) ▪ Physical (Location, plant, machinery)
Intangible: ▪ Technology (Patents) ▪ Human resources ▪ Reputation (Brands) ▪ Culture
• Strategic fit can also be used to evaluate specific opportunities like M&A
opportunities. In addition, M&A transactions give the acquiring firm the
possibility of achieving positive synergy effects meaning that the two merged
companies are worth more together than the sums of their parts individually.
Strategy as stretch and leverage
“If only we had more resources, we could be more strategic.”
Abundant resources alone won’t keep an
industry giant on top when its hungrier rival
practices the strategic discipline of stretch.
Strategic Flexibility
• Strategic flexibility is explained by management scholars as the capability of
firms to respond and successively adjust to environmental change (Evans,
1991). The phase has also been applied to strategic decision making, as it is the
extent to which new and alternative options in strategic decision making are
generated and considered (Greenley and Oktemgil, 1998).
• Strategic flexibility enable a firm to gain unique competitive advantage, because
the capabilities to generate decision making options, and different forms of
strategic flexibility to deal with dynamic and changing environments, is perhaps
difficult for competitors to reproduce (Sanchez, 1995). Successful adaptation
through strategic flexibility is likely generate superior performance,
exacerbating the imitation problem for rivals. Subsequently, it is important for
decision makers to possess the capabilities for strategic flexibility in its various
forms. Nevertheless, currently, there is no passable theoretical framework to
study the capabilities for strategic flexibility.
• The notion of strategic flexibility can be used at two levels. First, at the level of the firm, where it is
used to denote the ability of firms to respond and successively adapt to environmental change
(Evans, 1991). Second, at the level of decision makers, where it is the extent to which new and
alternative options in strategic decision making are created and deliberated (Aaker and
Mascarenhas, 1984). These two applications are not conjointly exclusive, because the creation of
different options by decision makers is a requirement for firms adjusting to environment change
(Sharfman and Dean, 1997). It can be assumed that for strategic flexibility to exist at the level of the
firm, decision makers themselves must possess capabilities for strategic flexibility.
• In theoretical literature, it has been demonstrated that Strategic flexibility is a possessions that
allows contemporary organizations to prepare for changes in their environment. Raynor stated that
the concept involves an interaction of many elements which includes actions taken in relation to
analytical studies, aimed at anticipating multiple scenarios, formulation of strategies for each
scenario, acquisition of resources and skills required to execute those strategies, implementation of
the most likely strategy and preparing for the task of rapidly accepting substitute strategy if needed.
According to Aaker and Mascarenhas, flexibility signifies the "ability of the organization to adapt to
substantial, uncertain and fast occurring (relative to the required reaction time) environmental
changes that have a meaningful impact on the organization's performance" (1984). Many scholars
affirmed that the ability to manage with unpredictable environment and strategic flexibility requires
ambiguity management skills, understanding of inconsistencies, broadening the viewpoints of
current analyses and focus on activities that enable fast reaction to changes (Gray, 2011).
• Strategic flexibility is composed of three elements (Kessler, 2013): 

• Attention
• Assessment
• Action
• It is well established in studies that strategic flexibility is the ability to recognize external changes, to quickly commit resources and identify when strategic decisions are
not working (James, 2010).
• Suggestions for developing strategic flexibility (Source: James, 2010):
• Know what's happening with strategies currently being used by monitoring and measuring results.
• Encourage employees to be open about disclosing and sharing negative information
• Get new ideas and perspectives from outside the organisation.
• Have multiple alternatives when making strategic decisions.
• Learn from mistakes.
• Strategic flexibility is indubitably associated with planning, formulation and implementation. It is found in empirical research that dynamic and prosperous companies
consider the effects of external factors, even if they espouse routine planning processes. In such cases, planning strategies typically include the so-called flex points, i.e.
elements that change depending on external circumstances. These companies symbolise a cohesive approach to strategy formulation and selection, while their concept
of development is focused on risks and hazards, which are interpreted as potential sources of competitive advantage. Experiential researches revealed that strategic
flexibility is interrelated with the company's results, particularly in times of turbulent changes brought about by the present economic crunch. This correlation is
especially important for companies operating on highly competitive markets, as opposed to markets characterized by high ambiguity of demand or technological growth,
where strong market orientation at the cost of flexibility is the favoured approach (Grewal, 2001). The inconsistency of strategic flexibility lies in the fact that strategy
formulation needs careful analyses, and these are not possible, since forecasts of market development and environmental changes are burdened with high-level
ambiguity (Harrison, 2013).
• Role of strategic flexibility: To overcome organizational lethargy, strategic flexibility is needed for firms to break down the institutional procedures and withstand their
explorative innovations. Because strategic flexibility underlines the flexible use of resources and reconfiguration of processes, it reflects one type of dynamic capability
that enables firms to attain a competitive advantage in tempestuous markets (Eisenhardtand Martin, 2000). Several management professionals stresses on the fact that it
is important to develop flexibility in organizational forms, resource management, and manufacturing processes. This will create an organizational culture that supports
explorative innovation (Matthyssens, Pauwels, and Vandenbempt, 2005). Since strategic flexibility serves as an organizing norm for structuring and synchronising various
resources and functional units (Zander and Kogut, 1995), it may not affect a firm's improvement output by itself. Rather, it may enhance the value of existing
technological capabilities in innovations. Many scholars posit that strategic flexibility augments the positive effect of technological competence on exploration. That is,
when strategic flexibility is high, strong technological capability leads to more explorative activities.
• To sum up, Strategic flexibility is a set of capabilities used to respond to various demands and opportunities existing in dynamic and uncertain competitive environment.
Therefore it involves coping with uncertainty and associated with risks (Hitt, 2014). Companies develop strategic flexibilities in all areas of operations.