UNIT-1 .

INTRODUCTION TO STRATEGIC
MANAGEMENT

Meaning:
The term ‘Strategic management refers to the set of managerial
decisions and actions that determines the long-run performance of a
corporation’. It includes environmental scanning (both external and
internal), strategy formulation (strategic or long range planning), strategy
implementation, strategy evaluation and control.
Definition:
According to Lester A. Digman, “Strategic management is a
continuous process that involves attempts to match or fit the
organization with its changing environment in the most
advantageous way possible.”
 
 Characteristics of Strategic Management

I. Complexity: Uncertainty brings complexity for strategic

management. Managers face environment which is difficult to
comprehend. External and internal environment is analysed.
ii. Strategic issues are future oriented: Strategic decisions are
future oriented, each manager worth calling is one who wants to
calculate what future holds for him or his firm.
iii. Fundamental: Strategic management is fundamental process for
improving the long-term performance of the organization.
iv. Long-term implication: Strategic management is not concerned
with day-to-day operation. It focuses on long-term growth and
survival of the organization. Basically it deals with vision, mission
and objectives of the organization.
v. Implementation: It ensures, that strategy is put into action. It
refers to formalized procedures to produce the strategic results
through analysis of internal and external environment which is used
as inputs for strategic planning.
 
Need /Role/Benefits of Strategic Management

• Discharges Responsibility: strategic management process discharges the responsibility of various

departmental managers with clarity in objective and direction.
• Minimizes the resistance to change: Strategic management, as a result has certain behavioural
consequences, One such encouraging behavioural consequence is that it reduces the resistance to change
that takes place in any area of management caused by external forces.
• It provides a Framework for Decision-Making: Strategy provides a framework within which all staff can
make day-to-day operational decisions and understand that those decisions are all moving the organization
in a single direction.
• It Supports better understanding of organizational strategy: Strategic Management allows the staff
participation in the strategic discussion and enables them to better understand the organizational strategy.
• Enables Measurement of Progress: A strategic management process forces an organization to set objectives
and measures to success.
• It Provides an Organizational Perspective: Strategic management takes an organizational perspective and
looks at all the components of business environment and their interrelationship.
•  
Disadvantages or Limitations of Strategic Management:

• 1. Strategic management is a Complex process: Strategic management includes various types of process
which checks all type of major critical components. This includes the internal and external environments, long
term and short term goals. This is a lengthy process because a change in one component can affect all the
factors.
• 2. Time consuming process: In order to implement the strategic management, it is necessary that the
management spends time in order to get the process right. This type of long term and time consuming training
and orientation could hamper the regular activities of the company.
• 3. Difficulty in implementation: It is a fact that the implementation of management system is difficult as
compared to other management techniques. The implementation requires perfect communication among the
employees and employer.
• 4. Ever changing complex and Dynamic environment: As management is getting refined and reinforced from
general management to Strategic management the environment is changing its color with new complexities
and intricacies.
• 5.It inflicts rigidity in the organization: Strategic management brings in rigidity in the organization through the
strategic planning process. Under the umbrella of strategic management- both external and internal
environment are taken into account for setting different parameters for its functioning. Thus, organizational
strategic management is always rigid.
Process of Strategic Management and its Elements:

• The strategic management process represents a logical, systematic, and objective

approach for determining an enterprise's future direction. However, a clear
separation is needed between the managerial process by which an organization
formulates, evaluates, implements, and controls the relationships between its
objectives, its strategies, and its environment. Researchers usually distinguish
four stages in the process of strategic management: situation analysis, strategy
formulation, strategy implementation, and evaluation and control.
Process of Strategic Management
• i. Situation Analysis - Situation analysis is the first step in the strategic management process. The
situation analysis provides the information necessary to create a company mission statement.
Situation analysis involves "scanning and evaluating the organizational context, the external
environment, and the organizational environment". This analysis can be performed using several
techniques. Observation and communication are two very effective methods.
• ii. Strategy Formulation - Strategy formulation is the process of establishing the organization's
vision, mission, objectives and choosing among alternative strategies. Sometimes strategy
formulation is called "strategic planning."
• iii. Strategy Implementation - Strategy implementation is the action stage of strategic management.
It refers to decisions that are made to install new strategy or reinforce existing strategy.
• iv. Strategy Evaluation and Control - The final stage in strategic management is strategy evaluation
and control. All strategies are subject to future modification because internal and external factors
are constantly changing. In the strategy evaluation and control process managers determine whether
the chosen strategy is achieving the organization's objectives.
Meaning of Strategy
Strategy refers to a plan of action designed to
achieve a long-term or overall aim, it is an
action that managers take to attain one or more
of the organization’s goals.
 
Strategic Decision-making
Strategic decision making is a major choice of actions concerning
allocation of resource and contribution to the achievement of
organisational objectives. It is described as follows
(i) The strategic decision affects the whole part of organisation and
largely relates to the responsibilities of senior management.
(ii) It contributes directly to the achievement of the organizational
objectives.
Strategic decision making includes three elements-
a) Action element- which specifies the work to be done.
b) Result element- which specifies the desired result to be
achieved through the implementation of decision.
c. Commitment element- which directs to undertake the course of
action, creates personnel involvement for attaining the objective
and allocates resources to them.
Business Ethics and Strategic Management
 
Definition of Business Ethics
 
According to ICAI (Institute of Chartered Accountants of
India),defines business ethics as “The principles and standards
that determine acceptable conduct in business organization”.
According to Professor Thomas Donaldson, “Business ethics
speaks of accepted norms that act as points of reference in the
managerial process”.
 
How to Ingrain Ethics into Strategy?
Several actions are called for embedding the values and codes
of ethics. They are:
 Incorporation of the statement of Values and the code of
ethics into employee training and educational programs.
 Explicit attention to values and ethics in recruiting and
hiring to screen out applicant who do not exhibit compatible
character traits.
 Frequent reiteration of company values and ethical
principles at company events and internal communications
to employees.
 Rewards and awards for individuals and groups who
displays the values.
 Instituting ethics enforcement procedures.
 Active involvement of management for inculcating ethical
values in business
Components of Strategic Management
Process
Meaning of strategic management
The strategic management process refers to the organization’s
strategy. It is also defined as the process by which managers
make a choice of a set of strategies for the organization that
will enable it to achieve better performance
Strategic Management Process Has the Following Four Steps:
The strategic management process is a sequence of components
which includes four phases. To understand the entire process, the
following is the brief description of each step.
1,Environmental Scanning- Environmental scanning refers to a
process of collecting, scrutinizing and providing information for
strategic purposes. It helps in analysing the internal and external
factors influencing an organization
. ii. Strategy Formulation- Strategy formulation is the process of
deciding the best course of action for accomplishing organizational
objectives and hence achieving organizational purpose.
iii. Strategy Implementation- Strategy implementation implies
making the strategy to work as intended or putting the
organization’s chosen strategy into action. It includes designing the
organization’s structure, distributing resources, developing decision
making process, and managing human resources.
iv. Strategy Evaluation and Control- Strategy evaluation is the
final step of strategy management process. The key strategy
evaluation activities are: appraising internal and external factors,
measuring performance and taking remedial actions. Evaluation
makes sure that the organizational strategy as well as its
implementation meets the organizational objectives.
Approaches to Strategic Management
Traditional Approaches
1. Design Approach: The design approach is a top-down
approach in which strategy is designed by the management
team. This approach is known for its reliance on external
factors, such as the opportunities and threats that exist in the
market.
2. Planning Approach:In the planning approach to strategic
management strategy is not created by the management but
by specialized planners within the organization. These
planners formalize the strategic process for others to follow
up.
3. Positioning Approach: The positioning approach is
concerned with the firm's place in the overall market. The
most common tool used in this approach is the five forces
model, which considers the bargaining power of suppliers,
bargaining power of buyers, threat of new entrants, threat of
substitutes and rivalry among competitors in the market.
Modern Approaches
1. Top-Down Approach: strategic planning is done at the top
of the corporation and the departments are advised
straightway what to do as advised by the top management
team.
2. Bottom-Up Approach: the management allows bottom
level departments to submit their suggestions and plans for
organizational betterment.
3. Mixture of the Top-Down and Bottom-Up Approaches:
This is practiced in largest decentralized companies. In this
approach, the guidelines are given by the management to the
divisions
4. Team Approach: The top management meets and interacts
with its executives on a regular basis to deal with all the
problems of an organization, so that the group can develop
written strategic plans.