SM Unit One

Strategic Unit 1
Management 1.1 Understanding Strategy

1.2 Introduction to Strategic
Management
1.3Strategic Management Process
1.4 Hierarchy of Strategic Intent
sa
1.5 Analyzing Company’s External
Environment
1.6 Analyzing Industry Environment
Introduction
The word strategy came from the Greek word `strategia`, which means a general, troop
leader. At that time, strategy literally meant the art and science of directing military forces.
Today strategy is used in business to describe how an organization is going to achieve its
objectives.
Strategic management may be defined as a systematic approach to positioning the business

in relation to its environment to ensure continued success and offer security from surprises.
Strategic management is that set of managerial decisions and actions that determine the
long-run performance of a corporation. Strategic mission consists of a long-term vision of
what an organization seeks to do and what kind of an organization it intends to become.
Development of organization completely rests on the efficiency of the decision-makers.

Strategic management always concentrates on the anticipated aim. Hence, strategic
decisions are always incomplete and are sometimes based on hypothetical information. It
may lead to further problems.
1.1 Understanding Strategy
The concept of strategy is central to understanding the process of strategic management. The
term ‘strategy’ is derived from the Greek word ‘strategia’, which means generalship-the actual
direction of military force, as distinct from the policy governing its deployment. In business
parlance, there is no definite meaning assigned to strategy. It is often used loosely to mean a
number of things.
A) Definitions:
1) Ansoff*:
"Strategy is a rule for making decisions. Ansoff also distinguishes between policy and
strategy .A policy is a general decision that is always made in the same way whenever the
same circumstances arise.”
2) Alfred D. Chandler*:
“Strategy can be defined as the determination of the basic long-term goals and objectives of
an enterprise, and the adoption of courses of action and the allocation of resources
necessary for carrying out these goals.“
B) Concept of Strategy:
Strategy is a high level plan to achieve one or more goals under conditions of uncertainty.
Strategy is important because the resources available to achieve these goals are usually
limited. Strategy is that which top management does that is of great importance to the
organization. Strategy refers to basic directional decisions, that is, to purposes and missions.
Strategy consists of the important actions necessary to realize these directions. Strategy
answers the questions: like what should the organization be doing? What is the ends
company seeks and how should company achieve them?
C) Levels of Strategy:
Good managers observe their competition all the time and speculate on what particular
strategy those organizations are following. In fact, strategic planning and management may
be occurring at three or more different levels in an organization. It will look like a cascading
hierarchy of strategic initiatives that build and depend upon each other.
L e v e ls S tru c tu re S tra te g y
C o rp o ra te C o r p o r a te O ffic e C o rp o ra te
L e v e l S tra te g y
S tr a te g ic B u s in e s s
B u s in e s s U n it S B U SB U SB U L e v e l S tra te g y
A B C
F u n c t io n a l F in a n c e M a r k e t in g F u n c t io n a l
L e v e l S tra te g y
O p e r a t io n s P e rs o n n e l
1) Corporate Level Strategy:
Strategy at the corporate level is designated as corporate strategy. It is the top management plan to direct and run the
enterprise as a whole. Corporate level strategy represents the pattern of entrepreneurial actions and intents
underlying the organisation’s strategic interests in different business, divisions, product lines, customer groups,
technologies etc. Corporate strategy emphasizes upon the fact that how one should manage the scope, mix and
emphasis of various activities and how the resources should be allocated over the different priorities of the
corporation.
2) Business Level Strategy:
For many companies which are dealing in number of product mix and dealing with different types of market, for them
a single strategy is not only inadequate but also inappropriate. The need is for multiple strategies at different levels. In
order to segregate different units or segments each performing a common set of activities, many companies organize
on the basis of operating divisions, or simply divisions. The divisions may also be known as Profit Centers or Strategic
Business Units.
3) Functional Level Strategy:
Functional level strategy deals with a relatively restricted plan which provides the objectives for a specific function.
These objectives are
1) The allocation of resources among different operations within that functional area.
2) Enabling a co-ordination between them for an optimal contribution to the achievement of business and corporate
level objectives.
1.2 Strategic Management
A) Meaning:
Strategic management is a comprehensive area that covers almost all the functional areas
of the organization. It is an umbrella concept of management that comprises all such
functional areas as marketing, finance & account, human resource, production operation
into a top level management discipline.
B) Definitions:
1) Sharplin*:
“Strategic management is the formulation and implementation of plans and carrying out of
activities relating to the matters which are of vital, pervasive or continuing importance to the
total organisation.”
2) Ansoff*:
“Strategic management is a systematic approach to a major and increasingly important
responsibility of general management to position and relate the firm to its environment in a
way that will assure its continued success and make it sure from surprises.”
C) Characteristics: Not Flexible

Operation
Specific
Long-
Term
Issues
Stream of
Decisions
and Actions
Competitiv
e
Advantage
Innovatio
n
Effect on
Operation
Sharehold s
ers
Oriented
1.2Strategic
Management
C)Characteristics:
1)Flexible:
2)Long-Term Issues:
3)Competitive Advantage:
1.2Strategic
Management
C)Characteristics:
4) Effect on Operations:
5) Shareholders Oriented:
6) Innovation:
1.2Strategic
Management
C)Characteristics:
7) Stream of Decisions and Actions :
8) Not Operation Specific:
Introduction
D) Strategic Management Vs Operational Management:

No. Strategic Management Operational Management
1) Strategic management is an organizational wide The operations management is
activity where the operations, sales and finance are concerned of operations as in production
concerned from the top level to the bottom level of function of the organization at the
the organization. In other words strategic operations/manufacturing floor level of
management is concerned about all the activities in the organization.
the organization as a whole
2) Strategic management is a long term process where Operations management is short term
it identifies the long term desired level of focused and handles day to day
performance and tries to achieve it. operations of an entity.
Introduction

3) The strategic management process involves The operations management involves day-to-
Unstructured decisions where the situation is day activities of a business organization at the
very ambiguous and dynamic in nature. operations level which is very routine-type and
mechanical. It does not involve any ambiguity.
4) Strategic management is a complex process Operations management is a fairly simple

which requires heavy management skills to process and a manager with average skills can
handle. handle the daily operations of the organization.
Introduction

5) Survival of an organization is directly linked to Operation management is not directly related to
strategic management process as it manages the survival of the organization rather it
critical success factors of an organization. It indirectly influences the survival through
identifies the factors that has direct link to the cumulative performance on a day to day basis.
survival of an organization and manage them
to optimize performance.
1.3 Phases in Strategic Management
Strategic management includes the determination or formulation, implementation and

evaluation of strategy. These activities constitute the most important elements of top
management’s strategic job; as such they form a continuous process in organisational life.
The process contains the setting up of broad objective and establishment of plans and
policies for their attainment.
A) Phases in Strategic Management Process:

The strategic management process is ways for businesses to build strategies that help the
company respond quickly to new challenges. It is not a static concept, but an ongoing
process. This dynamic process helps organizations find new and more efficient ways to do
business. The four key elements are: Environmental scanning or situational analysis, strategy
formulation, strategy implementation, and strategy evaluation.
E s ta b lis h in g S tr a te g ic In te n t
v is io n , m is s io n , b u s in e s s d e f in it io n ,
a n d o b je c tiv e .
A) Phases in Strategic Management F o r m u la tio n o f S tr a te g ie s

E n v ir o n m e n ta l O r g a n is a tio n a l
Process:
A p p r a is a l A p p r a is a l
S W O T A n a ly s is
C o r p o r a te - le v e l s tr a te g ie s
B u s in e s s - le v e l s tr a te g ie s
S tr a te g ic c h o ic e
S t r a t e g ic p la n
S t r a t e g ic Im p le m e n t a t io
P r o je c t
P ro c e d u ra l
R e s o u r c e a llo c a t io n
S tru c tu ra l
B e h a v io u r a l
F u n c t io n a l a n d o p e r a t io n a l
S t r a t e g ic E v a lu a t io n
A)Phases in Strategic Management Process:

1)Establishing Strategic Intent:
a)The Vision:
b)Mission:
c)Defining the Business:
d)Setting Objectives:

2) Strategy Formulation:
Strategy formulation refers to the process of choosing the most appropriate course of action
for the realization of organizational goals and objectives and thereby achieving the
organizational vision. The process of strategy formulation basically involves seven main
steps. Though these steps do not follow a rigid chronological order, however they are very
rational and can be easily followed in same order. This phase of the strategic management
process consists of the following elements:
a) Environmental Appraisal :
b) Organisational Appraisal :
c) SWOT Analysis:
d) Corporate Level Strategies:
e) Business Level Strategies:
f) Strategic Choice :
g) Strategic Plan :

3) Strategy Implementation:
Strategy implementation is the translation of chosen strategy into organizational action so as
to achieve strategic goals and objectives. Strategy implementation is also defined as the
manner in which an organization should develop, utilize, and amalgamate organizational
structure, control systems, and culture to follow strategies that lead to competitive
advantage and a better performance. For the implementation of a strategy, the strategic plan
is put into action through following six sub-processes:
a) Project Implementation:
b) Procedural Implementation :
c) Resource Allocation:
d) Structural Implementation:
e) Behavioural Implementation:
f) Functional and Operational Implementation:

4) Strategy Evaluation:
Strategy evaluation is as significant as strategy formulation because it throws light on the
efficiency and effectiveness of the comprehensive plans in achieving the desired results. The
managers can also assess the appropriateness of the current strategy in today's dynamic
world with socio-economic, political and technological innovations. Strategic Evaluation is
the final phase of strategic management. This is the last phase of strategic management
process is strategic evaluation. It appraises the implementation of strategies and measures
organisational performance.
B) Stakeholders in business:
Stakeholders are people or groups that are affected by company's operations. Shareholders
or owners are a commonly recognized stakeholder group. However, one also needs to
consider how customers, community, employees and business partners impact business. A
well-rounded approach that shows understanding of each stakeholder normally increases
long-term viability and success.
a) Meaning:
Stakeholders are the individuals or groups that have an interest in the organization and are
affected by its actions. Stakeholders are customers, employees, and suppliers, board of
directors, owners, shareholders, government agencies, unions, political groups, the media,
and others. Stakeholders can be divided into internal and external stakeholders. Internal
Stakeholders are: stockholders and employees, including executive officers, other managers
and board members. External stakeholders include: all other individual and groups that have
some claim on the company, This group is comprised of customers , suppliers , creditors ,
government , unions , local communities and the general public.
b) Effect of Stakeholders on Business: Effects of
stakeholder
Stakeholders are people or groups s in business
that are affected by company's
operations. Shareholders or owners
Business
are a commonly recognized
Partners
stakeholder group.
Employee Sharehold
s ers
Customers
and
Community
b) Effect of Stakeholders on Business:
1) Shareholders:
Company owners usually have a strong voice in the direction company takes. In a partnership, each owner-
partner has a financial interest in the profit potential of the business.
2) Customers and Community:
In the long run, ability to meet the needs of customers and community is key to success. Customers provide
the revenue and cash flow that business needs to operate and ultimately earn a profit. One must
understand customer wants and needs and meet them on an ongoing basis.
3) Employees:
In the early 21st century, companies tend to place greater value on the contributions employees make to
business operations. If one operates a service-based business, employees provide the consistent service
that helps to attract and retain customers.
4) Business Partners:
Business partners and suppliers can also significantly influence business. Partners are companies that
collaborate with in joint ventures or shared investment opportunities. Suppliers are companies that rely
on for key resources used inside company and for products to resell.
2. Providing
1. Detailed
B) Stakeholders in business: Understanding
Requirements and
the Business
a Financial Plan
c) Roles of Stakeholders in Drivers
3. Committing
the Necessary
Strategic Management: Resources
9. Project
Closure
4. Taking
Ownership of
Appropriate
Deliverables
8.
Communicating
Throughout the
Life of the Project
5. Project progress
and Cascading
Information to
Others Who Need
7. Identifying
to Know
and Resolving 6. Establish the
any Project
Training and
Issues and Risks
Support
Requirements
c) Roles of Stakeholders in Strategic Management:
1) Understanding the Business Drivers:
Understanding the Business drivers and Ensuring that the project fits with the strategy for their area
of the business is a fundamental responsibility of the stakeholder. Stakeholder must be able to
clearly explain the necessity for their project to be taken on before others and prove its strategic
merit.
2) Providing Detailed Requirements and a Financial Plan:
Every project must have these and is deemed to fail if they’re not completed up front.
3) Committing the Necessary Resources:
It’s key to have individuals from the affected areas involved on any project. They can provide with
instant answers and feedback as to how things do or should work. They are the daily operational
link to the eventual user base of the project deliverables and cannot stress enough the importance
and usefulness of having them involved.
4) Taking Ownership of Appropriate Deliverables:
The stakeholder needs to take ownership of the appropriate deliverables and make sure that they work
pertaining to a number of key elements such as mirroring the requirements, process compatibility,
usability and performance.
5) Project progress and Cascading Information to Others Who Need to Know:
The stakeholder must not skip project meetings and rely upon others to keep them up to
speed. Similarly, they must also keep affected others or teams up to date with frequent
progress reports.
6) Establish the Training and Support Requirements:
The stakeholder must identify any affected individuals of their projects and establish the
necessary training and support requirements. This will be done in harness with the relevant
departments but the stakeholder is responsible for it.
7) Identifying and Resolving any Project Issues and Risks:
It’s up to the stakeholder to identify and acknowledge any potential risk and change
associated with their project during the proposal stages.
8) Communicating Throughout the Life of the Project:
Requirements or processes sometimes change during project development and without
having relevant resource or communication with the targeted business areas a project will
quickly loose resonance and relevance.
9 ) Project Closure:
In accordance with good project governance, the stakeholder must perform an analysis of the
projects delivery against plan, budget and strategic objectives and sign off and accept the
project.
SINGUR TO SANAND, THE JOURNEY ON THORNS!

Effective strategic management begins with the management by clearly articulating its vision for
the future. The concept of strategic intent, popularized by Gary Hamel and C.K. Prahalad (1989),
refers to the purpose of the organization and the ends it wishes to pursue. The strategic intent
represents the organization’s belief about its state of the future. The purpose or ends the
organization wishes to pursue varies from being really broad and long-term (vision and mission),
to being narrow, with a focus on the short or near-term (objectives of goals).
A) Meaning of Strategic Intent:

Prahlad and Hamel coined the term "strategic intent". It means an "ambitious goal" of a firm
to acquire a desired leadership position. A company exhibits strategic intent when it
relentlessly pursues an ambitious goal and concentrates its full resources and actions on
achieving that goal. Strategic intent is focused on the ends, while the means are left to be
flexible.
B) Attributes of Strategic Intent:

The specific relationship
between the long-term and
short-term intentions is
described in the hierarchy of
strategic intent.

1) Vision:
The vision of the organization refers to the broad category of long-term intentions that the
organization wishes to pursue. It is broad, all inclusive, and futuristic. As the word ‘vision’
suggests, it is an image of how the organization sees itself. It is in most cases, a dream; the
aspirations the organization holds for its future; a mental image of the future state. It might
therefore be difficult for the organization to actually achieve its vision even in the long-term,
but it provides the direction and energy to work towards it.
a) Definitions:
1) Kottler:
“Vision is a description of something (an organisation, a corporate culture, a business, a
technology or an activity) in the future.”
2) Miller and Dess:

“It is the category of intentions that are broad, all-inclusive and forward thinking.”

1) Vision:
b) Benefits of Vision:
According to Parikh and Neubouer, there are several benefits of having a vision. They are as
follows:
i. Good vision is inspiring and exhilarating.
ii. Good vision helps in the creation of common identity and a shared sense of purpose.
iii. Good vision is competitive, original and unique. It makes sense in the market place, as it
is practical.
iv. Vision represents a discontinuity, a step function and a jump ahead, so that the company
knows what it is to be.
v. Good vision represents integrity. It is truly genuine and can be used for the benefit of
people.
vi. Good vision foster risk taking and experimentation.
vii. Foster long- term thinking.
viii. Good vision represents integrity: they are truly genuine and can be used to the benefit of
the people.

1 )Vision:
c) Process of Envisioning:
Well- conceived vision
Core ideology Envisioned Future
Long- term audacious

Core Values goal, Vivid description
of achievements

1) vision:
c) Process of Envisioning:
The process of envisioning is a difficult one, According to Collins and Porras (1996), a well-
conceived vision consists of two major components: core ideology and envisioned future.
1) Core Ideology:
The core ideology defines the enduring character of an organization that remains
unchangeable as it passes through the vicissitudes of vectors such as technology,
competition or management fads. The core ideology rests on the core values (the
essential and enduring tenets of an organization) and core purposes (an organization’s
reason for being).
2) Envisioned Future:
The envisioned future too consists of two components: a 10—30 year’s audacious goal and
vivid description of what it will be like to achieve that goal. The process of envisioning is
shown in the below figure.

2) Mission:
The mission statement makes the vision statement more tangible and comprehensible. In
most cases, the vision statement is just a slogan, a war cry, or even a short phrase containing
superlatives.
a) Meaning:
Mission is a statement which defines the role that an organization plays in the society. It refers
to the particular needs of the society, for instance. Its information needs. A mission statement
clearly specifies:
i. Why the organization exists, or the purpose?
ii. What differentiates the organization from others, or the identity?
iii. The basic beliefs, values, and philosophy of the organization.
b) Definitions:
Thompson:
”Mission is the essential purpose of the organisation, concerning particularly why it is in
existence, the nature of the business (es) it is in, and the customers it seeks to serve and
satisfy.”

2) Mission:
c) Key Elements in Developing a Mission Statement:
Most organizations derive their mission statement from a particular set of tasks they are
called upon to perform in the light of their individual, national or global priorities. Following
are the key elements considered while developing a mission statement.
Distinctive
History of the Organization's
Competencies of the
Organisation Environment
Organisation

2) Mission:
c) Key Elements in Developing a Mission Statement:
1) History of the Organisation:
Each and every organisation, whether it is a manufacturing or service organisation, profit-
oriented or non-profit based, big or small, has its own history of objectives, policies,
working, and mistakes.
2) Distinctive Competencies of the Organisation:
A company can do or produce many things, but they should decide what it can do best and
more efficiently. Thus, organisation with such distinctive competencies can offer
advantages over similar organisation. They must have the competencies to capitalise the
opportunities offered by the markets and society.
3) Organisation’s Environment:
The opportunities and threats posed by the environment should be identified by
management, while developing a mission statement. For example - advanced technology in
communication industry can adversely affect on hotel industry or transport industry.

2) Mission: It Should It Should be
Indicate How
Feasible
d) Characteristics of a Good Objectives are
to be
Mission Statement: Accomplished
It Should be
Precise
It Should
Indicate the
Major
Components
of Strategy
It Should be
Clear
It should be
Distinctive
It Should be
Motivating

2) Mission:
d) Characteristics of a Good Mission Statement:
1) It Should be Feasible:
A mission should always aim high but it should not be an impossible statement. It should be
realistic and achievable; its followers must find it to be credible. But feasibility depends on
the resources available to work towards a mission.
2) It Should be Precise:
A mission statement should not be so narrow as to restrict the organization’s activities, nor
should it be too broad to make itself meaningless.
3) It Should be Clear:
A mission should be clear enough to lead to action. It should not just be a high-sounding set
of platitudes meant for publicity purposes. Many organizations do adopt such statements
(sometimes referred to as the corporate positioning statement) but probably they do so for
emphasizing their identity and character.

2) Mission:
d) Characteristics of a Good Mission Statement:
4) It Should be Motivating:
A mission statement should be motivating for members of the organization and of the society
and they should feel it worthwhile working for such an organization or being its customers.
5) It should be Distinctive:
A mission statement which is indiscriminate is likely to have little impact. If all scooter
manufacturers defined their mission in a similar fashion, there would not be much of a
difference among them.
6) It Should Indicate the Major Components of Strategy:
A mission statement, along with the organisational purpose should indicate the major
components of the strategy to be adopted.
7) It Should Indicate How Objectives are to be Accomplished:
Besides indicating the broad strategies to be adopted, a mission statement should also
provide clues regarding the manner in which the objectives are to be accomplished.

3 )Core Values:
Core values of the organization represent the commonly held beliefs, mindsets, and
assumptions that shape how work is done in an organization. They clearly specify the
organization’s and its members' enduring preference for a mode of conduct (in both their
business processes, and their relationship with business partners).
Core values are derived out of the organization’s mission statement(s), and aid in
differentiating the organization from others, apart from spelling out the organization‘s
expectations and intended behaviors of people.
Good core value statements clearly delineate the observable norms of behavior that reflect
the desired core values of the organization. For instance, an organization might have
‘customer responsiveness` as its core value, but without proper operationalization in terms
of observable norms of behavior, it might mean different things to different people.

4) Goals:
Goals provide the basis for action towards the achievement of the organization’s mission, in
the form of specific milestones. Goals are financial and non-financial, and specify the route
the organization takes to achieve its vision and mission. It is often seen that organizations
pursue a range at financial and non-financial goals, which are not always perfectly
consistent with one another.
The goals statement also specifies the relative priorities and trade-offs between the various
goals the organization intends to pursue. Goals that make the organization ‘stretch’ in order
to achieve them are called stretch goals, and are considered to be more effective in
extracting the best out of the people and the resources in control of the organization.

5) Objectives:
Objectives are operational definitions of the organization‘s goals. They provide the
measurable parameters for monitoring/evaluating the performance of the organization.
Objectives also include a time dimension that delineates the specific goals the organization
intends to achieve in defined periods.
By providing a series of time-bound objectives, the organization demonstrates how it can
move towards achievement of its goals, through consistently and periodically achieving its
objectives.
6) Plans:
Plans indicate the specific actions that will be taken by the organization in order to achieve
the objectives. Plans specify the roles members of the organization will perform, the
resource allocation across different organizational sub-units and departments, and
prioritize and schedule the various activities.

5) Objectives:
Objectives are operational definitions of the organization‘s goals. They provide the
measurable parameters for monitoring/evaluating the performance of the organization.
Objectives also include a time dimension that delineates the specific goals the organization
intends to achieve in defined periods.
By providing a series of time-bound objectives, the organization demonstrates how it can
move towards achievement of its goals, through consistently and periodically achieving its
objectives.
6) Plans:
Plans indicate the specific actions that will be taken by the organization in order to achieve
the objectives. Plans specify the roles members of the organization will perform, the
resource allocation across different organizational sub-units and departments, and
prioritize and schedule the various activities.
C) Difference between Mission and Vision:

No. Vision Mission
1) Category of intension's are broad, all inclusive and Mission is the fundamental, unique purpose that sets a
forward Thinking business apart from other firms of its type and identifies the
scope of its operations in product and market terms
2) It states aspirations for the firm without stating the It states how it would achieve the vision of the firm
means to achieve them
3) Vision is dream, little hazy and intangible Mission is clear, tangibalize, or concretizes vision.
4) It guides in formulation of mission. It guides in formulation of business definition, goals and

objectives.
5) It is futuristic in nature It is current in nature
6) Vision is a mental image of a possible and desirable Mission is enduring statement of philosophy and a creed
future stale of the organization. statement.
7) Vision answers the question " What we want to become" Mission answers the question ‘what is our business.".
D) Business:
Business is a typical economic activity with the object of earning an income i.e. profit.
a) Dimensions of Business Definitions:

According to Abell (1980; Abell and
Hammond, 1979), a business may be defined
by three dimensions:
1) Customer groups describe the categories of
customers, or whom the business satisfies.
2) Customer functions describe customer
needs, or what is being satisfied.
3) Technologies describe the way the firm
satisfies customer needs.
D) Business:
a) Dimensions of Business Definitions:
1) Customer Groups:
Defining customer groups requires understanding customers’ identities. Some common
dimensions for describing identity include geography, demography, socioeconomic class, life
style, personality characteristics (in a consumer goods situation), or user industry and size.
2) Customer Functions:
Products or services perform certain functions for customers. However, functions must be
separated conceptually from the way the function is performed (i.e., technology), as well as
the attributes or benefits that a customer may perceive as important criteria for choice. In this
sense, transportation is a function: a taxi is a way of performing the function; and price,
comfort, speed, and safety are the attributes or benefits associated with the choices.
3) Alternative Technologies:
Technologies describe the alternative ways in which a particular function could be performed for
a customer. Therefore, in this context, a technology represents the form of the solution to the
customer’s problem. If the function is transportation, the technologies might include road,
rail, and/ or sea travel.
E) Linking Objectives to Missions and Visions:
Mission and vision statements are sometimes accompanied by statements of enterprise
values sometimes referred to as philosophies. Such statements are not, however, integral
elements of either mission or vision statements. The trend is towards making statements
short and memorable, expanding and qualifying them with separate, detailed statements of
corporate and business objectives and strategies. Since most enterprises of any size now
have websites, it is easy to communicate these more comprehensive statements.
a) Enterprise Objectives:
Mission and vision statements require translation into tangible and specific enterprise objectives
to guide future actions and to provide milestones against which to assess performance and
progress. Objectives attract various names including aims, ends, goals and targets, often
used imprecisely. In popular usage, aims are the broadest or highest level, in effect the
enterprise mission, leading to more detailed goals, objectives and targets. To set relevant,
realistic objectives and targets requires clarity of aims and goals. Since aims and objectives
exist at different levels, they signal actions of different degrees of specificity.
F) Strategic Performance Management Process:
Performance
Key Success
Key
Key Result
Measuremen
Factors
Performance
Areas (KRA):
t (KSFs):
Indicators

1) Performance Measurement:
The process of performance measurement considers collection, consolidation, and distribution
of performance data to compile the performance information. Such performance information
then gets related to the critical success factors (CSFs) and/or the performance indicators
(KPIs).
2) Key Success Factors (KSFs):
Key success factors (KSFs) or Critical success factors (CSFs) relate to the specific strategy
elements, product or service attributes resources, capabilities, competencies, and/or business
outcomes that influence a firm‘s profitability and/or survival in a particular industry. The KSFs
are, by definition, important for all firms in that industry to possess and pay attention to.
Major Sources of KSFs:
Rockart (1979) identified four major sources of KSFs:
a) Structure of the Industry:
b) Competitive Strategy, Industry Position, and Geographic Location:
c) Environmental Factors:
d) Temporal Factors:

3) Key Performance Indicators:
Performance indicators are well understood as being metrics or measures in terms of which
performance is measured, evaluated or compared. Key performance indicators (KPIs) are the
metrics or measures in terms of which the critical success factors are evaluated. What makes
the KPIs ‘key' is their relationship to the CSFs and ultimately, to the vision of the organization.
The company has to determine which combinations of metrics it would use to determine and
whether it is successful. KPIs thus, help to quantify critical success factors.
Benefits of KPI:
KPIs have gained importance as well as popularity in the corporate world as they have several
benefits as follows:
a) Helps in Shaping the Organisation:
b) Clear Understanding to Accomplish Objectives:
c) As a Motivational Factor:
d) To Measure Business Trends:
e) Easy in use:
f) Can be used as a Benchmarking tool:

4) Key Result Areas (KRA):
These are sometimes called Operational Objectives. There is no complete agreement on what
the key result areas of a business should be. They may differ for various enterprises. These
are normally short term objectives that have a time horizon of one or two years, and if
necessary are renewed from time no time.
They form the bread and butter of the organization. Generally, they are subservient to the
strategic Objectives and often to the Business Process Objectives. These are areas where
performance is essential for the ongoing success of the enterprise. In these areas,
managements normally attach financial objectives as well as operational objectives. Say if
Marketing/ Sales is a Key Result Area; it would have objectives that are financial as well as
those that relate to the measure of success in the market.
1.5 Analyzing Company’s External Environment
Most firms face external environments that are highly turbulent, complex, and global- conditions
that make interpreting those environments increasingly difficult. To cope with often ambiguous
and incomplete environmental data and to increase understanding of the general environment,
firms engage in external environmental analysis, the continuous process includes four activities:
scanning, monitoring, forecasting, and assessing.
A) Environmental Appraisals:
In order to draw a clear picture of what opportunities and threats are faced by the
organization at a given time, it is necessary to appraise the environment. This is done by
being aware of the factors that affect environmental appraisals, identifying the
environmental factors and structuring the results of this environmental appraisal.
a) Factors Affecting Environmental Appraisals:
Geographic
Power of the Dimensions of
Organisation Organisation
Environmental-
Related Factors
Organization
-Related
Factors
Strategist
-Related
Factors
1) Strategist-Related Factors:
There are many factors related to the strategist, which affect the process of environmental
appraisals. Since strategists play a central role in the formulation of strategies, their
characteristics such as age, education, experience, motivation level, cognitive styles, ability
to withstand time pressures and strain of responsibility have an impact on the extent to
which they are able to appraise their organization’s environment and how well they are able
to do it.
2) Organization-Related Factors:
These characteristics are the nature of business the organization is in, its age, size and
complexity, the nature of its markets and the product or services that it provides. Another
variable identified is of information climate, which as assessed through the information
infrastructure implemented, i.e. the processes, technologies and people used in information
acquisition and handling.
3) Environmental-Related Factors:
The nature of environment facing an organization determines how its appraisal could be done.
The nature of the environment depends on its complexity, volatility or turbulence, hostility
and diversity. Information processing perspectives suggest that scanning activity will increase
in response to increasing environmental uncertainty.
4) Power of the Organisation:
The relative power of the organisation vis-a-vis its external environment determines the extent
to which the organisation can control or is controlled by the environmental forces. If the
organisation is strong in respect of certain environmental factors, it is unlikely to focus
attention on this aspect.
5 )Geographic Dimensions of Organisation:
The geographic dimensions of the organisation affect the type of interaction which the
organisation has with its environment. Generally, the organisation having greater area of
operation will require more information because the environmental factors may differ from
place to place.
b) Importance of Environmental Appraisal:
Importance of Environmental Appraisal
Assessing the
Helpful in Facilitates
Impact of Assessment of
Evaluation of Planning and
Environmental Future
Present Strategy Strategies
Change
b) Importance of Environmental Appraisal:
1) Helpful in Evaluation of Present Strategy:
The importance of environmental appraisal lies in its usefulness for evaluating the present strategy,
setting strategic objectives and formulating future strategies. The fortunes of business enterprises are
determined by changes in the social, economic, political, business and industrial conditions.
2) Assessing the Impact of Environmental Change:
An alert management continually tunes in to the environmental forces that influence the demand for
existing products and services and create opportunities for new ones. Environmental change affects
much more than the products or services offered by an institution.
3) Assessment of Future:
To assess the future is a difficult task and all eventualities cannot be anticipated. But to some extent,
the future events can be predicted by systematic appraisal and monitoring of the environment.
4) Facilitates Planning and Strategies:
Environmental appraisal comprises information processing and forecasting of social, economic, political
and even international conditions besides technological and product market conditions.
B) Scenario- Planning:
To manage risks related to innovation investments that extend long into the future,
managers must be willing to look ahead and consider uncertainties. But rather than doing
that, many people react to uncertainty with denial. They take an unconsciously deterministic
view of events. They take it for granted that something’s will or will not happen.
a) Meaning:
Scenario Planning is a strategic planning method that some organisations use to make flexible
long-term plans. It is one of the methods which strategic planners have found useful for the
interpretation of a fluid, rapidly changing business environment with an uncertain future.
Scenarios constitute an effective device for sensing, interpreting, organising and bringing to
bear diverse information about the future in planning and strategic decision-making.
b) Definition:
Pierre Wack, Royal Dutch/Shell:
“Scenario planning is a discipline for rediscovering the original entrepreneurial power of creative
foresight in contexts of accelerated change, greater complexity and genuine uncertainty.”
Process of
B) Scenario- Planning: Scenario
c ) Process of Scenario Planning: Selection of Planning
Uncoverin
Leading
Indicators and g the
Signposts Decision
Analysis of Information
Implications Hunting and
of Decisions Gathering
Identifying
Composing
Driving Forces
Scenarios of a Scenario
Identify Uncover
Critical Predetermin
Uncertainties ed Elements
c ) Process of Scenario Planning:
The Scenario Planning Process works as follows:
1) Uncovering the Decision:
Management has to understand its choices. Each company has to take decisions in the near or immediate
future. Their response will determine its future performance or survival. So in this first step the covered
strategic decisions are to be uncovered.
2) Information Hunting and Gathering:
To create scenarios, observations from the real world must be built into the story. Thus, this process
involves research-skilled hunting and gathering of information.
3) Identifying Driving Forces of a Scenario:
The first task in building the scenario itself is to look for driving forces. Such driving forces influence the
key factors identified earlier.
4) Uncover Predetermined Elements:
Predetermined elements are developments and logics that work in scenarios without being dependent on
any particular chain of events. It means that a predetermined element is something that seems certain.
For example, the most commonly recognised predetermined element is demographics because it is
changing so slowly.
c ) Process of Scenario Planning:
5) Identify Critical Uncertainties:
In every plan critical uncertainties exist. Scenario planners seek them to prepare for them. Critical
uncertainties are often related to predetermined elements. They are the variables in scenario planning
and are the basis to create different scenarios in parallel.
6) Composing Scenarios:
Scenarios describe how the driving forces might plausibly behave which is useful to explain the future.
They are based on the assumption of predetermined elements and critical uncertainties. Important
uncertainties are used to describe the different scenarios and their plots.
7) Analysis of Implications of Decisions:
Once the scenarios have been developed in some detail, then it is time to return to the decision identified
in step one.
8) Selection of Leading Indicators and Signposts:
It is important to know as soon as possible which of several scenarios is closest to the course of history as
it actually unfolds. For this purpose, a few indicators should be selected to monitor the strategy or
decision in an ongoing way. Monitoring these indicators will allow a company to know what the future
holds for a given industry and how that future is likely to affect strategies and decisions in the industry. If
the scenarios
C) Preparing an Environmental Threat and Opportunity Profile ( ETOP):

Environmental Threats and Opportunities Profile (ETOP) gives a summarized picture of
environmental factors and their likely impact on the organization. ETOP is generally prepared
as follows.
1) List Environmental Factors:
The different aspects of the general as well as relevant environmental factors are listed. For
example, economic environment can be divided into rate of economic growth, rate of
inflation, fiscal policy etc.
2) Assess Impact of each Factor:
At this stage, the impact of each factor is assessed closely and expressed in qualitative (high,
medium or low) or quantitative factors (1, 2, 3). It is to be noted that not all identified
environmental factors will have the same degree of impact. The impact is assessed as positive
or negative.
3) Get a big picture:
In the final stage, the impact of each factor and its importance is combined to produce a
summary of the overall picture.

a) Example:
ETOP Profit of a Bicycle Company Ltd
Environmental Sectors Impact
Economic High export potential.
Political No significant factor.
Social Preference for sports cycles and fashionable cycles
Technological Technological up gradation of industry in progress. Import of
machinery is possible.
Supplier Ancillaries and associated companies supply parts and
components. Imported raw material available.
Government Liberalisation for technology import and a thrust area for
export.
Market For sport cycles growth rate is 25% while others it is 7 to 9 per
cent Increasing demand.

a) Example:
ETOP of a Bicycle Company Ltd
Looking to above chart, it can be concluded that many opportunities are operating in the
environment for a bicycle company. A company can take advantage of Government policies
and increase its production as per demand in the market. It can also take advantage of high
expert potential. Though, all conditions are favourable for settled company, but for a new
company much would depend upon supply of raw materials and how company can be able
to acquire latest technology. ETOP provides very useful information to a strategist. With the
help of ETOP, organisation knows where it stands with respect to its environment and this
helps the strategist in formulation of an appropriate strategy.
1.6Analyzing Industry Environment
An analysis of the external environment includes an industry analysis and an examination of key
external stakeholders and the broad environment.
Industry Analysis:
Environmental analysis should begin with an industry analysis. The first step in industry analysis
is to provide a basic description of the industry and the competitive forces that dominate it.
A) Porter’s Five Forces Model of
Competition:
A key concept in porter’s five forces
model is the view that some
industries are more attractive and
others are less attractive.
Therefore, the ability to identify
industry attractiveness is
important. Porter argues that
industries can be characterized and
evaluated by looking at and
analyzing the following five forces:
A) Porter’s Five Forces Model of Competition:

1) The Threat of Substitute Products:
If the product of an industry can be substituted by that of another, the purchaser of that
product has choices that extend beyond rival products. For example, going to the cinema can
be a substitute for a meal at a restaurant. Substitute products are a strong threat when:
a) They offer a similar level of benefits at proximate prices.
b) The consumer will not incur switching cost in moving between alternatives.
c) The consumer is price sensitive.
2) The Threat of New Entrants:
When new entrants enter an industry, they bring extra capacity to the Industry. If demand is
increasing the new entrants can use this capacity to meet the increased demand. This is
frequently the case during the growth stage of an industry, but as the industry matures
demand growth slows and new entrants will have to start competing with existing companies
for a share of existing demand. In this situation, the new entrants will have to gain market
share by offering similar products at competitive prices or by redefining the market to
increase products demand.

3) The Bargaining Power of Buyers:
Buyers or customers are powerful when the following conditions exist:
a) There are few buyers who purchase in large quantities.
b) Buyer has low switching costs.
c) Buyer has choices because there is a large volume of sellers.
d) The product or service supplied is not an important one.
e) The buyer has the ability to produce the product supplied.
f) The buyer has information about the costs of production and other buyer’s prices.
g) The impact of powerful buyers can be significant because they can negotiate prices down
and reduce industry profitability.

4) The Bargaining Power of Suppliers:
The factors that influence buyer’s power are similar to those that influence supplier power;
they just act in the opposite direction.
Supplier power is high when:
a) There are few alternative sources of supply and there are many buyers.
b) Particular buyer is not an important customer to the supplier.
c) The product or service supplied is an important input for the buyer.
d) The buyer cannot make the produce cheaper that the supplier can.
e) There are no substitutes for the supplied products.
f) The supplied product has a good brand reputation, especially when this branding is
important to the final product.

5) The Rivalry Amongst Industry Members:
There are two extreme possibilities
a) Competition between industry members is low. Each industry member is content with its
market share and gets involved only minimally with competitive activity. The main
concern is to maintain industry profitability by tacit co-operation.
b) Competitive rivalry is high and is manifested in direct and indirect price cutting,
promotional activities and discounted products.
Rivalry tends to be high when:
c) Demand is growing slowly or declining. This causes greater rivalry when it is difficult to
leave the industry.
d) Customers can switch over to other products easily.
e) New entrants are seeking to gain market share by price cutting.
f) Industry members are of similar size and have similar market power.
g) There is excess capacity. In this situation, some industry members may be prepared to
sell at prices that exceed variable costs but do not necessarily cover total costs.
B) Entry and Exit Barriers:

A barrier to entry is something that blocks or impedes the ability of a company (Competitor)
to enter an industry. A barrier to exit is something that blocks or impedes the ability of a
company (competitor) to leave an industry.
a) Barriers to Entry:
1) Economies of Size:
The need for a large volume of production and sales to reach the cost level per unit of
production for profitability is a barrier to entry.
2) Capital Intensive::
A large capital investment per unit of output in facilities tends to limit industry entry.
3) Intellectual Property:
Patents and other types of proprietary intellectual property are very effective in limiting
industry entry.
4) High Switching Costs:
The tendency for buyers of an industry`s products to be reticent about switching to a new
supplier tends to limit entry.

a) Barriers to Entry:
5) Established Brand Identity:
Industries dominated by branded products are difficult to enter due to the large amount of time
and money required to create a competing branded product.
6) Permitting Requirements:
Industries where permitting and licenses are required to establish production tend to have
limited entry.
7) Government Standards:
Industries where rigid industry standards exist tend to have limited entry.

b) Barriers to Exit:
1) Investment in Specialist Equipment:

An investment in specialized equipment that cannot readily be used in other industries tends
to be an impediment to leaving the industry.
2) Specialized Skills:

Highly specialized skills by industry participants that cannot be utilized in other industries tend
to be an impediment to leaving the industry.
3) High Fixed Costs:

High levels of dedicated fixed costs tend to be an impediment to leaving an industry
C) Strategic Group Analysis:

After analysing the environment it is necessary for a firm to analyse their competitors. The
aim here is to focus on the group of firms that are the closest rivals to the organization in
respect of the strategy positions they find themselves in. Specifically, a strategy group will
generally share similar strategic characteristics, follow similar strategies and compete on
similar bases.
a) Meaning:
Strategic groups are "conceptually defined clusters of competitors that share similar strategies
and therefore compete more directly with one another than with other firms in the same
industry". They are conceptual as they are not formally identified groups or part of an
industry association.

b) Benefits of Strategic Group Analysis:
Benefits
Helps in
Predict the
Threat
Helps in Helps in Predict

Identifying the Future
Competitors Opportunities
Predict Provide a
Important
Market Formula for
Dimensions Success

1) Helps in Identifying Competitors:
It serves as a purpose of indentifying the strategic groups and then analysing the industry
from the view-point of the differences in the business strategies employed. This facilitates a
direct comparison among the group of firms that compete directly with each other.
2) Helps in Predict the Threat:

It helps to understand the variance of threats and opportunities and competitive dynamics
among firms within an industry.
3) Helps in Predict the Future Opportunities:

It helps to indentify strategic opportunities by revealing area in the industry I which no or
very few firms currently compete.

4) Provide a Formula for Success:
It indicates a formula for success for a service category. Such insight may broader manager’s
view of important market needs.
5) Predict Important Market Dimensions:

It indicates important market dimensions or niches that are not being capitalized on by the
existing competitors. Lack of attention to critical success factors by other competitive
organizations offering the same or a similar service may provide an opportunity for
management to differentiate its services.
Thank You

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Strategic Unit 1

Management 1.1 Understanding Strategy

Strategic management may be defined as a systematic approach to positioning the business

Development of organization completely rests on the efficiency of the decision-makers.

C) Characteristics: Not Flexible

D) Strategic Management Vs Operational Management:

D) Strategic Management Vs Operational Management:

4) Strategic management is a complex process Operations management is a fairly simple

D) Strategic Management Vs Operational Management:

No. Strategic Management Operational Management

Strategic management includes the determination or formulation, implementation and

A) Phases in Strategic Management Process:

A) Phases in Strategic Management F o r m u la tio n o f S tr a te g ie s

A)Phases in Strategic Management Process:

A) Phases in Strategic Management Process:

A) Phases in Strategic Management Process:

A) Phases in Strategic Management Process:

SINGUR TO SANAND, THE JOURNEY ON THORNS!

A) Meaning of Strategic Intent:

B) Attributes of Strategic Intent:

B) Attributes of Strategic Intent:

2) Miller and Dess:

B) Attributes of Strategic Intent:

B) Attributes of Strategic Intent:

Core ideology Envisioned Future

Long- term audacious

B) Attributes of Strategic Intent:

B) Attributes of Strategic Intent:

B) Attributes of Strategic Intent:

B) Attributes of Strategic Intent:

B) Attributes of Strategic Intent:

B) Attributes of Strategic Intent:

B) Attributes of Strategic Intent:

B) Attributes of Strategic Intent:

B) Attributes of Strategic Intent:

B) Attributes of Strategic Intent:

B) Attributes of Strategic Intent:

C) Difference between Mission and Vision:

4) It guides in formulation of mission. It guides in formulation of business definition, goals and

5) It is futuristic in nature It is current in nature

a) Dimensions of Business Definitions:

F) Strategic Performance Management Process:

F) Strategic Performance Management Process:

F) Strategic Performance Management Process:

F) Strategic Performance Management Process:

Importance of Environmental Appraisal

C) Preparing an Environmental Threat and Opportunity Profile ( ETOP):

C) Preparing an Environmental Threat and Opportunity Profile ( ETOP):

C) Preparing an Environmental Threat and Opportunity Profile ( ETOP):

A) Porter’s Five Forces Model of Competition:

A) Porter’s Five Forces Model of Competition:

A) Porter’s Five Forces Model of Competition:

A) Porter’s Five Forces Model of Competition:

B) Entry and Exit Barriers:

B) Entry and Exit Barriers:

B) Entry and Exit Barriers:

1) Investment in Specialist Equipment:

2) Specialized Skills:

3) High Fixed Costs:

C) Strategic Group Analysis:

C) Strategic Group Analysis:

Helps in Helps in Predict

C) Strategic Group Analysis: