INTRODUCTION TO

STRATEGIC MANAGEMENT
 Definition Of Strategic Management

 Strategic Management is the process through which the

managers undertake efforts to ensure long-term adaptation of
their organization to its environment . Strategic management
is not a simple process . It is complex in nature . Its
complexity may be attributed mainly to three reasons :

a) Strategic management involves taking decisions about future .

b) Managers in different departments in an organization have
different priorities .
c) Strategic management involves major multifarious changes in
the organization .
 Benefits of Strategic Management

 The benefits of strategic management in an organization ,

specially in an business organization include :

1. Provide better guidelines to the entire organization .

2. Making managers more alert to the winds of change , new
opportunities and threatening developments in the
organizations external environment .
3. Provide managers with a rationale for evaluating competing
budget requests for investment capital and new employees .
4. Helping of unify the numerous strategy-related decisions by
managers across the organization .
5. Creating a more proactive management posture .
 Policy

A policy is a general statement that guides managers

thinking in decision making . A policy is a broad
guideline for decision making . Policies are
sometimes referred to as rules of choice and behavior
developed to guide and direct organizational
decision making and action . It is a standing plan in
the sense that is lasts relatively for a longer period of
time .
 Strategic Planning

A strategic plan is prepared to cope with a number of

issues , such as the industry and competitive conditions ,
expected actions of the key actors in the industry and any
obstacles to the success of the organization .

Strategic planning focuses on the future . When you are

involved in strategic planning , you will undertake through
scanning and analysis of total business environment and
resources of the existing and potential competitors as well
as your own resources and capabilities .
 Organizational Philosophy

Organizational philosophy establishes the

relationship between the organization and its
stakeholders . It establishes the values and beliefs of
the organization about what is important in both life
and business , how business should be conducted ,
its view of humanity , its role in society , the way the
world works and what is to be held inviolate .
 Strategy

 A strategy is considered as a long term plan that relates the

strategic advantages of an organization to the challenges of
the environment . It involves determination of long-term
objectives of the organization and adaptation of courses 0f
action . It also involves allocation of resources necessary to
achieve the objectives .
 According to the definition provided by Thompson
Strickland :
“ Strategy is the means used to achieve the ends . Here
‘means’ refers to ways or actions and ‘ends’ refers to
objectives .”
 Types of Strategy

Generally there are three forms of strategy :

1. General Strategy .

2. Corporate Strategy .
3. Competitive Strategy .
 General Strategy

 There are 3 types of strategy . These are :

 Business Strategy : Business strategy is formulated at the

business-unit level. It is popularly known as business-unit
strategy . This strategy emphasizes on the strengthening of
company’s competitive position of products or services.

 Functional strategy : Functional strategy refers to a

strategy that emphasizes on a particular functional area of
an organization . It is formulated to achieve some objectives
of a business unit by maximizing resource productivity.
 General Strategy ( cnt. )

Operating Strategy : Operating strategy is

formulated at the operating units of an organization .
A company may develop operating strategy, as an
instance, for its sales territories. An operating
strategy is formulated at the field level usually to
achieve immediate objectives.
 Corporate Strategy

Corporate strategy is formulated at the top level by

the top management of a diversified company . Such
strategy describes the company’s overall direction in
terms of its various businesses and product lines .
Corporate strategy defines the long-term objectives
and generally affects all the business-units under its
umbrella .
 Competitive Strategy

Competitive Strategy refers to a strategy that

incorporates the impact of external environment
along with the interactive concerns of internal
environment of an organization . Competitive
strategy aims at gaining competitive advantage in the
marketplace against the competitors .
Levels of Strategy

Corporate
Level Strategy

Business
Level Strategy

Functional
Level Strategy

Operating
Level Strategy
 Competence

Competence is related to internal activity of an

organization . Continuous effort to develop
organizational ability to perform a particular activity
lead to achieving competence in that activity . A
competence usually emerges from a single function .
However there may be cross functional and
multidisciplinary competences emerged from effective
collaboration among specialist people who are working
in different units of an organization .
 Core Competence

Core competence of an organization is its core skill . It

is central value-creating capability of the organization .
A core competence is a proficiently performed internal
activity performed in a better way than other internal
activities and which is most often knowledge-based
residing in people and in a company’s intellectual
capital and not in its assets on the balance sheet.
 Example of Core Competence

1) Manufacturing excellence .
2) Exceptional quality control .
3) Ability to provide better service .
4) Superior design capability .
5) Innovativeness in developing new products .
6) Mastery of an important technology .
7) A strong understanding of customer needs and taste .
8) Company’s ability to create and commercialize new product .
 Distinctive Competence

Distinctive competence is an essential requirements

for achieving competitive advantage .

Distinctive competences refer to those strengths of

the organization that allow it to attain competitive
advantage in the market . These strengths are unique
for the organization and they help it achieve superior
efficiency , quality , innovation and customer
responsiveness .
 Competitive Advantage

Competitive advantage is the special edge that allows

an organization to deal with market and
environmental forces better than its competitors . To
develop competitive advantage , a company should
develop distinctive competences and then use them to
creatively compete in its markets .

 There are many sources of competitive advantage :

Having the best made product on the market.
Delivering superior customer service.
 Competitive Advantage

Achieving lower cost than competitors .

Being in a more convenient geographical location .
Proprietary technology .
Features and styling with more buyer appeal .
Shorter lead time .
Brand name and reputation .
Provide buyers more value for money .
 How to Sustain Competitive Advantage ?

1. Focusing on building blocks of competitive advantage.

2. Developing distinctive competence.
3. Creating an environment of organizational learning.
4. Instituting continuous improvement mechanism.
5. Instituting best practices.
6. Overcoming barrier to change.
 How to Sustain Competitive Advantage?

1. superior efficiency, quality, innovation, and

customer responsiveness.

2. Generic Building Blocks

 Value Chain

 Value chain of an organization consists of its primary and supportive

activities . Every organization has to perform several activities to achieve
the objectives . Al of these activities create the value chain of the
organization . It is called value chain because each of the activities in the
chain create value for the customers . There are two activities of value
chain :
Primary Activities Supportive Activities

1. Infrastructure
1. Raw materials 2. Human Resource
2. Inbound Logistics Mgt.

3. Operations 3. Technology
4. Outbound Logistics 4. Procurement
5. Finance
5. Service
6. Inventory
 Stakeholders

Stakeholders refer to group of people or social actors or

institutions that significantly affect or are affected by
an organization’s decision-making activity or
achievement of objectives .
Stakeholders of a business organization may consist of
all employees including board members , shareholders ,
unions , customers , suppliers , intermediaries , lenders
, borrowers , relevant government agencies , alliances ,
watchdogs and so forth .
 Strategic Business Unit ( SBU )

 A Strategic Business Unit ( SBU ) is a relatively autonomous

unit of a firm .

 According to Pearce and Robinson , an SBU must have

certain characteristics :
1. A unique business mission .
2. An identifiable set of competitors .
3. The SBU strategic manager can make or implement a strategic
decision relatively independent of other SBUs .
4. Curtail operating decisions can be made within the SBU .
Process of Strategic Management

Developing Vision and Mission

Strategic Analysis

Establishing Objectives

Strategy Formulation

Strategy Implementation

Strategic Evaluation and Control

ENVIRONMENTAL EVOLUATION
ANALYSIS STRATEGY STRATEGY
IMPLEMENTATION
AND
FORMULATION
CONTROL
External :
(Opportunity and •Mission •Programs
•Budgets • Performance
threat ) •Vision
•Objectives •Procedures
•Natural
•Strategies
•Social
•Task •Policies

Internal :
( Strengths and
Weakness )

•Structure
•Culture
•Resource

Make Corrections as Needed