Strategy and Strategic

Management

An Overview
STRATEGIC MANAGEMENT (SPECIAL INDIAN EDITION):
FORMULATION, IMPLEMENTATION AND CONTROL, 10/E

• John A. Pearce, II, Villanova University

• Richard B. Robinson, Jr., University of South Carolina

• Amita Mital, Indian Institute of Management,

Lucknow
Adjectives Associated with Strategy /
Strategic
• War Plan / Game Plan • Craft
• Blueprint • Cunning
• Grand Design • Gimmick
• Long Term • Setup
• External Environment • Subtlety
• Scenario • Maneuvering
• Scheme • Approach
• Shrewd • Method
 http://www.thesaurus.com

Antonym of “Strategy”

• HONESTY

• OPENNESS

Roget's 21st Century Thesaurus, Third Edition Copyright © 2013 by the Philip
Lief Group.
 A Short Story

Molly’s search for Strategy

 What is common about all these statements ?

• “Our strategy is to be ………...”

• “We’re pursuing a global strategy.”

• “The company’s strategy is to integrate a set of

………..acquisitions.”

• “Our strategy is to provide unrivaled customer service.”

• “Our strategic intent is to always be the first mover.”

• “Our strategy is to move from defense to industrial applications.”

 Flawed Concepts of Strategy
• Strategy as aspiration
– “Our strategy is to be #1 or #2…”
– “Our strategy is to grow…”
– “Our strategy is to be the world leader…”

• Strategy as action
– “Our strategy is to merge…”
– “… internationalize…”
– “… consolidate the industry…”
– “… outsource…”

• Strategy as vision
– “Our strategy is to meet our customers’ needs…”
– “…to advance technology for mankind…”
Strategy – Strategic

OVERUSED
AND
MIS-UNDERSTOOD
 When leaders/ executives call everything
“strategy”, and end up with a collection of
strategies, they create confusion and
undermine their own credibility.
 ARE WE

STRATEGIC THINKER

OR

OPERATIONAL THINKER
It is this operational or tactical thinking that leads us, inevitably, into the many complex crises and convoluted
relationships that we are now facing. 

We are overwhelmed with the needs of the moment, and there appears to be no relief in sight.
Strategic Thinking
 Operational Thinker Vs. Strategic Thinker

What words come to your mind when we say ‘Strategic Thinking’ ?

Any difference between

Strategic Thinking
and
Strategic Planning ?
“… strategic planning is analytical and convergent,

whereas

strategic thinking is synthetic and divergent.”

The Object/Idea to be explained is The Object/Idea to be explained is
considered a WHOLE to be taken considered a part of a larger
a-part WHOLE
Strategic Thinking is a higher level approach
to issue identification and resolution. It
enables a concurrent view of the start line,
the goal line, and all the relevant features in
between, and at the same time. It's like
looking at an aerial photograph, or down
onto a tabletop model of a piece of terrain
that we must navigate. We are able to see
the 'big picture'.
Mintzberg describes strategic thinking as a distinct way of thinking that utilizes intuition
and creativity with the outcome being “an integrated perspective of the enterprise.”
Exploitation

Integrated
Perspective of an
Organization and
its Environment

Exploration
Strategic thinking is thinking that contributes to broad, general, overarching concepts that
focus the future direction of an organization based on anticipated environmental conditions
Attributes of Strategic Thinking
 I keep six honest serving men.
They taught me all I know. Their names are What, Why, When, How, Where and Who.

- Rudyard Kipling
1. Systems Perspective:
• strategic thinking reflects a systems or holistic view that recognizes how the
different parts of the organization influence each other;

2. Intent-focused:
• strategic thinking conveys a sense of direction and is driven by the continuous
shaping and re-shaping of intent;

3. Thinking in Time:
• strategic thinking is not solely driven by the future, but by the gap between the
current reality and the intent for the future;

4. Hypothesis Driven:
• hypothesis generation and testing is central to strategic thinking activities. It asks
the creative question “What if?” followed by the critical question “If … then?”;

5. Intelligent Opportunism:
• strategic thinking invokes the capacity to be intelligently opportunistic, or open to
new experience, allowing one to take advantage of alternative strategies that may
emerge in a rapidly changing environment.
10 Strategic Thinking Competencies
 1. Strategy 2. Insight 3. Context

4. Competitive
5. Value 6. Resource Allocation
Advantage

7. Modeling 8. Innovation 9. Purpose

10. Mental Agility

Four Critical Areas
 PROBLEM-
ADAPTABILITY
SOLVING

SCENARIO
ALIGNMENT
CONSTRUCTION
5 Personal Attributes
1) HAVING AN IMAGINATION 2) A BROAD PERSPECTIVE

4) THE ABILITY TO DEAL WITH

3) THE ABILITY TO JUGGLE THINGS OVER WHICH YOU
HAVE NO CONTROL

5) AN ADAMANT DESIRE TO
WIN
What limits our Strategic
Thinking
Paradigms – Once Upon a Time
Paradigm Shift Question
Killer Phrases
Strategic Management
The Missing FUNCTION – The Missing APPROACH and
The Missing CULTURE

Learn | Consult | Research

 The Nature and Value of Strategic
Management

• Strategic management:
The set of decisions and actions that result in
the formulation and implementation of plans
designed to achieve a company’s objectives

1-57
 What is strategic management?
• A continuous, iterative process aimed at keeping an organization
as a whole appropriately matched to its environment. (Certo and
Peter)

• Set of decisions and actions used to implement strategies that will

provide a competitively superior fit between the organization and
its environment so as to achieve organizational goals

• The art and science of formulating, implementing, and evaluating

cross-functional decisions that enable an organization to achieve
its objectives which in most cases are to achieve (Fred R. David) :
 Strategic Competitiveness
 Sustained Competitive Advantage
 Above-Average Returns.
 Terminology Explained

• Is achieved when a firm successfully

Strategic
formulates and implements a value-
Competitiveness
creating strategy

• Occurs when a firm develops a strategy

that competitors are not simultaneously
Sustained implementing
Competitive
• Provides benefits which current and
Advantage
potential competitors are unable to
duplicate

Above- • Returns in excess of what an investor

Average expects to earn from other investments
Returns with similar risk
Strategic Management VS Strategic Planning

“Strategic Management”
Synonymous with
“Strategic Planning”

• Strategic management
Used more often in academia

• Strategic planning
Used more often in the business world
 Terminology Explained
• Strategic management
Refers to:
 Strategy formulation
 Strategy implementation
 Strategy evaluation and control

• Strategic planning
Refers to:
 Strategy formulation
 Strategy Formulation
• Stage of strategic management that involves
planning and decision making that lead to the
establishment of the organization’s goals and of
a specific strategic plan

• The process of developing long range plans to

deal with environmental opportunities and
threats in light of corporate strengths and
weaknesses.
 Strategy Implementation
• Stage of strategic management that involves
the use of managerial and organizational tools
to direct resources toward achieving strategic
outcomes

• The process of putting strategies and policies

into action through the development of
Programs, Budgets, and Procedures.
 Strategy Evaluation and Control
• Is the process of monitoring organizational
and performance results so that actual
performance can be compared with desired
performance and take corrective actions
whenever required in order to achieve
organizational objectives.
 Military influences in strategy
• “Strategos” referred to a general in command of
an army

• The art of the general

– By 450 B.C. it came to mean managerial skill
– By 330 B.C. it referred to the skill of employing forces to
overcome positions to create a system of global governance

• Carl von Clausewitz “tactics…(involve) the use of

armed forces in the engagement, strategy (is) the
use of engagements for the object of war” 1838
On War
 Charles W. Hofer and others view: Four
PARADIGM shifts
• Till Mid- 1930s: Ad-hoc Policy-making
paradigm
• Till 1960: Planned Policy formulation paradigm
• After 1960: Need to look at the basic concept
of business and its relationship to the
environment strategy paradigm
• After 1990s: Strategic process of business firms
and the responsibilities of general
management: Strategic Management
paradigm
William F. Glueck and others view

• Day to day Planning

• Control Systems – MBO, Capital Budgeting
• Long-Range Planning
• Strategic Planning
• Strategic Management
Traditional vs. Current Use of Terminology
Traditional Currently Used
Terminology Terminology

Business Policy Strategic

Management
Focus of the
Manager’s job was Value of trying to
on Today’s decisions anticipate the future
for today’s works in and to prepare for it.
today’s business
 Why is strategic management important?

• Provides Clear sense of strategic DIRECTION

• Helps sharper focus on what is strategically
important
• Provides improved understanding of a rapidly
changing environment
• Gives everyone a role
• Makes a difference in performance levels
• Provides systematic approach to uncertainties
• Coordinates and focuses employees
Nine Critical Tasks of Strategic Management

Assess the external

Formulate the company’s Conduct an internal
environment – competitive
mission analysis
and general contexts

Analyze the company’s Select a set of long-term

Identify the most desirable
options by matching its objectives and grand
options in light of the
resources with the strategies that will achieve
mission
external environment the most desirable options

Develop annual objectives

and short-term strategies Evaluate the success of the
Implement the strategic
that are compatible with strategic process for future
choices
long-term objectives and decision making
grand strategies
1-71
STRATEGY
 What is Strategy?
• Large-scale, future-oriented plan
• Used to interact within competitive
environment to achieve company goals
• Provides a framework for managerial
decisions
• Reflects a company’s awareness of the main
elements of competition

1-73
 A definition of strategy
• Strategy is Goal-directed decisions and actions in which capabilities
and resources are matched with the opportunities and threats in
the environment.

• Strategy is the direction and scope of an organization over the long

term, which achieves advantage in a changing environment
through its configuration of resources and competences with the
aim of fulfilling stakeholder expectations.

• Strategy can be defined as “… the art and science of continuously

developing new advantages for the firm so that if effectively
executes and competes within its chosen position in the market
place and successfully achieve top management’s identified
objectives, including creating value for all stakeholders in the firm.”
 Definitions Provided By Prominent
Strategic Management Gurus
• Alfred D Chandler (1962)
“The determination of the basic long-term goals and objectives of an
enterprise and the adoption of the courses of action and the allocation
of resources necessary for carrying out these goals.”

• Igor Ansoff (1965)

“The common thread among the organization’s activities and product-
markets defines the essential nature of business that the organization
was or planned to be in future”.

• William F Glueck (1972)

“A unified, comprehensive and integrated plan designed to assure that
the basic objectives of the enterprise are achieved”.
 Henry Mintzberg (1987)
• A noted management thinker and prolific writer on strategy,
advocates the idea that strategies are not always the outcome of
rational planning.
• “Formal strategic planning is dead”
• Strategies emerge from what an organization does without any
formal plan.
• Defines strategy as: “a pattern in a stream of decisions and
actions”.

• Distinguishes between intended strategies ( plans that

managers develop) and emergent strategies (the actions that
actually take place over a period of time).
 Michael Porter (1996)
• “Strategy matters. Strategy is not accidental. It is a
purposeful process. Luck is alive and well. Intuition is
alive and well. But humans have some control over their
own destiny. And you can improve your odds of making
better judgments.”

• Opines that core of general management is strategy.

• Defines strategy as “… developing and communicating

the company’s unique position, making trade-offs, and
forging fit among activities”.
 Achieving Superior Performance
Operational Effectiveness is Not Strategy

Operational Strategic
Effectiveness Positioning

• Assimilating, attaining, and • Creating a unique and

extending best practices sustainable competitive
position

Run the same races faster Choose to run a different race

 Basic Questions:
1. Where will we play ?

2. With What ? (Unique Value Proposition)

3. Using What ? (Resources and Capabilities)

4. Remaining What ? For How Long ?

(Sustainability)
 5 P’s of strategy
A plan, - “how do I get there”

A pattern, in consistent actions over time

A position that is, it reflects the decision of the firm to offer

particular products or services in particular markets.

A ploy, a maneuver intended to outwit a competitor

A perspective that is, a vision and direction, a view of what the

company or organization is to become.
The Elements of Business Strategy

Arenas: where will we be active?

Vehicles: how will we get there?

Differentiators: how will we win in the marketplace?

Staging: what will be our speed and sequence of moves?

Economic logic: how will we obtain our returns?

IKEA’s Strategy
 Testing the quality of your strategy
• Does your strategy fit with what’s going on in the
environment?
– Is there healthy profit potential where you’re headed?
– Does your strategy align with the key success factors of your
chosen environment?

• Does your strategy exploit your key resources?

– With your particular mix of resources, does this strategy give
you a good head start on competitors?
– Can you pursue this strategy more economically than
competitors?
 ……
• Will your envisioned differentiators be sustainable?
– Will competitors have difficulty matching you?
– If not, does your strategy explicitly include a ceaseless regimen
of innovation and opportunity creation?

• Are the elements of your strategy internally consistent?

– Have you made choices of arenas, vehicles, differentiators, and
staging, and economic logic?
– Do they all fit and mutually reinforce each other?
 …..
• Do you have enough resources to pursue this strategy?
– Do you have the money, managerial time and talent, and other
capabilities to do all you envision? Are you sure you’re not
spreading your resources too thinly, only to be left with a
collection of feeble positions?

• Is your strategy implementable?

– Will your key constituencies allow you to pursue this strategy?
Can your organization make it through the transition? Are you
and your management team able and willing to lead the
required changes?
Five Tests of a Good Strategy
• A unique value proposition compared
to other organizations

• A different, tailored value chain

• Clear tradeoffs, and choosing what not

to do

• Activities that fit together and reinforce

each other

• Continuity of strategy with continual

improvement in realizing the strategy
 Dimensions of Strategic Decisions
• Strategic issues require top-management
decisions
– Strategic decisions overarch several
areas of a firm’s operations
– Usually only top management has the
perspective needed to understand
their broad implications
– Usually only top managers have the
power to authorize necessary resource
allocations
1-91
Dimensions of Strategic Decisions (contd.)
Strategic issues require large amounts of the
firm’s resources
They involve substantial allocations of
people, physical assets, and money
Strategic decisions commit the firm to
actions over an extended period
In highly competitive firms, achieving and
maintaining customer satisfaction
frequently involves commitment from every
facet of the firm

1-92
 Dimensions of Strategic Decisions (contd.)
Strategic issues often affect the firm’s long-term
prosperity
Strategic decisions commit the firm for a long time,
typically 5 years; however the impact lasts much
longer
Once a firm has committed itself to a strategy, its
image and competitive advantages are usually tied to
that strategy
Firms become known for what they do and where
they compete. Shifting away from that can jeopardize
their previous gains.

1-93
Dimensions of Strategic Decisions (contd.)
Strategic issues are future-oriented
They are based on what managers
forecast, rather than what they know
Emphasis is on the development of solid
projections that will enable a firm to seek
the most promising strategic options
A firm will succeed only if it takes a
proactive (anticipatory) stance toward
change
1-94
Dimensions of Strategic Decisions (contd.)
Strategic issues usually have multifunctional
or multi-business consequences.
Strategic decisions have complex
implications for most areas of the firm
Decisions about customer mix,
competitive emphasis, or organizational
structure involve a number of the firm’s
SBUs, divisions, or program units

1-95
Dimensions of Strategic Decisions (contd.)

• Strategic issues require considering the firm’s

external environment
– All businesses exist in an open system. They
affect and are affected by external conditions
that are largely beyond their control
– Successful positioning requires that strategic
managers look beyond operations and
consider what relevant others are likely to do

1-96
 Three Levels of Strategy
Corporate level: board of directors, CEO &
administration [Highest]

Business level: business and corporate

managers [Middle]

Functional level: Product, geographic, and

functional area managers [Lowest]
1-97
 Levels of strategy
Corporate
What direction are we going and what business(es)
are we in or do we want to be in?

Competitive (Business)
How are we going to compete in our chosen
business(es)?

Functional
What resources and capabilities do we have to
support the corporate and competitive strategies?
Alternative Strategic Management Structures

1-101
Characteristics of Strategic Management Decisions:
Corporate

Often carry greater risk, cost, and

profit potential
Greater need for flexibility
Longer time horizons
Choice of businesses, dividend policies,
sources of long-term financing, and
priorities for growth
1-102
Characteristics of Strategic Management Decisions:
Business

• Help bridge decisions at the corporate and

functional levels
• Less costly, risky, and potentially profitable
than corporate-level decisions
• More costly, risky, and potentially profitable
than functional-level decisions
• Include decisions on plant location,
marketing segmentation, and distribution
1-103
 Characteristics of Strategic Management
Decisions: Functional
• Implement the overall strategy formulated
at the corporate and business levels
• Involve action-oriented operational issues
• Relatively short range and low risk
• Modest costs: depend upon available
resources
• Relatively concrete and quantifiable

1-104
 Formality in Strategic Management

Formality is the degree to which

participation, responsibility, authority,
and discretion in decision-making are
specified in strategic management

1-105
 Forces Determining Formality

Organizational Size Problems in the Firm

Predominant Purpose of the
Management Styles Planning System
Complexity of Stage of Firm’s
Environment Development
Production Process

1-106
 Three Modes of Formality
Entrepreneurial Mode – most small firms

Planning Mode – most large firms

Adaptive Mode – most medium size firms

1-107
 Strategy Makers
Ideal strategic team includes decision
makers from all three levels

Top managers must give final approval

Strategic decisions coincide with

managers’ responsibilities
1-108
 Strategy Makers: The CEO
A firm’s CEO plays a dominant role in
strategic planning
The CEO’s principal duty is giving long-
term direction to the firm
The CEO bears ultimate responsibility
for the firm’s success and strategic
success
CEOs are typically strong-willed,
company-oriented individuals
1-109
 Benefits of Strategic Management
• Strategy formulation activities enhance the firm’s ability
to prevent problems
• Managers who encourage subordinates’ attention to
planning are aided in their monitoring and forecasting
responsibilities by subordinates who are aware of the
needs of strategic planning.
• Similar to participative decision making. Group based
strategic decisions are likely to be drawn from the best
available alternatives. Group interactions generates
greater variety of strategies and because forecasts based
on the specialized perspectives of group members
improve the screening of options. 1-110
 ……..

• The involvement of employees in strategy formulation improves

their understanding of the productivity-reward relationship in
every strategic plan and thus, heightens their motivation.
• Gaps and overlaps in activities among individuals and groups
are reduced as participation in strategy formulation clarifies
differences in roles.
• Assessing strategy formulation requires looking at nonfinancial
evaluations as well as financial ones
• Promoting positive behavioral consequences enables
achievement of financial goals.
• Resistance to change is reduced. Though the participants in
strategy formulation may be no more pleased with their own
decisions than they would be with authoritarian decisions, their
greater awareness of the parameters that limit the available
options makes them more likely to accept those decisions.
 Risks of Strategic Management
Managers’ time away from other responsibilities.
May have a negative impact on operational
responsibilities.
Managers must be trained to minimize that impact by scheduling
their duties to allow the necessary time for strategic activities.
Formulators if not involved in implementation, they may
shirk their individual responsibility for the decisions
reached.
Unrealistic expectations promised by strategy
formulators
To be trained to limit their promises to performance that the
decision makers and their subordinates can deliver. 1-112
 ……..

• Disappointment of participating sub-ordinates

over unattained expectations
– Strategic Managers must be trained to anticipate and
respond to the disappointment of participating sub-
ordinates over unattained expectations.

Sensitizing managers to these possible negative

consequences and preparing them with effective
means of minimizing such consequences will
greatly enhances the potential of strategic
planning.
 Strategic Management Process
• Businesses vary in formulation and other
processes

• The basic components of the models used to

analyze strategic management are similar

• Strategic management is a process—a flow of

information through interrelated stages of
analysis toward the achievement of some goal
1-114
Strategic Management Model

1-115
Competence Based Strategic Management Framework
Strategic-Management Process:
Three Stages

Strategy Formulation

Strategy Implementation

Strategy Evaluation &

Control
Strategy Formulation

Vision & Mission

Opportunities & Threats

Strengths & Weaknesses

Long-Term Objectives

Alternative Strategies

Strategy Selection
Strategy Implementation

Annual Objectives

Policies

Motivate Employees

Resource Allocation
Strategy Evaluation &
Control

Review
External & Internal

Measure Performance

Corrective Action
 Strategic – Management Model
Strategy Strategy Strategy
Formulation Implementation Evaluation &
Feedback Contol

Identify Establish
threats objectives
Perform
1. Management
external
audit 2. Marketing
3. Finance
Identify Establish 4. Production
Opportunities Goals 5. Research and
development
Identify current Measure and
Allocate
mission, evaluate
resources
Objectives and Establish performance
Strategies company
mission
Establish Policies
1. Management
2. Marketing
Identify 3. Finance
Weaknesses Establish 4. Production
Strategies 5. Research and
development
Perform
internal
audit

Identify
Strengths

Feedback
The vocabulary of strategy
 Strategy and Operations
Strategic Management Operational Management

Organisation-wide, holistic Routinised

Conceptualisation of issues Techniques and actions

Creating new directions Managing existing resources

Developing new resources Operating within existing

strategy

Ambiguous/uncertain Operationally specific

Long term Day to day issues

 THE END
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SWOT Analysis: How to do a SWOT Analysis, PESTLE Analysis, Porter 5 forces