STRATEGIC MANAGEMENT

Fifth Edition

AZHAR KAZMI & ADELA KAZMI

Chapter 1
INTRODUCTION TO STRATEGIC MANAGEMENT
Concept of Strategy

A strategy could be:

• a plan or course of action or a set of decision rules making a pattern or
creating a common thread;
• the pattern or common thread related to the organisation's activities which are
derived from the policies, objectives and goals;
• related to pursuing those activities which move an organisation from its current
position to a desired future state;
• concerned with the resources necessary for implementing a plan or following a
course of action; and
• connected to the strategic positioning of a firm, making trade-offs between its
different activities, and creating a fit among these activities.
• the planned or actual coordination of the firm's major goals and actions, in
time and space that continuously co-align the firm with its environment.

McGraw-Hill | © AZHAR KAZMI & ADELA KAZMI 2

 What is Strategy?

Where should we
Strategy is a firm’s
compete
answer to two
fundamental
how should we
questions:
compete?

Businesses that answer the questions effectively develop successful strategies, outperforming competitors over the long run. Those that don’t take the
time to address the questions thoughtfully—or come up with the wrong answers—end up deploying inconsistent or ill-conceived strategies, ultimately
destroying value.
Levels at which Strategy operates

McGraw-Hill | © AZHAR KAZMI & ADELA KAZMI 4

LEVELS OF STRATEGY

A)-CORPORATE LEVEL- It is an overarching plan of

action covering the various functions performed by
different SBUs. The plan deals with the objectives of the
company, allocation of resources and coordination of the
SBU’s for optimal performance. Ex –Decisions pertaining
to setting up new plant ,Merger and Acquisitions
A corporate strategy is generally broader than the other strategy
levels. Strategies at this level are more conceptual and futuristic
than business and functional level strategies. They usually span a
3-5 year period. A corporate strategic plan generally
encompasses- Key KPI’s ,Vision,strategic focus area and
objectives
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B)-STRATEGIC BUSINESS UNIT (SBU)LEVEL

SBU level (Business) strategy is a comprehensive plan

providing objectives for SBU’s,allocation of resources
among functional
areas(Marketing,HR,Operations,Technology etc) and
coordination between them for making optimal contribution
to the achievement of the corporate level objectives.
An SBU is defined by Sharplin “Any part of a business
organization which is treated separately for strategic
management purpose.
Ex- Bajaj Group has business related to steel ,sugar,two
wheelers,consumer electricals ,all are different SBU’s.
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C)- FUNCTIONAL LEVEL

Functional strategy deals with a relatively restricted plan

providing objectives for a specific function, allocation of
resources among different operations within that functional
area and coordination among them for optimal contribution
to the achievement of the SBU and corporate level
objectives.
A functional strategy at the marketing level could be
subdivided into Sales,Distribution,Pricing,IMC,Product
etc.In HR it would be
Recruitment,Selection,Training ,Compensation

McGraw-Hill | © AZHAR KAZMI & ADELA KAZMI 7

EXAMPLES

 Balmer Lawrie ,a public sector company in India has a

diversified portfolio of businesses organized into
strategic business units in the manufacturing(Industrial
packaging,Greases,Lubricants,Leather chemicals and
refinery),Service sector (Travel,Vacation and Logistics)
 Finolex group is a business conglomerate with diverse
portfolio as
Telecommunications,Petrochemicals,irrigation
 TVS group has 43 companies that operate in two
wheeler,automative component manufacturing to
automative dealerships,electronics
McGraw-Hill | © AZHAR KAZMI & ADELA KAZMI 8
Contd..

 Panacea Biotech is a health management company in

India involved in research, manufacturing and marketing
of pharmaceuticals, natural products ,surgical
components ,Vaccines and each has a separate SBU.
 BEL(Government-owned aerospace and defence
electronics company.) has major strategic business
units comprising of homeland security, telecom & broadcast
systems, engineering projects etc.
 Hindustan Unilever organizes itself into two businesses
of home & personal care and Food

McGraw-Hill | © AZHAR KAZMI & ADELA KAZMI 9

LEVELS OF STRATEGY
 Business Policy

A policy is a broad guideline for decision making that links formulation of a strategy with its
implementation. Companies make policies to make sure employees throughout firm make decisions
and take actions that support corporation’s mission, objectives and strategies.

Example-
Cisco decided on a strategy of growth through acquisitions, it established a policy to consider only
companies with no more than 75 employees, 75% of whom were engineers.

3M says researchers should spend 15% of their time working on something other than their primary
project. (This supports 3M’s strong product development strategy)

Keyword- Policy: broad guidelines for decision making

 Types of business policies
Organizational or Corporate Policies: Examples include the company’s code of ethics, equal
opportunity policy, or sustainability policy.

Functional or Departmental Policies: These are specific to a certain department or functional area
within the organization, such as human resources, finance, marketing, or operations. For instance,
the human resources department might have policies on recruitment, vacation time, or performance
appraisals.

Procedural Policies: For example, a company might have a procedural policy on handling customer
complaints or processing returns.

Operational Policies: These are day-to-day policies that guide the organization’s operations. They
might include policies on working hours, dress code, or use of company equipment.
 Types of business policies

Contingency Policies: These are policies that are designed for specific situations or emergencies
that may arise. For example, a company might have a contingency policy in place for handling a data
breach or a natural disaster.

Strategic Policies: These policies are linked with the organization’s strategic goals and provide
guidelines for decision-making that align with these goals. They can include policies on expansion,
diversification, or innovation.

Compliance Policies: These are created to ensure the company complies with applicable laws and
regulations. They might include policies on data privacy, workplace safety, or anti-discrimination.

Human Resources Policies: These policies govern the relationship between the organization and its
employees, including recruitment, compensation, benefits, performance management, and
termination policies.
 Need of business policy
1. Control:
Policy facilitates effective control on the working of the organization. It indirectly controls the managers at different levels without directly interfering in their
routine working.

2. Effective Communication:
Generally policies are written and well drafted statements. Hence there is not a remote chance of confusion or miscommunication. By setting policies the
management ensures that decisions made will be consistent and in the best interest of the organization. Clearly laid down policies try to eliminate personal hunch
and biasness.

3. Clarity:
Policies clarify the viewpoint of the management for the purpose of running a particular activity / activities.

4. Motivation:
Policy enables the line managers to be self reliant. They take the decision on their own in the confined border of the policy. This raises their confidence and
motivates them. A well drafted policy provides a pattern within which delegation of authority is possible.
 Need of business policy
5. Policy Review:
Regular review of policy is must to see to it that the existing policies are relevant in the given situation. If required policy may be modified or
altered depending on the business environment. Review of policy at regular intervals provides a method of anticipating future conditions and
situations and helps to resolve how to deal with them.

6. Economical and Efficient:

Policy enables the management to carry out its operations effectively and efficiently. It enhances the working of the organization.

7. Coordination of Efforts:
Policies ensure coordination of efforts and activities at different levels in the organization. Activities and duties are assigned in such a way that
all activities in the organization are integrated effectively. Policy coordinates with individual efforts.

8. High Morale:
A well crafted policy can raise the overall morale of an enterprise. Policy enables the managers to understand the intention of the management.
 Strategic Management

Acc. To Kazmi -Strategic management is defined as the dynamic process

of formulation, implementation, evaluation and control of strategies to
realise the organisation’s strategic intent.
The first phase consists of establishing the strategic intent for the
organisation.
The second phase of the formulation of strategies is concerned with the
devising of a strategy or a few strategies.
The third phase of implementation is the ‘putting into action’ phase.
The fourth, and the last, phase of evaluation and control involves
assessing how appropriately the strategies were formulated and how
effectively they are being implemented.

McGraw-Hill | © AZHAR KAZMI & ADELA KAZMI 16

 What is Competitive Advantage?

Competitive advantage refers to factors that allow a company to

produce goods or services better or more cheaply than its rivals.
These factors allow the productive entity to generate more sales or
superior margins compared to its market rivals. Competitive
advantage is attributes allowing firms to outperform its
competitors
For ex- Google has a competitive advantage. This will be of the
search engines out there.
Ferrari must have a competitive advantage when it comes to sports
car.
Lego has a competitive advantage when it comes to toys.
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CONTD..

COMPETETIVE ADVANTAGE APPROACH-The three main

types of competitive advantage are differentiation, cost
advantages, and focus advantages.
EMERGENT STRATEGY- Emergent strategy is an action
model coined by author Henry Mintzberg that describes a
business strategy that develops over time as a business balances
its goals with changing circumstances
RESOURCE BASED VIEW STRATEGY-The Resource-
Based View (RBV) is a group of theories proposing that
companies are able to establish competitive advantage through
internal resources of the firm that are valuable, rare, not imitable,
and organized for value capture. 19
These characteristics are described as valuable, rare, inimitable,
and non-substitutable, referred to as VRIN.
BLUE OCEAN STRATEGY-It is the simultaneous pursuit of
differentiation and low cost to open up a new market space and
create new demand. It is about creating and capturing
uncontested market space, thereby making the competition
irrelevant.

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STRATEGIC MANAGEMENT
(Benefits)
Sets the strategic direction to the firm

Focus on critical factors of the organization

Understanding the changing environment-

Obtaining sustainable competitive advantage

Lead to better performance

Ensure the long term survival in the market place

Simplifies complex scenarios and develop suitable strategies

 STRATEGIC MANAGEMENT
(Limitations)
A Complex Process

Time Consuming

Difficult to implement

Requires skillful planning- example failed case of

JET airways
Model of Strategic Management Process

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Elements in Strategic Management
Process
A. Establishing the hierarchy of
strategic intent:
•Creating and communicating a vision
•Designing a mission statement
•Adopting the business model
•Setting objectives
B. Formulation of strategies:
•Performing environmental appraisal
•Doing organisational appraisal
•Formulating corporate - level strategies
•Formulating international strategies
•Formulating business-level strategies
•Undertaking strategic analysis
•Exercising strategic choice
•Preparing strategic plan
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C. Implementation of strategies:
Activating strategies
Designing structure, systems and
processes
Managing behavioural implementation
Managing functional implementation
Putting strategies into operation
D. Performing strategic evaluation and
control:
Performing strategic evaluation
Exercising strategic control
Reformulating strategies
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