Strategic Management

Elements in Strategic Management Process

1. Establishing the hierarchy of strategic intent

2. Formulation of strategies

3. Implementation of strategies

4. Performing strategic evaluation and control

 Strategic Management

2. Formulation of strategies
a. Doing organisational appraisal

b. Performing environmental appraisal

c. SWOT Analysis / TWOs Model

d. Formulation corporate level strategies

e. Formulating business level strategies

f. Formulating Functional level strategies

g. Undertaking strategic level analysis

Strategic Management

Organisational
&
Environmental
Appraisal

Prof Bharat Nadkarni

 Strategic Management

Organisational Appraisal
 Strategic Management
Development of Strategic advantage by an organisation
1. Organisational Resources
Factors – Land, Location, Labour, Raw materials, Capital,
Technology, Org. Processes, Skills, Information and Knowledge.

2. Organisational Behaviour
Organisational behaviour is the manifestation of the various
forces and influences operating in the internal environment of an
organisation that create the ability for, or place constraints on,
the usage of resources.
3. Synergistic effects
Synergy is an idea that the whole is greater or lesser than the
sum of its parts.
4. Strengths & Weaknesses
Strength is an inherent capability which an org can use to gain
strategic advantage. A weakness on the other hand, is an
inherent limitation or a constraint.
 Strategic Management
5. Competancies
Competencies are special qualities possessed by an
organisation that make them withstand the pressures of
competition in the marketplace
ex. Mercedez Benz, Toyota.
6. Organisational Capability
Organisational capability is the inherent capacity or potential of
an organisation to use its strengths and overcome its
weaknesses in order to exploit the opportunities and face the
threats in its external environment.
7. Strategic Advantage
strategic advantages are the outcomes of organisational
capabilities. They are the results of organisational activities
leading to reward in terms of financial parameters like profits and
shareholder value or non financial parameters like market share
and reputation or image. Ex. Having a Pit head Mfg unit.,
Coastal Mfg unit, Highly efficient Workforce,
Core Competency : VRIO Model

•Value Creation

•Rare (Attain Uniqueness)

•Imitations (Beyond imitations)

•Organisation Wide

Organisation creates such competencies which takes them

beyond competition, creates a Blue Ocean situation.
 Strategic Management

Environmental Appraisal

External Environment
• Micro Level – Stakeholders approach and Competitors

• Macro Level – P E S T E L
 Strategic Management

Key Macro Environmental factors : P E S T E L

1. Political and Government factors

2. Economic factors

3. Social & Cultural include Demographic factors

4. Technological factors

5. Environmental incl Natural Factors

6. Legal incl International trading factors

 Strategic Management
Political & Government factors

• Government Approach – Interventionist or Free Trade

• Political parties
• Radical differences
• Fundamentalists
• Govt. system
 Strategic Management

Economic factors

• Nature and level of development of economy

• Economic resources

• Size of economy

• Economic system and policy

• Trends in GDP/ GNP growth rate, per capita income

• Nature and trends of foreign trade

 Strategic Management

Social & Cultural factors

• Religious factors

• Language

• Customs, Traditions & Beliefs

• Tastes & Preferences

• Buying and Consumption habits

 Strategic Management

Demographic factors

• Size of population, Growth rate

• Age composition

• Family size, Nature of families

• Income levels
 Strategic Management

Technological factors

• Type of technology in use

• Level of technological development

• Speed with which new technology is accepted and adopted

• Technology which is appropriate

 Strategic Management

Environmental and Natural factors

•Natural Resources

•Absolute advantages

•History: Learning and adaptation

(ex North and South Indians)
 Strategic Management

Legal and International trading factors

• Trade barriers

• Tariffs

• Non tariff barriers

Import licensing, quotas, foreign regulations, canalisation,

quantitative restrictions --- normally applied by developing
countries.
 Strategic Management

SWOT Analysis

Organisational Appraisal : S & W

Environmental Appraisal : O & T

 Strategic Management
SWOT Analysis
SWOT Analysis, evolved during the 1960s at Stanford
Research Institute, is a very popular strategic planning
technique having applications in many areas of
management. Organisations perform SWOT to understand
their internal and external environments. Through such an
analysis, the strengths and weaknesses existing within an
organisation can be matched with the opportunities and
threats operating in the environment so that an effective
strategy can be formulated. An effective organisational
strategy, therefore, is one that capitalises on the
opportunities through the use of strengths and neutralises
the threats by minimising the impact of weaknesses, to
achieve pre-determined objectives.
 Strategic Management
A simple application of the SWOT analysis technique
involves these steps;
1. Setting the objectives of the organisation or its unit

2. Identifying its strengths, weaknesses, opportunities and

threats

3. Asking four questions

a. How do we maximise our strengths?
b. How do we minimise our weaknesses?
c. How do we capitalise on the opportunitis in our
external environment?
d. How do we protect ourselves from threats in our
external environment?
4. Recommending strategies that will optimise the answers
from the four questions
 Strategic Management

Typical Examples of SWOT

 Strengths
 Unique product
 Location of your business
 Patents, know-how, trade secrets
 Worker's unique skill set
 Corporate culture, company image
 Quality of your product
 Access to financing
 Operational efficiency
 Weaknesses
 Location of your business
 Lack of quality and customer service
 Poor marketing and sales
 Access to resources
 Undifferentiated products or services
Opportunity in the SWOT model
A new emerging or developing market
(niche product, place - new country, less
competition)
Merger, joint venture, or strategic alliance
Market trends
New technologies
Social changes (for example
demographics)
 Threats
 New competition in the market, possibly
with new products or services
 Price wars
 Economic conditions
 Political changes
 Competitor oligopoly or monopoly
 Taxation
 Availability of resources
 SWOT Analysis
•Organisational Appraisal : S & W

•Environmental Appraisal : O & T

 TWO’s Analysis

Strength Weakness

Opportunity Maxi Maxi Mini Maxi

Maxi Mini Mini Mini

Threat
 TWOS Models

1. S & O : Maxi Maxi Ex. T C S

2. S & T : Maxi Mini Ex. Microsoft

3. W & O : Mini Maxi Ex. Vistara

4. W & T : Mini Mini Ex. Tata Docomo

Strategic Management

Functional Level Strategies

Business Level Strategies

and
Corporate Level Strategies

Prof Bharat Nadkarni

 Strategic Management
Corporate Level Strategies or simply corporate strategies
are basically about decisions related to:
• Allocating resources among the different businesses of a
firm.

• Transferring resources from one set of businesses to

others.

• Managing and Nurturing a portfolio of businesses.

These decisions are taken so that the overall corporate

objectives are achieved.
Corp strategies help to exercise the choice of direction that an
organisation adopts. There could be a small business firm
involved in a single business or a large, complex and
diversified conglomerate with several different businesses. The
corp strategy in both these cases would be about the basic
direction of the firm as a whole. In the case of a small firm
having a single business, it could mean the adoption of
 Strategic Management
Courses of action that yield better profitability for the firm. In
the case of the large, multi business firm, the corp strategy
would also be about managing the various businesses for
maximising their contribution to the overall corporate
objectives and transferring resources from one set of
businesses to others.
Corporate Level Strategies
• Shareholder return

• Growth & Expansion

• Economic profit

• Net income

• Income diversity

• Synergy

• Corporate citizenship, Ethics, CSR

Business Level Strategies
• Growth & Expansion

• Economic profits

• Quality

• Market share

• Employee development

• Productivity

• Knowledge generation
Functional Level Strategies

• Stakeholder Concept

• Effectiveness & Efficiency

• Creativity & Innovation

• Systems Approach

• Collaboration (Win – Win)

Thank you