INTRODUCTION

NATURE OF STRATEGY

o Strategy is a major course of action -- actions involved in

meeting the objectives of the organization

o Strategy is the blend of internal and external factors

o Strategy is the combination of actions aimed to meet a

particulars condition.

o Due to its dependence on environmental variable, strategy

may involve a contradictory action.

o Strategy is future oriented

o Strategy requires some systems and norms for its efficient

adoption in any organization.

o Strategy provides overall framework for guiding enterprise

thinking and action.
 NEED FOR STRATEGY

1. To have rules to guide the search for new opportunities both

inside and outside the firm.

2. To take high quality project decisions.

3. To have an assurance that the firms overall resource

allocation pattern is efficient.

4. To have & develop internal ability to anticipate changes.

5. To save time, money and executive talent.

6. To identify, develop and exploit potential opportunities.

7. To utilize the delay principle .i.e., delay the commitment

until an opportunity is in hand.
 KEY AREAS IN DEVELOPING A
STRATEGY

Managers have to consider the following key areas in developing

a strategy.

1. The type of goods and services that the firm will produce and
will.

2. The mode of producing goods and rendering services.

3. Who are and will be the firm’s customers.

4. The methods of financing various operations of the firm.

5. The amount of stock the firm will take.

6. Methods of implementing the strategy.

 DIFFERENT PHASES OF
DEVELOPING A STRATEGY
o PHASE 1: Basic financial planning

o Annual budget requirement for operational

functions like production, marketing, finance and
human resources and emphasising on the
operational control.
o PHASE 2: Mainly on effective plan

o Environmental scanning and plan for the

future & allocation of resources.
o PHASE 3: External Oriented Planning

o Increasing response to market competition,

complete situational assessment of competitive
strength, evaluation of strategic alternatives, and
allocation of resources based on change of need
from time to time.
o PHASE 4: Strategic Management

o Meeting the budget to planning for the

future, to thinking abstractly, to working to create
desired future. To create future decision makers,
orchestrate and integrate all their organisations
resources to gain competitive advantage.
 NEED FOR STRATEGIC
MANAGEMENT
1. Due to Change: Pro-acts to change and proves direction &
control.

2. To Provide Guidelines: Provide guidelines to their employer

about the organisations expectations from them. It provides an
incentive for employer and helps the organisation ion achieving
its objectives.

3. Developed field of study by research: Due to more research

more system knowledge is available in this area.

4. Probability for better performance: Strategic management leads

to higher performance. Expect higher probability of success
than those which do not have.

5. Systematise Business Decisions: Strategic management

provides data and information about different business
transactions to managers and help them to make decisions
systematically.

6. Improves communication: Provides effective communication

of information from lower level to the managers.
7. Improves allocation of resources: Helps in deciding upon most
feasible & viable projects.

8.
 FORMS OF STRATEGY
1) Formal vs informal: associated with size of firm & stage of
development.

2) Intended vs realized: Intended strategies are the plans of

managerial development & realized strategies are the actions
that actually take place over period of time.
 Mintzberg’s views of strategy (5 P’s)

1) Plan– Consciously intended course of action

2) Ploy – Manoeuvre to outwit opponent

3) Pattern – Consistency in behaviour

4) Position – Location in environment

5) Perspective – Way of perceiving the world.

Strategic plan in action:

o Every department managers should provide 3 plans every 6

months.

o Five year plan with technological & environmental changes.

o Two- year plan taking strategies into new products

o Six- month operating plan

o Monthly projections for production, sales, profits, inventories,

quality control, and personal requirements.
ESSENTIAL TASKS FOR STRATEGY
IMPLEMENTATION

1) Identify organizational mission & objectives

2) Assess the current performance Vis-a-vis mission and objectives

3) Create strategic plans to accomplish purpose and objectives

4) Proper execution / Implement strategic plans

5) Evaluate results to have overall control with top executives

 PROCESS OF STRATEGY
o Prescriptive Strategic Process: It is one whose objective is
defined in progress & whose main elements have been developed
before the strategy commences. It is mainly started from outside
environment and the resources of the company.

o Advantages of Prescriptive Strategic Process:

1. Clear objectives provide focus on the business

1. Objectives can be translated into Targets against performance can

be measures & monitored

2. Resources can be allocated to specific objectives & efficiency can

be judged

3. The approach is logical & rational

4. It structure complex information, defines & focuses business

objectives, establishes control & sets target that performance can be
measured.

o Emergent Strategic Process: It is one whose final objective is

undecided & whose elements are developed during the course of its
life, as the strategy proceeds. It is mainly started from more
knowledge & experimental environment

o Advantages of Emergent Strategic Process:

1. Emergent strategy increases flexibility in a chaotic
environment allowing the business to respond to
pressure & develop opportunities.

2. Changing Stakeholders connections means that strategy

is often, of necessity, emergent

3. Consistent with actual practice in organization

4. Motivation issue of customer is consider

5. Experimentation is allowed

6. Opportunity for inclusion of culture & politics of

organization.
 STRATEGIC MANAGEMANT
o Strategic management is the art & science of formulating,
implementing & evaluating functional decisions that enable an
organization to achieve its objectives.

o The term strategic management is used to refer:

o to strategy formulation
o to Implementation / execution &
o to evaluation & control with strategic planning
o A ‘strategic Plan’ is a company’s game plan results from management
choices among numerous ‘good alternatives’ and it signals commitment
to specific markets, polices, procedures and operations.

o Stages of strategic management:

Strategy formulation >> Strategy implementation>> Strategy

evaluation

o Strategic management consists of the analysis, decisions, & actions an

organization undertakes in order to create & sustain competitive
advantages.

o Strategic management is the process of formulating & implementing

strategies to accomplish long-term goals & sustain competitive
advantage.

o Strategic questions for strategy formulation is as follows:

o What is our business mission?

 o Who are our customers?
o What do our customers consider value?
o What have been our results?
o What is our plan?
o Strategic Implementation: The process of allocating resources &
putting strategies into action. All organizational & management systems
must be mobilized to support & reinforce he accomplishment of
strategies.
 FEATURES, QUALITIES OR
CHARACTERISTICS OF
STRATEGIC MANAGEMENT
o Directs the organization towards overall goals & objectives

o Includes multiple stakeholders in decision making

o Needs to incorporates short-term & long-term perspectives

o Recognizes trade-offs between efficiency & effectiveness

Benefits of strategic management
o Clear sense of strategic vision

o Sharper focus on what is strategically important

o Improved understanding of rapidly changing environment

o It helps an organization to be proactive rather than reactive

in shaping its future

o It initiate & influence its environment & thereby exert

control over its destiny

o It helps the organizations to achieve understanding &

commitment from all managers & employees become more
creative & innovative

o It encourages the organization to decentralize the

management process involving all staff members

o A well designed strategic management can boost profits.

o Using systematic long-term planning resulted in high

performance in business.

o It strengthens employee commitment & more participation

o reduce the of being affected by the changes

o Increase employee productivity, reduced resistance to
change, clear understanding of performance & reward
relationship

o It provides solutions to the problem & to encourage more

interaction among managers at all levels.

o It often brings order & discipline to a firm.

o It allows identification, prioritisation and exploitation of

opportunities.

o It provides an objective view of management problems.

o It represents a framework for improved control of activities.

o It minimizes the effects of adverse conditions and changes.

o It allows major decisions & supports established objectives.

o It allows fewer resources & less time to be devoted for

correcting environment of ad hoc decisions.

o It helps to integrate the behaviour of individuals into a total

effort..

o It provides classification of individual responsibilities

o It give encouragement to forward thinking..

o It encourages favourable attitude towards change

o It gives a degree of discipline on management of business..

o It helps to enhance customer relationship enable the
organization wants to achieve customer loyalty.
 3 Levels of Strategy

1) Corporate Strategy:

o Top of the heap

o Need to outline a general strategy
o It outlines what businesses they are going
to engage in & how they to plan to enter & win in
those markets
o Easy to overlook this planning stage when
getting started a new business.
o Quick & easy process.
o Easy to identify strategy to enter one or two
specific markets with their products & services.
o Helps to enhance sales turnover
o Larger business complication removed
easily
o Helps to decide appropriate equipment’s to
be used
o It assist to execute different strategies to
meet complex challenges in selling.
o Corporate strategy is always clearly
defined.
2) Business strategy: It is the best to think of this level of strategy
as a ‘step down’ from the corporate strategy level.

o It is more specific & they usually relate to

the smaller business within the larger
organization.
o The business strategies are outlined
perfectly before execution.
o Selling any product, business strategies are
looking assortment of products and department
e.g. Grocery stores to sell cookies, departmental
stores for selling general products & internet to
sell equipment etc.
o Business strategies are dramatically
different strategies, so they will be broken out at
this level.
o Even in smaller business, it is good idea to
pay attention to the business strategy.

3) Functional Strategy: This is day-to-day strategy that is going to

keep the organization moving in the right direction.

o If business fails from top-level perspective,

other business fail to plan at this bottom-level
o It helps to smooth running to meet its
competition well & drive forward. • Everything
 is well coordinated & working toward the same
end.
o It coordinate all bottom level & work
together to reach goals
o Satisfactory results expected from
marketing, finance, operations, IT and other
related department's activities.
o Business success and filature are depends
upon functionary strategy
o It helps the organization staying on path
that consistent with goals of the business.

LEVELS OF STRATEGY
LEVEL OF ORGANISATI SBU LEVEL FUNCTION
STRATEGY ONAL LEVEL AL LEVEL
PURPOSE Implementation Achieve Support
mission. Organisations business unit
Strategies. &
organisational
strategies.
INTERNAL Control Co-ordinate Manage daily
ACTIVITIES contribution of with other operating
divisions, units problems.
business units to developing
mission. distinctive
competence.
KEY What business Are the Are we on
QUESTION are we in? changes schedule?
threatening or
creating
opportunities
for our
products?
EXTERNAL External Focuses on an Anticipate
ACTIVITIES activities industry, changes
monitor general product or a required for
and specific market. new business
environments. units &
organisational
strategy.
TIME Long term (3+ Intermediate Detailed and
FRAME years) (1-3 years) Specific.
PERFORMA Vague, Flexible. Measurable,
NCE moderately
MEASURES flexible.

CHALLENGES FOR STRATEGIC

MANAGEMENT
1. Technological Advancement:
Mother of invention, competition & a host of other resources
are responsible for the rapid technological advancements
and innovation.

2. Product / service innovation & development & strategic

mgt:
Consumers taste and preferences needs & conveniences led
to the continuous product / service development and
innovation of new products.

3. Global issues and Strategic Management:

Economic liberalisation – National boundaries,
multinationals are experiencing the impact of globalisation
in markets and operations.

4. Quality issues & Strategic Mgt:

TQM – Total Quality Management
Zero – Defect of the product,
Enhance the value of goods & services. Product design, raw
materials, every stage of production process, marketing
process, and post sales services.

5. Economic BOOM and Recession:

BOOM – Provides the opportunities, Increase in demand as
 well as business operations.
Recession – Creates threats strategic management needs.

6. Social issues & Strategic Management:

Social responsibility is the managerial obligation to act,
protect and promote both organisational interests and
welfare of the society.
 CRITERIA FOR EFFECTIVE
STRATEGY
1. Clear decisive Objectives

2. Maintaining the initiative.

3. Concentration.

4. Flexibility.

5. Coordinated and committed leadership.

6. Surprise.

7. Security.

o Various kinds of Strategy:

1) Planned Strategy.

2) Entrepreneurial Strategy.

3) Ideological Strategy.
4) Umbrella Strategy.

5) Process Strategy.

6) Disconnected Strategy.

7) ?

8) Imposed Strategy.
 STRATEGIC MANAGEMENT
PROCESS
1) Identify corporate vision, mission, objectives & goals.

2) Analyse the corporate external environment to identify

opportunities & threats.

3) Scan the corporate internal environment to identify strengths &

weakness of the company.

4) Revise the corporate mission: if there is any drastic deviation in the

external environment.

5) Craft the strategic alternatives based mostly on the corporate

opportunities & strengths. Strategies for correcting company’s
weaknesses, when the opportunities are significant and distinct.
 STRATEGIC MANAGEMENT
PROCESS
1) Environmental scanning: It refers to a process of collecting,
scrutinizing & providing information for strategic purpose plus
analysing the internal & external factors influencing an
organization

2) Strategy formulation: It is the process of deciding best course of

action for accomplishing organizational objectives & hence
achieving organizational purpose after conducting environment
scanning etc.

3) Strategic implementation: Strategy implementation implies

making the strategy work as indented or putting the
organization’s chosen strategy into action & it includes
designing the organization ‘s structure, resources, developing
decision making & managing human resources.

4) Strategic evaluation: Strategy evaluation is the final step of

strategy management process & appraising internal & external
factors, Effective implementation to meets the organizational
objectives.
 STRATEGIC BUSINESS UNIT

o Business Portfolio Matrix

o Identify each division, product line - called strategic business units

(SBU’s) which have 4 parts (distinct mission, own competitors,
single business or collection of businesses).
o They can be planned independently of other businesses of the total
organization.
o SBU implies an independently managed of a large division of a
company having its own vision, mission, goals & objectives whose
planning is done separately from other business of the company.
 Characteristics of SBU

1) Separate business or a grouping of similar operation, offering

scope for autonomous planning

2) Own set of competitors

3) A manager who is accountable for strategic planning,

profitability & performance of the division

4) A strategic business unit is specially formed to target a

particular market segment, which requires expertise in
production or management, present in the parent company.
Structure of SBU
 Examples of SBU
o Customer-Segment: A bank is structured with a separate
division that services high network individuals

o Products: A snowboard manufacturer is structured as two

divisions: fashions and equipment. The division share a brand
and administrative functions such as human resources and
information systems.

o Services: A telecom company has a data centre decision that

offers services such as collection.

o Regions: A European fashion brand its Japanese distribution

and promotion capabilities as a separate unit.

o A large information technology firm launches new

innovation products as their own strategic business unit.

o The firm manages units as a growth investment with profit.

o ADVANTAGES OF SBU:

1. Responsibility: Assign responsibility & more importantly

outsource responsibility to others.
2. Accountability: When handling multiple brand or products.
3. Accountancy: P& L & B/S will look prettier and more
manageable.
4. Strategy: It’s very simple to change strategy for each
business unit. e.g. Nestle is having SBU like MAGGI deals
with Food products, MILKMAID deals with Dairy products,
and KITKAT deals with Chocolate products etc.,
5. Independence: The managers of the SBUs get more
independence to manage their own unit provides them the
opportunity to be more creative, innovative and empowers
them for making decisions.
6. Funds allocation: Further the more advantages of SBUs are
funds allocation become simpler for the parent company.
Because funds allocated depends upon performance of the
SBU.

o LIMITATION OF SBU:

1. Excessive fragmentation of strategic – critical process.

2. Can lead to inter-functional rivalry and conflict, rather than
team multi-layered management bureaucracies and
centralized decision-making, slow response time.
3. Hinders development of managers with cross-functional
experiences because the ladder of advancement is up the
ranks within the same functional area.
4. Forces profit responsibility to the top functional specialists
often attach more whole business,
 BCG Matrix - Market Growth

The above figure in your reading and analyse your internship

company. Pick an area in your intern organization and
determine what products or services fall into the 4 boxes: stars,
‘?’, cash cow & cash trap.
 Definitions
o Star is a SBU that has a high share of a high-growth market. They
need a great deal of resources because of growth. When growth slows
they become cash cows.

o Cash Cow has a high share of a low-growth market and produces a

good deal of cash for the organization. Since the market is not growing
they do not require a great amount of resources.

o Question Mark has a low share of a high-growth market, and the

organization must decide whether to build, phase it out, or eliminate.

o Cash Trap Has a low market share of a low growth market. It may
generate enough cash to maintain itself, or be a drain, but it does not
generate sources of cash.
So what are your Strategic Choices
using the BCG Business Portfolio
Matrix?

o Build, if you believe it has the potential to be a star.

o Hold, if the SBU is already cow

(especially when more a successful
cash is needed)

o Harvest, appropriate for all SBUs except cash cows.

o Divest, getting rid of low-growth markets.

 OBJECTIVES
1. Organic Objective: Business enterprise is an organic entity and
development is ? to biological growth.

a) Objective of survival

b) Objective of growth

c) Objective of maintaining prestige.

2. Economic Objective:

o Profit Objective
o Creation of Customers
o Innovation

8. Social Objectives: Supply according to the needs of the

society & benefits to the society.

o Supply of quality goods.

o Providing employment.

o Avoidance of anti-social practices.

4. Human Objectives: Business enterprises should consider their

employees as human beings and have a parental approach.
 o Fair Deal – Means fair wages.
o Participation & given representation.
o Job satisfaction – right person for the right
job.

5. National Objectives: Business concern should observe moral

code of conduct to serve the society.
 VISION AND MISSION
STATEMENTS

The strategy statements provides long-term strategic direction

& broad policy directions. It gives a clear sense of direction &
a blueprint for the firm’s activities for the upcoming years.

o STRATEGIC INTENT: -- A organization’s strategic intent

is the purpose that it exist long term basis and maintains a
competitive advantage -- It give a clear picture about what an
organization must get into immediately in order to achieve
company’s vision.-- It motivate people – It clarifies vision of
the company – It helps management to emphasize &
concentrate on the priorities. – It influencing organization’s
resources potential & core competencies to achieve goals in the
competitive environment. – It controlled organization’s
competencies to reach maximum value. – It needs directing
organization’s attention on the need of winning: inspiring
people by telling them that the targets and valuables & create
opportunities.
o VISION STATEMENT: It identifies where the organization
wants or intends to be in future or where it should be to best
meet the needs of the stakeholders.

o It describes dreams & aspirations for future.

E.g., Microsoft’s vision is “to empower people
through great software, any time, any place, or
any device” & Wall Mart’s vision is to “become
worldwide leader in retailing”.
o It is the potential to view things ahead to
develop. It contributes effective decision making
as well as effective business planning.
o It incorporates a shared understanding
about the nature & aim of the organization &
utilize this understanding to direct & guide the
organization towards a better purpose
o It describes that on achieving the mission,
how the organisational future would appear to be
Features of Vision:
1. It must be unambiguous
2. It must be clear.
3. It must harmonize with organization culture & values
4. Dreams & aspirations must be rational
5. Should be shorter & easy to memorise.
o MISSION STATEMENT: It helps the organization intends
to serve its stakeholders effectively – It describes why
organization is operating & thus provides a framework within
which strategies are formulated.

o It describes what the organization does

towards present capabilities, serving to its
stakeholders, & reason for existence.
o It differentiates an organization from others
by explaining its broad scope of activities, it
products, & technologies it uses to achieve its
goals & objectives.
o Mission statement talks about the present
condition of the organization i.e. “about where we
are”.
o It always exist at top level of n
organization, but may also be made for various
organization levels.
o Chief executive plays a significant role in
formulation of mission statement.
o It serves him organization in long run, but it
may become ambiguous with organizational
growth and innovations redefined.

Features of Mission
 1. Mission must be feasible and attainable
2. It should be possible to achieve.
3. It should be clear enough so that action may taken
4. It should be inspiring for the management, staff and
society at large
5. It should be precise neither broad nor too narrow
6. It should be Unique and distinctive to leave an impact in
everyone's mind
7. It should be analytical
8. It should be credible i.e., all stakeholders should be able
to believe it.

o GOALS

1. Goals are precise and measurable

2. Goals look after critical and significant issue
3. These are realistic and challenging
4. Goals must be achieved within a specifics time frame
5. These includes both financial and non-financial
components

o OBJECTIVES

1. It defines as goals that organization wants to achieve over

a period of time
2. These are the foundation planning & policies are
developed in an organization so as to achieve these
objectives
3. It is a task of top level management. It’s not single but
multiple.
 MCKINSEY 7 S FRAMEWORK
o If any organization feels their work can be done more
effectively and efficiently, the McKinsey 7S framework provides
green path. It was designated by TOM PETERS PASCALE &
ROBERT WATERMAN JR, an American consulting firm & it
applies in organization all over the world. The 7S in this
diagnostic model refer to the seven elements or factors that start
with the letter “S”.
1. Strategy – Achieving Organisational Purpose.

2. Structure – Basic framework to designate responsibilities

and functions.

3. Systems – Management tools for planning, decisions

making, communication & contract.

4. Staff – Human resources of the organisation.

5. Skills – It refers organisational and individual capabilities.

6. Style – This connotes how managers lead & motivate

7. Shared values - Values, objectives, goals which the

organisation pursues.