# Meaning and Concept of Strategy

The word “strategy” is derived from the Greek word “stratagos”; strat (meaning army) and
“ago” meaning leading/ moving. A strategy is a comprehensive master plan for a corporate
which directs the way to achieve its mission and objectives. It helps to maximize the
competitive advantages of the org and minimize the competitive disadvantages of the org. It is
a pattern of action for achieving its objectives in accordance with the requirements of the
external and internal environments. Strategy will be more supportive for scanning the
organizational environmental forces and making well defined mission vision and objectives of
the org. A corporate type business org may have corporate level strategy business unit level
strategy and functional level strategy.

Chandler (1962)- Strategy is the determination of the basic long-term goals of an enterprise,
and the adoption of courses of action and the allocation of resources necessary for carrying
out these goals;

Mintzberg (1979)- Strategy is a mediating force between the organization and its
environment: consistent patterns in streams of organizational decisions to deal with the
environment

“A strategy is an integrated and coordinated set of commitments and actions designed to

exploit core competencies and gain a competitive advantage.” – Hitt, Ireland, and Hoskisson

The following are the characteristics of strategy:

i. A strategy represents and org’s game plan.

ii. It reflects organizational awareness of how to compete and survive in the situation of
changing environment.

iii. Strategy provides a framework for management decision and actions.

iv. It is future oriented plan for interacting with the competitive envt to attain an
organizational goals.

v. A well formulated strategy provides a framework to make the policy procedures system of
the org for the purpose of allocating the resources.

Nature of Strategy

Based on the above definitions, we can understand the nature of strategy. A few aspects
regarding nature of strategy are as follows:
  Strategy is a major course of action through which an organization relates itself to its
environment particularly the external factors to facilitate all actions involved in meeting
the objectives of the organization.

 Strategy is the blend of internal and external factors. To meet the opportunities and
threats provided by the external factors, internal factors are matched with them.

 Strategy is the combination of actions aimed to meet a particular condition, to solve

certain problems or to achieve a desirable end. The actions are different for different
situations.

 Due to its dependence on environmental variables, strategy may involve a contradictory

action. An organization may take contradictory actions either simultaneously or with a
gap of time. For example, a firm is engaged in closing down of some of its business and
at the same time expanding some.

 Strategy is future oriented. Strategic actions are required for new situations which have
not arisen before in the past.

 Strategy requires some systems and norms for its efficient adoption in any organization.

Need for Strategy

Globalization and the advancement of information technology have made the current business
environment extremely competitive. Managers must develop a new mindset in such a
competitive business climate, one that values flexibility, speed, creativity, and the challenges
that arise from constantly changing business conditions. Firms typically actively confront their
competitors in a competitive market to improve their competitive position and performance. In
this case, strategy becomes a tool for obtaining a long-term competitive advantage. It is a
potential plan of actions that includes top management decisions and a considerable amount of
resources. It is prime objective is to achieve a sustainable competitive advantage over
competitors. The following are some of the points to show the need for a strategy for the
organizations.

 To understand the competitive environment and compete successfully

 To effectively adapt to the environment

 To adopt a suitable business model

 To acquire and utilize resources optimally

 To set a competitive organizational structure

  To retain the customers by building a relationship with them

 To expand the business

 To fulfill the stakeholder’s expectations

 To ensure the sustainability of the business

# Levels of Strategy

The strategy can be formulated either in the corporate level or in the business unit and
functional level. Each and every level are of strategy can be explained in the following ways:

1. Corporate level strategy:

Corporate level strategy is plan that deals with the objectives of the company, allocation of
resources and co-ordination of business unit level strategy for optimal performance. It is the
top management plan to direct and run the enterprise as a whole. It represents the pattern of
entrepreneurial action and intend underline org,s strategic interest in different business,
divisions, product lines, costumer groups and technologies. Corporate strategy emphasizes
upon the fact that how one should manage various activities over the different priorities of
corporation. It is basically suitable for three main categories: growth, stability and
retrenchment following are its features:

i. This strategy can be formulated by top management and prepare a suitable plan for the
smooth operation of the org activities.

ii. The overall policy plan, direction, control will be made by the top level executive of the
org.

iii. Corporate level vision is to be value oriented and conceptual.

iv. It is suitable for stability of the org, growth and diversification of the org and
retrenchment.

The corporate level strategy also includes four main types of strategies that a firm can opt for:

 Stability: It aims to continue the current operations of the organization without any
significant changes in direction.

 Growth: Organizations who aim to expand their business aim this strategy. It is designed
to achieve growth in sales, assets, profits, or some combinations.

 Retrenchment: Aims to reduce the size or diversify of a company for financial feasibility.
  Mixed: Adoption of stability, growth, and retrenchment strategies in different business
units and operations.

2. Business level strategy

It is followed at the business unit or at the product level. It emphasizes improvement of the
competitive position of and orgs product services or market segment served by that business
unit. Business strategy is formulated by business level managers depending upon
comprehensive plan, providing a suitable objectives for each business units, allocation of
resources among various functions areas and co-ordination between them for making optimal
contribution to the achievement of corporate level objectives. It is fit within two overall
categories: competitiveness, cooperativeness. Its features are:

v. This type of strategy is prepared for business unit or production level to fulfill the
objectives of corporate strategy. For example when the strategy is formulated by the business
unit of “Real Juice” and Glucose-D are the business level strategies.

vi. This type of strategy emphasizes on the competitive position of the product.

vii. It establishes the linkage between corporate and functional level strategy.

viii. Business level strategy is the follower strategy of the corporate strategy. It is relatively
narrow than corporate strategy.

It also includes three main types.

 Cost Leadership: This strategy attempts to achieve a competitive advantage by

providing acceptable products at lower than the competitors.

 Differentiation: Involves providing goods and services which are different than those of
competitors at an acceptable cost.

 Focus/Niche: Aims to serve a particular buyer group or niche more effectively than the
competitors.

3. Functional level strategy

It is the plan to manage functional activities such as marketing, finance, production, HR and
R&D of the business org. Responsibility of formulating and implementing functional strategy
lies with those who occupy the top of functional areas. For example if the strategy of
production department of a product is formulated by the department head is the functional
level strategy. Is is also a followers type of strategy. The department head follow system,
procedure, guidelines, mission, and vision of corporate and business strategy to achieve the
overall orgnal goals and objectives.

Following are the features of functional strategy

i. It is formulated and implemented by the functional managers in their functional areas to

achieve corporate and business objectives.

ii. Generally these strategies are implemented or formulated for action decisions and it is
tactical in nature.

iii. It provides competitive advantages to business units.

iv. Functional strategy always supports to the corporate strategy.

v. It also plays the partnership role as well as the follower role while preparing the strategy.

Functional level strategies are also called operational level strategies. It also has a number of
types:

 Marketing: It deals with customers and competition. It is basically related to market

position, marketing mix, reputation, and brand.
 Production/Operation: This strategy determines how and where a product or service is
to be manufactured. It also deals with the level of vertical integration in the production
process, deployment of physical resources, relationships with suppliers, and the
optimum level of technology.
 Finance: It includes activities related to the acquisition and management of funds
required for business. It mainly aims at enhancing the financial value of the business.
 Human Resource: It deals with the acquisition, development, and facilities of human
resources. It also addresses the skill, motivation, and diversification of human resources.
 Research and Development: It mainly deals with the acquisition, use, and development
of technology.

# Concept of Strategic Management

The term ‘strategic management’ is used to denote a branch of management that is concerned
with the development of strategic vision, setting out objectives, formulating and implementing
strategies and introducing corrective measures for the deviations (if any) to reach the
organization’s strategic intent. It has two-fold objectives:

 To gain competitive advantage, with an aim of outperforming the competitors, to

achieve dominance over the market.
  To act as a guide to the organization to help in surviving the changes in the business
environment.

Strategic Management is all about identification and description of the strategies that
managers can carry so as to achieve better performance and a competitive advantage for their
organization. An organization is said to have competitive advantage if its profitability is higher
than the average profitability for all companies in its industry. Strategic management can also
be defined as a bundle of decisions and acts which a manager undertakes and which decides
the result of the firm’s performance. The manager must have a thorough knowledge and
analysis of the general and competitive organizational environment so as to take right
decisions.

# Importance of Strategic Management

1. Because the environment for most firms is changing so quickly, strategic management is
the only approach to foresee potential issues and opportunities. It enables an
organization to form opinions on long-term projections rather than on-the-spot
judgments.

2. Strategic management offers financial advantages. Based on empirical research and

logical reasoning, it is possible to assert that the influence of strategic management is
mainly that better financial performance in terms of growth and profitability of
businesses with an advanced strategic management system having a significant
influence on the formulation and management of strategies.

3. People work effectively once they are aware of what is expected of them and where the
company is headed. Strategic management gives all the employees specific goals and
objectives for the company’s future. Additionally, this lessens conflict. It offers
management and staff a strong motive to accomplish the company’s goal. Additionally,
it makes sure that the senior executives agree on key strategic decisions and challenges.

4. Group involvement in strategic management enhances the quality of strategic

decisions. Owing to the unique viewpoints of group members, the practice of group
discussion for decision-making allows the invention of alternative methods and better
monitoring of opinion. Therefore, it is likely that the finest options will be picked and
used.

5. Enhanced employee motivation is a result of strategic management since it helps

employees and managers better grasp the objectives and understand how the incentive
system works. Additionally, they are more aware of the strategic plan’s built-in
productivity-reward correlation. As a result, rewards are likely to be followed by goal-
directed behavior.
 6. Strategic management reduces resistance to change. Greater knowledge of the factors
influencing a decision and the limitations of potential alternatives are probable to occur
from a participatory strategy-making procedure, which also has the added bonus of
making changes more acceptable with less resistance. Resistance to change is made
harmless by the procedure, which further eliminates the ambiguity that is linked to
change.

# Strategic Management Process

1. Establishing Strategic Foundations.

The first step in the strategic management begins with senior managers evaluating their
position in relation to the organization’s current mission and goals. The mission describes the
organization’s values and aspirations; and indicates the direction in which senior management
is going. Goals are the desired ends sought through the actual operating procedures of the
organization. It typically describes short-term measurable outcomes. The following are
established for laying down the foundation of the strategic management

a. Vision
b. Mission
c. Business definition
d. Business objectives
e. Business goals
f. Business models
2. Environmental Scanning:

Environmental scanning refers to a process of collecting, scrutinizing and providing information

for strategic purposes and helps in analyzing the internal and external factors influencing an
organization. After executing the process, management should evaluate it on a continuous
basis and strive to improve it.

3. Strategy Formulation:
Strategy formulation is the process of deciding best course of action for achieving
organizational objectives. After conducting environment scanning process, managers formulate
corporate, business and functional strategies. It involves steps.

Environmental Analysis

Organizational Analysis

Corporate Analysis
SWOT Analysis

Strategies- Corporate and business level

Strategic Analysis/appraisal and choice of strategy

Strategy final plan.

4. Strategy Implementation:

Strategy implementation implies putting the organization’s chosen strategy in to action and
making it work as intended. Strategy implementation includes:

- The design of organizational structure

- Project implementation

- Procedural implementation

- Structural implementation

- Resource allocation implementation

- Behavioral implementation

- Functional implementations

5. Strategy Evaluation & Control:

Strategy evaluation and control which is the final step of strategy management process involves

- Direction right or not

- Results-positive or negative

- Favorable or unfavorable

- Evaluation of strategies implemented

- Measurement of organizational performance

- Feedback from strategic evaluation leads to control of strategy

- Strategies may be reformulated if necessary or required.

These steps are carried by the businesses, in chronological order, when creating a new strategic
management plan. Present businesses that have already created a strategic management plan
will revert to these steps as per the situation’s requirement, so as to make essential changes

# Strategic Management Process (Alternative for long question)

Managers perform these activities in any order contingent upon the situation they face at a
particular time. And this is to be done again & again over the time as the situation demands.
There are four major phases of strategic management process which are as under.

A) Establishment of strategic intent.

B) Formulation of strategies.

C) Implementation of strategies.

D) Strategic evaluation.

A. Establishment of strategic intent:

It is a first step in strategic management Process. It involves the hierarchy of objectives that an
organization set for itself. Generally it includes vision, mission, business definition and
objectives establishing the hierarchy of strategic intent which includes -

1. Creating and communicating a vision.

2. Designing the mission statement.

3. Defining the business.

4. Adopting the business model.

5. Setting objectives.

The hierarchy of strategic intent lays the foundation for strategic management of any
organization. The strategic intent makes clear what organization stand for. In the hierarchy, the
vision intent serves the purpose of stating what the organization wishes to achieve in the long
run. The mission relates the organization to the society. The business definition explains the
businesses of the organization in terms of customer needs, customer groups and alternative
technologies. The business model clarifies how the organization creates revenue. And the
objectives of the organizations state what is to be achieved in a given period of time.

B. Formulation of strategy:

Formulation of strategy is relates to strategic planning. It is done at different levels i.e.

corporate, business, and operational level. The strategic formulation consists of the following
steps.

1. Framing of mission statement:

Here the mission states the philosophy and purpose of the organization. And all most all
business frames the mission statement to keep its activities in the right direction.

2. Analysis of internal & external environment:

The management must conduct an analysis of internal and external environment. Internal
environment consists of manpower, machines, and other sources which resides within the
organization and easily alterable and adjustable. These sources reveal the strength and
weakness of the organization. External environmental factor includes government,
competitions, consumers, and technological developments. These are not adjustable and
controllable and relates to organizations opportunities and threats

3. Setting of objectives:

After SWOT analysis, the management is able to set objectives in key result areas such as
marketing, finance, production, and human resources etc. While setting objectivities in these
areas the objectives must be realistic, specific, time bound, measurable, and easy attainable.

4. Performance comparison:

By undertaking gap analysis management must compare and analyze its present performance
level with the desired future performance. This enables the management to find out exact gap
between present and future performance of the organization. If there is adequate gap then, the
management must think of strategic measures to bridge the gap.

5. Alternative strategies :

After making SWOT analysis and gap analysis management needs to prepare (frame) alternative
strategies to accomplish the organizational objectives.

It is necessary as some strategies are to be hold and others to be implemented.

6. Evaluation of strategies :
The management must evaluate the benefits and costs of each every alternative strategy in
term of sales, market share, profit, goodwill and the cost incurred on the part of the strategy in
terms of production, administration, and distribution costs.

7. Choice of strategy :

It is not possible to any organization to implement all strategies therefore management must
be selective. It has to select the best strategy depending on the situation and it has to consider
in terms of its costs and benefits etc.

C. Strategy Implementation:

Once the strategies are formulated the next step is to implement them. The strategic plan is put
into action through six sub processes known as project, procedural, resource allocation,
structural, behavioral, and functional implementation. The project implementation deals with
the setting up of organization. Procedural implementation deals with the different aspects of
the regulatory framework within which organizations have to operate.

Resource allocation relates to the procurement and commitment of resources for

implementation. The structural aspect of implementation deals with the design of
organizational structures and systems and reorganizing so as to match the structure to the
needs of strategy. The behavioral aspects consider the leadership style for implementing
strategies and other issues like corporate culture, corporate politics, and use of power, personal
values and business ethics and social he responsibilities. The functional aspects relates to the
policies to be formulated in different functional areas. The operational implementation deals
with the productivity, processes, people and pace of implementing the strategies

For any strategy implementation there are five major steps.

Such as

1. Formulation of plans.

2. Identification of activities.

3. Grouping of activities.

4. Organizing resources.

5. Allocation of resources.

D. Strategic Evaluation:
Strategic evaluation appraises the implementation of strategies and measures organizational
performance. The feedback from strategic evaluation is meant to exercise control over the
strategic management process. Here the managers try to assure that strategic choice is
properly implemented and is meeting the objectives of the firm. It consists of certain elements
which are given below.

1. Setting of standards:- The strategists need to set standards, targets to implement the
strategies. it should be in terms of quality, quantity, costs and time. The standard should be
definite and acceptable by employees as well as should be achievable.

2. Measurement of Performance:- Here actual performances are measured in terms of quality,

quantity, cost and time.

3. Comparison Of Actual Performance With Set Targets:- The actual performance needs to be
compared with standards and find out variations, if any.

4. Analyzing Deviation And Taking Corrective Measures:- If any deviation is found then higher
authorities tries to find out the causes of it and accordingly as per its nature takes corrective
steps. Here some time authority may re-set its goals, objectives or its planning, policies and
standards.

# Components of Strategic management

1. Strategic planning

Strategic Planning is systematic procedure to establish the long term objectives of an

organization and the policies and strategies that oversee the achievement, use and disposition
of resources to accomplish the vision and mission of firms. It is basically the responsibility of
senior management. Strategic planning is the problem-solving process of establishing strategic
objectives and devising strategic plans to realize those objectives. Many theorists explained
that Strategic planning is a well-organized process to make major decisions and agreeing on
actions that shapes and guide what an organization is, what it does, and why it does it.

Strategic planning typically represents mid- to long-term goals with a life span of three to five
years, though it can go longer. This is different than business planning, which typically focuses
on short-term, tactical goals, such as how a budget is divided up. The time covered by
a business plan can range from several months to several years.

The product of strategic planning is a strategic plan. It is often reflected in a plan document or
other media. These plans can be easily shared, understood and followed by various people
including employees, customers, business partners and investors.
2. Strategy Implementation

Strategic implementation can be defined as turning strategy into action for attaining the
strategic objectives and goals. Since, implementing the strategy is more important than
selecting it, hence, it is very important for the strategists to consider various factors while
implementing. The strategy selected has to be well performed for the purpose of attaining the
strategic objectives. Even a superior strategy tends to fail in the absence of efficient
implementation. In other words, strategy implementation can be defined as a procedure which
enables putting the chosen strategy into action. Implementing a strategy requires carrying-out
various actions.

3. Strategic Control

Strategic control is a way to manage the execution of your strategic plan. As a management
process, it’s unique in that it’s built to handle unknowns and ambiguity as it tracks a strategy’s
implementation and subsequent results. Here are the six steps involved in the strategic control
process:

1. Determining What to Control

Prioritize evaluation of elements that relate directly with the mission and vision of the
organization and which can affect the organization’s goals.

2. Setting Standards

Past, present and future actions must be evaluated. Setting qualitative or quantitative control
standards help in determining how managers can evaluate progress and measure goals.

3. Measuring Performance

Measuring, addressing and reviewing performance on a monthly or quarterly basis can help
determine a strategy’s progress and ensure that standards are being met.

4. Comparing Performance

Performance comparison is done to determine if an organization is falling short of the set

benchmark and if these gaps between target and actuals are normal for that industry.

5. Analyzing Deviations

If there are deviations, managers have to analyze performance standards and determine why
performance was below par.

6. Corrective Action
If a deviation is due to internal factors such as resource shortage, then managers can act to sort
them out. But if it’s caused by external factors that are beyond one’s control, then incorrect
actions can worsen the outcome. Traditional control concepts have to be replaced by
the strategic control process, as it recognizes the unique needs of long-term strategies.

# Role of CEO in Strategic Management

The chief executive is the executive head of the organization. S/he represents the top
management. His/her main duty is to define long term direction and scope of the organization.
He has ultimate responsibility for its success. S/he leads the formulation and implementation of
the strategy. S/he is guided by the board of directors. Since strategic management involves
teamwork of multiple participants, the CEO plays the key roles in:

1. Formulation of strategy: Strategy Provides future direction and scope to the

organization for gaining competitive advantage. The roles of CEO in strategy formulation
are:

i. Key Strategist Role: The CEO plays the role of chief architect in defining vision,
mission and objective of the organization. He conceptualizes and crafts
strategies to achieve objectives.

ii. Decision making role: The CEO makes strategic decisions related to strategy
formulation. CEO makes strategic choice from among strategic option for
achieving this role involves risk-taking.

iii. Resource planning role: This role of CEO involves coordinated allocation of
significant resources to plans. Such plans can be organization-wide or related to
strategic business unit for function. Resources can be people, money,
technology, time and information.

iv. Negotiator role: Strategy must fulfill the expectations of various stakeholders of
the organization. The CEO balance conflicting interests of stakeholder by
negotiating disputes. The stakeholders can be owners, customers, employees,
suppliers, government, labour unions, and financial institutions. CEO ensures the
acceptability to strategy by stakeholders.

2. Implementation of Strategy: Implementation is putting strategy into action. The chief

executive ensures that strategies are operationalized in His/her roles in strategy
implementation are as Follows:

i. Information Role: The CEO disseminates information about strategy to the

implementers within the organization. S/he serves as a spokesperson for
 strategy implementation. Effective communication serves as the key to effective
implementation of strategy.

ii. Leadership Role: The CEO assumes overall leadership for the implementation of
strategy. He/she inspire trust and self-confidence among implementers of
strategy. CEO ensures participation of those who involve in implementation. CEO
motivates them for higher productivity and also provides direction for
implementation.

iii. Organizer Role: The CEO is an organization builder. S/he determines the
structure for strategy s/he establishes reporting relationship and span of control
and assigns authority and responsibility for positions and people in the
organization for key result areas.

iv. Resource manager Role: The CEO ensures efficient and effective mobilization,
allocation and utilization of resources for implementation of strategy. Budgets
are prepared for management of resources.

v. Monitoring role: The CEO monitors and evaluates the performance results of
strategy implementation. S/he takes corrective action to resolve performance