Strategic Management

Select A Company and Explain the Concept, Benefits and Risks of Strategic
Management

Submitted To
Prof. Prachi Ahuja

Submitted By
Name – Disha Agarwal
Roll No – 1

Hr College Of Commerce & Economics

Fy. M.Com (Banking & Finance) – Strategic Management

Date – 20th FEB 2023

Name – Disha Agarwal
 Contents

Sr No Topic

1 Introduction

2 Concept Of Strategic Management

3 Benefits Of Strategic Management

4 Disadvantages Of Strategic Management

5 Risks Of Strategic Management in Fmcg Industry

6 Case Study on Nestle

7 Conclusion

8 Acknowledgement
INTRODUCTION
The constant planning, monitoring, analysis, and assessment of all requirements that a company
requires to accomplish its goals and objectives is known as strategic management. Organizations
will have to reevaluate their success methods on a regular basis because of changes in the business
environment. The strategic management process aids businesses in taking stock of their current
condition, developing, and implementing management plans, and evaluating their efficacy. There
are five fundamental tactics for strategic management, and how they are implemented will vary
based on the situation. On-site and mobile platforms both require strategic management.
Steps for the process of strategic management are as follows: -
● Goal setting: The strategic management process is all about creating a roadmap to help
you achieve your vision. So, before you go any further, you need to clarify what your
company wants to achieve. Many companies kick off the strategic management process
by writing a vision statement. A vision statement communicates where you want to be in
the future. It’s different from your mission statement — which describes why your
company exists — but both statements should inform your strategic plan. Once you’ve
created or reviewed your vision statement, it’s time to pick some broad areas of focus.
You don’t need to have specific, measurable goals yet, but you should go into the
planning process with an idea of what you want to work on.

● Formulation of strategies: In strategy formulation, a firm must be aware of its strength,

weaknesses, opportunities, and threats. SWOT analysis focus attention on these four
variables viz, strengths, weaknesses, opportunities, and threats. The first two are internal
whereas the last two are external to an organization

● Implementation: This involves several administrative and operational decisions

The following three are the important components of strategy

● Resource implementation
● Organizational implementation
● Functional policy implementation

● Evaluation of strategies: The last phase of strategic management is evaluation and control.
In business, conditions often change resulting in the need of evaluation of existingstrategies
and planning the new ones to take advantage of changing conditions.
Concept of strategic management
The concept of strategic management are as follows:
1. Strategic management involves deciding what is important for the long-range success of
your business and focusing on it.
2. Strategic management asks, "How should I position my business to meet management and
business goals?"
3. A business strategy is a series of business decisions that lead to achieving a business goal.
4. Strategic management involves the "big picture" of your business.
5. Strategic management involves planning, analyzing, and implementing a business strategy.
6. Strategic management is most effective if you can step back far enough and say, "all things
are possible."
7. The essence of strategic management is matching business resources to market
opportunities.
8. Strategic management involves seeking and identifying opportunities and threats in the
market and industry as well as the outside world in general.
9. Strategic management is based on the premise that "all businesses are not the same."
10. Strategic management involves assessing the strengths and weaknesses of your business.
11. When assessing strengths and weaknesses, personal skills and abilities are likely to be more
important than business assets.
12. Strategic management involves looking into the future rather than dwelling on the past.
13. Strategic management is proactive rather than reactive.
14. Strategic management involves anticipating change and taking advantage of it.
15. Strategic thinking involves assessing how decisions made today will affect my business in
the future.
16. Strategic management is more of a state-of-mind than a rigid process.
17. A military connotation of strategic management is "it hasn’t won every war, but it has
avoided a lot of ambushes."
18. Strategic management is most useful for businesses with unique or differentiated products
for niche, specialty or differentiated product markets.
19. Strategic planning comes before business planning. Strategic planning is used to identify
and assess alternative business strategies. Business planning is used to implement a
business strategy.
20. Strategic planning is more words and less numbers than business planning.
21. A strategic plan is a "living" document that changes as your goals and resources evolve.
Benefits of Strategic Management
The advantages of strategic management are as follows: -
1. Discharges board responsibilities:
The first reason that most organizations state for having a strategic management process is that it
discharges the responsibility of the Board of Directors.

2. Forces an objective assessment:

Strategic management provides a discipline that enables the board and senior management to
take a step back from the day-to-day business to think about the future of the organization.
Without this discipline, the organization can become solely consumed with working through the
next issue or problem without consideration of the larger picture
3. Supports understanding and buy – in:
Strategic management provides a discipline that enables the board and senior management to
take a step back from the day-to-day business to think about the future of the organization.
Without this discipline, the organization can become solely consumed with working through the
next issue or problem without consideration of the larger picture.
4. Enables measurement of process:
A strategic management process forces an organization to set objectives and measures of
success. The setting of measures of success requires that the organization first determine what is
critical to its ongoing success and then forces the establishment of objectives and keeps these
critical measures in front of the board and senior management.
5. Provides an organizational perspective:
Addressing operational issues rarely looks at the whole organization and the interrelatedness of
its varying components. Strategic management takes an organizational perspective and looks at
all the components and the interrelationship between those components to develop a strategy that
is optimal for the whole organization and not a single component.

6. Provides a framework for decision – making:

Strategy provides a framework within which all staff can make day-to-day operational
decisions and understand that those decisions are all moving the organization in a single
direction. It is not possible (nor realistic or appropriate) for the board to know all the
decisions the executive director will have to make, nor is it possible (nor realistic or
practical) for the executive director to know all the decisions the staff will make. Strategy
provides a vision of the future, confirms the purpose and values of an organization, sets
objectives, clarifies threats and opportunities, determines methods to leverage strengths,
and mitigate weaknesses (at a minimum). As such, it sets a framework and clear
boundaries within which decisions can be made. The cumulative effect of these decisions
(which can add up to thousands over the year) can have a significant impact on the
 success of the organization. Providing a framework within which the executive director
and staff can make these decisions helps them better focus their efforts on those things
that will best support the organization’s success.

Disadvantages of strategic management

1. The future doesn’t unfold as anticipated:

One of the major criticisms of strategic management is that it requires the organization to anticipate
the future environment to develop plans, and as we all know, predicting the future is not an easy
undertaking. The belief being that if the future does not unfold as anticipated then it may invalidate
the strategy taken. Recent research conducted in the private sector has demonstrated that
organizations that use planning process achieve better performance than those organizations who
don’t plan – regardless of whether they achieved their intended objective. In addition, there are a
variety of approaches to strategic planning that are not as dependent upon the prediction of the
future.
2. It can be expensive:
There is no doubt that in the not-for-profit sector there are many organizations that cannot afford
to hire an external consultant to help them develop their strategy. Today there are many
volunteers that can help smaller organizations and funding agencies that will support the cost of
hiring external consultants in developing a strategy. Regardless, it is important to ensure that the
implementation of a strategic management process is consistent with the needs of the
organization, and that appropriate controls are implemented to allow the cost/benefit discussion
to be undertaken, prior to the implementation of a strategic management process.
3. Long term benefits vs immediate results:
Strategic management processes are designed to provide an organization with long-term benefits.
If you are looking at the strategic management process to address an immediate crisis within
your organization, it won’t. It always makes sense to address the immediate crises prior to
allocating resources (time, money, people, opportunity, cost) to the strategic management
process
4. Impedes flexibility:
When you undertake a strategic management process, it will result in the organization
saying “no” to some of the opportunities that may be available. This inability to choose
all the opportunities presented to an organization is sometimes frustrating. In addition,
some organizations develop a strategic management process that become excessively
formal. Processes that become this “established” lack innovation and creativity and can
stifle the ability of the organization to develop creative strategies. In this scenario, the
 strategic management process has become the very tool that now inhibits the
organization’s ability to change and adapt.
A third way that flexibility can be impeded is through a well-executed alignment and
integration of the strategy within the organization. An organization that is well aligned
with its strategy has addressed its structure, board, staffing, and performance and reward
systems. This alignment ensures that the whole organization is pulling in the right
direction but can inhibit the organization’s adaptability. Again, there are a variety of
newer approaches to strategy development used in the private sector (they haven’t been
widely accepted in the not-for-profit sector yet) that build strategy and address the issues
of organizational adaptability.

Risks Of Strategic Management

In the Vietnam market since after Multinational corporations “attacked” massively after 1995, the
big consumer brands have significant shares in the consumer’s mind. The leading names as Vina
milk, THP, Bia Saigon, Kin Do, Think, … are now meager in Vietnam market alongside Pepsi,
Coca-Cola, P & G, Unilever, Johnson & Johnson, Nestle, Kraft …. There are many brands that
consumers know. The competition is no longer much in advertising, communication that is
happening every day in every supermarket shelf, each retail outlet. Distribution management, this
time, is the key to help businesses win.
In the fast-moving consumer goods (FMCG) market, many distributions model has been
implemented in Vietnam, from direct to indirect, but gradually, many enterprises are oriented to
produce distributors models with traditional distribution channels for many reasons: to take
advantage of local knowledge of distributors, optimize coverage network and supply of goods,
share the burden of working capital and inventory in the distribution channel,
The 6 risks of strategic management in FMCG industry are as follows:

1. Out of stock:
This is the greatest and visible risk because customers would easily switch to use of
competitor products. Imagine when a new product phase launch, advertisements has
appeared widely in the media, but the customer cannot buy in the shops, How the damage
will be calculated? Typically, the implied reasons are manufacturing, and logistics do not
complete the task, or coordination problems. However, in reality “out of stock” due to
“management” from several employees and Distributors in distribution systems of
“virtual” outlets, this is one of the purposes of seeking profits from the distribution of
several “objects” are related directly or indirectly, whatever is reported to be out of stock,
but the market is not actually out of stock. Therefore, manufacturers should pay attention
to the shop review randomly, take measures to monitor cross from the Business
Department, or a mechanism to control this cargo problem to ensure correct information.
 2. Bad POSM:
“Dominate” positions on the shelves is the most obvious market share reflects way for
consumers. However, occupying the outlet displays across the tens of thousands to
hundreds of thousands of outlets is not simple. At the management level, manufacturers
often must hire the independent unit (e.g., Nielsen) to carry out surveys and provide display
stats at several outlets to assess market coverage. My experience of the FMCG manager
shows the display may contribute up to 60% of the sales success. Currently, the time to
have data on the display is usually more than one month and must accept errors because no
one can provide sample display information at each outlet, leading to make late decision.
The one which is responsible for Sales / Marketing of the company should regularly
monitor and evaluate the POSM by region to promptly update the market commodity
display and make decisions on time

3. Ineffective sales force management:

This is one of the most difficult risks, particularly with companies that have widely distribution
network and great number of staffs (hundreds of people). How do you know how manysales staffs
are working? How do you know “determination” of business personnel have been maintaining?
General thoughts are based on results compared with sales targets, but the fact is thatthere are many
“tricks” that staff currently apply: declare 10 employees but actually only 5 employees, each person
on the payroll of two people; “Grafted single, split unit” for each other to ensure general and
specific indicators; while reaching sales target they take rest, they do not try the best to exploit
market opportunities; … A beverage manufacturer fell 30% number of sales forces, but sales result
did not decrease, as staff by declaring “virtual” too high. In addition, the management of the sales
team is not only closely monitor sales personnel but also requiring timely measures to support
personnel in the “hard” area (competitors are too strong or market demand is not much) or new
personnel, thus assuring the company overall results.
4. Non strict distributor management:
After period, the distributors will gradually “stickier” in evaluate disadvantages and will take
advantages of loopholes in the management of manufacturers to exploit, for example in the
management of promotions. The budget was approved, the media has run, but promotional
materials have been to the consumer. Having been to right object that manufacturers expect? Or
whether the calculation of retail promotions is really accurate and consistent or depending on
relationship with each distributor and outlets that have different policies? “Strick’s” that distributor
often used is “cooked data” (“data cooking”) to ensure a very nice report, in full compliance with
requirements of the manufacturer. This is a relatively problematic risk and requires alertness and
supervision of manufacturer and carrying out continuously by a distributor with good history that
does not guarantee the long-term compliance
5. Inappropriate distribution management tool:
Which way to bookmark orders at the shop? How to prevent “data cooking”? In the past,
the salesperson just needs the notebook. But with the rapid advancement of technology,
more and more choices: PDA, mobile phone, tablet. There is no best solution, only the
most suitable solution for every stage of business development. When manufacturer
requires that information should be updated more quickly, more accurately, it is time to
review the technological options to improve the efficiency, accuracy. Many distributors /
sales staffs are afraid of using the management tools for monitoring sales more, to comply
more but the fierce competition of the market is required, only the “rough – players” are
capable of existing.

6. High inventory:

Contrary to the out of stock “disease”, high inventory shows that products are notconsumed
as expected. The fact that a manufacturer has number of product code from a few dozen to
several hundred but bestsellers (often referred to as Fast moving) just under the 10 (in
accordance with the 80/20 rule). And the high inventories typically fall in the line of slow
sale products (slow moving). The manufacturers may be based on experience and market
analysis to balance reasonable rate when conducting new products. However, with products
have already had in the market and determined that consumption is not highas expected, in
addition to the review of the sales team, manufacturer could also consider promotion
solutions, promote consumption, and then put terminate or “put in a blacklist” the item
codes which have bad selling result to limit manufacturing quantity. On the otherhand, the
adjustment of the number of inventory days while ensuring adequate supply for the market
will be huge opportunities for distributors to expand the network, business scopefrom the
main source of “dead” money that is long-time inventory. The transportation network
should be gradually improved, the reliability of higher delivery, manufacturers should
regularly monitor policy that gradually reduce the number of necessary inventory days to
improve capital efficiency for distributors and production forecasts will be more accurate.
CASE STUDY OF NESTLE
Nestle has many major customer brands like Carnation, Kit Kat, Nestle-water, and Stouffers,
among others. Thirty of its brands netted more than $1 billion in earnings in the year 2010, which
makes the company a vital force in the worldwide food and beverage industry. With around 42 %
of its sales being in North America, nestle is one of the most geographically distinct companies in
the food and beverage industry. It places it in a position that helps it edge over its competitors. Its
brands are well established in a considerable market share in leading economies like U.S. and
Europe. Danone and Unilever are important competitors for Nestle. These two are giants in the
food and beverage industry, like Nestle. In 2010, Unilever posted around 26% growth in yearly
profits because of its accelerated sales in the food and beverage industry, especially ice cream,
frozen food, tea-based beverages, and cooking products. On the other hand, Danone stated around
a 38 percent increase because of its improved share prices. In addition, a rise in its yogurt sales
also enhanced the growth in earnings. However, nestle handles positioned itself in the market by
adopting a new accounting method which aided a decline in its cost of sales. The company could
also incorporate discounts, allowances, and promotions for its retailers through sales profits rather
than the marketing line. Though its sale was lesser for a year, nestle pricing strategy helped them
match its peers, which in turn, made it a famous manufacturer even though the competition was so
high. Being the world’s most popular food manufacturer, nestle has intense competition with its
rival company, Unilever has around 1,49,000 employees and operates in 160 countries, with its
headquarters in London for food, home, and personal care. The company is trying hard to beat
Nestle in terms of the quality of their product, which has made Unilever the second company in
the Western European ready meals market with a market share of around 8.6%, i.e., 0.3 points
behind the iconic Nestle.
 Future of Nestle
Nestle planned to invest Rs. 5,000 crores in India in the coming 3 ½ years, as per Mark Schneider,
the company’s CEO.
The FMCG company, which has nearly 2,000 brands across the globe, believes that this initiative
will help Nestle to improve its core business in India and enjoy new growth opportunities. It marks
the brand’s most significant investment in India since the year it started manufacturing

CONCLUSION OF STRATEGIC MANAGEMENT

● The Strategy formulation is proposed as a crucial organizational leadership instrument of
strategic management process with illustrations.

● The paper draws conclusions on the foundational value and the contribution of strategy
formulation in the strategic process.

● Strategy can be simply defined as a plan for securing competitive advantage in each market.

● Strategy exists at multiple levels in an organization: corporate, business unit and functional
levels.

● The marketing concept has a significant role to play in strategy development and corporate
success.

● Competitive marketing strategies aims to establish a profitable competitive position for the
firm against all forces that determine industry competition.

● Strategy marketing process has been discussed in literature in such terms such as strategic
market planning and strategic marketing management.
ACKNOWLEDGEMENT
I would like to thank my professor for her guidance explaining how the project must be done
All the research done helped me understand about strategic management in detail about its process,
Importance, advantages, etc.
BIBLIOGRAPHY
● https://charityvillage.com/the_advantages_and_disadvantages_of_strategic_manage
ment/
● https://www.managementstudyguide.com/strategic-management.htm
● Contemporary Strategic Management – By Robert Grant