UNIT I

STRATEGIC HUMAN RESOURCE MANAGEMENT

HISTORICAL DEVELOPMENT OF STRATEGIC MANAGEMENT
Almost all the disciplines passed through different stages in their evolutionary process and
reached their present stage. Strategic management is not an exception to this. Though the
formulation of a strategy seems to be simple, it is very difficult to accomplish it. Many
organisations develop their strategic management process over periods of several years,
adjusting and tailoring them to meet specific needs of the organisation.

A. Phase 1: Basic Financial Planning: The first phase 'of the strategic development is fairly a
simple routine of basic financial planning. The main concern during this phase is simply
meeting annual budget requirement, operational functions like production, marketing, finance
and human resources and emphasizing on the operational control.

B. Phase 2: Forecast-based Planning: During this phase, the primary concern is mainly on
effective plans, environmental scanning, plan for the future and allocation of resources.

C. Phase 3: Externally-oriented Planning: There is a remarkable shift during this phase. The
notable developments include: increasing response to markets and competition, complete
situational analysis and assessment of competitive strength, evaluation of strategic
alternatives and allocation of resources based on changing needs from time to time.

D. Phase 4: Strategic Management: The focus shifts over time from 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 organisation's resources to gain a
competitive advantage. They build flexibility into the organisational planning process, and
foster a supportive, participative climate within the organisation.

DEFINITION:

Strategic management is concerned with deciding on strategy and planning how that strategy
is to be put into effect. According to Samuel C Certo and J. Paul Peter, “Strategic management
is a continuous, interactive, cross-functional process aimed at keeping an organisation as a
whole, appropriately matched to its environment.” A series of steps that a manager must take
are identified by this definition. These steps include performing an environmental analysis,
establishing organisational direction, formulating organisational strategy, implementing
organisational strategy and exercising strategic control.

Schellenberger and Bosenan define the term strategic management as, “the continuous process
effectively relating the organisation’s objectives and resources to the opportunities in the
environment.” or, “strategic management is primarily concerned with relating the organisation
to its environment, formulating strategies to adapt to the environment and assuring that
implementation of strategies taken place.”

Dr F Robert Gaspar/ MSSW/SHRM/UNIT I1

 Simple Model of Strategic Management Process

Strategic Analysis Strategic Choice Strategic Implementation

Evaluation process

The strategic management process is typically broken down into five steps:
1. Mission and goals
2. Environmental analysis
3. Strategic formulation
4. Strategy implementation
5. Strategy evaluation.

Step I Mission and goals

Management philosophy
Values

Environmental analysis
Step II Internal scan
External scan

Strategic formulation
Step III Strategic choice
Corporate, Business and Functional

Strategy implementation
Leadership, Structure, Control systems
Step IV and Human resources

Strategy evaluation
Step V Operating performance
Financial performance

The Strategic Management Process Model

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 1. The first step in the strategic management model 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 and typically describe short-term measurable
outcomes.
2. Environmental analysis looks at the internal organizational strengths and weaknesses and
the external environment for opportunities and threats. The factors that are most important
to the organization’s future are referred to as strategic factors and can be summarized by
the acronym SWOT – Strengths, Weaknesses, Opportunities, and Threats.
3. Strategic formulation involves senior managers evaluating the interaction between
strategic factors and making strategic choices that guide managers to meet the
organization’s goals. Some strategies are formulated at the corporate, business and specific
functional levels. The term ‘strategic choice’ raises the question of who makes decisions
and why they are made.
4. Strategy implementation is an area of activity that focuses on the techniques used by
managers to implement their strategies. In particular, it refers to activities that deal with
leadership style, the structure of the organization, the information, and control systems,
and the management of human resources.
5. Strategy evaluation is an activity that determines to what extent the actual change and
performance match the desired change and performance.

NEED FOR STRATEGIC MANAGEMENT

1. Due to Change: Everything, except change is not permanent. It does mean that only
change is permanent. Change makes planning difficult. But, firms may pro-act to the
change rather than just react to it. Strategic management encourages the top executives
to forecast change and provides direction and control. It will also allow the firm to take
advantage of the opportunities provided by the changes in the environment and avoid
the threats or reduce the risk as the future is anticipated. Thus, strategic management
allows an enterprise to base its decisions on long-range forecasts.
2. To Provide Guidelines: Strategic management provides guidelines to the~ employer
about the organisation's expectations from them. This would minimize conflict
between job performance and job demands. Thus, it provides incentive for employer
and helps the organisation in achieving its objectives.
3. Developed Field of Study by Research: Strategic management was just based on case
studies or anecdotal evidence 30 years ago. But recently, there are methodological
problem researches in this field of study. More systematic knowledge in this area is
available at present. Therefore, today it is worthwhile to study strategic management.
4. Probability for Better Performance: There is no clear research evidence that strategic
management leads to higher performance. But the majority of studies suggest that there
is a relationship between better performance and formal planning. It is also stated that
Dr F Robert Gaspar/ MSSW/SHRM/UNIT I3
 businesses which plan strategically have a higher probability of success than those
which do not have.
5. Systematize Business Decisions: Strategic management provides data and information
about different business transactions to managers and helps them to make decisions
systematically.
6. Improves Communication: Strategic management provides effective communication
of information from lower level managers to middle level managers and to top level
managers.
7. Improves Coordination: Strategic management improves coordination not only among
the functional areas of management, but also among individual projects.
8. Improves Allocation of Resources: Strategic planning helps in deciding upon most
feasible and viable projects and thereby improves the allocation of resources to the
viable projects.
9. Helps the Managers to have a Holistic Approach: Strategic management helps the
managers to have complete understanding of the company and to have a holistic
approach towards business problems and proportions.

Benefits of Strategic Management

Several corporations and institutions have been using strategic management. Organisations
reap several benefits from effective strategic management. The benefits of strategic
management include:
a) Strategic management helps an organisation to be proactive rather than reactive in
shaping its future.
b) It helps organisations not only to respond to its relevant environment, but also to
initiate and influence its environment and thereby exert control over its destiny.
c) It helps organisations to make effective strategies through the use of a more systematic,
logical and rational approach to strategic choice.
d) It helps the organisations to achieve understanding and commitment from all managers
and employers. Managers and employers become creative and innovative when they
understand and commit to the company's strategic management. This process results in
employee empowerment. Empowerment is the act of strengthening an individual's
sense of effectiveness.
e) It encourages the organisations to decentralize the management process involving
lower level managers and employees.
f) A significant number of research studies have suggested that a well-designed strategic
management can boost profits.
g) A number of research studies have also indicated that systematic long-run
planning resulted in high performance of the businesses.
h) It strengthens the employee commitment to and participation in formulating
long-term goals.
i) Organisations foresee the environmental changes. Therefore they reduce the

Dr F Robert Gaspar/ MSSW/SHRM/UNIT I4

 chance of being affected by the changes in the environment, market place and
actions of competitors.
j) It helps for increased employee productivity, reduced resistance to change, clear
understanding of performance-reward relationship.
k) It enhances problem-prevention capabilities of organisations as it promotes
interaction among managers at all levels.
l) It often brings order and discipline to a firm.
m) It allows for identification, prioritization and exploitation of opportunities.
n) It provides an objective view of management problems.
o) It represents a framework for improved control of activities.
p) It minimizes the effects of adverse conditions and changes.
q) It allows major decisions and supports established objectives.
r) It allows fewer resources and less time to be devoted for correcting erroneous or adhoc
decisions.
s) It helps to integrate the behaviour of individuals into a total effort.
t) It provides a basis for the clarification of individual responsibilities.
u) It gives encouragement to forward thinking.
v) It provides cooperative, integrated and enthusiastic approach to tackling problems
and opportunities.
w) It encourages favourable attitude towards change.
x) It gives a degree of discipline and formality to the management of business.

LEVELS OF STRATEGY
1. Corporate- Level Strategy: Corporate-level strategy is concerned with the overall
direction and scope of an organization and how value will be added to the different
business units of the organization. This could include issues of geographical coverage,
diversity of products/ services or business units, and how resources are to be allocated
between the different units of the organization. The corporate headquarters plays a
crucial role in determining how the organization should be structured, how targets are
set and performance is reviewed and the ways in which they can add value to the
separate business units within the company. Corporate-level strategy is also concerned
with the expectations of owners, the shareholders and the stock market. Being clear
about corporate-level strategy is important because it is the basis of other strategic
decisions.
Usually in corporate level strategy the following important strategies are developed
a) Strategy formulation and Situation analysis
b) Stability strategies
c) Growth strategies
d) Retrenchment strategies
e) Strategic alliances
f) Communication strategy/ portfolio Restructuring
2. Business- Level Strategy: Business-level strategy can be thought of as a second-level
strategy. It is about how to compete successfully in particular markets. The concerns
are therefore about how advantage over competitors can be achieved; what new
opportunities can be identified or created in markets; which products or services should
Dr F Robert Gaspar/ MSSW/SHRM/UNIT I5
 be developed in which markets and how to meet customer needs in such a way as to
achieve the objectives of the organization such as long-term profitability or market
share growth. So, corporate strategy involves decisions about the organization as a
whole, whereas business strategy involves decisions about the strategic business unit
(SBU).
Usually in business level strategy the following important strategies are developed
a) Generic strategies/
b) Leadership strategies
c) Offensive strategies and competitive advantage
d) Defensive strategies and competitive advantage
e) Matching strategy to situations
3. Functional Strategy: Functional strategies are detailed action plans or means that are
undertaken in functional areas to achieve short-term objectives and establish
competitive advantage. Functional strategies identify the specific, immediate actions
that must be undertaken in functional areas such as operations, finance, marketing, HR
etc. to implement the business strategy. Within the general framework provided by the
business and corporate-level strategies, each business function needs to identify and
undertake activities unique to the function that help build a sustainable competitive
advantage.
Usually in business level strategy the following important strategies are developed
a) Production/ operation strategies
b) Marketing strategies
c) Financial strategies
d) Human Resource strategies
e) Research and Development strategies
f) Information strategies
g) Integrated functional strategies
4. The operational strategies or tactics are concerned with how the component parts of an
organization deliver effectively the corporate and business-level strategies in terms of
resources, processes and people. For example, production scheduling, promotional
initiatives, pricing, distribution strategies etc. at the operational level fall into this
category. Indeed, in most businesses, successful business strategies depend to a large
extent on decisions that are taken or activities that occur, at the operational level. The
integration of operational decisions and strategic decisions is therefore of great
importance.

MISSION: Mission is defined as, “an enduring statement of purpose that distinguishes one
organisation from other similar organisations.” Most of the organisations define the
fundamental reason for their existence in terms of mission statement, Organisations do exist to
satisfy a particular need of the society or to fulfill a particular deficiency in the society. For
example, the society may have the need for having quick, reliable and cheap communication.
Providing quick information would be the mission of that organisation. BSNL came into being
to provide the facilities for providing fast, reliable and cheap mobile communication facilities.

Dr F Robert Gaspar/ MSSW/SHRM/UNIT I6

Thus, the mission of BSNL is to “provide fast, cheap and reliable mobile communication
facilities.”

Mission Statement: A mission statement is a declaration of an organisation’s reason for

being. When the mission of an organisation is carefully defined, it provides a statement to
insiders and outsiders of what the corporation stand for - its purposes image and character. The
mission statement should be a long-term purpose of what the organisation is trying to become.
The basic questions that must be answered are:
1. What is our business? And what should it be?
2. What is the basic purpose of your organization?
3. What is unique about your organization?
4. What is likely to be different about your business five years down the road?
5. What is in your company that will make it stand out in a crowd?
6. Who are, and who should be, your principal customers?
7. What are, and what should be, your principal economic concerns
8. What are the basic beliefs, values and philosophical priorities of your firm?

Mission statement provides direction and significance to all members of the organisation,
regardless of their level.

Formulation and Communication of Mission: In many cases the founders establish the mission
which may' remain unchanged down the years or may be modified as the conditions change. In a
number of cases, the mission is drawn up by the CEO and board of directors or a committee
constituted for this purpose. Engaging consultants for drawing up missions are not uncommon.
In some cases consultants play a participative role. Many companies hold brainstorming session»
of senior executives to develop mission. Soliciting employees’ views is also common.

Key Elements in Developing a Mission statement: Management must take into account three
key elements in developing mission statements,
1. History of the Organisation: Every organisation- manufacturing or service-oriented,
profit or non-profit, large or small has a history of objectives, policies,
accomplishments and mistakes. The critical characteristics and events of the past must
be considered in formulating and developing a mission statement.
2. Distinctive Competencies of the Organisation: Though an organisation can do many
things, it should seek to do what it can do best. Distinctive competencies are the
activities that an organisation does efficiently - so efficiently in fact, that an
organisation with distinctive competency offers an advantage over similar
organisations.
3. Organisation’s Environment: The management should identify the opportunities
provided and threats or challenges posed by the environment before formulating a
mission statement.
Hence, the mission statement should have the key elements like
a) The mission statement should specify the products to be produced and/or services to
rendered, markets and/or customer groups to be served and the type of technology;

Dr F Robert Gaspar/ MSSW/SHRM/UNIT I7

 b) The primary concern for survival and development through profitability;
c) The organisational philosophy in terms of basic beliefs, values, attitudes and
aspirations; and Management style to be practiced
d) Systems inputs (finance, human resource, machinery, material, management methods)

Characteristics of a Mission Statement

Mission statement specifies the basic reason for the organisational existence, philosophy,
identity, character and the image. It focuses on markets rather than products, it is also
achievable, motivating and specific. It should also be clear, distinctive, indicate major
components of strategy and how the policies are achieved.

1. Market Rather Than Product Focus: The customers are the key factors in determining
an organisation’s mission. It is viewed that, the mission statement should focus on the
broad class of needs that the organisation is intending to satisfy (external focus) not on
the physical product or service that the organisation is serving at present (internal
focus). According to Peter F. Drucker, “A business is not defined by the company's
name, statutes or articles of incorporation. It is fined by the want of the customer to be
satisfied when he buys a product or service.”
2. Achievable: Though the mission statements indicate that the organisations should
achieve high performance, it should at the same time be realistic or feasible and
practically achievable. In other words, it should not drive the company towards the
practically impossible projects and far beyond its capacities, but rather, it should open a
vision of new opportunities.
3. Motivational: The mission statement is a guide to its employees, managers and
customers spread geographically. A well defined mission provides a shared sense of
purpose. Thus, a mission should motivate the employees and managers to work for the
organisation, customers and the society. It should also motivate the customer to feel
pride for associating himself with that organisation.
4. Specific: The mission statement should be precise and specific and provide direction
and guidelines for management’s choices between alternative courses of action.
5. Clear: The mission statement should provide direction and guidance to the
management and employees. Therefore, it should be stated in clear terms. Otherwise, it
will result in confusion to all concerned.
6. Distinctive: The mission statement of one organisation should be different from those
of the similar organisations. In fact, different organisations serve the different markets
are different groups of customers and use different technologies and produce different
qualities of products.
7. Indicate Major Components of Strategy and Objectives: The objectives and strategies
are formulated based on the mission. The mission statement without the objectives and
strategies is incomplete. The organisation’s mission statement, therefore, should
indicate the objectives and strategies to be employed.
8. Achievement of the Policies: The mission statements of organisations should include
major policies they plan to follow in the pursuit of their missions. These policies
establish the ground rules for the organisation in its relationship with government,
customers, suppliers, distributors, creditors, other similar organisations, technological
Dr F Robert Gaspar/ MSSW/SHRM/UNIT I8
 parks, trade associations etc.
Contents of Mission Statements: The type of information contained in a mission statement
varies from company to company. But most mission statements address some common
themes. These themes include:

1. Company Product or Service: This information identifies the goods and/or services
produced by the organisation - what the company offers to its customers.
2. Markets: This information describes the markets and customers that the organisation
intends to serve. Who these customers are and where they are located are common
themes.
3. Technology: It includes topics such as the techniques and processes by which the
company produces goods and/or renders services.
4. Organisational Objectives: As stated earlier, most mission statements refer to
organisational objectives. These include, the general ways they propose for dealing
with key stakeholders like shareholders, customers and employees.
5. Organisational Philosophy or Core Values: A statement of organisational philosophy
commonly appears as part of the mission statement. An organisational philosophy
statement reflect the basic beliefs and values that should guide organisation members
in conducting organisational business.
6. Organisational Self Concept: Mission statement necessarily contains the information
on the self-concept of the organisation. Organisation self-concept is the company's
own view or impression of itself. The company arrives at this self-concept by assessing
its strengths and weaknesses, competition, and ability to survive in the market place.
7. Public Image: Mission statements normally contain some reference to the type of
impression that the organisation wants to leave with its public. However, public forms
the opinion of the company based on its activities and performances, It is viewed that
traditional firms try to position an image and modern firms express their true
characters.

OBJECTIVES: Long-range objectives specify the results that are desired in pursuing the
organisation’s mission and normally extend beyond the current financial year of the
organisation. Long-range objectives are notably speculative for distant years.
Short-range objectives are performance targets, normally of not more than one-year’s
duration, that are used by management to achieve the organisation’s long-range objectives.
The selection of short-range objectives is from an evaluation of priorities relating to long-
range objectives. Departmental objectives both long-range and short-range are formulated
based on the respective long-range and short-range objectives of the organisation. Unit
objectives are generally specific and are drawn from the departmental objectives.

Objectives vs. Goals: The terms objectives and goals are differentiated by some managers and
on generality and specificity of what an organisation seeks to achieve. For example, objective
an organisation is to improve its profitability whereas one of the goals of the organisation is to
increase the net sales by 20% during 2010 over 2009. Thus, objectives are open-ended
attributes and goals are close-ended attributes which are precise and expressed in specific

Dr F Robert Gaspar/ MSSW/SHRM/UNIT I9

terms. However, managers use these two terms synonymously.

Formulating Objectives: The mission and directional course are converted into designated
performance outcomes in the process of formulating objectives. Objectives represent a
managerial commitment to achieve specified results in a specified period of time. They clearly
spell out the quantity and quality of performance to be achieved, the time period, the process
and the person who is responsible for the achievement of the objective.
An organisation’s mission statement will be just a window-dressing, unless, it is translated
into measurable and specific performance targets and managers are pressured to achieve these
targets. Thus, objective formulation is a critical step in the strategic management process.
Objectives are based on mission statement and open- ended statements whereas goals are
closed ended statements. Performance objectives must be stated in quantifiable or measurable
terms. They must also contain a deadline for achievement.

Areas of Objectives
Objectives are set for all areas and departments of an organisation. The following are the
areas of objectives:
1. Profitability: Profitability objectives are expressed in terms of profits, return on
investment, earnings per share, profits to sales, etc. For example, to increase return on
investment by 10% in 2009-10 over 2008-09 financial year.
2. Markets: Objectives are expressed in terms of the share of the market or total rupee
sales or total quantity of sales. For example, to increase freight traffic (commercial) to
85% in 2009-10 and reduce the freight traffic (military) to 80% in 2010-11 over the
2009-10 figures of Railways.
3. Productivity: The level of goods and/or services produced by an organisation relative
to the resources used in the production process, organisations those use fewer resources
to produce specified levels of products are said to be more productive than
organisations those require more resources to produce at the same level.
4. Innovation: Any change made to improve methods of conducting organisational
business. Organisational objectives should indicate innovations the organisation
desires to implement.
5. Product: These objectives are expressed in terms of sales and profitability by product
line or product, target dates for development of new products and others.
6. Financial Resources: These objectives are expressed in terms of the capital structure,
new issues of common stock, cash flow, working capital, dividend payments and
collection periods.
7. Physical Facilities: These objectives are expressed in terms of machinery and
equipment, fixed costs, units of production and other measures.
8. Organisation Structure and Activities: These objectives are stated in terms of changes
to be made in the policies of organisation structure or projects to be undertaken.
9. Manager Performance and Development: These objectives are related to the quality
and rate of development of managerial skills, knowledge and performance.
Development of managerial performance is very important from the view point of the
long-range success of the company and achievement of the other objectives of the

Dr F Robert Gaspar/ MSSW/SHRM/UNIT I10

 company.
10. Employee Performance and Attitude: These objectives are related to the development
of skills, knowledge and performance of non-managerial employees of the company.
This area is also related to the development of favourable attitude of the employees
towards the organisation. The significance of these considerations should be stressed
through the formulation of organisational objectives.
11. Customer Service: These objectives are related to the quality of the product, pre-sales
and post-sales service, delivery times, promptly attending to the customer complaints,
price, package and the like.
12. Social Responsibility: These objectives are related to the obligation of business
towards the society with a view to contribute to its welfare. Today, these objectives
have become common to all the companies. For example to contribute to the medical
facilities of the community where the company is located.

Importance of Objectives:
Why do organisations formulate objectives? And what is their importance? The
following four factors explain the need for and importance of objectives.

1. Objectives help to define the organisation in its environment: The organisations

justify their existence to their stakeholders in the environment like customers,
government, creditors and society at large.
2. Objectives help in coordinating decisions and decision-makers: Stated objectives
impose some constraints on the behaviour of employees and modify it towards the
desirable direction. It coordinates decision-making process by different employees.
3. Objectives help in formulating strategies. Mission statements are translated into
objectives and objectives are the basis for formulating strategies.
4. Objectives provide standards for assessing performance: Objectives provide not only
the direction to move to the organisation but also provides the ultimate goals and
targets that the organisation is expected to achieve. These targets and goals become the
standards to judge the organisational performance. Organisations without clear
objectives will not have clear basis for evaluating their performance or success.
5. Objectives are more tangible targets than the mission statements: Mission statements
are general as they are expected to be fulfilled in the long run. As such mission
statements are not more tangible. Whereas, the objectives are the translated versions of
the mission statement and as such they are more tangible.
6. Objectives help to reflect the changes in the environment: Objectives are revised to
reflect the changes in the internal and external environment from time to time.

PROCESS OF STRATEGIC DECISION-MAKING: Though, we have studied different

approaches to strategic decision-making, the research suggests that the process of
decision-making which actually takes place in organisations and give rise to strategic
decisions possess the following five steps in the process: They are:
1) Problem Awareness: Mostly individual employees identify the problems in various
areas. Individuals when they get a 'gut feeling' that something is wrong, identify the

Dr F Robert Gaspar/ MSSW/SHRM/UNIT I11

 problem. The awareness of a strategic problem mostly occurs to employees at
grass-root level like sales people, machine operators, finance assistants, human
resource assistants, etc.
(a) Internal performance measurements like level of turnover or profit
performance.
(b) Customer reaction particularly to the quality and price of the products and/or
services.
(c) Changes in the environment, particularly in terms of competitive action,
technological change and economic conditions.
These three factors together provide a picture of the deviation of an organisation's
circumstances from the planned or expected one. This can be the deviation from a
normal trading pattern. Successful business performance depends upon the ability of
management in sensing its environment. Therefore, managers should respond when the
problem is identified by the individual employees at the bottom level.
2) Problem Diagnosis: After the individual employees are aware of the problem and it is
passed onto the managers, managers will gather the information and define the
problem. Information, may be gathered in the following ways:
(a) Information may be explored to determine the facts of the problem in detail.
Such information may be gathered on a verbal and informal basis.
(b) Rationalize the information and stimuli relevant to the problem so as to clarify
the situation.
(c) Act diplomatically to establish peer groups or political support for individual
views of the problem.
(d) Try to define the problem through debates and discussions and also get
organisational view or consensus on the problem to be solved. The problem,
then may take a clear shape by interweaving managerial experience of the
executives and political process in the organisations.
3) The Development of Solution: After the problem is diagnosed clearly, the tendency of
managers is that of searching for ready- made solutions. They do this process:
(a) Through memory search in which the managers seek for known, existing or
attempted solutions, or
(b) Passive search which entails waiting for possible solutions to be offered. If the
managers fail in these two searches, they search for their own past experiences
and other managers. If they fail to find a solution even through this method, they
attempt to designing solutions. This can take place both in the form of structured
and unstructured team works. The solutions once developed .are to be refined
until they are developed to the stage of perfection within the available human
and other resources of the organisation.
4) The Selection of a Solution: After the alternative solutions are developed, the solutions
have to be formally evaluated based on their inherent strengths and weaknesses and
also based on the environmental threats and opportunities for implementation. These
solutions are to be ranked on the basis of their weights in terms of strengths and
opportunities after eliminating the non-viable solutions in view of their weaknesses and
environmental threats for implementation. David Hickson and his colleagues in their
study identified three broad types of decision-making processes. They are:
Dr F Robert Gaspar/ MSSW/SHRM/UNIT I12
 (a) Sporadic processes characterised by many delays and impediments, many
sources of influence and information on decision, and therefore, protracted
personal interactions and informal negotiation. This type of process exists
mostly in public sector organisations.
(b) Fluid processes in which there are fewer delays and sources of influence, and
more formal channels of communication which takes rather less time.
(c) Constricted processes in which information sources are more readily available
and decisions can be taken within groups or by individuals without extensive
reference to others in the organisation. This might be the case in a business with
a dominant chief executive or where there is an issue which relates primarily to
one part of an organisation.
5) Implementation of the Decision: Implementation of the selected solution is a part of
the decision-making process as the process may be required to be recycled due to
impediments in the process of implementation. The managers should secure the support
of the top management for allocation of resources, time, etc., regarding the
implementation of the decision. A detailed programme of action specifying the minute
details of action, people who will execute it, when it will be implemented, who will
provide all necessary resources, how it will be implemented and who will co-ordinate
the work, is needed. Employees concerned will be entrusted with the work and relevant
information should be fed to them before hand.
6) Conclusion: Strategic decision-making, though plays a vital role in strategy crafting,
there is every chance for the failure of strategic decision-making due to various reasons
including the irrational thinking of the managers, unreliability of data and information,
failure of the managers in evaluating the environment, lack of experience on the part of
junior managers in decision evaluation and the political behaviour of the employees.
Hence, management has to take all possible care in evaluating the situations as
objectively and accurately as possible against the environment and organisational
mission and goals.

CHALLENGES FOR STRATEGIC MANAGEMENT: Strategic management faces different

kinds of challenges viz., technological advancement and obsolescence, product or service
innovations and development, etc. The recent additions to the challenges are: global issues
consequent upon economic liberalisation, quality issues consequent upon the total quality
management concept of the Japanese firms and social issues. We shall discuss these challenges
for strategic management.
1) Technological Advancements and Strategic Management: As necessity is the mother
of invention, competition and a host of other reasons are responsible for the rapid
technological advancements and innovations. These advancements and innovations of
one firm pose challenges for the strategic decision-making of the competing firms.
Further, the continuous technological advancements led to the obsolescence of the
existing technologies. It creates a challenge for the strategic management of those firms
using obsolete technologies. The strategic managers should be fully aware of
technological advances and innovations while formulating strategies
2) Product/Service Innovation & Development and Strategic Management:
Technological advancements and innovations together with changes in consumer tastes
Dr F Robert Gaspar/ MSSW/SHRM/UNIT I13
 and preferences, needs and conveniences led to the continuous product/service
development and innovation of new products.
3) Global Issues and Strategic Management: With the announcement of economic
liberalisation in India and consequently opening up of the economy to the rest of the
world in 1991, business activities have tended to cross national boundaries more
intensely and frequently. Due to the increase in scale and variety of operations of
multinational and transnational corporations in the country, even firms with no
international operations are experiencing the impact of globalisation on their markets
and operations, Since this trend is expected to continue, almost all the organisations,
irrespective of their size, nature of operations and markets will have to consider global
issues in their strategic management process.
4) Quality Issues and Strategic Management: The quality movement, spearheaded by
W. Edwards Dening has had a significant impact on the method of strategic
management process of organisations in the 1990s. It further changed to feed forward
and zero-defect of the product. Further, quality today does mean an organisation - wide
commitment to enhance the value of goods or services to the customer at each and
every stage - from the stage of product design, raw material, and every stage of
production process, to the place of marketing (or selling) to post sale service.
5) Economic Boom and Recession: Both economic booms as well as economic recession
affect the strategic management process. Economic boom provides the opportunities
for the increase in demand as well as business operations and economic recession in
general create threats. Companies should foresee the trends that result in recession and
formulate strategies accordingly.
6) Social Issues and Strategic Management: Since the organisation is part and parcel of
the society, most of the organisations are of the view that, social responsibility is the
managerial obligation to act, protect and promote both organisational interests and
welfare of the society. Strategic management process of an organisation will be
affected by recognizing this obligation. The strategic managers should have a clear idea
about
a. the societal constituencies that the organisation will serve as obligation,
b. the areas of the business to be affected by this obligation,
c. method of conducting social audit to facilitate the strategic management
process, and
d. the areas of strategic advantages that the organisation will be enjoying .
Organisational Adaptation and Learning Organisation
Significant environmental dynamism dominated by globalisation and information technology
led to the organisational adaptation and further creation and/or emergence of' learning
organisations. Institution theory of organisations propose that organisations can and do adapt
to changing environment factors by restructuring their activities and by imitating the
successful organisations. In fact, strategic choice perspective proposes that organisations not
only adapt to the changing environment, but have opportunity and power even to reshape their
environments. Organisational learning theory proposes that organisation reactively adapt to
the environmental changes and proactively improve organizational structure to fit the same to
the possible future environmental shifts either caused or created by using the knowledge they
Dr F Robert Gaspar/ MSSW/SHRM/UNIT I14
learned from the environment. Thus, the organisations have become learning organisations.
 Synergetic Outcome: Organisations are congregations of individual human resources.
Organisations learn and acquire knowledge through individual employees.
Organisational learning output is the synergetic outcome of individual learning of all
employees. Organisations learn by creating conducive environment for knowledge
creation and development through discussion, research, brain storming, etc,
Organisations create conducive environment for their employees to analyse and foresee
the environment and its influence on product design, demand, price and market share of
the organisation.
 Employees and Learning Organisations: Employees develop the knowledge for the
organisation to prepare for the future by developing systems, structure and products.
Flexibility allows the organisation to develop short-term thrusts within the long-term or
a fixed period strategy, resulting in strategic flexibility. Strategic flexibility demands
short-term flexibility' due to environmental shifts in order to achieve the long-term
strategic goal more efficiently and not be distracted by environmental
turbulences.
 Strategic Flexibility: Strategic flexibility takes place in learning organisation, where
the knowledge is created, shared, acquired, transferred and used for understanding and
foreseeing the future environment. Learning organisations, thus, prepare themselves
for the future by changing the structure adequately before the environmental changes
take place.
 Knowledge is Competitive Advantage: Organisational learning has become
imperative as organisational activities like product design, new product development,
manufacturing, and supply chain have become competitive and intellectual. In
addition, knowledge is accepted as competitive advantage. Procter and Gamble,
Microsoft, and Reliance Industries encourage the employees to create and share
information and knowledge and utilise the same for developing organisational
competencies.
 Learning Organisations and Competencies: Learning organisations develop
competencies in problem solving logically, experimenting with new approaches,
learning from past experiences, experiences of themselves and others and transferring
the knowledge quickly and utilization of such knowledge for their own and others
experiences for efficient strategic implementation by arresting or mitigating the
possible deviations.
 Learning Organisations and Action Learning: Learning organisation adopt
action-learning and action research techniques for knowledge creation, For example Motorola
through its action- learning tool allows the marketing, manufacturing, finance and human
resource personnel to meet and argue through brain storming sessions and agree on the new
products, new markets, customer groups, customer needs and pricing before taking up
commercial production.

Dr F Robert Gaspar/ MSSW/SHRM/UNIT I15

Dr F Robert Gaspar/ MSSW/SHRM/UNIT I16