STRATEGIC MANAGEMENT UNIT I

STRATEGY AND PROCESS

INTRODUCTION

In today's fast-paced and highly competitive business world, organizations need to carefully
plan their course of action to achieve long-term success and sustainable growth. Strategic
management is the process by which businesses define their goals, assess their resources and
environment, and make decisions to gain a competitive advantage. It encompasses a wide range
of activities that involve formulating, implementing, and evaluating strategies to ensure that an
organization is headed in the right direction.

STRATEGY

A strategy refers to a high-level plan designed to achieve one or more goals under conditions
of uncertainty. It is a roadmap or a comprehensive plan that guides an organization toward its
objectives. In the business context, strategy involves the allocation of resources, the
formulation of goals, and the actions taken to gain an edge over competitors and create value
for stakeholders. It involves making decisions on long-term goals, determining the best
methods to achieve them, and addressing challenges along the way.

• Corporate Strategy: Refers to the overall direction of the company, addressing

questions such as what businesses to be in and how to compete across different sectors.
• Business Strategy: Refers to how a company competes within a particular industry or
market segment.
• Functional Strategy: Refers to specific plans at the departmental or functional level,
such as marketing, finance, or HR, to support the overall corporate and business
strategies.

A good strategy is typically characterized by its ability to balance between opportunities and
threats in the external environment, while leveraging the strengths and addressing the
weaknesses within the organization.

STRATEGIC MANAGEMENT

Strategic management is a broader discipline that includes the formulation, implementation,

and evaluation of strategies to achieve organizational objectives. It involves a comprehensive
and systematic process that includes a detailed analysis of the organization’s internal and

Ms Ann Mercy J, Assistant Professor, PG & Research Department of Commerce, Sri

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STRATEGIC MANAGEMENT UNIT I

external environments, setting goals, making strategic choices, and effectively executing the
chosen strategies.

Strategic management provides organizations with a framework to make decisions that will
affect long-term business performance, enabling them to adapt to changing conditions and stay
ahead of the competition. It includes the involvement of top-level management, as well as the
integration of various functional areas to support the company's overarching goals. The process
of strategic management involves the following key steps:

1. Environmental Analysis: Understanding both internal (strengths, weaknesses) and

external factors (opportunities, threats) that could impact the business.
2. Strategy Formulation: Developing strategic plans based on the analysis, setting
specific goals, and deciding on actions to achieve them.
3. Strategy Implementation: Putting the formulated strategies into action, aligning
resources, structures, and processes to achieve the goals.
4. Strategy Evaluation: Continuously assessing the effectiveness of the implemented
strategies and making necessary adjustments.

DEFINITION

Strategic management can be defined as the process of formulating, implementing, and

evaluating strategies to achieve the long-term objectives and overall direction of an
organization. It is a set of managerial decisions and actions that determine the long-term
performance of an organization. It involves aligning the company’s resources and capabilities
with its environment, identifying opportunities and threats, and ensuring that the organization
stays competitive over time.

MEANING

The meaning of strategic management extends beyond mere business planning. It is a dynamic
and ongoing process that enables businesses to understand and adapt to the environment in
which they operate. It ensures that an organization makes informed decisions about its
direction, responds to market changes, and aligns its resources with its strategic goals.

• Anticipate Changes: Strategic management allows a company to predict changes in

the market, technology, or customer preferences and make proactive adjustments.
• Gain Competitive Advantage: By assessing strengths and weaknesses, a business can
develop strategies that differentiate it from competitors.

Ms Ann Mercy J, Assistant Professor, PG & Research Department of Commerce, Sri

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STRATEGIC MANAGEMENT UNIT I

• Achieve Long-Term Success: Through careful planning and execution, strategic

management leads to the achievement of long-term business goals and sustained
profitability.
• Align Resources and Actions: Strategic management ensures that all resources—
financial, human, technological—are used efficiently to support the organization’s
objectives.

Historical Perspective of Strategic Management

Year/Period Event/Development Description

Strategy in business was not formalized;

Pre-1900s Early Business Thinking influenced by military strategy and
operational efficiency.
Rise of large corporations and scientific
Industrialization & Early
1900s - 1940s management (e.g., Frederick Taylor,
Management Practices
Henry Ford).
The concept of long-term planning in
1950s Corporate Planning Begins business started to emerge, with focus on
future growth and positioning.
Alfred Chandler's Strategy Identified the link between a company’s
1962
and Structure strategy and organizational structure.
Introduced the product-market matrix
Igor Ansoff's Corporate and growth strategies: market
1965
Strategy penetration, development, product
expansion.
Formal development of strategic
Strategic Management
1970s management; Michael Porter’s work
Becomes a Discipline
begins.
Introduced the Five Forces Model and
Michael Porter’s Competitive
1979 generic strategies for competitive
Strategy
advantage (cost leadership, etc.).

Ms Ann Mercy J, Assistant Professor, PG & Research Department of Commerce, Sri

Ramakrishna College of Arts & Science
STRATEGIC MANAGEMENT UNIT I

Emergence of emergent strategy

Strategic Management
1980s (Mintzberg), SBUs, and tools like the
Expands and Formalizes
GE-McKinsey Matrix.
Globalization & Technological Rise of globalization and internet impact
1990s
Influence on strategic business models.
Focused on how nations can gain
Michael Porter’s Competitive
1990 competitive advantage in global
Advantage of Nations
markets.
Robert Kaplan and David Norton
Balanced Scorecard
1995 introduced the Balanced Scorecard for
Developed
performance measurement.
Innovation, Knowledge Focus on intellectual capital, digital
2000s Management, CSR, and transformation, and sustainability in
Digitalization strategic management.
Emergence of agile management
2010s Strategic Agility and Big Data practices and the use of data analytics for
strategic decision-making.
Companies embrace AI, digital
2020s & Digital Transformation &
platforms, and sustainable practices as
Beyond Sustainability Focus
core to long-term competitive advantage.

Pre-1900s: Early Business Thinking

Early Business Strategy: Prior to the 20th century, business strategy was not formalized.
Management was primarily concerned with operational efficiency and achieving short-term
financial success. The military strategy influenced early business practices, but there was no
clear conceptual framework for strategy.

1900s - 1940s: Industrialization and the Rise of Large Corporations

Early Management Practices: During the industrial revolution, businesses began to grow larger,
leading to more complex management and operational challenges. Management thinkers like
Frederick Taylor and Henry Ford began developing principles of scientific management and
efficiency, but these were focused primarily on day-to-day operations, not long-term strategy.

Ms Ann Mercy J, Assistant Professor, PG & Research Department of Commerce, Sri

Ramakrishna College of Arts & Science
STRATEGIC MANAGEMENT UNIT I

1920s-1930s: Businesses began focusing on planning, but strategic management as we know

it was still not well established.

1950s - 1960s: The Birth of Strategic Management

1950s: The early foundations of strategic management started taking shape as businesses
recognized the need for long-term planning. Concepts of corporate planning became popular
as businesses saw the value in planning for future growth and market positioning.

1962 - Alfred Chandler's Strategy and Structure: Alfred Chandler's influential work highlighted
the relationship between an organization’s strategy and its structure. He argued that changes in
strategy would require corresponding changes in organizational structure, marking a turning
point in the understanding of business strategy.

1965 - Igor Ansoff’s Corporate Strategy: Ansoff developed the product-market matrix, which
introduced four growth strategies: market penetration, market development, product
development, and diversification. This framework provided a formal approach to thinking
about corporate strategy and growth.

1970s: Strategic Management Becomes an Academic Discipline

1970s - Michael Porter’s Competitive Strategy (1979): Michael Porter revolutionized the field
of strategic management by introducing frameworks like the Five Forces Model and generic
strategies (cost leadership, differentiation, and focus). These frameworks became the
cornerstone of competitive strategy and laid the foundation for the study of business strategy.

1970s: Corporate planning became institutionalized in large organizations. Strategic

management was no longer just about day-to-day operations but began to focus on positioning
the company for long-term success in a competitive market.

1980s: Expansion and Formalization of Strategic Management

1980s - Henry Mintzberg’s The Strategy Process (1987): Mintzberg introduced the concept of
emergent strategy, challenging the traditional view that strategy is always deliberate and
planned. He argued that strategy can also evolve through day-to-day decisions and the actions
of employees.

1980s: The notion of strategic business units (SBUs) emerged, focusing on managing distinct
product lines or market segments. Companies like General Electric developed tools like the
GE-McKinsey matrix to evaluate their business units.

Ms Ann Mercy J, Assistant Professor, PG & Research Department of Commerce, Sri

Ramakrishna College of Arts & Science
STRATEGIC MANAGEMENT UNIT I

Late 1980s - Resource-Based View (RBV): This theory emerged as a response to Porter’s
frameworks and emphasized that competitive advantage arises from a firm’s unique resources
and capabilities rather than just its position in the industry.

1990s: Globalization and Technological Advancement

1990s: Strategic management became even more dynamic, incorporating concepts such as
globalization and the role of technology in shaping competitive advantage. The internet
revolutionized business models, making information technology a strategic tool.

1990s - Michael Porter’s Competitive Advantage of Nations (1990): Porter’s work shifted
focus to how countries can gain competitive advantage in global markets, emphasizing the role
of industries, clusters, and national competitiveness.

1995 - Introduction of the Balanced Scorecard: Developed by Robert Kaplan and David
Norton, the Balanced Scorecard became a tool for organizations to track performance using
financial, customer, internal process, and learning and growth metrics.

2000s - Present: Sustainability, Innovation, and Knowledge Management

2000s - Innovation and Knowledge Management: As the business environment became more
knowledge-driven, firms began to focus on innovation and the management of intellectual
capital as sources of competitive advantage.

2000s - Corporate Social Responsibility (CSR): Sustainability and CSR became an integral
part of strategic management, with businesses increasingly focusing on ethical practices,
environmental sustainability, and social impact as key components of long-term strategy.

2000s - Digital Transformation: The rise of digital technologies, including cloud computing,
social media, and big data, has forced businesses to rethink their strategic approaches.
Companies like Amazon, Google, and Apple have leveraged digital tools and platforms to
revolutionize industries and gain a competitive edge.

2010s - Strategic Agility: The need for firms to be agile and flexible in response to rapidly
changing market conditions became more critical. Firms adopted agile management principles
to continuously adapt their strategies in an era of constant change.

2020s and Beyond: Strategic management today incorporates digital transformation, artificial
intelligence (AI), and big data analytics. Organizations focus on strategic foresight, data-driven
decision-making, and the integration of technology in shaping their competitive strategies. The

Ms Ann Mercy J, Assistant Professor, PG & Research Department of Commerce, Sri

Ramakrishna College of Arts & Science
STRATEGIC MANAGEMENT UNIT I

focus on sustainability and corporate ethics continues to grow, influencing how businesses
develop long-term strategies.

CONCEPTUAL FRAMEWORK OF STRATEGIC MANAGEMENT

The conceptual framework of strategic management provides a structure for understanding how
strategies are developed, implemented, and evaluated within organizations. It consists of
several key components, which include vision and mission, environmental analysis, strategy
formulation, strategy implementation, and strategic evaluation.

1. Vision and Mission

The vision of an organization provides a long-term, aspirational view of what the organization
aims to achieve. It represents the desired future state and serves as a guide for decision-making.
The mission, on the other hand, defines the organization's purpose and primary objectives,
providing clarity on what the organization does and for whom.

Vision: Inspires and guides the organization’s direction.

Mission: Defines the organization's core purpose and reason for existence.

2. Environmental Analysis

Strategic management requires understanding both the internal and external environments. This
is typically done using tools such as SWOT analysis (Strengths, Weaknesses, Opportunities,
Threats) and PESTEL analysis (Political, Economic, Social, Technological, Environmental,
and Legal factors).

Internal Environment: Analyzing the organization’s resources, capabilities, and competencies.

External Environment: Assessing market conditions, competitors, regulatory factors, and other
macroeconomic forces.

3. Strategy Formulation

Once the environmental analysis is completed, organizations proceed with strategy

formulation. This involves selecting the best course of action to achieve the organization's
objectives. It requires deciding on the right strategic direction, identifying competitive
advantages, and determining how to allocate resources.

Corporate-Level Strategy: Decisions about what businesses to be in and how to grow.

Ms Ann Mercy J, Assistant Professor, PG & Research Department of Commerce, Sri

Ramakrishna College of Arts & Science
STRATEGIC MANAGEMENT UNIT I

Business-Level Strategy: Decisions about how to compete in a specific industry.

Functional-Level Strategy: The alignment of functional areas (marketing, finance, operations)

with the overall strategy.

4. Strategy Implementation

Strategy implementation is the process of putting the formulated strategies into action. This
includes aligning the organization’s structure, culture, resources, and leadership with the
strategic goals. It also involves defining operational plans, setting targets, and establishing
accountability systems.

Organizational Structure: The design of roles, responsibilities, and communication systems.

Leadership and Culture: Ensuring that leaders and organizational culture support the strategy.

5. Strategy Evaluation and Control

After implementing a strategy, organizations need to evaluate its effectiveness. This involves
monitoring performance, comparing actual results with the set objectives, and making
adjustments as needed. Tools such as Balanced Scorecard and performance measurement
systems help track progress.

Key Performance Indicators (KPIs): Metrics used to evaluate the success of strategies.

Feedback Mechanisms: Systems to ensure continuous improvement and adaptation.

THE CONCEPT OF STRATEGIC MANAGEMENT

Strategic management is the process of formulating, implementing, and evaluating strategies

that enable an organization to achieve its goals and objectives. It involves understanding and
adapting to both the internal and external environments of the business to gain a competitive
advantage.

1. Long-term Focus

Strategic management is focused on achieving long-term objectives rather than just short-term
gains. Successful strategies consider future trends, risks, and opportunities to ensure
sustainability over time.

2. Continuous Adaptation

Ms Ann Mercy J, Assistant Professor, PG & Research Department of Commerce, Sri

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STRATEGIC MANAGEMENT UNIT I

In a dynamic business environment, organizations must continuously adapt their strategies.

Changes in technology, consumer preferences, competition, and regulatory environments
require businesses to remain flexible and responsive.

3. Resource Allocation

Effective strategic management requires the optimal allocation of resources, including human
capital, financial resources, and technological capabilities, to achieve strategic goals. Resource-
based theories of strategy highlight how leveraging unique resources can lead to a competitive
advantage.

4. Competitive Advantage

At the core of strategic management is the quest for a competitive advantage—the unique
attributes that allow a company to outperform its rivals. Competitive advantage can come from
various sources, including cost leadership, differentiation, and focus strategies.

5. Decision-Making

Strategic management involves decision-making at all levels of the organization. Managers

must make informed, data-driven decisions that align with the overall strategic direction of the
company.

THE CONCEPT OF STRATEGY AND STRATEGIC MANAGEMENT

Strategy is often seen as the master plan or course of action designed to achieve long-term
success. In business, strategy involves setting objectives, determining actions to achieve those
objectives, and mobilizing resources to execute the actions. Strategy is concerned with how an
organization can achieve its desired goals in a competitive and dynamic environment. It is both
purpose-driven and adaptive—as it not only reflects the direction an organization seeks to take
but also how it plans to respond to external and internal challenges and opportunities.

Strategic Management is the ongoing process of formulating, implementing, and evaluating

strategies to achieve organizational goals. It helps organizations align their internal capabilities
with external opportunities to build a sustainable competitive advantage.

➢ Strategy Formulation – Developing the strategic plan by analyzing internal and external
factors.
➢ Strategy Implementation – Putting the formulated strategies into action.

Ms Ann Mercy J, Assistant Professor, PG & Research Department of Commerce, Sri

Ramakrishna College of Arts & Science
STRATEGIC MANAGEMENT UNIT I

➢ Strategy Evaluation – Assessing the effectiveness of strategies and making necessary

adjustments.

THE STRATEGY FORMATION PROCESS

1. Environmental Scanning: This is the first stage of strategic management, where the
organization scans both internal and external environments to identify critical factors
that affect strategic decisions. Tools like PESTEL analysis and SWOT analysis are used
here to understand opportunities, threats, and internal strengths and weaknesses.
2. Strategy Formulation: Based on the information gathered, organizations create strategic
goals and objectives. This involves determining the best course of action, considering
available resources and potential risks. Some of the strategic options could include
market expansion, diversification, cost leadership, differentiation, etc.
3. Strategy Implementation: After formulating the strategy, businesses must implement it.
This stage involves assigning tasks, allocating resources, restructuring the organization
if necessary, and ensuring that all employees are aligned with the strategic direction.
4. Strategy Evaluation and Control: This final phase involves measuring the performance
of the implemented strategy. It is an ongoing process where deviations from the strategy
are identified, and corrective actions are taken. Performance measurement tools like
KPIs and the Balanced Scorecard help in assessing the success of the strategies.

STAKEHOLDERS IN BUSINESS

Stakeholders are individuals, groups, or organizations that have an interest or stake in the
success or failure of a business. They can be internal or external and influence the company's
decisions. Identifying and understanding stakeholders is crucial for a business to manage
relationships and align its strategies with the needs and expectations of these stakeholders.

Types of Stakeholders:

1. Internal Stakeholders:
o Employees: They are directly involved in the company's operations and are concerned
with wages, job security, and career development.
o Management and Executives: They are responsible for setting goals, implementing
strategies, and ensuring the company's financial health.
o Shareholders: Owners of the company or those holding its stocks. They are concerned
with profitability, dividends, and the overall performance of the business.

Ms Ann Mercy J, Assistant Professor, PG & Research Department of Commerce, Sri

Ramakrishna College of Arts & Science
STRATEGIC MANAGEMENT UNIT I

2. External Stakeholders:
o Customers: Their needs and satisfaction directly influence the success of a business.
The company's products and services must meet their expectations.
o Suppliers: They provide the raw materials or services that the company needs to
operate. A stable supply chain is essential for production.
o Government: Government policies, regulations, taxes, and tariffs can significantly
affect a business’s operations.
o Competitors: Competing businesses that operate in the same market can influence a
company's market share and profitability.
o Community: Local communities and societies can also be stakeholders. A company
must ensure it operates responsibly and sustainably to maintain goodwill in the
community.

VISION, MISSION, AND PURPOSE

✓ Vision:
✓ The vision of a company is a statement that describes what the company aspires to
become in the future. It is an ambitious and long-term goal that provides inspiration and
motivation for employees. A vision statement helps to guide decision-making and
prioritize actions. For example, a vision statement could be: “To become the leading
provider of sustainable energy solutions globally.”
✓ Mission:
✓ The mission of a company defines its purpose or reason for existing. It clarifies the
company's role in society and outlines the core values and objectives that guide its
operations. A mission statement typically includes what the company does, who it
serves, and how it adds value. For instance: "To provide high-quality, affordable
healthcare products to improve the well-being of our customers."
✓ Purpose:
✓ The purpose is the underlying reason for a company's existence beyond profit-making.
It reflects the company’s values, social responsibilities, and contributions to society.
Purpose-driven businesses often emphasize ethics, sustainability, and positive impact
on communities. A clear purpose helps create a connection between the organization’s
activities and broader societal needs.

Ms Ann Mercy J, Assistant Professor, PG & Research Department of Commerce, Sri

Ramakrishna College of Arts & Science
STRATEGIC MANAGEMENT UNIT I

Aspect Vision Mission Purpose

A statement that The fundamental reason

A future-oriented
describes the core for an organization's
statement that
activities, focus, and existence beyond profit-
Definition defines what an
reason for the making; reflects its
organization aims to
organization's values and societal
become.
existence. impact.

Long-term goals Present operations and Broader societal impact

Focus
and aspirations. activities. and values.

Short to medium-term
Long-term (5-10 Ongoing, underlying
Time Frame (ongoing and
years or more). reason for existence.
immediate).
Describes the ideal Defines what the Explains why the
Content future state of the organization does, for company exists and its
organization. whom, and how. role in society.
Communicates the
Provides inspiration
company's operations, Connects the company's
and motivation for
Purpose products, and services activities to broader
employees and
to the public and societal goals and values.
stakeholders.
employees.
“To create positive
“To be the world’s
“To provide affordable, change through ethical
leading provider of
Example high-quality healthcare business practices and
sustainable energy
to improve lives.” environmental
solutions.”
stewardship.”
Internal and
external Internal and external Internal stakeholders and
stakeholders (to stakeholders (to clarify society at large (to align
Audience
inspire and guide what the company does business with broader
long-term daily). societal goals).
direction).

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Broad, focusing on the

Specific, action-
Broad and ethical, social, or
Scope oriented, and focused
idealistic. environmental impact of
on operations.
the company.
Not always directly
Difficult to measure Measurable in terms of
measurable, but can be
directly; success is outputs and outcomes
Measurement seen in the long-term
gauged over the (e.g., revenue, customer
impact and contribution
long term. satisfaction).
to society.
Can adapt in response to
Usually remains May evolve or adjust as
Change Over changing societal values,
unchanged for business needs and
Time but generally remains
several years. conditions change.
constant.

BUSINESS DEFINITION

A business definition outlines the key aspects of a company, including its core activities, the
market it operates in, and the customers it serves. It helps clarify the company’s identity and
guides decision-making regarding products, services, and operations.

The business definition typically includes:

▪ The industry or sector in which the company operates (e.g., technology, healthcare,
finance).
▪ The product or service offering that the company provides to meet the needs of its target
customers.
▪ The target market or audience for its products or services.
▪ The competitive advantage the company holds over its rivals.
▪ A well-defined business can help an organization stay focused and aligned with its
strategic goals.

OBJECTIVES AND GOALS

Both objectives and goals are critical components in strategic management, helping to provide
direction, measure success, and ensure alignment with the company’s mission and vision.

➢ Objectives:

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Objectives are specific, measurable, and time-bound targets that organizations set to
guide their actions. They are often the first step in the strategic planning process and
serve as milestones for achieving broader goals. Examples include:
o Achieve a 10% market share in the next two years.
o Reduce production costs by 5% within the next year.
➢ Goals:
Goals are broader and more long-term than objectives. They represent the overall vision
and desired outcomes that a company seeks to accomplish. Goals may not always be
immediately measurable but are critical to guiding the company’s efforts. Examples
include:
o Becoming a market leader in customer satisfaction.
o Expanding to international markets.

Ms Ann Mercy J, Assistant Professor, PG & Research Department of Commerce, Sri

Ramakrishna College of Arts & Science