UNIT-1

STRATEGIC MANAGEMENT: AN INTRODUCTION

Strategic Thinking
Strategic Thinking is a cognitive process encompassing the ability to analyse complex situations, envision the
future, and formulate innovative strategies. It goes beyond day-to-day operations and tactical decision-
making, focusing on the objectives of an organisation. The concept involves a holistic understanding of the
business environment, considering internal and external factors that impact the organisation’s performance.
Strategic Planning

Strategic Planning is a systematic and disciplined process of defining an organisation’s objectives, evaluating
its current position, and developing a roadmap to achieve its long-term goals. It involves setting priorities,
allocating resources, and formulating action plans that guide decision-making at all levels of the organisation.
At its core, Strategic Planning translates the vision and mission of an organisation into actionable steps. It
provides a structured framework for aligning the organisation’s resources, capabilities, and activities to
achieve desired outcomes.

Difference between Strategic Thinking and Strategic Planning

1) Nature
Strategic Planning and Strategic Thinking differ according to their nature. Strategic Thinking is a cognitive
process involving generating insights, exploring possibilities, and fostering innovation. On the other hand,
Strategic Planning is a structured and systematic process of developing actionable plans to achieve specific
objectives. It involves translating ideas into concrete steps and allocating resources.
2) Time orientation
Time orientation is another factor dividing the concepts. Strategic Thinking is future-oriented. It emphasizes
long-term vision and aims to anticipate and shape the future. It explores possibilities and new directions to
gain a competitive advantage. In contrast, Strategic Planning is more present-oriented. It focuses on
implementing strategies within defined timeframes to achieve predetermined goals.
3) Flexibility and rigidity
Strategic Thinking allows for flexibility and adaptability. It encourages exploration, experimentation, and
openness to new ideas. It embraces uncertainty and ambiguity and will adjust the course based on emerging
insights. Strategic Planning, on the other hand, provides structure and follows a defined framework. It is more
rigid in nature, as it involves setting specific goals, action plans, and timelines.
4) Scope and focus
Strategic Thinking has a broader scope and considers the organisation as a whole. It involves scanning the
external environment, analysing market trends, and identifying emerging opportunities. It encourages a
holistic perspective and cross-functional collaboration. Strategic Planning, in contrast, is more specific and
focused. It delves into implementing strategies within departments and functions, ensuring alignment with
broader strategic objectives.
5) Timing
Strategic Thinking precedes Strategic Planning. It lays the foundation for Strategic Planning by generating
ideas and insights. Strategic Thinking involves asking critical questions, challenging assumptions, and
exploring various possibilities. Once the Strategic Thinking process is complete, Strategic Planning takes over,
translating those ideas into concrete plans and actions.
6) Creativity vs. structure
Strategic Thinking is a creative process that encourages innovation and thinking outside the box. It thrives on
curiosity, imagination, and the ability to connect seemingly unrelated concepts. Strategic Planning is more
structured while still requiring creativity in its formulation. It involves the development of action plans,
resource allocation, and implementation frameworks.
7) Decision-making level
Strategic Thinking is often associated with top-level executives and leaders who shape the organisation’s long-
term direction. It involves big-picture thinking and setting the overall strategic direction. On the other hand,
strategic planning involves decision-making at various levels within the organisation. It cascades the strategic
vision into actionable plans and coordinates the efforts of different departments and teams.
STRATEGIC PLANNING
Strategic planning is the process of defining your long-term vision, goals, and objectives for your business,
and how you will achieve them. It involves analysing your internal and external environment, identifying your
strengths, weaknesses, opportunities, and threats, and setting priorities and timelines. Strategic planning helps
you align your resources, capabilities, and actions with your desired outcomes, and communicate them to your
stakeholders.
STRATEGIC MANAGEMENT
Strategic management is the process of implementing, monitoring, and evaluating your strategic plan, and
making adjustments as needed. It involves executing your strategies, measuring your performance, and
reviewing your progress. Strategic management helps you ensure that your actions are consistent with your
plan and that you are achieving your goals and objectives, or changing them if necessary.

Meaning of Strategy
The word ‘strategy’ has entered in the field of management from the military services where it refers to apply
forces against an enemy to win a war. The word “strategy” came from the two Greek words i.e. Stratus (Army)
and Agein (to lead). The Greeks felt that strategy-making is one of the responsibilities of the Army General.
This concept today is adopted even in business. Even around the same time, the Chinese General Sun Dzu
who wrote about strategy also suggested that strategy-making is one of the responsibilities of the leader. One
of the earliest definitions of Strategy is traced to the ancient Greek writer Xenophon who said “Strategy knows
the business you proposed to carry out.” This definition implies that the knowledge of the business as strategy.
Definitions of Strategy
Kennth Andrews defined strategy as “the pattern of major objectives, purposes or goals and essential policies
or plans for achieving the goals, stated in such a way as to define what business the company is in or is to be
in and the kind of company it is or is to be.” This definition of strategy emphasizes on purpose and the means
by which purpose will be achieved. It also emphasizes on the values and the cultures that the company stands
for.
Key Differences Between Strategy and Policy
1. The strategy is the best plan opted from a number of plans, in order to achieve the organisational goals
and objectives. The policy is a set of common rules and regulations, which forms as a base to take the
day to day decisions.
2. The strategy is a plan of action while the policy is a principle of action.
3. Strategies can be modified as per the situation, so they are dynamic in nature. Conversely, Policies are
uniform in nature. However, relaxations can be made for unexpected situations.
 4. Strategies are associated with the organizational moves and decisions for the situations and conditions
which are not encountered or experienced earlier. On the contrary. Policies define the rules for routine
activities, which are repetitive in nature.
5. Strategies are concentrated toward actions, whereas Policies are decision-oriented.
6. The top management always frames strategies, but sub-strategies are formulated at the middle level.
In contrast to Policy, they are, in general, made by the top management.

DEFINITION OF TACTICS
The word tactic is an ancient Greek origin of term ‘taktike’ which means ‘art of arrangement.’ To put simply,
tactics refers to the skill of dealing or handling difficult situations, to achieve a specific goal. It is defined as
a process that integrates all the resources of the firm like men, material, method, machinery, and money, to
cope up with the changing situation immediately. It can be a caution that prevents the organization from
uncertainties.
Key Differences Between Tactics and Strategy
1. Tactics are the properly organized actions that help to achieve a certain end. The strategy is the
integrated plan that ensures the achievement of organization objectives.
2. Tactics is a subset of strategy, i.e. without the strategy, tactics can do nothing.
3. Tactics try to find out the methods through which strategy can be implemented. Conversely, Strategy
is a unified set of activities that can help the organization to gain an advantageous position.
4. Tactics are formulated by middle-level management, whereas top level management formulates a
strategy.
5. Tactics involve lower risk as compared to strategy.
6. Tactics are preventive in nature while Strategy is competitive in nature.
Strategic Decisions - Definition and Characteristics
Strategic decisions are the decisions that are concerned with whole environment in which the firm operates,
the entire resources and the people who form the company and the interface between the two.

Characteristics/Features of Strategic Decisions

a. Strategic decisions have major resource propositions for an organization. These decisions may be
concerned with possessing new resources, organizing others or reallocating others.
b. Strategic decisions deal with harmonizing organizational resource capabilities with the threats and
opportunities.
c. Strategic decisions deal with the range of organizational activities. It is all about what they want the
organization to be like and to be about.
d. Strategic decisions involve a change of a major kind since an organization operates in an ever-changing
environment.
e. Strategic decisions are complex in nature.
f. Strategic decisions are at the topmost level, are uncertain as they deal with the future, and involve a
lot of risk.
g. Strategic decisions are different from administrative and operational decisions.
h. Administrative decisions are routine decisions that help or rather facilitate strategic decisions or operational
decisions.
LEVEL OF STRATEGY
Levels Of
Strategy

1. Corporate Level Strategy

2. Business Level Strategy
3. Functional Level Strategy
4. Operational Level Strategy

Corporate Level Strategy

The corporate level strategy is the highest level strategy in an organization. The corporate strategy defines the
organization’s overall direction and the high-level ideas of how to move towards it. These plans are usually
created by leadership, such as the CEO and top management. Generally, this is the group involved because
they have a deep understanding of the company and the strategic business knowledge needed to steer the
organization in the right direction. A corporate strategy is generally broader than the other strategy levels.
Strategies at this level are more conceptual and futuristic than the other level strategies. They usually span a
3-5 year period.
Business Level Strategy
The business level strategy is the second tier in the strategy hierarchy. Sitting under the corporate strategy, the
business strategy is a means to achieve the goals of the specific business units in the organization. The
initiatives and objectives within each business unit’s strategy will be focused on gaining a competitive
advantage in the particular market in which the business unit operates.
There are different types of business-level strategies organizations adopt depending on the competitive
advantage they want to gain. Organizations face crucial decisions here, with options like adopting a
differentiation strategy or embracing a cost leadership approach.
Functional Level Strategy
his level of strategy designs the approach for the different functional areas or departments—we’ve already
given you a little spoiler with the previous image of the bank strategy levels example. These functions can
include the marketing department, finance, supply chain, manufacturing, human resources, and more.
The primary objective of functional strategy is to align the activities and efforts of these individual
departments with the broader goals and objectives set at higher strategic levels, such as business and corporate
strategy. Functional strategy deals with a fairly narrow focus. They are designed to address the unique
challenges and opportunities within each functional area. Your marketing strategy, finance, IT, and other
departments all have goals and responsibilities to deliver. Having a visible functional level of strategy that
aligns back to the overall corporate strategy will increase the chances of success.
Operational Level Strategy
Operational level strategy, situated at the lowest tier of the strategic hierarchy, focuses on the day-to-day
actions and tactics needed to run the business, manage processes, and implement change effectively. It’s the
“boots-on-the-ground” aspect of strategy, ensuring that plans are translated into tangible actions and results.
It's primarily concerned with short-term objectives and the practical execution of plans, detailing the specific
actions, procedures, and activities that need to be executed to meet organizational goals. The operational level
strategy involves roles like PMOs, team leaders, individual contributors, and team members, and plays a
pivotal role in the successful implementation of broader strategies.
Strategic Management Definition
Strategic management in a business refers to the planning, management, and utilization of resources to define
and achieve objectives efficiently. It also includes a review of internal processes and external factors impacting
the business. Formulating and implementing strategies allow a company to proceed with its action plan.
PROCESS OF STRATEGIC MANAGEMENT
An organization must follow a set of processes for strategic planning to be effective and fruitful. The following
are the steps in the strategic management process:
1 – Identifying Direction
The first step requires the organization to have a clear vision and direction. Before developing plans, a business
should determine its short- and long-term objectives. The company will not have any clarity on processes and
procedures unless it sets its goals beforehand.
2 – Analysing Resources
An organization must first arrange its resources to carry out specific tasks to reap the strategic management
benefits. For example, someone who excels at marketing may struggle to manage the organization’s public
relations. Hence, the management should assess its resources and select the best one for respective processes.
3 – Framing Strategies
After selecting the best resource for every process, the organization frames its action plan for accomplishing
the goal. This strategic planning consists of elements needed to achieve the set objectives effectively. The
analysis, assessment, and supervision of processes at every stage help the business resolve issues, whether
internal or external.
4 – Implementing Strategies
Following the strategy development based on the organization’s objectives, the next stage is to execute them.
Every business must train its human resources, from entry-level employees to managers, to ensure they fully
understand the process. It will bring core competencies into action within the organization for the best possible
output.
5 – Evaluating Effectiveness
The review of strategies is the final step in the process. Looking into each aspect of the business during the
strategy formulation and implementation helps the management identify the efforts of every individual. The
organization can recognize these efforts through performance appraisal schemes, which are essential aspects
of the business.
Advantages of strategic management
Strategic management is the process of making decisions and taking actions that will shape and guide a
business or organization. This process involves setting goals, analyzing the competitive environment, and
identifying external and internal factors that can affect the organization. Some of the main benefits of strategic
management include:
1. Better decision-making: Strategic management offers a framework and a set of tools for examining
and weighing possibilities, which can assist leaders in making more knowledgeable and efficient
judgments.
2. Increased competitiveness: Strategic management can assist firms in positioning themselves in a way
that enables them to compete more successfully by comprehending the competitive environment and
recognising opportunities and risks.
3. Better resource allocation: Organizations may identify their important resources and allocate them
in the most efficient way with the aid of strategic management. By doing this, you can make sure that
resources are used effectively and efficiently to support the objectives of the organisation.
4. Enhanced organisational performances: Strategic management can assist businesses in enhancing
their overall performance and achieving their goals by establishing clear goals and routinely assessing
and modifying their strategy.
5. Greater adaptability: Organizations can use strategic management to prepare for and react to changes
in their internal and external environments. In a world that is changing quickly, this can help firms
become more flexible and agile.
Disadvantages of strategic management
There are a number of advantages to strategic management, but there are also some possible drawbacks to
take into account. Strategic management has a number of significant drawbacks, including:
1. Time and money: Creating and carrying out a strategic plan might take a lot of effort. Developing
intricate models and analysis as well as employing experts and performing market research might all
be necessary.
2. Complexity: Setting goals, analysing the competitive environment, and identifying internal and
external elements are just a few of the numerous components that make up strategic management. For
some people, this makes the process complicated and challenging to comprehend.
3. Resistance to change: Changing an organization’s structure, procedures, or culture is frequently a
part of strategic management. Some employees or stakeholders may object because they find the
changes difficult to accept or because they are uncomfortable with them.
4. Inaccurate predictions: Strategic management depends on predicting the future, including the
business’s objectives, the competitive landscape, and external events that might have an impact on the
firm. The resultant strategy might not work if these hypotheses are wrong.

MISSION, OBJECTIVES, GOALS AND ETHICS

Defining Vision
Richard Lynch defines vision as “ a challenging and imaginative picture of the future role and objectives of
an organization, significantly going beyond its current environment and competitive position.”
E1-Namaki defines it as “a mental perception of the kind of environment that an organization aspires to create
within a broad time horizon and the underlying conditions for the actualization of this perception”. Kotter
defines it as “a description of something (an organization, corporate culture, a business, a technology, an
activity) in the future.”
Example: Henry Ford’s vision of a “car in every garage” had power. It captured the imagination of others and
aided internal efforts to mobilize resources and make it a reality. A good vision always needs to be a bit beyond
a company’s reach, but progress toward the vision is what unifies the efforts of company personnel
Characteristics of Vision Statements
1. Possibility means the vision should entail innovative possibilities for dramatic organizational
improvements.
2. Desirability means the extent to which it draws upon shared organisational norms and values about the way
things should be done.
3. Action ability means the ability of people to see in the vision, actions that they can take that are relevant to
them.
4. Articulation means that the vision has imagery that is powerful enough to communicate a picture of where
the organization is headed
Advantages of Vision
Several advantages accrue to an organisation having a vision. Parikh and Neubauer point out the following
advantages:
1. Good vision fosters long-term thinking.
2. It creates a common identity and a shared sense of purpose.
3. It is inspiring and exhilarating.
4. It represents a discontinuity, a step function and a jump ahead so that the company knows what it is to beIt
fosters risk-taking and experimentation.
5. A good vision is competitive, original and unique.
6.It makes sense in the market place.
7. A good vision represents integrity. It is truly genuine and can be used for the benefit of people

MISSION STATEMENT
“A mission statement is an enduring statement of purpose”. A clear mission statement is essential for
effectively establishing objectives and formulating strategies.

A mission statement is the purpose or reason for the organization’s existence. A well-conceived mission
statement defines the fundamental, unique purpose that sets it apart from other companies of its type and
identifies the scope of its operations in terms of products offered and markets served. It also includes the firm’s
philosophy about how it does business and treats its employees. In short, the mission describes the company’s
product, market and technological areas of emphasis in a way that reflects the values and priorities of the
strategic decision makers.
Defining Mission Thompson defines mission as “The essential purpose of the organization, concerning
particularly why it is in existence, the nature of the business it is in, and the customers it seeks to serve and
satisfy”. Hunger and Wheelen simply call the mission as the “purpose or reason for the organization’s
existence”. A mission can be defined as a sentence describing a company’s function, markets, and competitive
advantages.
Example:
 l. Ranboxy Petrochemicals: To become a research-based global company.
2. Reliance Industries: To become a major player in the global chemicals business and simultaneously grow
in other growth industries like infrastructure.
3. ONGC: To stimulate, continue and accelerate efforts to develop and maximize the contribution of the
energy sector to the economy of the country.
4. Cadbury India: To attain a leadership position in the confectionery market and achieve a strong national
presence in the food and drinks sector.
5. Hindustan Lever: Our purpose is to meet everyday needs of people everywhere – to anticipate the
aspirations of our consumers and customers, and to respond creatively and competitively with branded
products and services which raise the quality of life.
Advantages of Mission Statement
The purpose of the mission statement is to communicate to all the stakeholders inside and outside the
organisation what the company stands for and where it is headed. It is important to develop a mission statement
for the following reasons:
1. It helps to ensure unanimity of purpose within the organisation.
2. It provides a basis or standard for allocating organisational resources.
3. It establishes a general tone or organisational climate.
4. It serves as a focal point for individuals to identify with the organisation’s purpose and direction.
5. It facilitates the translation of objectives into tasks assigned to responsible people within the organisation.
6. It specifies organisational purpose and then helps to translate this purpose into objectives in such a way that
cost, time and performance parameters can be assessed and controlled.
Characteristics of a Mission Statement
A good mission statement should be short, clear and easy to understand. It should therefore possess the
following characteristics:
1. Not lengthy: A mission statement should be brief.
2. Clearly articulated: It should be easy to understand so that the values, purposes, and goals of the
organisation are clear to everybody in the organisation and will be a guide to them.
3. Broad, but not too general: A mission statement should achieve a fine balance between specificity and
generality.
4. Inspiring: A mission statement should motivate readers to action. Employees should find it worthwhile
working for such an organization.
5. It should arouse positive feelings and emotions of both Defining Mission, Goals and Objectives of
employees and outsiders about the organization.
6. Reflect the firm’s worth: A mission statement should generate the impression that the firm is successful,
has direction and is worthy of support and investment.
Formulation of Mission Statements
There is no standard method for formulating mission statements. Different firms follow different approaches.
As indicated in the strategic management model, a clear mission statement is needed before alternative
strategies can be formulated and implemented. It is important to involve as many managers as possible in the
process of developing a mission statement, because through involvement, people become committed to the
mission of the organisation. Mission statements are generally formulated as follows:
1. In many cases, the mission is inherited i.e. the founder establishes the mission which may remain unchanged
down the years or may be modified as the conditions change.
2. In some cases, the mission statement is drawn up by the CEO and board of directors or a committee of
strategists constituted for the purpose.
3. Engaging consultants for drawing up the mission statement is also common.
4. Many companies hold brainstorming sessions of senior executives to develop a mission statement.
Soliciting employee’s views is also common.
5. According to Fred R. David, an ideal approach for developing a mission statement would be to select several
articles about mission statements and ask all managers to read these as background information. Then ask
managers to prepare a draft mission statement for the organisation. A facilitator or a committee of top
managers, merge these statements into a single document and distribute this draft mission statement to all
managers. Then the mission statement is finalized after taking inputs from all the managers in a meeting
Concept of Goals and Objectives
Goals The terms “goals and objectives” are used in a variety of ways, sometimes in a conflicting sense. The
term “goal” is often used interchangeably with the term “Objective”. But some authors prefer to differentiate
the two terms. A goal is considered to be an open-ended statement of what one wants to accomplish with no
quantification of what is to be achieved and no time criteria for its completion.
For example, a simple statement of “increased profitability” is thus a goal, not an objective, because it does
not state how much profit the firm wants to make.
Environmental Goals: An organisation should be responsive to Defining Mission, Goals and Objectives the
broader concerns of the communities in which it operates, and should have goals that satisfy people in the
external environment.
For example, goals like customer satisfaction and social responsibility may be important environmental goals.
2. Output Goals: Output goals are related to the identification of customer needs. Issues like what markets
should we serve, which product lines should be followed, etc. are examples of output goals.
3. System Goals: These goals relate to the maintenance of the organisation itself. Goals like growth,
profitability, stability etc. are examples.
4. Product Goals: These goals relate to the nature of products delivered to customers. They define quantity,
quality, variety, innovativeness of products.
5. Derived Goals: These goals relate to derived or secondary areas like contribution to political activities,
promoting social service institutions etc
OBJECTIVES
Objectives are the results or outcomes an organisation wants to achieve in pursuing its basic mission. The
basic purpose of setting objectives is to convert the strategic vision and mission into specific performance
targets. Objectives function as yardsticks for tracking an organisation’s performance and progress.
Characteristics of Objectives Well – stated objectives should be:
1. Specific
2. Quantifiable
3. Measurable Defining Mission, Goals and Objectives
4. Clear
5. Consistent
6. Reasonable
7. Challenging
8. Contain a deadline for achievement
9. Communicated, throughout the organisation.
Role of Objectives
play an important role in strategic management. They are essential for strategy formulation and
implementation because:
1. They provide legitimacy
2. They state direction
3. They aid in evaluation
4. They create synergy
5. They reveal priorities
6. They focus coordination
7. They provide basis for resource allocation
8. They act as benchmarks for monitoring progress
9. They provide motivation
Nature of Objectives The following are the characteristics of objectives:
Hierarchy of Objectives: In a multi–divisional firm, objectives should be established for the overall company
as well as for each division. Objectives are generally established at the corporate, divisional, and functional
levels, and as such, they form a hierarchy. The zenith of the hierarchy is the mission of the organization. The
objectives at each level contribute to the objectives at the next higher level
Long-range and Short-range Objectives: Organisations need Defining Mission, Goals, and Objectives to
establish both long-range and short-range objectives (Long-range means more than one year, and short–range
means one year and less.) Short-range objectives spell out the near–term results to be achieved. By doing so,
they indicate the speed and the level of performance aimed at each succeeding period.
Multiplicity of Objectives: Organisations pursue a number of objectives. At every level in the hierarchy,
objectives are likely to be multiple.
Example: The marketing division may have the objective of sales and distribution of products. This objective
can be broken down into a group of objectives for the product, distribution, research and promotion activities.
To describe a single, specific goal of an organization is to say very little about it. It turns out that there are
several goals involved.
Network of Objectives : Objectives form an interlocking network. They are inter-related and interdependent.
The implementation of one may impact the implementation of the other. If there is no consistency between
company objectives, people may pursue goals that may be good for their own function but detrimental to the
company as a whole. Therefore, objectives should not only “fit” but also reinforce each other. As observed by
Koontz et al., “it is bad enough when goals do not support and interlock with one another. It may be
catastrophic when they interfere with one anothe