STRATEGIC MANAGEMENT ( MODULE 1)

Meaning of Strategic Management

Strategic management is the process of defining an organization's direction,

making decisions on allocating resources, and implementing actions to achieve
long-term objectives. It involves analyzing internal and external environments,
setting goals, and ensuring adaptability to changing market conditions for
sustained competitive advantage.

What is Strategy?

Strategy is an action that managers take to attain one or more of the

organisation's goals. "A general direction set for the company and its various
components to achieve a desired state in the future. Strategy results from the
detailed strategic planning process."

Strategy narrowly defined "the art of the general (the Greek stratus, meaning
'field, spread out as in 'structure'; and agos, meaning 'leader"). Strategy is a set
of key decision made to meet objectives.

(Chandler1962)Strategy is the determination of the basic long term goals of an

enterprise, and the adoption of course of action and the allocation of resources
necessary for carrying out these goals.

Mintezberg has identified the 5p's of strategy

A plan

A pattern

A position

A poly

A perspective

What is strategic management?

Strategic management involves developing and implementing plans to help a

company achieve its business objectives. This can include building an annual
strategy, planning organizational structure and resource allocation, leading
change initiatives, and controlling processes and resources.
Strategic planning involves identifying business challenges, choosing the best
strategy, monitoring progress, and then making adjustments to the executed
strategy to improve performance. Tools like SWOT (strengths, weaknesses,
opportunities, and threats) analysis are used to assess where opportunities and
threats lie between the organization, its competition, and the overall market.

Strategic management happens at broader levels, like organization-wide

leadership, but it can also be implemented at a department- or team-level.

Benefits of strategic management

The strategic management process helps a company's leadership plan for the
future. With that big picture in mind, they can set a roadmap that includes
actionable steps to help employees see where they're going and understand how
to get there in the most efficient and cost-effective manner.

Because it's iterative, a strategic plan can (and should) be continuously evaluated
and adjusted as the market outlook changes.

Some of the financial benefits of strategic management include:

 Increase market share and profitability.
 Prevent legal risk.
 Improve revenue and cash flow.

Some of the non-financial benefits of strategic management include:

 Relieves the board of directors of responsibilities.
 Allows for an objective review and assessment.
 Enables an organization to measure progress throughout time.
 Provides a big-picture perspective of the organization's future.

Characteristics of Strategic Management

1. Goal-Oriented – Focuses on achieving long-term objectives.

2. Future-Oriented – Involves forecasting and planning for future
opportunities and threats.
3. Dynamic Process – Adapts to changing market conditions, technology,
and consumer preferences.
4. Competitive Advantage – Aims to create and maintain a unique position
in the market.
5. Resource Allocation – Ensures optimal utilization of financial, human,
and physical resources.
6. Top-Level Management Involvement – Requires decision-making by
executives and senior leadership.
 7. Interdisciplinary Approach – Combines elements of marketing,
finance, operations, and human resource management.
8. Risk and Uncertainty Management – Helps organizations navigate
uncertainties in the business environment.
9. Performance Measurement – Involves continuous monitoring and
evaluation of strategies.
10.Sustainability & Growth Focus – Ensures long-term sustainability by
balancing short-term and long-term objectives.

Scope of Strategic Management

Strategic management applies to various business areas and industries. Its scope
includes:

1. Corporate Strategy – Focuses on overall organizational vision, mergers,

acquisitions, and diversification.
2. Business Strategy – Deals with competitive positioning within a specific
market (cost leadership, differentiation, etc.).
3. Functional Strategy – Guides individual departments like marketing,
finance, HR, and operations to align with business goals.
4. Environmental Scanning – Analyzes external (market trends,
competition) and internal (resources, capabilities) factors.
5. Strategy Formulation and Implementation – Involves decision-
making, execution, and performance monitoring.
6. Global Strategy – Helps multinational corporations adapt strategies
across different markets.
7. Innovation & Technology Strategy – Focuses on research,
development, and digital transformation.

Need for Strategic Management

1. Ensures Organizational Growth – Provides a clear roadmap for

expansion and sustainability.
2. Enhances Competitive Advantage – Helps businesses stay ahead of
competitors through unique strategies.
3. Improves Decision-Making – Enables managers to make informed,
data-driven decisions.
4. Adapts to Market Changes – Ensures businesses remain flexible and
responsive to external shifts.
5. Optimizes Resource Utilization – Helps allocate financial, human, and
technological resources effectively.
6. Reduces Business Risks – Identifies threats and prepares contingency
plans.
 7. Boosts Profitability & Efficiency – Streamlines operations and
maximizes revenue generation.
8. Encourages Innovation – Fosters creative problem-solving and new
business opportunities.
9. Enhances Employee Motivation & Direction – Aligns workforce
efforts with organizational goals.
10.Ensures Long-Term Sustainability – Helps businesses thrive in the face
of uncertainty

Definitions of Strategic Management

Glueck (1980)
“Strategic management is a stream of decisions and actions which lead to the
development of an effective strategy or strategies to help achieve corporate
objectives.”
Pearce & Robinson (1991)
“Strategic management is the set of decisions and actions that result in the
formulation and implementation of plans designed to achieve a company’s
objectives.”
David (2011)
“Strategic management can be defined as the art and science of formulating,
implementing, and evaluating cross-functional decisions that enable an
organization to achieve its objectives.”

Approaches to Strategic Management

Strategic management can be approached in different ways based on how

strategies are formulated, implemented, and evaluated. These approaches help
organizations achieve long-term success and adapt to changing environments.
The key approaches to strategic management are:

1. Prescriptive Approach (Planned Strategy)

 Definition: This approach follows a structured, formalized process where

strategies are planned in advance and implemented systematically.
 Key Features:
o Clearly defined mission, vision, and goals.
o Detailed analysis of internal and external environments.
o Rational decision-making based on data.
o Focus on long-term planning.
 Example: Businesses using Porter’s Generic Strategies (Cost Leadership,
Differentiation, Focus).
🔹 Best for: Stable industries where predictability is high (e.g., manufacturing,
banking).

2. Emergent Approach (Adaptive Strategy)

 Definition: Strategies emerge over time as organizations learn from

experiences and adapt to changes.
 Key Features:
o Flexible and responsive to external changes.
o Learning-oriented decision-making.
o Encourages innovation and creativity.
 Example: Startups and tech firms adjusting their strategies based on
market feedback.

🔹 Best for: Dynamic industries with rapid change (e.g., technology, fashion, e-
commerce).

3. Resource-Based Approach

 Definition: Focuses on leveraging internal resources and capabilities to

gain a competitive advantage.
 Key Features:
o Emphasizes unique strengths (core competencies).
o Sustainable competitive advantage comes from within the
organization.
o Internal analysis is as important as external analysis.
 Example: Apple’s focus on design, innovation, and brand loyalty.

🔹 Best for: Companies with strong internal competencies (e.g., luxury brands,
tech giants)

4. Industrial Organization (I/O) Approach

 Definition: Focuses on external market conditions and industry structure

to determine strategy.
 Key Features:
o Competitive forces drive strategic choices.
o Uses frameworks like Porter’s Five Forces.
o Emphasizes positioning within the industry.
 Example: Airlines adjusting pricing and services based on industry
competition.

🔹 Best for: Highly competitive industries (e.g., retail, airlines,

telecommunications).
5. Contingency Approach

 Definition: Strategy depends on the specific situation and external

environment; there is no one-size-fits-all approach.
 Key Features:
o Flexible and situation-based.
o Decision-making varies by company size, industry, and
competition.
o Encourages scenario planning and risk management.
 Example: Multinational corporations adapting strategies in different
countries.

🔹 Best for: Businesses operating in multiple markets with diverse conditions.

6. Blue Ocean Strategy Approach

 Definition: Focuses on creating uncontested market spaces instead of

competing in existing ones.
 Key Features:
o Innovation-driven strategy.
o Differentiation combined with cost-effectiveness.
o Moves away from direct competition (Red Ocean).
 Example: Cirque du Soleil reinventing circus entertainment without
traditional animal acts.

🔹 Best for: Companies seeking radical innovation and new market creation.

7. Stakeholder Approach

 Definition: Emphasizes the interests of all stakeholders (customers,

employees, suppliers, society) in strategy formulation.
 Key Features:
o Ethical and sustainable decision-making.
o Long-term relationships with key stakeholders.
o Focus on corporate social responsibility (CSR).
 Example: Companies like Patagonia promoting sustainability while
maintaining profitability.

🔹 Best for: Socially responsible businesses and firms focusing on long-term

stakeholder engagement.

Which Approach is Best?

There is no single best approach—companies often combine multiple strategies
depending on their industry, goals, and challenges.

Types of strategy

One way of thinking about strategic management is to classify the management

focus into three types of strategy:

• Business strategy is a high-level plan where you outline how your organization
will achieve its objectives.

• Operational strategies are much more specific plans where you detail what
actions to take to achieve the desired results.

• Transformational strategies involve making radical changes to your

organization to achieve significant improvements.

5 steps of the strategic management process

It's common to view the strategic management process as five steps:

identification, analysis, formation, execution, and evaluation.

1. Define the direction.

The initial stage of the strategic management process involves identifying the
direction and specific goals and determining what needs to happen to achieve
them.

2. Analyze the current situation.

The second step is analysis and research. By using tools like SWOT analysis and
examining the organization's resources, including budget, time, staff, and more,
you'll gain a better understanding of how to leverage what's working and
eliminate what's not.

3. Outline the strategy and plan of action.

Next is formulating a strategy and plan of action based on situational analysis.

This step involves crafting a specific and realistic plan to help the organization
achieve its goals.

4. Execute the plan.

Executing the plan is the fourth step in the strategic management process. This
step involves implementing the plan and monitoring its progress. If you take a
more descriptive approach to strategy, you may have to adjust the plan as
circumstances change.

5. Evaluate the plan.

Evaluation is the fifth and final step in the strategic management process. Here,
you'll assess whether the organization has achieved its goals. If not, you can
adjust your plan and implement it in innovative ways. Feedback and analysis are
essential to evaluating and preparing for an optimal business future.

Meaning of Strategic Planning

Strategic planning is a structured process used by organizations to define their

vision, mission, and long-term goals. It involves analyzing internal and external
environments, setting objectives, and formulating strategies to achieve
sustainable growth and competitive advantage.

It serves as a roadmap for decision-making, ensuring that all activities align

with the organization's overall vision.

Characteristics of Strategic Planning

1. Future-Oriented – Focuses on long-term goals and preparing for future

challenges.
2. Goal-Driven – Aims to achieve specific objectives that align with the
organization’s mission.
3. Systematic Process – Follows a structured approach involving analysis,
formulation, implementation, and evaluation.
4. Environmental Adaptability – Adjusts strategies based on market
trends, competition, and external factors.
5. Decision-Making Tool – Helps managers make informed and strategic
decisions.
6. Resource Allocation – Ensures optimal use of financial, human, and
technological resources.
7. Competitive Advantage Focus – Helps organizations stand out in the
market by leveraging their strengths.
8. Top Management Involvement – Requires leadership commitment for
successful implementation.
9. Dynamic and Continuous – Strategy is regularly reviewed and modified
as needed.
10.Risk Management – Identifies potential risks and develops contingency
plans.
Scope of Strategic Planning

Strategic planning applies to various aspects of an organization and extends

across industries. Its scope includes:

1. Corporate-Level Strategy – Overall organizational direction,

diversification, mergers, acquisitions, and sustainability.
2. Business-Level Strategy – Competitive positioning, market
segmentation, and product differentiation.
3. Functional-Level Strategy – Departmental strategies (marketing,
finance, HR, operations) that support business objectives.
4. Market & Competitive Analysis – Understanding external trends,
customer behavior, and industry dynamics.
5. Resource Planning – Managing assets, workforce, technology, and
finances to align with goals.
6. Innovation & Growth Strategy – Research and development (R&D),
product innovation, and market expansion.
7. Risk Assessment & Contingency Planning – Identifying threats and
preparing mitigation strategies.
8. Global Strategic Planning – Expanding into international markets and
managing cross-border operations.

Need for Strategic Planning

1. Provides Direction and Focus – Aligns all activities with the

organization’s mission and vision.
2. Enhances Decision-Making – Enables data-driven and strategic choices
rather than reactive decisions.
3. Improves Resource Utilization – Ensures optimal use of manpower,
finances, and technology.
4. Increases Competitive Advantage – Helps companies stand out by
differentiating their products or services.
5. Adapts to Market Changes – Ensures flexibility to respond to evolving
business environments.
6. Minimizes Risks – Identifies potential risks and creates proactive
solutions.
7. Encourages Innovation – Promotes research, new ideas, and market
expansion strategies.
8. Boosts Employee Engagement – Gives employees a clear sense of
direction and purpose.
9. Supports Sustainable Growth – Helps businesses achieve long-term
success and expansion.
 10.Improves Performance Measurement – Establishes benchmarks and
KPIs to track success.

Modern considerations for strategic planning

While strategic planning has been a cornerstone of organizational management

for decades, the landscape of strategic planning has undergone significant shifts
in recent years.

Innovations in technology and socioeconomic upheavals, most notably the

COVID-19 pandemic, have fundamentally altered the calculus of strategic
planning. These modern considerations underscore the evolving nature of
strategic planning in today's world.

The importance of strategic planning in an evolving society

The advent of the COVID-19 pandemic has starkly highlighted the importance
of flexibility and resilience in strategic planning. Organizations worldwide have
faced the stark reality that the ability to pivot quickly in response to rapidly
changing external conditions is not just advantageous but essential for survival.

This period has reinforced the concept that strategic plans must be living
documents -- adaptable, dynamic and responsive to unforeseen challenges and
opportunities. The traditional view of strategic planning as a set of fixed
guidelines has given way to an understanding of strategic plans as fluid
frameworks that guide organizational response to a volatile environment.

Embracing digital transformation

The swift pace of technological evolution has made the incorporation of digital
transformation strategies a critical component of strategic planning.

Digital capabilities are now at the heart of operational success and competitive
differentiation. Organizations can integrate data analytics and AI into strategic
planning processes to help them innovate, boost efficiency, enhance customer
experiences and maintain a competitive edge.
Agility and adaptability

Modern strategic planning is characterized by an emphasis on agility and the

capacity for rapid adaptation. In an era marked by constant change,
organizations must be prepared to navigate through a sea of change, adjusting
their course in response to market dynamics and environmental shifts.

This necessitates a continuous reassessment of the strategic plan and a

willingness to recalibrate goals and tactics in alignment with the evolving
external landscape. The agility to adapt strategic priorities swiftly is now a
critical competency for organizational resilience and long-term success.

Sustainability and social responsibility

Sustainability and social responsibility have emerged as central considerations

in strategic planning. As societal expectations evolve, there is an increasing
demand for organizations to align their strategies with environmental, social and
governance (ESG) criteria.

This alignment reflects a broader commitment to sustainable development and

responsible corporate citizenship. Incorporating sustainability and social
responsibility into strategic planning not only meets regulatory and societal
expectations but also opens new avenues for innovation and connects
organizations with eco-conscious consumers and stakeholders.

Cultivating organizational culture and employee engagement

A strategic plan that resonates with an organization's culture and actively

engages employees is more likely to succeed. Cultivating a supportive culture
that aligns with the strategic vision is crucial for fostering organizational
alignment and buy-in.

Engaging employees in the strategic planning process instills a sense of

ownership and commitment to the organization's goals, thereby driving
collective effort toward their realization. Modern strategic planning recognizes
the value of employee engagement and organizational culture as foundational
elements that underpin the successful implementation of strategic objectives.

What are the steps in the strategic planning process?

There are myriad different ways to approach strategic planning depending on
the type of business and the granularity required. Most strategic planning cycles
can be summarized in these five steps:

Identify. A strategic planning cycle starts with the determination of a business's

current strategic position. This is where stakeholders use the existing strategic
plan -- including the mission statement and long-term strategic goals -- to
perform assessments of the business and its environment. These assessments
can include a needs assessment or a SWOT analysis (strengths, weaknesses,
opportunities and threats analysis) to understand the state of the business and
the path ahead.

Prioritize. Next, strategic planners set objectives and initiatives that line up
with the company mission and goals and will move the business toward
achieving its goals. There may be many potential goals, so planning prioritizes
the most important, relevant and urgent ones. Goals may include a consideration
of resource requirements -- such as budgets and equipment -- and they often
involve a timeline and business metrics or KPIs for measuring progress.

Develop. This is the main thrust of strategic planning in which stakeholders

collaborate to formulate the steps or tactics necessary to attain a stated strategic
objective. This may involve creating numerous short-term tactical business
plans that fit into the overarching strategy. Stakeholders involved in plan
development use various tools such as a strategy map to help visualize and
tweak the plan. Developing the plan may involve cost and opportunity tradeoffs
that reflect business priorities. Developers may reject some initiatives if they
don't support the long-term strategy.
Implement. Once the strategic plan is developed, it's time to put it in motion.
This requires clear communication across the organization to set
responsibilities, make investments, adjust policies and processes, and establish
measurement and reporting. Implementation typically includes strategic
management with regular strategic reviews to ensure that plans stay on track.

Update. A strategic plan is periodically reviewed and revised to adjust priorities

and reevaluate goals as business conditions change and new opportunities
emerge. Quick reviews of metrics can happen quarterly, and adjustments to the
strategic plan can occur annually. Stakeholders may use balanced
scorecards and other tools to assess performance against goals.

How often should strategic planning be done?

There are no uniform requirements to dictate the frequency of a strategic
planning cycle. However, there are common approaches.

 Quarterly reviews. Once per quarter is usually a convenient time

frame to revisit assumptions made in the planning process and gauge
progress by checking metrics against the plan.

 Annual reviews. A yearly review lets business leaders assess metrics

for the previous four quarters and make informed adjustments to the
plan.

Timetables are always subject to change. Timing should be flexible and tailored
to the needs of a company. For example, a startup in a dynamic industry might
revisit its strategic plan monthly. A mature business in a well-established
industry might opt to revisit the plan less frequently.

Types of strategic plans

Strategic planning activities typically focus on three areas: business, corporate
or functional. They break out as follows:
  Business. A business-centric strategic plan focuses on the competitive
aspects of the organization -- creating competitive advantages and
opportunities for growth. These plans adopt a mission evaluating the
external business environment, setting goals, and allocating financial,
human and technological resources to meet those goals. This is the
typical strategic plan and the main focus of this article.

 Corporate. A corporate-centric plan defines how the company works.

It focuses on organizing and aligning the structure of the business, its
policies and processes and its senior leadership to meet desired goals.
For example, the management of a research and
development skunkworks might be structured to function dynamically
and on an ad hoc basis. It would look different from the management
team in finance or HR.

 Functional. Function-centric strategic plans fit within corporate-level

strategies and provide a granular examination of specific departments
or segments such as marketing, HR, finance and development.
Functional plans focus on policy and process -- such as security and
compliance -- while setting budgets and resource allocations.

In most cases, a strategic plan will involve elements of all three focus areas. But
the plan may lean toward one focus area depending on the needs and type of
business.

Similarities Between Strategic Management and Strategic Planning

1. Long-Term Focus – Both are concerned with the long-term success and
sustainability of an organization.
2. Goal-Oriented – They aim to align organizational activities with defined
objectives and vision.
3. Decision-Making Tools – Both provide a framework for making strategic
decisions.
4. Resource Allocation – They help in optimizing financial, human, and
technological resources.
5. Environmental Analysis – Both require assessing internal and external
environments (SWOT, PESTEL, etc.).
 6. Competitive Advantage – Focus on creating a unique position in the
market.
7. Top Management Involvement – Requires leadership commitment for
successful implementation.
8. Continuous Process – Both need regular evaluation, feedback, and
adjustments.
9. Impact on Organizational Performance – Strategic planning and
management both contribute to growth, profitability, and efficiency.
10.Risk Management – Both identify threats and develop strategies to
mitigate risks.

Differences Between Strategic Management and Strategic Planning

Aspect Strategic Management Strategic Planning
A specific process within
The overall process of
strategic management that
formulating, implementing,
Definition focuses on setting goals and
and evaluating strategies to
determining the best course of
achieve long-term goals.
action.
Broader and includes Narrower focus, primarily on
Scope planning, execution, goal-setting and strategy
monitoring, and evaluation. formulation.
Continuous, dynamic A structured, step-by-step plan
Focus
decision-making process. for achieving goals.
Mainly concerned with
Involves executing strategies
Implementation formulating strategies before
and adapting to changes.
implementation.
Ongoing, adjusting
strategies based on Typically periodic (annually,
Time Horizon
performance and external every 3-5 years).
factors.
Highly adaptive and
More rigid, focusing on
Flexibility responsive to environmental
predefined goals.
changes.
Requires active participation Often led by top management
Involvement
of leadership at all levels. and strategic planners.
Execution Level Operational, tactical, and Mostly at the corporate and
 Aspect Strategic Management Strategic Planning
corporate levels. business levels.
Monitoring market trends
Creating a 5-year business
Examples and adjusting strategy
expansion plan.
accordingly.

Steps in the Strategic Management Process

1. Strategic Intent (Vision, Mission, and Objectives)

 Vision Statement – Defines the long-term aspirations of the

organization.
 Mission Statement – Describes the organization's purpose, core values,
and primary activities.
 Objectives & Goals – Establishes specific, measurable, achievable,
relevant, and time-bound (SMART) goals.

📌 Example: Tesla's vision is to "accelerate the world’s transition to sustainable

energy."

2. Environmental Scanning (Internal & External Analysis)

It is monitoring, evaluating and disseminating of information from external and

internal environment to key people within the corporation. Its purpose is to
identify strategic factors those internal elements that will determine the future of
the corporation.
The external environment consists of variables (opportunities and threats) that
are outside the organisation and most typically within the short-run control of
top management.
The internal environment of a corporation consists of variables (strength and
weakness) that are within the organisation itself and are not usually within the
short run control of top management.

 Internal Analysis – Evaluates organizational strengths and weaknesses

using tools like:
o SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats)
o Resource-Based View (RBV)
o Value Chain Analysis
 External Analysis – Identifies market opportunities and threats using:
 o PESTEL Analysis (Political, Economic, Social, Technological,
Environmental, Legal)
o Porter’s Five Forces (Competitive rivalry, Supplier power, Buyer
power, Threat of new entrants, Threat of substitutes)

📌 Example: A smartphone company analysing the impact of new AI

technology on its business.

3. Strategy Formulation (Developing Strategies)

It is the development of long-range plans for the effective management of

environmental opportunities and threats, in light of corporate strengths and
weakness.

After analysis, organizations develop strategies at different levels:

 Corporate-Level Strategy – Decisions on business expansion,

diversification, mergers, and acquisitions.
 Business-Level Strategy – Competitive positioning (Cost Leadership,
Differentiation, Focus Strategy).
 Functional-Level Strategy – Departmental strategies (marketing,
finance, HR, operations).

📌 Example: Amazon expanding into cloud computing with AWS as part of its
corporate strategy.

4. Strategy Implementation (Executing the Strategy)

It is the process by which strategies and policy are put into action through the
development of programs, budgets and procedures. This process might involve
changes within the overall culture, structure or management system of the entire
organisation.

 Resource Allocation – Distributing financial, human, and technological

resources.
 Organizational Structure – Aligning structure, leadership, and culture
to support strategy.
 Change Management – Managing resistance to change and ensuring
employee buy-in.
 Performance Metrics & KPIs – Setting benchmarks to track progress.

📌 Example: McDonald’s implementing automation and self-service kiosks to

enhance customer experience.
5. Strategy Evaluation and Control (Monitoring & Adjusting)

The process in which corporate activities and performance results are monitored
so that actual performance can be compared with desired performance.

 Measuring Performance – Comparing actual results with planned

objectives.
 Identifying Deviations – Recognizing gaps and areas for improvement.
 Taking Corrective Actions – Adjusting strategies based on performance
data.
 Continuous Improvement – Adapting to market shifts, competition, and
internal feedback.

📌 Example: Netflix shifting from DVD rentals to streaming based on market

trends and customer behaviour

Formulation Phase of Strategic Management

The formulation phase is the first stage in the strategic management process,
where organizations define their vision, mission, objectives, and conduct
environmental analysis to develop effective strategies. This phase is crucial as it
sets the foundation for long-term success.

1. Vision Statement

The vision statement defines the organization’s long-term aspirations and what
it hopes to achieve in the future. It provides direction and inspiration for
stakeholders.

Characteristics of a Good Vision Statement:

 Future-oriented
 Inspirational and motivational
 Clear and concise
 Defines long-term success

📌 Example:

 Google: "To provide access to the world’s information in one click."

 Tesla: "To create the most compelling car company of the 21st century by
driving the world’s transition to electric vehicles."

2. Mission Statement

The mission statement defines the core purpose of the organization, what it
does, and for whom. It reflects the organization's values and business activities.

Key Elements of a Mission Statement:

 Defines the company’s purpose

 Identifies target customers
 Specifies the key products/services
 Reflects organizational values

📌 Example:

 Nike: "To bring inspiration and innovation to every athlete in the world."
 Amazon: "To be Earth’s most customer-centric company, where
customers can find and discover anything they might want to buy online."

3. Environmental Scanning (Situation Analysis)

Environmental scanning involves analyzing internal and external factors that
impact the organization. It helps in identifying opportunities and threats while
assessing the company’s strengths and weaknesses.

A. Internal Analysis

Evaluates the organization’s strengths and weaknesses using:

 SWOT Analysis – Identifies Strengths, Weaknesses, Opportunities, and

Threats.
 Value Chain Analysis – Examines business activities that add value to
products or services.
 Resource-Based View (RBV) – Focuses on leveraging internal resources
for competitive advantage.

📌 Example: Apple’s strength lies in its brand reputation, innovation, and

ecosystem integration.

B. External Analysis

Analyzes external market forces and industry conditions using:

 PESTEL Analysis – Examines Political, Economic, Social,

Technological, Environmental, and Legal factors.
 Porter’s Five Forces – Assesses industry competition, supplier power,
buyer power, threat of substitutes, and threat of new entrants.

📌 Example: A car manufacturer monitoring government regulations on electric

vehicles.

4. Setting Organizational Objectives

Objectives define specific and measurable targets that help achieve the mission
and vision. They guide strategic planning and decision-making.

Types of Objectives:

 Strategic Objectives – Long-term goals for competitive advantage (e.g.,

market expansion).
 Financial Objectives – Profitability, revenue growth, cost efficiency.
 Operational Objectives – Improving production efficiency, customer
service.
 Social & Environmental Objectives – Corporate social responsibility
(CSR), sustainability.
📌 Example:

 Google’s Objective: Increase AI-driven search capabilities by 20% over

the next five years.

5. Strategy Formulation

Based on vision, mission, objectives, and environmental analysis, organizations

develop strategies to achieve their goals.

Levels of Strategy:

1. Corporate-Level Strategy – Defines overall business direction (e.g.,

diversification, mergers).
2. Business-Level Strategy – Focuses on competitive positioning (e.g., cost
leadership, differentiation).
3. Functional-Level Strategy – Strategies for departments (marketing, HR,
operations).

📌 Example:

 Apple's Corporate Strategy: Innovation-driven differentiation.

 Amazon’s Business Strategy: Cost leadership through economies of
scale.

Conclusion

The formulation phase is critical in shaping an organization's future by defining

its purpose, analyzing its environment, and setting strategic goals. This phase
ensures that strategies align with the company’s mission and competitive
landscape.

Formulation Phase: Vision, Mission, Environmental Scanning, Objective and

Strategy
23 Dec 2019
Strategy Formulation is an analytical process of selection of the best suitable
course of action to meet the organizational objectives and vision. It is one of the
steps of the strategic management process. The strategic plan allows an
organization to examine its resources, provides a financial plan and establishes
the most appropriate action plan for increasing profits.
It is examined through SWOT analysis. SWOT is an acronym for strength,
weakness, opportunity and threat. The strategic plan should be informed to all
the employees so that they know the company's objectives, mission and vision.
It provides direction and focus to the employees.

Steps of Strategy Formulation

The steps of strategy formulation include the following:
Establishing organizational objectives
Analysis of Organizational Environment
Forming quantitative analysis
Objectives in context with the divisional plans
Performance Analysis
Selection of strategy
1. Establishing Organizational Objectives: This involves establishing long-term
goals of an organization. Strategic decisions can be taken once the
organizational objectives are determined.
2. Analysis of Organizational Environment: This involves SWOT analysis,
meaning identifying the company's strengths and weaknesses and keeping
vigilance over competitors' actions to understand opportunities and threats.
Strengths and weaknesses are internal factors which the company has control
over. Opportunities and threats, on the other hand, are external factors over
which the company has no control. A successful organization builds on its
strengths, overcomes its weakness, identifies new opportunities and protects
against external threats.
3. Forming quantitative goals: Defining targets so as to meet the company's
short-term and long-term objectives. Example, 30% increase in revenue this
year of a company.
4. Objectives in context with divisional plans: This involves setting up targets
for every department so that they work in coherence with the organization as a
whole.
5. Performance Analysis: This is done to estimate the degree of variation
between the actual and the standard performance of an organization.
6. Selection of Strategy: This is the final step of strategy formulation. It involves
evaluation of the alternatives and selection of the best strategy amongst them to
be the strategy of the organization
Levels of strategy
Corporate Level
Business Level
Functional Level
Corporate level strategy: This level outlines what you want to achieve: growth,
stability, acquisition or retrenchment. It focuses on what business you are going
to enter the market.
Business level strategy: This level answers the question of how you are
going to compete. It plays a role in those organization which have smaller units
of business and each is considered as the strategic business unit (SBU).
• Functional level strategy: This level concentrates on how an organization is
going to grow. It defines daily actions including allocation of resources to
deliver corporate and business level strategies.
Hence, all organisations have competitors, and it is the strategy that enables one
business to become more successful and established than the other.
Environmental Analysis is described as the process which examines all the
components, internal or external, that has an influence on the performance of
the organization. The internal components indicate the strengths and weakness
of the business entity whereas the external components represent the
opportunities and threats outside the organization.
To perform environmental analysis, a constant stream of relevant information is
required to find out the best course of action. Strategic Planners use the
information. gathered from the environmental analysis for forecasting trends for
future in advance. The information can also be used to assess operating
environment and set up organizational goals.
It ascertains whether the goals defined by the organization are achievable or not,
with the present strategies. If is not possible to reach those goals with the
existing strategies, then new strategies are devised or old ones are modified
accordingly.
Advantages of Environmental Analysis
The internal insights provided by the environmental analysis are used to assess
employee's performance, customer satisfaction, maintenance cost, etc. to take
corrective action wherever required. Further, the external metrics help in
responding to the environment in a positive manner and also aligning the
strategies according to the objectives of the organization.

Environmental analysis helps in the detection of threats at an early stage, that

assist the organization in developing strategies for its survival. Add to that, it
identifies opportunities, such as prospective customers, new product, segment
and technology, to occupy a maximum share of the market than its competitors.
Steps Involved in Environmental Analysis

1. Identifying: First of all, the factors which influence the business entity are to
be identified, to improve its position in the market. The identification is
performed at various levels, i.e. company level, market level, national level and
global level.

2. Scanning: Scanning implies the process of critically examining the factors

that highly influence the business, as all the factors identified in the previous
step effects the entity with the same intensity. Once the important factors are
identified, strategies can be made for its improvement.

3. Analysing: In this step, a careful analysis of all the environmental factors is

made to determine their effect on different business levels. and on the business
as a whole. Different tools available for the analysis include benchmarking,
Delphi technique and scenario building.

4. Forecasting: After identification, examination and analysis, lastly the impact

of the variables is to be forecasted.

Environmental analysis is an ongoing process and follows a holistic approach

that continuously scans the forces effecting the business environment and
covers 360 degrees of the horizon, rather than a specific segment.
Key Strategic Activities in the Implementation Phase

1. Resource Allocation

Ensuring that financial, human, and technological resources are effectively

assigned to support strategic goals.

📌 Example: A company investing in new technology to improve production

efficiency.

2. Organizational Structure and Design

Aligning the company’s structure with the strategy to improve efficiency and
coordination.

 Centralized Structure – Decision-making is concentrated at the top

(useful for cost control).
 Decentralized Structure – Decision-making is spread across
departments (enhances flexibility).

📌 Example: Tesla's centralized structure helps maintain control over its

innovation and production processes.

3. Leadership and Corporate Culture

Strong leadership ensures employee engagement, motivation, and alignment

with strategic objectives.

 Transformational Leadership – Inspires employees to embrace change.

 Participative Leadership – Encourages collaboration in decision-
making.

📌 Example: Apple's leadership fosters a culture of innovation and creativity.

4. Change Management

Managing resistance to change and ensuring smooth implementation of new

strategies.

 Employee Training & Development – Upskilling employees to adapt to

new strategies.
 Communication & Transparency – Keeping employees informed about
strategic changes.
📌 Example: Microsoft’s shift from traditional software to cloud-based solutions
required major organizational change management.

5. Performance Measurement and Control Systems

Tracking progress and making adjustments as needed.

 Key Performance Indicators (KPIs) – Metrics to assess strategy

success.
 Balanced Scorecard – Measures financial, customer, internal processes,
and learning growth perspectives.

📌 Example: Google tracks user engagement metrics to assess the effectiveness

of its search algorithm updates.

6. Operational Execution

Turning strategy into day-to-day actions through process improvements and

efficiency enhancements.

 Process Optimization – Improving workflow efficiency.

 Quality Management – Implementing Total Quality Management
(TQM) and Six Sigma.

📌 Example: Toyota’s lean manufacturing system enhances operational

efficiency.

7. Strategic Partnerships and Alliances

Collaborating with external organizations to enhance strategic implementation.

 Joint Ventures – Two companies partnering to enter new markets.

 Mergers & Acquisitions – Expanding market reach through business
acquisitions.

📌 Example: Disney acquiring Pixar to strengthen its animation business.

Conclusion

The implementation phase ensures that strategies are effectively executed by

aligning resources, leadership, organizational structure, and performance
measurement. Success depends on strong leadership, adaptability, and
continuous monitoring.
Strategic Decision-Making
Meaning of Strategic Decision-Making

Strategic decision-making is the process of selecting the best course of action to

achieve long-term organizational goals and maintain a competitive advantage.
These decisions are complex, involve significant resources, and impact the
organization’s future direction.

📌 Example: A company deciding to enter a new market, invest in technology, or

launch a new product.

Characteristics of Strategic Decision-Making

1. Long-Term Impact – Affects the organization’s future and competitive

position.
2. Complex and Uncertain – Involves multiple variables and unpredictable
market conditions.
3. Resource-Intensive – Requires significant financial, human, and
technological resources.
4. Influences the Entire Organization – Affects various departments,
employees, and stakeholders.
5. Requires a Holistic Approach – Considers external and internal factors
like market trends, competition, and company strengths.
6. Irreversible and Risky – Strategic decisions often involve high risk and
are difficult to reverse.
7. Involves Multiple Stakeholders – Requires input from executives,
managers, investors, and sometimes customers.

Definitions of Strategic Decision-Making by Authors

1. Mintzberg (1994) – “Strategic decisions are those that determine the

overall direction of an enterprise and its long-term viability.”
2. Chandler (1962) – “Strategic decision-making involves determining the
long-term objectives of an enterprise and the adoption of courses of
action and allocation of resources to achieve these objectives.”
3. Ansoff (1987) – “Strategic decision-making is concerned with external
rather than internal problems of the firm and specifically with the
selection of the product-mix which the firm will produce and the markets
to which it will sell.”
Need for Strategic Decision-Making

1. Adapting to Market Changes – Helps organizations respond to

economic, technological, and competitive shifts.
2. Sustaining Competitive Advantage – Ensures the business remains
ahead of competitors.
3. Optimal Resource Allocation – Efficiently distributes financial, human,
and technological resources.
4. Risk Management – Identifies and mitigates business risks.
5. Growth and Expansion – Guides diversification, mergers, and global
expansion.
6. Enhancing Innovation – Supports investment in research and
development.
7. Stakeholder Satisfaction – Aligns business strategies with investor,
customer, and employee expectations.

📌 Example: Microsoft shifting its focus from software sales to cloud computing
to stay competitive.

Challenges in Strategic Decision-Making

1. Uncertainty and Complexity – Future market conditions are

unpredictable.
2. Data Overload – Managing and analyzing large volumes of information
can be overwhelming.
3. Resistance to Change – Employees and stakeholders may resist new
strategies.
4. Time Constraints – Strategic decisions require careful planning but must
be made in a timely manner.
5. Resource Limitations – Budget constraints may hinder strategy
execution.
6. Globalization Challenges – Expanding into new markets involves
cultural, legal, and operational challenges.
7. Balancing Short-Term and Long-Term Goals – Companies must
balance immediate profitability with future growth.
8. Ethical and Social Considerations – Strategic decisions must align with
corporate social responsibility (CSR) and ethical practices.

📌 Example: Facebook (Meta) facing regulatory challenges while expanding into

the metaverse.
Basic Model of Strategic Decision-Making

Strategic decision-making is a structured process that helps organizations

analyze, choose, and implement strategies to achieve long-term objectives. The
basic model of strategic decision-making follows a logical sequence of steps to
ensure well-informed and effective decisions.

Steps in the Strategic Decision-Making Model

1. Identifying the Problem or Opportunity

 Define the issue that requires a strategic decision.

 Identify key challenges, opportunities, and strategic goals.

📌 Example: A company facing declining market share needs to decide whether

to launch a new product or expand into new markets.

2. Gathering and Analyzing Information

 Conduct internal analysis (SWOT, Resource-Based View, Value Chain

Analysis).
 Perform external analysis (PESTEL, Porter’s Five Forces, competitor
analysis).
 Evaluate financial, operational, and market data.

📌 Example: Netflix analyzed customer preferences and industry trends before

transitioning from DVD rentals to streaming.

3. Developing Alternative Strategies

 Generate multiple possible solutions.

 Consider different strategic approaches at corporate, business, and
functional levels.

📌 Example: A retail company exploring different growth strategies—online

expansion, franchising, or international markets.

4. Evaluating Alternatives

 Assess feasibility, risks, and expected outcomes of each option.

 Use decision-making tools like Cost-Benefit Analysis, Scenario
Planning, and Risk Assessment.
📌 Example: A car manufacturer assessing whether to invest in electric vehicles
(EVs) or hybrid technology.

5. Choosing the Best Strategy

 Select the most effective and sustainable option based on data, resources,
and long-term impact.
 Align the decision with the company’s vision, mission, and core values.

📌 Example: Apple chose a differentiation strategy by focusing on innovation

and premium branding.

6. Implementing the Decision

 Allocate resources (financial, human, technological).

 Define responsibilities and action plans.
 Communicate the strategy across the organization.

📌 Example: Amazon invested heavily in logistics and warehouse automation to

strengthen its e-commerce dominance.

7. Monitoring and Evaluating Results

 Track performance using Key Performance Indicators (KPIs).

 Adjust strategy if necessary based on market conditions and feedback.
 Ensure continuous improvement through feedback loops.

📌 Example: Google continuously updates its search algorithm based on user

experience and data analytics.

Making good decisions is one of the most important skills any leader can
possess. Strategic decision-making involves a complex process of evaluating
potential outcomes and developing plans for the future. With a variety
of decision-making models available, it can be difficult to know which one is
right for you and your organisation. In this blog post, we will explore five of the
most popular decision-making models in management. We will look at each
model in detail to help you ascertain which is best suited to your needs and
enable you to make better decisions with confidence.

1. Rational Model

The rational model is the most traditional and well-known decision-making

model. It is based on the assumption that decision-makers think rationally and
will make decisions that maximise their utility. The steps in the rational model
are:

1. Define the problem

2. Identify objectives
3. Generate alternatives
4. Analyse alternatives
5. Select the best alternative
6. Implement the chosen alternative
2. Intuitive Model

The intuitive model is the simplest of all the decision-making models. It

involves using your intuition or ‘gut feeling’ to make a decision. This model is
most suitable for straightforward decisions that do not require much analysis.

To use the intuitive model, simply consider the options and choose the one that
feels right. Trust your instincts and go with your gut feeling. This model is best
used when you have experience in handling a particular situation and know
what you are doing.

While the intuitive model is quick and easy, it does have some drawbacks.
Intuition can be unreliable, especially if you are under stress or pressure. This
model also leaves little room for rational thought or consideration of other
options. If you are unsure about a decision, this model is probably not the best
one to use.

3. Recognition Primed Model

The Recognition Primed Model (RPM) is a decision-making model that was

developed by Garth Saloner and David A. Rosenkrantz in the early 1990s. The
RPM is based on the recognition-primed decision (RPD) theory, which states
that people make decisions by recognising patterns and then choosing the
course of action that best fits the situation. The RPM consists of three steps:

Recognize the problem or opportunity:

This step involves recognising that there is a problem or opportunity that needs
to be addressed.
Generate possible solutions:

This step involves generating a number of possible solutions to the problem or

opportunity.

Select the best solution:

This step involves selecting the best solution from among the possible solutions
generated in Step 2.

4. Bounded Rationality Model

Although a rational model is ideal, sometimes, there are one or multiple

constraints in a given business situation. There could be time constraints,
limited information or resources, making a perfect decision almost impossible.
In such a scenario, it is best to go for a business solution which offers the best
possible outcome under the present circumstances. This is the core principle of
the bounded rationality model.

5. Creative Model

In many business scenarios, there are cases where conventional wisdom and
knowledge are no longer applicable. This brings us to the creative model, a case
where leaders have to make innovative decisions by completely thinking outside
the box. Hence, conventional rationality and experience can be swapped for
something truly novel. While this is undoubtedly a significant challenge for the
management, if successful, this model can pave the way to more new and
revolutionary ideas, and completely transform the business landscape