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INTRODUCTION TO STRATEGIC
MANAGEMENT

Unit Structure:
1.0. Objective
1.1 Introduction
1.2 Meaning and definition of strategy.
1.3 Nature of business strategy
1.4 Strategic management process.
1.5 Benefits of strategic management.
1.6 Summery
1.7 Questions

1.0. OBJECTIVES

After studying this unit the student will be able to -

• Understand the concept of strategy and strategic management.

• Know the process of strategic management
• Know the levels of strategic management
• Understand the various types of strategies
• Explain its advantages and limitations
• Know the roles, strategists play in strategic management.

1.1. INTRODUCTION

Globalization of economy has brought about revolutionary

changes in the policy framework of both developed and
underdeveloped countries. The liberalization has removed artificial
trade barriers and businesses have, now truly become international
and the competition has become very severe. These developments
gave rise to new paradigms in business policies and strategic
thinking. Due to this there are drastic changes in conventional
concept of business. The survival and success of the firm ,is
influenced significantly by superior strategies like business have
started focusing on customers and their satisfactions rather than
focusing on products and sales early 1960’s corporate planning
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was popular but after 1980’s its place has taken by strategic
management to face stiff competition arisen by globalization.

There are number of examples where some firms have

prospered and other has perished. The keen study of these cases
reveals that the basic reasons of their success and failure are the
types of policy that the firm pursues. This is known as business
policy.

Business policy refers to decisions about the future taken by

top management. It is guidelines given to employees by senior
management for functioning. It is the means and ends, molding of
organization’s identity and character and continuous guidance of
actions to attain goal.

Normally the business policy consists of :

1. Study of the functions and responsibilities of senior
management related to the organizational problems affecting on
the success of total enterprise.
2. It determines the future course of action which organizations
have to adopt.
3. Choosing the purpose and defining the problem or need of the
organization.
4. Lastly, it is concerned with the proper mobilization of resources
so that Organization can attain its goal easily.

1.2 MEANING AND DEFINITION OF STRATEGY

Unlike the pure science which have their foundation in

experimental research, management studies draw upon the
practical experiences of managers in defining concepts? Business
policy is rooted in the practice of management and has passes
through certain phases before taking its shape of strategic
management.

The concept of strategy is undoubtedly the most significant

concept in business policy and strategic management. The concept
of strategy is derived from military principles. In military context, the
strategy is a plan of action to win a war. Here military identify the
quality and quantity of resources to be mobilized and used at the
most appropriate time in suitable and convenient manner to win a
war.

In business parlance, there is no definite meaning of

strategy and used for number of things like mobilizing and
deploying resources systematically and attain organizational goal or
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the pattern of common thread related to the organization’s activities

which are derived from the policies and objectives and goals. It is
related to pursuing those activities which move an organization
from its current position to desired future state. It also relates to
resources necessary for implementing a plan or following a course
of action.

Strategy literal meaning is “In anticipation of opponents

move, designing one’s own way of action”. As it has different
interpretations and really difficult to fathom what strategy means.
So we can conclude that it is the means to achieve organizational
goal.

Following are some of the definitions with which we will be

able to understand the meaning of strategy.

Definitions:-
“Strategy is the determination of the basic long term goals
and objectives of an enterprise and the adoption of the course of
action and the allocation of resources necessary for carrying out
these goals.”

Alfrred D. Chandler.

“A strategy is a unified, comprehensive, and integrated plan

that relates the strategic advantages of the firm to the challenges of
the environment. It is designed to ensure that the basic objectives
of the enterprise are achieved through proper execution by the
organization.”
Lawrence R. Jauch & William F. Glueck.

1.3 NATURE AND CHARACTERISTICS OF BUSINESS

STRATEGY

Following are the features of strategic management.

1. Objective.
2. Future oriented.
3. Availability and allocation of resources.
4. Influences of Environment.
5. Universal applicability.
6. Levels of strategy.
7. Review.

1. Objective Oriented:
The business strategies are objectives oriented and are
directed towards organizational goal. To formulate strategies the
business should know the objectives that are to be pursued. For
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example if any business want to achieve growth then it has to set

following objectives.
a) To increase market share.
b) To increase customers satisfaction.
c) To enhance the goodwill of the firm.

2. Future Oriented:
Strategy is future oriented plan and formulated to attain
future position of the organization. Therefore strategy enables
management to study the present position of organization and
decides to attain the future position of the organization. This is
possible because strategy answer question relating to the following
aspects.
a) Prosperity of the business in future.
b) The profitability of the business in future.
c) The scope to develop and grow in future in different business.

3. Availability and Allocation of Resources:

To implement strategy properly there is need of adequate
resources and proper allocation of resources. If it is done then
business can attain its objectives. There are three types of
resources required by business namely physical resources, i.e
plant and machinery, financial resources i.e capital, and human
resources i.e manpower. If these resources are properly
audited/evaluated and find out its strength and weaknesses and co-
ordinate well then management can do better strategy
implementation.

4. Influence of Environment:
The environmental factors affect the formulation and
implementation of strategy. The business unit by analyzing internal
and external environment can find out its strength and weaknesses
as well as opportunities and threats and can formulate its strategy
properly.

5. Universally Applicable:
Strategies are universally applicable and accepted
irrespective of business nature and size. Every business unit
designs strategy for its survival and growth. The presence of
strategy keeps business moving in right direction.

6. Levels of strategy:
There are companies that are working in different business
lines with regards to products /services, markets or technologies
and are managed by same top management. In this case such
companies need to frame different strategies. The strategies are
executed at three different levels such as –
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a) Corporate level
b) Business level
c) Functional/operational level

Corporate level strategies are overarching plan of action

covering the various functions that are performed by different
SBUs(strategic business unit, which involved in a signal line of
business) the plan deals with the objectives of the company,
allocation of resource and co-ordination of SBUs for best
performance.

Business level strategy is comprehensive plan directed to

attain SBUs objectives, allocation of resources among functional
areas and coordination between them for giving good contribution
for achieving corporate level objectives.

Functional level strategy is restricted to a specific function. It

deals with allocation of resources among different operations within
that functional area and coordinating them for better contribution to
SBU and corporate level achievement.

7. Revision of strategy:
Strategies are to be reviewed periodically as in the process of
its implementation certain changes are going to take place. For
example while implementing growth strategy there could be
shortage of resources because of limited sources or recession
during the period so retrenchment strategy should be considered.

8. Classification of strategy:
Strategies are classified into four major categories known
as –
a) Stable growth strategy
b) Growth strategy
c) Retrenchment strategy
d) Combination strategy.

1.4 STRATEGIC MANAGEMENT PROCESS

Strategic management is a dynamic process .it is continual,

evolving, iterative process. it means that it cannot be a rigid, step-
wise collection of few activities arranged in a sequential order
rather it is a continually evolving mosaic of relevant activities.
Managers perform these activities in any order contingent upon the
situation they face at a particular time. And this is to be done again
& again over the time as the situation demands. There are four
major phases of strategic management process which are as
under.
A) Establishment of strategic intent.
B) Formulation of strategies.
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C) Implementation of strategies.
D) Strategic evaluation.

A. Establishment of strategic intent:

It is a first step in strategic management Process. It involves

the hierarchy of objectives that an organization set for itself.
Generally it includes vision, mission, business definition and
objectives establishing the hierarchy of strategic intent which
includes -

1. Creating and communicating a vision.

2. Designing the mission statement.
3. Defining the business.
4. Adopting the business model.
5. Setting objectives.

The hierarchy of strategic intent lays the foundation for

strategic management of any organization. The strategic intent
makes clear what organization stand for. In the hierarchy, the vision
intent serves the purpose of stating what the organization wishes to
achieve in the long run. The mission relates the organization to the
society. The business definition explains the businesses of the
organization in terms of customer needs, customer groups and
alternative technologies. The business model clarifies how the
organization creates revenue. And the objectives of the
organizations state what is to be achieved in a given period of time.

B. Formulation of strategy:

Formulation of strategy is relates to strategic planning. It is

done at different levels i.e. corporate, business, and operational
level. The strategic formulation consists of the following steps.

1. Framing of mission statement :

Here the mission states the philosophy and purpose of the
organization. And all most all business frames the mission
statement to keep its activities in the right direction.

2. Analysis of internal & external environment:

The management must conduct an analysis of internal and
external environment. Internal environment consists of manpower,
machines, and other sources which resides within the organization
and easily alterable and adjustable. These sources reveal the
strength and weakness of the organization. External environmental
factor includes government, competitions, consumers, and
technological developments. These are not adjustable and
controllable and relates to organizations opportunities and threats
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3. Setting of objectives:
After SWOT analysis, the management is able to set
objectives in key result areas such as marketing, finance,
production, and human resources etc. While setting objectivities in
these areas the objectives must be realistic, specific, time bound,
measurable, and easy attainable.

4. Performance comparison :
By undertaking gap analysis management must compare
and analyze its present performance level with the desired future
performance. This enables the management to find out exact gap
between present and future performance of the organization. If
there is adequate gap then, the management must think of strategic
measures to bridge the gap.

5. Alternative strategies :
After making SWOT analysis and gap analysis management
needs to prepare (frame) alternative strategies to accomplish the
organizational objectives.
It is necessary as some strategies are to be hold and others to be
implemented.

6. Evaluation of strategies :
The management must evaluate the benefits and costs of
each every alternative strategy in term of sales, market share,
profit, goodwill and the cost incurred on the part of the strategy in
terms of production, administration, and distribution costs.

7. Choice of strategy :
It is not possible to any organization to implement all
strategies therefore management must be selective. It has to select
the best strategy depending on the situation and it has to consider
in terms of its costs and benefits etc.

C. Strategy Implementation :

Once the strategies are formulated the next step is to

implement them. The strategic plan is put into action through six
sub processes known as project, procedural, resource allocation,
structural, behavioral, and functional implementation. The project
implementation deals with the setting up of organization.
Procedural implementation deals with the different aspects of the
regulatory framework within which organizations have to operate.
Resource allocation relates to the procurement and commitment of
resources for implementation. The structural aspect of
implementation deals with the design of organizational structures
and systems and reorganizing so as to match the structure to the
needs of strategy. The behavioral aspects consider the leadership
style for implementing strategies and other issues like corporate
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culture, corporate politics, and use of power, personal values and

business ethics and social he responsibilities. The functional
aspects relates to the policies to be formulated in different
functional areas. The operational implementation deals with the
productivity, processes, people and pace of implementing the
strategies

For any strategy implementation there are five major steps.

Such as
1. Formulation of plans.
2. Identification of activities.
3. Grouping of activities.
4. Organizing resources.
5. Allocation of resources.

D. Strategic Evaluation:

Strategic evaluation appraises the implementation of

strategies and measures organizational performance. The feedback
from strategic evaluation is meant to exercise control over the
strategic management process. Here the managers try to assure
that strategic choice is properly implemented and is meeting the
objectives of the firm. It consists of certain elements which are
given below.

1. Setting of standards:- The strategists need to set standards,

targets to implement the strategies. it should be in terms of quality,
quantity, costs and time. The standard should be definite and
acceptable by employees as well as should be achievable.

2. Measurement of Performance:- Here actual performances are

measured in terms of quality, quantity, cost and time.
3. Comparison Of Actual Performance With Set Targets:- The
actual performance needs to be compared with standards and find
out variations, if any.
4. Analyzing Deviation And Taking Corrective Measures:- If any
deviation is found then higher authorities tries to find out the causes
of it and accordingly as per its nature takes corrective steps. Here
some time authority may re-set its goals, objectives or its planning,
policies and standards.

1.5 CORPORATE LEVEL STRATEGY

There are three broad levels of strategy known as-

A) Corporate strategy
B) Business strategy.
C) Functional strategy.