Unit-I-Introduction to Strategic Management

Definition: 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.
• Nature of Strategic Management:
• Better handling of corporate decisions
• Facilitates growth objectives and strategies
• Ensures the firm remains prepared
• Helps in best utilization of resources
• Serves as a hedge against uncertainty
• Helps to understand trends in advance
• Helps to avoid hazard response
• Provides the best possible fit
• Helps build competitive advantage and core competencies
• Need of Strategic Management:
• Increasing Rate of Changes: The environment in which the business
operates’ is fast, changing. A business concern which does not keep its
policies up-to-date, cannot survive for a long time in the market. In turn,
the effective strategy optimises profits over a long run.
• Higher Motivation of Employees: The employees (human resources) are
assigned clear cut duties by the top management viz. what is to be done,
who is to do it, how to do it and when to do it. ? When strategic
management is followed in any organisation, employees become loyal,
sincere and goal oriented and their efficiency is also increased.
Strategic Decision-Making: Under strategic planning, the first step is to set
the goals or objectives of a business concern. Strategic decisions taken
under strategic management help the smooth sailing of an enterprise.
Strategic planning is the overall planning of operations for effective
implementation of policies.
Optimization of Profits: An effective strategy should develop from policies
of a concern. It takes into account actions of competitors. It considers
future operations in respect of market area and opportunity, executive
competence, available resources and limitations imposed by the
Government. An effective strategy should optimise profits over the long
run.
• Importance of Strategic Management:
• It allows identification, Prioritization &exploitation of opportunities
• 2. Provides objective view of management problems
• 3. Framework for Improved co-ordination .
• 4. It minimizes the effect of adverse conditions
• 5. It allows major decisions to better support established objectives
• 6. It allows more efficient allocation of time.
• 7. It allows fewer resources and less time to be devoted
• 8. It creates a framework for internal communication
• 9. It helps to integrate the behaviour of individuals
• 10. It provides basis for the clarification of individual responsibility.
• Dis-advantages of Strategic Management
• Time Consuming
• 2. Ignorance of other Managerial Functions
• 3. Unsatisfaction in employees
• 4. Depression due to failure in target
• 5. Protest of employees
• 6. Demand for more reward and facilities
• 7. Dependability on-practical planning 8. Changes in technical factors
Environmental scanning: Is the monitoring, evaluating and disseminating of
information from the external and internal environments to key people
within the corporation. Its purpose is to identify strategic factors – those
external and internal elements that will determine the future of the
corporation. This is well done through use of SWOT analysis tool and the
PESTEL tool.
2. Strategic formulation: Is the development of long term plans for the
effective management of environmental opportunities and threats, in light
of corporate strengths and weaknesses. It includes defining the corporate
mission, specifying achievable objectives, developing strategies and setting
policy guidelines.
Strategic implementation: Is the process by which strategies and polices
are put into action through the development of programs, budgets and
procedures. This process might involve changes within the overall culture,
structure, and/or management system of the entire organization.
Sometimes referred to as operational planning, strategy implementation
often involves day-to-day decisions in resource allocation.
4. Evaluation and control: Is the process in which corporate activities and
performance results are monitored so that actual performance can be
compared with desired performance. Managers at all levels use the
resulting information to take corrective action and resolves problems.
Although this is the final stage, it can also pin point weaknesses in the
other stages thus stimulate the entire process to start all over again. This
means that a good and effective process of strategic management must
have room for feedback to ensure such changes and corrections are
performed.
• Levels of Strategy
• 1. Corporate level Strategy: At the corporate level, strategies tend to have the
broadest scope. It is at this level, e.g. where the organization’s statement of its
mission would be accomplished. Determining what business the organization
should be in.
• Corporate level strategy is concerned with; enterprise-wide business process
management; competitive contact; managing activities and business
interrelationships; and management practices
• 2. Business level Strategy: Once established, the business level sets strategies
related to ensuring that the organization is competing or performing within
the areas delineated in the mission. At this level, one can conceptualize the
organization in terms of strategic business units or, as they are more
commonly known, SBUs.
• The notion of SBUs has to do with the grouping of a firm’s similar products or
services, as well as the number of industries in which the firm competes, and
follows closely the organization’s diversification
• Functional level Strategy: The functional level relates to the strategies
employed in the various functional areas (i.e., human resources,
production, marketing, finance, research and development, etc.) of the
organization. Managers must analyze and develop strategies in the
context of how they will affect, or be affected by, other functional areas
in achieving overall organizational goals and objectives.
• Policy and Strategy:Policies are guidelines or rules set to achieve
specific goals and ensure consistent decision-making. Strategies
are broader plans outlining how to reach long-term
objectives. While policies focus on maintaining order, strategies
provide the overall direction and approach for achieving success.
• Strategy and tactic: Strategy is a long-term vision, whereas
tactics are short-term actions taken to achieve that vision.
• Strategy is a detailed plan which acts as a path or gives
direction to achieve your goals. Tactics are the small steps which
help in building a strategy