Unit 1 :

Introduction to Strategic Management and

schools of Strategic formulation and
implementation & evaluation
• Strategic Management is a relatively new
discipline focused in the field of management,
and provides overall direction to an
organization for attaining its objectives and
achieving success
• It is an ongoing process in which an
organization continuously updates its strategies
with respect to changes taking place in the ever
changing business environment
• The top management of an organization
concerned to meet the organizational
objectives
• The process by which objectives are
formulated and achieved is known as strategic
management and strategy acts as the means to
achieve the objective
• It provides overall direction for an
organization
 What is Strategy?
• Strategy is the grand design or an overall 'plan'
which an organization chooses in order to move
or react towards the set objectives by using its
resources
• An organization is considered efficient and
operationally effective if it is characterized by
coordination between objectives and strategies
• Strategy helps the organization to meet its
uncertain situations with due diligence
• Henry Mintzberg, argued that it's really hard to
get strategy right
• To help us think about it in more depth, he
developed his 5 Ps of Strategy – five different
definitions of (or approaches to) developing
strategy
 Mintzberg5 Ps of Strategy
• Mintzberg first wrote about the 5 Ps of Strategy in 1987
• By understanding each P, you can develop a robust business
strategy  that takes full advantage of your organization's
strengths and capabilities
• Each of the 5 Ps is a different approach to strategy
• They are:
– Plan
– Ploy
– Pattern
– Position
– Perspective
 Strategy as a Plan
• Planning is something that many managers are happy
with, and it's something that comes naturally to us
• As such, this is the default, automatic approach that
we adopt – brainstorming options and planning how
to deliver them
• Planning is an essential part of the strategy
formulation process
• It's not enough on its own – problem with planning
• This is where the other four Ps come into play
 Strategy as Ploy
• Mintzberg says that getting the better of competitors,
by plotting to disrupt, dissuade, discourage, or
otherwise influence them, can be part of a strategy
• This is where strategy can be a ploy, as well as a plan
• For example, a grocery chain might threaten to expand
a store, so that a competitor doesn't move into the same
area; or a telecommunications company might buy up
patents that a competitor could potentially use to
launch a rival product
 Strategy as Pattern
• Strategic plans and ploys are both deliberate exercises
• Strategy emerges from past organizational behaviour
• A consistent and successful way of doing business can
develop into a strategy
• For instance, imagine a manager who makes decisions that
further enhance an already highly responsive customer
support process
• Despite not deliberately choosing to build a strategic
advantage, his pattern of actions nevertheless creates one
• Tools such as USP Analysis  and Core Competence
Analysis  can help you with this
 Strategy as Position
• "Position" is another way to define strategy – that is, how you decide
to position yourself in the marketplace
• In this way, strategy helps you explore the fit between your
organization and your environment, and it helps you develop a
sustainable competitive advantage 
• For example, your strategy might include developing a niche product
to avoid competition, or choosing to position yourself amongst a
variety of competitors, while looking for ways to differentiate your
services
• Strategy as a Pattern," Core Competence Analysis , USP Analysis ,
and VRIO Analysis  can help you craft a successful competitive
position
• You can also use SWOT Analysis  to identify what you do well, and to
uncover opportunities
 Strategy as Perspective
• The choices an organization makes about its strategy rely
heavily on its culture
– just as patterns of behaviour can emerge as strategy,
– patterns of thinking will shape an organization's perspective, and
– the things that it is able to do well
• For instance, an organization that encourages risk-taking and
innovation from employees might focus on coming up with
innovative products as the main thrust behind its strategy
• An organization that emphasizes the reliable processing of
data may follow a strategy of offering these services to other
organizations under outsourcing arrangements
 CONCEPT AND DEFINITION OF
STRATEGY
• The term strategy is derived from a Greek
word strategos which means generalship – the
actual direction of military force as distinct
from the policy governing its deployment
• Stratos means the Army and ago means to lead
• The concept and practice of strategy and
planning started in the military and over time
permeated to Business and Management
• Strategy is a term derived from military science
• It means art of a general leading an army
• It is a technique of managing the war campaign
• In corporate planning strategy is the “Grand
Design” or an overall plan which an organization
chooses in order to move or react towards the set
objectives with available resources are their
disposal
• Strategy is the general program of action
 Strategy includes
• Awareness of mission, and objectives
– It provides the central concept for planning indicating what is our
business, who are our customers, what goods and services we are to
supply
• It also indicates economic, social, technological and political
conditions which are the ingredients of business environment
• The need to take into account probable fear of others in general
and of the rivals in particular
• Strategies show unified direction and imply a deployment of
emphasize and resources
– It serves the useful purpose of guiding enterprise thinking and action.
Strategies are then integrated into the organization’s major and minor
supporting
 Definition: Strategy
• According to Thompson a company’s strategies consists of the
combination of competitive moves and business approaches that
managers employ to please customers, compete successfully, and
achieve organizational objectives
• Chandler 1962 define strategy as “the determination of the basic long
term goals and objectives of Enterprise and the adoption of the courses
of action and the allocation of resources necessary for carrying out
these goals.”
• Glueck (1972) “a unified comprehensive and integrated plan is
designed to assure that the basic objectives of the Enterprise are
achieved.”
• Ansoff 1984 “a strategy is a set of decision making rules for the
guidance organizational behavior.”
Need and Importance of Strategy
• An organization is generally established with a
goal in mind, and this goal defines the purpose
for its existence
• All of the work carried out by the organization
revolves around this particular goal, and it has
to align its internal resources and external
environment in a way that the goal is achieved
in rational expected time
• An organization is a big entity with probably a huge
underlying investment, strategizing becomes a
necessary factor for successful working internally, as
well as to get feasible returns on the expended money
• Strategic Management on a corporate level normally
incorporates preparation for future opportunities, risks
and market trends
• This makes way for the firms to analyze, examine and
execute administration in a manner that is most likely
to achieve the set aims
• Strategic Management and the role it plays in the
accomplishments of firms has been a subject of thorough
research and study for an extensive period of time now
• Strategic Management in an organization ensures that
– goals are set,
– primary issues are outlined,
– time and resources are pivoted,
– functioning is consolidated,
– internal environment is set towards achieving the objectives,
– consequences and results are concurred upon, and
– the organization remains flexible towards any external changes
• Keeping in mind the long-term benefits to organizations,
strategic planning drives them to focus on
– the internal environment,
– through encouraging and setting challenges for employees,
– helping them achieve personal as well as organizational
objectives
• At the same time, it is also ensured that external
challenges are taken care of, adverse situations are
tackled and threats are analyzed to turn them into
probable opportunities
• An influential theorist was Michael Porter, who
invigorated the field in 1980 by arguing that corporate
strategy should be based on the conditions of the industry,
and the company's relative position in that industry
• Organizations should identify their strengths (or 'core
competencies') and concentrate on or discover markets
where those skills could be exploited
• The concept of core competencies was relevant for both
organic and acquisitive growth, informed diversification
and divestment strategies
• Porter's focus was on the interface between the organization and its
environment
• Competencies Theory was developed into a more 'inside out' focus
when Gary Hamel and C. K. Prahalad published their core
competencies model in 1990
• They took as the starting point for strategy development the core
strengths of the organization, and advised that a core competence
was recognized by:
– providing potential access to a wide variety of markets
– making a significant contribution to the benefits of a product as perceived
by customers
– being hard to replicate by competitors. Management‘s role was to create the
environment to facilitate the creation of these core competencies
• The competencies themselves were intended to
equip entities to adapt quickly to changing
environments and to produce innovative, even
unexpected, products
• Every organization needs a strategy and there
are generally the three approaches to forming
this strategy
 Strategy approach

Internally-Driven Customer Driven Market Driven

Organizations Organizations Organizations
Internally-Driven Organizations
• Most organizations are internally driven,
which means that their strategy is driven by
what they have done in the past; their thinking
is inside out
• The weakness with this strategy is that
organization members are not anticipating
changes that are happening in the marketplace
 Customer-Driven Organizations
• Customer-driven organizations are those who
try to by close and ready to listen to the
customer
• The problem with approach is that these
organizations end up trying to be ―all things
to all people
 Market-Driven Organizations
• Market-driven organizations base their
strategy on making conscious choices about
which markets they will serve and how they
will add value
• High performance organizations not only
participate in the strategy process, they also
understand which strategy will propel their
organizations forward
• Strategy refers to well defined growth path of
a firm
• Strategies are basically administrative course
of decision which cannot be delegated
• Strategy indicates how company is going to
deploy its resources, objectives in the given
environment
• It is a master plan design of role and objectives
• Strategy is the alternative course of action which is
developed only because of the inability to forecast the future
accurately
• Strategy indicates path or direction in which a firm is leading
• Strategy is concerned with long term development rather
than day today operation
• Strategies are framed only because future cannot be foreseen
• If the organization had perfect foresight then they could
produce a single plan to meet
• Strategies and policies are related to objectives
• This is evident from the fact that change in
objectives leads to change in policies as well
as strategies
• Efficiency of strategy is measured to the extent
to which organization is able to meet
objectives, to which they are relevant
environment
• A strategy may be framed at different levels in
an organization
• There are three different level of strategies:
– strategy needed for the whole company called as
corporate strategy.
– strategy needed for each business of the company
known as business strategy
– strategy needed for each functional unit named as
functional strategy
LEVELS AT WHICH STRATEGY
OPERATES
 CORPORATE LEVEL STRATEGY
• Corporate level strategies are concerned with overall
objectives of the organization
– For example, expansion, diversification through merger or
acquisition
• Business Unit level strategies addresses two issues related
with product or business unit of organization
– Example: product adoption or product development
• Functional strategies are also called as operational
strategies which relates with different functions or
operational areas like manufacturing, marketing, human
resource etc
 Strategic Window
• Strategic Window indicates that company should
grab opportunity at the right time because if
there is a mismatch between opportunities and
time, then company may lose the chance of
making better out of given opportunities
• It indicates the direction in which company tries
to achieve growth target and how they are going
to manage the various businesses under its
purview
There are mainly 3 categories in strategy

• Stability strategy,
• Growth strategy and
• Retrenchment strategy
 Stability Strategy
• When a company intent to hold its current position in the
market then they go for stability strategy
• Companies don’t think of expanding the market
• This strategy adopted by those firms who are satisfied with
their present performance
• It is less risky strategy
• Firm may try to improve functional efficiency through better
allocation and use of resources
• This strategy is suitable when
– a firm serves a well defined market.
– able achieve the desired targeted return
 Expansion/Growth Strategy
• Company may go for expansion or growth
strategy to compete in the market
• Growth can be through internal or external ways
• A company is said to be adopting growth
strategy when it increases its level of objectives
upward in significant manner
• The company set for itself the targets which are
much greater than its past performance
• One can say that company is adopting growth strategy when its
sales or profitability increased in greater manner
• Internal growth strategies relates with growth with
diversification or intensification strategy
• An external growth strategy includes merger, acquisitions and
joint ventures.
• Company need to adopt growth strategies due to the following:
– To survive and lead the market
– To take the advantage of large scale operations
– To go for innovation and invention
– To build corporate image
 Retrenchment Strategy
• When the firm feels that the current market or
product is not giving the desired outcome, firm may
decide to come out of that product or market
• Such strategy to tackle the adverse market condition
is known as retrenchment strategy
• Such strategy is more suitable in the time recession
or may at the time of economic crises
• The firm may sell some of its brands/ products. The
company may resort to divestment or liquidations
• The decision relating to retrenchment depends
on several factors such as
• Profitability
• Market access
• Concentrating on core products
 Combination strategy
• Combination Strategy or Portfolio
restructuring strategy is the combination of
stability, growth & retrenchment strategies
adopted by an organization, either at the same
time in its different businesses, or at different
times in the same business with the aim of
improving its performance and efficiency
BUSINESS LEVEL STRATEGY
• Business level strategies are the plans or methods companies
use to conduct various functions in their business operations
• Companies use business-level strategies to provide
guidelines for managers and employees to follow when
working in the business
• Strategy is not about being the best, but about being unique
• Many leaders compare competition in business with the
world of sports
• There can only be one winner, but competing in business is
more complex
• While formulating business strategy one must
be very clear with regards to choice of
– WHO you are going to serve and a clear choice of
– HOW you are going to serve those clients
• It’s nothing but connecting the outside world
– the demand side
– with our company
– the supply side
• Business strategy usually occurs at the strategic business
unit level or product level
• Firm may not use same strategies or tactics to deal with
different types of products
• There are two types of strategies
– competitive strategy wherein firm or a business unit tries to
compete with other firm or industry similar product by
following innovative product development strategies and
market development activities
– cooperative strategy where firm may resort to strategic
alliance or joint ventures
 FUNCTIONAL STRATEGIES
• The functional strategy of a company is customized to a specific
industry and is used to back up other corporate and business
strategies
• Functional strategies are derived from the tactical strategies
• Each functional area or department is assigned the specific goals
and objectives it must achieve to support the higher-level strategies
and planning
• Functional strategies specify outcomes to be achieved from the
daily operations of specific departments or functions
• Functional strategies reflect that strategic and tactical objectives
require the involvement of multiple functional areas, such as
departments, divisions, and branches
• A functional strategy, for any business, focuses the
achievement of a goal on the skills and abilities of
individual departments and their employees
• Functional strategy is a short-term plan for achieving
one or more goals of a business by one or more
functional areas or department
• Functional Strategy is the strategy or organizational
plan adopted by each functional area, viz. marketing,
production, finance, human resources and so on, in line
with the overall business or corporate strategy, to
achieve organizational level objectives.
• The firm may customize its functional strategy
for a particular product or strategic business
unit (SBU)
• It is used to back up other corporate and
business strategies
– Production Strategies
– Marketing Strategies
– Financial Strategies
– Personnel strategies
 Production Strategies
• Production is one of the important functions in an organization
• The raw material is converted into finished products which creates certain
values to the customer
• Business strategies respect to production can be framed with regards to:
• Quality Control: Quality matters a lot. Such strategies relates with
techniques of quality control.
• Research and Development: Amount of funds kept aside for R&D, the
different areas of research and development to be given top most priority.
• Product Strategies: Different areas of product decision like branding,
product line, product modification etc.
• Factory: where the plant to be expanded, process of manufacturing etc.
 Marketing Strategies
• Marketing is one of the most important functions of any organization. It is
the only revenue generating department. Various strategies related to these
areas are:
• Pricing: This strategy includes in the areas like what price to be charged to
the customer, what pricing techniques should be followed etc.
• Promotion: It is one of the techniques to promote product in the market.
Unless and unless customers are perceived and convinced they will not buy
companies offering
• Promotion strategies may relate with IMC, PR etc.
• Distribution: Logistics is one critical functional area of making goods
available at the place of consumption
• The strategy includes deciding on distribution channels, appointment and
incentives to be given to dealers etc.
• Product: The strategies are framed in the area of product modification,
development, packaging, brand and brand extension etc.
 Personnel Strategies
• The Human Resource is one of key resource for success and
survival of the business firm
• Unless and until workforce is highly dedicated and
committed business will not progress
• Therefore it is very important to frame appropriate personnel
strategies as regards to:
• Recruitment and Selection Strategies: Selection technique,
sources of recruitment etc.
• Training and Development: What type of induction,
orientation, training and development programmes should be
followed.
 STRATEGIC DECISION MAKING
• Decision making is one of the important functions of
manager
• Whatever manger does he does through decision making
• Strategic decision making is the prominent task of senior
management
• Decision making requires at all levels but when it comes
to strategic decision making, largely relates to the
responsibilities of the senior management.
• Decision making is the process of choosing an appropriate
plan of action amongst various available alternatives.
• In the conventional methods of decision
making the process involved was:
– Determination of objectives.
– Identifying the alternative ways of achieving
objectives
– Evaluation of each available alternative
– Choosing the best alternative
 PROCESS OF STRATEGIC
MANAGEMENT
• There are different approaches to strategic
management process these different approaches
lays down emphasis on different elements, this is
because of variation in nature and forms of
organization
• The organization may differ as regards to :
– Degree of formalization in the management process
– The environment within which organization is operating
– The role of the strategists
• Mintzburg has called three modes of the
strategic management process.
• These are:
• Entrepreneurial Approach
• Adaptive Approach
• Planning Approach
 The Strategic Planning Process
Phase 2
Diagnose opportunities
and threats

Phase 1 Phase 4 Phase 5

Develop mission Develop Prepare
and goals strategies strategic plan
Phase 3
Diagnose strengths
and weaknesses

Phase 8 Phase 7 Phase 6

Continue Control and Prepare
planning diagnose results tactical plans
• Strategic Management Process is divided
mainly into 4 phases:
– Strategy formulation / planning
– Strategic alternatives and choice
– Strategy implementation
– Strategy evaluation
 STRATEGY FORMULATION /
PLANNING
• Strategic formulation is also called as strategic planning. The
following steps are involved in strategy formulation:
• Defining Business and framing Mission statement:
• These attributes are concerned with laying down the foundation for
strategic management
• For formulation of strategy the three major things to be considered
are corporate mission, objectives, internal and external environment
• The starting point of in formulation of any strategy is the mission
statement of a company
• The mission statement starts with definition of business
• Corporate philosophy is closely related with mission.
• Form the mission and philosophy company
decides its objectives, goals and also strategic
intent
• While deciding objectives the interest of the
stakeholder needs to be considered
• Precise definition of business of a company
should be based on four factors i.e. product,
technology, customer segment and its market
competitiveness
• Analysis of the Internal Environment:
• The management needs to analyze its internal environment
• Internal environment analysis will enable the firm to know its strength and
weaknesses
• Internal environment includes machines, manpower, value system etc
• Analysis of External Environment:
• The external factors include customers, suppliers, competitors,
government, legal environment, social environment
• This deals with finding our opportunities and threats prevailing in the
environment
• Company needs to match its strength in order to create good match
between them in such a way that opportunities could be availed through
organizational strength
• Gap Analysis:
• The management needs to conduct gap analysis
• This is done by comparing the present
performance with the desired future
performance
• Such comparison will enable to know the extent
of gap prevails and according strategies will be
framed to fill this gap
 STRATEGIC ALTERNATIVES AND
CHOICE
• This steps calls for reframing of organization direction,
corporate appraisal and formulation of strategies
• Organization evaluates its external environment and
identifies possible opportunities which can be grabbed by
the organization with its existing capacity and capabilities
• After screening the environment the best opportunities
will be selected which will be supported by effective
strategy/ies
• Alternative strategies are prepared to tackle change in the
environment effectively.
• For selecting best strategy company may
undertake cost benefit analysis
• Therefore the firm has to select the best
strategy which will suit the current market
situation
• The strategy which gives maximum benefits
will be selected
 STRATEGY IMPLEMENTATION

• For implementation of strategy, the strategic

plan is put into action
• For this proper resource allocation is done
• To ensure success, the strategy must be
implemented carefully
• For this firm needs to come out with prior
planning and relevant implementation of
strategies based on environmental situations
• Strategies are formulated for each and every
functional areas like marketing, production
etc. once the strategies are formulated its needs
to effectively implement
 Following steps are taken for implementing
strategies:
• Formulation of Plans:
– Strategy itself does not work or leads to action
– There is need to frame plans for its implementation
– If the company decides to go for expansion then it may plan it through market development
plan or market penetration plan etc.
• Identification of activities:
– After deciding plan management need to identify various activities required to be carried
out to implement the plan e.g. for market development company need to carry out market
research.
• Organizing Resources:
– For effective implementation of plan, management needs to make arrangement of resources
– No plan will be effectively implemented unless and until all the resources like men,
machine, money etc are made available. Implementation of strategy largely depends on
resource availability.
• Allocation of Resources:
– The allocation of resources should be made on the basis of availability of resources,
importance of a particular activity
 STRATEGY EVALUATION
• After implementation of strategy, the strategy evaluation
process begins
• This process begins with monitoring, reviewing and
evaluating the strategy
• Evaluation enable the firm to know how much useful the
strategy was to the organization in achieving its objectives
• It is followed by strategic control
• It is concerned with placing the strategy in the right position
• It also detects the problems they faced in the implementation
• The strategies will be evaluated in terms of
standard set and actual performance
• The performance is measured in terms of quantity
as well as qualitative terms
• If there are any deviations corrective measures
will be undertaken
• After identifying the causes for deviations, the
management needs to take corrective steps to
correct the deviations