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Chapter – 1
Introduction to Strategic Management

Meaning and Nature of Strategic Management

• In-charge of organisational affairs. Making

Management as key
group
organisation a purposeful and productive entity.
Brings together/integrates the resources.

• The functions include Planning, Organising, Directing,

Management as set
of functions
Staffing & Control. Determine goals & activities
Helps in allocation of tasks and resources

• Management is an influence process to make things

Management happen, to gain command over phenomena, to induce
and direct events and people in a particular manner.

Concept of Strategy
♦It is a long term blueprint of desired image, direction and destination i.e. what
it wants to be and where it wants to be.

♦It is used to take market position, conducts its operations, attract and satisfy
customer, compete successfully.

♦It is game plan or ways to respond to dynamic and hostile external forces by top
level to pursue vision, mission and objectives.

♦It is no substitute for sound, alert and responsible management.

♦It can never be perfect, flawless and optimal.

Strategy is Partly Proactive and Partly Reactive

A company’s strategy is typically a blend of:
♦Proactive actions on the part of managers to improve the company’s market
position and financial performance.
♦Reactions to unanticipated developments and fresh market conditions in the
dynamic business environment.
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In other words, a company uses both proactive and reactive strategies to cope up
the uncertain business environment. Proactive strategy is planned strategy
whereas reactive strategy is adaptive reaction to changing circumstances.

Strategic Management
► It refers to the managerial process of
ü developing a strategic vision,
ü setting objectives,
ü crafting a strategy,
ü implementing and evaluating the strategy, and
ü finally initiating corrective adjustments were deemed appropriate.
The process does not end, it keeps going on in a cyclic manner.

►Strategic management emphasizes the monitoring and evaluation of external

opportunities and threats in the light of a company’s strengths and weaknesses
and designing strategies for the survival and growth of the company.

Importance/Advantages of Strategic Management

►Charles Darwin:- 'Survival of the fittest ', the only principle of survival for all
organizations, where 'fittest' are not the 'largest' or ‘strongest’ organizations
but those who can change and adapt successfully to the changes in business
environment.

►Many business giants have followed the path of extinction failing to manage
drastic changes in the business environment.
Thus, it becomes imperative to study Business Strategy.

►The major benefits of strategic management are:

• Gives direction to define goal, mission and objectives
• Proactive instead of just being reactive
• Framework for major decisions
• To face the future
• Defence mechanism against mistakes and pitfalls
• Develop core competencies
• Enhance the longevity
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Limitations Of Strategic Management

(a) Complex and turbulent environment

(b) Time consuming process
(c) Costly process
(d) Difficult to estimate competitor reaction or response

Strategic Intent (Vision, Mission, Goals, Objectives &

Values)
►It refers to purposes of what the organisation strives for

►Senior managers must define "what they want to do" and "why they want to do".

►It provides the framework within which the firm would operate to achieve
strategic objectives.

►It could be in the form of vision and mission statements for the organisation
at the corporate level.

►It is generally stated in broad terms but when stated in precise terms it is an
expression of aims to be achieved operationally, i.e., goals and objectives.

►Component of Strategic Intent

Values/Value System Strategic Intent

Vision

Mission

Goals and Objec.ve

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Vision:
›»By the top management.
›»It tells us “where we want to be”
›»It is the blueprint of future position.
›»It communicates management aspirations to stakeholders.
›»It define directional path, company should take in product, customer, market,
technology.

›»Essentials of a strategic vision

ü Think creatively about how to prepare a company for the future.
ü Vision involves exercise in intelligent entrepreneurship.
ü Vision creates enthusiasm among the members of the organisation.
ü Vision statement clearly illuminates the direction.

Mission:
›»It tells us 'what business are we in and what we do'.
›»It states what customer it serves, what need it satisfies and what type of
product it offers.
›»It is the way to get to the vision.
›»Many firms fail to articulate mission with clarity.
›»Things to be kept in mind while writing mission
• Gives organisation its own special identity
• Defines needs to satisfy, target customer group, technologies and
competencies it uses.
• Unique to the organisation.

›»Why should an organisation have a mission?

ü To ensure unanimity of purpose within the organisation.
ü To develop a basis, or standard, for allocating organisational resources.
ü To provide a basis for motivating the use of the organisation's resources.
ü To establish a general tone or organisational climate, to suggest a business-
like operation.
ü To serve as a focal point for those who can identify with the organisation's
purpose and direction.
ü To facilitate the translation of objective and goals into a work structure
involving the assignment of tasks to responsible elements within the
organisation.
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ü To specify organisational purposes and the translation of these purposes

into goals in such a way that cost, time, and performance parameters can
be assessed and controlled.

Vision Mission
It describes future identity It is an ongoing and time independent
guide

It is success It is a key to success

It tells us “where we want to be” It tells us, “what we are and what we do”

It is specific in terms of future and time Mission if crafted well can remain in
frame existence for a very long time
It motivates the people to achieve defined It provides a path to realise the vision.
objectives

Goals and Objectives:

›»Goals are open-ended attributes that denote the future states or outcomes.
›»Objectives are close-ended attributes which are precise and expressed in
specific terms.
›»Accordingly, we will also use the term interchangeably.
›»Objectives are organisation’s performance targets.
›»Objectives serves as yardsticks for tracking an organisation’s performance and
progress.
›» Thus, the Objectives are more specific and translate the goals to both long
term and short-term perspective.
›»Objectives must possess the following characteristics:
ü They should define the organisation's relationship with its environment.
ü They should be facilitative towards achievement of mission and purpose.
ü They should provide the basis for strategic decision-making.
ü They should provide standards for performance appraisal.
ü They should be concrete and specific.
ü They should be related to a time frame.
ü They should be measurable and controllable.
ü They should be challenging.
ü Different objectives should correlate with each other.
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ü Objectives should be set within the constraints of organisational resources

and external environment.

›»Long-term objectives: To achieve long-term prosperity, strategic planners

commonly establish long-term objectives in seven areas.
ü Profitability
ü Productivity
ü Public Responsibility
ü Competitive Position
ü Employee Development
ü Employee Relations
ü Technological Leadership

Values:
›»E.g. Integrity, trust, accountability, innovation and diversity
›»It sets the tone for how the people of think and behave, especially in situations
of dilemma.
›»It creates a sense of shared purpose to build a strong foundation and focus on
longevity of the company's success.
›»It have both internal as well as external implications.

Strategic Levels In Organisations

CORPORATE LEVEL
CEO, other senior
executives, Board of Head office
directors, and Corporate
staff

BUSINESS LEVEL
Division A Division B Division C
Divisional managers & staff

FUNCTIONAL LEVEL
Business Business Business
Functional managers Function Function Function
(marketing, finance, etc....)
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›»Corporate Level
›It consists of the Chief Executive Officer (CEO), other senior executives, the
board of directors, and corporate staff.

›They oversee development of strategies for whole organization.

›For this his task includes:
a) Defining vision, mission and objectives of Organization

b) Determining what businesses, it should be in

c) Allocating resources among different divisions

d) formulating and implementing strategies that span individual businesses

e) Providing leadership for Organization

f) Acts as a linkage between Management and Shareholders

›Corporate level managers, especially CEO is viewed as guardian of shareholder

welfare and must make strategies to maximize the wealth of shareholders.

›»Business or Divisional Level

›A Principle General Manager or Business level manager is head of a division.
›They are responsible for working of Division and overseeing all functions of the
Division or a particular business.

›They are responsible to translate general statements of direction of Corporate

Level into concrete business plans.

›They should listen to the functional level managers.

›»Functional Level
›They are responsible for specific business functions in a division or company like
marketing, Research & Development, Human Resource, Finance etc.

›Thus, a functional manager’s sphere of responsibility is generally confined to one

organizational activity or area.

›Functional managers are also responsible for

a) developing functional strategies in their area to fulfil strategic objectives
set by corporate and business level managers; and
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b) implementing/ executing strategies of corporate level and business level

managers.

›They are closer to customers and provide most of information that enable
corporate level and business level managers to formulate realistic and attainable
strategies.

Network of relationship between the three levels

There are 3 major types of networks of relationship between the levels and also
amongst the same levels of a business;
Functional and - It is an independent relationship, where each function or a division
Divisional is run independently headed by the function/division head, reporting
Relationship directly to the business head, who is a corporate level manager.
- Functions maybe like Finance, Human Resources, Marketing, etc.
while Divisions may depend on the products like for a toys
manufacturer - kid’s toys, teenager toys, etc. could be divisions.

Horizontal - All positions, from top management to staff-level employees, are

Relationship in the same hierarchical position.
- It is a flat structure where everyone is considered at same level.
- This leads to openness and transparency
- It focus more on idea sharing and innovation.
- This type of relationship between levels is more suitable for
startups where the need to share ideas with speed is more desirable.

Matrix - It features a grid-like structure of levels in an organisation, with

Relationship teams formed with people from various departments that are built
for temporary task-based projects.
- This relationship helps manage huge conglomerates with ease
where it is nearly impossible to track and manage every single team
independently.
- In Matrix relationship - there are more than one business level
managers for each functional level teams.
- It is complex for smaller organisations, but extremely useful for
large organisations.