Unit – 1

Introduction to Strategic Management

Definition:
Strategic management is a comprehensive approach to
planning, implementing, and evaluating strategies that enable
an organization to achieve its long-term goals. It involves
analyzing the internal and external environment, formulating
strategies, allocating resources, and monitoring progress.
Nature of Strategic Management:
* Long-term focus: Strategic management is concerned with
the long-term direction and sustainability of an organization.
* Top-management responsibility: It is primarily the
responsibility of top management to formulate and implement
strategies.
* Interdisciplinary: Strategic management draws on various
disciplines, including economics, finance, marketing, and
operations management.
* Dynamic and adaptive: It requires flexibility and adaptability
to respond to changes in the external environment.
* Risk-taking: Strategic decisions often involve risk and
uncertainty.
Scope of Strategic Management:
Strategic management encompasses a wide range of activities,
including:
* Environmental analysis: Assessing the external and internal
environment of the organization.
* Strategy formulation: Developing strategies to achieve
organizational goals.
* Strategy implementation: Putting strategies into action.
* Strategy evaluation: Monitoring and evaluating the
performance of strategies.
Significance of Strategic Management:
* Improved performance: Strategic management helps
organizations achieve superior performance by aligning their
resources and capabilities with their goals.
* Competitive advantage: It enables organizations to gain a
competitive advantage by identifying and exploiting
opportunities.
* Risk mitigation: Strategic management helps organizations
identify and mitigate risks that could threaten their long-term
viability.
* Decision-making: It provides a framework for making sound
decisions.
* Resource allocation: It helps organizations allocate resources
effectively to achieve their goals.
Elements of Strategic Management:
* Vision: A long-term aspiration of what the organization wants
to become.
* Mission: A statement of the organization’s purpose and
reason for existence.
* Business Purpose: The fundamental reason for the
organization’s existence.
* Objectives: Specific, measurable, achievable, relevant, and
time-bound goals that support the mission and vision.
* Strategies: The means by which the organization intends to
achieve its objectives.
* Policies: Guidelines that govern decision-making and action.
* Programs: Specific plans of action to implement strategies.
 * Budgets: Financial plans that allocate resources to support
strategies.
* Procedures: Detailed steps to carry out specific tasks.
Processes of Strategic Management:
The strategic management process typically involves the
following steps:
* Strategic planning: Formulating strategies to achieve
organizational goals.
* Strategic implementation: Putting strategies into action.
* Strategic evaluation: Monitoring and evaluating the
performance of strategies.

Strategic Decision Making

Strategic decision-making is a critical process where
organizations make choices that significantly impact their long-
term direction and performance. These decisions are typically
complex, involving a high degree of uncertainty and risk. They
often require careful analysis, consideration of multiple factors,
and a long-term perspective.
Key Characteristics of Strategic Decisions:
* Long-term impact: Strategic decisions shape the future
trajectory of an organization.
* Significant resource commitment: They involve substantial
allocation of resources, such as finances, human capital, and
technology.
* High level of uncertainty: The future outcomes of strategic
decisions are often uncertain.
* Involve multiple stakeholders: Strategic decisions affect
various stakeholders, including employees, customers,
investors, and society.
Strategy
A strategy is a comprehensive plan that outlines how an
organization intends to achieve its long-term goals. It involves
making choices about how to allocate resources, prioritize
activities, and position the organization in the market.
Strategic Situation
A strategic situation refers to the specific circumstances and
conditions that an organization faces at a particular point in
time. It includes factors such as:
* Internal factors: Organizational strengths, weaknesses,
resources, and capabilities.
* External factors: Industry trends, technological
advancements, economic conditions, and regulatory
environment.
* Competitive landscape: The competitive intensity, market
structure, and the behavior of rivals.
Michael Porter’s Strategy and Criticism
Michael Porter, a renowned strategist, has made significant
contributions to the field of strategic management. His
framework, known as Porter’s Five Forces, is a widely used tool
for analyzing industry structure and competitive intensity.
Porter’s Five Forces:
* Threat of New Entrants: The ease with which new
competitors can enter the market.
* Bargaining Power of Suppliers: The ability of suppliers to
influence prices and terms.
* Bargaining Power of Buyers: The ability of customers to
negotiate favorable terms.
* Threat of Substitute Products or Services: The availability of
alternative products or services that can satisfy customer
needs.
 * Intensity of Rivalry Among Existing Competitors: The degree
of competition among existing firms in the industry.
Criticisms of Porter’s Framework:
While Porter’s framework is valuable, it has been criticized for
several reasons:
* Static nature: It assumes a relatively static industry structure,
which may not always be the case in dynamic markets.
* Industry-centric view: It focuses primarily on industry-level
factors, neglecting the importance of firm-specific resources
and capabilities.
* Limited consideration of strategic alliances and networks: It
may not fully capture the impact of collaborative relationships
between firms.
* Overemphasis on competition: It emphasizes competition as
the primary driver of industry dynamics, while cooperation and
innovation may also play significant roles.

Strategic Management Model

A strategic management model is a framework that outlines the
key steps involved in the strategic management process. While
there are various models, a common one includes the following
steps:
* Strategic Planning:
* Environmental Analysis: Assessing the internal and external
environment to identify strengths, weaknesses, opportunities,
and threats (SWOT analysis).
* Mission and Vision: Defining the organization’s purpose and
long-term goals.
* Objective Setting: Establishing specific, measurable,
achievable, relevant, and time-bound (SMART) objectives.
 * Strategy Formulation: Developing strategies to achieve the
objectives, such as growth, stability, or retrenchment.
* Strategic Implementation:
* Resource Allocation: Allocating resources to support the
chosen strategies.
* Organizational Structure: Designing an organizational
structure that aligns with the strategies.
* Leadership and Culture: Cultivating a strong leadership
team and a culture that supports the strategies.
* Operational Planning: Developing detailed plans for
implementing the strategies.
* Strategic Evaluation and Control:
* Performance Measurement: Monitoring performance against
the established objectives.
* Control Systems: Implementing control systems to ensure
that the strategies are on track.
* Evaluation: Evaluating the effectiveness of the strategies
and making necessary adjustments.
Corporate Planning
Corporate planning is a systematic process of formulating,
implementing, and evaluating strategies that guide an
organization’s overall direction. It involves a top-down
approach, where decisions are made at the corporate level and
then cascaded down to lower levels.
Planning Process
The planning process typically involves the following steps:
* Goal Setting: Defining clear and specific goals.
* Situation Analysis: Assessing the internal and external
environment.
 * Strategy Formulation: Developing strategies to achieve the
goals.
* Action Planning: Creating detailed action plans to implement
the strategies.
* Budgeting: Allocating resources to support the action plans.
* Implementation: Executing the plans and monitoring
progress.
* Evaluation and Control: Evaluating the results and making
adjustments as needed.
Types of Planning
* Strategic Planning: Long-term planning that focuses on the
overall direction of the organization.
* Tactical Planning: Medium-term planning that focuses on
implementing strategic plans.
* Operational Planning: Short-term planning that focuses on
day-to-day activities.
* Contingency Planning: Developing plans to deal with
unexpected events.
* Crisis Planning: Developing plans to respond to emergencies
or crises.

Unit – 2

External Factors
External factors are the forces and conditions outside an
organization that can influence its performance. These factors
can be categorized into two main groups:
* General Environment:
 * Economic Factors: Interest rates, inflation, exchange rates,
economic growth, unemployment rates, etc.
* Sociocultural Factors: Cultural norms, values, demographics,
lifestyle changes, etc.
* Technological Factors: Technological advancements, rate of
technological change, etc.
* Ecological Factors: Environmental issues, sustainability,
climate change, etc.
* Political/Legal Factors: Government regulations, tax policies,
political stability, etc.
* Industry Environment (Porter’s Five Forces):
* Threat of New Entrants: The ease with which new
competitors can enter the market.
* Bargaining Power of Suppliers: The ability of suppliers to
influence prices and terms.
* Bargaining Power of Buyers: The ability of customers to
negotiate favorable terms.
* Threat of Substitute Products or Services: The availability of
alternative products or services that can satisfy customer
needs.
* Intensity of Rivalry Among Existing Competitors: The degree
of competition among existing firms in the industry.
Balanced Scorecard
The Balanced Scorecard is a strategic performance
management tool that helps organizations translate their
strategic goals into operational measures. It provides a
balanced perspective by considering four key perspectives:
* Financial Perspective: Measures financial performance, such
as profitability, revenue growth, and return on investment.
* Customer Perspective: Measures customer satisfaction,
retention, and market share.
 * Internal Process Perspective: Measures operational efficiency,
quality, and innovation.
* Learning and Growth Perspective: Measures the
organization’s ability to learn, innovate, and improve.
Porter’s Five Force Model
As mentioned earlier, Porter’s Five Force Model is a framework
for analyzing the competitive intensity and attractiveness of an
industry. It helps organizations understand the competitive
landscape and identify opportunities and threats.
Firm’s Resources and Organization
A firm’s resources and organizational capabilities are its internal
strengths and weaknesses that can be used to achieve a
competitive advantage. These resources can be tangible or
intangible:
* Tangible Resources: Physical assets, such as plant,
equipment, and financial resources.
* Intangible Resources: Non-physical assets, such as brand
reputation, patents, and human capital.
* Organizational Capabilities: The ability to deploy resources
effectively, such as innovation, operational efficiency, and
customer service.

Capability Factors
Capability factors are the skills, knowledge, and abilities that an
organization possesses to perform activities efficiently and
effectively. These factors can be categorized into:
* Physical Resources: These are tangible assets such as plant,
equipment, and financial resources.
* Human Resources: These include the skills, knowledge, and
abilities of employees.
 * Organizational Capabilities: These are the routines and
processes that enable organizations to coordinate and deploy
resources effectively.
Sustaining Competitive Advantage through Resources and
Capabilities
To sustain a competitive advantage, organizations must
possess resources and capabilities that are:
* Valuable: They must contribute to the creation of value for
customers.
* Rare: They must be possessed by few or no competitors.
* Inimitable: They must be difficult to imitate or substitute.
* Non-substitutable: There must be no strategic equivalents.
By developing and leveraging these valuable, rare, inimitable,
and non-substitutable (VRIN) resources and capabilities,
organizations can create and sustain a competitive advantage.
Organization Appraisal
Organization appraisal is a systematic process of evaluating an
organization’s performance and identifying areas for
improvement. It involves assessing:
* Strategic Fit: How well the organization’s strategy aligns with
its external environment and internal resources.
* Organizational Culture: The values, beliefs, and behaviors
that shape the organization’s culture.
* Leadership: The effectiveness of the organization’s
leadership team.
* Human Resources: The organization’s ability to attract,
develop, and retain talent.
* Operational Efficiency: The organization’s ability to perform
activities efficiently and effectively.
Sustained Competitive Advantage
Sustained competitive advantage refers to the ability of an
organization to maintain a competitive advantage over a
prolonged period. To achieve this, organizations must:
* Continuous Innovation: Continuously develop new products,
services, and processes.
* Customer Focus: Prioritize customer needs and preferences.
* Operational Excellence: Strive for efficiency and quality in all
operations.
* Strategic Flexibility: Adapt to changing market conditions.
Management Controls and Implementing Strategies
Effective management controls are essential for implementing
strategies successfully. These controls help ensure that:
* Strategic Alignment: The organization’s activities are aligned
with its strategic goals.
* Performance Measurement: Key performance indicators are
established and monitored.
* Resource Allocation: Resources are allocated effectively to
support strategic initiatives.
* Risk Management: Potential risks are identified and
mitigated.
By implementing effective management controls, organizations
can increase the likelihood of achieving their strategic
objectives.

Business Strategy and Competitive Advantage

Business Strategy
A business strategy is a comprehensive plan that outlines how
a company intends to achieve its long-term goals. It involves
making strategic decisions about how to allocate resources,
prioritize activities, and position the company in the market.
Key Components of a Business Strategy
* Mission and Vision: A clear articulation of the company’s
purpose and future aspirations.
* SWOT Analysis: An assessment of the company’s internal
strengths and weaknesses, as well as external opportunities
and threats.
* Strategic Objectives: Specific, measurable, achievable,
relevant, and time-bound (SMART) goals.
* Strategic Initiatives: The specific actions and projects that will
be undertaken to achieve the strategic objectives.
* Performance Measurement: Key performance indicators
(KPIs) to track progress and evaluate the effectiveness of the
strategy.
Competitive Advantage
A competitive advantage is a factor that allows a company to
outperform its competitors. It can be a unique characteristic
that sets the company apart from its rivals, such as a lower cost
structure, superior quality, or innovative products.
Types of Competitive Advantage
* Cost Leadership: Offering products or services at a lower cost
than competitors.
* Differentiation: Offering unique products or services that
customers value.
* Focus: Targeting a specific niche market and serving it better
than competitors.
Sustaining Competitive Advantage
To sustain a competitive advantage, companies must
continuously innovate, adapt to changing market conditions,
and protect their valuable resources and capabilities. Some
strategies for sustaining competitive advantage include:
* Product Innovation: Developing new products or services to
meet evolving customer needs.
* Process Innovation: Improving operational efficiency and
reducing costs.
* Brand Building: Creating a strong brand reputation and
customer loyalty.
* Strategic Alliances: Partnering with other companies to gain
access to new markets or technologies.
* Intellectual Property: Protecting innovative ideas and
technologies through patents and copyrights.

Global Strategies and Multinational Corporations

Defining the Multinational Enterprise
A multinational enterprise (MNE) is a corporation that operates
in multiple countries, often with a centralized management
structure. These companies have significant operations and
investments in foreign countries, allowing them to leverage
global resources and markets.
Motives for Internationalization
There are several reasons why companies choose to
internationalize:
* Market Seeking: Expanding into new markets to reach a
larger customer base and increase sales.
* Resource Seeking: Accessing raw materials, labor, or other
resources that are not readily available in the domestic market.
* Efficiency Seeking: Reducing costs through economies of
scale, scope, and experience curve effects.
* Strategic Asset Seeking: Acquiring valuable assets, such as
technology, brands, or distribution networks.
Integration-Responsiveness Framework
The integration-responsiveness framework is a strategic
framework that helps MNEs balance global integration and local
responsiveness. It identifies four primary global strategies:
* Global Strategy:
* High integration, low responsiveness
* Focus on efficiency and standardization
* Centralized decision-making
* Products are standardized for global markets
* Examples: Technology companies like Apple and Samsung
* International Strategy:
* Low integration, low responsiveness
* Focus on exporting products from the domestic market
* Limited customization for foreign markets
* Centralized decision-making
* Examples: Luxury brands like Rolex and Gucci
* Transnational Strategy:
* High integration, high responsiveness
* Balance global efficiency and local responsiveness
* Decentralized decision-making
* Products are adapted to local markets
* Examples: Automotive companies like Toyota and
Volkswagen
* Multidomestic Strategy:
* Low integration, high responsiveness
* Focus on adapting products and services to local markets
* Decentralized decision-making
 * Examples: Consumer goods companies like Nestlé and
Unilever

Aligning Strategy and Organizational Structure

Aligning strategy and structure is a critical aspect of effective
organizational design. The structure of an organization should
support its strategy. A mismatch between the two can lead to
inefficiencies, poor performance, and a loss of competitive
advantage.
Mechanistic and Organic Structures
Two common types of organizational structures are mechanistic
and organic structures:
* Mechanistic Structures:
* Highly centralized authority
* Rigid rules and procedures
* Specialized tasks
* Formal communication channels
* Suitable for stable environments with predictable demands
* Organic Structures:
* Decentralized authority
* Flexible rules and procedures
* Cross-functional teams
* Informal communication channels
* Suitable for dynamic environments with unpredictable
demands
Dimensions of Structure
Several dimensions can be used to characterize organizational
structures:
 * Centralization: The degree to which decision-making
authority is concentrated at the top of the organization.
* Formalization: The extent to which rules, procedures, and job
descriptions are written and formalized.
* Specialization: The degree to which tasks are divided into
specific jobs.
* Standardization: The extent to which work processes are
standardized.
* Complexity: The number of different departments and
hierarchical levels in the organization.
Common Organizational Structures
* Functional Structure:
* Groups employees based on their functional expertise (e.g.,
marketing, finance, operations)
* Suitable for small to medium-sized organizations with a
narrow product line
* Divisional Structure:
* Divides the organization into self-contained divisions based
on product, geographic area, or customer segment
* Suitable for large organizations with diverse product lines or
geographic markets
* Matrix Structure:
* Combines functional and divisional structures
* Employees report to both a functional manager and a
project manager
* Suitable for complex projects or organizations with a need
for both functional expertise and project focus
* Network Structure:
* A loosely coupled network of organizations that collaborate
to achieve a common goal
 * Suitable for organizations that need to respond quickly to
changing market conditions
Choosing a Business Unit Structure Based on Strategic
Objectives
The choice of business unit structure depends on the
organization’s strategic objectives. Some common strategies
and their corresponding structures include:
* Growth Strategy: A divisional structure can be effective for
managing diverse product lines or geographic markets.
* Cost Leadership Strategy: A functional structure can help to
achieve economies of scale and reduce costs.
* Differentiation Strategy: A matrix structure can facilitate
cross-functional collaboration and innovation.
Autonomous Units: Detecting and Reacting to Change
Autonomous units are self-governing units within an
organization that have the authority to make decisions and take
action. These units can be effective in detecting and responding
to changes in the external environment.
To effectively detect and react to change, autonomous units
should:
* Monitor the environment: Stay informed about industry
trends, customer needs, and competitive activities.
* Encourage innovation: Foster a culture of creativity and
experimentation.
* Empower employees: Give employees the authority to make
decisions and take action.
* Establish strong communication channels: Facilitate the flow
of information between units and levels of the organization.
* Measure performance: Use performance metrics to track
progress and identify areas for improvement.
Corporate Portfolio Analysis
Corporate portfolio analysis is a strategic management tool
used to evaluate the performance of a company’s different
business units. It helps companies allocate resources effectively
and prioritize investments.
Popular Models:
* Boston Consulting Group (BCG) Matrix:
* Stars: High market growth, high market share
* Cash Cows: Low market growth, high market share
* Question Marks: High market growth, low market share
* Dogs: Low market growth, low market share
* General Electric (GE) Nine-Cell Matrix:
* Evaluates business units based on industry attractiveness
and business strength.
Issues in Strategic Implementation
Strategic implementation is the process of putting a strategy
into action. Several issues can hinder successful
implementation:
* Lack of Commitment and Support: If top management is not
committed to the strategy, it will be difficult to gain support
from other employees.
* Poor Planning and Organization: Without a clear plan and
effective organization, implementation can be chaotic.
* Insufficient Resources: Lack of adequate resources, such as
budget, personnel, or technology, can hinder implementation.
* Inadequate Leadership: A lack of strong leadership can derail
the implementation process.
* Resistance to Change: Employees may resist change,
especially if it threatens their jobs or routines.
Model of Strategic Implementation
A common model of strategic implementation involves the
following steps:
* Formulation of Strategy: Develop a clear and concise
strategy.
* Resource Allocation: Allocate necessary resources to support
the strategy.
* Structural Design: Design an organizational structure that
aligns with the strategy.
* Cultural Change: Foster a culture that supports the strategy.
* Leadership and Management: Provide strong leadership and
effective management.
* Control and Evaluation: Monitor progress and make
necessary adjustments.
Strategic Management for Non-Profit Organizations
Non-profit organizations face unique challenges in strategic
management, including:
* Multiple Stakeholders: Balancing the needs of diverse
stakeholders, such as donors, volunteers, and clients.
* Limited Resources: Often operating with limited budgets and
resources.
* Social Impact: Measuring and evaluating social impact can be
complex.
* Regulatory Environment: Compliance with regulations and
reporting requirements.
However, strategic management principles can still be applied
to non-profit organizations. Key considerations include:
* Mission and Vision: A clear and compelling mission and
vision.
* Strategic Planning: A systematic process of setting goals and
developing strategies.
* Resource Allocation: Effective allocation of limited resources.
* Performance Measurement: Tracking and evaluating
performance.
* Fundraising and Partnerships: Developing sustainable funding
sources and strategic partnerships.

Unit – 3

Strategic Choice and Competitive Advantage

Strategic choice involves selecting the best course of action to
achieve an organization’s goals. This requires careful analysis
of the internal and external environment, and a clear
understanding of the organization’s strengths, weaknesses,
opportunities, and threats (SWOT).
The BCG Matrix: A Tool for Strategic Choice
The Boston Consulting Group (BCG) Matrix is a popular tool for
analyzing a company’s product portfolio. It categorizes products
into four quadrants based on market growth rate and relative
market share:
* Stars: High-growth, high-share products that require
significant investment to maintain their market position.
* Cash Cows: Low-growth, high-share products that generate
significant cash flow.
* Question Marks: High-growth, low-share products that require
careful evaluation to determine their future potential.
* Dogs: Low-growth, low-share products that may generate
little cash and require significant investment to maintain their
position.
By understanding the position of each product or business unit
in the matrix, companies can make strategic choices about
resource allocation, investment, and divestment.
Sustained Competitive Advantage
Sustained competitive advantage is the ability of a company to
outperform its competitors over a prolonged period. It is
achieved by developing and maintaining unique resources and
capabilities that are valuable, rare, inimitable, and non-
substitutable (VRIN).
Key Strategies for Sustaining Competitive Advantage:
* Cost Leadership: Becoming the lowest-cost producer in an
industry.
* Differentiation: Offering unique products or services that
customers value.
* Focus: Targeting a specific niche market and serving it better
than competitors.
* Innovation: Continuously developing new products, services,
or processes.
* Building Strong Brands: Creating strong brand equity and
customer loyalty.
To sustain a competitive advantage, companies must:
* Continuously innovate: Develop new products, services, and
processes.
* Invest in R&D: Allocate resources to research and
development.
* Build Strong Relationships with Customers and Suppliers:
Foster long-term partnerships.
* Protect Intellectual Property: Safeguard valuable assets like
patents and trademarks.
* Adapt to Change: Be agile and responsive to changes in the
market.

Strategic Implementation
Strategic implementation is the process of putting a strategy
into action. It involves translating strategic plans into
operational activities and ensuring that the organization has
the necessary resources, capabilities, and organizational
structures to execute the strategy effectively.
Performance Management Systems
Performance management systems are critical for strategic
implementation. They provide a framework for:
* Setting clear objectives: Aligning individual and team
objectives with the overall strategy.
* Monitoring progress: Tracking performance and identifying
areas for improvement.
* Providing feedback: Offering regular feedback to employees
to help them develop and improve.
* Rewarding performance: Recognizing and rewarding
employees for their contributions to the organization’s success.
Objectives and Measures
To effectively implement a strategy, it is essential to set clear
and measurable objectives. These objectives should be:
* Specific: Clearly defined and easy to understand.
* Measurable: Quantifiable and trackable.
* Achievable: Realistic and attainable.
* Relevant: Aligned with the organization’s overall strategy.
* Time-bound: Having a specific deadline for completion.
Key performance indicators (KPIs) are used to measure
progress toward these objectives.
Aligning Strategy and Organizational Structure
The organizational structure should support the strategy. This
involves:
 * Centralization vs. Decentralization: Determining the
appropriate level of decision-making authority.
* Functional vs. Divisional Structures: Choosing the most
suitable structure based on the organization’s business model
and strategy.
* Matrix Structures: Balancing functional and project-based
work.
* Network Structures: Leveraging external partners and
resources.
Communicating the Strategy Within the Organization
Effective communication is crucial for successful
implementation. Key communication strategies include:
* Leadership Communication: Clear and consistent
communication from top management.
* Cascading the Strategy: Breaking down the strategy into
smaller, more manageable components.
* Town Hall Meetings: Creating opportunities for open dialogue
and feedback.
* Intranet and Other Digital Tools: Using technology to
disseminate information and facilitate collaboration.
Managing Resistance and Other Implementation Risks
Resistance to change is a common challenge in strategic
implementation. To manage resistance, organizations can:
* Involve Employees: Involve employees in the decision-
making process.
* Communicate Effectively: Provide clear and honest
communication.
* Provide Training and Support: Equip employees with the
necessary skills and knowledge.
* Offer Incentives: Reward employees for their efforts and
contributions.
Other implementation risks include:
* Resource Constraints: Insufficient resources to support the
strategy.
* Lack of Competencies: A shortage of skilled employees.
* External Factors: Economic downturns, regulatory changes,
and competitive pressures.
Informal Networks for Implementation
Informal networks, such as social relationships and personal
connections, can play a significant role in strategic
implementation. These networks can:
* Facilitate Communication: Promote the flow of information
and ideas.
* Build Relationships: Foster trust and cooperation among
employees.
* Resolve Conflicts: Help to address disagreements and
misunderstandings.
* Accelerate Decision-Making: Speed up the decision-making
process.

Fundamentals of Global Strategy

Global Strategy is a strategy that aims to achieve a competitive
advantage in the global marketplace. It involves making
decisions about how to allocate resources and capabilities
across different countries to maximize the organization’s
overall performance.
Key Concepts in Global Strategy
* Global Integration: The degree to which activities and
decisions are coordinated across different countries.
* Local Responsiveness: The degree to which products and
services are adapted to local market conditions.
 * Global Efficiency: The ability to achieve economies of scale
and scope through global operations.
* Global Learning: The ability to learn from experiences in
different markets and apply that knowledge to other markets.
Competing in a Global World
To compete effectively in the global marketplace, organizations
must consider several factors:
* Cultural Differences: Understanding and adapting to cultural
nuances is crucial.
* Economic Conditions: Economic factors such as exchange
rates, inflation, and GDP growth can significantly impact
business operations.
* Political and Legal Factors: Political stability, government
regulations, and trade policies can create challenges and
opportunities.
* Technological Factors: Rapid technological advancements can
disrupt industries and create new opportunities.
* Competitive Intensity: The level of competition from domestic
and international firms.
Meet e-Types – A 21st Century Creative Company
e-Types is a global creative agency that specializes in digital
marketing and branding. To succeed in the global market, e-
Types has adopted a transnational strategy. This strategy
balances global integration and local responsiveness by:
* Centralizing Core Functions: Key functions like creative
direction, strategy, and technology are centralized to ensure
consistency and efficiency.
* Decentralizing Local Operations: Local offices have autonomy
to adapt to specific market needs and cultural nuances.
 * Knowledge Sharing: Encouraging knowledge sharing and
collaboration between different offices to foster innovation and
best practices.
* Global Brand Identity: Maintaining a strong global brand
identity while allowing for local adaptations.

Strategic Decision Making

Strategic decision-making is a complex process involving the
selection of a course of action to achieve long-term goals. It
often involves significant uncertainty and risk, and requires
careful analysis and consideration of multiple factors.
Homo Economicus and Bounded Rationality
Two key concepts in understanding strategic decision-making
are:
* Homo Economicus: This is the traditional economic model of
human behavior, which assumes that individuals are rational,
self-interested, and make decisions to maximize their utility. In
the context of strategic decision-making, this model suggests
that decision-makers are perfectly informed and can make
optimal choices.
* Bounded Rationality: This concept, proposed by Herbert
Simon, recognizes that human decision-making is limited by
cognitive constraints. Individuals have limited information-
processing capabilities and often rely on heuristics and biases
to make decisions.
Cognitive Limitations
Cognitive limitations can significantly impact strategic decision-
making. Some common cognitive biases that can influence
decision-making include:
* Confirmation bias: The tendency to seek information that
confirms existing beliefs and ignore contradictory evidence.
 * Overconfidence bias: The tendency to overestimate one’s
abilities and knowledge.
* Anchoring bias: The tendency to rely too heavily on the first
piece of information encountered.
* Framing bias: The tendency to be influenced by how
information is presented.
* Sunk cost fallacy: The tendency to continue investing in a
losing course of action because of past investments.
Strategy as Forecasting
Strategy can be viewed as a form of forecasting. It involves
making predictions about future trends and conditions.
However, the future is inherently uncertain, and accurate
forecasting is challenging. To mitigate the risks associated with
uncertainty, organizations can use various techniques, such as:
* Scenario planning: Developing multiple scenarios to
anticipate different future possibilities.
* Sensitivity analysis: Assessing the impact of different
variables on the outcome of a decision.
* Risk assessment: Identifying and evaluating potential risks.

Directional Policy Matrix (DPM)

The Directional Policy Matrix (DPM) is a strategic planning tool
used to analyze a company’s Strategic Business Units (SBUs)
based on their market attractiveness and business strength. It
helps in making strategic decisions about resource allocation
and portfolio management.
Key Components of DPM:
* Market Attractiveness: This dimension considers factors like
market size, growth rate, profitability, and competitive intensity.
 * Business Strength: This dimension considers factors like
market share, brand reputation, product quality, and cost
efficiency.
Strategic Implications of DPM:
* Invest: SBUs in high-attractiveness and high-strength
quadrants are prime candidates for investment.
* Grow: SBUs in high-attractiveness but low-strength quadrants
require significant investment to improve their competitive
position.
* Harvest: SBUs in low-attractiveness but high-strength
quadrants can be milked for cash to fund other initiatives.
* Divest: SBUs in low-attractiveness and low-strength
quadrants are often candidates for divestiture.
Symptoms of Malfunctioning of Strategy
Several symptoms can indicate that a strategy is not working
as intended:
* Poor Performance: Declining financial performance, market
share, or customer satisfaction.
* Internal Conflict: Disagreements among employees or
departments regarding strategic direction.
* Lack of Focus: The organization is pursuing too many
initiatives without clear priorities.
* Resistance to Change: Employees are resistant to new ideas
and strategies.
* Ineffective Implementation: The strategy is not being
effectively implemented due to poor planning or execution.
Operations Control and Strategic Control
* Operations Control: This focuses on monitoring and
controlling day-to-day activities to ensure they align with
strategic plans. It involves setting standards, measuring
performance, and taking corrective action.
 * Strategic Control: This involves monitoring the overall
performance of the organization and making adjustments to the
strategy as needed. It includes assessing the effectiveness of
the strategy, identifying emerging opportunities and threats,
and realigning the strategy to changing conditions.
Strategic Evaluation
Strategic evaluation is a systematic process of assessing the
effectiveness of a strategy. It involves:
* Setting Performance Standards: Establishing clear and
measurable performance targets.
* Measuring Performance: Collecting data on key performance
indicators (KPIs).
* Comparing Actual Performance to Standards: Identifying any
deviations.
* Analyzing Deviations: Determining the root causes of
performance gaps.
* Taking Corrective Action: Implementing corrective measures
to address performance issues.
* Learning and Adaptation: Using the evaluation process to
learn from mistakes and improve future strategies.