The core of general management

is strategy.

By: Michael E Porter

Unit 1:Strategic Planning

By Kumar Chandan
 Business Strategy
• Business strategy is a set of decisions and actions resulting in the
formulation and implementation of strategies designed to achieve the
objectives of an organization.

• For example: Kishor Biyani targets 40% sales growth of Future Group in
the financial year 2009-10. (Goal)

• What all future group is doing to achieve this target is called Strategy.

• It may be expansion (outlets, product mix, sales force), training to the

employees, mergers, acquisitions or joint ventures, restructuring in the
process and system, new more aggressive marketing plan or any other
activities.
• After deciding the combination of above activities, processes will be
defined, budgeting/financial planning will be done and they will be
implemented to achieve the goal.
 Strategy
• Originally, the word strategy has been derived from Greek ‘Strategos’,
which was evolved during 400 BC. This word means generalship. The word
strategy, therefore, means the art of the general (of worldwide scope or
applicability, applying to all or most members of a category or group, Not
specialized or limited to one class of things).

• The word strategy has entered the field of management more recently. At
first, the word was used in terms of Military Science to mean what a
manager does to offset actual or potential actions of competitors. It
refers to action that can be taken in the light of action taken by opposite
party. This word means science of guiding and directing military forces.
 Views of experts on Strategy
• Lack of unanimity has resulted into two broad categories of definitions: strategy as action inclusive of
objective setting and strategy as action exclusive of objective setting.

• Peter Drucker : Tomorrow always arrives. It is always different. And even the mightiest company is in
trouble if it has not worked on the future. Being surprised by what happens is a risk that
even the largest and richest company cannot afford, and the smallest business need not run.

• George David : If you don’t invest of the long term, there is no short term.

• Hoel Ross & Michael Kami: Without a strategy, a company is like a ship without a rudder, going around in
circles. It’s like a homeless person, it has no place to go.

• Confucius: If a man takes no thought about what is distant, he will find sorrow near at hand. He who will not
worry about what is far off will soon find something worse that worry.

• Toshiba Corporation: It is human nature to make decisions based on emotion, rather than fact. But nothing
could be more illogical.

• Peter Drucker : No business can do everything. Even if it has the money, it will never have enough good
people. It has to set priorities. The worse thing to do is a little bit of everything. This makes
sure that nothing is being accomplished. It is better to pick the wrong priority than none at
all.
 Definitions of Strategy
• Alfred D Chandler (1962) : The determination of the basic long-term goals
and objectives of an enterprise, the adoption of the courses of action and
the allocation of resources necessary for carrying out these goals.

• William F Glueck (1972) : A unified, comprehensive and integrated plan

designed to assure that the basic objectives of the enterprise are
achieved.

• Henry Mintzbeg (1987) : “A pattern in a stream of decisions and actions”.

• Mintzberg distinguishes between intended strategies and emergent

strategies. Intended strategies refer to the plans that managers develop,
while emergent strategies are the actions that actually take place over a
period of time.
 Definitions of Strategy cont..
Michael E Porter (1996) : Developing and communicating the company’s
unique position, making trade-offs and forging fit
among activities.
 a company’s unique position relates to choosing activities that are different from
those of the rivals or to performing similar activities in different ways.
 a sustainable strategic position requires a trade-off when the activities that a firm
performs are incompatible.
 creation of fit among the different activities is done to ensure that they relate to
each other.

• What is Coca-Cola’s strategy to go on to become a market leader?

• Is strategy static in nature or dynamic?

• The firm’s internal and external environment change over time, the
Strategy also changes consequently, the idea that strategy is dynamic is
inherent in our conception of strategic management.
 Summary of Definitions on Strategies
• Strategic management is understood as a process of formulating
objectives of an organization and developing methods to achieve them. It
is a process of designing a path and selecting one path, after due
evaluation of various alternatives for reaching a goal. The objective can be
in the form of a mission statement.

• Strategic management is the process of systematically analyzing various

opportunities and threats vis-à-vis organizational strengths and
weaknesses, formulating, and arriving at strategic choices through critical
evaluation of alternatives and implementing them to meet the set
objectives of the organization.
 Model of Strategic Management
 
Business Vision

Business Mission

Defining Goals and Objectives

Environment Appraisal

Development of Strategic Alternative

Implementation of Strategy

Evaluation of Strategy
 Working Model of Strategic Management

Vision & Developing

Scanning Implementa
Mission Strategic Evaluation
Environment tion
Statement Choices

Strategic Control
 Strategy and Tactics

• The major difference between strategy and tactics is that strategy

determines what major plans are to be undertaken and allocates
resources to them, while tactics, in contrast, is means by which previously
determined plans are executed.

• It can be understood better by analyzing military use of strategy and

tactics. They define Strategy as making use of battles in the furtherance
of the war’ and the tactics as ‘the use of armed forces in battle.
 Distinction between Strategy and Tactics
1. Level of Conduct: strategy is developed at the highest level of
management , where as Tactics is employed at and relates to lower
levels of management.

2. Periodicity: The formulation of strategy is both continuous and irregular.

The process is continuous but the timing of decision is irregular, where
as Tactics is determined on a periodic basis by various organizations. A
fixed timetable may be followed for this purpose, for example,
preparation of budgets at regular intervals.

3. Time Horizon: Strategy has a long-term perspective. In occasional cases,

it may have short-term duration depending on the nature and
requirement, its time horizon is flexible. On the other hand, time horizon
of tactics is short-run and definite. The duration is uniform, for example
budget preparation.
 Distinction between Strategy and Tactics contd..

4. Uncertainty: Element of uncertainty is higher in the case of strategy

formulation and its implementation. Tactical decisions are more certain
as these are taken within the framework set by the strategy. Thus,
evaluation of tactics is easier as compared to evaluation of a strategy.

5. Information Needs: The total possible range of alternatives from which a

manager can choose his strategic action is greater than tactics. Tactical
information is generated within the organization particularly from
accounting procedures and statistical sources.

6. Subjective Values: The formulation of strategy is affected considerably

by the personal values of the person involved in the process. On the
other hand, tactics is normally free from such values because this is to
.be taken within the context of strategic decisions.
 Distinction between Strategy and Tactics contd..
7. Importance: Strategies are most important factors of organization because
they decide the future course of action for the organization as a whole. On
the other hand, tactics are of less importance because they are concerned
with specific part of the organization.

8. Type of Personnel Involved in Formulation: strategic decisions are never

delegated below a certain level m the managerial hierarchy. Where as
Tactical decisions can be taken by personnel at lower levels because these
involve minute implementation of strategic decisions.

• Tactics is generated by strategy and may rightly be called sub-strategy.

What is one manager’s strategy is another manager’s tactics and vice-versa.
• Tactical plans at the headquarters may be termed as strategy at the
divisional levels. Thus, depending on the level of the organization, an action
may be strategic or tactical.
• The lines of demarcation between these two are blurred both conceptually
and operationally.
 Policy
• Policies are general statements or understandings which guide or channelize
thinking in decision making.

• Policies define how the company will deal with stakeholders, employees,
customers, suppliers, distributors, and other important groups. Policies
narrow the range of individual discretion so that employees act consistently
on important issues.

• A policy is the statement or general understanding which provides guidance

in decision making to members of an organisation in respect to any course of
action.
 Features of a policy can be identified

1. A policy provides guidelines to the members of the organization for

deciding a course of action and, thus, restricts their freedom of action.

2. Policy limits an area within which a decision is to be made and assures

that the decision will be consistent with and contributive to objectives.

3. Policies are generally expressed in qualitative, conditional, or general

way. The verbs most often used in stating policies are to maintain, to
continue, to follow, to adhere, to provide, to assist, to assure, to employ,
to make, to produce, or to be.
 Some facts about Policy

• Policy formulation is a function of all managers in the organization

because some form of guidelines for future course of action is required at
every level.

• However, higher is the level of a manager, more important is his role in

policy making.

• Similarly, policies may exist in all areas of the organization from major
organizational policies to minor policies applicable to the smallest
segment of the organization.
 Policy and Strategy: A Comparison

• Policy is a guideline for thinking and action of those who make decisions
while strategy is concerned with the direction in which human and
physical resources are deployed in order to maximize the chances of
achieving organizational objectives in the face of environmental variables.

• Policy is a contingent decision whereas strategy is a rule for making

decision. A contingent event is recognized because it is repetitive but the
specific occurrence cannot be specified.
Thank you