Introduction to

Strategic Management

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Introduction to Management
 Introduction to Strategic Management
Strategy is the overall plan of a firm deploying its resources to
establish a favorable position and compete successfully
against its rivals. Strategy describes a framework for charging
a course of action. It explicates an approach for the company
that builds on its strengths and is a good fit with the firm’s
external environment. It is basically intended to help firms
achieve competitive advantage. The term ‘terrain’ is highly
relevant in explaining the concept of strategy more clearly.
From a business sense, terrain refers to markets, segments
and products used to win over customers. The essence of
strategy is to match strengths and distinctive competence with
terrain in such a way that one’s own business enjoys a
competitive advantage over rivals competing in the same
terrain. The term capabilities refer to the ability or capacity of a
bundle of resources deployed by a firm to perform an activity.

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 Connotation of Strategy
The concept of strategy is central to understanding the process
of strategic management. The term ‘strategy’ is derived from
the Greek word strategies, which means generalship – the
actual direction of military force, as distinct from the policy
governing its deployment. Therefore, the word ‘strategy’
literally means the art of the genera. The term ‘strategy’
proliferates in discussions of business. Scholars and
consultants have provided myriad models and frameworks for
analyzing strategic choice. The key issue that should unite all
discussion of strategy is a clear sense of an organization’s
objectives and a sense of how it will achieve these objectives. It
is also important that the organization has a clear sense of its
distinctiveness. In another words strategy is about achieving
competitive advantage through being different – delivering a
unique value added to the customer.

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 A Variety of Definitions of Strategy

Igor Ansoff defined as “The common thread among the

organization’s activities and product markets that defines the
essential nature of business that the organization was or planned to
be in future”.

Alfred D. Chandler defined strategy as “The determination of

the basic long-term goals and objectives of an enterprise and the
adoption of the courses of action and the allocation of resources
necessary for carrying out these goals”.

Kenneth Andrews defines as “The pattern of objectives,

purpose, goals, and the major policies and plans for achieving
these goals stated in such a way so as to define what business the
company is in or is to be and the kind of company it is or is to be”.

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 Rudiments of Strategy

Definitions of strategy have their roots in military strategy,

which defines itself in terms of drafting the plan of war, shaping
individual campaigns and, within these, deciding on individual
engagements with the enemy. Strategy in this military sense is
the art of war, or, more precisely, the art of the general – the
key decision maker. The analogy with business is that business
too is on a war footing as competition becomes more and more
fierce and survival more problematic. Companies and armies
have much in common. They both, for example, pursue
strategies of deterrence, offence, defense and alliance.

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 The Evolution of the Concept of Strategy

A word “strategy” has come from the original Greek word

“Strategeia”. Meaning of word “strategeia” is as; art to become
supreme army chief or its related science, commander in chief
directs its army and gets victory, keeps control over area under his
control, saves from attack of enemy and destroys their enemy also.
It is necessary to make various plans and programs, to exchange
required materials and recourses to achieve each object. According
to people of Greek, Strategy is from special matter as against
fighting war. Expert commander in chief has to maintain condition of
supply. Also it is to be decided, when to fight the war or not to fight.
For this, relations between people, politicians and leaders are
required to be kept into account. According to this in concept of
strategy, factors of planning and decision process are involved.

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 Levels of Strategy: Some Explanation
Distinctions

Although alignment of strategic initiatives is a corporate-wide

effort, considering strategy in terms of levels is a convenient way
to distinguish among the various responsibilities involved in
strategy formulation and implementation. A convenient way to
classify levels of strategy is to view corporate level strategy as
responsible for market definition, business-level strategy as
responsible for market navigation, and functional-level strategy as
the foundation that supports both of these enterprise strategy can
be formulated and implemented at three different levels:

• Corporate level
• Business unit level
• Functional or departmental level.

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 Corporate Level Strategy
Corporate level strategy fundamentally is concerned with selection of
businesses in which your company should compete and with
development and coordination of that portfolio of businesses.
Corporate level strategy is concerned with:

• Reach: Defining the issues that are corporate responsibilities.

These might include identifying the overall vision, mission and goals
of the corporation, the type of business incorporation should be involved,
and the way in which businesses will be integrated and managed.

• Competitive Contact: Defining where incorporation competition is

to be localized.

• Managing Activities and Business Interrelationships: Corporate

strategy seeks to develop synergies by sharing and coordinating staff
and other resources across business units, investing financial resources
across business units, and using business units to complement other
corporate business activities.
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 Corporate Portfolio Analysis
One way to think of corporate-level strategy is to compare it to an
individual managing a portfolio of investments. Just as the individual
investor must evaluate each individual investment in the portfolio to
determine whether or not the investment is currently performing to
expectations and what the future prospects are for the investment,
managers must make similar decisions about the current and future
performances of various businesses constituting the firm’s portfolio.
The Boston Consulting Group (BCG) matrix is a relatively simple
technique for assessing the performance of various segments of the
business.

The BCG matrix classifies business-unit performance on the basis of

the unit’s relative market share and the rate of market growth. Products
and their respective strategies fall into one of four quadrants. The
typical starting point for a new business is as a question mark. If the
product is new, it has no market share, but the predicted growth rate is
good. What typically happens in an organization is that management is
faced with a number of these types of products but with too few
resources to develop all of them.
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 Growth Strategies
Growth strategies are designed to expand an organization’s
performance, usually as measured by sales, profits, product mix,
market coverage, market share, or other accounting and market-
based variables. Typical growth strategies involve one or more of
the following:
• With a concentration strategy the firm attempts to achieve greater
market penetration by becoming highly efficient at servicing its market
with a limited product line.

• By using a vertical integration strategy, the firm attempts to expand the

scope of its current operations by undertaking business activities
formerly performed by one of its suppliers or by undertaking business
activities performed by a business in its channel of distribution.

• A diversification strategy entails moving into different markets or adding

different products to its mix. If the products or markets are related to
existing product or service offerings, the strategy is called concentric
diversification.
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 Stability Strategies
When firms are satisfied with their current rate of growth and profits,
they may decide to use a stability strategy. This strategy is essentially
a continuation of existing strategies. Such strategies are typically
found in industries having relatively stable environments. The firm is
often making a comfortable income operating a business that they
know, and see no need to make the psychological and financial
investment that would be required to undertake a growth strategy.
Business Unit Level Strategy
Business-level strategies are similar to corporate-strategies in that they
focus on overall performance. In contrast to corporate-level strategy,
however, they focus on only one rather than a portfolio of businesses. In
large multi-product or multi-industry organizations, individual business units
may be combined to form strategic business units (SBUs). An SBU
represents a group of related business divisions, each responsible to
corporate head-quarter for its own profits and losses. Each strategic
business unit will likely have its’ own competitors and its own unique
strategy.

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 Generic Strategies by Michael Porter
Michael Porter developed a framework of generic strategies that can be
applied to strategies for various products and services, or the individual
business-level strategies within a corporate portfolio. The strategies are
(1) overall cost leadership, (2) differentiation, and (3) focus on a
particular market niche. The generic strategies provide direction for
business units in designing incentive systems, control procedures,
operations, and interactions with suppliers and buyers, and with making
other product decisions.

Functional-level Strategies
Functional-level strategies are concerned with coordinating the
functional areas of the organization so that each functional area upholds
and contributes to individual business-level strategies and the overall
corporate-level strategy. This involves coordinating the various
functions and operations needed to design, manufacturer, deliver, and
support the product or service of each business within the corporate
portfolio.
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 Strategy Implementation and Realization
Systems and processes for successful implementation of
organizational strategy and business development plans. Despite the
experience of many organizations, it is possible to turn strategies and
plans into individual actions, necessary to produce a great business
performance. But it’s not easy. Most companies and organizations
know their businesses, and the strategies required for success.
However many corporations - especially large ones - struggle to
translate the theory into action plans that will enable the strategy to be
successfully implemented and sustained.

Strategy Realization: Essential Elements

Motivational leadership - concentrates on achieving sustained
performance through personal growth, values-based leadership and
planning that recognizes human dynamics turning strategy into action -
entails a phased approach, linking identified performance factors with
strategic initiatives and projects designed to develop and optimize
departmental and individual activities.
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 Role of Strategists
Strategists are individual or groups who are primarily involved in the
formulation, implementation, and evaluation of strategy. In a limited
sense, all managers are strategists. There are persons outside the
organization who are also involved in various aspects of strategic
management. They too are referred to as strategists.

Measuring the Effectiveness of the

Organizational Strategy
The Industrial Organization Approach Based on economic theory
deals with issues like competitive rivalry, resource allocation,
economies of scale Assumptions — rationality, self discipline behavior,
profit maximization The Sociological Approach Deals primarily with
human interactions Assumptions bounded rationality, satisfying
behavior, profit sub-optimality.

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 Organizational Strategy – Vision, Mission,
Competitive Advantage

The first critical element of organizational strategy is Vision,

Mission and Competitive Advantage, which describes the
business a company, is in; it’s current and long-term market
objectives.

• Focused Purpose
• Clearly defining short-term purpose
• Ensuring mission is realistic
• Serving the best interests of all stakeholders
• Defining a point of differentiation
• Future Perspective
• Clearly defining long-term outlook

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 Mission of the Organization
The concept of mission has become increasingly fashionable in
discussions of strategy. Indeed, some analysts go as far as asserting
that a good ‘mission statement’ can provide an actual worthwhile
alternative to the whole task of corporate planning. The definition of a
firm’s strategic mission encapsulated in the mission statement can be
thought of as the first stage of the strategy process. Management guru
Peter Drucker, the source of much contemporary thinking about
the business mission, argues that asking the question ‘What is our
business?’ is the same as asking the question ‘What is our mission?’ A
business is defined by its mission. Only a clear definition of the
mission of the organization makes possible clear and realistic
business objectives, because the mission defines the purpose of the
firm in terms of its enduring sense of its reason for being.

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 Understanding Mission

Formulation of Mission Statements

Mission Statement

Steps of Developing Effective Mission Statements

Characteristics of a Mission Statement

Mission Statement Criteria

Mission Statement Criteria

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 Vision v/s Mission

Organization mission statements have been around almost as long as

organizations. However, the concept of a vision for an organization is
relatively new. A vision is often confused with mission, goals,
statement of purpose, and many other terms used by organizations.
When used in the context used by agencies that really understand
vision, it is not the same as the other terms. A vision is the preferred
future, a desirable state, and ideal state. It is an expression of
optimism. A vision is a general statement encompassing the direction
an agency wants to take and the desired end result once it gets there.
It is the vision of what those involved what their organization to
become.

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 Strategic Management
Strategic management is the emerging discipline that forms the
theoretical framework for business policy. Strategic decision making is
carried out through the process of strategic management. Strategic
management is a continuous process of effectively relating the
organization’s objectives and resources to the opportunities in the
environment. Strategic management is a stream of decisions and
actions which lead to the development of an effective strategy or
strategies to a help achieve corporate objectives. Strategic
management is a process of formulating, implementing and evaluating
crossfunctional decisions that enable an organization to achieve its
objectives. Strategic management is all about understanding the
environment and organization better, looking and positioning the
company for a competitive advantage. This one educates the reader
on Strategic Management the SWOT analysis and Porter’s five forces
and the implications after applying the same in an organization.

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 Definitions of Strategic Management
Strategic management is a level of managerial activity under setting
goals and over tactics. Strategic management provides overall
direction to the enterprise and is closely related to the field of
organizational studies. In the field of business administration it is
useful to talk about “strategic alignment” between the organization and
its environment or “strategic consistency”.

History of Strategic Management

Most firms were happy focusing attention on their day-to-day, short-
term activities till 1930s. In an environment characterized by very little
competition, a functional orientation supported by budgeting and
control systems guided the fortunes of firms. The adhoc policy making
yielded ground to planned policy formulation and by 1940 the
emphasis shifted to the integration of functional areas in the context of
environmental demands. The period between 1960s and 1980s, was
characterized by rapid environmental changes and increased
complexity of business functions necessitating long range planning
and comprehensive business policies aimed at placing a firm in an
advantageous relationship to its environment.
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 Strategic Management & Corporate Social
Responsibility

The emerging field of strategic management began to feature

implementation and evaluation as critical components of
organizational success, rather than being preoccupied exclusively with
the analysis of the firm and its environment and the formulation of
strategies. Strategy researchers could be identified in this period as
having strategy content or strategy process approaches. One of the
most influential works in content research, in what is the right strategy,
was Rumelt’s categorization of diversification strategies. On the other
hand, there were authors who were concerned with the understanding
of the process of strategy creation, on how to develop a strategy.

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 Stakeholder Management & Corporate Social
Responsiveness

The notion of corporate social responsibility, considered to be overly

abstract and generic, began to be replaced, or complemented, by that
of “corporate social responsiveness” during the second part of the
1970s The idea of social responsiveness is that business must not
only respond to, but must also anticipate public concerns. The
concrete demands of society have to be discovered and answered.

The proponents of this concept sketched out a new, more pragmatic

way of linking strategy with society’s expectations and demands, in a
manner that could contribute more explicitly to the benefit of the
organization, or in Porter’s terminology, to attaining competitive
advantage.

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 Management by Objectives

Management by Objectives (MBO) is a process of agreeing upon

objectives within an organization so that management and employees
agree to the objectives and understand what they are in the
organization. The term “management by objectives” was first
popularized by Peter F. Drucker in his 1954 book ‘The Practice of
Management’. The essence of MBO is participative goal setting,
choosing course of actions and decision making. An important part of
the MBO is the measurement and the comparison of the employee’s
actual performance with the standards set.

Unique Features and Advantage of the MBO Process

The principle following MBO is basically for employees to have clarity
of the roles and responsibilities expected of them. They then
understand the objectives they must do and the overall achievement of
the organization. They also help with the personal goals of each
employee.

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 Difference between Strategic and
Operational Plans

Strategic planning and operational planning involve two different types

of thinking. Strategic decisions are fundamental and directional, and
over-arching. Operational decisions, on the other hand, primarily affect
the day-to-day implementation of strategic decisions. While strategic
decisions usually have longer-term implications, operational decisions
usually have immediate implications.

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 Strategic Planning

• Expects new trends, surprises and changes

• Views future as unpredictable
• Views planning as a continuous process
• Considers a range of possible futures & emphasizes strategy
development based on assessment of the organization’s internal

Operational Planning

• Assumes much more detailed planning regarding who and how

activities will be accomplished
• Views future as something that needs to be implemented now.
• Focuses on setting short-term objectives.

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