Module-1

Strategic
management

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 STRATEGY

“Strategy can be defined as the determination of basic

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

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Hierarchy of Strategy/Levels of Strategy
Three different levels of organisational strategy can be
clearly distinguished.

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1. Corporate level strategies
- Decisions are more value oriented, more conceptual and
less concrete than decisions at functional level.
- There is greater risk, cost, profit and flexibility.
- Ex: choice of business, dividend policies and sources of
long term financing.

2. Business unit level strategies

- These decisions are less costly, risky and potentially
profitable than corporate level decisions, but they are
more costly, risky and potentially profitable than
functional level decisions.
- This level is also known as SBU.
- Ex: decisions on plant location, market segmentation,
and geographic coverage.
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3. Functional level strategies
- It involves action oriented and operational issues and
relatively sort range and low risk.
- They incur only modest cost’s, because they are
dependent on available resources.
- Ex: some of decisions are like – generic v/s brand name
labeling; high v/s low inventory levels.

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Strategy, Policy and Tactics
Strategy
A company’s strategy consists of the combination of
competitive moves and business approaches that managers
employ to please customers, compete successfully, and
achieve organisational objectives.

Policy
Policies define how the company will deal with
stakeholders, employees, customers, suppliers,
distributors and other important groups.

Tactics
Tactics is the means by which strategy is carried out.
Miscellaneous\Strategy, Policy and Tactics.doc
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Business Model
A company’s business model is managements model of how
the strategies they pursue will allow the company to gain
competitive advantage and achieve superior profitability.

A company’s business model describes the basic means by

which it creates value, delivers value to consumers and
collects revenue from customers to make profit.

Business models are usually based on financial projections

of the pricing structure, unit sales volume, revenues, cost
structure, profit levels and profitability that the company
can attain if successfully implements its strategies and
meets its goals.

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Ex: Dell’s direct distribution business model is based on
the central idea that prices of PC’s can be lowered
through bypassing distributors and selling directly to
consumers.

Relationship between a company’s strategy and Business

Model
Miscellaneous\Strategy and Business Model.doc

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 STRATEGIC MANAGEMENT
“It is the continuous process of determining the mission
and goals of an organisation within the context of its
external environment and its internal strengths and
weaknesses, formulating and implementing strategies, and
exerting strategic control to ensure that the
organisations strategies are successful in attaining its
goals.”

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Importance of Strategic Management
 It ensures a rational allocation of resources
 Improves coordination between various divisions of the
organisation
 It helps managers to think ahead and anticipate
problems before they occur
 It establishes a continuous dialogue about the
organisations future between the hierarchical levels in
the organisation.
 It provides clarity of strategic vision for the
organisation
 It focuses on what is strategically important to the
organisation.
 It provides better understanding of the rapidly
changing business environment.
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Characteristics of Strategic Management
 It co-ordinates and integrates business activities
 It strengthens the competitive position
 It satisfies customers
 It works toward achieving performance targets
 It is adaptive

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 STRATEGIC PLANNING
 Plan or planning should precede action, and , strategic
planning should precede strategic management.
 Strategic planning (also called Corporate Planning)
provides the framework for all major decisions of an
enterprise – decisions on products, markets,
investments and organisational structure.
 A Strategic plan, is a blue print or document which
incorporates details regarding different elements of
strategic management.
 Strategic Planning is the process of deciding the
objectives of the organisation as a whole, formulating
strategies to achieve them and allocating resources to
execute the strategies.

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Features of Strategic Planning:
 Strategic Planning is planning for the company as a
whole.
 Strategic Planning is largely the responsibility of the
top management.
 Strategic Planning is mainly long-term in nature.
 Strategic Planning provides a framework for
operational planning and day to day decision-making.
 Strategic Planning involves choice among the broad
directions in which an organisation seeks to move.
 Strategic Planning relates the organisation to its
external environment.

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Strategic Planning Process
1.Defining the mission
2.SWOT Analysis
3.Identifying Strategic Alternatives
4.Choice of Strategy
5.Implementation and Follow up.

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Major concern areas of strategic planning in an
organisation:
1. SP is concerned with environment or rather, the fit
between the environment, the internal competencies and
business.
2. It is concerned with the portfolio of businesses a
company should have.
3. It is concerned with the future or the long-term
dynamics of an organisation rather than its day-to-day
operations.
4. It is concerned with growth – direction, pattern and
timing of growth.
5. Strategy is the main concern of SP.
6. It is intended to suggest to an organisation, measures
or capabilities required to face uncertainties to the
extent possible.
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Competitive Advantage
A company is said to have a competitive advantage over
its rivals when its profitability is greater than the
average profitability of all other firms.
The greater the extent to which a company’s profitability
exceeds the average profitability for its industry, the
greater is its competitive advantage.

Sustained Competitive Advantage

A company is said to have a sustained competitive
advantage when it is able to maintain above average
profitability for a number of years.
Dell computer had a significant and sustained competitive
advantage between 1996 and 2001.

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STRATEGIC MANAGEMENT PROCESS

External Analysis

Internal Analysis
Mission and Direction

Strategy Formulation

Strategy Implementation

Strategic Control

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 COMPONENTS OF STRATEGIC MANAGEMENT
MODEL
Miscellaneous\Strategic Management Model.docx
 Company Mission
 Internal Analysis
 External Environment
 Strategic Analysis and Choice
 Long Term Objectives
 Generic and Grand Strategies
 Action Plants and Short-term Objectives
 Functional Tactics
 Policies That Empower Action
 Restructuring, Reengineering, and Refocusing the
Organisation
 Strategic Control and Continuous Improvement
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