UNIT 1 CONCEPT OF STRATEGY

OBJECTIVES

After reading this unit you should be able to:

• Define strategy and understand its meaning

• Understand the essence of strategy.
• Distinguish b/w strategy, policy, tactics, programmes, procedures and rules.
• Understand strategic decisions and its difference with operational decisions.
• Understand different levels of strategy.
• Know the importance of strategy.

STRUCTURE

1.1 Introduction
1.2 Meaning of Strategy
1.3 Nature of Strategy
1.4 Essence of Strategy
1.5 Strategy v/s Policy and Tactics
1.6 Strategy v/s Programmes, Procedure, Rules
1.7 Levels of Strategy
1.8 Importance of Strategy
1.9 Summary
1.10 Key Words
1.11 Self Assessments Questions
1.12 Further Readings

1.1 INTRODUCTION

The top management of an organization is concerned with selection of a course of action

from among different alternatives to meet the organizational objectives. The process by
which objectives are formulated and achieved is known as strategic management and
strategy act as the means to achieve the objective. Strategy is the grand design or an
overall ‘plan’ which an organization chooses in order to move or react towards the
set objectives by using its resources. Strategies most often devote a general programme
of action and an implied deployment of emphasis and resources to attain comprehensive
objectives. An organization is considered efficient and operationally effective if it is
characterized by coordination between objectives and strategies. There has to be
integration of the parts into a whole. Strategy helps the organization to meet its uncertain
situations with due diligence. Without a strategy, the organization is like a ship without a
rudder. It is like a tramp, which has no particular destination to go to. Without an
appropriate strategy effectively implemented, the future is always dark and hence, more
are the chances of business failure.

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1.2 MEANING OF STRATEGY

The word ‘strategy’ has entered in the field of management from military where it refers
to apply the forces against an enemy to win a war. Originally, the word strategy has been
derived from Greek ‘strategos’ which means generalship. The word was used first time
around 400 BC. The word strategy means the art of the general to fight in war.

The dictionary meaning of strategy is, “the art of so moving or disposing the instrument
of warfare as to impose upon enemy, the place time and conditions for fighting by one
self.”

In management, the concept of strategy is taken in more broader terms. According

Glueck, “Strategy is the unified, comprehensive and integrated plan that relates the
strategic advantage of the firm to the challenges of the environment and is designed
to ensure that basic objectives of the enterprise are achieved through proper
implementation process.”

It lays stress on the following:

a) Unified comprehensive and integrated plan.

b) Strategic advantage is related to challenges of environment.
c) Proper implementation ensures achievement of basic objectives.

Another definition of strategy is given below which also relates strategy to its
environment. “ Strategy is organization’s pattern of response to its environment over
a period of time to achieve its goals and mission.”

This definition lays stress on the following:

a) It is organization’s pattern of response to its environment.

b) The objective is to achieve its goals and mission.

However, various experts do not agree about the precise scope of strategy. Lack of
consensus has lead to two broad categories of definitions: strategy as action inclusive of
objective setting and strategy as action exclusive of objective setting.

Strategy As Action Inclusive of Objective Setting

In 1960s, chandler made an attempt to define strategy as “the determination of basic

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

This definition provides for three types of actions involved in strategy:

i) Determination of long term goals objectives

ii) Adoption of courses of action
iii) Allocation of resources.

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Strategy As Action Exclusive of Objective Setting

This is another view in which strategy has been defined. It states that strategy is a way in
which the firm, reacting to its environment, deploys its principal resources and marshalls
its efforts in pursuit of its purpose. Michael Porter has defined strategy as “Creation of a
unique and valued position involving a different set of actives. The company that is
strategically positioned performs different activities from rivals or performs similar
activities in different ways.”

The people who believe this version of the definition call strategy a unified,
comprehensive and integrated plan relating to the strategic advantages of the firm to the
challenges of the environment.

After considering both the views, strategy can simply be put as management’s plan for
achieving its objectives. It basically includes determination and evaluation of alternative
paths to an already established mission or objective and eventually, choice of best
alternative to be adopted.

1.3 NATURE OF STRATEGY

Based on the above definitions, we can understand the nature of strategy. A few aspects
regarding nature of strategy is a follows:

• Strategy is a major course of action through which an organization relates itself to

its environment particularly the external factors to facilitate all actions involved in
meeting the objective of the organization.
• Strategy is the blend of internal and external factors. To meet the opportunities and
threats provided by the external factors, internal factors are matched with them.
• Strategy is the combination of actions aimed to meet a particular condition, to solve
certain problems or to achieve a desirable end. The actions are different for
different situations.
• Due to its dependence on environmental variables, strategy may involve a
contradictory action. An organization may take contradictory actions either
simultaneously or with a gap of time. For example, a firm is engaged in closing
down of some of its business and at the same time expanding some.
• Strategy is future oriented. Strategy actions are required for new situations which
have not arisen before in the past.
• Strategy requires some systems and norms for its efficient adoption in any
organization.
• Strategy provides overall framework for guiding enterprise thinking and action.

The purpose of strategy is to determine and communicate a picture of enterprise through a

system of major objectives and policies. Strategy is concerned with a unified direction and
efficient allocation of an organization’s resources. A well made strategy guides managerial
action and thought. It provides an integrated approach for the organization and aids in
meeting the challenges posed by environment.

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1.4 ESSENCE OF STRATEGY

Strategy, according to a survey conducted in 1974, includes the determination and

evaluation of alternative paths to an already established mission or objective and
eventually, choice of the alternative to be adopted. Strategy is characterized by four
important aspects.

• Long term objectives

• Competitive Advantage
• Vector
• Synergy

LONG TERM OBJECTIVES

Strategy is formulated keeping in mind the long term objectives of the organization. It is
so because it emphasizes on long term growth and development. Strategy is future
oriented and therefore concerned with the objectives which have a long term perspective.
The objectives give directions for implementing a strategy.

COMPETITIVE ADVANTAGE

Whenever strategy is formulated, managers have to keep in mind the competitors of the
organization. The environment has to be continuously monitored for forming a strategy.
Strategy has to be made in a sense that the firm may have competitive advantage. It makes
the organization competent enough to meet the external threats and profit from the
environmental opportunities. The changes that take place over a period of time in the
environment have made the use of strategy more beneficial. While making plans, competitors
may be ignored but in making strategy competitors are given due importance.

VECTOR

Strategy involves adoptions of the course of action and allocation of resource for meeting
the long term objectives. From among the various courses of action available, the,
managers have to choose the one which utilizes the resources of the organization in the
best possible manner and helps in the achievement of the organizational objectives. A
series of decisions are taken and they are in the same direction.

Strategy provides direction to the whole organization. When the objective have been set, they
bring about clarity to the whole organization. They provide clear direction to persons in the
organization who are responsible for implementing the various courses of action. Most
people perform better if they know clearly what they are expected to do and where the
organization is going.

SYNERGY

Once we take a series of decisions to accomplish the objectives in the same direction there
will be synergy. Strategies boost the prospects by providing synergy.

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Activity 1

1. Ask the managers of three organizations about their perception regarding concept of
strategy.

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2. Explain the term vector. How is it important in decision making?

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3. Discuss the nature of strategy.

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1.5 STRATEGY V/S POLICIES AND TACTICS

In this subsection, the concept of strategy is compared with concept of policies and tactics.

• STRATEGY V/S POLICIES

Strategy has often been used as a synonym of policy. However, both are different and should
not be used interchangeably.

Policy is the guideline for decisions and actions on the part of subordinates. It is a general
statement of understanding made for achievement of objectives. Policies are statements or a
commonly accepted understandings of decision making. They are thought oriented. Power is
delegated to the subordinates for implementation of policies. In general terms, policy is
concerned with course of action chosen for the fulfillment of the set objectives. It is an
overall guide that governs and controls managerial actions. Policies may be general or
specific, organizational or functional, written or implied. They should be clear and consistent.
Policies have to be integrated so that strategy is implemented successfully and effectively.
For example, when the performance of two employees is similar, the promotion policy may
require the promotion of the senior employee and hence he would be eligible for promotion.

Strategies on the other hand are concerned with the direction in which human and physical
resources are deployed and applied in order to maximize the chances of achieving
organizational objectives in the face of environmental variable. Strategies are specific actions
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suggested to achieve the objectives. Strategies are action oriented and everyone in the
organization are empowered to implement them. Strategy cannot be delegated downward
because it may require last minute decisions.

Strategies and polices both are the means towards the end. In other words, both are directed
towards meeting organizational objectives. Strategy is a rule for making decision while
policy is contingent decision.

• STRATEGY V/S TACTICS

Strategies are on one end of the organizational decisions spectrum while tactics lie on the
other end.

Carl Von Clausewitz, a Prussian army general and military scientist defines military
strategy as ‘making use of battles in the furtherance of the war and the tactics as “the use of
armed forces in battle”. A few points of distinction between the two are as follows:

(i) Strategy determines the major plans to be undertaken while tactics is the means by
which previously determined plans are executed.

(ii) The basic goal of strategy according to military science is to break the will of the army,
deprive the enemy of the means to fight, occupy his territory, destroy or obtain control
of his resources or make him surrender. The goal of tactics is to achieve success in a
given action and this forms one part of a group of related military action.

(iii) Tactics decisions can be delegated to all the levels of an organization while strategic
decisions can not be delegated too low in the organization. The authority is not
delegated below the levels than those which possess the perspective required for taking
decisions effectively.

(iv) Strategy is formulated in both a continuous as well as irregular manner. The decisions
are taken on the basis of opportunities, new ideas etc. Tactics is determined on a
periodic basis by various organizations. A fixed time table may be made for following
tactics.

(v) Strategy has a long term perspective and occasionally it may have a short term
duration. Thus, the time horizon in terms of strategy is flexible but in case of tactics, it
is short run and definite.

(vi) The decisions taken as part of strategy formulation and implementation have a high
element of uncertainty and are taken under the conditions of partial ignorance. In
contrast tactical decisions are more certain as they work upon the framework set by the
strategy. So the evaluation of strategy is difficult than the evaluation of tactics.

(vii) Since an attempt is made in strategy to relate the organization with its environment, the
requirement of information is more than that required in tactics. Tactics uses
information available internally in an organization.

(viii) The formulation of strategy is affected considerably by the personal values of the
person involved in the process but the same is not the case in tactics implementation.

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(ix) Strategies are the most important factor of organization because they decide the future
course of action for organization as a whole. On the other hand tactics are of less
importance because they are concerned with specific part of the organization.

Activity 2

1. List the policies of any organization and also state the strategies it undertook.

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2. Distinguish between strategy and tactics.

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3. Distinguish between strategy and policy.

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1.6 STRATEGY AND PROGRAMMES, PROCEDURE & RULES

In this subsection, the relation ship of strategy is explained with programmes, procedure
and rules.

• PROGRAMMES

A programme is a single use comprehensive plan laying down the principal steps for
accomplishing a specific objective and sets an approximate time limit for each stage. It is
basically concerned with providing answers to questions like: By whom will the actions
be taken up? When will the actions be taken? Where will the actions be taken?
Programmes are guided by organization’s objectives and strategies and cover many of
the other types of plans. Therefore, they provide a step by step approach to guide the
action necessary to meet the objectives as set in the strategy. Programmes provide the
sequence of activities in proper order which are designed to implement polices.
Programmes are the instruments for coordination as they require system, thinking and
action. They also involve integrated and coordinated planning efforts.

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• PROCEDURE

In general terms, a procedure can be defined as “ A series of functions or steps

performed to accomplish a specific task or undertaking.” Strategies, programmes,
policies, budgets etc. need to be supplemented with detailed specifications i.e. how they
are to / would operate. A procedure is a precise means of making a step by step guide to
action that operates within a policy framework. Most companies have hundreds of
procedures like for selection, promotion, transfer etc. They are essential for smooth
operation of the business activities. For example procedure may include calling tenders
for purchasing materials, keeping them in stock room and issuing them against
requisition slips. Procedures are concerned with communication of tasks to be
performed, organization interfaces and the responsibilities of the individuals involved.
They describe the customary method for handling a future activity. It gives sequence of
actions directed at a single goal (usually short term) that is repeatedly pursued, i. g.
adopting budget, making procedures or granting sick leave to an employee against
medical certificate etc. Procedure are more rigid and allow no freedom as against
strategies which are flexible and are not concerned with fixed steps.

• RULES

A rule is principle to which an action or a procedure conforms or is intended to conform.

It is a standard or a norm to be followed in the conduct of a business in a particular
situation. It is more rigid and demands a specific action with respect to particular
situation. It does not mention any kind of time estimate or sequence as in the case of
procedures. It is much more specific than a policy. It allows no liberty or leniency and
does not tolerate much deviation. Rules have to be strictly followed and non compliance
may entail penalty or punishment. For example, “No Smoking” is a rule which has to be
adhered to by all the levels of management.

1.7 LEVELS OF STRATEGY

It is believed that strategic decision making is the responsibility of top management.

However, it is considered useful to distinguish between the levels of operation of the
strategy. Strategy operates at different levels:

¾ Corporate Level
¾ Business Level
¾ Functional Level

There are basically two categories of companies- one, which have different businesses
organized as different directions or product groups known as profit centers or strategic
business unit(SBUs) and other, which consists of companies which are single product
companies. The example of first category can be that of Reliance Industries Limited
which is a highly integrated company producing textiles, yarn, and a variety of petro
chemical products and the example of the second category could be Ashok Leyland
Limited which is engaged in the manufacturing and selling of heavy commercial
vehicles. The SBU concept was introduced by General Electric Company (GEC) of USA
to manage product business. The fundamental concept in the SBU is the identification of
dicrete independent product/ market segments served by the organization. Because of the
different environments served by each product, a SBU is created for each independent
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product/ segment. Each and every SBU is different from another SBU due to the distinct
business areas (DBAs) it is serving. Each SBU has a clearly defined product/market
segment and strategy. It develops its strategy according to its own capabilities and needs
with overall organizations capabilities and needs. Each SBU allocates resources
according to its individual requirements for the achievement of organizational objectives.
As against the multi product organizations, the single product organizations have single
Strategic Business unit. In these organizations, corporate level strategy serves the whole
business. The strategy is implanted at the next lower level by functional strategies. In
multiple product company, a strategy is formulated for each SBU (known as business
level strategy) and such strategies lie between corporate and functional level strategies.

The three levels are explained below.

• CORPORATE LEVEL STRATEGY

At the corporate level, strategies are formulated according to organization wise polices.
These are value oriented, conceptual and less concrete then decisions at the other two
levels. These are characterized by greater risk, cost and profit potential as well as
flexibility. Mostly, corporate level strategies are futuristic, innovative and pervasive in
nature. They occupy the highest level of strategic decision making and cover the actions
dealing with the objectives of the organization. Such decisions are made by top
management of the firm. The example of such strategies include acquisition decisions,
diversification, structural redesigning etc. The board of Directors and the Chief
Executive Officer are the primary groups involved in this level of strategy making. In
small and family owned businesses, the entrepreneur is both the general manager and
chief strategic manager.

• BUSINESS LEVEL STRATEGY

The strategies formulated by each SBU to make best use of its resources given the
environment it faces, come under the gamut of business level strategies. At such a level,
strategy is a comprehensive plan providing objectives for SBUs, allocation of resources
among functional areas and coordination between them for achievement of corporate
level objectives. These strategies operate within the overall organizational strategies i.e.
within the broad constraints and polices and long term objectives set by the corporate
strategy. The SBU managers are involved in this level of strategy. The strategies are
related with a unit within the organization. The SBU operates within the defined scope of
operations by the corporate level strategy and is limited by the assignment of resources
by the corporate level. However, corporate strategy is not the sum total of business
strategies of the organization. Business strategy relates with the “how” and the corporate
strategy relates with the “what”. Business strategy defines the choice of product or
service and market of individual business within the firm. The corporate strategy has
impact on business strategy.

• FUNCTIONAL LEVEL STRATEGY

This strategy relates to a single functional operation and the activities involved therein.
This level is at the operating end of the organization. The decisions at this level within
the organization are described as tactical. The strategies are concerned with how
different functions of the enterprise like marketing, finance, manufacturing etc.

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contribute to the strategy of other levels. Functional strategy deals with a relatively
restricted plan providing objectives for specific function, allocation of resources among
different operations within the functional area and coordination between them for
achievement of SBU and corporate level objectives.

Sometimes a fourth level of strategy also exists. This level is known as the operating
level. It comes below the functional level strategy and involves actions relating to
various sub functions of the major function. For example, the functional level strategy of
marketing function is divided into operating levels such as marketing research, sales
promotion etc.

Three levels of strategies have different characteristics as shown in the following table.

TABLE 1
STRATEGIC DECISIONS AT DIFFERENT LEVELS

LEVELS
DIMENSIONS
CORPORATE BUSINESS FUNCTIONAL
TYPE OF DECISION CONCEPTUAL MIXED OPERATIONAL
Impact Significant Major Insignificant
Risk Involved High Medium Low
Profit Potential High Medium Low
Time Horizon Long Medium Low
Flexibility High Medium Low
Adaptability Insignificant Medium Significant

1.8 IMPORTANCE OF STRATEGY

With the increase in the pressure of external threats, companies have to make clearer
strategies and implement them effectively so as to survive. There have been companies
like Martin Burn, Jessops etc. that have completely become extinct and some companies
which were not existing before they have become the market leaders like Reliance,
Infosys, Technologies etc. The basic factor responsible for differentiation has not been
governmental policies, infrastructure or labour relations but the type of strategic thinking
that different companies have shown in conducting the business.

Strategy provides various benefits to its users:

• Strategy helps an organization to take decisions on long range forecasts.

• It allows the firm to deal with a new trend and meet competition in a effective
manner.
• With the help of strategy, the management becomes flexible to meet unanticipated
future changes.
• Efficient strategy formation and implementation result into financial benefits to the
organization in the form of increased profits.
• Strategy provides focus in terms of organizational objectives and thus provides
clarity of direction for achieving the objectives.
• Organizational effectiveness is ensured with effective implementation of the strategy.

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• Strategy contributes towards organizational effectiveness by providing satisfaction to
the personnel.
• It gets managers into the habit of thinking and thus makes them, proactive and more
conscious of their environments.
• It provides motivation to employees as it pave the way for them to shape their work
in the context of shared corporate goals and ultimately they work for the achievement
of these goals.
• Strategy formulation & implementation gives an opportunity to the management to
involve different levels of management in the process.
• It improves corporate communication, coordination and allocation of resources.

With all the benefits listed above, it is quite clear that strategy forms an integral part of
an organization and is the means to achieve the end in an efficient and effective manner.

ACTIVITY 3

1. Identify the benefits which an organization may have after implementing strategies.
Choose any organization of your choice.
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2. Distinguish corporate level strategy and business level strategy.

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3. State three benefits of strategy.

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1.9 SUMMARY

In this unit we introduced the concept of strategy. Strategy is the conscious and rational
management exercise which involves defining and achieving an organization objectives
and implanting its mission. Strategy is a major course of action, a blend of internal &
external factors and is particular to a specific situation. It is dependant on environmental
variables and as futuristic in nature. Strategy has been misused with terms like policy,
tactics, programmes and procedures and rules. It is differentiated with all these concepts.
Strategy is operational at three levels – Corporate level, Business level and Functional
level. There may be a fourth level known as the Operations level as well. Strategies are
lifeblood of business activities.

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1.10 KEY WORDS

Strategy- A unified, comprehensive and integrated plan that relates the strategic
advantage of the firm to the challenges of the environment.

Policy- Guideline for decisions and actions on the part of subordinates and is a
general statement of understanding made for the achievement of
objectives.

Tactics- It is the Means by which previously determined plans are executed.

Programmes- A single use comprehensive plan laying down the principal steps for
accomplishing a specific objective and sets an approximate time limit for
each stage.

Procedures- A series of functions or steps performed to accomplish a specific task or

undertaking.

Rules- A principle to which an action or a procedure conforms or is intended to

conform.

1.11 SELF ASSESSMENT QUESTIONS

1) What do you mean by strategy? Explain the nature of strategy.

2) “Strategy is synonymous with policies” Comment on the statement.
3) Differentiate between strategy and programmes, procedures, rules.
4) What are the various levels at which a strategy may exist?
5) What is the importance of strategy?
6) List the important characteristics of strategy.
7) Distinguish business level and functional strategies.

1.12 FURTHER READINGS

• GHOSH, P.K., I.C. DHINGRA, N. RAJAN NAIR and K.P. MANI, “Advanced
Management Accounting Strategic Management”, Sultan Chand & Sons, New Delhi,
1997
• PRASAD, L.M., 2002, “Business Policy: Strategic Management”, Sultan Chand &
Sons, New Delhi.
• SHRIVASTAVA, R.M., “Management Policy and Strategic Management:
Concepts, Skills and Practices, Himalaya Publication House, Mumbai, 1999
• MAMORIA, C.B., SATISH MAMORIA and Dr. P. SUBBA RAO, 2001, “ Business
Planning and Plicy”, Himalaya Publishing House, Mumbai, 2001
• KAZMI, AZHAR, “Business Policy and Strategic Management”, Tata Mcgraw Hill
Publishing Co, Ltd., New Delhi, 2002.

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13
Introduction to Strategic
Management UNIT 2 PROCESS OF STRATEGY
Objectives
After reading this unit, you should be able to:
• understand the process of strategy;
• identify various steps of strategy formulation;
• understand the role played by different participants in the process; and
• know the sequence of activities involved in the process.
Structure
2.1 Introduction
2.2 Process of Strategy
2.3 Strategic Intent
2.4 Environmental and Organizational Analysis
2.5 Identification of Strategic Alternatives
2.6 Choice of Strategy
2.7 Implementation of Strategy
2.8 Evaluation and Control
2.9 Summary
2.10 Key Words
2.11 Self Assessment Questions
2.12 References and Further Readings

2.1 INTRODUCTION
There are two dimensions of every action – substantive and procedural. The former
involves determination of what to do and the latter is concerned with determination of
how to do. Both of these dimensions are interdependent and taken together help in
achieving the objectives for which the action is contemplated. In the context of an
organization engaged in strategy formulation and implementation, the substantive
dimension deals with the determination of strategy or set of strategies and procedural
dimension deals with putting a strategy into operation. Besides these, it has to be
decided that who will do what in completing the action. The logic of a process is that
its particular elements are undertaken in a sequence over a period. The strategy
process involved in strategy includes a number of elements. The process can be
defined as a set of management decisions and actions which determines the
long run direction and performance of the organization. It is a dynamic and
continuous process. However, there are two problems in identifying and sequencing
the elements:
i) There is no unanimity among various authors about the elements and their
interaction.
ii) After the elements have been identified, their sequential arrangement is another
problem.
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Both these problems highlight the complexity of strategic process. The process Process of Strategy
includes definition of organizational vision, mission and objectives, environmental
analysis, identification and evaluation of strategic alternatives, making a choice,
implementing it and evaluating and controlling the strategy.

2.2 PROCESS OF STRATEGY

The process of strategy is cyclical in nature. The elements within it interact among
themselves. Figures 2.1 and 2.2 present the process for single SBU firm and multiple
SBU firm respectively. The process has to be adjusted for multiple SBU firms because
there it is conducted at corporate level as well as SBU levels as these firms insert SBU
strategy between corporate strategy and functional strategy. Initially, the process of
strategy was discussed in terms of four phases which are:
l Identification phase
l Development phase
l Implementation phase
l Monitoring phase
The process of strategy does not have the same steps as stated by different authors.
According to C.K. Prahalad, the process comprises of five steps. They are:
l Strategic Intent
l Environmental Analysis
l Evaluation of strategic alternatives and choice
l Strategy Implementation
l Strategy Evaluation and Control
For our understanding, the process has been divided into the following steps:
l Strategic Intent
l Environmental and Organizational Analysis
l Identification of Strategic Alternatives
l Choice of Strategy
l Implementation of Strategy
l Evaluation and Control

2.3 STRATEGIC INTENT

Setting of organizational vision, mission and objectives is the starting point of strategy
formulation. The organizations strive for achieving the end results which are ‘vision’,
‘mission’, ‘purpose’, ‘objective’, ‘goals’, ‘targets’ etc. The hierarchy of strategic
intent lays the foundation for the strategic management of any organization. The
strategic intent makes clear what an organization stands for. It is reflected through
vision, mission, business definition and objectives. Vision serves the purpose of stating
what an organization wishes to achieve in long run. The process of assigning a part of
a mission to a particular department and then further sub dividing the assignment
among sections and individuals creates a hierarchy of objectives. The objectives of the
sub unit contribute to the objectives of the larger unit of which it is a part. From
strategy formulation point of view, an organization must define ‘why’ it exists, ‘how’
it justifies that existence, and ‘when’ it justifies the reasons for that existence. The
answers to these questions lies in the organization’s mission, business definition,
objectives and goals. These terms become the base for strategic decisions and actions. 17
Introduction to Strategic
Management
Defining Vision, Mission and
Business

s s

Environmental Analysis Organizational Analysis

s s

s
Setting Objectives and Goals
Reset if
required

Identifying Alternative
Strategies

s
Reformulate
if required Choice of Strategy

Reimplement Implementation of
s

if required Strategy

Strategy Evaluation
s

and Control

s
s

Feedback

Figure 2.1: Strategic Process in a Single SBU Firm

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 Process of Strategy

s
Deifining Vision, Setting

s
Mission and Business Organizational SBU Objectives

s
Loing-term

s
Objectives s

s s
Environmental Environmental
Analysis for Present Analysis for
and Potential SBU SBU

s s
Organizational and
SBU Analysis Analysis of SBU

s
s
Strategic Alternatives
Strategic
Alternatives

s
Choice of Strategy
s

Choice of Strategy

s
s
Implementation
s

Strategy Implementation
s

Strategy

s
s
Evaluation of
Organisation and Evaluation of
SBU Results SBU Results

s
s
Feedback
Feedback

Figure 2.2: Strategic Management Processing in a Multiple SBU Firm

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Introduction to Strategic Mission
Management
The vision of an organization is the expectation of the owner of the organization and
putting this vision into action is mission. Often these terms are used interchangeably,
but both are different. The dictionary meaning of mission is that, “mission relates to
that aspect for which an individual has been or seems to have been sent into the
world”. Mission is relatively less abstract, subjective, qualitative, philosophical and
non-imaginative. Mission has a societal orientation and is a statement which reveals
what an organization intends to do for a society. It is a public statement which gives
direction for different activities which organizations have to carry on. It motivates
employees to work in the interest of the organization.

Business Definition
The answer to the question that ‘how’ does an organization justify its existence is
defining business of the organization. A business definition is the clear cut statement
of the business or a set of businesses, the organization engages or wishes to pursue in
the future. It also defines the scope of the organization. An organization can face its
competitors not by doing what they do but by doing it differently. Business can be
defined along three dimensions viz a viz product, customer and technology. In
whatever dimensions, it is defined, it must reflect two features:
l focus
l differentiation
Focus of business is defined in terms of the kind of functions the business performs
rather than the broad spectrum of industry in which the organization operates. A sharp
focus on business definition provides direction to a company to take suitable actions
including positioning of the company’s business.
The next feature involved in business definition is differentiation i.e. how an
organization differentiates itself from others so that the business concentrates on
achieving superior performance in the market. Differentiation can be on several bases
like quality, price, delivery, service or any other factor which the concerned market
segment values. For example, an organization can charge comparatively lower price
as compared to its competitors in the same product quality segment, then price is not
the differentiating factor. As against this, if the organization is charging a much lower
price in the same product group excluding quality, price becomes a differentiating
factor. For example, in synthetic detergent market, HLL and Nirma provide for such a
differentiation. We will discuss this aspect in detail in Block 3.

Objectives and Goals

Once the organization’s mission has been determined, its objective, desired future
positions that it wishes to reach, should be identified. Organizational objectives are
defined as ends which the organization seeks to achieve by its existence and operation.
Objectives represent desired results which the organization wishes to attain. They
indicate the specific sphere of aims, activities and accomplishments. An organization
can have objectives in terms of profitability and productivity. Objectives provide a
direction to the organization and all the divisions work towards the attainment of the
set objectives. Objectives and goals are the terms which are used interchangeably.
It is necessary for the organization to assess the process identifying the objectives of
each functional area. After accomplishment of these objectives, the overall objectives
of the organization are achieved. Organization’s mission becomes the cornerstone for
strategy. Objectives are other factors which determine the strategy. By choosing its
objectives, an organization commits itself for these.
20
Activity 1 Process of Strategy

1. Explain strategic process in a single business firm.

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2. Distinguish between mission, objectives, and goals. Give some real world
examples.
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3. Explain hierarchy of strategic intent and its importance.

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2.4 ENVIRONMENTAL AND ORGANIZATIONAL

ANALYSIS
Every organization operates within an environment. This environment may be internal
or external. For conducting an environmental analysis, the strategic intent has to be
very clear. This clarity in definition of mission and objectives helps in the detailed
analysis of the environment. Environmental analysis, also known as environmental
scanning or appraisal, is the process through which an organization monitors and
comprehends various environmental factors and determines the opportunities and
threats that are provided by these factors. There are two aspects involved in
environmental analysis:
l Monitoring the environment i.e. environmental search and
l Identifying opportunities and threats based on environmental monitoring i.e.
environmental diagnosis.
Environmental analysis is an exercise in which total view of environment is taken. The
environment is divided into different components to find out their nature, function and
relationship for searching opportunities and threats and determining where they come
from, ultimately the analysis of these components is aggregated to have a total view of
the environment. Some elements indicate opportunities while others may indicate
threats.
A large part of the process of environmental analysis seeks to explore the unknown
terrain, the dimensions of future. The analysis emphasizes on what could happen and
not necessarily what will happen. The factors which comprise firms environment are
of two types:
l factors which influence environment directly including suppliers, customers and
competitors, and
l factors which influence the firm indirectly including social, technological,
political, legal, economic factors etc.

21
Introduction to Strategic The environmental analysis plays a very important role in the process of strategy
Management formulation. The environment has to be analysed to determine what factors in the
environment present opportunities for greater accomplishment of organizational
objectives and what factors present threats. Environmental analysis provides time to
anticipate the opportunities and plan to meet the challenges. It also warns the
organization about the threats. The analysis provides for elimination of alternatives
which are inconsistent with the organizations objectives. Due to the element of
uncertainty, environmental analysis provides for certain anticipated changes in the
organization’s network. The organization equips itself to meet the unanticipated
changes and face the ever increasing competition.
For doing the environmental analysis, there can be the strategic advantage profile
which provides for analysis of internal environment, and the organization capability
profile as well. For analyzing the external environment, environmental threat and
opportunity profile could be adopted. An organization has to continuously grow in
term of its core business and develop core competencies.
Through organizational analysis, the organization has to understand its strengths and
weaknesses. It has to identify the strengths and emphasize on them. At the same time,
it has to identify its weaknesses and unprove them or try to eliminate them.
Organizational threats and opportunities, strengths and weaknesses help in identifying
the relevant environmental factors for detailed analysis.
Therefore, after developing the strategic intent, environmental analysis becomes the
next important step in the process of strategy formation. The environmental analysis is
covered in detail in unit 4 of block 2.

2.5 IDENTIFICATION OF STRATEGIC ALTERNATIVES

After environmental analysis, the next step is to identify the various strategic
alternatives. After the identification of strategic alternatives they have to be evaluated
to match them with the environmental analysis. According to Glueck & Jauch,
“strategic alternatives revolve around the question whether to continue or change the
business, the enterprise is currently improving the efficiency or effectiveness with
which the firm achieves its corporate objectives in its chosen business sector” the
process may result into large number of alternatives through which an organization
relates itself to the environment. All alternatives cannot be chosen even if all of these
provide the same results. Obviously, managers evaluate them and limit themselves.
According to Glueck, there are basically four grand strategic alternatives:
l Stability
l Expansion
l Retrenchment
l Combination
These are together known as stability strategies/ basic strategies.
Stability: In this, the company does not go beyond what it is doing now. The company
serves with same product, in same market and with the existing technology. This is
possible when environment is relatively stable. Modernization, improved customer
service and special facility may be adopted in stability.
Expansion: This is adopted when environment demands increase in pace of activity.
Company broadens its customer groups, customer functions and the technology. These
may be broadened either singly or jointly. This kind of a strategy has a substantial
impact on internal functioning of the organization.
22
Retrenchment: If the organization is going for this strategy, then it has to reduce its Process of Strategy
scope in terms of customer group, customer function or alternative technology. It
involves partial or total withdrawal from three things. For example L & T getting out
of the cement business. The objective varies from company to company.
Combination: When all the three strategies are taken together, this is known as
combination strategy. This kind of strategy is possible for organizations with large
number of portfolios.
Apart from these four grand strategies, different strategies which are used commonly
are as follows:
Modernization: In this , technology is used as the strategic tool to increase production
and productivity or reduce cost. Through modernization, the company aims to gain
competitive and strategic strength.
Integration: The company starts producing new products and services of its own
either creating facility or killing others. Integration can either be forward or
background in terms of vertical integration. In forward integration it gains ownership
over distribution or retailers, thus moving towards customers while in backward
integration the company seeks ownership over firm’s suppliers thus moving towards
raw materials. When the organization gains ownership over competitors, it is engaged
in horizontal integration.
Diversification: Diversification involves change in business definition either in terms
of customer functions, customer groups or alternative technology. It is done to
minimize the risk by spreading over several businesses, to capitalize organization
strength and minimize weaknesses, to minimize threats, to avoid current instability in
profit & sales and to facilitate higher utilization of resources. Diversification can be
either related or unrelated, horizontal or vertical, active or passive, internal or
external. It is of the following types:
l Concentric diversification
l Conglomerate diversification
l Horizontal diversification
Joint Ventures: In joint ventures, two or more companies form a temporary
partnership ( consortium). Companies opt for joint venture for synergistic advantages
to share risk, to diversify and expand, to bring distinctive competences, to manage
political and cultural difficulty, to take technological advantage and to explore
unexplored market.
Strategic Alliance: When two or more companies unite to pursue a set agreed upon
goals but remain independent it is known as strategic alliance. The firms share the
benefits of the alliance and control the performance of assigned tasks. The pooling of
resources, investment and risks occur for mutual gain.
Mergers: It is an external approach to expansion involving two or more than two
organizations. Companies go for merger to become larger, to gain competitive
advantage, to overcome weaknesses and sometimes to get tax benefits. Merger takes
place with mutual consent and common goals.
Acquisition: For the organization which acquires another, it is acquisition and for
organization which is acquired, it is merger.
Takeovers: In takeovers, there is a strong motive to acquire others for quick growth
and diversification.
Divestment: In divestment, the company which is divesting has no ownership and
control in that business and is engaged in complete selling of a unit. It is referred to
the disposing off a part of the business. 23
Introduction to Strategic Turnaround Strategy: When the company is sick and continuously making losses, it
Management goes for turnaround strategy. It is the efforts in reversing a negative trend and it is the
efforts to keep an organization alive.
All these alternatives are available to an organization and according to its objectives,
it can decide on the one which is most suitable. We will study all these strategies in
detail in block 4.

Activity 2
1. What is strategic advantage profile?
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2. Select any two strategic alternatives and cite company examples of each.
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2.6 CHOICE OF STRATEGY

The next logical step after evaluation of strategic alternatives is choice of the most
suitable alternative. For a business group, it may be possible to choose all strategic
alternatives but for a single company it is quite difficult. The strategic alternatives has
to be matched with the problem. While making a choice, two types of factors have to
be considered:
l Objective factors
l Subjective factors
Objective factors are the ones which can be quantified while subjective factors are the
ones which cannot be quantified and are based on experience and opinion of people.
Strategic choice is like a decision making process. There are three objective ways to
make a choice:
l Corporate Portfolio Analysis
l Competitor Analysis
l Industry Analysis

Corporate Portfolio Analysis

When the company is in more than one business, it can select more than one strategic
alternative depending upon demand of the situation prevailing in the different
portfolios. It is necessary to analyze the position of different business of the business
house which is done by corporate portfolio analysis. This analysis can be done by
using any of the seven technologies given below:
l Experience curve
l PLC concept
l BCG Matrix
l GE nine cell Matrix
24
l Space Diagram Process of Strategy

l Hofer’s product market evaluation matrix

l Directional Policy Matrix
In the experience curve technique, the experience of the strategist enables him to
decide which businesses to enter or quit.
Depending upon the stage of the product life cycle of the business, one can make a
strategic choice for different portfolio.
Boston consultancy developed a matrix called BCG Matrix which is helpful to make
strategic choice. In this, the products are positioned based on various external and
internal factors to know the continuity, growth and discontinuing product. The factors
given are specific in nature and attempt has been made to quantify them.
The GE Nine Cell Matrix is a matrix in which nine positions are defined in terms of
business strength factors and industry attractiveness factors. The business strength
factors include market share, profit margin, ability to compete, market knowledge,
competitive position, technology, and management caliber and the industry
attractiveness factor include market size, growth rate, profit, competition, economics
of scales, technology and other environmental factors. Nine cells are divided into three
zones and depicted by different colours i.e. green, yellow and red. Each zone of matrix
presents a specific type of strategy or set of strategies.
The strategic position and action evaluation (SPACE) is an extension of two
dimensional portfolio analysis which helps an organization to hammer out an
appropriate strategic posture. It involves consideration of dimensions like
organization’s competitive advantage, organization’s financial strength, environmental
stability etc. Various SPACE factors are measured in terms of degrees, often
quantified from 0 to 5 with 0 indicating most unfavourable and 5 indicating most
favourable. On basis of four dimensions, organization can choose its strategy.
Hofer and Schendel suggested the product market evaluation matrix. They
constructed a 15 cell matrix taking competitive position and stages of product / market
evolution dimensions.
The directional policy matrix was developed by shell chemicals, U.K. It used two
dimensions – business sector prospects and company’s competitive capabilities to
choose strategies. Each dimension is further divided into unattractive, average and
attractive (for business sector prospects) and weak, average and strong (for
company’s competitive capabilities. Each quadrant shows a different strategy which
the organization may adopt.

Competitor Analysis
In this analysis, we try to assess what the competitor has and what he does not have.
We explore everything with respect to the competitor. In competitor analysis, focus is
on external environment as one of the components of external environment is the
competitor. The difference between SWOT analysis and competitor analysis is that in
competitor analysis we are concerned with only one component of the environment i.e.
competitor while in SWOT analysis we take about all the factors of the environment.

Industry Analysis
In industry analysis, all the competitors belonging to the particular industry with
which the organization is associated are looked at. All the members of the industry are
considered as a whole. In competitive analysis, only the major competitors are
assessed while in industry analysis all the competitors belonging to the industry are
looked at. 25
Introduction to Strategic The strategic choice is a decision making process which looks into the following steps:
Management
l Focussing on strategic alternatives
l Evaluating strategic alternatives
l Considering decision factors – objective factors and subjective factors.
l Finally, making the strategic choice.

2.7 IMPLEMENTATION OF STRATEGY

After the evaluation of the alternatives, the choice of strategy is made. This choice
now needs to be implemented i.e. strategy is now put into action. This step of strategy
process is the implementation step. This includes the activation of the strategic
alternatives chosen. Strategy making and strategy implementation are two different
things. Strategy making requires person with vision while strategy implementation
requires a person with administrative ability. If the strategy made is not implemented
properly then the objectives would be lost. Strategy implementation is as good as
starting a new business. The stage requires looking at the problems and eliminating
them. In strategy implementation, one has to pass through different steps:
l Project Implementation
l Procedural Implementation
l Resource Allocation
l Structural Implementation
l Functional Implementation
l Behavioural Implementation
Project implementation is a comprehensive plan of action from acquiring land to the
installation of machinery within a time frame.
Procedural implementation takes place by following the “Law of the Land” i.e. the
rules and regulation in terms of wastage cost, utility etc. It involves completing all
those procedural formalities that have been prescribed by the governments both
central and state. A procedure is a series of related tasks that make up the
chronological sequence and the established way of performing the work to be
accomplished. Procedural implementation involves different steps. These steps vary
from industry to industry. Also these may change as per the changes in the government
policies. The major procedural requirements are:
l Licensing Requirements
l FEMA Requirements
l Foreign Collaboration Procedure
l Capital Issue Requirements
l Import and Export requirements
l Incentives and benefits
After procedural implementation thire comes resource allocation. The organization
has to allocate resource both inside the company and outside the company. It has to
make decisions regarding short term and long term allocation. The problems
associated with resource allocation is the problem involved in the process. The
problems emerge because:
l Resources are limited.
l There are competing organizational units with each trying to have the major
portion.
26 l Organization’s past commitment.
The structural implementation of strategy involves designing of the organization Process of Strategy
structure and interlinking various units and sub units of the organization. It involves
issues like
l How the work of the organization will be divided?
l How will the work be assigned among various positions, groups, department,
divisions, etc.?
l The coordination among these for achivement of organizational objectives.
There are basically two aspects:
l Differentiation and
l Integration
Differentiation refers to, “the differences in cognitive and emotional orientations
among managers in different functional departments.”
Integration refers to, “the quality of the state of collaboration that are required to
achieve unity of efforts in the organization.”
The organization has to emphasize on both aspects and therefore, it must design
organization structure and provide systems for integration and coordination among
organization’s parts and members.
Functional implementation deals with the development of policies and plans in
different areas of functions which an organization undertakes. The major functions of
the organization include:
l Production
l Marketing
l Finance
l Personnel
Each and every function makes its own policies and plans in tune with the whole
organization’s strategy and then implements to fulfill the objectives. For example, the
production function may involve decisions relating to size and location of plants,
technology to be used, cost factor, production capacity, quality of the product,
research and development etc. Similarly marketing function may include the decisions
relating to type of products, price of products, product distribution and product
promotion.
The financial function deals with decisions like sources of funds, usage of funds and
management of earnings. Likewise, the major consideration in personnel policies
include recruitment of right personnel, development of personnel, motivation system,
retaining personnel, personnel mobility, industrial relations etc.
Behavioural implementation deals with those aspects of strategy implementation that
have impact on behaviour of people in the organizations. Since human resources form
an integral part of the organization, their activities and behaviour need to be directed
in a certain way. Any departure may lead to the failure of strategy. The five issues in
this context relevant to strategy implementation are:
l Leadership
l Organization Culture
l Values and Ethics
l Corporate Governance, and
l Organizational Politics
27
Introduction to Strategic
Management 2.8 EVALUATION AND CONTROL
This is the last step of the strategy making process. This is an ongoing process and
evaluation and control have to be done for future course of action as well. To get
successful results and to achieve organizational objectives, there has to be continuous
monitoring of the implementation of strategy. The evaluation and control of strategy
may result in various actions that the organization may have to take for successful
well being, such actions may involve any kind of corrective measures concerned with
any of the steps involved in the whole process be it choice for setting mission or
objectives. The process of strategy formulation is considered as a dynamic process
wherein corrective actions are taken and change is brought in any of the factors
affecting strategy.
Evaluation of strategy is done by the top managers to determine whether their strategic
choice is implemented in a manner that it is meeting the organization’s objectives.
Evaluation emphasizes measurement of results of a strategic action. On the other
hand, control emphasizes on taking necessary action in the light of gap that exists
between intended results and actual results in the strategic action.
When evaluation and control is carried out efficiently, it contributes in three basic
areas:
l Measurement of organizational process,
l Feedback for future actions, and
l Linking performance and rewards.
The board of directors, the chief executive and other managers all play a very
important role in strategy evaluation and control. Control can be of three types:
l Control of inputs that are required in an action, known as feed forward control.
l Control at different stages of action process, known as concurrent control.
l Past action control based on feedback from completed action known as feedback
control.
Control is exercised by mangers in the form of four steps:
l Setting performance standards
l Measuring actual performance
l Analyzing variance
l Taking corrective actions
After evaluation and control, the strategy process continues in an efficient manner.
The effectiveness could be assessed only when the strategy helps in the fulfillment of
organizational objectives.

2.9 SUMMARY
A good strategy is one which helps in the accomplishment of the organization’ s
objectives. The first step, therefore, is the development of strategic intent i.e. the
setting of organizational mission and objectives. After this, the organization has to
assess its environment external to it and which affects its strategy. It has to assess the
opportunities and threats in the environment. Alongwith the environmental analysis,
the organization has to go for an organizational analysis as well, through which it
assesses its own strengths and weakness and then incorporates them in the strategy
being formulated. It becomes necessary for the organization to identify the various
strategic alternatives and choose from them the one which is most compatible with the
28
organizational objectives. The strategic choice has to be implemented in a manner that Process of Strategy
the organization’s culture and structure support the implementation. After
implementing the strategy, strategic evaluation and control is carried out so that the
firm is successful in meeting its objectives.

2.10 KEY WORDS

Acquisition : For the organization which acquires another it is
acquisition and for organization which is acquired, it is
merger.
Diversification : is a growth strategy which involves adding of new
products or services to existing ones.
Diversification : Diversification involves change in business definition
either in terms of customer functions, customer groups or
alternative technology.
Divestment : In divestment, the company which is divesting has no
ownership and control in that business and is engaged in
complete selling of a unit. It is referred to the disposing off
a part of the business.
Expansion : Strategy in which company broadens its customer groups,
customer function and the technology.
Mergers : It is an external approach to expansion involving two or
more than two organizations.
Retrenchment : Strategy in which organization has to reduce its scope in
terms of customer group, customer functions or alternative
technology.
Stability : Strategy in which the company serves the same product in
same market and with existing technology.
Structure : is the configuration of resources used by management to
coordinate the activities of the organization so that the
objectives can be achieved.
Takeovers : In takeovers, there is strong motive to acquire others for
quick growth and diversification.
Turnaround Strategy : When the company is sick and continuously making losses,
it goes for turnaround strategy. It is the efforts in reversing
a negative trend and it is the efforts to keep an organization
alive.

2.11 SELF ASSESSMENT QUESTIONS

1. Describe the process of strategy formulation.
2. What are the various strategic alternatives? Give example of each.

2.12 REFERENCES AND FURTHER READINGS

Drucker, P.F. (1974). “Management Task Responsibilities and Practices”, Harper &
Row, New York.
Ghosh, P.K. (1996). “Business Policy Strategic planning and Management”, Sultan
Chand & Sons, New Delhi. 29
Introduction to Strategic Ghosh, P.K., I.C. Dhingra, N. Rajan Nair and K.P. Mani (1997). “Advanced
Management Management Accounting Strategic Management”, Sultan Chand & Sons, New Delhi.
Glueck, W.F. and Iavch, L.R. (1984). “Business Ploicy and Strategic Management”
Mc graw Hill, New York.
Kazmi, Azhar. (2002). “Business Policy and Strategic Management”, Tata Mcgraw
Hill Publishing Co, Ltd., New Delhi.
Mamoria, C.B., Mamoria Satish and Rao, P. Subba. (2001). “Business Planning and
Plicy”, Himalaya Publishing House, Mumbai.
Miller, A. and Den, G.G. (1996). “Strategic Management” Mcgraw hill, New York.
Prasad, L.M. (2002). “Business Policy: Strategic Management”, Sultan Chand &
Sons, New Delhi.
Shrivastava, R.M. (1995). “Corporate Strategic Management”, Pragati Prakashan,
Meerut.
Shrivastava, R.M. (1999). “Management Policy and Strategic Management:
Concepts, Skills and Practices, Himalaya Publication House, Mumbai.
Thompson, J.L. (1997). “Strategic Management: Awareness and Change”,
International Thompson Business Press, London.

30
 Strategic Framework
UNIT 3 STRATEGIC FRAMEWORK
Objectives
After studying this unit, you should be able to:
l understand the meaning of intent and vision;
l understand the issues related to core values and core purpose;
l know the concept of mission and its characteristics;
l appreciate the process of formulating mission statements;
l discuss the characteristics, need and issues with respect to objectives; and
l distinguish the concepts of vision and mission, objectives and goals, intent and
vision etc.

Structure
3.1 Introduction
3.2 Strategic Intent
3.3 Vision
3.4 Core Values and Core Purpose
3.5 Mission
3.6 Business Definition
3.7 Objectives and Goals
3.8 Summary
3.9 Key Words
3.10 Self Assessment Questions
3.11 References and Further Readings

3.1 INTRODUCTION
Strategies are involved in the formulation, implementation and evaluation of process.
The hierarchy of strategic intent lays the foundation for strategic management process.
The process of establishing the hierarchy of strategic intent is very complex. In this
hierarchy, the vision, mission, business definition and objectives are established.
Formulation of strategies is possible only when strategic intent is clearly set up. This
step is mostly philosophical in nature. It will have long term impact on the
organization.

3.2 STRATEGIC INTENT

The foundation for the strategic management is laid by the hierarchy of strategic
intent. The concept of strategic intent makes clear WHAT AN ORGANISATION
STANDS FOR, Harvard Business Review, 1989 described the concept in its infancy.
Hamed and Prahalad coined the term strategic intent. A few aspects about strategic
intent are as follows:
l It is an obession with an organization.
l This obession may even be out of proportion to their resources and capabilities. 31
Introduction to Strategic l It envisions a derived leadership position and establishes the criterion, the
Management organization will use to chart its progress.
l It involves the following:
l Creating and Communicating a vision
l Designing a mission statement
l Defining the business
l Setting objectives
Vision serves the purpose of stating what an organization wishes to achieve in the
long run.
Mission relates an organization to society.
Business explains the business of an organization in terms of customer needs,
customer groups and alternative technologies.
Objectives state what is to be achieved in a given time period.
l The strategic intent concept also encompasses an active management process that
includes focussing the organization’s attention on the essence of winning.
l The concept of stretch and leverage is relevant in this context.
Stretch is a misfit between resources and aspirations.
Leverage concentrates, accumulates, conserves and recovers resources so that a
meagre resource base can be stretched. Leverage reduces the stretch and focusses
mainly on efficient utilization of resources.
l The strategic fit matches organizational resources and environment. This
positions the firm by assessing organizational capabilities and environmental
opportunities.
l Under fit, the strategic intent would seem to be more realistic.
l It is hierarchy of intentions ranging from a board vision through mission and
purpose down to specific objectives.

3.3 VISION
It is at the top in the hierarchy of strategic intent. It is what the firm would ultimately
like to become. A few definitions are as follows:
Kotter “description of something (an organization, corporate culture, a business, a
technology, an activity) in the future. The definition itself is comprehensive and states
clearly the futuristic position.
Miller and Dess defined vision as the “category of intentions that are broad, all
inclusive and forward thinking”
The definition lays stress on the following:
l broad and all inclusive intentions;
l vision is forward thinking process.
A few important aspects regarding vision are as follows:
l It is more of a dream than articulated idea.
l It is an aspiration of organization. Organization has to strive and exert to
achieve it.
l It is powerful motivator to action.
l Vision articulates the position of an organization which it may attain in distant
32 future.
Envisioning Strategic Framework

This is the process of creating vision. It is a difficult and complex task. A well
conceived vision must have:
l Core Ideology
l Envisioned Future
Core Ideology will remain unchanged. It has the enduring character. It consists of
core values and core purpose. Core values are essential tenets of an organization. Core
purpose is related to the reasoning of the existence of an organization.
Envisioned Future will basically deal with following:
l The long term objectives of the organization.
l Clear description of articulated future.

Advantages of having a Vision

A few benefits accruing to an organization having a vision are as follows:
l They foster experimentation.
l Vision promotes long term thinking.
l Visions foster risk taking.
l They can be used for the benefit of people.
l They make organizations competitive, original and unique.
l Good vision represent integrity.
l They are inspiring and motivating to people working in an organization.
Appendix 1 gives an example of vision and mission of Reliance Technology Centre so
as to develop an understanding of the concept of vision in the corporate world.

Activity 1
1. What is envisioning?
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2. What is strategic intent? Discuss the concept giving an example from the
corporate world.
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3. Explain the concept of leverage stretch and fit.
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33
Introduction to Strategic
Management 3.4 CORE VALUES AND CORE PURPOSE
Initial reference of these two terms were given in section 3.3. These concepts are very
important in the process of envisioning. Collins and Porras have developed this
concept for better philosophical perspective. As has already been discussed, a well
conceived vision consists of core ideology and envisioned future. Core ideology rests
on core values and core purpose.
Core Values are the essential and enduring tenets of an organization. They may
be beliefs of top management regarding employees welfare, costumer’s interest and
shareholder’s wealth. The beliefs may have economic orientation or social orientation.
Evidences clearly indicate that the core values of Tata’s are different from core values
of Birla’s or Reliance. The entire organization structure revolves around the
philosophy coming out of core values.
Core Purpose is the reason for existence of the organization. Its reasoning needs to be spelt.
A few characteristics of core purpose are as follows:
i) It is the overall reason for the existence of organization.
ii) It is why of an organization.
iii) This mainly addresses to the issue which organization desires to achieve
internally.
iv) It is the broad philosophical long term rationale.
v) It is the linkage of organization with its own people.

Activity 2
1. What is core purpose? How is it different from core value?
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2. Give examples of two companies with respect to core purpose and core values.
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3.5 MISSION
The mission statements stage the role that organization plays in society. It is one of the
popular philosophical issue which is being looked into business managers since last
two decades.

Definition
A few definitions of mission are as follows:
Hynger and Wheelen “ purpose or reason for the organization’s existence.
David F. Harvey states “ A mission provides the basis of awareness of a sense of
purpose, the competitive environment, degree to which the firm’s mission fits its
34 capabilities and the opportunities which the government offers.
Thompson states mission as the “ essential purpose of the organization, concerning Strategic Framework
particularly why it is in existence, the nature of the business it is in, and the customers
it seeks to serve and satisfy.
The above definition reveals the following:
i) It is the essential purpose of organization.
ii) It answers “ why the organization is in existence”.
iii) It is the basis of awareness of a sense of purpose.
iv) It fits its capabilities and the opportunities which government offers.

Nature
A few points regarding nature of mission statement are as follows:
l It gives social reasoning. It specifies the role which the organization plays in
society. It is the basic reason for existence.
l It is philosophical and visionary and relates to top management values. It has
long term perspective.
l It legitimises societal existence.
l It has stylistic objectives. It reflects corporate philosophy, identity, character and
image of organization.

Characteristics
In order to be effective, a mission statement should posses the following characteristics.
i) A mission statement should be realistic and achievable. Impossible statements
do not motivate people. Aims should be developed in such a way so that may
become feasible.
ii) It should neither be too broad nor be too narrow. If it is broad, it will become
meaningless. A narrower mission statement restricts the activities of
organization. The mission statement should be precise.
iii) A mission statement should not be ambiguous. It must be clear for action.
Highly philosophical statements do not give clarity.
iv) A mission statement should be distinct. If it is not distinct, it will not have any
impact. Copied mission statements do not create any impression.
v) It should have societal linkage. Linking the organization to society will build
long term perspective in a better way.
vi) It should not be static. To cope up with ever changing environment, dynamic
aspects be looked into.
vii) It should be motivating for members of the organization and of society. The
employees of the organization may enthuse themselves with mission statement.
viii) The mission statement should indicate the process of accomplishing objectives.
The clues to achieve the mission will be guiding force.

Examples of Mission Statement

A few examples of mission statement (academically not accepted) are as follows:
l India Today “ The complete new magazine”.
l Bajaj Auto, “Value for Money for Years”.
l HCL, “ To be a world class Competitor”.
l HMT, “Timekeepers of the Nation”. 35
Introduction to Strategic Some experts argue that these are the publicity slogans. They are not mission
Management statements. A few other examples are as follows:
Ranbaxy Industries “To become a research based international Pharmaceuticals
Company”.
Eicher Consultancy “To make India an economic power in the lifetime, about 10 to 15
years, of its founding senior managers.”

Formulation of Mission Statements

The mission statements are formulated from the following sources:
i) National Priorities projected in plan documents and industrial policy statements.
ii) Corporate philosophy as developed over the years.
iii) Major strategists have vision to develop mission statements.
iv) The services of consultants may be hired.

Mission vs Purpose
The term purpose was used by some strategists. At some places, it was used as
synonymous to mission. A few major points of distinction are as follows:
i) Mission is the societal reasoning while the purpose is the overall reason.
ii) Mission is external reasoning and relates to external environment. Purpose is
internal reasoning and relates to internal environment.
iii) Mission is for outsiders while purpose is for its own employees.

Activity 3
1. Distinguish between Mission and Purpose.
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2. Explain the essentials of Mission statement.
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3. Formulate Mission statements of any two organizations of your choice.
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 Strategic Framework
3.6 BUSINESS DEFINITION
It explains the business of an organization in terms of customer needs, customer
groups and alternative technologies.
Oerik Abell suggests defining business along the three dimension of customer
groups. Customer functions and alternative technologies. They are developed as
follows:
i) Customer groups are created according to the identity of the customers.
ii) Customer functions are based on provision of goods/services to customers.
iii) Alternative Technologies describe the manner in which a particular function can
be performed for a customer.
For a watch making business, these dimensions may be outlined as follows:
l Customer groups are individual customers, commercial organizations, sports
organizations, educational institutions etc.
l Customer functions are record time, finding time, alarm service etc. It may be a
gift item also.
l Alternative technologies are manual, mechanical and automatic.
A clear business definition is helpful in identifying several strategic choices.
The choices regarding various customer groups, various customer functions and
alternative technologies give the strategists various strategic alternatives. The
diversification, mergers and turnaround depend upon the business definition.
Customer oriented approach of business makes the organization competitive.
On the same lines, product/ service concept could also give strategic alternatives
from a different angle. Business can be defined at the corporate or SBU levels.
At the corporate level, it will concern itself with the wider meaning of customer
groups, customer functions and alternative technologies. If strategic alternatives are
linked through a business definition, it results in considerable amount of synergic
advantage.

3.7 OBJECTIVES AND GOALS

Objectives refer to the ultimate end results which are to be accomplished by the
overall plan over a specified period of time. The vision, mission and business
definition determine the business philosophy to be adopted in the long run. The goals
and objectives are set to achieve them.

Meaning
l Objectives are openended attributes denoting a future state or out come and are
stated in general terms.
l When the objectives are stated in specific terms, they become goals to be
attained.
l In strategic management, sometimes, a different viewpoint is taken.
l Goals denote a broad category of financial and non-financial issues that a firm
sets for itself.
l Objectives are the ends that state specifically how the goals shall be achieved.
l It is to be noted that objectives are the manifestation of goals whether
specifically stated or not.
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Introduction to Strategic Difference between objectives and goals
Management
The points of difference between the two are as follows:
l The goals are broad while objectives are specific.
l The goals are set for a relatively longer period of time.
l Goals are more influenced by external environment.
l Goals are not quantified while objectives are quantified.
Broadly, it is more convenient to use one term rather than both. The difference
between the two is simply a matter of degree and it may vary widely.

Need for Establishing Objectives

The following points specifically emphasize the need for establishing objectives:
l Objectives provide yardstick to measure performance of a department or SBU
or organization.
l Objectives serve as a motivating force. All people work to achieve the
objectives.
l Objectives help the organization to pursue its vision and mission. Long term
perspective is translated in short-term goals.
l Objectives define the relationship of organization with internal and external
environment.
l Objectives provide a basis for decision-making. All decisions taken at all levels
of management are oriented towards accomplishment of objectives.

What Objectives should be set?

According to Peter Druker, objectives should be set in the area of market standing,
innovation productivity, physical and financial resources, profitability, manager
performance and development, worker performance and attitude and public
responsibility. Researchers have identified the following areas for setting objectives:
Profit Objective: It is the most important objective for any business enterprise. In
order to earn a profit, an enterprise has to set multiple objectives in key result areas
such as market share, new product development, quality of service etc. Ackoff calls
them performance objectives.
Marketing Objective may be expressed as: “to increase market share to 20 percent
within five years” or “to increase total sales by 10 percent annually”. They are related
to a functional area.
Productivity Objective may be expressed in terms of ratio of input to output. This
objective may also be stated in terms of cost per unit of production.
Product Objective may be expressed in terms of product development, product
diversification, branding etc.
Social Objective may be described in terms of social orientation. It may be tree
plantation or provision of drinking water or development of parks or setting up of
community centers.
Financial Objective relates to cash flow, debt equity ratio, working capital, new
issues, stock exchange operations, collection periods, debt instruments etc. For
example a company may state to decrease the collection period to 30 days by the end
of this year.

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Human resource Objective may be described in terms of absenteeism, turnover, Strategic Framework
number of grievances, strikes and lockouts etc. An example may be “to reduce
absenteeism to less then 10 percent by the end of six months”.

Characteristics of Objectives
The following are the characteristics of corporate objectives:
i) They form a hierarchy. It begins with broad statement of vision and mission and
ends with key specific goals. These objectives are made achievable at the lower
level.
ii) It is impossible to identify even one major objective that could cover all
possible relationships and needs. Organizational problems and relationship
cover a multiplicity of variables and cannot be integrated into one objectives.
They may be economic objectives, social objectives, political objectives etc.
Hence, multiplicity of objectives forces the strategists to balance those
diverse interests.
iii) A specific time horizon must be laid for effective objectives. This timeframe
helps the strategists to fix targets.
iv) Objectives must be within reach and is also challenging for the employees.
If objectives set are beyond the reach of managers, they will adopt a
defeatist attitude. Attainable objectives act as a motivator in the
organization.
v) Objectives should be understandable. Clarity and simple language should be the
hallmarks. Vague and ambiguous objectives may lead to wrong course of action.
vi) Objectives must be concrete. For that they need to be quantified.
Measurable objectives help the strategists to monitor the performance in a
better way.
vii) There are many constrants internal as well as external which have to be
considered in objective setting. As different objectives compete for scarce
resources, objectives should be set within constraints.

Process of Setting Objectives

Glueck identifies four factors that should be considered for objective setting. These
factors are: the forces in the environment, realities of an enterprise’s resources and
internal power relations, the value system of top executives and awareness by the
management of the past objectives. They are briefly narrated below:
i) Environmental forces, both internal and external, may influence the interests of
various stake holders. Further, these forces are dynamic by nature. Hence
objective setting must consider their influence on its process.
ii) As objectives should be realistic, the efforts be made to set the objectives in such
a way so that objectives may become attainable. For that, existing resources of
enterprise and internal power structure be examined carefully.
iii) The values of the top management influence the choice of objectives. A
philanthropic attitude may lead to setting of socially oriented objectives while
economic orientation of top management may force them to go for profitability
objective.
iv) Past is important for strategic reasons. Organizations cannot deviate much from
the past. Unnecessary deviations will bring problems relating to resistance to
change. Management must understand the past so that it may integrate its
objectives in an effective way.
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Introduction to Strategic Activity 4
Management
1. For a company of your choice, apply the concept of business definition.
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2. Select any organization of your choice. You formulate vision, business
definition, mission, objectives, core purpose and core values.
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3.8 SUMMARY
Strategic intent refers to the purpose for which the organization strives for. It is the
philosophical framework of strategic management process. The hierarchy of strategic
intent covers the vision and mission, business definition and the goals and objectives.
Stretch is misfit between resources and aspirations. Leverage stretches the meagre
resource base to meet the aspirations. The fit positions the firm by matching its
organizational resources to its environment. Vision constitutes future aspirations. This
articulates the position that a firm would like to attain in the distant future.
Mission is the social reasoning of organization. It has external orientation. It
legitimizes social existence.
Business definition explains the business of an organization in terms of customer
needs, customer groups and alternative technologies goal denote a broad category of
issues which a firm sets for itself. Objectives are the ends that state specifically how
the goals shall be achieved. Overall this unit tries to give a view of strategic intent as a
whole.

3.9 KEY WORDS

Business Definition : It explains the business of an organization in terms of
customer needs, customer groups and alternative
technologies.
Core Purpose : It is the reason for organization’s existence.
Core Values : It is the essential and enduring character of organization.
Goals : A broad category of financial and non financial issues that
a firm sets for itself.
Mission : It is the social reasoning of organization. It links
organization to society.
Objectives : What is to be achieved in a given time period. They are the
manifestation of goals.
Strategic Intent : It makes clear what an organization stands for.
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Vision : What an organization wishes to achieve in the long run.
 Strategic Framework
3.10 SELF ASSESSMENT QUESTIONS
1) What is strategic intent? Discuss the concept of leverage, stretch and fit with
respect to business organization.
2) What is mission? How is it different from purpose? Discuss the essentials of a
mission statement.
3) Stage five mission statements of big companies in India and review them
critically.
4) Explain the three dimensions of a business definition. Illustrate.
5) What are objectives? How are they set? State the characteristics of objectives.
6) How will you set objectives for a large organization? Assume imaginary details.
7) Explain the following:
a) Core Value
b) Core Purpose
c) Leverage
8) Visit two companies of your choice and collect the details regarding hierarchy of
strategic intent.

3.11 REFERENCES AND FURTHER READINGS

Drucker, P.F. (1974). “Management Task Responsibilities and Practices”, Harper &
Row, New York.
Ghosh, P.K. (1996). “Business Policy Strategic planning and Management”, Sultan
Chand & Sons, New Delhi.
Glueck, W.F. and Iavch L.R. (1984). “Business Ploicy and Strategic Management”
Mc graw Hill, New York.
Kazmi, Azhar (2002). “Business Policy and Strategic Management”, Tata Mcgraw
Hill Publishing Co, Ltd., New Delhi.
Miller A. and Den G. G. (1996). “Strategic Management” Mcgraw hill, New York.
Prasad, L.M. (2002). “Business Policy: Strategic Management”, Sultan Chand &
Sons, New Delhi.
Shrivastava, R.M. (1995). “Corporate Strategic Management”, Pragati Prakashan,
Meerut.
Tompson, J.L. (1997). “Strategic Management: Awareness and Change”,
International Thompson Business Press, London.

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Introduction to Strategic Appendix 1
Management
RELIANCE TECHNOLOGY CENTRE
Reliance Industries Limited is the largest private sector in India and is the
second largest manufacturer of polyster in the world. Reliance Technology
Centre was set up in 1997 and presently is engaged in manufacturing PET
homo and co-polymer fibres. The following is the vision and mission of the
company.
VISION
l To establish a centre of excellence for research and development in PET homo
and copolymer fibres and resins through disciplined, motivated and time bound
execution of projects;
l To create an environment conducive to intellectual growth, efficient flow of
information and accountability in order to achieve a productive and sustained
phase of research activities;
l To closely interact with the business group companies and technical for short,
medium and long-term quality and process issues;
l To thrive to become a catalyst to the growth of company’s polyster business;
l To leverage synergy between Reliance’s PET, polymers and fibre intermediate
business;
l To create, maintain and pursue strategic research alliance for top end research
activities.

MISSION
To achieve ‘Global leadership in polymers, fibres and resin businesses’.
Source: www.ril.com

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