UNIT 1 – OVERVIEW OF STRATEGIC MANAGEMENT

ORIGIN OF STRAGEY
Strategy (from Greek στρατηγία stratēgia, "art of troop leader; office of general, command,
generalship"[1]) is a high-level plan to achieve one or more goals under conditions of uncertainty.
Strategy is important because the resources available to achieve these goals are usually limited.
Strategy generally involves setting goals, determining actions to achieve the goals, and
mobilizing resources to execute the actions. A strategy describes how the ends (goals) will be
achieved by the means (resources). Strategy can be intended or can emerge as a pattern of
activity as the organization adapts to its environment or competes. It involves activities such
as strategic planning and strategic thinking.

STRATEGY VS STRUCTURE
Strategy—The positioning and actions taken by an organization, in response to or anticipation of
changes in the external environment, intended to achieve competitive advantage.
Structure—The way in which tasks and people are specialized and divided and authority is
distributed; how activities and reporting relationships are grouped; the mechanisms by which
activities in the organization are coordinated.

ELEMENTS OF BUSINESS STRATEGIES

Element 1: Power Distribution

Power distribution dictates who's involved, how much information each individual can access,
and the decision-making process.
It's crucial to know who you're working from their track record on complex strategy projects to
basic strengths and weaknesses. Talk to other people in the organization who have worked with
them to gain more information. Vet people to avoid surprises and to understand the best ways to
support and motivate team members.

Element 2: Decision Making

The way that decisions are made in organizations determines how ideas are generated and which
ideas are considered. The way decisions are made influences how these ideas are carried out
later.
Does decision making in your organization flow top-down or bottom-up? Who are the holders of
the power to decide which ideas advance and which are eliminated? If ideas are valued in your
culture, there's a strong likelihood that it might not matter who generates the ideas.

Element 3: Idea Generation

How ideas are generated affects the quantity and quality of these ideas, which directly affects the
number of viable strategy options.
A company that has an annual strategy meeting with a brainstorming component that
encompasses input from many directions within the company uses one type of idea generation.
The Google model involves having employees use 20% of their time for innovation. They test
and grow projects. Some projects are nurtured and provide the company with revenue. Others are
killed off. It's even possible that original projects may mutate into something different.

Element 4: Process
Process is the way that ideas are handled and consumed within organizations. Process defines the
way that agreements and commitments are made and managed, and how well people understand
what is happening and what to do.
The process-driven organization avoids wasting employee time and energy. People in this type of
company reach agreement that an action is valuable, develop a process around it, and set it in
motio

Element 5: People
In an organization of any size, people bring their domain knowledge, talents, and perspectives to
strategy creation. Often people are viewed as the first point of strategy failure, but they are
actually the last point of failure in a long series of cascading interactions.
Put another way, very bright, creative, motivated people can fail if they are embedded in a
strategy creation structure process where power, decision making, idea generation, or process are
broken.

STRETEGIC MANAGEMENT PROCESS

The strategic management process means defining the organization’s strategy. It is also defined
as the process by which managers make a choice of a set of strategies for the organization that
will enable it to achieve better performance.
Strategic management process has following four steps:

Environmental Scanning- Environmental scanning refers to a process of collecting, scrutinizing

and providing information for strategic purposes. It helps in analyzing the internal and external
factors influencing an organization. After executing the environmental analysis process,
management should evaluate it on a continuous basis and strive to improve it.
Strategy Formulation- Strategy formulation is the process of deciding best course of action for
accomplishing organizational objectives and hence achieving organizational purpose. After
conducting environment scanning, managers formulate corporate, business and functional
strategies.
Strategy Implementation- Strategy implementation implies making the strategy work as
intended or putting the organization’s chosen strategy into action. Strategy implementation
includes designing the organization’s structure, distributing resources, developing decision
making process, and managing human resources.
Strategy Evaluation- Strategy evaluation is the final step of strategy management process. The
key strategy evaluation activities are: appraising internal and external factors that are the root of
present strategies, measuring performance, and taking remedial / corrective actions. Evaluation
makes sure that the organizational strategy as well as it’s implementation meets the
organizational objectives.
These components are steps that are carried, in chronological order, when creating a new
strategic management plan. Present businesses that have already created a strategic management
plan will revert to these steps as per the situation’s requirement, so as to make essential changes.

UNIT – 2 – ENVIRONMENTAL ANALYSIS

STRATEGICALLY RELEVANT COMPONENTS OF INTERNAL AND EXTERNAL
ENVIRONMENT

Internal and External Environment

All businesses have an internal and external environment. The internal environment is very much
associated with the human resource of the business or organisation, and the manner in which
people undertake work in accordance with the mission of the organisation. To some extent, the
internal environment is controllable and changeable through planning and management
processes.
The external environment, on the other hand is not controllable. The managers of a business have
no control over business competitors, or changes to law, or general economic conditions.
However the managers of a business or organisation do have some measure of control as to how
the business reacts to changes in its external environment.

ENVIRONMENTAL SCANNING TECHNIQUES

SWOT (Strength-Weakness-Opportunity-Threat)

Identification of threats and Opportunities in the environment (External) and strengths and
Weaknesses of the firm (Internal) is the cornerstone of business policy formulation; it is these
factors which determine the course of action to ensure the survival and growth of the firm.

PEST Analysis

A scan of the external macro-environment in which the firm operates can be expressed in terms
of the following factors:

Political
Economic
Social
Technological

1.Political Factors:-

tax policy
employment laws
environmental regulations
trade restrictions and tariffs
political stability

2.Economic Factors:-

economic growth
interest rates
exchange rates
inflation rate

3.Social Factors:-

health awareness
population growth rate
age distribution
career attitudes
emphasis on safety

4.Technological Factors:-

R&D activity
rate of technological change
Porter’s Approach to Industry Analysis:-

*A corporation is most concerned with the intensity of competition within its industry.
*The level of this intensity is determined by basic competitive forces.
*In scanning its industry, the corporation must assess the importance to its success of each of the
six forces.

Competitive Structure of Industries:

*Threat of substitutes.
*Threat of new entrants.
*Rivalry among existing firms.
*Bargaining power of suppliers.
*Bargaining power of buyers.

QUEST
The Quick Environmental Scanning Technique, is a scanning procedure designed to assist
executives and planners to keep side by side of change and its implications for the organizational
strategies and policies.
QUEST produces a broad and comprehensive analysis of the external environment.
 UNIT 3 – ESTABLISHING ORGANIZATIONAL
DIRECTION

DEVELOPING STRATEGIC VISION, MISSION AND SETTING OBJECTIVES

The first is a statement of vision. It provides a destination for the organization. Next is a
statement of mission. This is a guiding light of how to get to the destination. These are critical
statements for the organization and the individuals who run the organization.
Vision – Big picture of what you want to achieve.
Mission – General statement of how you will achieve the vision.
A companion statement often created with the vision and mission is a statement of core values.
Core Values – How you will behave during the process.
Once you have identified what your organization wants to achieve (vision) and generally how the
vision will be achieved (mission), the next step is to develop a series of statements specifying
how the mission will be utilized to achieve the vision:
Strategies – Strategies are one or more ways to use the mission statement in order to achieve the
vision statement. Although an organization will have just one vision statement and one mission
statement, it may have several strategies.
Goals – These are general statements of what needs to be accomplished to implement a strategy.
Objectives – Objectives provide specific milestones with a specific timeline for achieving a
goal.
Action Plans – These are specific implementation plans of how you will achieve an objective.

A more in-depth discussion of these statements is presented below. Statements for an example
business are provided for clarification.
Vision Statement – A mental picture of what you want to accomplish or achieve. For example,
your vision may be a successful winery business or an economically active community.
Vision of an Example Business – A successful family dairy business.
Mission Statement – A general statement of how the vision will be achieved. The mission
statement is an action statement that usually begins with the word "to".
Mission of an Example Business – To provide unique and high quality dairy products to local
consumers.
Core Values – Core values define the organization in terms of the principles and values the
leaders will follow in carrying out the activities of the organization.
Core Values of the Example Business:
Focus on new and innovative business ideas
Practice high ethical standards.
Respect and protect the environment.
Meet the changing needs and desires of clients and consumers.
Objectives – An objective turns a goal’s general statement of what is to be accomplished into a
specific, quantifiable, time-sensitive statement of what is going to be achieved and when it will
be achieved. Examples of business objectives are:
Earn at least a 20 percent after-tax rate of return on our investment during the next fiscal year
Increase market share by 10 percent over the next three years.
Lower operating costs by 15 percent over the next two years through improvement in the
efficiency of the manufacturing process.
Reduce the call-back time of customer inquiries and questions to no more than four hours.
Objectives should meet the following criteria:
Measurable: What specifically will be achieved and when will it be achieved?
Suitable: Does it fit as a measurement for achieving the goal?
Feasible: Is it possible to achieve?
Commitment: Are people committed to achieving the objective?
Ownership: Are the people responsible for achieving the objective included in the objective-
setting process?

STRATEGIG INTENT AND CONCEPT OF STRATEGIC PYRAMID

Definition: Strategic Intent can be understood as the philosophical base of strategic management
process. It implies the purpose, which an organization endeavor of achieving. It is a statement,
that provides a perspective of the means, which will lead the organization, reach the vision in the
long run.
Strategic intent gives an idea of what the organization desires to attain in future. It answers the
question what the organization strives or stands for? It indicates the long-term market position,
which the organization desires to create or occupy and the opportunity for exploring new
possibilities.

CORPORATE ETHICS
The broad area dealing with the way in which a company behaves towards, and conducts
business with, its internal and external STAKEHOLDERS, including employees, investors,
creditors, customers, and regulators. In certain national systems minimum standards are required
or recommended in order to eliminate potential conflicts of interest or client/employee
mistreatment.
CORPERATE SOCIAL RESPONSIBILITY
Corporate social responsibility is a form of management that considers ethical issues in all aspects
of the business. Strategic decisions of a company have both social and economic consequences.
Social responsibility of a company is a main element of the strategy formulation process. There is a
misconception that corporate social responsibility is less relevant to small businesses; however,
there is growing recognition of the importance of social responsibility for smaller firms.

UNIT 4 – GENERIC COMPETITIVE STRATEGIES

STABILITY
Stability strategy implies continuing the current activities of the firm without any significant
change in direction. If the environment is unstable and the firm is doing well, then it may believe
that it is better to make no changes. A firm is said to be following a stability strategy if it is
satisfied with the same consumer groups and maintaining the same market share, satisfied with
incremental improvements of functional performance and the management does not want to take
any risks that might be associated with expansion or growth.
Stability strategy is most likely to be pursued by small businesses or firms in a mature stage of
development.
Stability strategies are implemented by ‘steady as it goes’ approaches to decisions. No major
functional changes are made in the product line, markets or functions.
However, stability strategy is not a ‘do nothing’ approach nor does it mean that goals such as
profit growth are abandoned. The stability strategy can be designed to increase profits through
such approaches as improving efficiency in current operations.
Nature of Stability Strategy
It decides to serve the same markets with the same products;
It continues to pursue the same objectives with a strategic thrust on incremental improvement of
functional performances; and
It concentrates its resources in a narrow product-market sphere for developing a meaningful
competitive advantage.
Types of Stability Strategies
Pause/Process with caution strategy – Some organizations pursue stability strategy for a
temporary period of time until the particular environmental situation changes, especially if they
have been growing too fast in the previous period. Stability strategies enable a company to
consolidate its resources after prolonged rapid growth. Sometimes, firms that wish to test the
ground before moving ahead with a full-fledged grand strategy employ stability strategy first.
No change strategy – No change strategy is a decision to do nothing new i.e continue current
operations and policies for the foreseeable future. If there are no significant opportunities or
threats operating in the environment, or if there are no major new strengths and weaknesses
within the organization or if there are no new competitors or threat of substitutes, the firm may
decide not to do anything new.
Profit strategy – Profit strategy is an attempt to artificially maintain profits by reducing
investments and short-term expenditures. Rather than announcing the company’s poor position to
shareholders and other investors at large, top management may be tempted to follow this
strategy. Obviously, the profit strategy is useful to get over a temporary difficulty, but if
continued for long, it will lead to a serious deterioration in the company’s position. The profit
strategy is thus usually the top management’s short term and often self serving response to the
situation.

EXPANSION STRATEGY

Definition: The Expansion Strategy is adopted by an organization when it attempts to achieve a

high growth as compared to its past achievements. In other words, when a firm aims to grow
considerably by broadening the scope of one of its business operations in the perspective of
customer groups, customer functions and technology alternatives, either individually or jointly,
then it follows the Expansion Strategy.
The reasons for the expansion could be survival, higher profits, increased prestige, economies of
scale, larger market share, social benefits, etc. The expansion strategy is adopted by those firms
who have managers with a high degree of achievement and recognition. Their aim is to grow,
irrespective of the risk and the hurdles coming in the way.
The firm can follow either of the five expansion strategies to accomplish its objectives:

1.Expansion through Concentration

2.Expansion through Diversification
3.Expansion through Integration
4.Expansion through Cooperation
5.Expansion through Internationalization

The Expansion through Concentration is the first level form of Expansion Grand strategy that
involves the investment of resources in the product line, catering to the needs of the identified
market with the help of proven and tested technology.

The Expansion through Diversification is followed when an organization aims at changing the
business definition, i.e. either developing a new product or expanding into a new market, either
individually or jointly. A firm adopts the expansion through diversification strategy, to prepare
itself to overcome the economic downturns.

The Expansion through Integration means combining one or more present operation of the
business with no change in the customer groups. This combination can be done through a value
chain.

The Expansion through Cooperation is a strategy followed when an organization enters into a
mutual agreement with the competitor to carry out the business operations and compete with one
another at the same time, with the objective to expand the market potential.

The Expansion through Internationalization is the strategy followed by an organization when

it aims to expand beyond the national market. The need for the Expansion through
Internationalization arises when an organization has explored all the potential to expand
domestically and look for the expansion opportunities beyond the national boundaries.

RETRECHMENT STRATEGY

Definition: The Retrenchment Strategy is adopted when an organization aims at reducing its
one or more business operations with the view to cut expenses and reach to a more stable
financial position.
In other words, the strategy followed, when a firm decides to eliminate its activities through a
considerable reduction in its business operations, in the perspective of customer groups,
customer functions and technology alternatives, either individually or collectively is called as
Retrenchment Strategy.
 The firm can either restructure its business operations or discontinue it, so as to revitalize its
financial position. There are three types of Retrenchment Strategies:

1. Turnaround

2. Divestment

3. Liquidation

To further comprehend the meaning of Retrenchment Strategy, go through the following

examples in terms of customer groups, customer functions and technology alternatives.

1. The book publication house may pull out of the customer sales through market
intermediaries and may focus on the direct institutional sales. This may be done to slash the sales
force and increase the marketing efficiency.

2. The hotel may focus on the room facilities which is more profitable and may shut down
the less profitable services given in the banquet halls during occasions.
3. The institute may offer a distance learning programme for a particular subject, despite
teaching the students in the classrooms. This may be done to cut the expenses or to use the
facility more efficiently, for some other purpose.

In all the above examples, the firms have made the significant changes either in their customer
groups, functions and technology/process, with the intention to cut the expenses and maintain
their financial stability.

CONGLOMERATE STRATEGY

Conglomerate diversification is growth strategy that involves adding new products or services
that are significantly different from the organization's present products or services. Conglomerat
diversification occurs when the firm diversifies into an area(s) totally unrelated to the
organization current business.
Most conglomerate diversifications are based on the rationale that expansion into unrelated
industries has a very attractive potential:
"... the basic premise of unrelated diversification is that any company that can be acquired on
good financial terms represents a good business to diversify into"

STRATEGIC AND COMPETITIVE ADVANTAGE

In business, a competitive advantage is the attribute that allows an organization to outperform

its competitors. A competitive advantage may include access to natural resources, such as high-
grade ores or a low-cost power source, highly skilled labor, geographic location, high entry
barriers, and access to new technology.
The three forms of generic competitive strategy

Cost leadership strategy

Cost leadership is a business' ability to produce a product or service that will be at a lower cost
than other competitors. If the business is able to produce the same quality product but sell it for
less, this gives them a competitive advantage over other businesses. Therefore, this provides a
price value to the customers. Lower costs will result in higher profits as businesses are still
making a reasonable profit on each good or service sold. If businesses are not making a large
enough profit, Porter recommends finding a lower-cost base such as labor, materials, and
facilities. This gives businesses a lower manufacturing cost over those of other competitors.
[9]
The company can add value to the customer via transfer of the cost benefit to them.
Differential strategy
A differential advantage is when a business' products or services are different to its competitors.
In his book, Michael Porter recommended making those goods or services attractive to stand out
from their competitors. The business will need strong research, development and design thinking
to create innovative ideas. These improvements to the goods or service could include delivering
high quality to customers. If customers see a product or service as being different from other
products, consumers are willing to pay more to receive these benefits.[10]

Focus strategy

Focus strategy ideally tries to get businesses to aim at a few target markets rather than trying to
target everyone. This strategy is often used for smaller businesses since they may not have the
appropriate resources or ability to target everyone. Businesses that use this method usually focus
on the needs of the customer and how their products or services could improve their daily lives.
In this method, some firms may even let consumers give their inputs for their product or service.

NEW BUSINESS MODEL FOR GLOBAL AND INTERNET ECONOMY

STRATEGY CLUSTER AND MODELS RELATING TO PORTFOLIO ANALYSIS

UNIT 5 – STRATEGY IMPLEMENTATION